Advancing Semiconductor Manufacturing Technologys2.q4cdn.com/736093886/files/doc_presentations/...Wafer starts per year & global IC production: •Semiconductor demand: – 280bn IC

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

on Form 10-K filed with the Securities and Exchange Commission. The forward-looking statements made in this presentation relate

only 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

PAGE:

INTEGRATION & TEST

MANUFACTURING

Expert Outsourcing Partner

SUPPLY CHAIN MANAGEMENT

Design for manufacturability

(DFM)

Partnering with customers onnew products

Global network of strategicsuppliers

Comprehensive new product introduction

process

Subsystem through full

tool integration

MANUFACTURINGENGINEERING

PROTOTYPING/ DEVELOPMENT

Highly integrated, one-stop, full

spectrum solution for semi customers

4

CLEANING& ANALYSIS

tool chamber parts cleaning and

coating, microcontamination

analytical services

United States55%

China4%

Singapore31%

Europe4%

Others6%

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 deliveryProcess step with liquid

delivery

EpitaxialPhoto-

resistLitho-

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

Sem

i E

qu

ipm

en

t R

eve

nu

e

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


EV / EBITDA: ~11.8x

PF Debt / EBITDA: ~2.2x


EV / EBITDA: ~6.2x


Purchase Price: $342mm

EV / EBITDA: ~6.6x


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

QuantumClean89%

ChemTrace

11%

Segment Breakdown

United States66%EMEA

3%

Asia31%

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

15

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)

PAGE:

UCT’s New Global Footprint

16

Source: Company Information.

UCT Location

QGT LocationUKQGT

Czech Republic Plastic Machining & fabrication, Integration

IsraelQGT

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

South San Francisco Precision Machining

HaywardWeldments, Gas Panels, Integration

FremontPrototyping Machine

HaywardThermal Systems

ChandlerSheet Metal, Frames, Integration

AustinWeldments, Gas Panel, Integration

KoreaQGT

ShanghaiWeldments, Gas Panels, Integration

PhilippinesWeldments, Modules

SingaporeGas Panel, Integration, Additive Manufacturing

PAGE:

MANUFACTURED COMPONENTS

GAS DELIVERY

METALS MACHINING

FRAMESSHEET METAL FORMING

THERMAL PRODUCTS

PLASTICS MACHINING

INTEGRATION & TEST

FLUID DELIVERY

PARTS CLEANING VALIDATION

Critical Value-Added Broad Capabilities

17

PROTOTYPE MACHINING

CHEMICAL DELIVERY SUB-SYSTEMS

One-stop for components & services across the value chain

SERVICES

Lam Research

Applied Materials

OtherLam

Research Applied Materials

#1 IDM

OtherLam

ResearchApplied 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

20152016

2017

$469.1$562.8

$924.4

20152016

2017

3.4%5.4%

10.3%

20152016

2017

$0.32$0.65

$2.34

Total Revenue$ in millions

Non-GAAP

operating 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%

20152016

2017

$0.9

$17.6

$48.9• Variable cost based operating model

• Targeting value-add, complex assemblies that support operating 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

ongoing 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





5. Costs incurred related to the acquisition of Marchi and Miconex





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





5. Costs incurred related to the acquisition of Marchi and Miconex





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

operations 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

operations 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 EBITDAUCT 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)

0 - 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 0 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 0 0 0 0 0

Other Non-recurring Items(2)

3 - 1 2 6 Adjusted EBITDA 14$ 24$ 30$ 33$ 50$

Revenue 108$ 145$ 179$ 185$ 218$

43

Documents

Advancing Semiconductor Manufacturing Technologys2.q4cdn.com/736093886/files/doc_presentations/...Wafer starts per year & global IC production: •Semiconductor demand: – 280bn IC