Market Overview

Cabot Microelectronics Corporation Reports Record Revenue for Fourth Quarter and Full Fiscal Year 2019

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Fourth Fiscal Quarter

  • Record Revenue of $278.6 Million, $121.9 Million, or 77.8% Higher Than Last Year; Pro Forma Revenue was Essentially Flat Compared with Last Year1
     
  • Net Loss of $20.2 Million, $68.5 Million Lower Than Last Year; Adjusted Pro Forma Net Income of $49.8 Million, $1.1 Million, or 2.2% Lower Than Last Year1
     
  • Reported Net Loss Includes a Non-Cash Impairment Charge of $67.4 Million2, or $50.3 Million After Tax, Associated with Management's Decision to Cease Future Investments in KMG-Bernuth Wood Treatment Business
     
  • Loss Per Share of $0.70, $2.54 Lower Than Last Year; Adjusted Pro Forma Diluted Earnings Per Share of $1.68, $0.05, or 2.9% Lower Than Last Year1
     
  • Adjusted Pro Forma EBITDA of $85.3 Million, $1.4 Million, or 1.6% Lower Than Last Year1; Adjusted Pro Forma EBITDA of 30.6% of Revenue, 50 Basis Points Lower Than Last Year

Full Fiscal Year 2019

  • Record Revenue of $1,037.7 Million, $447.6 Million, or 75.8% Higher Than Last Year; Pro Forma Revenue of $1,099.7 Million was $36.1 Million, or 3.4% Higher Than Last Year1
     
  • Net Income of $39.2 Million, $70.8 Million, or 64.4% Lower Than Last Year; Adjusted Pro Forma Net Income of $198.4 Million, $17.0 Million, or 9.4% Higher Than Last Year1
     
  • Diluted Earnings Per Share of $1.35, $2.84, or 67.8% Lower Than Last Year; Adjusted Pro Forma Diluted Earnings Per Share of $6.72, $0.57, or 9.3% Higher Than Last Year1
     
  • Adjusted EBITDA of $333.4 Million; Adjusted Pro Forma EBITDA of $345.4 Million, $34.4 Million, or 11.0% Higher Than Last Year1; Adjusted Pro Forma EBITDA of 31.4% of Revenue, 220 Basis Points Higher Than Last Year
     
  • Expecting Full Year Fiscal 2020 Adjusted EBITDA Between $350 Million and $380 Million

AURORA, Ill., Nov. 17, 2019 (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 fourth quarter and full fiscal year 2019, which ended September 30, 2019.

Key Highlights

The company delivered record revenue of $278.6 million in the fourth fiscal quarter, essentially flat compared with the pro forma revenue in the same quarter last year. The year-over-year revenue growth in CMP pads, electronic chemicals and pipeline performance products offset lower CMP slurries revenue due to semiconductor industry softness.  Adjusted pro forma EBITDA was $85.3 million, or 30.6% of revenue, in the quarter. Full year revenue was a record $1,037.7 million, $447.6 million, or 75.8% higher than last year primarily due to the company's acquisition of KMG Chemicals, Inc. ("KMG"), and growth of its CMP pads business. The company generated $177.1 million in cash flow from operations during the year, and had $188.5 million of cash on hand and $941.8 million in total debt as of September 30, 2019. The company has made a decision to focus its future capital investments on high-growth businesses complementary to its core, and to cease future investments in the KMG-Bernuth wood treatment business; thus, it recorded a non-cash impairment charge of $67.4 million2, or $50.3 million after-tax.

"We are proud of another year of record results for our company," said David Li, President and CEO of Cabot Microelectronics Corporation. "We completed the largest acquisition in our history, which broadened our product portfolio and geographic reach, and nearly doubled our size. With some signs of stabilization in the semiconductor industry and continued robust demand for our pipeline performance products, we look forward to another year of strong performance in fiscal 2020, and remain optimistic about the bright future for our company with continued growth expectations for our revenue and profitability."   

1  Adjusted pro forma results, including adjusted pro forma gross margin, adjusted pro forma net income, adjusted pro forma EBITDA and adjusted pro forma diluted EPS, are considered as non-GAAP financial measures by the U.S. Securities and Exchange Commission (SEC).  These adjusted pro forma results are presented as if the company's acquisition of KMG Chemicals, Inc. ("KMG") had been consummated on October 1, 2017, and exclude the impact of non-recurring acquisition and integration related costs, acquisition-related amortization expenses, the effect of the enactment of the Tax Cuts and Jobs Act in December 2017 in the United States ("tax act") and the newly issued final regulations related to the tax act, the effect of asset impairment and restructuring charges related to the company's wood treatment business (recorded in fourth quarter of fiscal 2019), and certain costs related to a warehouse fire at KMG-Bernuth in Tuscaloosa, Alabama (recorded in third and fourth quarters of fiscal 2019). See "Use of Certain GAAP and Non-GAAP Adjusted Pro Forma Financial Information" below for more information about these measures.  In addition, reconciliations of these non-GAAP measures to their most comparable GAAP measures and reconciliations of selected pro forma financial information to adjusted pro forma financial information are included in the financial statements portion of this press release.
Asset impairment charge for the KMG-Bernuth wood treatment business is preliminary and subject to finalization of impairment analysis and control procedures.

Key Financial Information for Fourth Quarter of Fiscal 2019

  • Revenue was $278.6 million, which is $121.9 million, or 77.8% higher than the revenue reported in the same quarter last year. Pro forma revenue was essentially flat compared to the same quarter last year as revenue growth in CMP pads, electronic chemicals and pipeline performance products offset lower CMP slurries revenue. Electronic chemicals revenue benefited from growth in advanced logic while CMP pads continued to gain traction with customers. CMP slurries revenue declined due to soft semiconductor industry demand, primarily from memory customers.
     
  • Net loss for the quarter was $20.2 million, which is $68.5 million lower than in the same quarter last year. Excluding the impact of acquisition-related amortization and integration expenses, additional cleanup costs related to a wood treatment business warehouse fire in Tuscaloosa, Alabama, which occurred in the third quarter of fiscal 2019, and the asset impairment and restructuring charges related to the wood treatment business, adjusted pro forma net income was $49.8 million, which is $1.1 million, or 2.2%, lower than in the prior year.
     
  • Loss per share was $0.70 this quarter, which is $2.54 lower than in the fourth quarter of fiscal 2018.  Adjusted pro forma EPS was $1.68, which is $0.05, or 2.9%, lower than in the same quarter last year.
     
  • Adjusted pro forma EBITDA was $85.3 million, which is $1.4 million, or 1.6%, lower than in the same quarter last year, primarily due to lower gross margin, which was partially offset by lower selling, general and administrative expenses.  Adjusted pro forma EBITDA margin for the quarter was 30.6%, compared to 31.1% in the same quarter last year.

Electronic Materials – Revenue was $217.5 million, which is $8.0 million, or 3.6%, lower than pro forma revenue in the same quarter last year. CMP pads and electronic chemicals delivered results that were 1.8% and 1.5% higher, respectively, than in the same quarter last year. CMP slurries revenue declined 7.7% from last year's quarter, primarily due to softer industry conditions and lower demand from memory customers.  The Electronic Materials segment adjusted EBITDA was $74.3 million, or 34.2% of revenue.

Performance Materials – Revenue was $61.2 million for the quarter, which is $7.8 million, or 14.7%, higher than pro forma revenue in the prior year's quarter.  The increase was driven by higher revenue from pipeline performance products, which was partially offset by a decline in QED revenue. The Performance Materials segment adjusted EBITDA was $28.2 million, or 46.1% of revenue.

Asset Impairment Charge
During the quarter, the company made a decision to further focus its future capital investments on high-growth core businesses such as pipeline performance products, CMP slurries and pads and electronic chemicals. As a result, it has decided to cease future investment in the wood treatment business and not construct a new production facility to replace operations in Matamoros, Mexico and Tuscaloosa, Alabama. The company is considering various options regarding this business.  This decision has triggered a non-cash impairment charge of $67.4 million, or $50.3 million after tax, that negatively impacted fourth fiscal quarter and full year reported results; this amount is preliminary and subject to finalization of procedures.

Key Financial Information for Full Fiscal Year 2019

  • Revenue was $1,037.7 million, which is $447.6 million, or 75.8% higher than the revenue reported in fiscal year 2018. Pro forma revenue of $1099.7 million was $36.1 million, or 3.4%, higher compared to last year. Results benefited from revenue growth in CMP pads and pipeline performance products, but were offset by lower CMP slurries revenue. CMP slurries revenue declined due to soft semiconductor industry demand, primarily from memory and foundry customers.
     
  • Net income was $39.2 million, which is $70.8 million, or 64.4% lower than in fiscal year 2018. Excluding the impact of acquisition-related amortization and integration expenses, an adjustment related to newly issued final regulations for the tax act, additional cleanup costs related to the wood treatment business warehouse fire in Tuscaloosa, Alabama, and the asset impairment and restructuring charges related to the wood treatment business, adjusted pro forma net income was $198.4 million, which is $17.0 million, or 9.4%, higher than in the prior year.

  • Diluted EPS was $1.35, which is $2.84, or 67.8% lower than in fiscal year 2018.  Adjusted pro forma EPS was $6.72, which is $0.57, or 9.3%, higher than last year.
     
  • Adjusted pro forma EBITDA was $345.4 million, which is $34.4 million, or 11.0% higher than in fiscal year 2018, primarily due to lower selling, general and administrative expenses.  Adjusted pro forma EBITDA margin was 31.4%.

Guidance for First Quarter and Full Fiscal Year 2020

For the first quarter of fiscal 2020, the company currently expects total revenue to be approximately flat compared to the company's revenue for the fourth quarter of fiscal 2019. Electronic Materials revenue is expected to be approximately flat sequentially and Performance Materials revenue is expected to be approximately flat to up low single digits sequentially.

The company currently expects full fiscal year 2020 adjusted EBITDA to be between $350 million and $380 million. Additional current expectations are provided on slide 10 in the related slide presentation.

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 Monday, November 18.  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. may dial (973) 638-3236. The conference code for the call is 1096337.  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 companies.  The company's mission is to create value by delivering high-performing and innovative solutions that solve its customers' challenges.  The company has approximately 1,900 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 PRO FORMA FINANCIAL INFORMATION
The company presented the following measures considered as non-GAAP by the SEC: adjusted pro forma EBITDA (earnings before interest, taxes, depreciation and amortization), adjusted pro forma EBITDA margin, adjusted pro forma net income and adjusted pro forma diluted earnings per share. These adjusted pro forma results are presented as if the company's acquisition of KMG Chemicals, Inc. ("KMG"), had been consummated on October 1, 2017 and exclude the impact of non-recurring acquisition and integration related costs, acquisition related amortization expenses, the adjustments related to the effect of the enactment of the Tax Cuts and Jobs Act in December 2017 in the United States ("tax act") and the newly issued final regulations related to the tax act, the effect of asset impairment and restructuring charges related to the company's wood treatment business, and certain costs related to a warehouse fire at KMG-Bernuth in Tuscaloosa, Alabama.  The non-GAAP adjusted pro forma 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 adjusted pro forma 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 effect of the enactment of the Tax Cuts and Jobs Act in December 2017 in the United States ("tax act") and the newly issued final regulations related to the tax act, KMG acquisition and integration-related expenses, the effect of asset impairment and restructuring charges related to the company's wood treatment business, certain costs related to a warehouse fire at KMG-Bernuth in Tuscaloosa, Alabama, and acquisition-related amortization expenses are not indicative of its core operating results, and thus presents these certain metrics excluding these effects.  The presentation of non-GAAP adjusted pro forma 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 and reconciliations of pro forma financial information to adjusted pro forma financial information are included in the financial statements portion of this press release.

The company has not quantitatively reconciled its guidance for adjusted EBITDA to its most comparable GAAP measure because the company does not provide specific guidance for the various reconciling items as certain items that impact this measure have not occurred, are out of the company's control, or cannot be reasonably predicted.  Accordingly, a reconciliation to the nearest GAAP financial metric is not available without unreasonable effort.  Please note that the unavailable reconciling items could significantly impact the company's results.

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 industry and markets in which the Company participates; the acquisition of, investment in, or collaboration with other entities, including the Company's acquisition of KMG Chemicals, Inc. ("KMG"), and the expected benefits and synergies of such acquisition; 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; competitive landscape; the Company's supply chain; natural disasters; various economic or political factors and international or national events, including related to 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, 2018 and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.  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 (LOSS)      
(Unaudited and amounts in thousands, except per share amounts)      
             
    Quarter Ended   Year Ended
    September 30, 2019   June 30, 2019   September 30, 2018   September 30, 2019   September 30, 2018
                                       
                     
Revenue   $278,645     $271,882     $156,729     $1,037,696     $590,123
                     
Cost of sales     165,535       156,492       72,383       595,043       276,018
                     
Gross profit     113,110       115,390       84,346    
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