11th Annual CEO Summits23.q4cdn.com/907520135/files/doc_presentations/2019/CCMP-Inve… · Memory...

©2019 Cabot Microelectronics Corporation

11th Annual CEO Summit

July 2019


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Safe Harbor StatementThe 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.


Cabot Microelectronics Investment Highlights

LEADING ELECTRONIC MATERIALS SUPPLIER

CONSUMABLES-BASED BUSINESS MODEL

GROWING OPPORTUNITIES

SUSTAINED STRONG FINANCIAL PERFORMANCE

COMMITMENT TO RETURN VALUE TO SHAREHOLDERS

• 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

• Approximately 97% of revenue derived from consumable materials• Broad exposure across all types of semiconductor devices• Historically less cyclical than semiconductor equipment suppliers

• Robust growth in memory and logic applications• Increasing 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

• High profitability• Low capital intensity• Strong free cash flow generation

• Ongoing balanced return of excess capital to shareholders with investment for growth• Maintain stable and increasing dividends over time• Maintain a prudent balance sheet and de-lever appropriately post-M&A

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Cabot Microelectronics’ Portfolio of Critical Materials

› 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

› Manufacture products that preserve and protect vital infrastructure

› Precision machining and polishing technologies for optics industry

› 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

Heritage CMC Business

Acquired KMG Business*Based on FY2018 actual revenue

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~80%* of Revenue

~20%* of Revenue


Global Footprint and Product Diversity

Largest global producer of CMC slurries and HPPC

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©2019 Cabot Microelectronics Corporation6

Electronic MaterialsElectronic Materials


Semiconductor Fabrication Process – Overview

Our diverse solutions cover almost every step of the semiconductor manufacturing process

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Robust CMP Consumables Portfolio

Serving virtually all semiconductor suppliers in the world with a broad product portfolio

FY18 IC CMP Revenue by Product Area Estimated 2018 Market:

Slurries - $1,270MPads - $740M

Estimated Market Growth ~ 4-6% Annually (2019-2023)

Providing solutions for all applications and nodes that improve performance and cost of ownership

Dielectrics25%

Tungsten 45%

Polishing Pads 15%

Other Metal Slurries

12%

Engineered Surface Finishes 3%

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Source: IC Insights and company information


CMP Slurries

Shift from 2D to 3D NAND› Approximately twice the number of CMP steps,

primarily tungsten

› We currently estimate that approximately 60-70% 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

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

Technology advances and emerging applications expected to be continued growth drivers for our CMP slurries

MEMORY LOGIC

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Memory – Market Shift From 2D to 3D NAND Benefits CMC

Source: Company information Source: Company information


› 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

› Pads and slurries used together in a consumable set represents a potential growth opportunity*FY16 benefited from the October, 2015 NexPlanar acquisition

**Represents internal revenue goal

CMP Pads

CMP polishing pads continue to represent significant organic growth opportunity for our company

We continue to focus on our goal to grow our pads revenue toaround $100 million in FY19, reflecting CAGR of ~20% since FY17

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Source: Company information


High Purity Process Chemicals (HPPC)

$1.6 billion addressable market opportunity for HPPC

Source: Company Information

Global Semiconductor Fab Materials Market

$12B*

› 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

› 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

› Provide chemicals management services in certain regions

* Excludes silicon wafers

HPPC$1.5B

Pads and

Slurry $2B

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Pads and Slurries

$2B

HPPC$1.6B


Electronic Materials Growth Strategy

Revenue Drivers:

› Growth in memory and advanced logic applications

› 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

Expect our revenue to grow faster than the consumables market

Polishing Pads

Acids

CMP Slurries

Source: Company information

Solvents

Blends

Core Consumables

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Growth of Technology Drives Demand for Materials

Emerging applications require a wide range and large quantity of chips to deliver the myriad of functions and applications being designed

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PC & INTERNET

MOBILE

DATA CENTRIC AND ARTIFICIAL INTELLIGENCE

Big DataVirtual / Augmented Reality

Internet of Things Artificial Intelligence

Autonomous Vehicles

2016 20202000

ONE PC PER HOUSEHOLD

ONE MOBILE DEVICE PER PERSON

100’s OF CHIPS PER HOUSEHOLD? 1000’s OF CHIPS PER FACTORY?

HOW MANY CHIPS PER CITY?

2010

©2019 Cabot Microelectronics Corporation14

Electronic MaterialsPerformance Materials


Performance Materials Business Attributes

Exhibits similar characteristics to Electronic Materials business

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Consumables based products with high customer retention

Recognized leaders in participating industries

Represents less than 1% of the total customer spend

Close partnerships with customers to deliver innovative solutions

Attractive financial metrics and strong cash flow generation


Pipeline Performance

› 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

Leading provider of performance products to midstream oil and gas

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DRAs Optimize Pipeline Flow

DRAs increase throughput, lower operating pressure and reduce energy costs

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Performance Materials Growth Strategy

Revenue Drivers:

› New pipeline construction in North America and other locations to meet rising global energy demand

› Oil production in the Permian/Eagle Ford regions outpacing existing pipeline takeaway capacity

› Oil production in the U.S. has increased in the last 9 out of 10 years

› Aging infrastructure (65% of U.S. crude oil pipelines are at least 30 years old) coupled with heightened safety and environmental regulations

Expect demand for DRAs and pipeline maintenance products to increase

> 60 years40%

30 to 60 years25%

< 30 years35%

U.S. Crude Oil Pipelines, Average Age

Source: Company Information

0

100

200

300

400

500

'16 '17 '18E '19E '20E '21E '22E '23E '24E '25E

(in

thou

sand

s)

Global Operating Pipeline Mileage

Source: IHS, Oil & Gas Journal

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$0

$25

$50

$75

$100

$125

$150

$175

$200

$225

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

$ in

mill

ions

Cabot Microelectronics KMG

Cabot Microelectronics’ Strong Free Cash Flow* Generation

Our strong free cash flow has enabled us to invest internally and return cash to shareholders

$212 Million

Generated strong free cash flow

during recession$148M

$64M

* Free cash flow is operating cash flow less capital expenditures

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Cabot Microelectronics’ Capital Deployment Program

Enables our strategy while thoughtfully returning capital to shareholders

Internal Investments

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HISTORICAL CASH DEPLOYMENT FY14 – FY18

M&A

28%

DIVIDENDS

13%

CAPEX

19%

SHARE REPURCHASES

40%

FUTURE CASH DEPLOYMENT PRIORITIES

INTERNAL INVESTMENTS Invest in growth and cost improvement opportunities, resulting in increased spending in FY20-FY21

DIVIDENDSPay ongoing and increasing dividends

M&AUtilize the balance sheet to execute opportunistic M&A that meets strategic objectives

SHARE REPURCHASESRepurchase shares, balanced with deleveraging goals and other priorities

OR

DE

R O

F P

RIO

RIT

Y


Long-Term Growth Estimates


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M&A

28%

Electronic MaterialsEstimated average annual growth rate of 5% to 7%, which is expected to be 1% to 2% growth above industry*

Performance MaterialsEstimated average annual growth rate of 8% to 10%

TOTAL REVENUEEstimated average annual growth rate of 6% to 8%*

*Based on current estimated semiconductor industry growth outlook


FY20-FY24 Long-Term Growth Estimates


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M&A

28%




*Based on current estimated semiconductor industry growth outlook

6% to 8%Average Annual Revenue Growth*

35%EBITDA Margin by FY24

>$1.5BCumulative Free Cash Flow Generation by FY24


FY20-FY24 Long-Term Growth Estimates


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M&A

28%




FY18 PRO FORMA

FY24

Total Revenue

EBITDA

~$1.4B-$1.5B

~$480M-$520M

Electronic Materials Revenue

Performance Materials Revenue

Total Revenue

Adjusted Pro Forma EBITDA

$866M

$198M

$1,064M

$311M

5%-7% CAGR*

8%-10% CAGR

6%-8% CAGR*

~35% of Revenue

FY20-FY24

Note: LTM Pro Forma is through FY19 Q2*Based on current estimated semiconductor industry growth outlook


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630.499.2600

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