21 st Annual Needham Growth Conference

Transcription

1 21 st Annual Needham Growth Conference Investor Presentation January 15, 2019

2 Safe Harbor Statement The information contained in and discussed during this presentation may include forward-looking statements within the meaning of federal securities regulations. These forward-looking statements involve a number of risks, uncertainties, and other factors, including those described in Cabot Microelectronics filings with the Securities and Exchange Commission (SEC), that could cause actual results to differ materially from those described by these forward-looking statements. Cabot Microelectronics Corporation assumes no obligation to update this forward-looking information. 2

3 Cabot Microelectronics Investment Highlights LEADING ELECTRONIC MATERIALS SUPPLIER World s largest supplier of chemical mechanical planarization (CMP) polishing slurries Leading global supplier of high purity process chemicals (HPPC) Second largest CMP pads supplier to the semiconductor industry Supply to virtually all semiconductor manufacturers in the world Robust product portfolio, serving all applications and technology nodes CONSUMABLES-BASED BUSINESS MODEL Approximately 97% of revenue derived from consumable materials Broad exposure across all types of semiconductor devices Historically less cyclical than semiconductor equipment suppliers GROWING OPPORTUNITIES Robust growth in memory and logic applications Increasingly complexity of semiconductor devices Rising semiconductor content to support Virtual Reality (VR), Internet of Things (IoT), High Performance Computing (HPC), Cloud, Automotive Increasing oil production, aging infrastructure and new pipeline construction SUSTAINED STRONG FINANCIAL PERFORMANCE High profitability Low capital intensity Strong free cash flow generation COMMITMENT TO RETURN VALUE TO SHAREHOLDERS Intend to maintain stable and increasing dividends over time De-lever appropriately Continue to focus on profitable growth in all areas Share repurchases expected to be balanced with de-leveraging goals 3

4 Cabot Microelectronics Portfolio of Critical Materials Provides essential products that constitute a minimal portion of the customers end product cost Electronic Materials ~85%* of Revenue Performance Materials ~15%* of Revenue CMP Consumables High Purity Process Materials Pipeline Performance Other Largest supplier of CMP polishing slurries and second largest supplier of CMP polishing pads Leading global supplier of high purity process materials for semiconductor manufacturing Critical to the semiconductor manufacturing process Global footprint with facilities in North America, Europe and Asia Leading provider of performance products and services for improving pipeline operations and enhancing efficiency Drag-reducing agents (DRAs) to optimize pipeline throughput, lower operating pressure, and reduce energy costs Valve lubricants and sealants Manufacture products that preserve and protect vital infrastructure Precision machining and polishing technologies for optics industry *Based on FY2018 actual revenue 4

5 Global Footprint and Product Diversity Largest global producer of CMC slurries and HPPC 5

6 Electronic Materials 6

7 Semiconductor Fabrication Process Overview Our diverse solutions cover almost every step of the semiconductor manufacturing process Acids Solvents Bases Etch / Clean / Dry Custom blends Performance products Oxidizers Implant Our solutions help enable the manufacture of semiconductor devices Deposition Copper damascene products Photolithography Adhesion promoters Developers Edge bead removers Photoresist solvents Photoresist strippers Chemical Mechanical Planarization Slurry Base chemistry materials Pads BEFORE CMP AFTER CMP 7

8 Market Size ($M) Robust CMP Consumables Portfolio Serving virtually all semiconductor suppliers in the world with a broad product portfolio FY18 Revenue by Product Area Polishing Pads 15% Engineered Surface Finishes 3% Other Metal Slurries 12% Tungsten 45% Dielectrics 25% 2,200 2,000 1,800 1,600 1,400 1,200 1, Estimated 2018 Market: Slurry - $1,270M Pads - $740M Estimated Market Growth ~ 6% Annually Wafer Starts (Millions of 8 Equivalents) Slurry Pads Wafer Starts Providing solutions for all applications and nodes that improve performance and cost of ownership 8

9 CMP Slurries Technology advances and emerging applications expected to be continued growth drivers for our CMP slurries MEMORY Shift from 2D to 3D NAND Approximately twice the number of CMP steps, primarily tungsten We currently estimate that approximately 50% of 2D to 3D NAND wafer capacity conversion has occurred Expect the industry transition to continue over the next several years, driving demand for our tungsten and dielectrics slurries LOGIC FinFET logic at 14, 10 and 7 nm As technology advances, CMP intensity has increased Advanced logic IC devices may require new materials to be polished, offering growth opportunities Source: internal data 9

10 Pad Revenue ($M) CMP Pads CMP polishing pads continue to represent significant organic growth opportunity for our company Leveraging our technical expertise, global infrastructure, and supply chain capabilities to drive CMP pads revenue Pads represents a large and closely adjacent opportunity to slurries The 2015 NexPlanar acquisition provided innovative technology, improved product performance, and lower cost of ownership *FY16 benefited from the October, 2015 NexPlanar acquisition **Represents internal revenue goal Pads and slurries used together in a consumable set represents a potential growth opportunity We continue to focus on our goal to grow our pads revenue to over $100 million in FY19, reflecting CAGR of ~20% since FY17 10

11 High Purity Process Chemicals (HPPC) $1.5 billion addressable market opportunity for HPPC Specialize in the purification, formulation, blending and packaging of value-added chemicals for the semiconductor manufacturing industry Serve many of the world s leading semiconductor manufacturers Pads and Slurry $2B HPPC $1.5B Global footprint with facilities in North America, Europe and Asia HPPC Leader in U.S. and Europe High customer retention due to inherent costs and risks of switching suppliers Global Semiconductor Fab Materials Market $12B* Provide chemicals management services * Excludes silicon wafers Source: SEMI 11

12 Electronic Materials Growth Strategy Expect our revenue to grow faster than the consumables market Revenue Drivers: CMC Slurry Growth in memory and advanced logic applications Core Consumables Polishing Pads Acids Solvents Blends Emerging technologies such as VR, IoT, HPC, Cloud, and Automotive Increasing complexity of semiconductor device architectures adds process steps and increases materials usage Advances in semiconductor fabrication process drive higher filtration and purification requirements Industry investments in China and Korea Source: industry analysts and internal data 12

13 Growth of Technology Drives Demand for Materials Demand for consumables is ultimately driven by electronic applications Key: indicates increasing levels of semiconductor content or performance requirements Source: internal data 13

14 Performance Materials 14

15 Performance Materials Business Attributes Exhibits similar characteristics to Electronic Materials business Consumables based products with high customer retention Recognized leaders in participating industries Represents less than 1% of total customer spend Close partnerships with customers to deliver innovative solutions Attractive financial metrics and strong cash flow generation 15

16 Pipeline Performance Leading provider of performance products to midstream oil and gas Value-added specialty products optimize pipeline efficiency, lower operating costs and enhance safety A leading supplier of drag reducing agents (DRAs), valve lubricants, cleaners and sealants Providing valve maintenance and safety training services Global presence with facilities in the U.S., Canada and the Middle East Pipeline Performance products are critical to performance and safety, but represent a minimal portion of overall pipeline operating costs Historically, DRA consumption has not been correlated to oil prices 16

17 DRAs Optimize Pipeline Flow DRAs increase throughput, lower operating pressure and reduce energy costs Drag in pipelines is caused by turbulent liquid flow DRAs are injected at multiple points along a pipeline DRAs reduce drag throughout the turbulent fluid core DRA polymers have no effect on the composition of crude oil and refined products Increased turbulence can lead to energy loss and reduced throughput of a pipeline The additives align turbulent fluid molecules to linearize the flow patterns Fluid molecules Turbulent Flow Orderly flow with DRAs 17

18 (in thousands) Performance Materials Growth Strategy Expect demand for DRAs and pipeline maintenance products to increase U.S. Crude Oil Pipelines, Average Age Revenue Drivers: < 30 years 35% 30 to 60 years 25% > 60 years 40% Aging infrastructure (65% of U.S. crude oil pipelines are at least 30 years old) coupled with heightened safety and environmental regulations New pipeline construction in North America and other locations to meet rising global energy demand Global Operating Pipeline Mileage Oil production in the Permian/Eagle Ford regions outpacing existing pipeline takeaway capacity '16 '17 '18E '19E '20E '21E '22E '23E '24E '25E Oil production in the U.S. has increased in the last 9 out of 10 years Source: IHS, Oil & Gas Journal 18

19 Wood Treating Chemicals Niche business with solid industry position, high margins and strong free cash flow generation North America Wood Utility Pole Preservatives Business Leading provider of Penta* preservatives to wood utility poles in North America Utility customers rely on industrial wood treating products to protect infrastructure, providing a 50-plus year service life CCA 45% Creosote 10% Penta* 45% Replacement of wood poles and new pole infrastructure drive long-term demand Approximately 4 million wood utility poles replaced annually *Pentachlorophenol 19

20 $ in millions Cabot Microelectronics Strong Free Cash Flow Generation Our strong free cash flow has enabled us to invest internally and return cash to shareholders $225 $212 Million $200 $175 $64M $150 $125 $100 $75 Generated strong free cash flow during recession $148M $50 $25 $ Cabot Microelectronics KMG 20

21 Cabot Microelectronics Capital Deployment Program Remain committed to returning cash to shareholders through dividends and opportunistic share repurchases CMC Priorities: Internal Investments Current Status: Continue to invest internally to maintain strong quality and technology leadership Dividends Intend to maintain stable and increasing dividends over time Mergers and Acquisitions De-lever appropriately Primary focus on integration of KMG in near term Continue to focus on profitable growth Share Repurchases Share repurchases to be balanced with de-leveraging goals 21

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