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Cabot Microelectronics Corporation Reports Higher Revenue and Diluted EPS Compared to Prior Year

08/05/2020
  • Revenue of $274.7 Million, 1.0% Higher than Last Year Primarily Due to Growth in CMP Slurries and Wood Treatment
     
  • Diluted EPS of $1.17, 82.8% Higher than Last Year; Adjusted Diluted EPS1 of $1.80, 13.2% Higher than Last Year
     
  • Expecting Total Revenue for the Fourth Quarter of Fiscal 2020 to be Up Low Single Digits Sequentially
     
  • Provides Full Year Fiscal 2020 Outlook

AURORA, Ill., Aug. 05, 2020 (GLOBE NEWSWIRE) -- Cabot Microelectronics Corporation (Nasdaq: CCMP), a leading global supplier of consumable materials to semiconductor manufacturers and pipeline companies, today reported financial results for its third quarter of fiscal 2020, which ended June 30, 2020.

Key Highlights

Total company revenue increased 1.0% over the prior year driven by stronger demand for CMP slurries and CMP pads, as well as higher wood treatment business revenue, which more than offset lower revenue in pipeline performance products, primarily due to softer industry conditions. Net income for the quarter was $34.5 million. Adjusted EBITDA was $92.0 million in the quarter, up 7.3% compared with the prior year. Year to date, the company generated $204.1 million in cash flow from operations, and had $354.7 million of cash on hand and $1,076.0 million in total debt as of June 30, 2020, which includes the $150 million drawn from the company’s revolving credit facility in the second quarter.

“We are pleased with our results this quarter, which demonstrate the continued strength and resiliency of our businesses as well as our team’s ability to execute, despite the unprecedented business environment.  I am proud of and thankful for the efforts and dedication of our employees globally, who continue to maintain our essential operations and support our customers despite these challenges,” said David Li, President and CEO of Cabot Microelectronics Corporation. “Although near-term outlook remains uncertain across our end markets, we see steady demand from our semiconductor customers as well as improving conditions in our pipeline performance business in the fourth quarter. We expect to continue to drive growth and best in class profitability by leveraging our positions in the most advanced and challenging technologies as well as our deep customer relationships.”

Key Financial Information for the Third Quarter of Fiscal 2020

  • Revenue was $274.7 million, 1.0% higher than the revenue reported in the same quarter last year. Revenue was down 3.3% compared to the prior quarter primarily due to softer oil and gas industry conditions that negatively impacted revenue in pipeline performance products.
     
  • Net income was $34.5 million, 82.9% higher than last year. Adjusted net income was $53.1 million, 13.3% higher compared to adjusted net income in the prior year. Adjusted net income benefited from higher revenue, lower operating expenses, and lower interest expense in the quarter compared to last year.
     
  • Diluted earnings per share (EPS) was $1.17, 82.8% higher than last year.  Adjusted diluted EPS was $1.80, 13.2% higher than adjusted EPS in the same quarter last year.
     
  • Adjusted EBITDA was $92.0 million, up 7.3% compared to adjusted EBITDA in the same quarter last year.  Adjusted EBITDA margin for the quarter was 33.5%, compared to adjusted EBITDA margin of 31.5% in the same quarter last year.

       
Electronic Materials – Revenue was $220.4 million for the quarter, 3.9% higher than revenue in the same quarter last year. Higher revenue for CMP slurries and CMP pads offset slightly lower revenue for electronic chemicals.  Adjusted EBITDA was $76.9 million, or 34.9% of revenue.

Performance Materials – Revenue was $54.4 million for the quarter, 9.0% lower than revenue in the same quarter last year. The decrease was driven by lower demand for pipeline performance products, which more than offset higher revenue in the wood treatment and QED businesses. Adjusted EBITDA was $27.0 million, or 49.6% of revenue.

Guidance for the Fourth Quarter and Full Year of Fiscal 2020

With continued uncertainty as to the ongoing macroeconomic and industry impact of the COVID-19 pandemic, the company currently expects fiscal fourth quarter revenue to be up low single digits compared to the company’s revenue in the third quarter of fiscal 2020. Sequentially, Electronic Materials revenue is expected to be approximately flat to up low single digits and Performance Materials revenue is expected to be up low to mid-single digits.

The company currently expects full fiscal year 2020 adjusted EBITDA to be between $357 million and $362 million. Additional current expectations are provided on slide 8 in the related slide presentation.

[1] Refer to financial tables and “Use of Certain GAAP, non-GAAP Adjusted Financial Information” in the press release below for information about these non-GAAP financial measures and reconciliations of these non-GAAP measures to their most comparable GAAP measure.

RELATED SLIDE PRESENTATION

A slide presentation related to this press release will be available at ir.cabotcmp.com in the Quarterly Results section of the Investor Relations center at approximately the same time that this press release is issued.

CONFERENCE CALL

Cabot Microelectronics Corporation’s quarterly earnings conference call will be held at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on Thursday, August 6.  The conference call will be available via live webcast and replay from the company’s website, www.cabotcmp.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 1775053.  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 CABOT MICROELECTRONICS CORPORATION

Cabot Microelectronics Corporation, headquartered in Aurora, Illinois, is a leading global supplier of consumable materials to semiconductor manufacturers and pipeline companies.  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.  Cabot Microelectronics Corporation 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 2,000 employees globally. For more information about Cabot Microelectronics Corporation, visit www.cabotcmp.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 presented the following measures considered as non-GAAP by the SEC: adjusted net income, adjusted diluted earnings per share, adjusted EBITDA, adjusted EBITDA margin, free cash flow, and net debt. Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of revenue. Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, adjusted for certain items that affect comparability from period to period.  These adjustments include items related to the company’s acquisition of KMG Chemicals, Inc.  (“KMG”) (“Acquisition”), such as expenses incurred to complete the Acquisition and related integration, costs of restructuring related to the wood treatment business and related adjustments in 2020, costs related to the KMG-Bernuth warehouse fire net of insurance recovery, costs incurred in 2020 related to the Pandemic net of grants received and, in 2019, impact of fair value adjustments to inventory acquired from KMG.  The non-GAAP adjusted 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 impact of the adjustments related to the Acquisition, such as expenses incurred to complete the Acquisition and related integration, acquisition-related amortization expenses, costs of restructuring related to the wood treatment business and related adjustments in 2020, costs related to the KMG-Bernuth warehouse fire net of insurance recovery, costs incurred in 2020 related to the Pandemic net of grants received, 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, and in 2019, impact of fair value adjustments to inventory acquired from KMG are not indicative of its core operating results and thus presents these certain metrics excluding these effects. The presentation of non-GAAP adjusted 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.   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, including the company’s acquisition of KMG, 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 COVID-19 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 Cabot Microelectronics; the company's management; foreign exchange fluctuation; the company's current or future tax rate, including the effects of the Tax Cuts and Jobs Act in the United States (“Tax Act”); 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 Cabot Microelectronics’ beliefs, plans and expectations, are forward-looking statements. Such statements are based on current expectations of Cabot Microelectronics’ 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 Cabot Microelectronics’ filings with the Securities and Exchange Commission (“SEC”), including the risk factors contained in Cabot Microelectronics’ Annual Report on Form 10-K for the fiscal year ended September 30, 2019 and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 to be filed by August 10, 2020.  Except as required by law, Cabot Microelectronics 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
Cabot Microelectronics Corporation
(630) 499-2600

CABOT MICROELECTRONICS CORPORATION        
CONSOLIDATED STATEMENTS OF INCOME        
(Unaudited and amounts in thousands, except per share amounts)        
                       
               
    Quarter Ended   Nine Months Ended  
    June 30, 2020   March 31, 2020   June 30, 2019   June 30, 2020   June 30, 2019  
             
                       
Revenue   $274,727     $284,193     $271,882     $842,063     $759,051    
                       
Cost of sales     152,973       163,091       156,492       470,525       429,508    
                       
Gross profit     121,754       121,102       115,390       371,538       329,543    
                       
Operating expenses:                      
                       
Research, development and technical     12,165       13,230       12,191       38,206       39,009    
                       
Selling, general and administrative     51,847       56,209       50,959       162,495       162,415    
                       
Total operating expenses     64,012       69,439       63,150       200,701       201,424    
                       
Operating income     57,742       51,663       52,240       170,837       128,119    
                       
Interest expense     10,406       10,753       12,757       33,079       32,978    
                       
Interest income     131       143       417       589       2,004    
                       
Other income (expense), net     (201 )     (1,010 )     (472 )     (1,608 )     (2,897 )  
                       
Income before income taxes     47,266       40,043       39,428       136,739       94,248    
                       
Provision for income taxes     12,741       7,144       20,550       30,766       34,790    
                       
Net income   $34,525     $32,899     $18,878     $105,973     $59,458    
                       
                       
Basic earnings per share   $1.19     $1.12     $0.65     $3.63     $2.09    
                       
Diluted earnings per share   $1.17     $1.11     $0.64     $3.58     $2.06    
                       
Weighted average basic shares outstanding     29,079       29,287       29,064       29,157       28,399    
                       
Weighted average diluted shares outstanding   29,456       29,725       29,568       29,603       28,924    
                       

 

CABOT MICROELECTRONICS CORPORATION          
CONSOLIDATED CONDENSED BALANCE SHEETS          
(Unaudited and amounts in thousands)              
                     
              June 30, 2020   September 30, 2019  
                 
      ASSETS:              
                     
Current assets:              
Cash and cash equivalents       $354,708   $188,495  
Accounts receivable, net         137,736     146,113  
Inventories         161,805     145,278  
Prepaid expenses and other current assets         24,623     28,670  
Total current assets         678,872     508,556  
                     
Property, plant and equipment, net         356,022     276,818  
Other long-term assets         1,450,479     1,476,392  
Total assets       $2,485,373   $2,261,766  
                     
                     
      LIABILITIES AND STOCKHOLDERS' EQUITY:            
                     
Current liabilities:              
Accounts payable       $50,211   $54,529  
Short-term debt         150,000     -  
Current portion of long-term debt         13,313     13,313  
Accrued expenses, income taxes payable and other current liabilities     126,399     103,618  
Total current liabilities         339,923     171,460  
                     
Long-term debt, net of current portion         912,691     928,463  
Other long-term liabilities         207,725     181,466  
Total liabilities         1,460,339     1,281,389  
                     
Stockholders' equity         1,025,034     980,377  
Total liabilities and stockholders' equity       $2,485,373   $2,261,766  
                     

 

  CABOT MICROELECTRONICS CORPORATION            
  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    
      June 30, 2020   June 30, 2019    
  GAAP Net income   $34,525     $18,878      
               
  Amortization of acquisition related intangibles     20,786       16,923      
  Acquisition and integration-related expenses     2,735       2,910      
  Costs related to KMG-Bernuth warehouse fire, net of insurance recovery     622       4,450      
  Net costs related to restructuring of wood treatment business1     (293 )     -      
  Costs related to COVID -19 (Pandemic), net of grants received     112       -      
  Charges for fair value write-up of acquired inventory sold     -       42      
  U.S. tax reform     18       9,128      
  Tax effect on adjustments to net income2     (5,356 )     (5,431 )    
  Adjusted Net income   $53,149     $46,900      
               
  1 Represents adjustments to previously recorded severance liability related to the wood treatment business.      
  2 Tax effect on the adjustments was calculated using the U.S. Federal and state blended tax rate for the respective periods as the related adjustments are mainly U.S. driven.    
               
  Reconciliation of GAAP Diluted Earnings Per Share to Non-GAAP Adjusted Diluted Earnings Per Share    
               
      Three Months Ended    
      June 30, 2020   June 30, 2019    
  GAAP Diluted earnings per share   $1.17     $0.64      
  Adjustments (net of tax)3 :            
  Amortization of acquisition related intangibles     0.55       0.44      
  Acquisition and integration-related expenses     0.07       0.08      
  Costs related to KMG-Bernuth warehouse fire, net of insurance recovery     0.02       0.12      
  Net costs related to restructuring of wood treatment business1     (0.01 )     -      
  U.S. tax reform     -       0.31      
  Adjusted Diluted earnings per share   $1.80     $1.59      
               
  3 Tax effect on the adjustments was calculated using the U.S. Federal and state blended tax rate for the respective periods as the related adjustments are mainly U.S. driven.    
               
  Reconciliation of GAAP Revenue to Non-GAAP Adjusted Gross Profit and Gross Margin  
      Three Months Ended  
      June 30, 2020
    June 30, 2019
     
               
  GAAP revenue   $274,727     $271,882      
  Cost of sales     152,973       156,492      
  Gross profit and gross margin   $121,754   44.3 % $115,390   42.4 %  
  Adjustments:            
  Amortization of acquisition related intangibles     3,347       3,469      
  Costs related to KMG-Bernuth warehouse fire, net of insurance recovery     622       4,200      
  Net costs related to restructuring of wood treatment business1     (293 )     -      
  Costs related to the Pandemic, net of grants received     198       -      
  Charges for fair value write-up of acquired inventory sold     -       42      
  Adjusted gross profit and gross margin   $125,628   45.7 % $123,101   45.3 %  
               
  Reconciliation of GAAP Operating expenses to Non-GAAP Adjusted Operating expenses  
      Three Months Ended  
      June 30, 2020
    June 30, 2019
     
               
  GAAP Research, development and technical   $12,165     $12,191      
  GAAP Selling, general, and administrative     51,847       50,959      
  Operating expenses   $64,012     $63,150      
  Adjustments4 :            
  Amortization of acquisition related intangibles     (17,439 )     (13,454 )    
  Acquisition and integration-related expenses     (2,735 )     (2,910 )    
  Costs related to KMG-Bernuth warehouse fire, net of insurance recovery     -       (250 )    
  Costs related to the Pandemic, net of grants received     86       -      
  Adjusted operating expenses   $43,924     $46,536      
               
  4 All the adjustments are related to the Selling, general and administrative expenses.        
               
  Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA and EBITDA Margin  
               
      Three Months Ended  
      June 30, 2020
    June 30, 2019
     
               
  GAAP net income   $34,525     $18,878      
  Interest expense     10,406       12,757      
  Interest income     (131 )     (417 )    
  Provision for income taxes     12,741       20,550      
  Depreciation & amortization     31,324       26,587      
  EBITDA and EBITDA margin5   $88,865   32.3 % $78,355   28.8 %  
  Adjustments (pre-tax):            
  Acquisition and integration-related expenses     2,735       2,910      
  Costs related to KMG-Bernuth warehouse fire, net of insurance recovery     622       4,450      
  Net costs related to restructuring of wood treatment business1     (293 )     -      
  Costs related to the Pandemic, net of grants received     112       -      
  Charges for fair value write-up of acquired inventory sold     -       42      
  Adjusted EBITDA and EBITDA margin6   $92,041   33.5 % $85,757   31.5 %  
               
  5 EBITDA represents earnings before interest, taxes, depreciation and amortization.          
  6 Adjusted EBITDA is calculated by excluding items from EBITDA that are believed to be infrequent or not indicative of the company's continuing operating performance.  
               
               
  Fiscal Year 2020 Guidance Reconciliation 7    
      Fiscal Year 2020 Low
    Fiscal Year 2020 High    
               
  Net income   $134,000     $138,100      
  Interest expense, net8     43,500       43,500      
  Provision for income taxes8     38,000       38,900      
  Depreciation8     42,500       42,500      
  Amortization     90,000       90,000      
  EBITDA (Consolidated)   $348,000     $353,000      
  Acquisition and integration-related expenses     7,800       7,800      
  Costs related to KMG-Bernuth warehouse fire, net of insurance recovery     1,200       1,200      
  Net costs related to restructuring of wood treatment business1     (300 )     (300 )    
  Costs related to the Pandemic, net of grants received     300       300      
  Adjusted EBITDA Guidance (Consolidated)   $357,000     $362,000      
               
  7 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.     
  8 Amounts represent the mid-point of the current financial guidance provided on August 5, 2020.    
               
  Reconciliation of Cash Flow From Operations to Free Cash Flow    
               
      Nine months ended    
      June 30, 2020   June 30, 2019    
               
  Net cash provided by operating activities   $204,083     $117,045      
  Less: Capital expenditures     107,015       32,691      
  Free cash flow   $97,068     $84,354      
               
  Net cash used in investing activities     ($105,428 )     ($1,209,708 )    
               
  Net cash provided by financing activities   $67,201     $908,678      
               
  Reconciliation of GAAP Debt to Net Debt    
           
      June 30, 2020   September 30, 2019    
               
  Total short-term and long-term debt   $1,076,004     $941,776      
  Less: Cash and cash equivalents     354,708       188,495      
  Total net debt   $721,296     $753,281      
               

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Source: Cabot Microelectronics Corporation

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