Market Overview

Cabot Microelectronics Corporation Reports Record Revenue for the Second Quarter of Fiscal 2020

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  • Record Revenue of $284.2 Million, 7.1% Higher than Last Year, Due to Strong Growth in CMP Slurries and Pipeline Performance Products
  • Diluted EPS of $1.11; Adjusted Diluted EPS¹ of $1.75, 12.9% Higher than Adjusted EPS¹ Last Year
  • Expecting Total Revenue for Third Quarter of Fiscal 2020 to be Approximately Flat to Down Low Single Digits Sequentially

AURORA, Ill., May 06, 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 second quarter of fiscal 2020, which ended March 31, 2020.

Key Highlights

Total company revenue increased 7.1% over the prior year driven by stronger demand for CMP slurries and pipeline performance products, as well as higher wood treatment revenue. Net income for the quarter was $32.9 million. Adjusted EBITDA was $85.9 million in the quarter, essentially flat compared with the prior year. Year to date, the company generated $112.3 million in cash flow from operations, and had $340.7 million of cash on hand and $1,075.3 million in total debt as of March 31, 2020, which includes $150 million drawn from the company's revolving credit facility during the quarter.

"During this unprecedented environment of the COVID-19 pandemic, I am extremely thankful for the dedication and efforts of our teams globally to keep our employees safe as well as to continue supporting our customers," said David Li, President and CEO of Cabot Microelectronics Corporation. "Our results this quarter, including record revenue, demonstrate the strength and resiliency of our business and company. Going forward, we see continued stable financial performance in our third fiscal quarter, but with limited visibility into the second half of the calendar year, we have decided to withdraw our annual EBITDA guidance."

Key Financial Information for Second Quarter of Fiscal 2020

  • Revenue was $284.2 million, 7.1% higher than the revenue reported in the same quarter last year due to stronger demand for CMP slurries and pipeline performance products as well as increased revenue in wood treatment. Revenue was up 0.4% compared to the prior quarter due primarily to higher revenue in wood treatment.
  • Net income was $32.9 million. Adjusted net income was $52.1 million, 14.0% higher compared with adjusted net income in the prior year. Adjusted net income benefited from higher revenue, lower interest expense and lower tax expense, partially offset by unfavorable impact from the timing of certain manufacturing costs and higher operating expenses in the quarter, compared to last year.
  • Diluted earnings per share (EPS) was $1.11. Adjusted diluted EPS was $1.75, 12.9% higher than adjusted EPS in the same quarter last year.
  • Adjusted EBITDA was $85.9 million, essentially flat with adjusted EBITDA in the same quarter last year. Adjusted EBITDA margin for the quarter was 30.2%, compared to adjusted EBITDA margin of 32.2% in the same quarter last year.

Electronic Materials – Revenue was $218.9 million, 2.8% higher than the revenue in the same quarter last year. Higher revenue for CMP slurries offset lower revenue for CMP pads and essentially flat revenue for electronic materials. Adjusted EBITDA was $69.6 million, or 31.8% of revenue.

Performance Materials – Revenue was $65.3 million for the quarter, 24.2% higher than revenue in the same quarter last year. The increase was driven by higher revenue for pipeline performance products and wood treatment products, which more than offset a decline in QED revenue. Adjusted EBITDA was $29.9 million, or 45.8% of revenue.

Guidance for Third Quarter of Fiscal 2020

With uncertainty over the ongoing macroeconomic and industry impact of the COVID-19 pandemic, the company currently expects fiscal third quarter revenue to be approximately flat to down low single digits compared to the company's revenue in the second quarter of fiscal 2020. Sequentially, Electronic Materials revenue is expected to be approximately flat and Performance Materials revenue is expected to be down 10% to 15%.

The company is withdrawing full fiscal year 2020 adjusted EBITDA guidance given general uncertainty related to the pandemic.

Additional current expectations are provided on slide 9 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, May 7. The conference call will be available via live webcast and replay from the company's website, www.cabotcmp.com, or by phone at (844) 634-6404. Callers outside the U.S. may dial (825) 312-2296. The conference code for the call is 1383647. 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 (earnings before interest, taxes, depreciation and amortization), adjusted EBITDA margin. The adjusted results 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 final regulations related to the tax act, certain costs related to a warehouse fire at KMG-Bernuth in Tuscaloosa, Alabama, and certain costs related to the COVID-19 pandemic. 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 effect of the enactment of the Tax Cuts and Jobs Act in December 2017 in the United States ("tax act") and the final regulations related to the tax act, KMG acquisition and integration-related expenses, certain costs related to a warehouse fire at KMG-Bernuth in Tuscaloosa, Alabama, acquisition-related amortization expenses, and costs related to the COVID-19 pandemic 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; 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; 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 March 31, 2020 to be filed by May 11, 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   Six Months Ended
                     
    March 31, 2020   December 31, 2019   March 31, 2019   March 31, 2020   March 31, 2019
                     
Revenue   $284,193     $283,143     $265,391     $567,336     $487,169  
                     
Cost of sales     163,091       154,461       150,571       317,552       273,016  
                     
Gross profit     121,102       128,682       114,820       249,784       214,153  
                     
Operating expenses:                    
                     
Research, development and technical     13,230       12,811       12,778       26,041       26,818  
                     
Selling, general and administrative     56,209       54,439       50,328       110,648       111,456  
                     
Total operating expenses     69,439       67,250       63,106       136,689       138,274  
                     
Operating income     51,663       61,432       51,714       113,095       75,879  
                     
Interest expense     10,753       11,920       13,331       22,673       20,221  
                     
Interest income     143       315       568       458       1,587  
                     
Other income (expense), net     (1,010 )     (397 )     (1,014 )     (1,407 )     (2,425 )
                     
Income before income taxes     40,043       49,430       37,937       89,473       54,820  
                     
Provision for income taxes     7,144       10,881       10,800       18,025       14,240  
                     
Net income   $32,899     $38,549     $27,137     $71,448     $40,580  
                     
                     
Basic earnings per share   $1.12     $1.32     $0.94     $2.45     $1.45  
                     
Diluted earnings per share   $1.11     $1.30     $0.92     $2.41     $1.42  
                     
Weighted average basic shares outstanding     29,287       29,137       28,998       29,183       28,066  
                     
Weighted average diluted shares outstanding   29,725       29,694       29,479       29,666       28,607  


CABOT MICROELECTRONICS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited and amounts in thousands)
 
          March 31, 2020   September 30, 2019
      ASSETS:        
               
Current assets:        
Cash and cash equivalents   $340,702     $188,495  
Accounts receivable, net     151,959       146,113  
Inventories     157,872       145,278  
Prepaid expenses and other current assets     25,768       28,670  
Total current assets     676,301       508,556  
               
Property, plant and equipment, net     320,846       276,818  
Other long-term assets     1,462,813       1,476,392  
Total assets   $2,459,960     $2,261,766  
               
               
      LIABILITIES AND STOCKHOLDERS' EQUITY:        
               
Current liabilities:        
Accounts payable   $58,803     $54,529  
Short-term debt     150,000       -  
Current portion of long-term debt     10,650       13,313  
Accrued expenses, income taxes payable and other current liabilities     109,389       103,618  
Total current liabilities     328,842       171,460  
               
Long-term debt, net of current portion     914,617       928,463  
Other long-term liabilities     207,091       181,466  
Total liabilities     1,450,550       1,281,389  
               
Stockholders' equity     1,009,410       980,377  
Total liabilities and stockholders' equity   $2,459,960     $2,261,766  


CABOT MICROELECTRONICS CORPORATION
Reconciliation of Certain GAAP Financial Measures to Certain Non-GAAP Financial Measures
(Unaudited and amounts in thousands, except per share and percentage amounts)
 
Unaudited Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income            
             
    Three Months Ended  
    March 31, 2020     March 31, 2019  
GAAP Net income   $32,899       $27,137    
             
Amortization of acquisition related intangibles     22,012         16,957    
Acquisition and integration-related expenses     2,285         2,904    
Costs related to the COVID-19 (Pandemic)     237         -    
Costs related to KMG-Bernuth warehouse fire     206         -    
Impact of U.S. Tax Cuts and Jobs Act (Tax Act)     13         -    
Charges for fair value write-up of acquired inventory sold     -         4,566    
Tax effect on adjustments to net income     (5,529 )       (5,832 )  
Adjusted Net income   $52,123       $45,732    
             
             
Unaudited Reconciliation of GAAP Revenue to Non-GAAP Adjusted Gross Profit/ Gross Margin            
             
    Three Months Ended
    March 31, 2020   March 31, 2019
             
GAAP revenue   $284,193       $265,391    
Cost of sales     163,091         150,571    
Gross profit/margin   $121,102   42.6 %   $114,820   43.3 %
Adjustments:            
Amortization of acquisition related intangibles     3,380   1.2 %     3,480   1.3 %
Costs related to KMG-Bernuth warehouse fire     206   0.1 %     -   0.0 %
Costs related to the Pandemic     31   0.0 %     -   0.0 %
Charges for fair value write-up of acquired inventory sold     -   0.0 %     4,566   1.7 %
Adjusted gross profit/gross margin   $124,719   43.9 %   $122,866   46.3 %
             
                 
Unaudited Reconciliation of GAAP Operating expenses to Non-GAAP Adjusted Operating expenses                
                 
    Three Months Ended
    March 31, 2020   March 31, 2019
             
GAAP Research, development and technical   $13,230       $12,778    
GAAP Selling, general, and administrative     56,209         50,328    
Operating expenses   $69,439       $63,106    
Adjustments *:            
Amortization of acquisition related intangibles     (18,632 )       (13,477 )  
Acquisition and integration-related expenses     (2,285 )       (2,904 )  
Costs related to the Pandemic     (206 )       -    
Adjusted operating expenses   $48,316       $46,725    
         
* All the adjustments are related to the Selling, general and administrative expenses.            
             
             
Unaudited Reconciliation of GAAP Diluted Earnings Per Share to Non-GAAP Adjusted Diluted Earnings Per Share                
             
    Three Months Ended  
    March 31, 2020     March 31, 2019  
GAAP Diluted earnings per share   $1.11       $0.92    
Adjustments (net of tax):            
Amortization of acquisition related intangibles     0.57         0.44    
Acquisition and integration-related expenses     0.05         0.07    
             
Costs related to KMG-Bernuth warehouse fire     0.01         -    
Costs related to the Pandemic     0.01         -    
Charges for fair value write-up of acquired inventory sold     -         0.12    
Adjusted Diluted earnings per share   $1.75       $1.55    
             
             
Unaudited Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA/ EBITDA Margin            
             
    Three Months Ended
    March 31, 2020   March 31, 2019
             
GAAP net income   $32,899       $27,137    
Interest expense     10,753         13,331    
Interest income     (143 )       (568 )  
Provision for income taxes     7,144         10,800    
Depreciation & Amortization     32,550         27,348    
GAAP EBITDA **/ EBITDA margin   $83,203   29.3 %   $78,048   29.4 %
Adjustments (pre-tax):            
Acquisition and integration-related expenses     2,285   0.8 %     2,904   1.1 %
Costs related to the Pandemic     237   0.1 %     -   0.0 %
Costs related to KMG-Bernuth warehouse fire     206   0.0 %     -   0.0 %
Charge for fair value write-up of acquired inventory sold     -   0.0 %     4,566   1.7 %
Adjusted EBITDA ***/EBITDA margin   $85,931   30.2 %   $85,518   32.2 %
             
** EBITDA represents earnings before interest, taxes, depreciation and amortization.
*** 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.
 

 

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