Press Release

Press Release

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Cabot Microelectronics Corporation Reports Record Results for Fourth Quarter and Full Fiscal Year 2017
  • For the Fourth Fiscal Quarter:
    • Record Quarterly Revenue of $137 Million, 11.5 Percent Higher Than Last Year
    • GAAP Gross Profit Margin of 51.2 Percent of Revenue, Up 140 Basis Points Year-Over-Year; Non-GAAP 52.1 Percent
    • Record GAAP Earnings Per Share of $1.03, Up 24.1 Percent Compared to Last Year; Non-GAAP $1.07
  • For the Full Fiscal Year:
    • Record Annual Revenue of $507 Million, 17.8 Percent Higher Than Last Year
    • GAAP Gross Profit Margin of 50.1 Percent of Revenue, Up 130 Basis Points Year-Over-Year; Non-GAAP 51.1 Percent
    • Record GAAP Earnings Per Share of $3.40, Up 39.9 Percent Compared to Last Year; Non-GAAP $3.56

AURORA, Ill., Oct. 26, 2017 (GLOBE NEWSWIRE) -- Cabot Microelectronics Corporation (Nasdaq:CCMP), the world’s leading supplier of chemical mechanical planarization (CMP) polishing slurries and second largest CMP pads supplier to the semiconductor industry, today reported financial results for its fourth quarter and full fiscal year 2017, which ended September 30.

Total revenue during the fourth fiscal quarter was $136.8 million, 11.5 percent higher than in the same quarter last year, and a record level for the company. This reflects record quarterly revenue from tungsten and dielectrics slurries, and the eighth consecutive quarter of record revenue in CMP pads. Gross profit margin was 51.2 percent of revenue, an increase of 140 basis points over the same quarter last year; non-GAAP gross profit margin was 52.1 percent, excluding amortization expense related to the company’s October 2015 acquisition of NexPlanar Corporation. The company achieved record diluted earnings per share of $1.03, representing an increase of 24.1 percent compared to the same quarter last year; non-GAAP diluted earnings per share were $1.07, excluding the referenced amortization expense. Cash flow from operations was a record $51.4 million.

For the full fiscal year, the company generated record revenue of $507.2 million, 17.8 percent higher than last year, including record annual revenue in its tungsten slurry and polishing pads product areas. The company achieved a gross profit margin of 50.1 percent of revenue, or 130 basis points higher than last year; non-GAAP gross profit margin was 51.1 percent of revenue, excluding the amortization expense. The company achieved record diluted earnings per share of $3.40, representing an increase of 39.9 percent compared to last year; non-GAAP diluted earnings per share were $3.56, excluding the amortization expense. Cash flow from operations was a record $141.4 million for the full fiscal year, representing an increase of $46.2 million compared to the prior year. As of September 30, 2017, the company’s balance sheet reflected a cash balance of $397.9 million and $143.9 million of debt outstanding.

“We are very proud of our strong performance in fiscal 2017, and in particular, our results for the fourth fiscal quarter,” said David Li, President and CEO of Cabot Microelectronics. “The sustained successful execution of our strategic initiatives, coupled with strong semiconductor industry demand, enabled us to grow revenue well in excess of industry growth. We achieved record revenue and profit for both the quarter and for the full fiscal year, with full year earnings per share up by almost 40 percent compared to the prior year.”

Mr. Li continued, “Fiscal 2017 was highlighted by double-digit revenue growth in our three key product areas – tungsten slurries, dielectrics slurries and polishing pads. This year we achieved record tungsten and CMP pads revenue, and also expanded the adoption of our higher performing, higher profitability ceria and colloidal silica-based slurry solutions for dielectrics applications. During the year, we experienced robust demand for our CMP solutions across a wide range of memory and logic applications, including 3D NAND and FinFET technologies, driven by our unrelenting focus on, and ongoing delivery of, a differentiated, value-added total customer experience.”

Mr. Li concluded, “As we enter fiscal 2018, I am confident that we are well-positioned for continued profitable growth given the significant momentum in our tungsten and dielectrics slurries, and polishing pads product areas. We believe that based on our effective execution in these areas, along with our global resources, capabilities and infrastructure, we are differentiated among leading suppliers of specialty materials to the semiconductor industry, and poised to continue to grow faster than the industry.”

Key Financial Information

The company’s record revenue of $136.8 million in the fourth fiscal quarter represents an increase of 11.5 percent from $122.7 million in the same quarter last year. The company achieved record quarterly revenue in its tungsten and dielectrics slurries, and polishing pads product areas, which grew 18.0 percent, 21.2 percent and 14.0 percent year-over-year, respectively.

Total revenue for the full fiscal year was a record $507.2 million, which represents a 17.8 percent increase from $430.4 million in fiscal 2016. The company achieved record annual revenue in its tungsten slurry and CMP pads product areas, which grew 19.5 percent and 31.9 percent year-over-year, respectively; revenue from the company’s dielectrics slurry product area grew 21.3 percent. Annual revenue also benefited from record revenue from the company’s Engineered Surface Finishes business, which includes QED Technologies; revenue in this area was up 24.7 percent compared to last year.

Gross profit for the quarter was 51.2 percent of revenue, which is 140 basis points higher than the 49.8 percent reported in the same quarter a year ago. Gross profit this quarter includes $1.2 million of NexPlanar amortization expense; excluding this, non-GAAP gross profit was 52.1 percent of revenue. Factors impacting gross profit this quarter compared to last year include benefits of lower raw material costs, higher sales volume and a higher valued product mix, partially offset by higher fixed manufacturing costs, including higher incentive compensation expense.

Gross profit for the full fiscal year was 50.1 percent of revenue, which is 130 basis points higher than the 48.8 percent reported last year and slightly above the company’s prior full fiscal year guidance for GAAP gross profit of 49 to 50 percent of revenue. Gross profit this year includes $4.8 million of amortization expense related to NexPlanar; excluding this, non-GAAP gross profit was 51.1 percent of revenue. Factors impacting gross profit this year compared to last year include benefits of higher sales volume, a higher valued product mix and lower raw material costs, partially offset by higher fixed manufacturing costs, including higher incentive compensation expense. For full fiscal year 2018, the company currently expects its GAAP gross profit margin to be between 50 and 52 percent of revenue. This includes approximately 100 basis points of NexPlanar amortization expense.

Operating expenses, which include research, development and technical, selling and marketing, and general and administrative expenses, were $37.0 million in the fourth fiscal quarter, including $0.5 million of NexPlanar amortization expense. Operating expenses were $1.7 million higher than the $35.4 million reported in the same quarter a year ago, primarily due to higher incentive compensation expense, partially offset by a gain on the sale of surplus research and development equipment, and the absence of an impairment charge recorded last year for a NexPlanar intangible asset related to a technology under development.

For the full year, total operating expenses were $142.1 million, including $1.9 million of amortization expense related to NexPlanar. Previously, the company had expected its GAAP operating expenses for the full fiscal year to be between $140 million and $142 million. Operating expenses were $6.4 million higher than the $135.7 million reported in fiscal 2016, primarily due to higher incentive compensation expense. The company currently expects its GAAP operating expenses for full fiscal year 2018 to be between $142 million and $147 million. This includes approximately $2 million of NexPlanar amortization expense.

Operating income for the fourth fiscal quarter represented 24.2 percent of revenue, which was 320 basis points higher than in the same quarter last year. Operating income for the full fiscal year of 22.1 percent of revenue was 480 basis points higher than in fiscal 2016. The significant year-over-year increases represent operating leverage driven by revenue growth combined with the company’s ongoing attention to controlling costs.

The company’s effective tax rate for the fourth fiscal quarter was 19.0 percent, compared to 16.5 percent in the same quarter last year. For the full fiscal year, the effective tax rate was 20.5 percent, which is below the company’s expected effective tax rate range for the full fiscal year of 21 to 22 percent, compared to 15.0 percent in fiscal 2016. The comparative increases are primarily due to the absence of last year’s retroactive reinstatement of the research and experimentation tax credit, and changes in the jurisdictional mix of the company’s earnings. The company currently expects its effective tax rate for full fiscal year 2018 to be within the range of 24 to 27 percent; the expected increase versus the rate for full fiscal year 2017 is primarily due to the expiration of the tax holiday benefit in South Korea based on the company’s investment in new facilities there in fiscal year 2011.

Net income for the quarter was a record $26.5 million, which was 28.0 percent higher than the $20.7 million reported in the same quarter last year. The increase was primarily due to higher revenue and a higher gross profit margin, partially offset by a higher tax rate and higher operating expenses. Excluding amortization expense related to NexPlanar, net income this quarter was $27.6 million on a non-GAAP basis. Net income for the full fiscal year was a record $87.0 million, which increased by 45.3 percent from $59.8 million in fiscal 2016. The increase was primarily due to higher revenue and a higher gross profit margin, partially offset by a higher tax rate and higher operating expenses. Excluding the referenced amortization expense, net income this fiscal year was $91.2 million on a non-GAAP basis.

Diluted earnings per share were a record $1.03 this quarter, which was 24.1 percent higher than the $0.83 reported in the fourth quarter of fiscal 2016. Excluding the amortization expense related to NexPlanar, diluted earnings per share this quarter were $1.07 on a non-GAAP basis. The company achieved record diluted earnings per share of $3.40 for full fiscal year 2017, which is 39.9 percent higher than the $2.43 reported last year. Excluding the amortization expense, diluted earnings per share this fiscal year were $3.56 on a non-GAAP basis.

CONFERENCE CALL
Cabot Microelectronics Corporation’s quarterly earnings conference call will be held today at 9:00 a.m. Central Time. The conference call will be available via live webcast and replay from the company’s website, www.cabotcmp.com, or by phone at (844) 825-4410. Callers outside the U.S. can dial (973) 638-3236. The conference code for the call is 95400341. 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.

USE OF NON-GAAP FINANCIAL INFORMATION
The company presented the following measures considered as non-GAAP by the U.S. Securities and Exchange Commission: gross profit margin, net income and diluted earnings per share, excluding the effects of amortization expense related to its October 2015 acquisition of NexPlanar Corporation. The non-GAAP financial information provided in this press release is 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 NexPlanar amortization expense is not indicative of its core operating results, and thus presents its gross profit margin, net income and diluted earnings per share excluding this expense. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with U.S. GAAP. A reconciliation table of GAAP to non-GAAP financial measures, including gross profit percentage, net income and diluted earnings per share, is contained in this press release.

ABOUT CABOT MICROELECTRONICS CORPORATION
Cabot Microelectronics Corporation, headquartered in Aurora, Illinois, is the world's leading supplier of CMP polishing slurries and second largest CMP pads supplier to the semiconductor industry. 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. The company's mission is to create value by delivering high-performing and innovative solutions that solve its customers’ challenges. The company has approximately 1,150 employees on a global basis. For more information about Cabot Microelectronics Corporation, visit www.cabotcmp.com or contact Trisha Tuntland, Director of Investor Relations at 630-499-2600.

SAFE HARBOR STATEMENT
This news release may include statements that constitute “forward looking statements” within the meaning of federal securities regulations. These forward-looking statements include statements related to: future sales and operating results; growth or contraction, and trends in the industry and markets in which the company participates; the company’s management; various economic or political factors and international or national events; regulatory or legislative activity; product performance; the generation, protection and acquisition of intellectual property, and litigation related to such intellectual property; new product introductions; development of new products, technologies and markets; the company’s supply chain; the financial conditions of the company’s customers; natural disasters; the acquisition of, investment in, or collaboration with other entities; 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, based on a variety of factors; financing facilities and related debt, payment of principal and interest, and compliance with covenants and other terms; the company’s capital structure; the company’s current or future tax rate; and the operation of facilities by Cabot Microelectronics Corporation. These forward-looking statements involve a number of risks, uncertainties, and other factors, including those described from time to time in Cabot Microelectronics’ filings with the SEC, that could cause actual results to differ materially from those described by these forward-looking statements. In particular, see "Risk Factors" in the company’s quarterly report on Form 10-Q for the quarter ended June 30, 2017 and in the company’s annual report on Form 10-K for the fiscal year ended September 30, 2016, both filed with the SEC. Cabot Microelectronics assumes no obligation to update this forward-looking information.

           
CABOT MICROELECTRONICS CORPORATION          
CONSOLIDATED STATEMENTS OF INCOME  
(Unaudited and amounts in thousands, except per share amounts)  
   
   
    Quarter Ended Twelve Months Ended  
    September 30, June 30, September 30, September 30, September 30,  
      2017     2017       2016     2017     2016  
   
Revenue   $   136,784   $   127,957     $   122,684   $   507,179   $   430,449  
               
Cost of goods sold      66,734     65,414       61,598     253,050     220,247  
               
  Gross profit     70,050     62,543       61,086     254,129     210,202  
               
Operating expenses:              
               
  Research, development & technical      13,839     14,333       15,842     55,658     58,532  
               
  Selling & marketing      8,680     7,346       8,057     30,846     27,717  
               
  General & administrative      14,489     13,953       11,454     55,637     49,445  
               
  Total operating expenses     37,008     35,632       35,353     142,141     135,694  
               
Operating income     33,042     26,911       25,733     111,988     74,508  
               
Interest expense     1,127     1,117       1,187     4,529     4,723  
               
Other income (expense), net     798     (115   )   257     1,913     653  
               
Income before income taxes     32,713     25,679       24,803     109,372     70,438  
               
Provision for income taxes      6,211     5,740       4,096     22,420     10,589  
               
  Net income   $   26,502   $   19,939     $   20,707   $   86,952   $   59,849  
               
               
               
Income available to common shareholders   $   26,434   $   19,887     $   20,589   $   86,696   $   59,488  
               
               
Basic earnings per share    $ 1.05   $ 0.79     $ 0.85   $ 3.47   $ 2.47  
               
Weighted average basic shares outstanding      25,236     25,228       24,234     25,015     24,077  
               
Diluted earnings per share    $ 1.03   $ 0.77     $ 0.83   $ 3.40   $ 2.43  
               
Weighted average diluted shares outstanding      25,710     25,721       24,678     25,512     24,477  
   

 

CABOT MICROELECTRONICS CORPORATION      
CONSOLIDATED CONDENSED BALANCE SHEETS      
(Unaudited and amounts in thousands)      
       
  September 30, September 30,  
    2017     2016  
ASSETS:      
       
Current assets:      
  Cash and cash equivalents $   397,890   $   287,479  
  Accounts receivable, net      64,793       62,830  
  Inventories, net     71,873       72,123  
  Other current assets     16,426       14,398  
  Total current assets   550,982     436,830  
       
Property, plant and equipment, net     106,361       106,496  
Other long-term assets     176,757       183,904  
  Total assets $   834,100   $   727,230  
       
       
LIABILITIES AND STOCKHOLDERS' EQUITY:      
       
Current liabilities:      
  Accounts payable $   17,624   $   16,834  
  Current portion of long-term debt     10,938       7,656  
  Accrued expenses, income taxes payable and other current liabilities     62,651       41,395  
  Total current liabilities   91,213     65,885  
       
Long-term debt, net of current portion     132,997       146,961  
Other long-term liabilities     14,853       16,736  
  Total liabilities     239,063       229,582  
       
Stockholders' equity     595,037       497,648  
  Total liabilities and stockholders' equity $   834,100   $   727,230  
       

 

             
CABOT MICROELECTRONICS CORPORATION            
U.S. GAAP to Non-GAAP Reconciliation                
Gross Profit as a Percentage of Revenue, Net Income and Diluted Earnings Per Share        
(Unaudited and amounts in thousands, except per share and percentage amounts)          
                 
The following presents reconciliation of the Non-GAAP financial measures included in the Cabot        
Microelectronics Corporation press release dated October 26, 2017.            
                 
                 
  Three Months Ended September 30, 2017 Twelve Months Ended September 30, 2017    
                 
  U.S. GAAP Adjustments Non-GAAP U.S. GAAP Adjustments Non-GAAP    
Gross profit $   70,050   $   1,199 $   71,249   $   254,129   $   4,794 $   258,923      
Gross profit as a percentage of revenue (1)   51.2 %     52.1 %   50.1 %     51.1 %    
                 
                 
Net income (2) $   26,502   $   1,063 $   27,565   $   86,952   $   4,265 $   91,217      
                 
                 
Diluted earnings per share (3) $ 1.03   $ 0.04 $ 1.07   $ 3.40   $ 0.16 $ 3.56      
                 
                 
(1) Non-GAAP gross profit as a percentage of revenue for the three months ended September 30, 2017 excludes $1,199 of NexPlanar amortization expense.
  Non-GAAP gross profit as a percentage of revenue for the twelve months ended September 30, 2017 excludes $4,794 of NexPlanar amortization expense.
                 
                 
(2) Non-GAAP net income for the three months ended September 30, 2017 excludes the item mentioned above in (1) plus $468 of NexPlanar amortization
  expense recorded in operating expenses.  These adjustments are partially offset by a $604 related increase in the provision for income taxes.  
  Non-GAAP net income for the twelve months ended September 30, 2017 excludes the item mentioned above in (1) plus $1,871 of NexPlanar amortization
  expense recorded in operating expenses.  These adjustments are partially offset by a $2,400 related increase in the provision for income taxes.
                 
                 
(3) Non-GAAP diluted earnings per share is calculated based upon Non-GAAP net income.        

Trisha Tuntland
Director of Investor Relations
630-499-2600

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