CHELMSFORD May 1, 2020 (Thomson StreetEvents) -- Edited Transcript of Brooks Automation Inc earnings conference call or presentation Thursday, April 30, 2020 at 8:30:00pm GMT

* Lindon G. Robertson

Brooks Automation, Inc. - Executive VP & CFO

Brooks Automation, Inc. - Director of IR

* Stephen S. Schwartz

* J. Ho

Stifel, Nicolaus & Company, Incorporated, Research Division - MD of Technology Sector

* Jacob K. Johnson

Crdit Suisse AG, Research Division - MD, Global Technology Strategist and Global Technology Sector Head

Janney Montgomery Scott LLC, Research Division - MD, Head of Healthcare Research & Senior Equity Research Analyst

Greetings, and welcome to the Brooks Automation Q2 2020 Financial Results. (Operator Instructions) As a reminder, this conference is being recorded Thursday, April 30, 2020. I would now like to turn the conference over to Mark Namaroff. Please go ahead.

Mark Namaroff, Brooks Automation, Inc. - Director of IR [2]

Thank you, Malaika. Good afternoon everyone on the line today. We hope everyone is staying healthy in this environment. We'd like to welcome you to our earnings conference call for the second quarter of fiscal 2020. Our Q2 earnings press release was issued after the close of the market today and it is available on our Investor Relations website located at brooks.investorroom.com, as are the supplementary PowerPoint slides that we'll be using during the prepared remarks.

I would like to remind everyone that during the course of the call today, we will be making a number of forward-looking statements within the meaning of the Private Litigation and Securities Act of 1995. There are many factors that may cause actual financial results or other events to differ from those identified in such forward-looking statements. I would refer you to the section of our earnings release titled Safe Harbor Statement, the safe harbor slide on our aforementioned PowerPoint presentation on our website, and our various filings with the SEC, including our annual reports on Form 10-K and our quarterly reports on Form 10-Q. We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today.

We would also refer to a number of non-GAAP financial measures, which are used in addition to and in conjunction with results presented in accordance with GAAP. We believe non-GAAP measures provide an additional way of viewing aspects of our operations and performance. But when considered with GAAP financial results, the reconciliation of GAAP measures, and a reconciliation of GAAP measures, they provide an even more complete understanding of the Brooks business. Non-GAAP measures should not be relied upon to the exclusion of GAAP measures themselves.

On the call with me today is our President and Chief Executive Officer, Steve Schwartz, and Executive Vice President and Chief Financial Officer, Lindon Robertson. We will open the call up with remarks from Steve on the highlights of the second quarter, and then Lindon will provide a more detailed look into our financial results for the quarter and our outlook for the third fiscal quarter of 2020. We will then have time to take your questions at the end of our prepared remarks.

And with that, now I'd like to turn the call over to our CEO, Steve Schwartz.

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Stephen S. Schwartz, Brooks Automation, Inc. - CEO, President, Interim GM of Life Sciences & Director [3]

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Thank you, Mark, and good afternoon, everyone. We're glad to have you with us today. As we've already published preliminary results in a press release we issued on April 13th, I'll recap those results briefly and focus my remarks on some extra color at the segment level to give you some indication about how we see the current and near term business environment.

I'd like to start by discussing our priorities during this pandemic. First is the safety and wellbeing of our employees and their families as well as our partners including our suppliers and customers. Second, our ability to serve our customers that are deemed essential businesses with specific focus on any and all COVID-19 requests. And there have been many. And finally, the ongoing health of the company for the long term and actions we're taking to ensure that we emerge from this crisis stronger than ever.

With the exceptions of only a few brief work interruptions, all of our 20 plus factories, laboratories and repair centers were up and running throughout Q2 and all are currently operating. Of our approximately 3,300 global employees, about 1,800 have jobs that require them to be onsite. The rest of our employees are working from home. We are particularly proud of the way that each and every employee has embraced the new work practices that include social distancing, the diligent use of PPE, temperature screenings, staggered shifts and other practices which have allowed us to continue serving customers. All have adapted to this new work environment and we could not be more pleased with the resiliency of our operations during these turbulent times.

We consistently met our delivery commitments to customers as they struggled with their supply chains. And in many instances on the Life Sciences side, we stepped up to provide GENEWIZ, Sample Management and Informatic Services to customers who had either lost their regular services providers or who needed new services from us that came about because of the COVID-19 crisis. It's been energizing to bring even more capability to our customers and their need for our services underscores our purpose and mission.

Finally, we're building this company for the long term and our quarter to quarter and year to year revenue and earnings growth speaks to the momentum that we've generated. We've amassed an incredible technology and scientific portfolio, a global presence that allows us to deliver our world class capability to customers around the world, and we possess market positions in trusted brands that are the envy of our competitors. We've accomplished this through the energy and commitment of our global workforce. They know just how to ensure that we deliver on our long-term goals.

There is so much opportunity in front of us and it would be shortsighted of us to slow down now, especially since the capability we're building will be even more valuable in the future. For that reason, we intend to retain our team and fund their activities for technology development, new discovery, market capture, and customer support.

With each day that goes by, we're taking actions and making investments to emerge from the pandemic even stronger and more necessary to our customers. Our decision to continue these investments will have some impact on our earnings performance through the rest of this year, but we believe that it's absolutely the right action to take.

As companies and countries are contemplating how to reemerge from the pandemic, we have a definitive plan in place and a dedicated team that will continue to drive the momentum that we've established.

Now I'll report on Q2. Second quarter performance was strong with revenue of $220 million, up 11% year-over-year with the same 11% growth for each of our Semiconductor and Life Sciences segments. As I mentioned, for the most part our factories and laboratories were running throughout the quarter as we worked to meet customer demand, albeit it with many adjustments to mix because of both supply and demand changes throughout the quarter.

I'll begin with Life Sciences which delivered strong results with $95 million in revenue, up 4% sequentially with growth coming from both GENEWIZ and Sample Management. As each of these subsegments witnessed its own dynamics, I'll cover them separately starting with GENEWIZ.

Once again, GENEWIZ outperformed even our expectations, delivering a 25% year-over-year increase in revenue to $41 million. We were advantaged by our unique capability as both readers and writers of genes which allowed us to overcome some of the curveballs thrown our way. First, in early February when we announced our Q1 results, we told you that except for a team of scientists who remained onsite in support of urgent COVID-19 research, our Suzhou, China operations were basically shut down. It's in our Suzhou site where we perform the vast majority of our gene synthesis. Although we were bracing for what could have been a prolonged slowdown, China operations came back much faster than we'd imagined. By the end of February, more than 90% of our employees were back at work. And even without recovery in academia in China, demand from global customers was strong. In fact, despite the speedbump in February, the March quarter was a record for synthesis at just over $10 million.

Similarly, in next generation sequencing, we also had a record quarter with year-over-year growth of 46% and consistent 7% sequential growth, but with more volatility as the quarter progressed. We saw a normal pattern for NGS demand in the first two months of the quarter and then something of a spike in orders in the first half of March followed by two weeks of lower order volume. As we assess the NGS and synthesis businesses, we believe that much of the Q2 increase was the result of our normal customer capture. At the same time, it appears that some of the March burst came from researchers who no longer had capacity from their core laboratories or were facing reduced productivity from their existing suppliers while GENEWIZ remained at full capability and was eager to serve.

That said, order patterns for April have been steady but slightly lower in both synthesis and NGS but we have mixed signals as customer engagement for both synthesis and NGS projects remains quite active.

In Sanger sequencing, which is a high volume, overnight turns business where we perform millions of measurements for thousands of customers each quarter, revenue was steady for the first 10 weeks of the quarter. But when shelter in place orders closed many academic labs and caused a shutdown of nonessential research, we saw an abrupt reduction of more than 50% of our average daily volumes for the last two weeks of the quarter. And that level has persisted throughout most of April.

Though total Sanger revenue actually decreased slightly quarter-over-quarter, it was still up low single digits from Q2, one year ago. In Q3, we anticipate lower Sanger revenue until academic labs come back online and industry reaccelerates. And although we've seen average daily volumes increase during each of the past 4 weeks, we still remain below 50% of average. So at this point in the quarter, it would be too early to say that we have any concrete signs of a meaningful return to work.

In terms of overall GENEWIZ outlook, we expect business to be slightly down until academic researchers return to their benches and the activities that support clinical trials are back on the upswing. We don't have a prediction for when that will be, but we modeled a gradual return toward more normal volumes as we make our way through the rest of this quarter.

A difficult environment like the one we're in provides opportunities for companies that are prepared. In Q2, customers challenged us with hundreds of COVID-19 projects that gave us opportunities to demonstrate our incredible scientific acumen, round-the-clock collaboration, and fast turn, high quality results in support of their essential research. In addition, we took on many new urgent projects for first time customers. We believe that over the long run, it's this attention to solving customer issues that cement them to us and enabled GENEWIZ to add more than 200 new customers in the quarter.

Now I'll turn to Sample Management which even with all the disruption from coronavirus came in right on forecast I remind you that this year in Sample Management we have two areas of focus. A return to double digit revenue growth and sustainable gross margin improvement. And we're pleased with our progress against these goals. Even in this environment, Q2 was a very solid quarter. Revenue came in at $54 million, up 5% from Q1 and 3% year-over-year. Moreover, gross margin was up another 290 basis points from Q1. We're very encouraged by these results and it gives us confidence that this business is solidly on a path to be able to deliver on our expectations.

At the time we announced Q1 results, we knew two things. That the changes we had made to the organization structure and our focus on performance were set to deliver more growth and keep us on our trajectory for reacceleration of revenue in 2020, and that we were on track to deliver more profitability improvements.

That said, we also mentioned to you that we could foresee approximately $2 million of potential headwind from the coronavirus because of the inability of our field teams to complete system startups and perform revenue generating service on our equipment. Unfortunately, our customers obviously did not open for our employees and we did incur the headwinds that we had built into our forecast.

That said, there were many accomplishments in the quarter and I do want to highlight a few as they relate to trends in the business. Our cryogenics cold-chain products continue to make strong progress. Revenue topped $3 million in the quarter and we shipped B3C Cryo systems to 9 different customers. Six of those were repeat buyers. To date, 3/4 of our systems have been sold into cell and gene therapy applications and the momentum for these automated solutions continues to build.

In spite of the significant slowdown in clinical trial activity in March, Q2 Bio Storage activity generated our largest sample intake quarter since 2017, and we're encouraged by the reinvigoration of our customer capture activities. And in our consumables and instruments business lines, we made fast turn capital addition to respond to increased volume of consumables that will be used for COVID-19 tests as part of packages that we sell to diagnostics companies. This added capacity should allow us to increase revenue in Q3.

All-in, it was a very good quarter for Sample Management. Even with some COVID-19 related delays, revenue growth was right on track, profitability was ahead of schedule, and the result of our deliberate action is something that we'll build upon. The team is energized and active and we plan to come out of the COVID-19 days stronger than ever. What energizes us even more is the amount and level of large customer, large deal activity that's underway. During these days of no travel, our customer engagement activity has moved to the internet and deals that we've been working on for months are still being advanced. We are currently negotiating the final Ts and Cs on two large contracts and we have more multimillion dollar contracts in the pipeline. There opportunities speak to our capabilities and confidence to resume growth and profitability in this business.

On the semiconductor side, our performance in Q2 demonstrates the value of our product portfolio, and because of our close working relationship with our supply chain, we experienced only a small COVID-19 related revenue impact in the quarter which caused no impact to our customers. At $125 million in Q2, we established a new record high for quarterly semiconductor revenue and that's all the more remarkable because as an industry, we are still not back to our highs for semiconductor capital equipment spending. We attribute this outperformance to two factors. The strong high market share position of our Contamination Control Solutions business which satisfies a rapidly growing technology need, and continued design win and market share capture in our equipment automation products for OEM process equipment along with the steadily evolving advanced packaging market.

I'll give some specific color from our major Semiconductor business drivers, tool automation, advanced packaging and Contamination Control Solutions. Our automation products remained strong in the quarter with systems up approximately 10% and robots similar to last quarter's results. We had record bookings for our vacuum robots and vacuum systems, indicating demand remains very strong.

Sales to Chinese equipment manufacturers is picking up and this is a good indicator for both China fab activity and advanced packaging capability. We saw an uptick in advanced packaging in the quarter to just over $13 million or up 30% from Q1. This is still lower than one year ago, but it's the first sequential uptick in the last three quarters and in general a positive indicator. Based on order activity, we do have some indication that advanced packaging opportunities may be staring to percolate, especially in China.

Finally, I'll give a brief update on Contamination Control business which has been extremely strong as we delivered a record $45 million in revenue. The $45 million number is extremely significant for several reasons. First, we truly tested our supply chain and determined it to be very capable. In the first 2 quarters of 2020, we shipped as much revenue as in the last 3 quarters of 2019. And those were already healthy business levels.

Second, we met the demand for the expansion of the 5 Nanometer Foundry ramp on schedule and with very high quality. And finally, we continue to win additional business across a broad range of customers, device technologies that will serve us well as tier one foundry spending subsides.

Revenue in CCS will necessarily be lower in Q3 after two very strong back to back quarters, but still we expect healthy levels of more than $30 million in revenue which will be largely made up of a broader base of customers across different geographies and technology applications.

All-in, we're prepared for another strong quarter in our Semiconductor business. That said, we're also aware of some COVID-19 related supply chain issues that are slowing delivery of some parts. So far, we've been able to navigate through most of these issues, but it remains to be seen what the impact might be on actual demand from our customers. There's currently a lot of speculation as to the outlook for semiconductor processing equipment in 2020. Already our March quarter Semiconductor revenue was up 11% from one year ago and our Q2 Semiconductor book to bill was 1.2 for the quarter on a record revenue quarter. Depending upon June quarter capability of the global supply chain, our backlog and customer demand expectations would allow us to deliver yet another record quarter in June if we do not see any meaningful interruptions.

All-in, we had a very solid second quarter. We adjusted well as changes hit us and all companies. And we know that we'll need to rely on these same adaptive skills in the June quarter which may be even more uncertain. But already, we're well positioned and we're extremely confident in the long-term opportunities that we're diligently winning with all that we're investing today.

That concludes my formal remarks, and I'll turn the call now over to Lindon.

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Lindon G. Robertson, Brooks Automation, Inc. - Executive VP & CFO [4]

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Thank you, Steve. I'd like to refer your attention to the slides on our website, starting with Slide 3. Since Steve hit on these messages in his remarks, I will also be brief on what we see as the headlines of our performance. First, we had excellent momentum that has only modestly slowed by COVID-19 disruptions.

We have performed remarkably well with double digit year-over-year revenue growth in both segments and have established ourselves truly as a top reliable supplier in every market we serve.

Next, we expanded earnings substantially with continued performance enhancements in the Life Science segment. To put a finer point on it, gross margins in the Sample Management business are up nearly 600 basis points from a year ago. And third, we are well equipped for what lies ahead. Our liquidity is strong with $198 million of net cash on the balance sheet and healthy cash generation. To this point, our year-to-date cash flow from operations when you exclude the taxes paid on the sale of the semi cryo business, are $51 million. This a year-to-date improvement of $29 million over the prior year. The business is healthy and both sides are contributing growth, profit and cash flow.

Let's move onto Slide 4 to review the overall P&L. Let me first point you to the GAAP earnings and highlight what is different in that comparison. The growth of revenue and operating income is similar to that shown in the Non-GAAP profile on the right side. But what is different on the left side is in the tax line. If the first fiscal quarter, as guided under GAAP, we recognized a windfall tax benefit of approximately $6 million which is related to long term incentive stock units divested in the first quarter. That allowed deduction resulted in a net tax benefit of $3 million for the first fiscal quarter that in the second quarter is back to normal with the $3 million tax expense. The $6 million swing offsets the positive operating performance picture in the GAAP Profile.

In the Non-GAAP results, we apply this windfall to the projected tax rate and take it across the quarters of the fiscal year so that you can use the financials for a level performance indicator.

Continuing with the Non-GAAP performance on the right side, you can see the performance supported 48% year-to-year growth in earnings per share. Starting at the top, the revenue growth came similarly from each business with each growing 11% year to year. We saw a nice uptick in gross margins of 60 basis points sequentially, but Semiconductor gross margins remained approximately level from Q1 as expected. And the uptick was driven by Life Sciences improvement. On a year-over-year basis, the dynamics are also similar with improvement in Life Sciences and a bit softer margins in semiconductor. But all-in, gross margins continue to make progress and contribute to the bottom line.

Operating expenses during the quarter were up. On a sequential basis, the increase was in R&D for our Semiconductor business. Our engineering team has been kept busy throughout the COVID-19 environment, committed to advancing the projects with customers. On a year-over-year basis, operating expense was $7 million higher, driven by both R&D and SG&A. In the SG&A line, the growth was driven primarily around investments in Life Sciences including our IT transition to a single cloud based ERP platform, GENEWIZ growth, and some additional structure from our recent acquisition of RURO Software.

While we are spending some extra to keep our team in a safe environment and onboard with us through the COVID crisis, we anticipate reductions in travel expenses and G&A which will result in lower operating expense by approximately $1 million to $2 million in the third quarter. You can see operating margin expansion. Combining the growth with the margin expansion, you can also see Non-GAAP net income grew 51% year-over-year and expanded 11% sequentially.

Moving to below the operating income line, net interest expense was $600,000, lower by about $7 million compared with last year when we were carrying debt associated with the GENEWIZ acquisition. The non-GAAP tax rate for the quarter came in at about 23%, very consistent with our expectation of 21% to 25% for the year.

Let's turn now over to Slide 5 to discuss the segment results, starting with Life Sciences. In the second quarter, Life Sciences revenue grew 11% to $95 million compared with the second quarter last year. On an organic basis, Life Sciences grew 11% as well. This quarter was the first full year-over-year comparison which includes a full quarter of GENEWIZ revenue since the acquisition of the business in November of 2018. GENEWIZ had a strong second quarter with a revenue of $41 million, growing 25% from last year despite the impacts of COVID-19 as Steve addressed. As a reminder, our GENEWIZ China operations were largely closed down and observed strict quarantine restrictions from that Chinese New Year through February 10th. The exception to that were the labs from which GENEWIZ provided gene synthesis support for COVID-19 research customers. We estimated that the shutdown had an impact of approximately $2 million in the quarter. We are currently fully operational and demand from the China market has largely returned.

Sample Management provided 3% organic growth during the quarter in line with our expectation when we started the quarter. We had described and we did see about $2 million headwind from COVID-19 in the large store systems and post warranty services. This was due to some delays in an onsite installation and general lack of access to customer sites. But there were bright spots in Sample Management as well. Year-over-year growth was driven by cryo which more than doubled, and more substantively, Bio Storage services grew 7%. We have been very encouraged by the continued significant engagements and wins by the teams in the large storage business and in Bio Storage during this environment, fueling the path to return to double digit growth.

In addition, during the second quarter we acquired the Life Science Informatics Software firm RURO. RURO provides cloud-based software solutions to manage the laboratory workflow and bio sample data for a broad range of customers in the biotech, healthcare and pharmaceutical sectors. The business contributed approximately half a million of revenue in the time that we've owned them since mid-February.

As we announced in a March press release effective April 1st, we reorganized our Life Sciences business. We've combined the Bio Storage services with GENEWIZ, leveraging the common lab services and sample handling capabilities. This business combined is now $64 million of this quarter's $95 million business and showed year-to-year growth on that basis of 17%.

The remaining portion of the segment of Life Sciences is the Life Sciences products which was about $31 million and was up 1% year-over-year. If we had avoided the negative impact of the COVID-19 constraints, we estimate that the Life Science Products business would have grown about 4%.

Another bright spot in the quarter was on the gross margin line. The segment improved nicely in the second quarter up to 45.8%, up 330 basis points compared with last year. The year-over-year improvement was driven by the performance in Sample Management. In fact, we had improvement on every area of the business including our large TwinBank's store systems and services, the cryo systems, the consumables and instruments, and the Bio Storage services. This is driven by the performance improvements and cost reductions and the improved price management that's been implemented.

The growth of the segment and gross margin expansion covered the increased operating expense and drove 260 basis points of incremental operating margin year-over-year. The leverage of this business model and growth is fully evident on this page.

As we look into the third quarter, we are more cautious due to the continued and varied impacts of COVID-19. As Steve described, we've seen inside GENEWIZ sustained demand in synthesis, some volatility in the next generation sequencing, and a lower run rate from Sanger sequencing. Most notable to use is that continued absence of the academic research institutions and we have seen only a portion of the commercial teams return to full active status. And in Sample Management, it is unclear when customer sites will fully open around the world, limiting our access for installations and services. So at this point, we're expecting Life Sciences to deliver revenue in the range of $85 million to $91 million which is about 5% to 10% lower quarter-to-quarter.

Let's turn over to Slide 6 to review our Semiconductor business. Semiconductor Solutions revenue was $125 million for the second quarter, an increase of 5% sequentially and 11% year-over-year. If you were to look into the details of the quarter-to-quarter, you would see an uptick in the systems business which we ship primarily to tier two OEMs. I would highlight that the strength in that line in is the atmospheric systems as we expected. We do expect to see more vacuum systems coming in the second half which should assist gross margin.

The real story in the revenue line however is the strength of the Contamination Control Solutions which indeed ships to end user fabs. As referenced, these are record quarters for us in CCS and we continue to see expansion of qualifications and orders across many fabs. The rest of the Semiconductor story is in robots. While it is stable quarter-to-quarter, it is significantly higher year-over-year and our tier one OEM customers continue to call for additional output as we head into our second half.

It may appear we face no challenges in the second quarter, but in fact, the accomplishment reflects much diligence to coordinate supply availability, factory production and of course customer needs. We estimate that the negative impact to COVID-19 on revenue during the quarter for Semiconductor was approximately $5 million due to supply chain and the services challenges. On the positive side, these are delayed, not lost opportunities and due to the coordination efforts, our customers were not surprised nor disappointed by us.

Gross margins in Semi were similar to the prior quarter at about 40% and operating margins improved by 70 basis points. As mix improves in the second half, we expect gross margins to strengthen and if the market holds, growth will bring operating margins back upward on the leverage of the model.

Similar to the Life Science business, we're cautious about the outlook for the third quarter. We expect our supply chain will continue to face some issues. We also are sensitive that the broader supply chain of our customers aside from us affects the end user's timing for when they need our products. Finally, we know the impact of COVID-19 on the end markets can change rapidly. We expect our semiconductor business to deliver revenue in the range of $115 million to $124 million. This is approximately flat to lower -- I'm sorry, flat to down 8% quarter-to-quarter.

Let's turn now over to Slide 7 for a summary of our cash flow over the quarter. We generated $26 million of adjusted operating cash flow during the quarter. This excludes $92 million of income tax payments associated with a gain of the 2019 sale of our semiconductor cryo business. We also used approximately $16 million of cash for the acquisition of RURO as mentioned previously.

Our CapEx amounted to $12 million for the quarter, driven primarily by investments in operations and it includes approximately $1 million for the new GENEWIZ operation facility in Suzhou, China. Total uses of cash during the quarter totaled $105 million, and the change in net cash and equivalents during the quarter brings our cash, restricted cash and cash equivalents balance down to $249 million. The highlight here is the cash capability of the business we have built with GENEWIZ and subsequent to the divestiture of the semi cryo business. Year-to-date, as I said before, our operating cash flow when you exclude the tax on the gain in the sale, was $51 million or an increase of $29 million year-over-year.

On Slide 8, you will see a summary of the balance sheet. You can see at the top of the March 31st column we now carry $249 million in cash and marketable securities. With $51 million of debt, we have $198 million of net cash for operations and investments. This strong position provides us the fuel to invest for growth and gives us the confidence we will weather these uncertain times, and customers and our employees the confidence that we will sustain our investments.

Let's turn now to the summary on Slide 9. Fundamentals of the business are intact and we've gained customers and market share during these times. We have extended our leadership and continue preparing ourselves to be ready to accelerate when the recovery of the market. The balance sheet is strong, provides us the fuel for the journey and the strategic flexibility. We have seen growth momentum in each business. In Semiconductor we saw strong orders and have healthy backlog. But we also know the WFE CapEx environment comes down to the path which the chip makers decide to take. And in this time in particular, the OEM customers depend on a broad supply chain that is vulnerable.

Our Life Sciences business continues to win new business. The active markets of pharma, biotech and clinical continue to engage on improving their infrastructure with our capabilities and to request our support for the COVID research that they have stepped up to do themselves. So meanwhile, the academic research institutions have not returned to work yet and the timing of that return is uncertain and varied across the regions. So we find ourselves with unusually mixed signals. Good customer demand momentum, but uncertain market continuity in the near term. We have solid backlog but uncertain access to some customer locations. But there is one aspect that is very clear to us. We have the momentum with customers and the opportunity to delight them. If we keep that momentum with us, we will maintain our resources and be ready for the ramp as markets do fully return. In the short term, we are carrying some costs. We have some elements of our business less active during this time, but we're going to keep the team employed. We are providing premium pay for onsite labor, ensuring the PPE and clean facilities make a safe environment and expediting shipments to satisfy stressed delivery schedules. We will carry some so this cost in the short term and we will win additional customers as we are there for them throughout and we will be prepared for the full recovery ramp as the market returns to working order.

Let's cover that guidance for the third fiscal quarter of 2020. Revenue is expected to be in the range of $200 million to $215 million. Adjusted EBITDA is anticipated to be $26 million to $34 million and non-GAAP diluted earnings per share to be $0.16 to $0.24 per share. GAAP will be in the range of $0.04 to $0.12. For Life Sciences we factored in a return of the markets in the June month. This now concludes our prepared remarks, and I'll turn the call back over to Malaika, the Operator, to take questions from the line.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first phone question is from the line of Patrick Ho with Stifel. Please go ahead, your line is open.

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J. Ho, Stifel, Nicolaus & Company, Incorporated, Research Division - MD of Technology Sector [2]

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Thank you very much and hope everyone is well. And congrats on a really nice quarter in these challenging circumstances. Steve, maybe first off, in terms of the disruptions and the volatilities you've been seeing, can you give a little bit of color on your end how you were able to manage a very fluid environment and ensure that your top tier customers got what they needed? What were some of the steps you took? How did the business continuity plan work? If you could just give a little bit of color on that first.

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Stephen S. Schwartz, Brooks Automation, Inc. - CEO, President, Interim GM of Life Sciences & Director [3]

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Sure, Patrick, and thanks for the question on this. Specifically, on the Semi side, we give a lot of credit to the large OEM customers. They give us a good look at the business. And they adjust it quite frequently, so we're able to get out in front of the supply chain. And then our team managed the supply base extremely well. I think this is something over the past years that's become really fluid. When we get a signal from our tier one OEMs, we're able to transmit that quickly to our suppliers to get them prepared and I think the team managed it really well. It wasn't without problems for sure, but everybody knew how to accelerate and to get the job done. And Patrick, inside the company, everybody knows that deliveries to the customers are top priority, so if we go overtime, we spend. If we do something to get shipments there, we do it. And so I think it's a successful model that played out through the COVID period. And I think the business continuity plans that we have in place, we kicked them into action and I think they played out extremely well. I don't know that anybody could have anticipated the magnitude of what everybody was going to be faced with. But I think the team responded well. We're functioning completely differently just even two weeks into the shutdown period. Two weeks into the shutdown period we were operating with the same fluidity, but in a really different mode. So in general, the things that should have happened did. And we continue to manage going forward the supply base. There are air pockets we're finding coming from India, from Malaysia that we've been trying to work through now for the past 5 weeks. I think we're doing very well, but when you hear uncertainty from everybody in and around the supply chain, I think we're all dealing with the same kinds of things. But I do believe the team is in front of it and we seem to be weathering it pretty well.

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J. Ho, Stifel, Nicolaus & Company, Incorporated, Research Division - MD of Technology Sector [4]

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