Updates Fiscal Year 2019 Guidance

Fiscal First Quarter 2019 Financial Highlights Versus Fiscal First

Quarter 2018



  • Sales of $340 million, up 3%


  • Net Income of $61 million, or diluted EPS of $0.56


  • Adjusted EBITDA of $110 million, up 7%


  • Advanced Materials continues double-digit volume growth


  • Key Process Materials capital projects brought on-stream


  • Delivery Systems & Services delivers strong top-line and record
    margin


Updates Fiscal Year 2019 Guidance



  • Estimated Sales of $1,380 - $1,430 million, up 1% to 4% versus
    fiscal year 2018



  • Estimated Adjusted EBITDA of $465 - $485 million, up 4% to 9%
    versus fiscal year 2018


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 specialty materials

and equipment supplier to the semiconductor industry, today reported

results for the fiscal first quarter ended December 31, 2018.

Sales were $339.5 million, up 3% versus prior year quarter, driven by

growth from both the Materials and Delivery Systems & Services ("DS&S")

segments. Net income was $61.1 million, or $0.56 per diluted share, up

227% versus prior year quarter, primarily due to the impact of the US

Tax Act. Adjusted Net Income was $60.2 million, up 2% versus prior year

quarter, or $0.55 per diluted share, also up 2%. Adjusted EBITDA was

$110.4 million, up 7% versus prior year quarter, primarily due to the

volume growth in Materials.

Guillermo Novo, Versum Materials' President and Chief Executive Officer

said, "We delivered another solid quarter, with revenue rising three

percent and adjusted EBITDA increasing seven percent. Both segments

continued to deliver volume and sales growth and our Advanced Materials

business sustained its innovation momentum and increased revenues again

by double-digits."

Fiscal Year 2019 Outlook

For fiscal year 2019, Versum Materials currently estimates sales of

$1,380 to $1,430 million and Adjusted EBITDA of $465 to $485 million.

Regarding the fiscal 2019 outlook, Mr. Novo added, “While the industry

outlook for the first half of the calendar year has weakened, we

continue to support our Process of Record (POR) ramps, execute our

Delivery Systems projects and advance our unique growth accelerators. We

believe that we will deliver another solid performance this year.”



Table 1: Fiscal First Quarter Fiscal Year 2019 Financial
Highlights




 

 

 






Three Months Ended December 31,





2018

 

 

 

2017

 

 

 

% Change

(In millions, except percentages and per share data)














Sales




$

339.5





$

330.8





3

%

Operating Income(A),(B)




95.8





89.3





7

%

Net Income(A)




61.1





18.7





NM


Net Income Margin




18.0

%




5.7

%





1230 bps




 



Diluted Earnings Per Share




0.56





0.17





NM


Adjusted Net Income(A)




60.2





59.2





2

%

Adjusted Net Income Margin(A)




17.7

%




17.9

%





-20 bps




 



Adjusted Diluted Earnings Per Share




0.55





0.54





2

%

Adjusted EBITDA(A),(B)




110.4





102.7





7

%

Adjusted EBITDA Margin




32.5

%




31.0

%





150 bps




 
















 

Cash Flows from Operations




46.2





39.1





18

%

Capital Expenditures




22.0





28.7





(23

)%
















 


(A) - The fiscal first quarter ended December 31, 2017 amounts have
been recast to reflect the retrospective application of the
company’s election to change its inventory valuation method of
accounting for its U.S. inventories from the last-in, first-out
(“LIFO”) method to the first-in, first-out (“FIFO”) method.

 

(B) - The fiscal first quarter ended December 31, 2017 amounts have
been recast to reflect the retrospective application of the
company’s change in classification of the non-service components of
net periodic pension cost.

 

Business Segment Results

Materials

Sales were $221.7 million, up 3% from the prior year quarter due to

double-digit volume growth in Advanced Materials and modest volume

growth in Process Materials, partially offset by negative price/mix in

Process Materials. Stronger sales in both memory and logic offset weaker

foundry activity in the quarter.

Operating income was $67.6 million, up 2% from the prior year quarter.

Segment Adjusted EBITDA was $80.2 million, up 4% from the prior year

quarter driven by volumes.

Delivery Systems & Services (DS&S)

Sales were $117.2 million, up 2% from the prior year quarter, driven by

continued strong activity in equipment and installations.

Operating income was $34.7 million, up 4% from the prior year quarter.

Segment Adjusted EBITDA was $35.4 million, up 5% from the prior year

quarter, driven by equipment and installation growth and favorable

product mix.



Table 2: Segment Sales




 

 

 






Three Months Ended December 31,





2018

 

 

 

2017

 

 

 

% Change

(In millions, except percentages)













Materials




$

221.7





$

214.6





3

%

DS&S




117.2





115.3





2

%

Corporate




0.6

 




0.9

 




(33

)%

Total Versum Materials Sales




$

339.5

 




$

330.8

 




3

%





 


Table 3: Segment Operating Income to Segment Adjusted EBITDA







 





Three Months Ended December 31,





2018




2017




% Change

(In millions, except percentages)





Materials













Operating income(A),(B)




$

67.6





$

66.1





2

%

Add: Depreciation and amortization




12.6

 




11.0

 




15

%

Segment Adjusted EBITDA(A),(B)




$

80.2

 




$

77.1

 




4

%

Segment Adjusted EBITDA Margin(C)




36

%




36

%





DS&S













Operating income(B)




$

34.7





$

33.5





4

%

Add: Depreciation and amortization




0.7

 




0.3

 




133

%

Segment Adjusted EBITDA(B)




$

35.4

 




$

33.8

 




5

%

Segment Adjusted EBITDA Margin(C)




30

%




29

%





Corporate













Operating loss




$

(5.4

)




$

(8.5

)




(36

)%

Add: Depreciation and amortization




0.2

 




0.3

 




(33

)%

Segment Adjusted EBITDA




$

(5.2

)




$

(8.2

)




(37

)%


















 


(A) - The fiscal first quarter ended December 31, 2017 amounts
have been recast to reflect the retrospective application of the
company’s election to change its inventory valuation method of
accounting for its U.S. inventories from the LIFO method to the
FIFO method.







 


(B) - The fiscal first quarter ended December 31, 2017 amounts
have been recast to reflect the retrospective application of the
company’s change in classification of the non-service components
of net periodic pension cost.



 


(C) 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 December 31,





2018




2017




% Change

(In millions, except percentages)





Materials(A),(B)




$

67.6





$

66.1





2

%

DS&S(B)




34.7





33.5





4

%

Corporate




(5.4

)




(8.5

)




(36

)%

Total Segment Operating Income(A),(B)




96.9





91.1





6

%

Less: Business separation, restructuring and cost reduction actions




1.1

 




1.8

 




(39

)%

Total Versum Materials Operating Income(A),(B)




$

95.8

 




$

89.3

 




7

%

 


(A) - The fiscal first quarter ended December 31, 2017 amounts
have been recast to reflect the retrospective application of the
company’s election to change its inventory valuation method of
accounting for its U.S. inventories from the LIFO method to the
FIFO method.




















 


(B) - The fiscal first quarter ended December 31, 2017 amounts
have been recast to reflect the retrospective application of the
company’s change in classification of the non-service components
of net periodic pension cost.



 

Conference Call and Webcast Details

On Monday, February 4, 2019 at 4:30 pm 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 1-(877) 883-0383 (domestic) or 1-(412) 902-6506 (international)

and use the participant code 8196300.

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 global specialty

materials company providing high-purity chemicals and gases, delivery

systems, services and materials expertise to meet the evolving needs of

the global semiconductor and display 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 reported fiscal year

2018 annual sales of about US $1.4 billion, has approximately 2,300

employees and operates fifteen manufacturing and seven research and

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

Tempe, Arizona. 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 http://www.versummaterials.com.

Non-GAAP Financial Measures

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

including Adjusted Net Income, Adjusted Net Income Margin, Adjusted

Diluted Earnings Per Share, Adjusted EBITDA, Segment Adjusted EBITDA,

Adjusted EBITDA margin, and Segment Adjusted EBITDA margin. Adjusted Net

Income is net income excluding certain disclosed items which we do not

believe to be indicative of underlying business trends, including

business separation, restructuring and cost reduction actions, net of

tax, the write-off of financing costs, net of tax, and the impact of the

Tax Act. Adjusted Diluted Earnings Per Share uses Adjusted Net Income

but otherwise uses the same calculation used in arriving at diluted

earnings per share, the most directly comparable GAAP financial measure.

Adjusted EBITDA is net income excluding certain disclosed items which we

do not believe to be indicative of underlying business trends, including

interest expense, the write-off of financing costs, non-service

components of net periodic pension cost, income tax provision,

depreciation and amortization expense, non-controlling interests, and

business separation, restructuring and cost reduction actions. Segment

Adjusted EBITDA is segment operating income excluding segment

depreciation and amortization expense. Adjusted Net Income Margin,

Adjusted EBITDA margin and Segment Adjusted EBITDA margin are calculated

by dividing Adjusted Net Income, 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), net income to Adjusted Net Income (see

Appendix Table A-2), diluted EPS to Adjusted Diluted EPS (see Appendix

A-3) and of segment operating income (loss) to Segment Adjusted EBITDA

by Quarter (see Appendix Table A-5), 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 our operating performance.

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

excluding certain disclosed items that we believe are not representative

of our underlying business. Management may use these non-GAAP measures

to evaluate our performance period over period and relative to

competitors in our industry, to analyze underlying trends in our

business and to establish operational budgets and forecasts or for

incentive compensation purposes. We use Adjusted EBITDA to calculate

performance-based cash bonuses. We use Segment Adjusted EBITDA as the

primary measure to evaluate the ongoing performance of our business

segments.

We believe non-GAAP financial measures provide security analysts,

investors and other interested parties with meaningful information to

understand our underlying operating results and to analyze financial and

business trends; enables better comparison to peer companies; and allows

us to provide a long-term strategic view of the business going forward.

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 Net Income and

Adjusted EBITDA exclude expenses related to business separation,

restructuring and cost reduction actions and the write-off of financing

costs, each of 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 of cash available 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 and amortization

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 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 2019

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 restructuring

and other income or charges to be incurred in 2019 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 “forward-looking statements” within the

meaning of the safe harbor provisions of the Private Securities

Litigation Reform Act of 1995. Forward-looking statements may be

identified by references to future periods and include statements about

our financial outlook or guidance; statements about our expectations or

predictions of future financial or business performance or conditions;

statements about our anticipated growth, profitability and margins; our

ability to compete successfully as a leading materials supplier to the

semiconductor industry and obtain next generation node opportunities;

and other matters. The words “believe,” “expect,” “anticipate,”

“estimate,” “continue,” “could,” “intend,” “may,” “plan,” “potential,”

“predict,” “seek,” “should,” “forecast,” “guidance,” “outlook,”

“opportunity” and similar expressions, among others, generally identify

forward-looking statements, which are based on management’s reasonable

expectations and assumptions as of the date the statements were made.

These statements involve a number of risks, uncertainties and other

factors that could cause actual results to differ materially, including

without limitation the following: the occurrence of any event, change or

other circumstances that could give rise to the right of one or both of

the parties to terminate any definitive merger agreement between us and

Entegris, Inc.; the outcome of any legal proceedings that may be

instituted against us or Entegris, Inc.; the ability to obtain

regulatory approvals and meet other closing conditions to the merger,

including approval by our and Entegris, Inc. stockholders on the

expected terms and schedule, including the risk that regulatory

approvals required for the merger are not obtained or are obtained

subject to conditions that are not anticipated; delay in closing the

merger; difficulties and delays in integrating our business with

Entegris, Inc. or fully realizing cost savings and other benefits;

business disruption following the merger; our ability or the ability of

Entegris, Inc. to retain and hire key personnel; potential adverse

reactions or changes to business relationships resulting from the

announcement or completion of the merger; uncertainty as to the

long-term value of the common stock of Entegris, Inc. following the

merger; legislative, regulatory and economic developments; potential

business uncertainty, including changes to existing business

relationships, during the pendency of the merger that could affect our

or Entegris, Inc.’s financial performance; certain restrictions during

the pendency of the merger that may impact our or Entegris, Inc.’s

ability to pursue certain business opportunities or strategic

transactions; the business, economic and political conditions in the

markets in which we and Entegris, Inc. operate; events beyond our

control such as acts of terrorism; product supply versus demand

imbalances in the semiconductor industry or in certain geographic

markets may decrease the demand for our goods and services; our

concentrated customer base; the dependence of our DS&S segment upon the

capital expenditure cycles of our customers; our ability to continue

technological innovation and successfully introduce new products to meet

the evolving needs of our customers; our ability to protect and enforce

our intellectual property rights and to avoid violating any third party

intellectual property or technology rights; unexpected interruption of

or shortages in our raw material supply; inability of sole source,

limited source or qualified suppliers to deliver to us in a timely

manner or at all; hazards associated with specialty chemical

manufacturing, such as fires, explosions and accidents, could disrupt

operations; increased competition and new product development by our

competitors, changing customer needs and price increases in materials

and components; operational, political and legal risks of our

international operations; increased costs due to trade wars and the

implementation of tariffs; the impact of changes in tax laws; the impact

of changes in environmental and health and safety regulations,

anticorruption enforcement, sanctions, import/export controls, tax and

other legislation and regulations in the U.S. and other jurisdictions in

which Versum Materials and its affiliates operate; our available cash

and access to additional capital may be limited by substantial leverage

and debt service obligations; possible liability for contamination,

personal injury or third party impacts if hazardous materials are

released into the environment; cyber security threats may compromise our

data or disrupt our information technology applications or services;

fluctuation of currency exchange rates; costs and outcomes of litigation

or regulatory investigations; the timing, impact, and other

uncertainties of future acquisitions or divestitures; and other risks,

uncertainties and factors discussed in the company’s Form 10-Qs, Form

10-K and in the company’s other filings with the U.S. Securities and

Exchange Commission available at www.sec.gov

or in materials incorporated therein by reference. Any forward-looking

statement in this press release speaks only as of the date on which it

is made. The company assumes no obligation to update or revise any

forward-looking statements.


Versum Materials, Inc.

CONSOLIDATED INCOME STATEMENTS

(Unaudited)


 

 

 






Three Months Ended December 31,





2018

 

 

 

2017

 

 

 

% Change

(In millions, except per share data and percentages)






Sales




$

339.5





$

330.8





3

%

Cost of sales (A),(B)




196.1





191.2





3

%

Selling and administrative




35.5





35.3





1

%

Research and development




12.9





12.7





2

%
















 

Business separation, restructuring and cost reduction actions




1.1





1.8





(39

)%

Other (income) expense, net




(1.9

)




0.5

 




NM


Operating Income(B)




95.8





89.3





7

%

Interest expense




12.8





11.3





13

%

Write-off of financing costs










2.1





NM


Non-service components of net periodic pension cost(B)




0.2

 




0.2

 






%

Income Before Taxes




82.8





75.7





9

%

Income tax provision(A)




19.7

 




55.0

 




(64

)%

Net Income




63.1





20.7





NM


Less: Net Income Attributable to Non-Controlling Interests




2.0

 




2.0

 






%

Net Income Attributable to Versum




$

61.1

 




$

18.7

 




NM


Net income attributable to Versum per common share:














Basic




$

0.56

 




$

0.17

 




NM


Diluted




$

0.56

 




$

0.17

 




NM


Shares used in computing per common share amounts:














Basic




109.1




108.9






%

Diluted




109.8




109.7






%














 


(A) - The fiscal first quarter ended December 31, 2017 amounts have
been recast to reflect the retrospective application of the
company’s election to change its inventory valuation method of
accounting for its U.S. inventories from the LIFO method to the FIFO
method, which resulted in a decrease in Cost of sales of $0.2
million for the fiscal first quarter ended December 31, 2017 and an
increase in the Income tax provision of $0.1 million for the fiscal
first quarter ended December 31, 2017.

 

(B) - The fiscal first quarter ended December 31, 2017 amounts have
been recast to reflect the retrospective application of the
company’s change in classification of the non-service components of
net periodic pension cost, which resulted in a decrease in Cost of
sales of $0.2 million for the fiscal first quarter ended December
31, 2017, an increase to Operating Income by the same amount and an
increase to non-service components of net periodic pension costs of
$0.2 million for the fiscal first quarter ended December 31, 2017.


Versum Materials, Inc.

CONSOLIDATED BALANCE SHEETS

(Unaudited)


 

 

 


 

 

 







December 31,
2018







September 30,
2018



(In millions)










Assets











Current Assets









Cash and cash items




$

408.0





$

399.8


Trade receivables, net




188.8





184.4


Inventories




190.0





177.1


Contracts in progress, less progress billings




24.6





20.3


Prepaid expenses




16.1





13.6


Other current assets




18.0

 




17.9

 

Total Current Assets




845.5

 




813.1

 

Plant and equipment, net




414.5





405.1


Goodwill




183.7





183.0


Intangible assets, net




62.2





63.5


Other non-current assets




39.5

 




40.6

 

Total Non-Current Assets




699.9

 




692.2

 

Total Assets




$

1,545.4

 




$

1,505.3

 


Liabilities and Stockholders’ Deficit











Current Liabilities









Payables and accrued liabilities




$

118.9





$

138.6


Accrued income taxes




50.6





43.3


Current portion of long-term debt




5.8

 




5.8

 

Total Current Liabilities




175.3

 




187.7

 

Long-term debt




973.2





974.2


Noncurrent income tax payable




35.7





37.3


Deferred tax liabilities




40.2





41.3


Other non-current liabilities




54.2

 




52.4

 

Total Non-Current Liabilities




1,103.3

 




1,105.2

 

Total Liabilities




1,278.6

 




1,292.9

 

Stockholders’ Equity









Common stock




109.1





109.0


Capital in excess of par




5.2





6.1


Retained earnings




133.9





81.6


Accumulated other comprehensive income (loss)




(17.3

)




(18.2

)

Total Versum’s Stockholders’ Equity




230.9





178.5


Non-Controlling Interests




35.9

 




33.9

 

Total Stockholders Equity




266.8

 




212.4

 

Total Liabilities and Stockholders’ Equity




$

1,545.4

 




$

1,505.3

 













 


Versum Materials, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


 

 

 






Three Months Ended December 31,





2018

 

 

 

2017

(In millions)









Operating Activities









Net income




$

63.1





$

20.7


Less: Net income attributable to non-controlling interests




2.0

 




2.0

 

Net income attributable to Versum




61.1





18.7


Adjustments to reconcile income to cash provided by operating
activities:









Depreciation and amortization




13.5





11.6


Deferred income taxes




(0.7

)




(7.4

)

Gain on sale of assets










(0.3

)

Share-based compensation




2.6





2.4


Other adjustments




5.7





(4.9

)

Working capital changes that provided (used) cash:









Trade receivables




(4.8

)




(10.1

)

Inventories




(12.9

)




(9.9

)

Contracts in progress, less progress billings




(4.3

)




(7.6

)

Payables and accrued liabilities




(17.0

)




(22.4

)

Accrued income taxes




4.6





60.2


Other working capital




(1.6

)




8.8

 

Cash Provided by Operating Activities




46.2

 




39.1

 

Investing Activities









Additions to plant and equipment




(22.0

)




(28.7

)

Proceeds from sale of assets




0.7

 




0.4

 

Cash Used by Investing Activities




(21.3

)




(28.3

)

Financing Activities









Payments on long-term debt




(1.4

)




(1.4

)

Dividends paid to shareholders




(8.8

)




(5.5

)

Other financing activity




(6.4

)




(1.6

)

Cash Used for Financing Activities




(16.6

)




(8.5

)

Effect of Exchange Rate Changes on Cash




(0.1

)




4.6

 

Increase in Cash and Cash Items




8.2





6.9


Cash and Cash items - Beginning of Year




399.8

 




271.4

 

Cash and Cash items - End of Period




$

408.0

 




$

278.3

 













 

Contacts

Investor Inquiries:

Soohwan Kim, CFA, 602-282-0957

Media Inquiries:

Tiffany Elle, 480-282-6475