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CMC Materials Reports Record Revenue for the First Quarter of Fiscal 2021 and Raises Full Year Guidance

02/03/2021
  • 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 EPS 1 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, Ill., Feb. 03, 2021 (GLOBE NEWSWIRE) -- 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.

1 Refer 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 in the company’s related slide presentation 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 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

Source: CMC Materials

 

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.


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Source: CMC Materials

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