Mks Inc. · NASDAQ:MKSI
Mks — MKS Instruments — Debt Investor Presentation (October 2021)
68 slides from Mks's debt investor presentation, Oct 4, 2021
Slide 1: Public Lender Presentation
Exhibit 99.1 Public Lender Presentation October 6, 2021 MKS Instruments, Inc.
Slide 2: Safe Harbor for Forward-Looking Statements
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 regarding the proposed acquisi
Slide 3: Financial Information; Use of Non-GAAP and Non-IFRS Financial Measures
FINANCIAL INFORMATION; USE OF NON-GAAP AND NON-IFRS FINANCIAL MEASURES Financial Information; Presentation of Pro Forma Combined Information Except as otherwise indicated, all financial information of MKS has been reported in accordance with U.S. generally accepted accounting principles (“GAAP”) and
Slide 4: Today's Presenters
Today’s Presenters John T. C. Lee Seth H. Bagshaw President & Senior Vice President, Chief Executive Officer Chief Financial Officer & Treasurer 14+ years at MKS 15+ years at MKS MKS PROPRIETARY 4
Slide 5: Table of Contents
Table of Contents 1 1. Transaction Summary 2 2. Company Overview 3 3. Transaction Rationale 4 4. Financial Overview 5 5. Appendix - MKS Instruments - Atotech MKS PROPRIETARY 5
Slide 6: Transaction Summary
Transaction Summary st (1) • On July 1 2021, MKS announced it entered into an agreement to acquire Atotech for an equity value of ~$5.1B Transaction • $16.20 in cash per share and 0.0552 of a share of MKS common stock for each Atotech common share summary • Expect to realize $50M of cost synergies o
Slide 7: Sources & Uses and Pro Forma Capitalization
Sources & Uses and Pro Forma Capitalization Sources of funds (6/30/21) ($M) Uses of funds (6/30/21) ($M) (1) Cash from Balance Sheet $499 Purchase of equity $4,827 (1) Equity to Atotech shareholders 1,624 Refinance MKS debt 829 New USD Term Loan B 4,280 Refinance Atotech debt 1,592 New EUR Term Loan
Slide 8: Summary Terms and Conditions
Summary Terms and Conditions MKS Instruments, Inc. (the “Borrower”) Borrower Borrower’s direct and indirect domestic material subsidiaries Guarantors n Perfected first lien priority security interest on substantially all assets of the Borrower and Guarantors Security n 65% of the voting capital stoc
Slide 9: Financing Timeline
Financing Timeline October 2021 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 Key transaction date U.S. public holiday Date Event st n Launch acquisition financing October 1 th n Global lender call October 6 st n Commitments due at 5:00pm EST Octob
Slide 10: Company Overview
Company Overview John T.C. Lee
Slide 11: MKS Business Snapshot
MKS Business Snapshot (1) (1) (1) Revenue Mix Revenue Stream Revenue By Segment Equipment & Solutions 11% Services 13% Advanced Semiconductor Light & markets 59% Motion 41% 27% Vacuum & Analysis Equipment 62% 87% SEMI CHIPS MADE EMPLOYEES ENGINEERS AND LEADING PATENTS TOTAL CUSTOMERS w/ MKS WORLDWID
Slide 12: Broad Portfolio Driving Growth Across Multiple End Markets
Broad Portfolio Driving Growth Across Multiple End Markets Semiconductor Advanced Markets • Deposition • Advanced Electronics – Atomic Layer Deposition, Plasma Manufacturing Enhanced Chemical Vapor Deposition – PCB Manufacturing, Electronic Component Manufacturing, Electronic • Etching Thin Film LTM
Slide 13: Atotech Business Snapshot
Atotech Business Snapshot (1) (1) Revenue By End Market (1) Revenue Stream Revenue Mix Service Metal 4% Equipment Coatings General 7% 17% Metal Finishing 36% Auto Surface Advanced Finishing Electronics Electronics 19% Consumables 64% 64% 89% PCB CUSTOMERS TOTAL CUSTOMERS R&D & Tech Center PATENTS (2
Slide 14: Atotech Key Solutions Delivers Superior Performance
Atotech Key Solutions 1 Delivers Superior Performance n Mission‐critical “designed‐in” solutions n Environmentally sustainable product portfolio n Commitment to R&D and innovation 2 1 n Proprietary molecules synthesized in‐house Equipment Chemistries 2 Maximizes Chemistry Effectiveness n Plating equ
Slide 15: Strategic Rationale
Strategic Rationale John T.C. Lee
Slide 16: Key Credit Highlights
Key Credit Highlights 1 ● Combined company is strategically positioned to outperform industry growth ‒ MKS and Atotech are positioned to benefit from growing miniaturization and complexity in electronics ‒ Broad equipment and consumable portfolio with market leading positions in critical application
Slide 17: MKS: Years of Leadership in Enabling Miniaturization
MKS: 60 Years of Leadership in Enabling Miniaturization The Next Frontier in Miniaturization and Complexity is the Interconnection of chips, sensors, and devices ● Broadens MKS’ capabilities in Advanced Markets ‒ Atotech is a global leader in electronics chemistry ● Positions MKS to accelerate custo
Slide 18: Market Expansion With Leading Positions
Market Expansion With Leading Positions EQUIPMENT VACUUM & ANALYSIS LIGHT & MOTION CHEMISTRY & SOLUTIONS Semiconductor Advanced Electronics Mfg. Industrial Life & Health Sciences Research & Defense (1) Contribution from Photon Control MKS PROPRIETARY 18 INDUSTRIAL TECHNOLOGIES Pressure Measurement C
Slide 19: M&A is Core to MKS Growth Strategy
M&A is Core to MKS Growth Strategy 2000 - 2010 2010 - 2015 2015 – 2021 PHOTON – 2021 ASTEX – 2000 ESI – 2019 NEWPORT – 2016 ENI – 2002 PLASMART – 2012 CONTROL Plasma & Light & Motion Equipment & Optical Sensors RF Power RF Power Reactive Gas Solutions for Temperature Control for Etch & Dep ® Surroun
Slide 20: Chemistry Is Critical Enabler in the Markets MKS Serves
Chemistry Is Critical Enabler in the Markets MKS Serves Semiconductor Advanced Markets MINIATURIZATION / FORM-FACTOR MINIATURIZATION Smaller Geometries (nm) Finer Features (µm) COMPLEXITY Vertical Scaling Higher Density CHEMISTRY CHEMISTRY CHEMISTRY Novel Materials Novel Materials Nove Novel M l Mat
Slide 21: Challenges at the Interconnect Demand Integrated Approach
Challenges at the Interconnect Demand Integrated Approach Combined PCB Expertise Unique to Industry ● Increased device complexity driving PCB and Packaging innovation ‒ Increasing density, shrinking geometries ● Interconnect quality is essential to integration of chips to devices ‒ Reliability, prod
Slide 22: Complete Via Formation Process – Unique to the Industry
Complete Via Formation Process – Unique to the Industry VIA FORMATION PRESSING Optimize laser absorption for & PLATING G Oe p W W o td iorld orld m e:i zm e - - class class a pro ke stt- 's Cu Cu d m rillplating for plating for o c slte a ad nv in ag n c fe o d r LAMINATION PHOTO quality & productiv
Slide 23: Unique Domain Expertise In PCB and Packaging
Unique Domain Expertise In PCB and Packaging Wafer RDL IC Packaging Advanced PCB (HDI, Flex, SLP) MKS LASER SYSTEMS Multilayer PCB ATOTECH EQUIPMENT & MATERIALS LARGER VIA SIZE SMALLER Ability to optimize chemistry and equipment together will be a key differentiator MKS PROPRIETARY 23 LOW COMPLEXITY
Slide 24: L-T Opportunity: Leverage Combined Via Formation Expertise
L-T Opportunity: Leverage Combined Via Formation Expertise TODAY FUTURE Cross-Selling Opportunities Integrated via Formation Architectures Atotech leadership in ATOTECH HDI chemistry Growing miniaturization and complexity driving the need for optimization at the interconnect Deliver faster solutions
Slide 25: Financial Rationale
Financial Rationale Seth H. Bagshaw
Slide 26: Stronger Financial Profile
Stronger Financial Profile ● Atotech brings robust operating profile (1) ‒ Adjusted Gross margin ~50% ; Adjusted EBITDA margin (1) of >25% ● Attractive recurring consumables revenue stream ‒ Equipment + Consumables provides sticky/stable business ● Non-GAAP EPS expected to be accretive within first
Slide 27: Diversifies Revenue & Provides Recurring Stable Cash Flows
Diversifies Revenue & Provides Recurring Stable Cash Flows MKS Standalone Pro Forma $4.1B $2.7B Total Revenue Semiconductor Semiconductor 39% 41% 61% Revenue mix Advanced Markets 59% Advanced Markets 13% Consumables Services 31% Services Equipment Revenue streams 59% 10% 87% Equipment Revenue contri
Slide 28: Sticky and Stable Customer Relationships
Sticky and Stable Customer Relationships Atotech MKS ● Complexity of Semiconductor manufacturing process ● Mission-critical “designed-in” solutions drives drives deep and long customer relationships customer loyalty and stickiness ‒ 24 years avg. relationship length with top-25 customers ● IC manufa
Slide 29: Strong Track Record of Successful M&A Execution
Strong Track Record of Successful M&A Execution Newport Acquisition - April 2016 ESI Acquisition - February 2019 Announced Realized Announced Realized Run-rate synergies $35M $38M Run-rate synergies $15M $18M Timeline 18-36 months 17 months Timeline 18-36 months 20 months E&S SEGMENT NON-GAAP OPERAT
Slide 30: Synergy Overview
Synergy Overview ● Majority of the cost savings / synergies exist at the corporate level ● $50M of annualized cost synergies estimated to be achieved over Projected Synergies 36 months from transaction close Public company, corporate, and related costs $20 ● Synergies expected to be phased in 1/3 pe
Slide 31: Financial Overview
Financial Overview Seth H. Bagshaw
Slide 32: Post-close Financial Plan
Post-close Financial Plan For the immediate future, MKS is focused on integration and committed to paying down debt LIQUIDITY • Total estimated liquidity of $1.3B: ~$0.8B cash at close plus $500M undrawn credit facility • Pro forma gross leverage at close expected to be slightly below 4.4x based on
Slide 33: Combined Pro Forma Financial Profile
Combined Pro Forma Financial Profile $ in millions Revenue Adj. Gross profit (Non-GAAP) MKS Atotech $4,114 % PF growth MKS Atotech % PF margin $1,981 $3,564 $1,714 $3,088 $1,420 $1,522 $735 $1,234 $661 $1,188 $684 $2,694 $1,245 $2,330 $1,054 $1,900 $838 2019 2020 LTM Q2'21 2019 2020 LTM Q2'21 (6)% 1
Slide 34: MKS Q3'21 Guidance
MKS Q3’21 Guidance Q3’21E Q2’21A ● Revenue from Semiconductor Market Revenue $720M +/- $30M $750M expected to be consistent to slightly up sequentially Non-GAAP Financial Measures Gross Margin 47.0% +/- 100bps 47.4% ● Revenue from Advanced Markets Operating Expenses $149M +/- $4M $147M expected to d
Slide 35: Atotech FY 2021 Guidance
(1) Atotech FY 2021 Guidance FY 2021 ● Assumptions: Market growth rates based Electronics Chemistry Organic Revenue Growth 7% – 8% on Atotech’s internal market model, GMF Chemistry Organic Revenue Growth 12% – 13% (data derived from key consultancy firms (e.g. IHS, IDC)) and continued recovery Total
Slide 36: MKS Standalone Long-Term Target Model
MKS Standalone Long-Term Target Model (1) 2020-2025 Semi CAGR WFE +200bps (2) 2020-2025 Advanced Markets CAGR GDP +300bps Incremental Non-GAAP Gross Margin ~50% ~40% Incremental Non-GAAP Operating Margin (1) Growth rate for Wafer Fabrication Equipment spend for the period 2020-2025 (2) Growth rate f
Slide 37: Key Takeaways
Key Takeaways ● Compelling industrial logic for acquisition ‒ Strategic fit ‒ Diversifies business in terms of customers, end-markets and consumables / hardware mix ‒ Provides recurring revenue and cash flow stability through business cycles ‒ Path to seamless integration ● Strong pro forma cash gen
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Slide 39: MKS Overview
MKS Overview
Slide 40: MKS Value Proposition
MKS Value Proposition Enabling key Semi subsystems technology trends leader with with foundational broadest portfolio solutions Focus on Positioned for miniaturization growth in and technical complementary complexity drives Advanced Markets shareholder value MKS PROPRIETARY 40
Slide 41: A Stronger, More Diverse Company
A Stronger, More Diverse Company 2015-2020 2015 2020 CAGR +23% Total Revenue $0.8B $2.3B +20% • Semiconductor Market $0.6B $1.4B • Advanced Markets $0.3B $0.9B +30% (1) (1) Leading Product Categories 7 15 Patents ~1,100 ~2,200 (2) +28% Free Cash Flow $126M $428M (1) Product categories where Company
Slide 42: Strong and Accelerating Free Cash Flow Generation
Strong and Accelerating Free Cash Flow Generation $450 $1.4B MKS standalone FCF (excludes Atotech) $400 $350 $300 $538M $250 (1) $200 Strong Through-Cycle Free Cash Flow $399M $150 $100 $107M $50 $0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 (
Slide 43: Multiple Secular Growth Drivers
Multiple Secular Growth Drivers Semiconductor Mechanical to 5G and IoT Demand/Complexity Laser-Based Proliferation Drives WFE Manufacturing MKS is Uniquely Positioned for Market share gains Accelerating adoption Ubiquitous as equipment of Lasers, Optics expansion spend increases and Photonics of ele
Slide 44: Attractive Long-Term Market Growth
Attractive Long-Term Market Growth Average Chip Revenue ($B) Average WFE Spending ($B) >$550 >$70 +45% $431 +47% $48 +16% $324 +22% $32 $255 $28 $23 $177 2001-2005 2006-2010 2011-2015 2016-2020 2 2021 021-202 -2025E 5 2001-2005 2006-2010 2011-2015 2016-2020 2021-2025 2021-2025E VERTICAL SCALING, EUV
Slide 45: MKS Semi Business Has Outperformed WFE
MKS Semi Business Has Outperformed WFE 40% 25.0 Executing On Surround 10-year Average CAGR 30% ® the Chamber MKS Annual Semi Outperformance 20.0 MKS 10-Year Organic Trend • SAM expansion, technology MKS has (1) WFE 10-Year Trend 20% increased WFE 8% enablement, portfolio breadth share by 40% CAGR in
Slide 46: MKS Approaches Innovation Differently
MKS Approaches Innovation Differently Creating a Virtuous Cycle That Drives Growth and Expansion Drives cross- LASERS collaboration Solve Customers’ Toughest FLOW Collaborate Challenges POWER CONTROL Across Provides critical Enterprise insights as inflections arise Office of Office of Fosters cultur
Slide 47: Corporate Social Responsibility Is CORE To MKS
Corporate Social Responsibility Is CORE To MKS Our People and Our Our Communities Environment Shareholders Driving Sustainability and Value for All Stakeholders • Diversity is core to MKS and starts at the top: • Enabling sustainability with our products: • Strong, diverse and independent Board: - B
Slide 48: MKS Historical Financial Performance
MKS Historical Financial Performance (1) Revenue Gross margin (Non-GAAP) ($ in millions) % growth $2,694 46% 45% 44% $2,330 $1,900 2019 2020 LTM Q2'21 2019 2020 LTM Q2'21 (8)% 23% 32% (1),(2) (1) Adj. EBITDA (Non-GAAP) Free cash flow (Non-GAAP) $762 ($ in millions) ($ in millions) % margin $597 $495
Slide 49: Atotech Overview
Atotech Overview
Slide 50: Atotech Over Time
Atotech Over Time Founding & Expansion Carlyle Ownership & IPO 1901 1993 2000 2001 2016 2017 2021 ROOTS: FOUNDING: EXPANSION: MERGER: SALE TO CARLYLE: MANAGEMENT: PUBLIC OFFERING: Ernst Christian Elf Aquitaine Begins operating Elf Aquitaine merges In October, Carlyle Geoff Wild joins as On February
Slide 51: Atotech Key Investment Highlights
Atotech Key Investment Highlights • Global leader in specialty chemicals and equipment for electroplating serving secular growth markets in technology, industrial and consumer applications • Comprehensive systems and solutions approach drives sustainable competitive advantage • Market‐leading R&D in
Slide 52: Electronics (EL) – A Leader in Electronics Chemicals
Electronics (“EL”) – A Leader in Electronics Chemicals EL segment overview Application example - Plating high-end smartphones 32% FY 2020 $798M $259M Adj. EBITDA Financials (1) Revenue Adj. EBITDA (1) Margin (IFRS-basis) ● Supplies chemicals, equipment, and services used in manufacturing of electron
Slide 53: GMF – A Leading Position in the Surface Finishing Industry
GMF – A Leading Position in the Surface Finishing Industry GMF segment overview Application example - Automotive 24% FY 2020 $437M $105M Adj. EBITDA Financials (1) Revenues Adj. EBITDA (1) Margin (IFRS-basis) ● Supplies plating and coating chemicals, equipment, and services for decorative and functi
Slide 54: Global Market Leadership
Global Market Leadership (1) #1 in Well-Structured Electronics and GMF Markets Electronics General Metal Finishing (2) 1 Other 1 ATC ATC 28% 26% 23% (2) Other 46% Competitor A Competitor C Competitor A 20% 9% 18% Competitor B Competitor B Competitor C 19% 7% 4% Note: Based on Atotech company estimat
Slide 55: Strong Focus on Driving Sustainability
Strong Focus on Driving Sustainability Atotech’s commitment to providing sustainable plating solutions spans decades Product Applications Customer Support Improvements Solar energy Chemicals R&D focus Current: Chemistry forn Successfully eliminated several hazardous chemicals In 2020, 53% of Atotech
Slide 56: Atotech Historical Financial Performance (IFRS Basis)
Atotech Historical Financial Performance (IFRS Basis) Revenue Gross Margin (Excluding Depreciation & Amortization) ($ in millions) % growth $1,420 59% 55% $1,234 53% $1,188 2019 2020 LTM Q2'21 2019 2020 LTM Q2'21 (2)% 4% 22% (1)(2) (1) Adj. EBITDA (IFRS-basis) Adj. Free Cash Flow before Debt Service
Slide 57: GAAP to Non-GAAP and IFRS to Non-IFRS Reconciliations, Other Adjustments
GAAP to Non- GAAP and IFRS to Non-IFRS Reconciliations, Other Adjustments
Slide 58: Bridge to Pro Forma LTM Q2'21 Adjusted EBITDA
Bridge to Pro Forma LTM Q2’21 Adjusted EBITDA (GAAP-basis) Pro forma EBITDA $690.2 $403.2 $1,093.4 Stock-based compensation 32.7 2.0 34.7 COVID-19 related net adjustment - 1.2 1.2 Acquisition and integration costs 13.1 - 13.1 Restructuring and other 13.6 0.3 13.9 Asset impairment 1.1 2.2 3.3 Invento
Slide 59: MKS Income from Operations and Operating Margin Reconciliation
MKS Income from Operations and Operating Margin Reconciliation Reconciliation of Income from Operations to Non-GAAP Income from Operations and Calculation of Non-GAAP Operating Margin % L&M Segment Pro forma* (in millions) 2016 2020 Income from operations $(1.7) $102.6 (1) COVID-19 related net credi
Slide 60: Notes to MKS Income from Operations and Operating Margin Reconciliation
Notes to MKS Income from Operations and Operating Margin Reconciliation (1) MKS recorded COVID-19 related costs and credits that were direct, incremental and not expected to recur. The amounts consisted of payroll-tax credits for maintaining MKS’ workforce during the pandemic, offset by shift premiu
Slide 61: MKS Adj. Gross Margin Reconciliation (GAAP to Non-GAAP)
MKS Adj. Gross Margin Reconciliation (GAAP to Non-GAAP) (in millions) 2019 2020 LTM Q2 ’21 Gross Profit $830.4 $1,049.5 $1,240.6 COVID-19 related net costs – 0.3 - Acquisition inventory step-up 7.6 – – Inventory charge related to exit of product groups – 3.9 3.9 Non-GAAP Adj. Gross profit $838.0 $1,
Slide 62: MKS Adj. EBITDA Reconciliation (GAAP to Non-GAAP)
MKS Adj. EBITDA Reconciliation (GAAP to Non-GAAP) Consisted of payroll tax credits for maintaining workforce during the A (in millions) 2019 2020 LTM Q2 ’21 pandemic, offset by shift premiums and bonuses Net income $140.4 $350.1 $476.1 Interest expense, net 38.7 27.7 25.1 Related to the acquisition
Slide 63: MKS Free Cash Flow Reconciliation (GAAP to Non-GAAP)
MKS Free Cash Flow Reconciliation (GAAP to Non-GAAP) LTM (in millions) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q2’21 Net cash provided by (used in) operating $20.1 $13.8 $(0.2) $66.4 $64.2 $78.2 $119.1 $92.7 $4.9 $163.5 $156.0 $137.2 $76.1
Slide 64: MKS Q2'21 Financial Reconciliation (GAAP to Non-GAAP)
MKS Q2’21 Financial Reconciliation (GAAP to Non-GAAP) (in millions) Q2 ’21 (in millions) Q2 ’21 Gross Profit $355.2 Net Income $146.5 COVID-19 related net costs — Acquisition and integration costs 6.0 Non-GAAP Adj. Gross profit $355.2 Restructuring and other 3.0 Non-GAAP Gross margin 47.4% Amortizat
Slide 65: Atotech Adj. EBITDA Reconciliation (IFRS to Non-IFRS)
Atotech Adj. EBITDA Reconciliation (IFRS to Non-IFRS) (in millions) 2019 2020 LTM Q2 ’21 Eliminates the non-cash impact of (1) share-based compensation, (2) A losses on the sale of fixed assets, (3) goodwill impairment charges of Consolidated net income (loss) $7.6 $(289.4) $(8.5) $284 million, and
Slide 66: Atotech Adj. Free Cash Flow before Debt Service Reconciliation
Atotech Adj. Free Cash Flow before Debt Service Reconciliation (IFRS to Non-IFRS) (in millions) 2019 2020 LTM Q2 ’21 Adj. EBITDA (IFRS-basis) $380 $364 $436 Less: Capex (66) (53) (48) Less: Change in OWC 40 21 13 Less: Cash Taxes (85) (71) (107) Adj. Free Cash Flow before Debt Service $269 $262 $294
Slide 67: Atotech Financial Adjustments
Atotech Financial Adjustments (in millions) 2019 2020 LTM Q2’21 Revenue $1,188.0 $1,234.0 $1,420.3 Reported gross profit (ATC-basis) $699.8 $676.3 $750.9 Reported gross margin (ATC-basis) 59% 55% 53% Less: Depreciation Reallocated to COGS (11.9) (11.2) (11.8) Less: External Warehousing Cost Realloca
Slide 68: Pro forma Schedule
Pro forma Schedule (in millions) 2019 2020 LTM Q2’21 MKS Revenue 1,900 2,330 2,694 Atotech Revenue 1,188 1,234 1,420 Total Revenue $3,088 $3,564 $4,114 % Growth (6%) 15% 28% MKS Adj. Gross Profit (Non-GAAP) 838 1,054 1,245 Atotech Adj. Gross Profit (MKS-basis) 684 661 735 Total Adj. Gross Profit $1,
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