Ultra Clean Holdings, Inc. · NASDAQ:UCTT
Ultra Clean — Debt Investor Presentation (September 2018)
55 slides from Ultra Clean's debt investor presentation, Sep 5, 2018
Slide 1: Lender Presentation September 5, 2018
Lender Presentation September 5, 2018
Slide 2: Disclaimer
Disclaimer This presentation may contain forward - looking statements and management may make additional forward - looking statements in respon se to your questions. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These fo rw
Slide 3: Presenters
Presenters Jim Scholhamer Chief Executive Officer and Director Ultra Clean Technology Sheri Savage Senior Vice President of Finance and Chief Financial Officer Ultra Clean Technology Jim Pursiano Head of Corporate Development Ultra Clean Technology 2
Slide 4: Transaction Overview
TRANSACTION OVERVIEW
Slide 5: Transaction Overview
Transaction Overview Ultra Clean Holdings, Inc. (“Ultra Clean” or “UCT”), is a leading developer and supplier of critical subsystems for the semiconductor and display capital equipment industries UCT acquired Quantum Global Technologies, LLC (“QGT”) on August 27, 2018 for implied $342mm in Enter
Slide 6: Sources/Uses and Pro Forma Capitalization
Sources/Uses and Pro Forma Capitalization Pro Forma Capitalization Sources and Uses ($ in millions) Amount % Total Balance Sheet Cash $29 8% New First Lien Term Loan 350 92% Total Sources $379 100% % Total QGT Equity $320 85% Refinancing of Existing Debt 45 12% Financing and Transaction Expenses 14
Slide 7: Summary Term Sheet: Senior Secured Credit Facilities
Summary Term Sheet: Senior Secured Credit Facilities Borrower: Ultra Clean Holdings, Inc. (the “Borrower”) Security: Secured by a first - priority lien on substantially all existing and future assets of the Borrower and the subsidiary Guarantors and 100% of the equity in the Borrower and each Guaran
Slide 8: Expected Transaction Timeline
Expected Transaction Timeline Timetable Details Date Event September 5 th Bank Meeting September 19 th Commitments Due by 12pm September 20 th Price and Allocate 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 Market Holiday Key Date September 2018 6
Slide 9: UCT Overview
UCT OVERVIEW
Slide 10: Ultra Clean Holdings at a Glance
$444 $514 $469 $563 $924 6.8% 6.0% 5.1% 7.6% 11.7% 0% 6% 12% 18% $0 $400 $800 $1,200 2013 2014 2015 2016 2017 (% margin ) ($mm) Ultra Clean Holdings at a Glance Headquarters: Hayward, CA Founded: 2002 Employees: ~ 2,750 Business Description: A global leader in the design, engineering, and manufact
Slide 11: Customers Choose UCT Through All Steps of the Value Chain
Customers Choose UCT Through All Steps of the Value Chain Design for manufacturability (DFM) New product design and manufacture Global network of strategic suppliers Comprehensive new product introduction process Subsystem through full tool integration Prototyping / Development Manufacturing / Engin
Slide 12: UCT's Solutions Form the Backbone for the Complex Semiconductor Manufacturing Process
PROCESS CHAMBER GAS PANEL TRANSFER CHAMBER FACTORY INTERFACE Semi Manufacturing Process UCT’s solutions address key semiconductor manufacturing processes, which provides avenues for organic market expansion going forward Source: Company Information. UCT’s Solutions Form the Backbone for the Complex
Slide 13: UCT Supplies Critical Elements of the Semiconductor Manufacturing Process
UCT Supplies Critical Elements of the Semiconductor Manufacturing Process Prep Front - end Processing Back - end Processing Semi Manufacturing Process Process step with gas delivery Process step with liquid delivery Epitaxial Photo - resist Litho - graphy CMP Slicing Ingot CMP Implant Clean Depos -
Slide 14: Strong Market Share with Meaningful Opportunity to Drive Further Penetration
Strong Market Share with Meaningful Opportunity to Drive Further Penetration OEM Outsourced Manufacturing Market Share x Need for uniform delivery solutions favors UCT as OEMs continue to outsource gas subsystems to reduce fixed costs and better focus on their value - added processes x 50% of gas de
Slide 15: UCT's Business Has a High Degree of Stickiness
UCT’s Business Has a High Degree of Stickiness □ Extremely complex applications, once designed in, very hard to displace □ Application knowledge critical □ Performance/reliability essential □ Improved design - to - delivery cycle times □ Increased integration with OEMs through local presence □ Compo
Slide 16: Leading Manufacturer in a Highly Fragmented Supply Chain
A CM- UCT CM-A B CM-B C D E F CM-C G H CM-D I J K L M N O P Q R S T U V W Specialty Manufacturer Contract Manfacturer Thousands of additional suppliers Leading Manufacturer in a Highly Fragmented Supply Chain Semi Equipment Revenue Manufacturers Meaningful scale positions UCT to provide differentiat
Slide 17: How UCT Succeeds with Customers
How UCT Succeeds with Customers Company Description Engages in the design and manufacture of semiconductor processing equipment used in IC fabrication Supplies equipment, services and software to enable the manufacture of ICs for electronics, flat panel displays and solar products Length of Relation
Slide 18: Disciplined Track Record in Executing Acquisitions
Disciplined Track Record in Executing Acquisitions Feb 2015 Aug 2015 Sep 2018 Jul 2012 American Integration Technologies (AIT) Miconex acquisition bolstered UCT’s position in the chemical delivery market and augmented UCT’s manufacturing capabilities for wet clean and CMP subsystems Acquisition of M
Slide 19: Case Studies: UCT's Acquisitions of Marchi and Miconex
“We are very pleased to add Marchi’s unique products and expertise to UCT and expect the transaction to be immediately accretive to earnings following the close of the transaction. Like UCT, Marchi products are well entrenched in leading semiconductor capital equipment providers, enabling advanced p
Slide 20: Highlighting UCT's Key Growth Drivers
Significant increase in Etch and CVD to support new devices • Primary customers are concentrated in Deposition & Etch; fastest growing areas of WFE Customers enabling organic/inorganic SAM expansion • High OEM factory capacity utilization driving strong push for expanded outsourcing • Share gain opp
Slide 21: UCT Core Management Team
UCT Core Management Team Leadership Team with strong industry expertise and proven track record Jim Scholhamer Chief Executive Officer CEO since 2015 Previously Corporate Vice President and General Manager at Applied Materials, Inc. Headed display and manufacturing operations of Applied Materi
Slide 22: Acquisition Rationale and QGT Overview
ACQUISITION RATIONALE AND QGT OVERVIEW
Slide 23: Quantum Global Technologies at a Glance
$108 $145 $179 $185 $218 13.3% 16.2% 17.0% 17.8% 23.2% 0% 12% 24% 36% $0 $100 $200 $300 2013 2014 2015 2016 2017 (% margin ) ($mm) Quantum Global Technologies at a Glance Headquarters: Quakertown, PA Founded: 2000 Employees: ~ 1,800 Business Description: Leading global outsourced provider of clean
Slide 24: Strategically and Financially Compelling Transaction
Strategically and Financially Compelling Transaction Platform investment that enhances UCT’s position as a differentiated global solutions provider to the semiconductor industry Expands UCT into a complementary adjacent market that broadens the Company’s addressable market Increases durability and r
Slide 25: UCT and QGT Company Comparison
Founded in 2002 Headquartered in Hayward, CA FY 2017 Revenue of $924mm ~2,750 Employees as of FY 2017 Leadership in: □ Critical gas/chemical delivery subsystems for semiconductor industry □ OLED modules for the capital display industry Operations in East Asia, Europe and US Growth Driv
Slide 26: Historical Financial Summary
Historical Financial Summary Historical Revenue Adj. EBITDA (1) / Adj. EBITDA Margin (FYE) (FYE) $444 $514 $469 $563 $924 $108 $145 $179 $185 $218 $0 $500 $1,000 $1,500 2013 2014 2015 2016 2017 ($mm) $30 $31 $24 $42 $108 $14 $24 $30 $33 $50 6.8% 6.0% 5.1% 7.5% 11.7% 13.3% 16.2% 17.0% 17.8% 23.2% (80
Slide 27: QGT Increases and Complements UCT's TAM
The acquisition strengthens UCT’s position as a supplier through vertical integration and highly complementary product offerings Source: Wall Street research and Company information. QGT Increases and Complements UCT’s TAM $1.1bn $1.1bn $0.7bn $0.7bn $0.2bn $0.2bn $0.4bn $0.4bn $0.8bn $0.8bn $4.4bn
Slide 28: QGT Business Segments – Overview
Leading Provider of Ultra High Purity, Outsourced Parts CCR (1) Services Leading Provider of State - of - the - Art Analytical Laboratory Services Quantum Clean ChemTrace Recurring semiconductor services revenue □ From Fabs ( IC manufacturers) and OEMs (capital equipment providers) Recurring sem
Slide 29: QGT's Services and Capabilities
QGT’s Services and Capabilities Aluminum Anodized Materials Ceramics All Semiconductor Manufacturing Processes Served Materials Cleaned Diffusion Etching Chemical Vapor Deposition Physical Vapor Deposition Atomic Layer Deposition Lithography Implant Subfab Coated Materials Polymers Quart
Slide 30: Outsized Growth in Sub-14nm Manufacturing
Outsized Growth in Sub - 14nm Manufacturing 0 2,000 4,000 6,000 8,000 10,000 12,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 0.010 Micron 0.014 Micron 0.015 Micron 0.019 Micron 0.020 Micron 0.022 Micron 0.028 Micron 0.032 Micron 0.040 Micron
Slide 31: QGT has a Diverse Customer Base
FY 2016 Sales ($mm) FY 2017 Sales ($mm) % of FY 2017 Total Sales Customer Relationship Global leader in IDM space $56 $62 28.4% 10+ years Leading manufacturer of chips and advanced display 36 45 20.6% 10+ years Global leader in consumer electronics 40 44 20.2% 10+ years World - class provider of WFE
Slide 32: QGT Operates from an Advantaged Position
QGT Operates from an Advantaged Position • Industry remains fragmented • Large customers are more likely to engage with large, global suppliers who can meet their requirements • Large number of small regional players serve ~72% of market □ Most serve local fabs or a specific small group of IC manufa
Slide 33: QGT's Addressable Market Opportunity
QGT’s Addressable Market Opportunity 1 2016 Data. 2 Expected to grow at 15.4% CAGR 2016 – 2020 (Future Market Insights) to $3.0 trillion by 2020. Electronic End Market Products > $1.7T (2) Semiconductors $339bn Materials $44bn Process Tools $37bn Services $35bn $0.8bn $0.4bn $0.2bn Current market si
Slide 34: QGT Can Leverage UCT's Global Footprint
QGT Can Leverage UCT’s Global Footprint FY2017 Employees UCT QGT Total United States 1,347 941 2,288 Asia 1,051 684 1,735 EMEA 349 86 435 UCT Location QGT Location FY2017 Employees UCT QGT Total Engineering / Development 39 160 199 SG&A 268 452 720 Manufacturing 2,440 1,099 3,539 South San Francisco
Slide 35: Credit Highlights
CREDIT HIGHLIGHTS
Slide 36: Credit Highlights
Credit Highlights Capitalizing on Fastest Growing Semiconductor Market Segments 1 Critical Subsystems Provider Throughout Manufacturing Process 2 Increased Recurring Revenue and Business Resiliency 4 Proven Growth Strategy Driving Exceptional Results 6 Complementary Revenue Profile and Customer Base
Slide 37: Strong Semiconductor Industry Tailwinds
Strong Semiconductor Industry Tailwinds 1 0 200 400 600 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E ($ bns) Auto Comms Consumer Data Industrial A & D $419 $479 $300 $343 $513 $315 $335 $344 $503 $30 $27 $30 $34 $37 $51 $54 (17%) (7%) 10% 12% 10% 37% 6% (200%) (100%) 0% 100% 200% $0 $30 $60 $90 2
Slide 38: Strong Semiconductor Industry Tailwinds (cont'd)
Applied Materials 18% Lam Research 15% ASML 13% Tokyo Electron 11% KLA - Tenor 5% Others 38% Strong Semiconductor Industry Tailwinds (cont’d) Semiconductor WFE market accounts for 50% – 55% of capital spending by semiconductor manufacturers □ WFE market dominated by five major players, accounting
Slide 39: UCT is a One-Stop Shop Providing Services Throughout the Value Chain
FOUNDING CAPABILITY MANUFACTURED COMPONENTS CHEMICAL DELIVERY SUB - SYSTEMS COMPLETE ASSEMBLIES GAS DELIVERY METALS MACHINING FRAMES SHEET METAL FORMING PROTOTYPE MACHINING THERMAL PRODUCTS PLASTICS MACHINING ASSEMBLY INTEGRATION & TEST FLUID DELIVERY PARTS CLEANING VALIDATION 2 UCT is a one - stop
Slide 40: Highly Complementary Product Mix and Customer Base
Lam Research Applied Materials Other Lam Research Applied Materials #1 IDM Other Lam Research Applied Materials #1 IDM Other UCT Revenue $924mm QGT Revenue $218mm Combined Revenue $1,142mm Highly Complementary Product Mix and Customer Base Source: Company information. Note: Ultra Clean & Quantum Glo
Slide 41: Increased Recurring Revenue and Business Resiliency
Increased Recurring Revenue and Business Resiliency High degree of recurring, acyclical revenue and sticky customer base at QGT will increase go - forward business resiliency QGT’s revenue stream is recurring and sticky across IDM and OEM customers, as processes are fixed and changing suppliers is
Slide 42: Accretive to Margins and Free Cash Flow
$11.3 $5.0 $24.8 17% 18% 23% (8%) 0% 8% 16% 24% ($20) $0 $20 $40 $60 2015 2016 2017 ($mm) $2.1 $15.3 $57.6 8% 10% 14% (8%) 0% 8% 16% 24% ($20) $0 $20 $40 $60 2015 2016 2017 ($ mm ) ($9.2) $10.3 $32.8 5% 7% 12% (8%) 0% 8% 16% 24% ($20) $0 $20 $40 $60 2015 2016 2017 ($mm) Accretive to Margins and Free
Slide 43: Growth Strategy Driving Exceptional Results
$403 $444 $514 $469 $563 $924 5.1% 6.8% 6.0% 5.1% 7.6% 11.7% $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 0% 2% 4% 6% 8% 10% 12% 14% ($mm) UCT Revenue UCT EBITDA Margin Growth Strategy Driving Exceptional Results July 2012 American Integration Technologies (AIT) 2012 2013 2014 2015 2016 20
Slide 44: UCT's Financial Policy
UCT’s Financial Policy
Slide 45: UCT's Financial Policy Overview
UCT’s Financial Policy UCT’s Financial Policy Overview Strategic Outlook: Acquisition of QGT provides UCT with complementary source of revenue with higher margins, a more diversified customer base, and further stability of cash flow generation Maintain a prudent and disciplined approach to M&A w
Slide 46: Appendix
APPENDIX
Slide 47: Ultra Clean Holdings, Inc. Pro Forma Structure
Ultra Clean Holdings, Inc. Pro Forma Structure Ultra Clean Holdings, Inc. (DE) $65mm RCF due 2023 $350mm Term Loan B due 2025 Quantum Global Technologies, LLC (DE) Ultra Clean Technology Systems and Service, Inc. (CA) UCT Thermal Solutions, Inc. (DE) Ultra Clean International Holding Company (Cayman
Slide 48: EBITDA Bridge
EBITDA Bridge $105 $10 $2 $118 $43 $5 $49 $0 $167 $0 $50 $100 $150 $200 UCT 6/29 EBITDA Stock Based Comp One-Time Charges UCT 6/29 Adj. EBITDA QGT 6/29 EBITDA Stock Based Comp + Precious Metal Recovery Acquisition and Other Adjustments QGT 6/29 Adj. EBITDA Synergies New Co. Adj. EBITDA ($mm) (1) (2)
Slide 49: GAAP to Non-GAAP Reconciliation EBITDA
1 UCT and one - time charges include income - tax effect of non - GAAP adjustments, restructuring fees reserved for severance and other costs related to the closure of the Company’s operations in China, and one time consulting fees related to the expansion of the Company’s operations in Singapore. 2
Slide 50: GAAP to Non-GAAP Reconciliation EBITDA (UCT and QGT FYE)
1 UCT and one - time charges include income - tax effect of non - GAAP adjustments, restructuring fees reserved for severance and other costs related to the closure of the Company’s operations in China, and one time consulting fees related to the expansion of the Company’s operations in Singapore. 2
Slide 51: QGT Historical Financial Summary
$108.2 $145.1 $178.7 $185.4 $217.9 $0 $50 $100 $150 $200 $250 2013 2014 2015 2016 2017 $ mm Sales $14.4 $23.5 $30.4 $33.1 $50.5 $0 $10 $20 $30 $40 $50 $60 2013 2014 2015 2016 2017 $ mm Adj. EBITDA $61.3 $83.8 $103.6 $107.5 $128.9 0 20 40 60 80 100 120 140 2013 2014 2015 2016 2017 $ mm GAAP Gross Pro
Slide 52: QGT Historical Income Statement
Source: Company information. QGT Historical Income Statement Fiscal Year Ended LTM Dec. 2015 Dec. 2016 Dec. 2017 Jun. 2018 (1) $178.7 $185.4 $217.9 $222.9 75.1 77.9 88.9 91.3 $103.6 $107.5 $128.9 $131.7 44.5 49.6 49.2 52.5 28.4 29.1 33.6 33.3 6.3 6.5 8.3 8.2 6.2 6.7 7.6 7.5 Total Operating Expenses
Slide 53: QGT Historical Balance Sheet
Source: Company information. QGT Historical Balance Sheet Assets Dec. 31, 2015 Dec. 31, 2016 Dec. 31, 2017 Current Assets Cash 15.7 11.9 30.3 Accounts receivable, net 16.5 17.1 18.8 Prepaid expense and other 3.5 3.7 4.8 Total Current Assets $35.8 $32.7 $54.0 Property and Equipment $65.9 $76.1 $88.5
Slide 54: QGT Historical Cash Flow Statement
Source: Company information. QGT Historical Cash Flow Statement Fiscal Year Ended Cash Flows from Operating Activities: Dec. 2015 Dec. 2016 Dec. 2017 Net Income $15.0 $8.5 $22.0 9.1 12.6 12.1 2.4 2.4 2.4 0.0 0.0 0.0 (1.2) 2.9 0.0 0.5 0.2 0.0 0.2 0.1 0.1 (0.6) 1.5 2.0 (0.4) (0.3) 0.2 (0.0) (0.0) 0.1
Slide 55: Thank You
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Ultra Clean Holdings — Debt Investor Presentation (September 2018) on 6ix