MKS Instruments : IR Presentation

Investor Presentation

May 22, 2020

Safe Harbor for Forward Looking Statements

This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934 regarding the future financial performance, business prospects and growth of MKS. These statements are only predictions based on current assumptions and expectations. 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 be considered to be forward- looking statements. Actual events or results may differ materially from those in the forward-looking 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 MKS operates, including the fluctuations in capital spending in the semiconductor industry and other advanced manufacturing markets, fluctuations in sales to our major customers, the impact of the COVID-19 pandemic on the global economy and financial markets, including any restrictions on MKS' operations and the operations of MKS' customers and suppliers resulting from public health requirements and government mandates, the impact of new or proposed trade regulations, the

terms of our term loan, competition from larger or more established companies in MKS' markets; MKS' ability to successfully grow

ESI's business; the challenges, risks and costs involved with integrating the operations of the companies we have acquired, the Company's ability to successfully grow our business, potential fluctuations in quarterly results, 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' most recent Annual Report on Form 10- K for the year ended December 31, 2019 and any subsequent Quarterly Reports on Form 10-Q, as filed with the SEC. MKS is under no obligation to, and expressly disclaims any obligation to, update or alter these forward-looking statements, whether as a result of new information, future events or otherwise after the date of this presentation.

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Non-GAAP Measures

This presentation includes measures that are not in accordance with U.S. generally accepted accounting principles ("Non-GAAP

measures"). These Non-GAAP measures should be viewed in addition to, and not as a substitute for, MKS' reported GAAP 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.

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MKS: Our Story

1961	~5,500		18
MKS		EMPLOYEES	COUNTRIES MKS
FOUNDED		WORLDWIDE	OPERATES IN

$1.9B #21 ~100%

2019		FORTUNE 100	SEMI CHIPS MADE
REVENUE	FASTESTGROWING	w/ MKS PRODUCTS

$164M ~900 ~2,200

2019 R&D	ENGINEERS		WORLDWIDE
INVESTMENT	& SCIENTISTS		PATENTS

4

Driving Technology Enablement Across Markets

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

MKS is committed to product development and innovation, with $164M invested in Research & Development in 2019.

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Achieving High Growth and Transformation

2013 REVENUE

$669M

32%

68%

2019 REVENUE

$1.9B

51% 49%

6 YEAR CAGR

Advanced Markets 29%

Semiconductor 13%

TOTAL19%

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MKS Transformation: Technology and Market Expansion

MKS 2013	PLUS NEWPORT 2016	PLUS ESI 2019
$669M	$1.3B	$1.9B

Adv Mkt

32%

Semi

68%

Adv Mkt	Semi	Adv Mkt
44%	Semi
51%
56%
	49%

SINGLE MARKET FOCUS

• Technology leader: Vacuum
  Measurement & Control and Plasma
• Focused selling channel to support Semi OEMs

TECHNOLOGY & MARKET EXPANSION

• Technology leader: Vacuum Control, Plasma, RF Power, Lasers & Motion
• Hybrid sales model to support expanded offering across multiple markets and customer types

INTEGRATED SOLUTIONS

• Technology leader: Vacuum Control, Plasma, Power, Lasers, Motion &
  System Integration
• Sales & Service model to support expanded offering across multiple markets and customer types

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Broad Portfolio Offers Significant Differentiation

● Technology scale and leadership

underpin deeper customer engagement

● Product breadth offers unique line

of sight, and ability to capitalize on technology inflections

● Technology integration and joint development across portfolio offer

competitive differentiation

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Market Leader with Broad Technology Portfolio

Source: Company information

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Technology Enablement For Semiconductor Scaling

DEPOSITION

• Power
• Plasma & Reactive Gas
• Vacuum Measurement & Control

ETCH

• Power
• Plasma & Reactive Gas
• Vacuum Measurement & Control

Source: Internal Company estimates

EXPOSURE TO

>85%

OF WFE

CRITICAL WET PROCESSING

• Dissolved Reactive Gas

METROLOGY & INSPECTION

• Optics & Optical Subsystems
• Lasers
• Precision Motion

LITHOGRAPHY

• Optics & Optical Subsystems
• Precision Motion
• Vibration Control

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Critical Solutions Spanning Semiconductor Applications

~100% of chips made with MKS products

FRONT END

BACK END

LITHOGRAPHY	DEPOSITION,	PACKAGING &
& INSPECTION	ETCH & CLEAN	INSPECTION

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Broad Advanced Markets Exposure…With Focus on Industrial

Strategic Focus on

Next Generation

Electronics Manufacturing

within Industrial

Technologies

2019 Advanced Markets Revenue Mix

LIFE & HEALTH	RESEARCH
SCIENCES	& DEFENSE
16%	22%

62%

INDUSTRIAL

TECHNOLOGIES

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Enabling Advanced Electronics Manufacturing with Lasers

Electronic	Electronic Component
Thin Film	Manufacturing

SOLAR

DISPLAY

PC BOARDS

ADV PACKAGING

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Critical Solutions Spanning Microprocessing Applications

Surround the Workpiece®

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Differentiated Lasers Are Key To MKS Microprocessing Strategy

• Microprocessing Applications
• • Flex PCB, OLED Displays, Clean Energy, Advanced Electronics Packaging
• Lasers
• • Diode-pumpedSolid State, Hybrid Fiber, Fiber
• Pulse Duration / Peak Power
• • Nanosecond / 10 Kilowatts+
  • Picosecond / 6 Megawatts+
  • Femtosecond / 1 Gigawatt+
• Capability
• • Machining of features as small as 1 micron at high quality

MKS Differentiation

Extensive Optical Coating IP

Enables power scaling & reliability

Unique Wavelength Conversion IP

Enables efficient and reliable UV generation for industry leading cost of ownership

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Extending Microprocessing Strategy Into Systems

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PCB Laser Systems: A Key Market Expansion Opportunity

FLEX PCB SYSTEMS	HDI PCB SYSTEMS
• Market size1: ~$150M-$200M	• Market size1: ~$500M
• #1 Market Share	• New Market entrant
• Differentiation:	• Differentiation:
throughput, yield, cost of	throughput, space/weight,
ownership	serviceability, cost of ownership

1 Internal Company estimates

1 Internal Company estimates

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5G: A Key Catalyst Within Advanced Markets

• Increased Adoption of Flex PCB in 5G Smartphones
• • Flex PCB Systems
  • Lasers, Optics and Motion Components
• Proliferation of Flex and HDI in 5G Base Stations
• • Flex PCB Systems
  • Lasers, Optics and Motion Components
• Acceleration In
  Connected Devices (Auto, IoT)
• • Flex PCB & HDI Systems
  • MLCC Test Systems
  • Lasers, Optics and Motion Components

Note: Semiconductor Market is a key beneficiary of greater chip demand and technology complexity

Sources: IDC and internal Company estimates

INCREASING MOBILE DATA TRAFFIC

140
120
100					5G
80
60
40				2G, 3G, 4G
20
0
2014	2016	2018	2020	2022	2024

ACCELERATING 5G SHIPMENTS

1,800
Non 5G	5G
1,600		400 700	900	1100
	19	200
1,400

1,200

1,000

800

600

400

200

-

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Strong Financial

Execution &

Performance

Focused Financial Management

Track Record of	Capital Deployment	Culture of
Strong Financial	Focused on Value	Continuous
Performance	Creation	Improvement

• Multiyear record of strong financial performance
• Delivering on gross margin expansion and operating leverage

●	Disciplined acquisition	●	Profit and cash
	strategy and track		recovery efforts
	record of delivering		engrained in MKS
	on acquisition		business process.
	synergies	●	Over 400% increase
●	Steady dividend		in Non-GAAP EPS
	strategy, increasing		from 2013 to 2019
	33% since inception

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Multiyear Record of Strong Financial Performance

REVENUE		NON-GAAP
AS REPORTED	$1,900	EPS
(in millions)

19%	31%	$4.52
CAGR
CAGR

$669

$0.90

FY13

FY19

FY13

FY19

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Gross Margin Expansion & Operating Leverage

NON-GAAP	NON-GAAP
GROSS MARGIN %	OPERATING MARGIN %

+330	44.1%	+760
BASIS		BASIS	18.1%
POINTS		POINTS
		10.5%

40.8%

FY13

FY19

FY13

FY19

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Proven Acquisition Integration Approach

ACCOUNTABILITY	COLLABORATION	CONTINUOUS	OPERATIONAL	STRATEGIC
IMPROVEMENT	EXCELLENCE	PLANNING
Created	Fostered	Extended	Harnessed	Applied
accountability	cross-product	"Profit & Cash	Operational	Strategic
for results &	collaboration	Recovery	Excellence across	Planning Process
executive level	including joint	Program" to	divisions	to product
involvement &	roadmap	achieve cost		portfolio
support	meetings	synergies

Applied to NEWPORT & ESI acquisitions

• • Significant expansion of Light and Motion operating margins since Newport acquisition
• Delivered Newport synergies of $38M within 17 months post close, ahead of the initial $35M target within 18-36 months
• • Delivered ESI synergies of $15M within 14 months post close, ahead of the 18-36 month target

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Successful Execution of Disciplined Acquisition Strategy

	MARKET LEADING TECHNOLOGY
MKS CORE	EXPANSION INTO HIGH GROWTH MARKETS
PRODUCT
PORTFOLIO
IN 2000	INNOVATIVE CUSTOMER SOLUTIONS
	DRIVE SHAREHOLDER VALUE CREATION

Completed Over 15 Acquisitions Since 2000

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Consistent Dividend Strategy

$0.205							Quarterly Cash Dividend Per Share
$0.200
$0.195
$0.190
$0.185
$0.180
$0.175
$0.170
$0.165
$0.160
$0.155
$0.150
$0.145
2,011	2,01120112,011	2,011	2,012	2,01220122,012	2,012	2,013	2,01320132,013	2,013	2,014	2,01420142,014	2,014	2,015	2,01520152,015	2,015	2,016	2,01620162,016	2,016	2,017	2,01720172,017	2,017	2,018	2,01820182,018	2,018	2019	201920192019	2019	Q1'202020

Dividend growth is a reflection of confidence in Free Cash Flow generation

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Appendix - GAAP to Non-GAAP Reconciliations

Appendix - GAAP to Non-GAAP Reconciliations

		2013			2019			2013			2019
Gross profit	$	266.6	$	830.4	Net income	$	35.8	$	140.4
Acquisition inventory step-up (Note 1)		-			7.6	Acquisition inventory step-up (Note 1)		-			7.6
Excess and obsolete charge (Note 2)		6.4			-	Excess and obsolete charge (Note 2)		6.4			-
Non-GAAP gross profit						Acquisition and integration costs (Note 3)
$	273.0	$	838.0		0.2			37.3
Non-GAAP gross margin						Fees and expenses related to term loan (Note 4)
	40.8%			44.1%		-			6.6
						Amortization of debt issuance costs (Note 5)		-			5.1
Income from operations	$	58.4	$	219.8	Restructuring and other (Note 6)		2.9			7.0
Acquisition inventory step-up (Note 1)		-			7.6	Amortization of intangible assets		2.1			67.4
Excess and obsolete charge (Note 2)		6.4			-	Gain on sale of long-lived assets (Note 7)		-			(6.8)
Acquisition and integration costs (Note 3)		0.2			37.3	Asset impairment (Note 8)		-			4.7
						Windfall tax expense (benefit) on stock-based
Fees and expenses related to term loan (Note 4)		-			6.6	compensation (Note 9)		-			(2.2)
Restructuring and other (Note 6)		2.9			7.0	Tax reform adjustments (Note 10)		2.9			(0.1)
Amortization of intangible assets		2.1			67.4	Tax-cost on the inter-company sale of an asset (Note 11)		-			5.4
Gain on sale of long-lived assets (Note 7)		-			(6.8)	Tax effect of pro-forma adjustments (Note 12)		(1.9)			(23.4)
Asset impairment (Note 8)						Non-GAAP net earnings
	-			4.7	$	48.4	$	249.0
Non-GAAP income from operations						Non-GAAP net earnings per diluted share
$	70.0	$	343.6	$	0.90	$	4.52
Non-GAAP operating margin		10.5%			18.1%	Weighted average shares outstanding		53.5			55.1

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Appendix - GAAP to Non-GAAP Reconciliations

Non-GAAP financial measures adjust GAAP financial measures for the items listed below. These Non-GAAP measures should be viewed in addition to, and not as a substitute for, MKS' reported GAAP 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.

Note 1: Cost of revenues during the twelve months ended December 31, 2019 includes the amortization of the step-up of inventory to fair value as a result of the ESI acquisition.

Note 2: Cost of revenues for the twelve months ended December 31, 2013 includes $6.4 million of 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 3: Acquisition and integration costs for the twelve months ended December 31, 2019, related to our acquisition of Electro Scientific Industries, Inc. ("ESI"). Acquisition and integration costs for the twelve months ended December 31, 2013, related to our acquisition of Alter Power Systems S.r.l.

Note 4: We recorded fees and expenses during the twelve months ended December 31, 2019 related to Amendments No. 5 and No. 6 to our Term Loan Credit Agreement dated as of April 29, 2016 (as amended, the "Term Loan Credit Agreement").

Note 5: We recorded additional interest expense during the twelve months ended December 31, 2019 related to the amortization of debt issuance costs related to our Term Loan Credit Agreement and our ABL Credit Agreement dated February 1, 2019, as amended on April 26, 2019.

Note 6: Restructuring and other costs during the twelve months ended December 31, 2019 consisted of severance costs related to an organization-wide reduction in workforce, the consolidation of service functions in Asia, and the movement of certain products to lower cost regions, costs related to the pending closure of a facility in Europe, and costs from a legal settlement from a contractual obligation we assumed as part of our acquisition of Newport Corporation. Restructuring and other costs for the twelve months ended December 31, 2013 consisted of benefits related to the retirement of the Company's chief executive officer, severance related costs related to the consolidation of certain facilities, offset by insurance proceeds related to a litigation settlement.

Note 7: During the twelve months ended December 31, 2019, we recorded a net gain on the sale of two properties in Boulder, CO and three properties in Portland, OR.

Note 8: During the twelve months ended December 31, 2019, we recorded an impairment charge related to a minority interest investment in a private company.

Note 9: We recorded windfall tax benefits on the vesting of stock-based compensation.

Note 10: We recorded tax adjustments resulting from tax election changes in response to tax reform, additional guidance provided by tax authorities and the direct effect of enactment of tax reform statues.

Note 11: We recorded taxes on the inter-company sales of assets during the three and twelve months ended December 31, 2019.

Note 12: Non-GAAP adjustments are tax effected at applicable statutory rates resulting in a difference between the GAAP and Non-GAAP tax rates.

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