Investor Presentation July 31, 2018

Transcription

1 Investor Presentation July 31, 2018

2 Safe Harbor Statements in this presentation regarding the future financial performance of MKS, MKS future business prospects, MKS future growth, and any other statements about MKS management s future expectations, beliefs, goals, plans or prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Any statements that are not statements of historical fact (including statements containing the words will, projects, intends, believes, plans, anticipates, expects, estimates, forecasts, continues and similar expressions) should also be considered to be forward-looking statements. These statements are only predictions based on current assumptions and expectations. Actual events or results may differ materially from those in the forwardlooking statements set forth herein. Among the important factors that could cause actual events to differ materially from those in the forward-looking statements are the conditions affecting the markets in which we operate, including the fluctuations in capital spending in the semiconductor industry, and other advanced manufacturing markets, fluctuations in net sales to our major customers, the challenges, risks and costs involved with integrating the operations of the companies we have acquired, including our most recent acquisition of Newport Corporation, our ability to successfully grow our business, potential fluctuations in quarterly results, the terms of our term loan, dependence on new product development, rapid technological and market change, acquisition strategy, manufacturing and sourcing risks, volatility of stock price, international operations, financial risk management, and the other factors described in MKS Annual Report on Form 10-K for the period ended December 31, 2017 filed with the SEC. MKS is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events or otherwise after the date of this presentation. MKS PROPRIETARY 2

3 Non-GAAP Measures This presentation includes measures that are not in accordance with U.S. generally accepted accounting principles ( non-gaap measures ). Non-GAAP measures exclude amortization of acquired intangible assets, asset impairments, costs associated with completed and announced acquisitions, acquisition integration costs, an inventory step-up adjustment related to an acquisition, restructuring charges, certain excess and obsolete inventory charges, fees and expenses related to the repricings of MKS term loan, amortization of debt issuance costs, net proceeds from an insurance policy, costs associated with the sale of a business, the tax effect of the 2017 Tax Cut and Jobs Act, the tax effect of legal entity restructurings, other discrete tax benefits and charges, and the related tax effect of these adjustments. These non-gaap measures should be viewed in addition to, and not as a substitute for, MKS reported results, and may be different from non-gaap measures used by other companies. In addition, these non-gaap measures are not based on any comprehensive set of accounting rules or principles. MKS management believes the presentation of these non-gaap measures is useful to investors for comparing prior periods and analyzing ongoing business trends and operating results. Please see the Appendix entitled GAAP to Non-GAAP Reconciliations at the end of this presentation for reconciliations of our non-gaap measures to the comparable GAAP measures and the definitions of terms used in this presentation. MKS PROPRIETARY 3

4 MKS Key Messages GLOBAL TECHNOLOGY LEADER in served markets Leveraged to attractive HIGH GROWTH MARKETS Track record of SUSTAINABLE & PROFITABLE GROWTH ROBUST & DISCIPLINED business process MKS PROPRIETARY 4

5 Enabling Technology for 50+ Years $3M $12M $67M $327M $853M $1.9B $$$B sustainable & profitable growth Well positioned for by solving complex problems MKS PROPRIETARY 5

6 Focused on High Growth Markets 32% $670M % $1.9B % 68% 5 Year CAGR Advanced 28% Semiconductor 22% Total 24% MKS PROPRIETARY 6

7 Successful Execution of Disciplined Acquisition Strategy MARKET LEADING TECHNOLOGY MKS CORE PRODUCT PORTFOLIO IN 2000 EXPANSION INTO HIGH GROWTH MARKETS INNOVATIVE CUSTOMER SOLUTIONS DRIVE SHAREHOLDER VALUE CREATION Completed Over 15 Acquisitions Since 2000 MKS PROPRIETARY 7

8 Market Leader with Broad Technology Portfolio ADVANCED ENERGY AEROTECH BROOKS COHERENT CVI MELLES GRIOT DAIHEN EBARA GENTEC HORIBA HUTTINGER II-VI INFICON IPG PHOTONICS LUMENTUM NEWPOWER PLASMA PI QIOPTIQ SEMROCK SIGMA KOKI SUMITOMO THORLABS ULVAC VAT Source: Company information MKS PROPRIETARY 8

9 Diversified & Balanced End Markets 21% 57% $1.9B % 24% $820M % Advanced Semiconductor Industrial Research & Defense Life & Health Science MKS PROPRIETARY 9

10 Multiple Growth Opportunities

11 Our Focus: Technology-Intensive Markets SEMICONDUCTOR INDUSTRIAL TECHNOLOGIES LIFE & HEALTH SCIENCES RESEARCH & DEFENSE Deposition Equipment Etch Equipment Lithography Inspection Packaging Electronic Thin Film Industrial Manufacturing Electronic Component Manufacturing Process Industries Telecom/Datacom Analytical & Medical Instrumentation Bio-Pharmaceutical Medical & Bioimaging Medical Devices Ophthalmic Surgery Atomic & Molecular Physics Spectroscopy High Energy Physics Ultrafast Laser Studies Infrared Technology Surveillance MKS PROPRIETARY 11

12 Extended Leadership in the Semiconductor Market FRONT END BACK END LITHOGRAPHY & INSPECTION DEPOSITION, ETCH & CLEAN PACKAGING & INSPECTION MKS PROPRIETARY 12

13 Surround the Workpiece SM MKS PROPRIETARY 13

14 Changing Landscape of Semiconductors THEN NOW FUTURE CHIPS DEVICES BIG DATA EFFICIENT & FAST UNTETHERED FROM THE DESKTOP NEW MODELS & APPLICATIONS Desktop computing Ubiquitous computing Greater storage density Critical real-time data Cloud storage Faster chips driving PC upgrades Improved power consumption Increased connectivity Streaming video AI / AR / VR MKS PROPRIETARY 14

15 Changing Landscape of Semiconductors BIG DATA MKS PROPRIETARY 15

16 Accelerating Volume and Velocity of Data DATA GENERATION and STORAGE ZETTABYTES 22% CAGR Source: Seagate Data Age 2025 March 2017 IoT >20B connected devices by 2020 SMART CAR 4,000GB per day/per car NETWORK 22% CAGR IP traffic growth MOBILE 7X increase in data by 2021 MKS PROPRIETARY 16

17 Capital Investment Drivers BIT GROWTH PERFORMANCE Increasing area and number of layers MEMORY $5.8B Increasing chip design and process steps LOGIC $18B $3.5B $4.1B $7.8B $10.1B 32L 64L 128L 28NM 14NM 7NM Source: Equipment cost per greenfield 100K WSPM MKS PROPRIETARY 17

18 Laser Microprocessing: Paradigm Shift THEN NOW FUTURE TOUCHSCREEN PATTERNING PC BOARD DEPANELING PACKAGE ENCLOSURE MARKING FLEX PCB DRILLING CAMERA WINDOW CERAMIC SCRIBING GLASS TOUCHSCREEN PATTERNING PC BOARD DEPANELING PACKAGE ENCLOSURE MARKING ENCLOSURE DRILLING & FILM FLEX PCB DRILLING CAMERA WINDOW CERAMIC SCRIBING RESISTOR TRIMMING COMPOSITE MATERIALS PROCESSING GLASS TOUCHSCREEN PATTERNING PC BOARD DEPANELING PACKAGE ENCLOSURE MARKING ENCLOSURE DRILLING & SURFACE FUNCTIONALIZATION NANOMATERIAL PROCESSING FILM FLEX PCB DRILLING CAMERA WINDOW CERAMIC SCRIBING RESISTOR TRIMMING BATTERY PROCESSING DRILLING MOBILE TOUCH DISPLAYS MOBILE IoT TOUCH DISPLAYS MOBILE IoT AUTOMOTIVE ENERGY VR/AR FLEXIBLE DISPLAYS MKS PROPRIETARY 18

19 Laser Microprocessing: Paradigm Shift THEN NOW FUTURE TOUCHSCREEN PATTERNING PC BOARD DEPANELING PACKAGE ENCLOSURE MARKING 100s COMPONENTS/DEVICE FLEX PCB DRILLING CAMERA WINDOW CERAMIC SCRIBING GLASS TOUCHSCREEN PATTERNING PC BOARD DEPANELING PACKAGE ENCLOSURE MARKING ENCLOSURE DRILLING & 1,000s COMPONENTS/DEVICE FILM FLEX PCB DRILLING CAMERA WINDOW CERAMIC SCRIBING RESISTOR TRIMMING COMPOSITE MATERIALS PROCESSING GLASS TOUCHSCREEN FLEX PCB PATTERNING DRILLING PC BOARD 10,000s DEPANELING CAMERA WINDOW PACKAGE ENCLOSURE MARKING ENCLOSURE DRILLING & SURFACE FUNCTIONALIZATION COMPONENTS/DEVICE NANOMATERIAL PROCESSING FILM CERAMIC SCRIBING RESISTOR TRIMMING BATTERY PROCESSING DRILLING MOBILE TOUCH DISPLAYS MOBILE IoT TOUCH DISPLAYS MOBILE IoT AUTOMOTIVE ENERGY VR/AR FLEXIBLE DISPLAYS MKS PROPRIETARY 19

20 High Growth Industrial Technology Segments ELECTRONIC THIN FILM ELECTRONICS MANUFACTURING INDUSTRIAL MANUFACTURING Thin film applications with similar manufacturing requirements to Semi Lasers Pressure, Flow, Valves Power, Plasma, Ozone Electronics and electrical component manufacturing including flexible circuits, printed circuit boards and all electrical components Lasers Power Vibration Control Material processing in applications such as cutting, welding, embossing; discrete assembly operations Lasers Power Motion Pressure, Flow DISPLAY SOLAR LED PCB PROCESSING ELECTRONIC COMPONENTS MATERIAL PROCESSING PRECISION ASSEMBLY MKS PROPRIETARY 20

21 Strong Recurring Revenue Growth Growing installed base Global footprint close to customers GLOBAL SERVICE REVENUE $220 $200 $180 +9% CAGR $212M Trusted OEM service provider $160 $140 $151 $164 $175 $186 $212 $120 FY13 FY14 FY15 FY16 FY17 MKS PROPRIETARY 21

22 Strong Financial Execution & Performance

23 Focused Financial Management TRACK RECORD OF STRONG PERFORMANCE Multiyear record of strong financial performance and operating leverage Significant operating leverage in business model CAPITAL DEPLOYMENT FOCUSED ON VALUE CREATION Strong emphasis toward generating organic growth and funding M&A strategy Successful execution of disciplined acquisition strategy CULTURE OF CONTINUOUS IMPROVEMENTS Deep culture of continuous profitability improvement Resulting in over 560% increase in Non-GAAP EPS from 2013 to 2017 MKS PROPRIETARY 23

24 Multiyear Record of Strong Financial Performance REVENUE AS REPORTED (in millions) NON-GAAP EPS $ % CAGR $1,916 60% CAGR $1,295 $3.03 $669 $781 $814 $1.89 $2.22 $0.90 FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17 MKS PROPRIETARY 24

25 Capital Deployment Focused on Value Creation $2.2 Billion Allocated Over Last 5 Years Acquisitions Acquisition and highly effective integration of Newport Corporation and Granville-Phillips 46% $1,039 Product Development Continued investments and deployment of new products, increased customer value and enhance competitive advantage 20% $438 Debt Management (1) Approximately $425M of voluntary principal repayments and four successful repricings have lowered Non-GAAP interest expense 70+% in 24 months 19% $432 Dividend (1) Initiated dividend in 2011 and subsequently increased dividend 9% rate 6 times for a cumulative 33% increase $200 Capex Share Buyback Increased investments to continue to support above-market 4% growth rates $88 Opportunistic repurchases allows flexibility 2% $39 (1) Includes Q voluntary principal repayment, fourth repricing completed April 11, 2018 and dividends through Q See also Footnote 2 on slide 55. MKS PROPRIETARY 25

26 Successful Execution of Disciplined Acquisition Strategy MARKET LEADING TECHNOLOGY MKS CORE PRODUCT PORTFOLIO IN 2000 EXPANSION INTO HIGH GROWTH MARKETS INNOVATIVE CUSTOMER SOLUTIONS DRIVE SHAREHOLDER VALUE CREATION Completed Over 15 Acquisitions Since 2000 MKS PROPRIETARY 26

27 Proven Acquisition Integration Approach APPLIED TO Newport Acquisition ACCOUNTABILITY Created accountability for results, and executive level involvement and support FOCUS Implemented clear, consistent and achievable line of sight goals CONTINUOUS IMPROVEMENT Introduced Profit and Cash Recovery Program to achieve cost synergies STRATEGIC PLANNING Strategic Planning Process applied to product portfolio, competitive assessments, key market opportunities MKS PROPRIETARY 27

28 Post Acquisition Performance of Light and Motion Division REVENUE IN MILLIONS $240 NON-GAAP OPERATING INCOME ($ and % of revenue) $70 (in millions) $220 $200 36% increase $201 $206 $205 $60 $50 248% increase $50 $ % $ % $180 $160 $151 $152 $153 $159 $171 $178 $40 $30 $20 $16 $22 $ % 14.2% $ % $ % $ % 24.9% $140 Q (1) Q Q Q Q Q Q Q Q $ % Q (1) Q Q Q Q Q Q Q Q (1) Acquisition of Newport Corporation closed on April 29, The Q amounts assume the acquisition closed on April 1, MKS PROPRIETARY 28

29 Strong Balance Sheet Supports Growth ROBUST FREE CASH FLOW (2) GENERATION (in millions) SIGNIFICANT DELEVERAGING ACHIEVED 406% increase $ % REDUCTION IN GROSS LEVERAGE RATIO $161 $126 $64 $ FY13 FY14 FY15 FY16 FY17 4/2016 (1) 6/2016 (1) 12/2016 (1) 12/2017 6/2018 (1) Acquisition of Newport Corporation closed on April 29, April, June and December 2016 periods are pro forma as if the acquisition of Newport Corporation closed on January 1, (2) Free Cash Flow equals cash flow from operations less capital expenditures. MKS PROPRIETARY 29

30 Deep Culture of Continuous Profitability Improvement STRATEGIC SOURCING: - LOWER MATERIAL COSTS Dedicated Low Cost Country sourcing teams Aligned with ongoing product design LEVERAGE LOW COST COUNTRY CAPABILITIES Leverage flexible, low cost manufacturing footprint Utilize design for manufacturability techniques Outsource non-core functions STREAMLINE COST STRUCTURE Create Centers of Excellence Implement Lean Organizational Structure/ Techniques Introduce market-based compensation plans EFFECTIVE TAX STRUCTURE Employ multi-year strategic planning horizon Closely integrated with business functions Enables achieving corporate capital allocation objectives MKS PROPRIETARY 30

31 Substantially Improved Financial Performance 2013 ACTUAL 2017 ACTUAL REVENUE $669M 186% GROWTH $1,916M NON-GAAP GROSS MARGIN 40.8% 46.6% NON-GAAP OPERATING MARGIN 10.5% 24.6% NON-GAAP TAX RATE NON-GAAP EPS 32% $ % 26.5% $5.96 ADJUSTED EBITDA (1) $99M 434% $529M FREE CASH FLOW $64M 406% $324M Significant Operating Leverage (1) Adjusted EBITDA is defined in our Term Loan Credit Agreement. MKS PROPRIETARY 31

32 2021 Target Model 2017 ACTUAL 2021 MODEL (1)(2) REVENUE LEVELS $1,916M 36% GROWTH $2,600M NON-GAAP GROSS MARGIN 46.6% 47.5% % NON-GAAP OPERATING MARGIN 24.6% 30% - 32% NON-GAAP TAX RATE 26.5% 19% NON-GAAP EPS $ % $11.56 ADJUSTED EBITDA (3) $529M 65% $875M FREE CASH FLOW (4) $324M 93% $625M Revenue Growth of ~8% CAGR, 18% CAGR in Non-GAAP EPS (1) Annual revenue for illustrative purposes only. (2) At midpoint of model range. Non-GAAP measures may exclude any of the adjustments listed in Non-GAAP Measures. (3) Adjusted EBITDA is defined in our Term Loan Credit Agreement. (4) Free Cash Flow in 2021 model assumes working capital days consistent with MKS PROPRIETARY 32

33 GAAP to Non-GAAP Reconciliations & 2021 Model Assumptions

34 2021 Target Model Assumptions Wafer Fab Equipment (1) 13.3% Pro forma MKS Revenue: 4 YEAR CAGR ( ) Semiconductor (2) 18.7% Advanced Markets (2) 4.9% Market Growth Assumptions: 4 YEAR CAGR ( ) Wafer Fab Equipment (1) 4% - 5% SAM Advanced Markets (1) 4% - 5% MKS Growth Goals: Semiconductor 6% - 7% Advanced Markets 8% - 10% (1) VLSI and Company estimates. (2) Revenue amounts assume acquisition of Newport Corporation closed on January 1, MKS PROPRIETARY 34

35 GAAP Net Income Per Share to Non-GAAP Earnings Per Share Reconciliations (in thousands, except per share data) Year Ended December 31, Net income per share $ 6.16 $ 1.94 $ 2.28 $ 2.16 $ 0.67 Adjustments (net of tax, if applicable) Acquisition and integration costs Acquisition inventory step-up Expenses related to sale of a business Excess and obsolete inventory charge Sale of previously written down inventory - - (0.04) - - Fees and expenses related to repricing of term loan Amortization of debt issuance costs Restructuring Executive retirement costs Asset impairment Gain on sale of business (1.36) Net proceeds from an insurance policy - (0.02) - - (0.02) Amortization of intangible assets Windfall tax benefit on stock-based compensation (0.20) Withholding tax on dividends Special tax (benefit)/expense - - (0.14) (0.39) 0.05 Tax benefit from legal entity restructuring - (0.09) Effect of US tax reform Pro forma tax adjustments (0.31) (0.51) (0.05) (0.07) (0.04) Non-GAAP net earnings per share $ 5.96 $ 3.03 $ 2.22 $ 1.89 $ 0.90 Weighted average shares outstanding 55,074 54,051 53,560 53,515 53,481 MKS PROPRIETARY 35

36 Light & Motion Division GAAP Operating Income to Non-GAAP Operating Income Reconciliation Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Income (loss) from operations ($23.7) $5.1 $11.0 $18.2 $13.9 $28.9 $40.4 $43.4 $47.5 Adjustments: Acquisition and integration costs (Note 1) (0.3) (0.3) - (1.2) Acquisition inventory step-up (Note 2) Excess and obsolete inventory charge (Note 3) Restructuring (Note 4) (0.1) Asset impairment (Note 5) Environmental costs (Note 6) Amortization of intangible assets Non-GAAP income from operations $16.0 $21.6 $21.7 $29.3 $33.8 $38.3 $50.0 $54.1 $55.7 Sales $151.1 $151.5 $153.1 $159.2 $170.9 $178.1 $200.6 $206.0 $204.9 % of Sales 10.6% 14.3% 14.2% 18.4% 19.8% 21.5% 24.9% 26.2% 27.2% Note 1: Acquisition and integration costs related to the acquisition of Newport Corporation by MKS Instruments, Inc. (the "Newport Merger"), which closed during the second quarter of Note 2: Adjustments in cost of sales related to the step-up of inventory to fair value as a result of the Newport Merger. Note 3: Excess and obsolete inventory charges related to the discontinuation of a product line in connection with the consolidation of two manufacturing sites. Note 4: Restructuring costs during fiscal year 2017 primarily related to the consolidation of two manufacturing plants. Note 5: Impairment charge primarily related to the write-off of goodwill and intangible assets in conjunction with the consolidation of two manufacturing plants. Note 6: Environmental costs related to an EPA-designated Superfund site, which was acquired as part of the Newport Merger. MKS PROPRIETARY 36

37 2017 GAAP to Non-GAAP Reconciliations Twelve Months Twelve Months Ended Ended December 31, December 31, GAAP to Non-GAAP Reconciliations Income from operations $ 58.4 $ Adjustments: Acquisition and integration costs (Note 1) Expenses related to the sale of a business (Note 2) Excess and obsolete inventory charge (Note 3) Fees and expenses relating to re-pricing of term loan (Note 4) Restructuring (Note 5) Asset impairment (Note 6) Executive retirement costs (Note 7) 2.6 Insurance reimbursement (Note 8) (1.1) Amortization of intangible assets Non-GAAP income from operations $ 70.0 $ Non-GAAP operating margin percentage 10.5% 24.6% Gross profit $ $ Excess and obsolete inventory charge (Note 3) Non-GAAP gross profit $ $ Non-GAAP gross profit percentage 40.8% 46.6% MKS PROPRIETARY 37

38 2017 GAAP to Non-GAAP Footnote Disclosures Note 1: In 2013, costs related to the Company s acquisition of Alter Power Systems S.r.l. In 2017, acquisition and integration costs related to the Newport Corporation acquisition, which closed during the second quarter of Note 2: Legal, consulting and compensation related expenses related to the sale of a business. Note 3: In 2013, cost of sales includes special charges for obsolete inventory related to unique product in a solar application in which slowing market conditions provided uncertainty as to the net realizable volume of this inventory. In 2017, excess and obsolete inventory charges in cost of sales related to the discontinuation of a product line in connection with the consolidation of two manufacturing plants. Note 4: Fees and expenses related to the repricings of our Term Loan Credit Agreement. Note 5: In 2013, the restructuring cost related to the consolidation of certain facilities and in 2017, restructuring costs related to the consolidation of two manufacturing plants, a restructuring of one of our international facilities and the consolidation of certain sales offices. Note 6: Asset impairment charge primarily related to the write-off of goodwill and intangible assets in conjunction with the consolidation of two manufacturing plants. Note 7: In 2013, the Company s Chief Executive Officer retired and $2.6 million of costs related to his supplemental executive retirement plan and other benefits were recognized and recorded in selling, general and administrative expenses for the twelve month periods ended December 31, Note 8: In 2013, we recovered $1.1 million from our insurance company relating to the prior year settlement. MKS PROPRIETARY 38

39 GAAP to Non-GAAP Tax Rate Reconciliation Twelve Months Ended December 31, 2013 Income Before Provision for Effective GAAP to Non-GAAP Tax Rate Reconciliation Income Taxes Income Taxes Tax Rate GAAP $59.3 $ % Adjustments: Income tax charge (Note 1) - (6.5) Credits on U.S. tax expense (Note 2) Tax benefit (Note 3) Executive retirement costs (Note 4) Insurance reimbursement (Note 5) (1.1) - Excess and obsolete charge (Note 6) Completed acquisition costs (Note 7) Acquisition inventory step-up - - Restructuring (Note 8) Amortization of intangible assets Tax effect of pro forma adjustments Non-GAAP $ 71 $ % MKS PROPRIETARY 39

40 GAAP to Non-GAAP Tax Rate Footnote Disclosures Note 1: In 2013, we incurred income tax charges of $6.5 related to an election to pay currently, at a substantially reduced rate, taxes on certain accumulated earnings from the years 2001 to 2011 of one of our foreign subsidiaries. Note 2: In 2013, we received credits against U.S. tax expense on amended returns related to prior years. Note 3: Tax benefit related to the enactment of the American Taxpayer Relief Act of 2012 on January 2, Note 4: In 2013, the Company's Chief Executive Officer retired and $2.6 million of costs related to his supplemental executive retirement plan and other benefits were recognized and recorded in selling, general and administrative expenses for the twelve month periods ended December 31, Note 5: In 2013, we recovered $1.1 million from our insurance company relating to the prior year settlement. Note 6: Cost of sales 2013 included special charges for obsolete inventory related to unique product in a solar application in which slowing market conditions provide uncertainty as to the net realizable value of this inventory. Note 7: Costs related to the Company's acquisition of Alter Power Systems S.r.l., in March Note 8: Includes restructuring charges primarily for severance related costs related to the consolidation of certain facilities. MKS PROPRIETARY 40

41 GAAP to Non-GAAP Tax Rate Reconciliation Twelve Months Ended December 31, 2017 Income Before Provision (benefit) Effective Income Taxes for Income Taxes Tax Rate GAAP $ $ % Adjustments: Acquisition and integration costs (Note 1) Expenses related to the sale of a business (Note 2) Excess and obsolete inventory charge (Note 3) Fees and expenses relating to repricing of term loan (Note 4) Amortization of debt issuance costs (Note 5) Restructuring (Note 6) Asset impairment (Note 7) Gain on sale of business (Note 8) (74.9) - Amortization of intangible assets Windfall tax benefit on stock-based compensation (Note 9) Taxes related to the sale of a business (Note 10) - (2.9) Deferred tax adjustment (Note 11) Transition tax on accumulated foreign earnings (Note 12) - (28.7) Accrued tax on MKS subsidiary distribution (Note 13) - (14.0) Tax effect of pro forma adjustments Non-GAAP $ $ % MKS PROPRIETARY 41

42 GAAP to Non-GAAP Tax Rate Footnote Disclosures Note 1: Acquisition and integration costs related to the Newport Corporation acquisition, which closed during the second quarter of Note 2: Expenses related to the sale of a business. Note 3: Excess and obsolete inventory charges in cost of sales related to the discontinuation of a product line in connection with the consolidation of two manufacturing plants. Note 4: Fees and expenses related to the repricing of our Term Loan Credit Agreement. Note 5: Amortization of debt issuance costs related to our Term Loan Credit Agreement and ABL Facility. Note 6: Restructuring costs primarily related to the consolidation of two manufacturing plants, and costs related to a restructuring of one of our international facilities and the consolidation of certain sales offices. Note 7: Asset impairment charge primarily related to the write-off of goodwill and intangible assets in conjunction with the consolidation of two manufacturing plants. Note 8: Gain on the sale of our Data Analytics Solutions business. Note 9: Windfall tax benefit on the vesting of stock-based compensation relating to the implementation of a new accounting standard issued by the Financial Statement Accounting Standards Board (Accounting Standards Update ). Note 10: Taxes related to the sale of our Data Analytics Solutions business. Note 11*: Deferred tax adjustment, which also includes the reversal of a tax accrual on a French dividend, related to the 2017 Tax Cut and Jobs Act. Note 12*: Transition tax on accumulated foreign earnings related to the 2017 Tax Cut and Jobs Act. Note 13*: Accrual for tax expense on a potential distribution to a subsidiary related to the 2017 Tax Cut and Jobs Act. *The computation of the one-time tax on our offshore earnings pursuant to the 2017 Tax Cut and Jobs Act (the "Tax Act") as well as our net deferred tax liability is based on our current understanding and assumptions regarding the impact of the Tax Act, and may change as additional clarification and implementation guidance is issued and as the interpretation of the Tax Act evolves over time. MKS PROPRIETARY 42