Advancing Semiconductor Manufacturing Technology Fall 2018 Safe - - PowerPoint PPT Presentation

Fall 2018

Advancing Semiconductor Manufacturing Technology

This presentation may contain forward-looking statements and management may make additional forward-looking statements in response to your questions. These statements are made under the ''safe harbor'' provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Statements that are not historical facts, including statements concerning our beliefs, forecasts, estimates and expectations, and those regarding our expected financial results for fourth quarter of 2018 are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks related to: the risk that our results of operations are cyclical and may fluctuate from period to period; the risk that we rely on a small number of customers for a significant portion of our revenue; the risk that the industries in which we participate are highly competitive and other risks outlined in our public filings with the Securities and Exchange Commission, including as set forth under “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in our most recent Quarterly Report on Form 10-Q and Annual Report

• n Form 10-K filed with the Securities and Exchange Commission. The forward-looking statements made in this presentation relate
• nly to events or information as of the date on which the statements are made in this presentation. Except as required by law, we

undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events Management uses non-GAAP net income and non-GAAP net income per diluted share to evaluate the Company's operating and financial results. The Company believes the presentation of non-GAAP results is useful to investors for analyzing our core business and business trends and comparing performance to prior periods, along with enhancing investors' ability to view the Company's results from management's perspective. The presentation of this additional information should not be considered a substitute for results prepared in accordance with GAAP. Tables presenting reconciliations of non-GAAP results to U.S. GAAP results are included in the Appendix.

2

Safe Harbor

Non-GAAP

3

Investment Highlights

Capitalizing on opportunities in equipment manufacturing, parts cleaning, microcontamination analysis Flexible, vertically integrated model supports significant growth and creates high barriers to entry Key customers (OEM & IDM) enabling robust organic growth opportunities Increasing recurring revenues driving financial leverage and strong operating profitability Accelerating share growth through acquisitions

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INTEGRATION & TEST MANUFACTURING

Expert Outsourcing Partner

SUPPLY CHAIN MANAGEMENT Design for manufacturability (DFM) Partnering with customers on new products Global network

• f strategic

suppliers Comprehensive new product introduction process Subsystem through full tool integration MANUFACTURING ENGINEERING PROTOTYPING/ DEVELOPMENT

Highly integrated,

• ne-stop, full

spectrum solution for semi customers

4

CLEANING & ANALYSIS tool chamber parts cleaning and coating, microcontamination analytical services

United States 55% China 4% Singapore 31% Europe 4% Others 6%

5

Driving UCT’s Rapid Financial Growth

$469 $563 $924

5.1% 7.6% 11.7%

0% 6% 12% 18% $0 $400 $800 $1,200

2015 2016 2017

(% margin) ($Millions)

Historical Revenue and Adjusted EBITDA Margin(1) FY 2017 Revenue Breakdown(1)

6

FACTORY INTERFACE GAS PANEL PROCESS CHAMBER TRANSFER CHAMBER

Key Customers Enable Organic Growth

UCT’s solutions provide avenues for organic market expansion going forward

* Based on UCT internal estimates

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- ition Etch Certain Steps Repeated 20x – 30x Package and Test Core UCT offering

Source: Company Information. 9

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

Source: VLSI 2017 Critical Subsystems Market Share (excludes pump and optic suppliers), UCT internal estimates.

Scale is Difficult to Achieve

10

Scale positions UCT to provide differentiated, comprehensive global solutions.

Target core semi customers who require high capacity solutions to deliver copy-exact services Scale operations to capitalize on market growth

(close to customers)

Increase content on customers’ platforms; expand cleaning and analytical services Accelerate share growth through acquisitions

11

Growth Strategy

1 2 4 3

Strategic M&A; targets accretive to earnings with recurring cash flows

Disciplined Track Record in Executing Acquisitions

Feb 2015 Aug 2015 Sep 2018 Jul 2012

American Integration Technologies (AIT)

Bolstered chemical delivery offering; Facilitated vertical integration in chemical and gas delivery Added to customer base & expanded manufacturing capabilities Expand customer base and capitalize on recurring revenue stream

Purchase Price: $100.3mm EV / EBITDA: ~5.0x PF Debt / EBITDA: ~1.5X Purchase Price: $43.6mm EV / EBITDA: ~11.8x PF Debt / EBITDA: ~2.2x Purchase Price: $22.8mm EV / EBITDA: ~6.2x PF Debt / EBITDA: ~3.7x Purchase Price: $342mm EV / EBITDA: ~6.6x PF Debt / EBITDA: ~2.2x

Source: Company materials, Company filings and website. 12

$179 $185 $218 17.0% 17.8% 23.2%

0% 12% 24% 36% $0 $100 $200 $300

2015 2016 2017

(% margin) ($mm)

Quantum Global Technologies at a Glance

Headquarters: Quakertown, PA Founded: 2000 Employees: ~1,800 Business Description: Largest global outsourced provider of cleaning, coating and refurbishment (“CCR”) and micro-contamination analytical lab services to the semiconductor industry

 Operates in two segments:

❑

Outsourced Parts Cleaning – QuantumClean

▪

Leader in cleaning of sub-14nm process parts with estimated 33% of market share

▪

18 Advance Technology Cleaning Centers

▪

4,000+ production cleaning and recoating methods

▪

Recurring revenues from Fabs (IDMs) and OEMs

❑

Analytical lab services – ChemTrace

▪

Four micro-contamination analytical laboratories

▪

Recurring revenues from the semiconductor and solar industries

 Growth Drivers

❑ Total Wafer Starts / IC Production ❑ Increased utilization of equipment

Business Overview FY 2017 Revenue Breakdown Historical Revenue and Adj. EBITDA Margin

QuantumClean 89% ChemTrace 11%

Segment Breakdown

United States 66% EMEA 3% Asia 31%

Geography Breakdown

Source: Company information. 13

1 2 4 3 5

Quantum – A Compelling Transaction

Platform investment enhances UCT’s position as a differentiated global solutions provider to the semiconductor industry Expands UCT into a complementary adjacent market that broadens addressable market Increases durability and recurring nature of revenues; positioned for growth as semiconductors become increasingly pervasive Vertically integrated portfolio strengthens barriers to entry Accretive to margins and free cash flow with attractive coverage ratios

14

QGT’s Services and Capabilities

All Semiconductor Manufacturing Processes Served Materials Cleaned

Diffusion Etching Chemical Vapor Deposition Physical Vapor Deposition Atomic Layer Deposition Lithography Implant Subfab

• Ultra-High purity, validated parts cleaning
• Performance coatings
• Quartz fabrication and repair
• Refurbishment and rebuilding
• Complex analytical and engineering services
• On-site logistics and support

Services Performed

Source: Company information.

Ta Coated Shield Pre-Clean Post-Clean Etch Before and After Clean

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Metals Aluminum Stainless Steel Titanium Ceramics Alumina Quartz Silicon Silicon Carbide Other Anodized Aluminum Coated materials

QGT has a Diverse Semiconductor Customer Base

Key QGT Growth Drivers

Source: Company information. Numbers have been rounded 17

2016 2017

Top 4 IDMs 56% 53% Top 3 OEMs 28% 31% Top 2 Foundries 4% 5% All Other 12% 11% Revenue $185M $218M Wafer starts per year & global IC production:

• Semiconductor demand:

– 280bn IC Units in 2017 – 7.2% CAGR from 2012-2017 – Projected to reach $503bn by 2020E

• Progression of node geometries:

– 250% projected growth 2016-2019 for sub- 14nm silicon wafers – Forecast of 3,000+ MSI by 2020

Engagements across semiconductor value chain increases resilience

QGT has an Advantaged Position

• Large customers more likely to engage with large,

global suppliers who can meet their requirements

• Large number of regional players serve ~72% of market

❑ Primarily serve local fabs or small group of IC manufacturers

with trailing edge technology nodes

• Industry drivers favor consolidation:

❑ Smaller players unable to invest & meet advanced

technology nodes requirements

❑ Regional players cannot meet copy-exact needs of global

fabs or OEMs

❑ Consolidation improves customer reach, capacity utilization

and profitability

UHP Cleaning + Analytical Lab Services Market*

Source: QGT Management estimates.

Industry Highlights

18

14% 6% 5% 3% 72%

Competitor A Competitor B Competitor C Others (~90 companies)

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UCT’s New Global Footprint

16

Source: Company Information.

UCT Location QGT Location UK

QGT

Czech Republic

Plastic Machining & fabrication, Integration

Israel

QGT

Global footprint provides co-location with customers’ supply chain and capital efficient UCT business model

South San Francisco

Precision Machining

Hayward

Weldments, Gas Panels, Integration

Fremont

Prototyping Machine

Hayward

Thermal Systems

Chandler

Sheet Metal, Frames, Integration

Austin

Weldments, Gas Panel, Integration

Korea

QGT

Shanghai

Weldments, Gas Panels, Integration

Philippines

Weldments, Modules

Singapore

Gas Panel, Integration, Additive Manufacturing

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MANUFACTURED COMPONENTS

GAS DELIVERY METALS MACHINING FRAMES SHEET METAL FORMING THERMAL PRODUCTS PLASTICS MACHINING INTEGRATION & TEST FLUID DELIVERY PARTS CLEANING VALIDATION

Critical Value-Added Broad Capabilities

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PROTOTYPE MACHINING

CHEMICAL DELIVERY SUB-SYSTEMS

One-stop for components & services across the value chain

SERVICES

Lam Research Applied Materials Other Lam Research Applied Materials #1 IDM Other Lam Research Applied Materials #1 IDM Other

Highly Complementary Product Mix and Customer Base

 QGT acquisition reduces revenue exposure to top 2 customers by ~11% of total revenue  QGT has greater exposure to integrated device manufacturers (IDM)  Combined company is more balanced between WFE manufacturers and IDMs

❑ Diversifies UCT revenue away from dependence on LAM and OEMs

 Potential for further customer diversification by exploring opportunities in QGT’s markets  QGT revenue based on semi equipment installed base, relatively stable during WFE downturns

❑ Shift toward wafer starts from WFE ❑ QGT has high stickiness as changing suppliers around process chamber is very risky

Source: Company information. Note: Ultra Clean & Quantum Global Technologies’ metrics as of FY2017.

Improvement in Customer Diversification

21

19

Investment Highlights

Capitalizing on opportunities in equipment manufacturing, parts cleaning, microcontamination analysis Flexible, vertically integrated model supports significant growth and creates high barriers to entry Key customers (OEM & IDM) enabling robust organic growth opportunities Increasing recurring revenues driving financial leverage and strong operating profitability Accelerating share growth through acquisitions

APPENDIX

21

UCT Record Revenue Growth Driving Financial Leverage

2015 2016 2017

$469.1

$562.8

$924.4

2015 2016 2017 3.4%

5.4% 10.3%

2015 2016 2017 $0.32

$0.65

$2.34 Total Revenue

$ in millions

Non-GAAP

• perating margin(1)

Non-GAAP diluted earnings per share (1)

(1) Non-GAAP results exclude intangible asset amortization and non-recurring expense items. See Appendix for reconciliation of GAAP to non-GAAP amounts.

• Q3’18 revenue $234M
• Q3’18 Non-GAAP operating margin 6.4%

2015 2016 2017

$0.9 $17.6

$48.9

• Variable cost based operating

model

• Targeting value-add, complex

assemblies that support

• perating margin targets
• Focusing on capacity

management

• Extending capabilities and

simplifying operations

22

UCT Strong Cash Flow & Operating Profitability

Non-GAAP Operating margin (1) GAAP Operating cash flow

$ in millions

(1) Non-GAAP results exclude intangible asset amortization and non-recurring expense items. See Appendix for reconciliation of GAAP to non-GAAP amounts.

3.4% 5.4% 10.3%

• Q3’18 Non-GAAP operating margin 6.4%

23

UCT Balance Sheet

• Inventory decrease due to
• ngoing inventory reduction efforts
• Ongoing improvements in working

capital management

($ in Millions)

Q3’18 Q4’17 Cash & Investments $160.3 $68.3 Accounts Receivable $95.1 $90.2 Inventory $198.6 $236.8 Total Assets $986.6 $563.4 Liabilities $539.9 $263.1 Shareholders’ Equity $446.7 $300.3

(in thousands)

FY’15 FY’16 FY’17 Q1’18 Q2’18 Q3’18

Net income (loss) per GAAP basis $(10,732) $10,051 $75,085 $24,741 $18,960 $(5,997) Amortization of intangible assets (1) $6,212 $5,757 $5,438 $1,098 $1,098 $2,411 Executive transition costs (2) $2,783 $925

• $1,400

$246 Restructuring charges (3) $245 $251

• $874
• Consulting fees (4)
• $150
• Acquisition costs (5)

$642

• $9,391

Impairment of “Held for Sale” Assets (6)

• $666
• Termination of Contractual Obligation (7)
• $438
• Reduction in force (8)
• $1,319

Product transition fees (9)

• $657

Disposal of business unit (10)

• $1,082

Bank transaction costs (11)

• $99

Income tax effect of non-GAAP adjustments (12) $(2,767) $(1,664) $(714) $(262) $(296) $(2,220) Income tax effect of valuation allowance (13) $13,859 $4,964 $469 $(873) $303 $4,865 Non-GAAP net income $10,242 $21,388 $80,278 $25,728 $21,465 $11,853

24

Reconciliation: GAAP Net Income to Non-GAAP Net Income

1. Amortization of intangible assets related to the Company's acquisitions of AIT, Marchi and Miconex 2. Represents expense for termination benefits paid to former executives of the Company 3. Adjustment to previous restructuring reserve related to the abandonment of one of the Company's facilities 4. One-time consulting fees related to the expansion of the Company’s operations in Singapore 5. Costs incurred related to the acquisitions of Marchi and Miconex 6. Impairment of assets classified as “held for sale” related to our 3D printing business in Singapore 7. Amount paid related to the termination of a long-term contractual obligation to our 3D printing business in Singapore 8. Represents severance costs related to the company’s reduction in force during the quarter 9. One-time product transition payment

• 10. Represents the loss on disposal of the Company’s 3D printing operations in Singapore
• 11. Represents the write-off of debt issuance costs, bank fees related to the pay-off of remaining debt with East West Bank.
• 12. Tax effect on amortization of intangible assets, executive transition costs, restructuring charges, acquisition costs, impairment charges, and buy-out costs based on the non-GAAP tax rate
• 13. The Company's GAAP tax expense is generally higher than the Company's non-GAAP tax expense, primarily due to losses in the U.S. with full federal and state valuation allowances. The

Company's non-GAAP tax rate and resulting non-GAAP tax expense considers the tax implications as if there was no federal or state valuation allowance position in effect

(in thousands)

FY’15 FY’16 FY’17 Q1’18 Q2’18 Q3’18

Reported GAAP income from operations $5,841 $22,391 $89,397 $26,908 $22,664 $922 Amortization of intangible assets (1) $6,212 $5,757 $5,438 $1,098 $1,098 $2,411 Executive transition costs (2) $2,783 $925

• $1,400

$246 Restructuring charges (3) $245 $251

• $874
• Consulting fees (4)
• $150
• Acquisition costs (5)

$642

• $9,391

Impairment of “Held for Sale” Assets (6)

• $666
• Termination of Contractual Obligation (7)
• $438
• Reduction in force (8)
• $1,319

Product transition fees (9)

• $657

Non-GAAP income from operations $15,723 $30,428 $94,835 $29,030 $25,162 $14,946

25

Reconciliation: GAAP Income from Operations to Non-GAAP Income from Operations

1. Amortization of intangible assets related to the Company's acquisitions of AIT, Marchi and Miconex 2. Represents expense for termination benefits paid to former executives of the Company 3. Adjustment to previous restructuring reserve related to the abandonment of one of the Company's facilities 4. One-time consulting fees related to the expansion of the Company’s operations in Singapore 5. Costs incurred related to the acquisition of Marchi and Miconex 6. Impairment of assets classified as “held for sale” related to our 3D printing business in Singapore 7. Amount paid related to the termination of a long-term contractual obligation to our 3D printing business in Singapore 8. Represents severance costs related to the company’s reduction in force during the quarter 9. One-time product transition payment

FY’15 FY’16 FY’17 Q1’18 Q2’18 Q3’18

Reported GAAP net income $(0.34) $0.30 $2.19 $0.66 $0.48 $(0.15) Amortization of intangible assets (1) $0.20 $0.18 $0.16 $0.03 $0.03 $0.06 Executive transition costs (2) $0.09 $0.03

• $0.04

$0.01 Restructuring charges (3) $0.01 $0.01

• $0.02
• Consulting fees (4)
• $0.01
• Acquisition costs (5)

$0.02

• $0.24

Impairment of “Held for Sale” Assets (6)

• $0.02
• Termination of Contractual Obligation (7)
• $0.01
• Reduction in force (8)
• $0.03

Product transition fees (9)

• $0.02

Disposal of business unit (10)

• $0.03

Bank transaction costs (11)

• $0.00

Income tax effect of non-GAAP adjustments (12) $(0.09) $(0.05) $(0.02) $(0.01) $(0.01) $(0.06) Income tax effect of valuation allowance (13) $0.43 $0.15 $0.01 $(0.02) $0.01 $0.12 Non-GAAP net income $0.32 $0.65 $2.34 $0.69 $0.55 $0.30 Weighted average number of diluted shares (in K) 31,564 33,150 34,303 37,491 39,297 38,930

26

Reconciliation: GAAP Earnings Per Diluted Share to Non-GAAP Earnings Per Diluted Share

1. Amortization of intangible assets related to the Company's acquisitions of AIT, Marchi and Miconex 2. Represents expense for termination benefits paid to former executives of the Company 3. Adjustment to previous restructuring reserve related to the abandonment of one of the Company's facilities 4. One-time consulting fees related to the expansion of the Company’s operations in Singapore 5. Costs incurred related to the acquisition of Marchi and Miconex 6. Impairment of assets classified as “held for sale” related to our 3D printing business in Singapore 7. Amount paid related to the termination of a long-term contractual obligation to our 3D printing business in Singapore 8. Represents severance costs related to the company’s reduction in force during the quarter 9. One-time product transition payment 10. Represents the loss on disposal of the Company’s 3D printing operations in Singapore 11. Represents the write-off of debt issuance costs, bank fees related to the pay-off of remaining debt with East West Bank 12. Tax effect of items above based on the non-GAAP tax rate each quarter 13. The Company's GAAP tax expense is generally higher than the Company's non-GAAP tax expense, primarily due to losses in the U.S. with full federal and state valuation allowances. The Company's non-GAAP tax rate and resulting non-GAAP tax expense considers the tax implications as if there was no federal or state valuation allowance position in effect

1UCT 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

• perations in China, and one time consulting fees related to the expansion of the Company’s operations in Singapore.

2QGT adjustments include one time acquisition related items and other non-recurring expenses.

GAAP to Non-GAAP Reconciliation EBITDA

34

Unaudited Reconciliation of Pro Forma Combined GAAP Net Income to Pro Forma Combined Adjusted EBITDA LTM ended 6/29/2018 ($ in millions) UCT QGT Pro Forma Combined GAAP Net Income 84 $ 20 $ 105 $ Provision for Taxes 10 2 11 Interest and Other Expense, net 1 8 9 Depreciation 5 13 18 Amortization 5 2 8 Stock-Based Compensation 10 1 12 Other Non-recurring Items 2 2 5 Adjusted EBITDA 118 $ 49 $ 167 $ Unaudited Combined Pro Forma Revenue LTM ended 6/29/2018 ($ in millions) UCT QGT Pro Forma Combined Revenue 1,097 $ 231 $ 1,327 $

1UCT 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

• perations in China, and one time consulting fees related to the expansion of the Company’s operations in Singapore.

2QGT adjustments include one time acquisition related items, precious metal recovery, and other non-recurring expenses.

GAAP to Non-GAAP Reconciliation EBITDA

UCT FYE Reconciliation of GAAP Net Income to Adjusted EBITDA

($ in millions)

2013 2014 2015 2016 2017 GAAP Net Income 10 $ 11 $ (11) $ 10 $ 75 $ Provision for Taxes 2 5 14 9 12 Interest & Other Expenses, Net 3 2 2 3 2 Depreciation 3 3 5 6 5 Amortization 6 5 6 6 5 Stock-Based Compensation 5 4 4 6 8 Other Non-recurring Items(1)

• 4

2

• Adjusted EBITDA

31 $ 31 $ 24 $ 42 $ 108 $ Revenue 444 $ 514 $ 469 $ 563 $ 924 $ QGT FYE Reconciliation of GAAP Net Income to Adjusted EBITDA

($ in millions)

2013 2014 2015 2016 2017 GAAP Net Income 6 $ 5 $ 15 $ 9 $ 22 $ Provision for Taxes 1 1 1 2 Interest & Other Expenses, Net (2) 9 2 6 7 Depreciation 4 7 9 13 12 Amortization 3 2 2 2 2 Stock-Based Compensation Other Non-recurring Items(2) 3

• 1

2 6 Adjusted EBITDA 14 $ 24 $ 30 $ 33 $ 50 $ Revenue 108 $ 145 $ 179 $ 185 $ 218 $

43