Semiconductor Manufacturing Technology Summer 2018 Safe Harbor - - PowerPoint PPT Presentation

Summer 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 third 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

DELIVERING

VALUE TO

INVESTORS

3

The Past 3 Years

Increase in Revenue

97%

Increase in Non-GAAP EPS

631%

Increase in Market Cap

98%

1) FY2017 over FY2015 2) Increase in market cap from beginning of FY2015 to August 21, 2018 assuming ~39M shares outstanding 3) See Appendix for reconciliation of percentage increase and GAAP EPS to non-GAAP diluted EPS.

(1) (1)(3) (2)

4

Investment Highlights

Capitalizing on fastest growing segments of WFE market (Dep & Etch) Flexible, vertically integrated model supports significant growth and creates high barriers to entry Key customers enabling robust organic growth

• pportunities

Increasing revenues drive financial leverage and strong operating profitability Accelerating share growth through acquisitions

INTEGRATION & TEST MANUFACTURING

5

Customers Choose UCT Through All Steps of the Value Chain

SUPPLY CHAIN MANAGEMENT

Design for manufacturability (DFM) New product design and manufacture Global network of strategic suppliers Comprehensive new product introduction process Subsystem through full tool integration

MANUFACTURING ENGINEERING PROTOTYPING/ DEVELOPMENT

Highly integrated, one-stop, full spectrum solution for semi equipment customers

5

0% 10% 20% 30% 40% 50% 60% 70% 80%

2015 2016 2017

WFE Etch + CVD UCT Semi

6

Outperforming our Served Markets

Y/Y Growth Rate

* Source: Gartner Semiconductor Wafer Fab Equipment Forecast (July 2018)

* *

DEP/ETCH

F Y 2 0 1 7

>80%

• f UCT

Semi Sales

*

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

7

Driving UCT’s Rapid Financial Growth

$444 $514 $469 $563 $924

6.8% 6.0% 5.1% 7.6% 11.7%

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

2013 2014 2015 2016 2017

(% margin) ($Millions)

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

8

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.

Targeting fastest growing market segments

(dep & etch)

Scaling operations to capitalize on market growth

(close to customers)

Increasing content on customers’ platforms

(new modules)

Accelerating share growth through acquisitions

11

Growth Strategy

1 2 4 3

Highly strategic M&A; on 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 position in the chemical delivery market; augmented capabilities for wet clean and CMP subsystems Facilitated vertical integration in chemical and gas delivery Added to customer base & expanded manufacturing capabilities Further capitalize on the fastest growing WFE segments; become leading

• utsourcing manufacturer

for semiconductor capital equipment

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

$108 $145 $179 $185 $218 13.3% 16.2% 17.0% 17.8% 23.2%

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

2013 2014 2015 2016 2017

(% margin) ($mm)

Quantum Global Technologies at a Glance

Headquarters: Quakertown, PA Founded: 2000 Employees: ~1,800 Business Description: 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 – Quantum Clean

• 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

• Five micro-contamination analytical laboratories
• Rrecurring 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

Quantum Cleaning 89% ChemTrace 11%

Segment Breakdown

United States 66% EMEA 3% Asia 31%

Geography Breakdown

Source: Company information. 13

1 2 4 3 5

Strategically and Financially 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 the Company’s 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

15

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

Outsized Growth in Sub-14nm Manufacturing

2,000 4,000 6,000 8,000 10,000 12,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

0.010 Micron 0.014 Micron 0.015 Micron 0.019 Micron 0.020 Micron 0.022 Micron 0.028 Micron 0.032 Micron 0.040 Micron 0.045 Micron 0.065 Micron 0.08 Micron 0.09 Micron 0.11 Micron 0.13 Micron 0.15 Micron 0.18 Micron 0.25 Micron 0.0.35 Micron >=0.50 Micron

Wafer Square Inch by Geometry

Millions of Square Inches (MSI)

Source: Company information. 16

QGT’s differentiated services increasingly critical for high advanced node yield

~250% growth projected in sub-14nm silicon wafers Quantum positioned to take full advantage leading edge growth

QGT has a Diverse Customer Base

Key QGT Growth Drivers

Source: Company information. Numbers have been rounded 17

2016 2017

Top 4 IDM 56% 53% Top 3 OEM 28% 31% Top 2 Foundries 4% 5% All Other 12% 12% Revenue 185 218 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 local fabs or small group of IC manufacturers  Typically serve the trailing edge of 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

CCR + 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)

QGT Leverages UCT’s Global Footprint

FY2017 UCT QGT Total United States 1,347 941 2,288 Asia 1,051 684 1,735 EMEA 349 86 435 UCT Location QGT Location FY2017 UCT QGT Total Engineering / Development 39 160 199 SG&A 268 452 720 Manufacturing 2,440 1,099 3,539

South San Francisco – Precision Machining Hayward – Weldments, Gas Panels, Integration Fremont – Prototyping Machine Czech Republic – Plastic Machining and fabrication, Integration Hayward – Thermal Systems Chandler – Sheet Metal, Frames, Integration Austin – Weldments, Gas Panel, Integration Philippines – Weldments, Modules Shanghai – Gas Panels, Weldments, Integration

Source: Company Information.

Korea – QGT Israel – QGT Singapore – Gas Panel, Integration, Additive Manufacturing UK – QGT

19

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

UCT: one-stop for services across the value chain, customers’ partner of choice

FOUNDING CAPABILITY

MANUFACTURED COMPONENTS CHEMICAL DELIVERY SUB-SYSTEMS

COMPLETE ASSEMBLIES

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

Critical Value-Added Broad Capabilities

UCT Offering QGT Services

SERVICES

20

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

UCT Revenue $924mm QGT Revenue $218mm Combined Revenue $1,142mm

Highly Complementary Product Mix and Customer Base

 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

Acquisition of QGT is Accretive to Margins and Free Cash Flow

$11.3 $5.0 $24.8 17% 18% 23%

(8%) 0% 8% 16% 24% ($20) $0 $20 $40 $60

2015 2016 2017

($mm)

$2.1 $15.3 $57.6 8% 10% 14%

(8%) 0% 8% 16% 24% ($20) $0 $20 $40 $60

2015 2016 2017

($mm) ($9.2) $10.3 $32.8 5% 7% 12%

(8%) 0% 8% 16% 24% ($20) $0 $20 $40 $60

2015 2016 2017

($mm)

Immediately Accretive to Margins and Free Cash Flow

 The Company is projected to generate ample cash flow to service its debt obligations

 ~$75mm combined company free cash flow generated from FY2015 through FY2017  UCT and QGT have increased their EBITDA margins; the significantly stronger FCF from combined Pro Forma entity

 Historically, UCT has typically operated with high cash balances relative to its debt

UCT FCF and Margins

(FYE) (FYE) (FYE)

Free Cash Flow(1) EBITDA Margin(2)

Source: Company Information.

QGT FCF and Margins Pro Forma FCF and Margins

22

Driven organic growth, with strategic accretive acquisitions

$403 $444 $514 $469 $563 $924 5.1% 6.8% 6.0% 5.1% 7.6% 11.7%

$0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000

0% 2% 4% 6% 8% 10% 12% 14%

($mm)

UCT Revenue UCT EBITDA Margin

Proven Growth Strategy Driving Exceptional Results

July 2012 American Integration Technologies (AIT) 2012 2013 2014 2015 2016 2017 February / August 2015 / 2018 January 2015 Focus on Semiconductor End Market September 2018

(FYE)

2016 & 2017 Faster Growth than WFE Market and Customers

Source: Company Filings. 23

24

Investment Highlights

Capitalizing on fastest growing segments of WFE market (Dep & Etch) Flexible, vertically integrated model supports significant growth and creates high barriers to entry Key customers enabling robust organic growth

• pportunities

Increasing revenues drive financial leverage and strong operating profitability Accelerating share growth through acquisitions

APPENDIX

26

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.

• Q2’18 revenue $290M
• Q2’18 Non-GAAP operating margin 8.7% - within target range of 8-10%

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

27

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%

• Q2’18 Non-GAAP operating margin 8.7% - within target range of 8-10%

28

UCT Balance Sheet

• Inventory decrease due to
• ngoing inventory reduction efforts

and lower shipments projected in Q3 2018

• Ongoing improvements in working

capital management

($ in Millions)

Q2’18 Q4’17 Cash & Investments $141.1 $68.3 Accounts Receivable $98.6 $90.2 Inventory $228.6 $236.8 Total Assets $643.7 $563.4 Liabilities $204.4 $263.1 Shareholders’ Equity $439.3 $300.3

FY’15 FY’17 9mos’16

Revenue $469.1M $924.4M Market Cap $273.7M $542.0M Stock price $9.28(2) $13.92 Shares Outstanding 29.5M ~39M GAAP EPS ($0.34) $2.19 Non-GAAP EPS $0.32 $2.34

29

Backup for Slide 3

As of Aug 21, 2018

1) Increase in UCTT market cap from beginning of FY 2015 to August 21, 2018. 2) UCTT stock price as of December 29, 2014. 3) See Appendix for reconciliation of GAAP EPS to non-GAAP EPS.

% Increase

98.0%(1) 97.0% 631.3%(3)

2016 2017

Top 4 IDM 56% 53% Top 3 OEM 28% 31% Top 2 Foundries 4% 5% All Other 12% 12% Revenue 185 218

30

Backup for Slide 3

1) Increase in UCTT market cap from beginning of FY 2015 to August 21, 2018. 2) UCTT stock price as of December 29, 2014. 3) See Appendix for reconciliation of GAAP EPS to non-GAAP EPS. 4) Numbers have been rounded

(in thousands)

FY’15 FY’16 Q1’17 Q2’17 Q3’17 Q4’17 FY’17 Q1’18 Q2’18

Net income (loss) per GAAP basis

$(10,732) $10,051 $14,341 $20,179 $19,716 $20,849 $75,085 $24,741 $18,960

Amortization of intangible assets (1)

$6,212 $5,757 $1,231 $1,231 $1,231 $1,745 $5,438 $1,098 $1,098

Executive transition costs (2)

$2,783 $925

• $1,400

Restructuring charges (3)

$245 $251

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

$642

• Impairment of “Held for Sale”

Assets (6)

• $666
• Termination of Contractual

Obligation (7)

• $438
• Income tax effect of non-GAAP

adjustments (8)

$(2,767) $(1,664) $(256) $(163) $(159) $(229) $(714) $(262) $(296)

Income tax effect of valuation allowance (9)

$13,859 $4,964 $576 $18 $524 $(2,096) $469 $(873) $303

Non-GAAP net income

$10,242 $21,388 $15,892 $21,265 $21,312 $20,269 $80,278 $25,728 $21,465

31

Reconciliation: GAAP Net Income to Non-GAAP Net Income

(in thousands)

FY’15 FY’16 Q1’17 Q2’17 Q3’17 Q4’17 FY’17 Q1’18 Q2’18

Reported GAAP income from

• perations

$5,841 $22,391 $19,773 $24,405 $23,262 $21,957 $89,397 $26,908 $22,664

Amortization of intangible assets (1)

$6,212 $5,757 $1,231 $1,231 $1,231 $1,745 $5,438 $1,098 $1,098

Executive transition costs (2)

$2,783 $925

• $1,400

Restructuring charges (3)

$245 $251

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

$642

• Impairment of “Held for Sale”

Assets (6)

• $666
• Termination of Contractual

Obligation (7)

• $438
• Non-GAAP income from operations

$15,723 $30,428 $21,004 $25,636 $24,493 $23,702 $94,835 $29,030 $25,162

32

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

FY’15 FY’16 Q1’17 Q2’17 Q3’17 Q4’17 FY’17 Q1’18 Q2’18

Reported GAAP net income

$(0.34) $0.30 $0.42 $0.59 $0.57 $0.60 $2.19 $0.66 $0.48

Amortization of intangible assets (1)

$0.20 $0.18 $0.04 $0.04 $0.04 $0.05 $0.16 $0.03 $0.03

Executive transition costs (2)

$0.09 $0.03

• $0.04

Restructuring charges (3)

$0.01 $0.01

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

$0.02

• Impairment of “Held for Sale” Assets

• $0.02
• Termination of Contractual

Obligation (7)

• $0.01
• Income tax effect of non-GAAP

adjustments (8)

$(0.09) $(0.05) $(0.01) $(0.01) $(0.01) $(0.01) $(0.02) $(0.01) $(0.01)

Income tax effect of valuation allowance (9)

$0.43 $0.15 $0.02

• $0.02

$(0.05) $0.01 $(0.02) $0.01

Non-GAAP net income

$0.32 $0.65 $0.47 $0.62 $0.62 $0.59 $2.34 $0.69 $0.55

Weighted average number of diluted shares (in K)

31,564 33,150 33,865 34,064 34,360 34,500 34,303 37,491 39,297

33

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

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

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 $

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

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