CCMP - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Cabot Microelectronics First Quarter Fiscal 2018 Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today’s conference call is being recorded. I would now like to turn the conference over to Trisha Tuntland, Director of Investor Relations at Cabot Microelectronics. ahead. go Please

Trisha Tuntland

discussions as me which Scott With available CFO including David discussed President shortly could assume quarter statements. XX-K recently no Li, A this These results statements or we Good our our website forward-looking We remarks in this Relations materially are be of for section update conference fiscal that XXX-XXX-XXXX. factors who after involve also obligation of today joined CEO; first XXXX. ended retired who Johnson, non-GAAP for December Beamer, and of fiscal new of forward-looking This copy risk forward-looking us a office call. SEC to results Investor A uncertainties and actual in on from reference that webcast may our morning that month; reported our our XXXX, morning. measures. earnings of Bill any are Relations CFO. as website, earlier call financial the script cabotcmp.com by factors conference our today XX, these XXXX. and other number release calling ended Investor is XX, this include live prepared Also, will differ our to risks, cause this the prepared of and available Please this Form of today’s our year September comments information. at filings, morning the remember our our morning’s

over to I GAAP non-GAAP measures. call now reconciliation will turn of a includes the release to earnings Our David. financial

David Li

thanks for morning, everyone us. joining Thanks, and Trisha. Good

I new announced Johnson’s the XX after service nearly our Bill years December our Scott to CFO. XX, and like Before we retirement I want I’d thank get note many for of as to CFO Bill his the as in want over Beamer to We will the of we appointment your that started, for on miss to welcome endeavors. and service the wish future Scott we thank Bill, the years definitely best his you your your new to role. leadership you and company company. contributions to all

Bill Johnson

serve over forward been Thanks, I’m accomplished of in and and sincere Dave. CFO I the we’ve very interactions pleasure particular of the Microelectronics. my years of the all proud as Company’s continued investors what with I look It’s really Cabot In to future. have our analysts. success enjoyed my to

smooth I to think look help company a is Cabot Microelectronics I seamless and to a Scott it’s great our working been forward honor story. and transition. with assure an to tell

David Li

delighted broad specialty traded a industrial that semiconductor at and quarter execution and I’m bring we over of who Thanks, role. financial CFO morning the performance. continued I discuss and and about new strong in We execution continued you our most years chemicals announced materials This initiatives recently to environments, will consumer the a call. in operating quarterly the fiscal industry healthy revenue results later another the will XXXX of by excited results first and for our are Scott performance level our strong achieved record driven successful demand. very our strategic of leadership we supplying and Stepan company introduce variety to Bill. XX experience of his as to of $X.X markets. look billion a Company, brings of Scott forward and end range deep business publicly expertise to

We pads. tungsten, polishing slurries product CMP areas: continued in and dielectrics for three CMP momentum key from slurries, year our last

last the record same of quarter During million year. higher the $XXX XX% quarter, than we realize in revenue approximately

per of one-time this was in which in loss U.S. share. by December, revenue, Our our quarter was XX.X% enacted gross profit resulted margin the million effect companies, highest a since income significantly $X.XX or traded XXXX. level our Like publicly tax U.S. of GAAP of most impacted reform net $X.X

well income this XX% However, increased both $X.XX net increased of XX% expense $XX of NexPlanar. non-GAAP by excluding reform was approximately non-GAAP one-time XXXX compared the by record year. Non-GAAP as and share earnings to acquisition net and impact amortization quarter diluted to per tax per non-GAAP income or share as million a last related earnings our approximately

semiconductor from we continued To for the addition, generation detail trend with our perspectives offer let cash flow our In industry strong some some Scott me more later results, of in the context quarter will $XX million. on first cash call. operations provide global environments. provide

this expectations several October. firm our the that suggest for requirements the product generally as quarter healthy by applications, was by forecast range wide analysts, growing due industry and during our are fourth customers to December market and during conference as overall as with of was robust semiconductor industry we As driven as discussed demand storage well in driven the results well market, consistent quarter our a continued mobile end-use demand launches. Reports a logic of by in call memory

it recall demand remain for And seasonally may tied seeing soft, demand serve is solid for products. consumables demand quarter. January, demand conditions from memory that softer the quarter, during although overall all should March semiconductor strong IC across the consensus we broad for memory, manufacturers are and logic XXXX. continued have We in foundry an but more CMP calendar industry experience participants sources to environment March historically that As suggest the through exposure continued is firm, sectors. and Views the various closely logic

automotive semiconductor early of the revenue in demand longer view drivers should This previous the conference views Year, Strategy which semiconductor in the California. this well ISS drivers reality, and augmented smart, we February which will theme the March more year call, great represents through like on applications, through participants. opportunity in our performance play advanced ago This drive as which intuitive intelligence, sizes of order the two event term our chips connected devices and engineered benefit Scott formulate including delivering remain and highly role, artificial cryptocurrencies, as can equipment, Higher participated electronics. world. begins materials all for forward. power industry will are demand, year’s annual we requiring sophisticated semiconductor volatility industry SEMI computing on a at going semiconductor emphasize positioned Later be was smaller packaging of Lunar in or Industry of industry view, remain in a across weeks with collaboration commentary highly memory fluctuations the feature Symposium calendar As devices strong event compare realized design company Considering the years, materials, focused and XX. New to the provide in semiconductor in other connectivity, lower cloud supply performing logic. to ever consumption potential believe be from well transforming The around critical should which high We industry chain, these with year technologies. and the to trends current only longer-term this about and Discussion continue confident future transforming are ours CMP on quarter. solutions and mindful innovations on

Now turn to company related me let matters.

XX% significance achieved This slurries During IC also XX% quarter, revenue a quarter the the of for range year-on-year we our revenue pad technology dielectric for growth quarter for and demand Korea. in China applications wide in tungsten year-on-year growth the products. for particular approximately we and nodes. XX% drove and experienced CMP consumables of A across approximately solutions strong and

for overall memory in growth and China positions industry growth countries these strong are notable, in given long-term semiconductor in expectations Korea. Our continued

with Turning NAND quarter, FinFET. continued to of advanced grow and we technologies the CMP XD our slurries, during to the customers ramp including

requires FinFET opportunity applications in NAND discussed and and as have XD dielectrics. for the steps business twice roughly and our of tungsten XD product mainly require growth XD number those our past significant memory in area. given CMP many we particular of is This the tungsten. As steps, CMP leadership this more are steps In

We from to over XD the expect the next years. transition industry memory continue will XD several

area achieved fiscal we record the first tungsten in of growth our result, a revenue product revenue year-over-year and approximately XX%. quarter As in

the sustain product this and products, seen leadership reflects commitment continued tungsten Over from we years, our our revenue which to growth area. important have

approximately removal colloidal provide compared growth slurries the the In by primarily addition, quarter ceria our revenue was silica-based high year. application dielectrics to same and last up slurries for driven ownership. demand represents for largest market. CPM solutions X% of believe defectivity Dielectrics from dielectrics lower of achieved We and This CMP cost we the with solutions advanced these within applications. improved rate, benefits significant

Here we legacy incumbents own expect to displacing aim and solutions profitability. growth as continued improve of some we and our to continue replace

of driven growth CMP and achieved our for revenue This strong was customer products. by quarter record approximately pull year-over-year pads, Turning XX%. to this we revenue continued

of pipeline opportunities rich pad of a range new and have customers wide a spanning business applications. We

And discussed. adoption years to shorter leverage portfolio with in a to sales given as new the product past our NexPlanar a pad we global new and discussed, and as and of offerings speed unique previously We and have of to our experience technical pad we configurations previously legacy continue resources advanced of our our business family we’ve significantly qualification technology. applications. times continue win continue recently qualification channel to for attributes broadened than We’ve

pleased can over we least and strategic Supplier growth I a leading were $XXX a the would device of awarded reflect Hynix that to from annual believe to We in at compound Best memory our am million grow continue we pads XX%. fiscal Award quarter, which SK revenues XXXX, report a during company customer.

be the and honored slurry and SK of Hynix. is one highest This supplier only are only their by supplier We level pad to recipients award CMP recognition. of five

for for Our is deliver won many a portfolio innovation. long-term collaborating customers to broad we customers, and and our other quality, CMP demonstrating closely our important to and CMP DRAM in with number and solutions this company of outstanding solutions was best-in-class ability along the their our with the highest from slurry for performance standards recognition best-in-class to pad technology other performance technology. of years applications flash and over of commitment a We evidence the believe delivering recognized NAND awards have

for to and Over pad pads, the three been and slurries committed very dielectrics growth key we’ve our tungsten, several focused and including product areas, slurries performance sets. years, slurry last and CMP consumable polishing and

continue we these We of continued us continued specialty which effective Looking forward, of that, to foundation and with resources, the strong global growth on to position that remain profitable and momentum believe I’m innovative, areas, detail differentiate and product call on focused delivering performing focused execution deliver infrastructure with ongoing for another among our high performance. model these CMP of financial Scott the combined industry for well materials confident to suppliers for quality leading key We provide the I’ll results. us in our to turn capabilities solutions. semiconductor areas And and believe more our company. over high business in year

Scott Beamer

that foundation honored company. already exists everyone. and leadership to of join to hello upon I’m very and forward the team Microelectronics look Dave strong the building within Thanks, the Cabot

We represents a that revenue fiscal of have total in our quarterly last of the and execution $XXX continued global of semiconductor the over area, a we quarter continued our by and business million increase quarter to the up quarters. we in revenue into tremendous continued last was given XXXX growth accounted year for operate. record initiatives the an strong in achieved of product demand revenue. we quarter. last Revenue record the seven and quarter the the million, was area industry which have XX% Revenue tungsten slurries this Drilling XX% seen the for reflects $XX This compared strength same of opportunity XX% same industry current successful strategic year. for approximately increase from which first

revenue of with year representing higher was more demand product will from memory our revenue quarter quarter profitable last XX% expect this from higher the the and area year. other polishing and performing, for growth area XX% represented quarter of Our in the applications, of the and metals the profitability our to during revenue same area tungsten, XX% Sales for and our ago. company. FinFET, driven for key increased of with revenue We product represented key XX% This XD forward strong lower up including increased quarter to this than logic for our including same product same and total we area cost tungsten products. business memory aluminum continue to achieved second X% barrier, total key third compared of slurries drive a product sales quarter. both Dielectric look year. provided X% area growth last our this record the and slurries quarter winning Sales our polishing copper, from by pads,

year. compared million includes to up Finally, to same quarter Engineered of Gross XX% quarterly year total Finishes from profit business quarter to This revenue, revenue X% ESF, ago. expense was of and in represented amortization a of our Surface includes quarterly was $X.X or sales compared QED acquisition. same which last NexPlanar the the our XX.X% the Technologies, XX.X% related

which non-GAAP this, higher profit incentive offset up value fixed was profit last the to sales volume, is including gross basis Excluding expense. year higher include impacting to of revenue, manufacturing Factors XXX quarter costs, product gross compensation by XX.X% last points higher partially mix, for compared higher year. compared

GAAP profit fiscal to unchanged. approximately gross XX% year of expense. which NexPlanar amortization full includes revenue, range XX% points Our is This XXX guidance basis of remains

Now expenses, and costs million to year, I’ll million, Operating to staffing turn compensation operating $X.X NexPlanar million We expense. general expenses company’s of costs. last which development including expenses Operating administrative quarter year selling $X.X were currently higher to the related quarter million to expenses marketing, expect this the than incentive reported including and were related amortization operating for full higher research, between and include $XX.X and and expenses, and primarily be technical, $XXX $XX.X due our $XXX million in the the GAAP million. higher transition CFO same expense.

year. the year-over-year expanding quarter, XXX Operating million representing of also to around objective A the achieving experience an This prior increase during controlling margins, higher certain quarter merit with to revenue, March includes amortization approximately by we such $X in expenses that, as revenue Our annual income is leverage than operating fiscal to our typically quarter calendar $XXX cost was higher the related new range driven significant March. progress expense. company’s meeting profit of points last of the increase $XXX year, Recall represented increases, in growth and combined guidance our factors same and which XXXX. we from in NexPlanar million ongoing XX.X% to introduced payroll multi-year taxes salary million. which attention the due financial basis toward costs

the U.S. about tax Our million. $XX last which reported compared primarily XXX%, effective of approximately expense in increase the same our XX% by time year. tax rate The to income one for the is quarter significant to was related impact reform, tax quarter increased

would expect effect, this fiscal U.S. XX%, in rate been range of tax and within our the tax $X XX% tax our expense have have million the a lower the currently of XX%. effective the year approximately Excluding rate to benefit including one-time our been the be rest would rate for We to of tax

expense. associated was had the net enactment a between estimated full in we tax Before tax The share higher for primarily of $X.X than impact earnings reform in a XX% per $X.XX partially net of We additional higher to to the of the last XX% XX% of the loss gross diluted the year. of previously one-time net diluted XX% in approximately $X.XX were higher the income impact share million. reform, this quarter fiscal with in higher income margin, tax increased fiscal reported due quarter for revenue was year, tax expense. basis, amortization earnings expenses. resulted operating profit excluding this But diluted approximately the and and per expense offset mentioned of higher a share first amortization per Non-GAAP referenced quarter the XXXX. non-GAAP Non-GAAP loss reform quarter excluding or income by $XX.X non-GAAP than million, same onetime on

capital were items, for million. investments balance $X related to turning cash and Now sheet the quarter

expect we equivalents spending was was $XXX $XXX of $XX Depreciation approximately million generated with so the to in million. and for ended For fiscal the million. of debt year, expenses amortization the to within and million cash outstanding, $X million. we from $XXX the capital cash We full continue net million $XX $XX range of flow short-term operations and and be to million cash quarter quarter

CMP years paying share Our us areas priorities generation global implement investments funding strong capital organic repurchases. core which cash to improve be, deployment closely-related balanced consumables in model the has a our and enabled and over business, our our acquisitions to continue strategy capabilities dividends, to for

balanced remarks I’ll greater U.S. consumables tax the IC continue we the less as few to in our on cash my will to demand products. conclude CMP expect friction reform comments repatriating provide approach, implement for We a flexibility, with with this

our in line the devices the a products, first and our currently the is XXXX. the be compared revenue that increase X% IC October. to we products first CMP slight expected second sequential quarter quarter we our expect During the referenced the sometimes slightly This in March a logic This IC fiscal quarter. saw for notable, holiday. our in in fourth achieved environment, of includes seasonally somewhat revenue for flat during to a in with our softer Lunar consumable of quarter is than record of call XXXX. the we Year than talked demand fiscal to this range quarter continued industry Earlier, quarter, memory traditionally for December March about demand Within higher quarter CMP from of we in volatility is devices and since general consumables Dave for demand around firm orders during increase New the expectations level softer

I have delivered seven standpoint, However, consecutive caution for towards would with fiscal quarterly revenue, level quarters, quarter performance of along limited near-term our a first cash flow summarize, that financial To and now we from performance of for record we’ve strong another achieved operating XXXX. revenue. strong some visibility and

believe another cost. are performance successful solid year fiscal of in are all for we XXXX. operating we another to management Based firm on positioned a – prudent continued margin and performance expectations well sustained near-term successful ongoing demand, gross Our this, of deliver

questions. your the turn we to to as the I’ll call back take prepare Now operator

Operator

of our And Duffy question first Barclays. Fischer Instructions] [Operator you. Thank from comes

now line open. is Your

Trisha Tuntland

Duffy. Good morning,

Duffy Fischer

Good morning.

you’re R&D down down and a been R&D have year X of or strongly, of Can us but – through up up you’ve question, there year would then sales kind and on through rest marketing selling bit so up of them us dynamics the G&A? through in are is last the little quarter-over-quarter this with revenue and was walk can in X kind year? a then shift something Was the that why are that was touched that pretty X and G&A where walk within in Just and large. a just of is you extrapolate

Scott Beamer

Scott. This Good is Duffy. Yes, question.

each long the of way last some and with being million the focus the expenses. cash period of for I that think had think $XX.X about CFO I related the going the is to that $XX.X expenses, year, think at look we the to cost over a of at to this items majority think time to best bill’s were related so time as the within quarter we’ve operating about the P&L, you primary which items we’re and of non-cash the reclasses the company. quarter million parts longer-term for the moving buckets number item a total the December is with on of those to related And to as transition, performance that

be going it’s if item. those total, But at good buckets, drill for can that it look to difficult we So focus – down question. to it’s we on the

Duffy Fischer

are question enough. there? I line today, Okay, in around deal one in fairly in economics? and that expectations we then different is the about have talk you once specific what contract where raw materials is? can being And market you deal guess, think XXXX, with doing at should fair general, off Cabot. parent When significantly about a your Or former with then resets, And it that rolls where the just year-over-year –

Scott Beamer

favorable part Roz the in least are So our first I’ll take here at year-over-year. Duffy,

sheet higher through we being were through on previous the balance in quarter, the P&L. based ultimately think those prices I and about contract our the Roz prior working way and talked

have you behind a perspective the with are the agreement Dave, an largest is total have raw you – if that us comment impact a company, where which So the now that we that. XXXX in products quarter. that former The buying material from abrasive beyond parent about have we mentioned

David Li

and be just we we’ve raw the our looking very going expect think think control I been material Yes, forward. that I cost, case to we to to would going continue – beyond, effective

referenced we particle the one well. are There you parent, use. former – the of others Our that’s suppliers currently several as

we’ve XXXX, would of out wouldn’t I to a expect demonstrated supply number past. want you put beyond continued the as chain there but strong in management So the

Duffy Fischer

you. Great, thank

Trisha Tuntland

Duffy. Thank our you, please. take We’ll question next

Operator

question from comes Harrison Thank Securities. you. Mike Seaport And our of Global next

open. is Your now line

Trisha Tuntland

Good morning, Mike.

Mike Harrison

and Hi, Scott. Bill aboard, retirement, your good on congrats welcome morning, and

Scott Beamer

Thank you, Mike.

Mike Harrison

you ask the to of in the DRAM mid-XXs. their Wanted customers, an about gave shipment the they NAND expect that shipment XX% business, of on one of and mentioned your growth earnings and calls growth memory side who award, recently

wondering the if your XXXX this could Just the memory own on of outlook for as compares business. you comment expectations it side to

David Li

Yes, thanks, Michael.

really continue see as memory a for of to We important growth driver us.

that going the XD still from relatively mentioned, stages. on transition early is XD, we’ve to side, As really especially the on NAND

only you important still out SK today received ours. a been has And the today, start on who or their NAND we basis supplier Hynix, So this of XD. about would customer what’s at conversion, about that of – based wafer really from past to highest overall we honor there mentioned XD quarter, converted X/X look you we’re if estimate

NAND. go. comments strong So expended in their lot runway DRAM about of and demand saw also of still demand And strong continued kind a the I continued in to

the of they growth really so a that should that XXXX the of drive continued tungsten in as But environment we growth do growth a really for growth talk are also well those the position as what about us, that to expect well sensitive steps memory what see most ISS a really course, important the for going in rates, One ASPs doubling of that well. us as overall, that so strong consensus business dielectrics. that was is, are, that’s for thing with part their really pricing, key expectations growth and unit I’d some area when memory are memory, those they and intermixed and is to the of of about is is course, comment talk CMP of some when of also to because – they So and really there’s transaction well.

Mike Harrison

pricing, of in speaking memory of So memory actually the And curious, to expect is markets how hold would kind some in of pricing. some happening you that CCMP’s understanding there that pricing my just are up? declines environment, for

David Li

Right.

an cycles really, when many, through gone that think and is we’ve – us, they something it pressure pull impact part really and we’ve But industry, of there’s significant customers with for on the really the in continue of seen So CapEx, place investments with as as on historically when so many not impact happens I their they side from memory equipment may the those may there’s material pricing, pricing the what materials. they a memory it’s lot profound have our is What them. more. is fabs, to in side run just

material peaking, side equipment material we going pricing from forward end although at is be the and memory still may a the or lot So the a of as CapEx upside see markets. affected side side by not

Mike Harrison

mentioned M&A. – a you that changed, question of just but perspective, be Scott bring we additional some haven’t – And may some on then deployment say the for those right. All you capital shall plans obviously,

be kind M&A going the and the pipeline Your for thoughts forward may strategy CCMP. on of

Scott Beamer

we of operating and cash Mike, from great history benefited here a Well, performance.

sit the of a and in we’re in strength future. for position today where do So coming of here we from terms opportunities

a the as a We a we’re then M&A won’t sheet fourth. repurchases to the and drive which capital M&A to recently of continued where from paying been priorities about the dividends, very share outline with do, the balance business, and we organic as deployment lot growth pipeline, capital we have cognizant sit to deployment past where our be we but they’ve in forward, they as initiated perspective, comment we continue spending with think today. going we’ve on sit about I

We’re our going continue be going to to actionable, look and M&A needs to leverage it of that then course. is to at capabilities core also

on. lot of So activity a there’s going

We’re speak future I would our point going about the but staying think, also in a has working strength at of in interested strength, to to with but some hope the been cash drive in that deployment able to some of of We very we’re the to disciplined hard. help using those continue the past, terms we’re things, capital be company.

Mike Harrison

All very right. much. Thanks

Trisha Tuntland

We’ll your take Thank Mike next for questions. our you, please. caller

Operator

Thank from you. next question And Company. Mok our Edwin Needham & of comes

is now line Your open.

Trisha Tuntland

morning, Good Edwin.

Arthur Su

actually thanks is Arthur and for our this Edwin, for taking everyone, Hi on questions.

Trisha Tuntland

Arthur. Hi,

Arthur Su

Hi, Trisha.

Trisha Tuntland

Hi.

Arthur Su

So X.X% average growth lower saw just up the business. XX% on year-over-year, you of the is year-over-year in first dielectrics about fiscal I rate saw question is which XXXX. that was than

obviously, growth with in XXXX, into strong have comps the So should you you fiscal tougher have going XXXX.

fiscal we should as normal you to this of double-digit a can did rate growth growth this we think percentage do as So new you think back return Or rate? XXXX? in

David Li

Right.

just coming record we first, Arthur, So year-over-year for saw growth. we’re and dielectrics context, last still quarter, off a quarter for

some we’re excited. So quarter-to-quarter, really volatility, there’s going to be but

our of And We’re, transform the execution obviously, we’re about to just just strategy. remind, really to trying that portfolio.

Both really of and cost in places, In of one a that In better offer we’ve better ceria-based products: seen some some we’re cases, we’re is encouraging growth of them So we’ve incumbents, performance, ownership, so one, silica-based. of colloidal ourselves. families a really area. two new better is defectivity. introduced replacing replacing lot

to strategy, part and is well. as that course, and – improve also area our product of that so profitability And of

the So progress. encouraged by we

for I trajectory could but quarter-to-quarter, you think this overall, line. volatility product see good some

Arthur Su

Okay. Thanks for that color Dave.

on Next question is just China.

can region XXXX? you expecting think level in quarter. are which that I provide fiscal in and you in kind you last up – China your is what in color XX% year-over-year, more you you remarks, year-over-year some of said the activity from in seeing on David, XX% was are up prepared the China

David Li

Sure.

supply our strong I We’ve on We a course, revenue would trajectory investing see say is in of of that pad obviously, and chain the the quarter-to-quarter. continues collaboration very position some which also, always China But the realize investment And is a strong did side due China partnership starting. growth to semiconductor pads. revenue qualify, continued from early just QED, lumpy quite be bit from fiscal this strong what China had have of as in slurry was future to also in the in in strong we KFMI, spent time a I for to year see well. a us. So the government, overall, there. just side. the on just the We, we really so could be with area exciting

So growing we positioned. for really feel we China. look us, well really and forward to we are like region important a It’s with

Arthur Su

Thanks, David.

quarter for the than you maybe had a remarks, down And was trend talked last you, March March is seasonal. question for TSMC Scott, me, consumable about guided quarter. prepared better a X.X% for your in Just how IC’s

see IC in Is what trend? are to memory decline? offsetting quarter consumables Just the it want that’s March mostly puts TSMC the in your strong and takes growth

Scott Beamer

Yes, – said to it down QX of is historically, average years. over X% that that for we’ve number revenue, about on been unusual flat higher that’s has revenue slightly a we

changed. intelligence, of fundamentally, business the of and structural uplift think to demand items about we our There’s the in memory, marketplace all as connectivity. now logic, think that automobiles the more terms artificial go factors that I into the has in and –

structurally, seasonality with throughout less there’s So seasonality business. and less the our year

Arthur Su

very guys, Got questions it. the on much congrats great quarter. Thanks for

Scott Beamer

Thanks.

Trisha Tuntland

our your Arthur for questions. We’ll you, next please. caller take Thank

Operator

of our And question Loop Capital. from Kapsch you. next comes Thank Chris

now line is open. Your

Trisha Tuntland

Good morning, Chris.

Chris Kapsch

Yes, good morning. Can you hear me?

Trisha Tuntland

you. Thank can. we Yes,

Chris Kapsch

roll. congratulations with on Scott to new you. Look the working forward Hey,

for business, for margin strong gross the your therefore, be year outlook at juncture? but given performance. end margin gross know early on tungsten all quarter? thoughts the year, the secondly, strong fiscal lifting slurry, the in Two high-margin market during it’s any did And, and move guidance QED the at on needle tungsten I quickly this the the may things, this Just performance, the slurry memory given one,

Scott Beamer

what delivered even year, factor part QED where our for And low XX%. this our ask rest the of but year. you with profit think question is the it’s was its story. Chris, revenue projection fiscal relevant really XX% not of that And about gross of of not now, a then of early to so the think GAAP keeping in really terms its terms I it that’s right quarter percentage in we’ve could the a in at you that just much of of

little bit think of QX the On those the we’re It’s I – is year, seasonality there December to so as early that of our we with had. the words question. said quarter. the a a because your part effect being margin, going of guidance in continue you

costs do grants things we that. some March, into and increases with go like pick equity some up merit we As extra and

to is margin early the in there the to with we’re we a being continuing the metric. So the and comfortable year, margin that be impact on percentage had. guidance with it seasonality And

David Li

add Yes, that longer out and Chris, just term, there expectation expand is put to we margins. our

for our what gross areas, you is We as those I so look what if far, performance future growth satisfied. is our for mentioned, a think corporate product with not demonstrated at we three margin. tungsten, pleased far transforming our we’re there. above really should area a see But see key Very from that strong area you then we’ve growing a is And headwind versus product positive Dielectrics obviously gross excited we’re margin, is our corporate for strong is standpoint. us. gross also be that, pads, margin it pads from margin but positive about dollars.

there’s mix in as some you company know. also So will that overall gross there affect

Chris Kapsch

cannibalizing on get follow-up share mentioned there a And the versus color. growth extra the competitive for just it out? offerings you performance more guess longer-term as new there you commoditized dielectric Thank business. growth some helpful. then slurries, that more I – winning The Can – as business those displacing you market the and well of pronounced break Is matured vis-à-vis the is as share gains? it curious, just dielectric cannibalization growth technologies. lower is is and market it that’s or from balanced? Yes, I dielectric – Can the your margin own

Scott Beamer

there’s And the look is memory dielectrics. both. the There we producers That’s we’re logic and aggressive the logic, seeing on and pipeline, foundry. really The memory more distinction prefer solution. I segments, to seem across legacy, advanced a customer. tend the a hasn’t Yes, silica, bringing ceria-based customers so the at across different lot of think to foundry seen some segmentation there past some by is overall, solutions colloidal prefer is we’re doing And taking in that space to innovation innovation to really market. a and innovative and what there balanced a

solids while in providing really percent So cases, performance, area for higher we’re better reduce exciting some so throughput, able really us. the to

and lot runway. see advanced a the And side so of on both we’re excited legacy and

As so of as is – to the portion room you slurries the grow largest might might a CMP market, have there. you dielectrics know, lot of

Chris Kapsch

as law I one especially just with due bigger Thank and that business. from gorilla POR so any from a just deal? on you pad and company? – guess you. room on the a numbers that expected would the of you you’re have momentum did is, NexPlanar of And – of much guess, the the bump change and function then business behavior the are at you business. the the the I as pad on that And one when it. the business, any evidence rate, getting little into like competitive of in success curious starting – Got changes bit decelerating diligence is we're big there growth But I’m to in mean feel growth the in many wins I commercially do considering last the what as you that

David Li

thanks. Yes,

reaffirmed which We’ve to benefits with seen really year-over-year. business we’ve healthy this for seen, as We’re see What then quarter really and going customer competitive and really to bring seen it so growth the XXXX, what been by will grow benefits in portions the process. performance always proliferate PORs their ownership of we’ve the – of out at one sometimes is, cost over be million delighted from we’ve growth well application, in our it’s growth the a always CAGR, other would terms the as XX% of pad We start. be there. continued CMP $XXX a this XX% expectation to

the both same within POR just seeing we’re which wins customer, is and exciting. So proliferation more

Trisha Tuntland

Thank you, Chris for questions. your

Operator

Citi. from you. And of Amanda next Scarnati question Thank [Operator comes our Instructions]

now open. is line Your

Trisha Tuntland

Amanda. Good morning,

Amanda Scarnati

Good morning.

cash cash reform cash uses been on looking and in usage? a that all, tax fund little the follow-up aggressive cash how, more with U.S. it’s in return building that Just a you the still of if have? to bit and changed of Are you question getting kind at Or out

Scott Beamer

most excited are U.S. of companies the reform, impact we like tax are. Well, about

as today of cash XX% have the actually our we in – and you outside U.S. We is – business Asia, or know, so our have, of is XX% is in so Asia,

of less moving terms across little of So a of the rate, tax U.S. cash ongoing friction have less of in we impact to greater and potentially a world the but impact bit an back in terms

that friction, repatriation our should or less expensing the the cash to to ease tax priorities in quarter, ability to getting repatriate after fundamentally, implement paying So that deemed cash assist of outlined. the order this that we

Amanda Scarnati

Got it.

Mainland to happening growth the do months? year? the year, expected And year new at more late you terms In production changed being all built, volume and year? over of next are Or that China of productions last with this China, any you pilot expect in couple with do see that’s expect this to see the fabs volume the how

David Li

is things in, Yes, you equipment construction we the to is which the same at Amanda, going completed. sales follow look that when are do, being

So like YMCC I that of closely finishing and and technology So growth, think of OTRAN starting [ph], a second half can those new and growth that that acceptable many would consensus customers the lot only to online yield, them. demonstrating really right? customer an that, is construction, varies customer. still but be they’re an important domestic we’re XXXX they China’s comes Most with of working not of by capacity achieve element

strong seen already. there we’ve course, growth Of

of domestic production, of So that Huali. are coming in customers that and from that’s SMIC already a some like – lot

of to the fabs, like Hynix, who Intel coming that’s from Some continuing up Dalian, international TSMC, are their ramp in also Samsung, players very active.

facilities. are China domestic international customers very ramping in the the just not but also that it’s customers, So up active their

Amanda Scarnati

Great, much. thank so you

David Li

Thanks.

Trisha Tuntland

Thank Those We time your soon. questions Thank you, have Cabot talking for the all morning. Microelectronics. and look with to in forward you your we again you are this interest Amanda.

Operator

This you program, may does and you for all Everyone, thank and great Ladies disconnect. in have gentlemen, the today’s conclude participating conference. a day.

CMC Materials (CCMP) 25 Jan 182018 Q1 Earnings call transcript