Mks Inc. · NASDAQ:MKSI
Mks — MKS Instruments — Debt Investor Presentation (January 2019)
51 slides from Mks's debt investor presentation, Jan 9, 2019
Slide 1: Lenders Presentation January 9, 2019
Lenders Presentation January 9, 2019 Exhibit 99.1
Slide 2: Safe Harbor for Forward Looking Statements
Safe Harbor for Forward Looking Statements Statements in this presentation regarding the proposed transaction between MKS Instruments, Inc. (“MKS”) and Electro Scientific Industries Inc. (“ESI”), the expected timetable for completing the transaction, future financial and operating results, benefits
Slide 3: Non-GAAP Measures
Non-GAAP Measures This presentation includes measures that are not in accordance with U.S. generally accepted accounting principles (“non-GAAP measures”). Non-GAAP measures exclude amortization of acquired intangible assets, asset impairments, costs associated with completed and announced acquisitio
Slide 4: Transaction Overview
Transaction Overview
Slide 5: Executive Summary and Transaction Background
Executive Summary and Transaction Background MKS Instruments, Inc. (“MKS” or the “Company”) is a global provider of instruments, subsystems and process control solutions that measure, monitor, deliver, analyze, power and control critical parameters of advanced manufacturing processes to improve proc
Slide 6: Sources and Uses / Capitalization
Sources and Uses / Capitalization MKS PROPRIETARY Pro Forma Capitalization Sources and Uses Notes: Includes financing fees, advisory fees, and change in control payments. Includes Japanese lines of credit and Austrian loans. EBITDA figures adjusted to exclude stock-based compensation, purchase accou
Slide 7: MKS Overview
MKS Overview
Slide 8: MKS is a Leading Global Provider of process control solutions
of process control solutions based on these critical technologies MKS is a Leading Global Provider measure PRECISE CONTROL of pressure, flow, composition, position, motion and automation GENERATION & DELIVERY of reactive gases, laser power and electrical power INTEGRATED SOLUTIONS for process, inspe
Slide 9: Five Decades of Profitable Growth
STRATEGIES FOR Five Decades of Profitable Growth -Accelerate organic growth -Semi expansion -Continued M&A 1980’s 1970’s 1990’s 2000’s 2012 2014 2016 2018+ -Strategic growth -SAM expansion -M&A -Sustainable and profitable growth -Strategic planning Technical localization End user champions Q&R -Targ
Slide 10: Market Leader with Broad Technology Portfolio
Market Leader with Broad Technology Portfolio MKS PROPRIETARY ADVANCED ENERGY AEROTECH BROOKS COHERENT CVI MELLES GRIOT DAIHEN EBARA GENTEC HORIBA HUTTINGER II-VI INFICON IPG PHOTONICS LUMENTUM NEWPOWER PLASMA PI QIOPTIQ SEMROCK SIGMA KOKI SUMITOMO THORLABS ULVAC VAT Source: Company information
Slide 11: Differentiated Technical Capability
~750* R&D engineers and scientists Competencies in power, plasma, lasers and pressure Differentiated Technical Capability MKS PROPRIETARY Annual R&D spend $133M* Leverage across multiple markets >1,500* Patents worldwide Significant Investment * Source 2017 MKS 10K Technical Expertise
Slide 12: Why MKS Instruments
Why MKS Instruments COMPREHENSIVE PORTFOLIO Largest breadth of products and services for the Semiconductor, Industrial Technologies, Life & Health Sciences, and Research & Defense markets CRITICAL TECHNOLOGIES World-class technology and development capabilities for leading-edge processes PROVEN PART
Slide 13: Acquisition Overview
Acquisition Overview
Slide 14: MKS to Acquire Electro Scientific Industries (ESI)
MKS to Acquire Electro Scientific Industries (ESI) MKS PROPRIETARY EXECUTING ON A Key Strategy for MKS Acquiring a market leading technology company that serves common markets with complementary customer solutions Expands Industrial segments of PCB, Electronic Thin Film, and Electronic Component man
Slide 15: Transaction Rationale
Transaction Rationale MKS PROPRIETARY COMPLEMENT our technology platforms creating unique capabilities INNOVATE by combining component and system expertise ENHANCE strategic growth initiative in industrial laser processing A Compelling Combination . . .
Slide 16: Complementary Technology Leaders
Complementary Technology Leaders MKS PROPRIETARY Founded 1944 Headquarters in Portland, OR CY 2017 Revenue of $304M 600+ Employees* 1,000+ Global Patents* R&D Spending ~$35M R&D Headcount ~140+* Leadership in • Laser-based process equipment – Advanced PCB processing – Semi manufacturing – Component
Slide 17: Advancing Our Strategy
Advancing Our Strategy EXTEND and differentiate leadership in the use of UV lasers for advanced manufacturing DRIVE opportunities within both the Systems and Component businesses COMBINE applications knowledge (beam / Workpiece) with systems and technologies ACCELERATE pursuit of additional Industri
Slide 18: ESI – Background
ESI – Background Delivering over 70 years of innovation as a global leader in laser-based manufacturing solutions Systems enable precise engineering of micron to submicron features in PCBs Semiconductors LEDs Advanced test systems for MLCC MKS PROPRIETARY End Markets* Business Segments* PCB ELECTRON
Slide 19: Significant Potential Growth Opportunities
Significant Potential Growth Opportunities MKS PROPRIETARY PRINTED CIRCUIT BOARDS $1.0B INDUSTRIAL MACHINING $1.0B MARKING ENGRAVING FINE METAL DRILLING EXPANDS MKS SAM BY $2.2B WAFER MARKING WAFER SCRIBING/DICING WAFER TRIM FLEX PCB VIA DRILLING HDI PCB VIA DRILLING IC PACKAGING VIA DRILLING MLCC T
Slide 20: Strengthens Advanced Market Growth
Strengthens Advanced Market Growth MKS PROPRIETARY MKS by End Market in CY2017 Pro Forma Combined in CY2017 * Revenue is combined CY17 data from MKS and ESI ADVANCED MARKETS $820M SEMI SEMI 34% increase in Advanced Market revenue ADVANCED MARKETS $1.1B
Slide 21: MKS and ESI
MKS and ESI MKS PROPRIETARY UV and ultrafast lasers Motion, photonics and optics RF power and plasma Vacuum processing; precise control of pressure, flow and composition Laser-based process equipment Advanced PCB processing Semi manufacturing Component manufacturing
Slide 22: Credit Strengths
Credit Strengths
Slide 23: Credit Strengths
Credit Strengths Track record of SUSTAINABLE & PROFITABLE GROWTH Broad market exposure to HIGH GROWTH SEGMENTS GLOBAL TECHNOLOGY LEADER in served markets Proven M&A augments ORGANIC GROWTH MKS PROPRIETARY
Slide 24: Disciplined Financial Management
Disciplined Financial Management MKS PROPRIETARY OPTIMIZE FINANCIAL MODEL Continually improved financial performance Significant operating leverage in our financial model Strong free cash flow generation Successful track record of growing and integrating acquisitions Voluntary prepayments and four d
Slide 25: Track Record of Operational Excellence
Track Record of Operational Excellence 2013A 2017A 2018 Q3 LTM Total Revenue $669M $1,916M $2,126M Non-GAAP Gross Margin 40.8% 46.6% 47.4% Non-GAAP Operating Margin 10.5% 24.6% 26.8% Non-GAAP Tax Rate 31.8% 26.5% 20.9% Non-GAAP EPS $0.90 $5.96 $7.99 Adj. EBITDA $99M $529M $630M MKS PROPRIETARY +186%
Slide 26: Strong and Stable Cash Flow Generation
Strong and Stable Cash Flow Generation MKS PROPRIETARY Free Cash Flow is defined as net cash provided by operating activities less purchases of property, plant and equipment. From 2008 through 2018 September LTM. ~$1.7B Combined Company Free Cash Flow generated since 2008(1) ($M) Pro Forma Company C
Slide 27: Technology Leadership Across Broad Portfolio
Technology Leadership Across Broad Portfolio MKS PROPRIETARY Credit Strength Proven diverse market leadership & customer base Track record of operational excellence & acquisition integration Highly cash generative with history of stable & conservative financial policies Broad Portfolio 2,500 patents
Slide 28: Diverse Market Exposure
MKS PROPRIETARY Semi Industrial LHS Research & Defense $2.2B $1.9B MKS by End Market in CY2017 Pro Forma Combined in CY2017 Diverse Market Exposure
Slide 29: Expanding Customer Base
Expanding Customer Base Pro Forma Combined by Customer(1) CY17 PF Revenues: $2.2B MKS PROPRIETARY Customer Diversity On a pro forma basis, no customer represents more than 11% of combined revenue Deep collaborative customer relationships Strong history of design wins Long-term trusted partner Combin
Slide 30: Successful Execution of Disciplined Acquisition Strategy
MKS CORE PRODUCT PORTFOLIO IN 2000 Successful Execution of Disciplined Acquisition Strategy MKS PROPRIETARY MARKET LEADING TECHNOLOGY EXPANSION INTO HIGH GROWTH MARKETS INNOVATIVE CUSTOMER SOLUTIONS DRIVE SHAREHOLDER VALUE CREATION Completed Over 15 Acquisitions Since 2000
Slide 31: Strong Post-Acquisition Performance from Newport
Strong Post-Acquisition Performance from Newport Newport, now our Light and Motion Division, has experienced a 33% increase in revenues Since closing, L&M has delivered a 225% increase in non-GAAP operating income on a pro forma basis Synergy expectations for the Newport acquisition were revised upw
Slide 32: Proven Track Record of Debt Management and Paydown
MKS PROPRIETARY Newport Acquisition LTM Leverage Proven Track Record of Debt Management and Paydown Quarterly Deleveraging since Newport Acquisition MKS has delivered on its stated intent to quickly de-lever following its acquisition of Newport Corporation in April 2016 Total Leverage following the
Slide 33: Financials
Financials
Slide 34: Historical Financial Performance – Revenue & Gross Margin
Historical Financial Performance – Revenue & Gross Margin MKS PROPRIETARY Note: Financials based on calendar year ended December 31st for ’15 to ’17. MKS financials in ’15 and ’16 are not pro forma for NEWP acquisition which was completed on April 29, 2016. Non-GAAP items include restructurings, cos
Slide 35: Historical Financial Performance – Adj. EBITDA & Cash Flow
Historical Financial Performance – Adj. EBITDA & Cash Flow MKS PROPRIETARY Adjusted EBITDA(2) Free Cash Flow(3) MKS(1) ESI Pro Forma ($7.5) ($7.4) Note: Financials based on calendar year ended December 31st for ’15 to ’17. MKS financials in ’15 and ’16 are not pro forma for NEWP acquisition which wa
Slide 36: Cost Synergies Overview
Cost Synergies Overview MKS PROPRIETARY Cost Synergy Build ($M) COGS SG&A Material COGS Manufacturing Overhead General Overhead / Other Exec. Comp. Public Company Costs Other SG&A Total Timing of Cost Synergies COGS $8.3M in projected savings in costs of goods sold, including leveraging combined pur
Slide 37: Summary Terms and Timing
Summary Terms and Timing
Slide 38: Summary Term Sheet - TLB
Summary Term Sheet - TLB MKS PROPRIETARY Borrower MKS Instruments, Inc. (the “Company” or the “Borrower”) Facility Incremental Term Loan B (“TLB”) Size $650 mm Maturity 7 years Indicative Margin TBD LIBOR Floor 0.00% Upfront Fee/OID TBD Security Similar to existing credit agreement Guarantees Simila
Slide 39: Summary Term Sheet - ABL
Summary Term Sheet - ABL MKS PROPRIETARY Borrower MKS Instruments and certain wholly-owned domestic restricted subsidiaries thereof (the “Borrower”) Facility $100mm Asset Based Revolver (the “ABL Revolver”) with availability subject to a Borrowing Base L/C Sub-Facility $25mm Accordion $50mm Use of P
Slide 40: Summary Term Sheet – ABL (Cont’d)
Summary Term Sheet – ABL (Cont’d) MKS PROPRIETARY Financial Covenant Springing Fixed Charge Coverage Ratio (“FCCR”) of 1.0x if excess availability is less than the greater of (i) $8.5 million and (ii) 10% of the lesser of the borrowing base and the facility size (the “Line Cap”), or during an event
Slide 41: Targeted Transaction Timeline
Targeted Transaction Timeline MKS PROPRIETARY January 9 Lender Call January 23 Lender Commitments Due Early February Close of ESI Acquisition Date Event January 2019 S M T W T F S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 February 2019 S M T W T F S 1 2 3 4
Slide 42: eemks
eemks
Slide 43: Appendix: GAAP To Non-GAAP Reconciliations and Combined Pro Forma Income Statement
Appendix: GAAP To Non-GAAP Reconciliations and Combined Pro Forma Income Statement (9/30/18 LTM)
Slide 44: Light & Motion GAAP to Non-GAAP Operating Income Reconciliation
Acquisition and integration costs related to the acquisition of Newport Corporation by MKS Instruments, Inc. (the "Newport Merger"), which closed during the second quarter of 2016. Step-up adjustments recorded in cost of sales relate to the step-up of inventory to fair value as a result of the Newpo
Slide 45: Note: Electro Scientific Industries excludes stock-based compensation expenses from non-GAAP financials for financial…
Note: Electro Scientific Industries excludes stock-based compensation expenses from non-GAAP financials for financial reporting purposes. Electro Scientific Industries non-GAAP financials shown above include stock-based compensation expenses to conform with MKS financial reporting. Cost of sales for
Slide 46: MKS recorded acquisition and integration costs related to the Newport Corporation acquisition, which closed
MKS recorded acquisition and integration costs related to the Newport Corporation acquisition, which closed during the second quarter of 2016. ESI recorded acquisition costs related to its acquisitions of Wuhan Topwin Optoelectronics Technology Co., Ltd. ("Topwin") and Visicon Technologies, Inc. MKS
Slide 47: MKS GAAP to Non-GAAP Operating Income & Gross Margin Reconciliation
MKS GAAP to Non-GAAP Operating Income & Gross Margin Reconciliation MKS GAAP to Non-GAAP Operating Income & Gross Margin Reconciliation, and MKS EBITDA to Adjusted EBITDA Reconciliation $ in millions MKS PROPRIETARY MKS EBITDA to Adjusted EBITDA Reconciliation $ in millions MKS recorded acquisition
Slide 48: MKS GAAP to Non-GAAP EPS Reconciliation
MKS GAAP to Non-GAAP EPS Reconciliation $ in millions MKS PROPRIETARY MKS recorded acquisition and integration costs for 2017 and 2018 related to the Newport Corporation acquisition, which closed during the second quarter of 2016. In 2013, the Company's Chief Executive Officer retired and $2.6 milli
Slide 49: Acquisition and integration costs in 2017 and 2018 related to the Newport Corporation acquisition,
Acquisition and integration costs in 2017 and 2018 related to the Newport Corporation acquisition, which closed during the second quarter of 2016. In 2013, the Company's Chief Executive Officer retired and MKS recorded $2.6 million of costs related to his supplemental executive retirement plan and o
Slide 50: Combined Pro Forma Income Statement (9/30/18 LTM)
Note: Electro Scientific Industries excludes stock-based compensation expenses from non-GAAP financials for financial reporting purposes. Electro Scientific Industries non-GAAP financials shown above include stock-based compensation expenses to conform with MKS financial reporting. Pro forma combine
Slide 51: Thank You!
Thank You!
MKS Instruments — Debt Investor Presentation (January 2019) on 6ix