Fourth Quarter and Fiscal Year 2016 Financial Results



  • Sales of $248 million for the fourth quarter, up 7% over prior year
    quarter and $970 million for fiscal year 2016, down 4% over prior year



  • Net Income of $45 million for the fourth quarter, up 5% over prior
    year quarter and $212 million for fiscal year 2016, up 15% over prior
    year



  • Net Income Margin for the fourth quarter of 18.2%, down 40 basis
    points over prior year quarter and 21.9% for fiscal year 2016, up 370
    basis points over prior year



  • Adjusted EBITDA of $78 million for the fourth quarter, up 12% over
    prior year quarter, and $327 million for fiscal year 2016, up 8% over
    prior year



  • Adjusted EBITDA margin for the fourth quarter of 31.4%, up 140
    basis points over prior year quarter and 33.7% for fiscal year 2016,
    up 380 basis points over prior year


Fiscal Year 2017 Guidance



  • Sales of $990 - $1,050 million, up 2% to 8% versus fiscal year 2016


  • Adjusted EBITDA of $330 - $350 million, up 1% to 7% versus fiscal
    year 2016


The results and guidance in this press release include Non-GAAP

financial measures. Refer to the section entitled “Non-GAAP Financial

Measures.”

TEMPE, Ariz.--(BUSINESS WIRE)--Versum Materials, Inc. (NYSE: VSM), a leading materials and equipment

supplier to the semiconductor industry, today reported results for the

fourth quarter and full fiscal year ended September 30, 2016. Net income

for the fourth quarter of $45 million was up 5% versus the comparable

prior year period while fiscal 2016 net income of $212 million was up

15% versus prior year. Adjusted EBITDA for the quarter of $78 million

was up 12% versus the comparable prior year period while fiscal 2016

adjusted EBITDA of $327 million was up 8% versus prior year.

The results reflect the performance of Versum Materials as a wholly

owned subsidiary of Air Products and Chemicals, Inc. (NYSE: APD) (“Air

Products”), and are derived from the consolidated financial statements

and accounting records of Air Products as if Versum operated on a

stand-alone basis during the periods presented and were prepared in

accordance with GAAP.

“For the Versum team, this fourth quarter closes a strong final chapter

as a subsidiary of Air Products and sets us up for a bright future ahead

as an independent company, focused on delivering meaningful value to our

customers, shareholders and employees,” said Guillermo Novo, our

President and Chief Executive Officer. “With a broad portfolio of

products and services, Versum is uniquely positioned to grow and lead

through innovative solutions and services for our customers in the

semiconductor industry.”

Table 1: Fourth Quarter and Full Fiscal Year 2016 Financial

Highlights*



 


 




Three Months Ended September 30,


Year Ended September 30,



2016

 

2015

 

% Change


2016

 

2015

 

% Change

(In millions, except percentages)



 





Sales


$

248.4



$

232.4



7

%


$

970.1



$

1,009.3



(4

)%

Operating Income


63.0



47.9



32

%


278.9



222.0



26

%

Net Income


45.2



43.2



5

%


212.0



184.1



15

%

Net Income Margin


18.2

%


18.6

%


(40) bp


21.9

%


18.2

%


370 bp

Adjusted EBITDA


78.0



69.8



12

%


326.9



301.5



8

%

Adjusted EBITDA Margin


31.4

%


30.0

%


140 bp


33.7

%


29.9

%


380 bp

















 

*Based on carve-out financials; includes allocated governance costs

within Air Products and results related to certain business lines that

remained with Air Products.

Sales for the fourth quarter ended September 30, 2016 were $248.4

million, versus $232.4 million for the comparable period in fiscal year

2015. This represents an increase of 7% year on year, which was driven

largely by stronger equipment sales in the Delivery Systems & Services

(DS&S) segment and growth in Advanced Materials product lines offsetting

capacity constraints and lower volumes in some of the Process Materials

product lines within the Materials segment.

Net Income for the fourth quarter ended September 30, 2016 was $45.2

million versus $43.2 million for the comparable period in fiscal year

2015 and included business separation, restructuring and cost reduction

actions of $2.5 million and $7.1 million, respectively. This 5% increase

was a result of stronger operating results offset by a higher tax

provision.

Adjusted EBITDA for the fourth quarter ended September 30, 2016 was

$78.0 million versus $69.8 million for the comparable period in fiscal

year 2015, a 12% increase year on year. The major drivers of the

improved performance were strong DS&S and Advanced Materials volumes,

lower cost of sales due to favorable operating productivity and

favorable price/mix.

Sales for the fiscal year ended September 30, 2016 were $970.1 million

versus $1,009.3 million for the fiscal year ended September 30, 2015, a

4% decrease year on year. This decrease was driven largely by lower

turnkey installation activity, the impact of exited product lines in the

DS&S segment and unfavorable currency, which more than offset positive

price/mix in the Materials segment.

Net Income for the fiscal year ended September 30, 2016 was $212.0

million versus $184.1 million for the fiscal year ended September 30,

2015, a 15% increase year on year, and included business separation,

restructuring and cost reduction actions of $0.9 million in fiscal year

2016 and $21.6 million in fiscal year 2015.

Adjusted EBITDA for the fiscal year ended September 30, 2016 was $326.9

million versus $301.5 million for the fiscal year ended September 30,

2015. This 8% year on year improvement was a result of favorable

price/mix and improved operating productivity which more than offset

lower DS&S volumes and negative currency.

Fiscal 2016 Results by Business Segment

Versum Materials reports results for its two operating business

segments, Materials and DS&S, and a Corporate segment.

Table 2: Segment Sales*



 


 




Three Months Ended September 30,


Year Ended September 30,



2016

 

2015

 

% Change


2016

 

2015

 

% Change

(In millions, except percentages)



Materials


$

192.9



$

192.8





%


$

756.7



$

743.4



2

%

DS&S


55.5

 


39.6

 


40

%


213.4

 


265.9

 


(20

)%

Total Versum Materials Sales


$

248.4

 


$

232.4

 


7

%


$

970.1

 


$

1,009.3

 


(4

)%





















 

Table 3: Segment Operating Income to Segment Adjusted EBITDA*



 


 




Three Months Ended September 30,


Year Ended September 30,



2016

 

2015

 

% Change


2016

 

2015

 

% Change

(In millions, except percentages)



Materials













Operating income


$

57.3



$

55.1



4

%


$

252.3



$

213.7



18

%

Add: Depreciation and amortization


11.8



12.2



(3

)%


44.4



48.1



(8

)%

Add: Equity affiliates’ income




 


0.3

 


(100

)%


0.2

 


1.0

 


(80

)%

Segment Adjusted EBITDA


$

69.1

 


$

67.6

 


2

%


$

296.9

 


$

262.8

 


13

%

Segment Adjusted EBITDA margin(A)


35.8

%


35.1

%





39.2

%


35.4

%



DS&S













Operating income


$

13.3



$

4.9



171

%


$

50.8



$

49.1



3

%

Add: Depreciation and amortization


0.6



2.2



(73

)%


2.1



8.3



(75

)%

Add: Equity affiliates’ income




 




 






 




 



Segment Adjusted EBITDA


$

13.9

 


$

7.1

 


96

%


$

52.9

 


$

57.4

 


(8

)%

Segment Adjusted EBITDA margin(A)


25.0

%


17.9

%





24.8

%


21.6

%



Corporate













Operating loss


$

(5.1

)


$

(5.0

)


2

%


$

(23.3

)


$

(19.2

)


21

%

Add: Depreciation and amortization


0.1



0.1





%


0.4



0.5



(20

)%

Add: Equity affiliates’ income




 




 






 




 



Segment Adjusted EBITDA


$

(5.0

)


$

(4.9

)


2

%


$

(22.9

)


$

(18.7

)


22

%























 

(A)Segment Adjusted EBITDA margin is calculated by dividing Segment

Adjusted EBITDA by sales.

Table 4: Reconciliation of Segment Operating Income to Total Versum

Materials Operating Income*



 


 




Three Months Ended September 30,


Year Ended September 30,



2016

 

2015

 

% Change


2016

 

2015

 

% Change

(In millions, except percentages)



Materials


$

57.3



$

55.1



4

%


$

252.3



$

213.7



18

%

DS&S


13.3



4.9



171

%


50.8



49.1



3

%

Corporate


(5.1

)


(5.0

)


2

%


(23.3

)


(19.2

)


21

%

Total Segment Operating Income


65.5



55.0



19

%


279.8



243.6



15

%


Less: Business separation, restructuring
and cost reduction
actions




2.5

 


7.1

 


(65

)%


0.9

 


21.6

 


(96

)%

Total Versum Materials Operating Income


$

63.0

 


$

47.9

 


32

%


$

278.9

 


$

222.0

 


26

%





















 

* Reflects Carve-Out Financials; Includes allocated governance costs

within Air Products and results related to certain business lines that

remained with Air Products.

Materials:

Sales for the fourth quarter ended September 30, 2016 were $192.9

million, flat versus the prior year period. Advanced Materials sales

were up due to higher volumes and favorable currency. Process Materials

sales were down due to lower volumes from reduced spot sales and a

product line exit partially offset by favorable currency.

Operating income for the fourth quarter ended September 30, 2016 was

$57.3 million, up 4% from the prior year period. Segment Adjusted EBITDA

for the fourth quarter was $69.1 million, up 2% versus prior year

period. This improvement was driven by lower operating costs partially

offset by unfavorable volumes and price/mix together with higher selling

and administrative costs.

Sales for the fiscal year ended September 30, 2016, were $756.7 million,

a 2% improvement versus the fiscal year ended September 20, 2015. The

Materials segment saw stronger volumes from new product growth in

Advanced Materials offset by lower spot sales and a product line exit in

Process Materials. Favorable price/mix primarily in Process Materials

was slightly offset by negative currency across the entire Materials

segment.

Operating income for the fiscal year ended September 30, 2016 was $252.3

million, up 18% versus the prior year 2015. Segment Adjusted EBITDA of

$296.9 million was up 13% versus prior year. This increase was driven

largely by favorable price/mix, improved operating cost performance, and

positive volume contribution partially offset by unfavorable currency.

Delivery Systems & Services (DS&S):

Sales for the fourth quarter ended September 30, 2016 were $55.5

million, up 40% versus the fourth quarter ended September 30, 2015

primarily driven by stronger equipment volumes as the semiconductor

industry ramped up capital spending for both fab expansions and new fabs.

Operating income for the fourth quarter ended September 30, 2016 was

$13.3 million, up 171% versus the comparable period in fiscal 2015 and

Segment Adjusted EBITDA of $13.9 million was up 96%. The increase was

driven by the higher equipment sales and favorable product mix.

Sales for the fiscal year ended September 30, 2016 of $213.4 million

were down 20% versus fiscal year 2015 due to the absence of turnkey

installation projects that were largely completed in 2015 and impacts

from exited product lines, partially offset by higher equipment and

services sales.

Operating income for the fiscal year ended September 30, 2016 was $50.8

million, up 3% versus the fiscal year ended September 30, 2015 largely

driven by positive product mix and reduced costs including depreciation

partially offset by lower turnkey installation activity and impacts from

exited product lines.

Segment Adjusted EBITDA for the fiscal year ended September 30, 2016 was

$52.9 million, down 8% versus prior year. This is attributed to the

lower turnkey installation activity and impacts from exited product

lines more than offsetting positive product mix and favorable costs.

Fiscal Year 2017 Outlook

For fiscal year 2017, Versum Materials currently estimates sales of $990

to $1,050 million and Adjusted EBITDA of $330 to $350 million, in each

case excluding certain product lines that were historically managed by

Versum Materials (and reflected in Versum’s results of operations for

fiscal year 2016) but remained with Air Products. The fiscal year 2017

sales outlook reflects top line growth driven by expectations for

increasing memory and VNAND demand, acceleration of advanced logic

devices and the continued increase in capital spending by the

semi-conductor industry. The fiscal year 2017 Adjusted EBITDA outlook

excludes approximately $20 to $25 million of estimated one-time stand-up

costs related to the implementation of its own enterprise resource

planning (ERP) system and relocation of certain administrative and

research and development personnel to Versum Materials sites.

Based upon current LIBOR rates, Versum Materials currently expects a

weighted average annualized interest rate of approximately 4.3%.

Additionally, our effective tax rate is expected to be in the range of

20 to 25%. Depreciation and amortization is expected to be approximately

$50 million.

Capital expenditures are expected to be in the range of $75 to $85

million, including capital for implementing the ERP system and other

information technology infrastructure and the relocation of R&D assets

of $35 to $40 million.

Subject to approval by the Versum Materials Board, it is currently

expected that Versum Materials will pay a nominal quarterly dividend.

Conference Call and Webcast Details

On Thursday December 1, 2016 at 11:00 am Eastern Time, Versum Materials

plans to host its conference call and webcast to discuss these results.

Investors may listen to the conference call live via telephone by

dialing (877) 883-0383 (domestic) or (412) 902-6506 (international) and

use the participant code 0743555.

An audio-only live webcast of the conference call and presentation

materials can be accessed through the “Investors” section of our website

Presentation materials will be posted to the “Investors” section of the

website prior to the call.

A replay of the conference call/webcast will be available under “Events

& Presentations” on the “Investors” section of the Versum Materials

website.

About Versum Materials

Versum Materials, Inc. (NYSE: VSM) is a leading electronic materials

company providing high-purity chemicals and gases, delivery systems,

services and materials expertise to meet the evolving needs of the

global semiconductor, display and LED industries. Derived from the Latin

word for “toward,” the name “Versum” communicates the company’s deep

commitment to helping customers move toward the future by collaborating,

innovating and creating cutting-edge solutions.

A global leader in technology, quality, safety and reliability, Versum

Materials is one of the world’s leading suppliers of next generation CMP

slurries, ultra-thin dielectric and metal film precursors, formulated

cleans and etching products, and delivery equipment that has

revolutionized the semiconductor industry. Versum Materials, which began

“regular way” trading October 3, 2016 on the NYSE as an independent

company, has annual sales of about $1 billion, 1,900 employees and 10

major facilities in Asia and North America. It is headquartered in

Tempe, Arizona. Prior to its separation on October 1, 2016, Versum

Materials had operated for more than three decades as a division of Air

Products and Chemicals, Inc. (NYSE: APD).

For additional information, please visit www.versummaterials.com.

Non-GAAP Financial Measures

This earnings press release includes “non-GAAP financial measures,”

including Adjusted EBITDA, Segment Adjusted EBITDA, Adjusted EBITDA

margin, and Segment Adjusted EBITDA margin. We define Adjusted EBITDA as

net income excluding certain disclosed items which we do not believe to

be indicative of underlying business trends, including interest expense,

income tax provision, depreciation and amortization expense,

non-controlling interests, and business separation, restructuring and

cost reduction actions. Versum Materials defines Segment Adjusted EBITDA

as segment operating income excluding segment depreciation and

amortization expense, and equity affiliates’ income. Adjusted EBITDA

margin and Segment Adjusted EBITDA margin are calculated by dividing

Adjusted EBITDA and Segment Adjusted EBITDA, respectively, by sales. In

the accompanying tables, Versum Materials has provided reconciliations

of net income to Adjusted EBITDA (see Appendix Table A-1) and of segment

operating income (loss) to Segment Adjusted EBITDA (see Appendix Table

A-3), in each case the most directly comparable GAAP financial measure.

We encourage investors to read these reconciliations.

The presentation of these non-GAAP financial measures is intended to

enhance the usefulness of financial information by providing measures

which management uses internally to evaluate operating performance. We

use these non-GAAP measures to assess our operating performance by

excluding certain disclosed items that we believe are not representative

of our underlying business. We use Adjusted EBITDA to calculate

performance-based cash bonuses and determine whether certain

performance-based options and restricted stock units vest (as such cash

bonuses, options and restricted stock units are tied to Adjusted

EBITDA). We use Segment Adjusted EBITDA as the primary measure used by

our chief operating decision maker to evaluate the ongoing performance

of our business segments. We believe non-GAAP financial measures provide

investors with meaningful information to understand our underlying

operating results and to analyze financial and business trends. These

non-GAAP financial measures should not be viewed in isolation, are not a

substitute for GAAP measures, and have limitations which include but are

not limited to the following: (a) Adjusted EBITDA excludes expenses

related to business separation, restructuring and cost reduction actions

which we do not consider to be representative of our underlying business

operations, however, these disclosed items represent costs to Versum

Materials; (b) Adjusted EBITDA is not intended to be a measure for

management’s discretionary use, as it does not consider certain cash

requirements such as interest payments, tax payments and debt service

requirements; (c) though not business operating costs, interest expense

and income tax provision represent ongoing costs of Versum Materials;

(d) depreciation, amortization, and impairment charges represent the

wear and tear or reduction in value of the plant, equipment, and

intangible assets which permit us to manufacture and market our

products; and (e) other companies may define non-GAAP measures

differently than we do, limiting their usefulness as comparative

measures. A reader may find any one or all of these items important in

evaluating our performance. Management compensates for the limitations

of using non-GAAP financial measures by using them only to supplement

our GAAP results and to provide a more complete understanding of the

factors and trends affecting our business. In evaluating these non-GAAP

financial measures, the reader should be aware that we may incur

expenses similar to those eliminated in this presentation in the future.

A reconciliation of net income to Adjusted EBITDA as forecasted for 2017

is not provided. Versum Materials does not forecast net income as it

cannot, without unreasonable effort, estimate or predict with certainty

various components of net income. These components include additional

costs associated with the separation from Air Products, further

restructuring and other income or charges to be incurred in 2017 as well

as the related tax impacts of these items. Additionally, discrete tax

items could drive variability in our forecasted effective tax rate. All

of these components could significantly impact net income. Further, in

the future, other items with similar characteristics to those currently

included in Adjusted EBITDA that have a similar impact on comparability

of periods, and which are not known at this time, may exist and impact

Adjusted EBITDA.

Forward-Looking Information:

This press release contains, and management may make, certain

“forward-looking statements” within the meaning of the safe harbor

provisions of the U.S. Private Securities Litigation Reform Act of 1995.

These forward-looking statements may be identified by references to

future periods, and include statements about business strategies,

operating plans, and outlook for Versum Materials, our growth prospects,

expectations as to future sales, operating income or Adjusted EBITDA,

estimates regarding capital requirements and needs for additional

financing, estimates of expenses and cost reduction efforts, future

revenues and profitability, our future operating results on a segment

basis, anticipated cash flows, estimates of the size of the market for

our products, estimates of the success of other competing technologies

that may become available, and our future success as an independent

public company. These forward-looking statements are based on

management’s reasonable expectations and assumptions as of the date of

this release. Actual results and the outcomes of future events may

differ materially from the those expressed or implied in the

forward-looking statements because of a number of risks and

uncertainties, including, without limitation, weakening of global or

regional general economic and business conditions that could decrease

the demand for our goods and services; our ability to continue

technological innovation to meet the evolving needs of our customers;

future financial and operating performance of major customers;

unanticipated contract terminations or customer cancellations of sales;

the impact of competitive products and pricing; unexpected changes in

raw material supply and markets; our failure to successfully develop and

market new products and optimally manage product life cycles; our

inability to protect and enforce intellectual property rights; our

failure to appropriately manage process safety and product stewardship

issues; changes in laws and regulations or political conditions; global

economic and capital markets conditions, such as inflation, interest and

currency exchange rates; business or supply disruptions; security

threats, such as acts of sabotage, terrorism or war, weather events and

natural disaster; increased competition; changes in relationships with

our significant customers and suppliers; unanticipated business

disruptions; our ability to predict, identify and interpret changes in

consumer preferences and demand; uncertainty regarding the availability

of financing to us in the future and the terms of such financing;

disruptions in our information technology networks and systems;

unexpected safety or manufacturing issues; costs and outcomes of

litigation or regulatory investigations; the impact of management and

organizational changes; the success of productivity and operational

improvement programs; the timing, impact, and other uncertainties of

future acquisitions or divestitures; the impact of changes in

environmental, tax or other legislation and regulations in jurisdictions

in which Versum Materials and its affiliates operate; and uncertainties

related to our ability to contain costs and realize the anticipated

benefits of the completed spin-off from Air Products; and other risk

factors described in our filings with the Securities and Exchange

Commission, including the Registration Statement on Form 10, as amended,

and our periodic filings. Versum Materials assumes no obligation to

update any forward-looking statements or information in this press

release.



 


 


Versum Materials, Inc.





ANNUAL COMBINED INCOME STATEMENTS









 



Three Months Ended September 30,


Year Ended September 30,



2016

 

2015

 

% Change


2016

 

2015

 

% Change

(In millions, except percentages)



Sales


$

248.4



$

232.4



7

%


$

970.1



$

1,009.3



(4

)%

Cost of sales


138.7



139.7



(1

)%


539.5



616.5



(12

)%

Selling and administrative


33.2



26.6



25

%


109.8



109.6





%

Research and development


11.5



11.7



(2

)%


43.9



40.7



8

%

Business separation, restructuring and cost reduction actions


2.5



7.1



(65

)%


0.9



21.6



(96

)%

Other income (expense), net


0.5

 


0.6

 


(17

)%


2.9

 


1.1

 


164

%

Operating Income


63.0



47.9



32

%


278.9



222.0



26

%

Equity affiliates’ income






0.3



(100

)%


0.2



1.0



(80

)%

Interest expense


0.4

 




 


100

%


0.4

 


0.1

 


300

%

Income Before Taxes


62.6



48.2



30

%


278.7



222.9



25

%

Income tax provision


15.6

 


3.6

 


333

%


58.8

 


31.7

 


85

%

Net Income


47.0



44.6



5

%


219.9



191.2



15

%

Less: Net Income Attributable to Non-controlling Interests


1.8

 


1.4

 


29

%


7.9

 


7.1

 


11

%

Net Income Attributable to Versum


$

45.2

 


$

43.2

 


5

%


$

212.0

 


$

184.1

 


15

%























 

Contacts

Versum Materials, Inc.

Investor Inquiries:

Nahla A.

Azmy, 610-481-7499

or

Media

Inquiries:

Michael Drabenstott, 610-417-0503