Shares of Chelmsford, Massachusetts-based Brooks Automation (BRKS 2.85%) traded higher by 8% on Thursday, as the company's fiscal fourth-quarter 2019 report, released Wednesday, pointed to momentum in its life sciences sample management business. Shares of the small-cap automation equipment manufacturer have appreciated 50% over the last 12 months.
As we walk through highlights of the last three months below, note that all comparative numbers are presented against the prior-year quarter.
Headline numbers
| Metric | Q4 2019 | Q4 2018 | Change |
|---|---|---|---|
| Revenue | $200.2 million | $159.6 million | 25.4% |
| Net income | $412.7 million | $10.4 million | N/A |
| Diluted EPS | $5.69 | $0.15 | N/A |
Data source: Brooks Automation. EPS = earnings per share. N/A = not applicable; difference too small to be meaningful.
Essential details from the quarter
- Semiconductor solutions revenue declined by 3%, to $106 million. As management pointed out, this was a relatively stable result given softness in the overall semiconductor manufacturing industry in recent months.
- Life sciences revenue jumped 85%, to $94 million. The company's November 2018 acquisition of genomics services provider GENEWIZ contributed $50 million in revenue, but the segment also generated 10% year-over-year organic growth, driven by the division's sample management business.
- Brooks completed the $675 million sale of its Semiconductor Cryogenics business to Edwards Vacuum, LLC (a subsidiary of Atlas Copco) on July 1, 2019. The company recognized a gain on the sale of $409 million, and recognized $5.61 in earnings per share from discontinued operations during the quarter from the transaction.
- Adjusting for the Semiconductor Cryogenics sale, Brooks Automation's fourth-quarter EPS of $0.08 represented an improvement over the $0.02 adjusted EPS loss in the comparable quarter.
- Gross margin improved by 110 basis points, to 40.3%, which management attributed to sample management revenue and a favorable margin profile from the acquired GENEWIZ business.
- Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped 39%, to $31 million.
- Excluding one-time transaction items related to the Semiconductor Cryogenics business sale, the company generated $46 million in operating cash flow during the quarter.
- Brooks declared a quarterly dividend that maintained its recent payout level of $0.10 per share.
Image source: Getty Images.
Management's comments on the quarter
In Brooks Automation's earnings press release, CEO Steve Schwartz commented on the company's momentum from a perspective that included earnings, cash flow, and the organization's stronger balance sheet following the sale of Semiconductor Cryogenics:
In the fourth quarter we delivered continued growth in our Life Sciences business, solid performance in our Semiconductor business, and one of our highest quarters in cash generation. We capped off a year in which all areas of the business provided growth and margin expansion. It was truly a transformative year for us as our team successfully completed the acquisition of GENEWIZ and closed the sale of the Semiconductor Cryogenics business. We have good momentum in Life Sciences revenue, strong bookings in the Semiconductor Solutions business, and a solid balance sheet that supports additional investments. We have set the stage for a strong 2020 fiscal year.
Fiscal first-quarter 2020 guidance
For the first quarter of fiscal 2020, the company projects that revenue will land between $204 million and $214 million. Management expects diluted earnings per share of $0.09-$0.17 and adjusted EPS of $0.20-$0.27. The midpoint of this range will represent an improvement of 38% over the $0.17 in adjusted EPS that Brooks booked in Q1 2019.
This is an appreciable earnings leap: It's worth keeping this small-cap automation dynamo on your radar screen to see if it surpasses its guidance next quarter and generates further momentum in calendar 2020.
