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CMC Materials Reports Record Revenue for the Third Quarter of Fiscal 2021

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·17 min read
In this article:
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  • Record Total Company Revenue of $309.5 Million, 12.7% Higher than Last Year and 6.5% Higher Sequentially

  • Electronic Materials Segment Revenue of $251.1 Million, 13.9% Higher than Last Year and 3.5% Higher Sequentially

  • Expecting Total Company Revenue for Fourth Quarter Fiscal 2021 to be Approximately Flat Sequentially

  • Full Year Adjusted EBITDA Guidance Range Revised to Between $355 Million and $365 Million

AURORA, Ill., Aug. 04, 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 third quarter of fiscal 2021, which ended June 30, 2021.

“Our CMC Materials team delivered another quarter of solid results, posting record revenue. Within Electronic Materials, we are particularly proud of the execution from our CMP pads and electronic chemicals businesses. We are also encouraged by the improvement in our pipeline and industrial materials (PIM) business,” said David Li, President and CEO of CMC Materials.

“Looking ahead, we have revised our expectation for full year Adjusted EBITDA reflecting industry-wide inflationary pressures and lower than expected CMP slurries revenue in the short-term, driven by variability in order patterns from certain Chinese customers. As we actively address these challenges, we remain confident that our technological differentiation, deep customer collaboration and extensive global footprint should enable us to build upon our industry-leading positions,” said Li.

Key Highlights for the Third Quarter

The company’s record quarterly revenue of $309.5 million, an increase of 12.7% compared to the same quarter last year, was driven by continued robust demand in the company’s Electronic Materials segment, which represents more than 80% of the company’s revenue. In the company’s Performance Materials segment, the PIM business showed solid improvement sequentially, yet continues to be adversely impacted by the COVID-19 Pandemic (“Pandemic”). In the quarter, the company recorded a $3.1 million impairment charge for the wood treatment business related to the previously announced strategic decision to exit this business. Net income was $33.6 million compared to $34.5 million in the prior year. Adjusted EBITDA1 was $96.0 million, compared to $92.0 million in the prior year. Year to date, the company generated $179.8 million in cash flow from operations, and $263.0 million in the last twelve months.

Key Financial Information for the Third Quarter

  • Revenue was $309.5 million, 12.7% higher than the same quarter last year due to growth in both the company’s segments. Revenue was up 6.5% sequentially.

  • Net income was $33.6 million compared to $34.5 million in the same quarter last year. Adjusted net income1 was $55.2 million, 3.9% higher compared to the prior year, as higher revenue and lower interest expense was partially offset by higher costs.

  • Diluted EPS was $1.13. Adjusted diluted EPS1 was $1.86, 3.3% higher compared to the same quarter last year.

  • Adjusted EBITDA1 was $96.0 million, up 4.3% compared to the same quarter last year. Adjusted EBITDA margin1 for the quarter was 31.0%, compared to adjusted EBITDA margin of 33.5% in the same quarter last year.

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 $251.1 million, 13.9% higher than revenue in the same quarter last year due to continued strength across all businesses, and the addition of International Test Solutions (ITS), which is reported as materials technologies. Revenue was 3.5% higher sequentially. Adjusted EBITDA was $82.5 million, or 32.9% of revenue.

Performance Materials Revenue was $58.4 million for the quarter, 7.5% higher than revenue in the same quarter last year, driven primarily by improved demand for the company’s PIM products. Revenue was 21.8% higher sequentially. Adjusted EBITDA was $25.5 million, or 43.6% of revenue.

Current Financial Guidance

Sequentially, the company currently expects revenue in the fourth quarter of fiscal 2021 to be approximately flat compared to revenue in the third fiscal quarter. Electronic Materials revenue is expected to be approximately flat and Performance Materials revenue is expected to be up mid-single digits for the fourth fiscal quarter.

The company revised the full fiscal year 2021 expectation for its Adjusted EBITDA range to between $355 million to $365 million.

With respect to this guidance, and additional current expectations provided in the company’s related slide presentation and prepared commentary, 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, August 5. 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 7062157. 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 primarily to 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 www.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 impairment charges, acquisitions, such as expenses incurred to complete an acquisition and related integration and acquisition-related amortization expenses, costs of restructuring related to the wood treatment business, costs incurred related to the COVID-19 pandemic (“Pandemic”) net of grants received, costs related to the KMG-Bernuth warehouse fire net of insurance recoveries 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 transactions; 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 and vulnerabilities; 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 June 30, 2021, which the Company expects to file by August 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

CMC MATERIALS, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited and amounts in thousands, except per share amounts)

Quarter Ended

Nine Months Ended

June 30,
2021

March 31,
2021

June 30,
2020

June 30,
2021

June 30,
2020

Revenue

$

309,516

$

290,528

$

274,727

$

887,907

$

842,063

Cost of sales

180,320

166,782

152,973

512,061

470,525

Gross profit

129,196

123,746

121,754

375,846

371,538

Operating expenses:

Research, development and technical

13,654

12,925

12,165

39,007

38,206

Selling, general and administrative

56,242

58,538

51,847

170,700

162,495

Impairment charges

3,090

208,221

218,658

Total operating expenses

72,986

279,684

64,012

428,365

200,701

Operating income (loss)

56,210

(155,938

)

57,742

(52,519

)

170,837

Interest expense

9,551

9,508

10,406

28,667

33,079

Interest income

11

13

131

47

589

Other (expense) income, net

(427

)

(484

)

(201

)

541

(1,608

)

Income (loss) before income taxes

46,243

(165,917

)

47,266

(80,598

)

136,739

Provision for (benefit from) income taxes

12,601

(16,109

)

12,741

4,038

30,766

Net income (loss)

$

33,642

$

(149,808

)

$

34,525

$

(84,636

)

$

105,973

Basic earnings (loss) per share

$

1.15

$

(5.13

)

$

1.19

$

(2.90

)

$

3.63

Diluted earnings (loss) per share

$

1.13

$

(5.13

)

$

1.17

$

(2.90

)

$

3.58

Weighted average basic shares outstanding

29,260

29,210

29,079

29,197

29,157

Weighted average diluted shares outstanding

29,682

29,210

29,456

29,197

29,603

CMC MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited and amounts in thousands)

June 30,
2021

September 30,
2020

ASSETS:

Current assets:

Cash and cash equivalents

$

228,506

$

257,354

Accounts receivable, net

170,346

134,023

Inventories

169,147

159,134

Prepaid expenses and other current assets

25,901

26,558

Total current assets

593,900

577,069

Property, plant and equipment, net

357,304

362,067

Other long-term assets

1,298,621

1,437,331

Total assets

$

2,249,825

$

2,376,467

LIABILITIES AND STOCKHOLDERS' EQUITY:

Current liabilities:

Accounts payable

$

55,737

$

49,254

Current portion of long-term debt

10,650

10,650

Accrued expenses, income taxes payable and other current liabilities

129,497

121,442

Total current liabilities

195,884

181,346

Long-term debt, net of current portion

904,967

910,764

Other long-term liabilities

167,727

210,044

Total liabilities

1,268,578

1,302,154

Stockholders' equity

981,247

1,074,313

Total liabilities and stockholders' equity

$

2,249,825

$

2,376,467

CMC MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited and amounts in thousands)

Nine months ended June 30,

2021

2020

Net cash provided by operating activities

$

179,793

$

204,083

Cash flows from investing activities:

Acquisition of a business, net of cash acquired

(126,129

)

Additions to property, plant and equipment

(31,574

)

(107,015

)

Proceeds from the sale of assets

2,613

1,587

Net cash used in investing activities

(155,090

)

(105,428

)

Cash flows from financing activities:

Repayment of long-term debt

(7,988

)

(17,988

)

Repurchases of common stock under Share Repurchase Program

(15,171

)

(35,009

)

Repurchases of common stock withheld for taxes

(5,492

)

(3,112

)

Proceeds from revolving line of credit

150,000

Proceeds from issuance of stock

13,326

10,960

Dividends paid

(39,570

)

(37,527

)

Other financing activities

(219

)

(123

)

Net cash (used in) provided by financing activities

(55,114

)

67,201

Effect of exchange rate changes on cash

1,563

357

(Decrease) increase in cash and cash equivalents

(28,848

)

166,213

Cash and cash equivalents at beginning of period

257,354

188,495

Cash and cash equivalents at end of period

$

228,506

$

354,708

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 and GAAP Diluted Earnings Per Share to Non-GAAP Adjusted Diluted Earnings Per Share

Three Months Ended

June 30, 2021

June 30, 2020

Net income

$

33,642

$

1.13

$

34,525

$

1.17

Amortization of acquisition related intangibles

20,620

0.69

20,786

0.71

Acquisition and integration-related expenses

3,353

0.11

2,735

0.09

Costs related to KMG-Bernuth warehouse fire, net of insurance recovery

26

622

0.02

Net costs related to restructuring of wood treatment business

24

(293

)

(0.01

)

Costs related to Pandemic, net of grants received

(200

)

(0.01

)

112

U.S. tax reform

18

Impairment charge

3,090

0.11

Tax effect on adjustments to net income1

(5,334

)

(0.17

)

(5,356

)

(0.18

)

Adjusted Net income

$

55,221

$

1.86

$

53,149

$

1.80


Reconciliation of GAAP Revenue to Non-GAAP Adjusted Gross Profit and Gross Margin

Three Months Ended

June 30, 2021

June 30, 2020

Revenue

$

309,516

$

274,727

Cost of sales

180,320

152,973

Gross profit

$

129,196

$

121,754

Gross margin

41.7

%

44.3

%

Adjustments:

Amortization of acquisition related intangibles

3,754

3,347

Costs related to KMG-Bernuth warehouse fire, net of insurance recovery

26

622

Net costs related to restructuring of wood treatment business

24

(293

)

Costs related to the Pandemic, net of grants received

(6

)

198

Adjusted gross profit

$

132,994

$

125,628

Adjusted gross margin

43.0

%

45.7

%


Reconciliation of GAAP Operating expenses to Non-GAAP Adjusted Operating expenses

Three Months Ended

June 30, 2021

June 30, 2020

Research, development and technical

$

13,654

$

12,165

Selling, general, and administrative

56,242

51,847

Impairment charge

3,090

Operating expenses

$

72,986

$

64,012

Adjustments:

Amortization of acquisition related intangibles2

(16,866

)

(17,439

)

Acquisition and integration-related expenses2

(3,353

)

(2,735

)

Costs related to the Pandemic, net of grants received2

194

86

Impairment charge

(3,090

)

Adjusted operating expenses

$

49,871

$

43,924


Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA and EBITDA Margin

Three Months Ended

June 30, 2021

June 30, 2020

Net income

$

33,642

$

34,525

Interest expense

9,551

10,406

Interest income

(11

)

(131

)

Provision for income taxes

12,601

12,741

Depreciation & amortization

33,927

31,324

EBITDA

89,710

88,865

EBITDA margin

29.0

%

32.3

%

Adjustments (pre-tax):

Acquisition and integration-related expenses

3,353

2,735

Costs related to KMG-Bernuth warehouse fire, net of insurance recovery

26

622

Net costs related to restructuring of wood treatment business

24

(293

)

Costs related to the Pandemic, net of grants received

(200

)

112

Impairment charge

3,090

Adjusted EBITDA

$

96,003

$

92,041

Adjusted EBITDA margin

31.0

%

33.5

%


Fiscal Year 2021 Guidance Reconciliation 3

Fiscal Year 2021

Fiscal Year 2021

Low

High

Net income

$

(63,000

)

$

(54,000

)

Interest expense, net5

38,000

38,000

Provision for income taxes4

16,000

17,000

Depreciation4

53,000

53,000

Amortization

85,000

85,000

EBITDA (Consolidated)

$

129,000

$

139,000

Acquisition and integration-related expenses6

7,889

7,889

Costs related to KMG-Bernuth warehouse fire, net of insurance recovery6

(1,050

)

(1,050

)

Net costs related to restructuring of wood treatment business6

96

96

Costs related to the Pandemic, net of grants received6

641

641

Impairment charges6

218,658

218,658

Adjusted EBITDA Guidance - Consolidated

$

355,234

$

365,234


Reconciliation of Cash Flow From Operations to Free Cash Flow

Nine Months Ended

June 30, 2021

June 30, 2020

Net cash provided by operating activities

$

179,793

$

204,083

Less: Capital expenditures

31,574

107,015

Free cash flow

$

148,219

$

97,068

Net cash used in investing activities

$

(155,090

)

$

(105,428

)

Net cash (used in) provided by financing activities

$

(55,114

)

$

67,201


Reconciliation of GAAP Debt to Net Debt

June 30,
2021

September 30,
2020

Total short-term and long-term debt

$

915,617

$

921,414

Less: Cash and cash equivalents

228,506

257,354

Total net debt

$

687,111

$

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 Adjustment is 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 future impairment charges associated with the anticipated closure of our wood treatment business.
4 Amounts represent the mid-point of the financial guidance provided on November 11, 2020.
5 Amount represents the mid-point of the current financial guidance provided on August 4, 2021.
6 Amounts represent actual Non-GAAP adjustments through the third quarter fiscal year 2021.