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| 8-K - 8-K - CMC Materials, Inc. | ccmp-20210203.htm |
EXHIBIT 99.1
PRESS RELEASE
CMC Materials Reports Record Revenue for the First Quarter of Fiscal 2021 and Raises Full Year Guidance
•Record Revenue of $287.9 Million, 1.7% Higher than Last Year and 5.0% Higher Sequentially Due to Strong Growth in CMP Slurries and CMP Pads
•Diluted Earnings Per Share (EPS) of $1.07; Adjusted Diluted EPS1 of $1.92, Flat Compared to Last Year
•Expecting Revenue for Second Quarter Fiscal 2021 to be Up Low Single Digits Sequentially
•Raises Full Fiscal Year 2021 Adjusted EBITDA to be Between $367 Million and $387 Million
AURORA, IL, February 3, 2021 – CMC Materials, Inc. (Nasdaq: CCMP), a leading global supplier of consumable materials primarily to semiconductor manufacturers, today reported financial results for its first quarter of fiscal 2021, which ended December 31, 2020.
Key Highlights for the First Quarter
Stronger demand in Electronic Materials, which represents over 80% of the company’s revenue, drove a revenue increase of 1.7% compared to the same quarter last year. The increase was slightly offset by lower revenue from pipeline and industrial materials (PIM) products, which continues to be adversely impacted by the COVID-19 pandemic. Net income was $31.5 million compared to $38.5 million in the prior year primarily due to the $7.3 million impairment charge the company took in the quarter for its previously announced strategic decision to exit the wood treatment business by approximately the end of calendar year 2021. Adjusted EBITDA1 was $91.6 million, compared to $95.3 million in the prior year, primarily due to a prior year benefit of $5 million from the timing of certain manufacturing variances. During the quarter, the company generated $54.0 million in cash flow from operations, and $293.2 million in the last twelve months.
“Our record revenue this quarter is a reflection of our continued focused execution and innovation, as well as healthy semiconductor industry conditions,” said David Li, President and CEO of CMC Materials, Inc. “Looking ahead, we believe we are well positioned to deliver sequential growth above this record quarter given our robust customer positions and the expectations for continued strength in the semiconductor industry, as well as stabilization in the oil transport and demand sector. We also want to highlight the release of our inaugural Corporate Sustainability Report, which we believe captures our industry leading performance in this important area, and our efforts and ongoing commitment towards employee safety and making a positive impact to the communities in which we operate.”
Key Financial Information for the First Quarter
•Revenue was $287.9 million, 1.7% higher than the same quarter last year. Revenue was up 5.0% sequentially primarily due to higher revenue in CMP slurries and CMP pads.
•Net income was $31.5 million compared to $38.5 million last year. Adjusted net income1 was $56.8 million, 0.7% lower compared to the prior year, primarily due to the timing of certain manufacturing variances recorded in the prior year, partially offset by higher revenue and lower interest expense.
•Diluted EPS was $1.07. Adjusted diluted EPS1 was $1.92, flat compared to the same quarter last year.
•Adjusted EBITDA1 was $91.6 million, down 3.9% compared to last year. Adjusted EBITDA margin1 for the quarter was 31.8%, compared to adjusted EBITDA margin of 33.6% in the same quarter last year, which benefited from the timing of certain manufacturing variances.
1Refer to financial tables and “Use of Certain GAAP, non-GAAP Adjusted Financial Information” below for information about these non-GAAP financial measures and reconciliations of these non-GAAP measures to their most comparable GAAP measure.
Electronic Materials – Revenue was $236.8 million for the quarter, 7.3% higher than revenue in the same quarter last year and 6.3% higher sequentially due to higher revenue in CMP slurries, CMP pads and electronic chemicals. Adjusted EBITDA was $80.8 million, or 34.1% of revenue.
Performance Materials – Revenue was $51.1 million for the quarter, 18.2% lower than revenue in the same quarter last year, driven primarily by the impact of the pandemic on demand for PIM products. Higher revenue in the wood treatment and QED businesses partially offset this impact. Revenue was approximately flat sequentially. Adjusted EBITDA was $23.0 million, or 45.0% of revenue.
Current Financial Guidance
Sequentially, the company currently expects revenue in the second quarter of fiscal 2021 to be up low single digits compared to revenue in the first quarter. Electronic Materials revenue is expected to be up low single digits and Performance Materials revenue is expected to be up high single digits for the quarter.
The company is increasing full fiscal year 2021 adjusted EBITDA to be between $367 million and $387 million.
With respect to this guidance, and additional current expectations provided on page 11 of the company’s related slide and prepared commentary document, the company notes the continued uncertainty as to the ongoing macroeconomic environment and the impact of the pandemic on the industries in which the company participates.
RELATED SLIDE PRESENTATION AND PREPARED COMMENTARY
A slide presentation and corresponding prepared commentary related to this press release will be available at cmcmaterials.com in the Quarterly Results section of the Investor Relations center at approximately the same time that this press release is issued.
CONFERENCE CALL
CMC Materials’ quarterly earnings conference call will be held at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on Thursday, February 4. The conference call will be available via live webcast and replay
from the company’s website, cmcmaterials.com, or by phone at (833) 714-0937. Callers outside the U.S. may dial (778) 560-2685. The conference code for the call is 4539453. A transcript of the formal comments made during the conference call will also be available in the Investor Relations section of the company’s website.
ABOUT CMC MATERIALS, INC.
CMC Materials, Inc., headquartered in Aurora, Illinois, is a leading global supplier of consumable materials to primarily semiconductor manufacturers. The company’s products play a critical role in the production of advanced semiconductor devices, helping to enable the manufacture of smaller, faster and more complex devices by its customers. CMC Materials, Inc. is also a leading provider of performance materials to pipeline operators. The company's mission is to create value by delivering high-performing and innovative solutions that solve its customers’ challenges. The company has approximately 2,100 employees globally. For more information about CMC Materials, Inc., visit www.cmcmaterials.com, or contact Colleen Mumford, Vice President, Communications and Marketing, at 630-499-2600.
USE OF CERTAIN GAAP AND NON-GAAP ADJUSTED FINANCIAL INFORMATION
The company’s financial results are provided in accordance with accounting principles generally accepted in the United States of America (GAAP) and using certain non-GAAP financial measures. In particular, the Company presents the following non-GAAP financial measures: adjusted net income, adjusted diluted earnings per share, adjusted EBITDA, adjusted EBITDA margin, free cash flow, and net debt. Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, and excludes certain items that affect comparability from period to period. Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of revenue.
The non-GAAP financial measures provided in this press release are a supplement to, and not a substitute for, the company’s financial results presented in accordance with U.S. GAAP. These non-GAAP financial measures are provided to enhance the investor's understanding about the company's ongoing operations. Specifically, the company believes the impact of the adjustments related to the acquisition of KMG Chemicals, Inc. (“KMG”)(“Acquisition”), such as expenses incurred to complete the Acquisition and related integration and acquisition-related amortization expenses, costs of restructuring and impairments related to the wood treatment business, costs incurred related to the COVID-19 pandemic (“Pandemic”) net of grants received, and in fiscal 2020, costs related to the KMG-Bernuth warehouse fire net of insurance recovery, and the effects of Tax Cuts and Jobs Act in December 2017 in the United States (“Tax Act”) and the issued final regulations related to the Tax Act, are not indicative of its core operating results and thus presents these certain measures excluding these effects. The presentation of non-GAAP financial measures is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with U.S. GAAP. Reconciliations of non-GAAP measures to their most comparable GAAP measures are included in the financial statements portion of this press release.
Adjusted EBITDA for the Electronic Materials and Performance Materials segments is presented in conformity with Accounting Standards Codification Topic 280, Segment Reporting. This measure is reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. For these reasons, this measure is excluded from the definition of non-GAAP financial measures under the SEC Regulation G and Item 10(e) of Regulation S-K.
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements, which address a variety of subjects including, for example, future sales and operating results; growth or contraction, and trends in the industries and markets in which the company participates such as the semiconductor, and oil and gas, industries; the acquisition of, investment in, or collaboration with other entities, and the expected benefits and synergies of such acquisitions; divestment or disposition, or cessation of investment in certain, of the company’s businesses; new product introductions; development of new products, technologies and markets; product performance; the financial conditions of the company's customers; the competitive landscape that relates to the company’s business; the company's supply chain; natural disasters; various economic or political factors and international or national events, including related to global public health crises such as the Pandemic, and the enactment of trade sanctions, tariffs, or other similar matters; the generation, protection and acquisition of intellectual property, and litigation related to such intellectual property or third party intellectual property; environmental, health and safety laws and regulations, and related compliance; the operation of facilities by the company; the company's management; foreign exchange fluctuation; the company's current or future tax rate, including the effects of changes to tax laws in the jurisdictions in which the company operates; cybersecurity threats; financing facilities and related debt, pay off or payment of principal and interest, and compliance with covenants and other terms; and, uses and investment of the company's cash balance, including dividends and share repurchases, which may be suspended, terminated or modified at any time for any reason by the company, based on a variety of factors. Statements that are not historical facts, including statements about CMC Materials’ beliefs, plans and expectations, are forward-looking statements. Such statements are based on current expectations of CMC Materials’ management and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. For information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to CMC Materials’ filings with the Securities and Exchange Commission (“SEC”), including the risk factors contained in CMC Materials’ Annual Report on Form 10-K for the fiscal year ended September 30, 2020 filed on November 17, 2020, and its Quarterly Report on Form 10-Q for the quarter ended December 31, 2020, which the Company expects to file by February 9, 2021. Except as required by law, CMC Materials undertakes no obligation to update forward-looking statements made by it to reflect new information, subsequent events or circumstances.
Contact:
Colleen Mumford
Vice President, Communications and Marketing
CMC Materials, Inc.
(630) 499-2600
CMC MATERIALS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited and amounts in thousands, except per share amounts)
| Quarter Ended | |||||||||||||||||
| December 31, 2020 | September 30, 2020 | December 31, 2019 | |||||||||||||||
| Revenue | $ | 287,863 | $ | 274,207 | $ | 283,143 | |||||||||||
| Cost of sales | 164,959 | 157,144 | 154,461 | ||||||||||||||
| Gross profit | 122,904 | 117,063 | 128,682 | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Research, development and technical | 12,428 | 14,105 | 12,811 | ||||||||||||||
| Selling, general and administrative | 55,920 | 54,576 | 54,439 | ||||||||||||||
| Asset impairment charges | 7,347 | 2,314 | — | ||||||||||||||
| Total operating expenses | 75,695 | 70,995 | 67,250 | ||||||||||||||
| Operating income | 47,209 | 46,068 | 61,432 | ||||||||||||||
| Interest expense | 9,608 | 9,431 | 11,920 | ||||||||||||||
| Interest income | 23 | 81 | 315 | ||||||||||||||
| Other income (expense), net | 1,452 | (110) | (397) | ||||||||||||||
| Income before income taxes | 39,076 | 36,608 | 49,430 | ||||||||||||||
| Provision for (benefit from) income taxes | 7,546 | (247) | 10,881 | ||||||||||||||
| Net income | $ | 31,530 | $ | 36,855 | $ | 38,549 | |||||||||||
| Basic earnings per share | $ | 1.08 | $ | 1.27 | $ | 1.32 | |||||||||||
| Diluted earnings per share | $ | 1.07 | $ | 1.25 | $ | 1.30 | |||||||||||
| Weighted average basic shares outstanding | 29,123 | 29,082 | 29,137 | ||||||||||||||
| Weighted average diluted shares outstanding | 29,598 | 29,520 | 29,694 | ||||||||||||||
CMC MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited and amounts in thousands)
| December 31, 2020 | September 30, 2020 | ||||||||||
| ASSETS: | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 278,895 | $ | 257,354 | |||||||
| Accounts receivable, net | 139,840 | 134,023 | |||||||||
| Inventories | 157,355 | 159,134 | |||||||||
| Prepaid expenses and other current assets | 27,830 | 26,558 | |||||||||
| Total current assets | 603,920 | 577,069 | |||||||||
| Property, plant and equipment, net | 365,871 | 362,067 | |||||||||
| Other long-term assets | 1,421,155 | 1,437,331 | |||||||||
| Total assets | $ | 2,390,946 | $ | 2,376,467 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY: | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 49,266 | $ | 49,254 | |||||||
| Current portion of long-term debt | 10,650 | 10,650 | |||||||||
| Accrued expenses, income taxes payable and other current liabilities | 98,874 | 121,442 | |||||||||
| Total current liabilities | 158,790 | 181,346 | |||||||||
| Long-term debt, net of current portion | 908,834 | 910,764 | |||||||||
| Other long-term liabilities | 214,594 | 210,044 | |||||||||
| Total liabilities | 1,282,218 | 1,302,154 | |||||||||
| Stockholders' equity | 1,108,728 | 1,074,313 | |||||||||
| Total liabilities and stockholders' equity | $ | 2,390,946 | $ | 2,376,467 | |||||||
CMC MATERIALS, INC.
Unaudited Reconciliation of Certain GAAP Financial Measures to Certain Non-GAAP Financial Measures
(Unaudited and amounts in thousands, except per share and percentage amounts)
| Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income | |||||||||||
| Three Months Ended | |||||||||||
| December 31, 2020 | December 31, 2019 | ||||||||||
| GAAP Net income | $ | 31,530 | $ | 38,549 | |||||||
| Amortization of acquisition related intangibles | 20,201 | 21,361 | |||||||||
| Acquisition and integration-related expenses | 2,369 | 2,204 | |||||||||
| Costs related to KMG-Bernuth warehouse fire, net of insurance recovery | — | 392 | |||||||||
| Net costs related to restructuring of wood treatment business | 26 | — | |||||||||
| Costs related to Pandemic, net of grants received | 1,262 | — | |||||||||
| U.S. tax reform | — | 7 | |||||||||
| Charges related to asset impairment of wood treatment | 7,347 | — | |||||||||
Tax effect on adjustments to net income1 | (5,948) | (5,354) | |||||||||
| Adjusted Net income | $ | 56,787 | $ | 57,159 | |||||||
| Reconciliation of GAAP Diluted Earnings Per Share to Non-GAAP Adjusted Diluted Earnings Per Share | |||||||||||
| Three Months Ended | |||||||||||
| December 31, 2020 | December 31, 2019 | ||||||||||
| GAAP Diluted earnings per share | $ | 1.07 | $ | 1.30 | |||||||
Adjustments (net of tax)2 : | |||||||||||
| Amortization of acquisition related intangibles | 0.53 | 0.55 | |||||||||
| Acquisition and integration-related expenses | 0.06 | 0.06 | |||||||||
| Costs related to KMG-Bernuth warehouse fire, net of insurance recovery | — | 0.01 | |||||||||
| Costs related to the Pandemic, net of grants received | 0.03 | — | |||||||||
| Charges related to asset impairment of wood treatment | 0.23 | — | |||||||||
| U.S. tax reform | — | — | |||||||||
| Adjusted Diluted earnings per share | $ | 1.92 | $ | 1.92 | |||||||
| Reconciliation of GAAP Revenue to Non-GAAP Adjusted Gross Profit and Gross Margin | |||||||||||
| Three Months Ended | |||||||||||
| December 31, 2020 | December 31, 2019 | ||||||||||
| GAAP Revenue | $ | 287,863 | $ | 283,143 | |||||||
| Cost of sales | 164,959 | 154,461 | |||||||||
| Gross profit | $ | 122,904 | $ | 128,682 | |||||||
| Gross margin | 42.7 | % | 45.4 | % | |||||||
| Adjustments: | |||||||||||
| Amortization of acquisition related intangibles | 3,232 | 3,338 | |||||||||
| Costs related to KMG-Bernuth warehouse fire, net of insurance recovery | — | 392 | |||||||||
| Net costs related to restructuring of wood treatment business | 26 | — | |||||||||
| Costs related to the Pandemic, net of grants received | 1,176 | — | |||||||||
| Adjusted gross profit | $ | 127,338 | $ | 132,412 | |||||||
| Adjusted gross margin | 44.2 | % | 46.8 | % | |||||||
| Reconciliation of GAAP Operating expenses to Non-GAAP Adjusted Operating expenses | |||||||||||
| Three Months Ended | |||||||||||
| December 31, 2020 | December 31, 2019 | ||||||||||
| GAAP Research, development and technical | $ | 12,428 | $ | 12,811 | |||||||
| GAAP Selling, general, and administrative | 55,920 | 54,439 | |||||||||
| GAAP Asset impairment charges | 7,347 | — | |||||||||
| Operating expenses | $ | 75,695 | $ | 67,250 | |||||||
Adjustments2 : | |||||||||||
| Amortization of acquisition related intangibles | (16,969) | (18,023) | |||||||||
| Acquisition and integration-related expenses | (2,369) | (2,204) | |||||||||
| Costs related to the Pandemic, net of grants received | (86) | — | |||||||||
| Charges related to asset impairment of wood treatment | (7,347) | — | |||||||||
| Adjusted operating expenses | $ | 48,924 | $ | 47,023 | |||||||
| Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA and EBITDA Margin | ||||||||||||||
| Three Months Ended | ||||||||||||||
| December 31, 2020 | December 31, 2019 | |||||||||||||
| GAAP Net income | $ | 31,530 | $ | 38,549 | ||||||||||
| Interest expense | 9,608 | 11,920 | ||||||||||||
| Interest income | (23) | (315) | ||||||||||||
| Provision for income taxes | 7,546 | 10,881 | ||||||||||||
| Depreciation & amortization | 31,891 | 31,642 | ||||||||||||
| EBITDA | 80,552 | 92,677 | ||||||||||||
| EBITDA margin | 28.0 | % | 32.7 | % | ||||||||||
| Adjustments (pre-tax): | ||||||||||||||
| Acquisition and integration-related expenses | 2,369 | 2,204 | ||||||||||||
| Costs related to KMG-Bernuth warehouse fire, net of insurance recovery | — | 392 | ||||||||||||
| Net costs related to restructuring of wood treatment business | 26 | — | ||||||||||||
| Costs related to the Pandemic, net of grants received | 1,262 | — | ||||||||||||
| Charges related to asset impairment of wood treatment | 7,347 | — | ||||||||||||
| Adjusted EBITDA | $ | 91,556 | $ | 95,273 | ||||||||||
| Adjusted EBITDA margin | 31.8 | % | 33.6 | % | ||||||||||
Fiscal Year 2021 Guidance Reconciliation 3 | |||||||||||
| Fiscal Year 2021 | Fiscal Year 2021 | ||||||||||
| Low | High | ||||||||||
| Net income | $ | 141,000 | $ | 157,000 | |||||||
Interest expense, net4 | 39,000 | 39,000 | |||||||||
Provision for income taxes4 | 39,000 | 43,000 | |||||||||
Depreciation4 | 52,500 | 52,500 | |||||||||
| Amortization | 85,000 | 85,000 | |||||||||
| EBITDA (Consolidated) | $ | 356,500 | $ | 376,500 | |||||||
Acquisition and integration-related expenses5 | 2,369 | 2,369 | |||||||||
Net costs related to restructuring of wood treatment business5 | 26 | 26 | |||||||||
Costs related to the Pandemic, net of grants received5 | 1,262 | 1,262 | |||||||||
Charges related to asset impairment of wood treatment5 | 7,347 | 7,347 | |||||||||
| Adjusted EBITDA Guidance - Consolidated | $ | 367,504 | $ | 387,504 | |||||||
| Reconciliation of Cash Flow From Operations to Free Cash Flow | |||||||||||
| December 31, 2020 | December 31, 2019 | ||||||||||
| Net cash provided by operating activities | $ | 54,038 | $ | 48,124 | |||||||
| Less: Capital expenditures | 11,939 | 26,013 | |||||||||
| Free cash flow | $ | 42,099 | $ | 22,111 | |||||||
| Net cash used in investing activities | $ | (11,586) | $ | (25,470) | |||||||
| Net cash used in financing activities | $ | (25,364) | $ | (19,264) | |||||||
| Reconciliation of GAAP Debt to Net Debt | |||||||||||
| December 31, 2020 | September 30, 2020 | ||||||||||
| Total short-term and long-term debt | $ | 919,484 | $ | 921,414 | |||||||
| Less: Cash and cash equivalents | 278,895 | 257,354 | |||||||||
| Total net debt | $ | 640,589 | $ | 664,060 | |||||||
1 Tax effect on the adjustments were calculated using the U.S. Federal and state blended tax rate for the respective periods as the related adjustments are mainly U.S. driven.
2 All the adjustments are related to the Selling, general and administrative expenses.
3 This is a reconciliation of our indicated full year net income to our adjusted EBITDA. The amounts above may not reflect certain future charges costs and/or gains that are inherently difficult to predict and estimate due to their unknown timing, effect and/or significance, including impairment charges associated with the anticipated closure of our wood treatment business.
4 Amounts represent the mid-point of the current financial guidance provided on November 11, 2020.
5 Amounts represent actual Non-GAAP adjustments in the first quarter fiscal year 2021.