CCMP - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Cabot Microelectronics Fourth Quarter Fiscal 2018 Earnings Call Conference Call. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to introduce your host for today's conference, Ms. Colleen Mumford, Director of Investor Relations. Please go ahead.

Colleen Mumford

you. Thank morning. Good are Beamer, today President CEO; and With President David and Scott Vice CFO. and me Li, Last night, we fiscal reported results for our which September year fourth ended XX, XXXX. XXXX, quarter and the joining center website, online review are on investor that quarterly our under presentation cabotcmp.com. made slide encourage the results you Whether section the or over of you phone, us to available the we've we Investor Relations on will our a and shortly A webcast also of morning's conference be prepared conference available live of this script comments website this after call today's call.

risk office filings, to actual this by these risks, You fiscal of XXX-XXX-XXXX. the assume may information. measures. results our to of the ended discussions in are statements of factors Form that Also, request our forward-looking XX-K forward-looking no discussed statements. any from today cause We number a including uncertainties remember differ any financial XXXX. materially for and referenced calling that information our non-GAAP our may These involve forward-looking include other obligation Investor Relations factors Please September our XX, year this could update at morning SEC remarks that

release financial a to include Our measures. slide reconciliation GAAP of and earnings presentation non-GAAP

regarding the I with SEC values that rounded this Additionally, represented KMG Form statement registration Cabot a the data prospectus S-X transaction. you is by Microelectronics includes would to that proxy discussion supporting and inform throughout like in materials. also has statement filed a

other related they contain the will are transaction. about urged the because transaction You to important the prospectus read statement documents to proxy information and

solicitation proposed to be directors their favor and of be the In may transaction. addition, Cabot and in KMG participating a in proxies Microelectronics deemed of and officers

KMG the the each information Cabot officers SEC. statement filed Microelectronics about in find with can directors the and and company's proxy executive You

will a over the documents and I these to of releases press copy or now requesting department. by turn Cabot call KMG website a at the through from obtain may either copy Microelectronics and SECs website You companies Dave.

David Li

results morning gross announced good net us. quarter for and for fiscal night income Colleen, for fourth revenue, and everyone, thanks share joining Last annual margin, our per full and we Thanks and XXXX. while quarterly record This quarter as the adjusted were same XX%, the to XX% period share is revenue up compared year year. for of the sixth revenue quarter earnings last company. record Fourth increased earnings per consecutive

Our full well we believe XX% above which industry. fiscal of semiconductor revenue year the was up reflects XXXX growth that over

fourth of our environments. model, consecutive in record and that our XXXX margins income Our profitability share record the has in years gross also earnings strong earnings continued industry demand performance year share consumable technology base achieving and per evidence consecutive second revenue. net through our record believe XXXX and significantly improved We contributing record fiscal leadership, per of record with of is This to XXXX. is a financial strength of fiscal business year

results financial industry. and provide of execution of now expand to which corporate performance view additional call. turn allowed sustained grow of industry Scott is We semiconductor strategic to stated we our believe are profitability proud than our objectives our global about has This of in result our us later our to initiatives. revenue will the achieve the environment. successful faster the details I'll the

business future our is have logic remember continue Within or difficulties to important which several reports capital consumables delay side, have noted model. environment, utilization technology logic smaller On the nearly full purchases on side, expansions. to their customers indicated it our memory strengths this to equipment delays operate that the further to memory factories achieving supports customers in based some caused nodes. capacity at prices customers and recent major foundry to certain softening chip Further that related

off both coming for for memory fiscal XXXX. discuss, our seeing solid for we current will and this six outlook currently demand our about potential, are for We We Scott demand optimistic higher as to in increases products consider logic and quarter. continue demand we applications. record remain As quarter long-term products with expect growth our industry

support enable existing to storage increasing virtual-reality and economist as computing, and and and automation, such processing power cloud emerging industrial product XG. Our high-performance requirements Internet-of-Things, applications driving,

XX% addition should In the in which the number XD a industry to favorable next benefit continued We provide believe CMP XX% twice revenue trends, years. memory we XD transition the to still continue the approximately NAND of conversion approximately steps. these to complete to which from few tail-end is requires

generation future. remain advanced a next solutions steps, We of also for logic demand XD to expect transitions also customer and which for additional architecture, our foreseeable driver the benefit memory the CMP requires should to from and slurry

provide me let and quarter area results key product all CMP performance and for reported year. the quarter and pads. our three some fiscal full in slurries, dielectric product fourth details full slurries tungsten in key Now We record around year areas; the

the dielectric same for XX% logic This was XX% XX% as quarter NAND and XXXX versus driven year fiscal memory XD the was at winning versus year. applications. for XX% was as in increased revenue primarily slurry last leading well versus slurries, year the up tungsten full-year. solutions increased customers, and same revenues In by advanced applications growth Our quarter the last prior up

solutions margin of memory as successful higher and adoption provide from are advanced In that a for dielectric our ownership discussed. several silica higher we'd as cost advanced higher as customers, grew overall that lower colloidal demand result notable our benefiting ceria-based of performance, well customers. for of displacements previously competitive products applications, These addition total the slurries to to

to to to revenue margin growth improvement. and legacy adding transition products our the XXXX dielectric advance expect continue fiscal We the into from

pads, trajectory XX% revenue in of the revenue level to full-year million quarter. to annual increased million revenue least year-over-year maintaining by fiscal new record the XXXX. end CMP Pads XX% at the increased to to goal a our Turning for $XX reach in of $XXX the

XXXX the customer manufacturer and adoption we're growth major in we in happy revenue cleaner expect fiscal XXXX. which benefit next win expect product will memory new fiscal a strong We to lines of report with a our remain

Looking the strength businesses. continued excited ahead, we're our about core of

product from technology to leadership, pads our our Our applications. constant the to customer slurries, continue slurries, fresh offerings advanced dielectric and and benefit transition CMP

provide I of on to our update KMG Lastly Chemicals. pending wanted an acquisition

critical supplier better our to as global We and development enthusiastic in as to own industry to premier us enabling about step continue inform address materials as nearly as add the process as fab the prepare to which well addition the every their will the products KMG's future KMG's to believe allow electronic challenges, well material customers commercial portfolio. chemicals team, the efforts. providing our transaction technologies employees our us welcome we We electronic position to be and of business will to

profitable In additional is customer efficiency specialty several expand scheduled the our pipeline XX. particular, opportunities performance addressable and industry. KMG's KMG's transaction business expected throughput provides meetings business November addition, KMG's in materials shareholder fast-growing will with performance oil attractive, to highly market for enable highly materials. In leading pipeline is critical provide The materials enhance the to that approve

turn shareholder acquisition. vast and that over on financial satisfaction expect to around shareholders call November of our approval conditions will from provide to represents we this these And we the our combination world-class and and Assuming remaining XX. companies results. will customers, believe the close two Scott of opportunities employees closing that, KMG's I The benefit to more with the acquisition details

Scott Beamer

follow last we on My Thanks everyone. good comments the website generally release. our Dave, press with along related slide presentation posted will and night morning our

million provided with is a year. fiscal of than start quarter $XX was of Let's financial Revenue is XXXX performance same overview last which quarter this an the $XXX record X. our for which or Slide on higher million XX% fourth quarter the

the IC mentioned, increase areas. CMP X% continued strong revenue consumables the industry our focus demand total $X million increased semiconductor key on revenue up product with Dave driven As and by was or three X%. Sequentially

overall timing that Japan September was a quarter into negatively impacted fourth from shifted solid quarter September typhoon shipments by the of December While the the some revenue and quarter. in in customer

Our to net same and $XX higher represented XX% driven the increase operating a $XX income increase million was revenues, an a year. related the up KMG expenses tax This million increased or and offset over last by primarily partially of quarter margin acquisition. $XX gross an record in benefit also million was by was

income expenses, over the tax year. quarter net NexPlanar million acquisition last $XX up amortization same and XX% Excluding adjustments non-GAAP related was

increase the improved industry above revenue was million record $XXX of million year well IC income a and non-GAAP revenue operating Full while by growth, leverage. an XX% strong CMP XX%, year full of and growth. net driven Our was gross margin to up strong revenue $XXX XX% consumables increased

Slide revenue into shown dive let’s which on X. is Now

As previously us. three key as slurries dielectric areas to stated, strategically slurries, tungsten and are polishing defined important product pads that our we

of polishing year order. same increase I’ll last slurries the $XX the XX% ago. a including Tungsten XX% were accounted approximately XX% metals quarter aluminum copper, and to record During Sales same total quarter for record of XX% for of than the represented of $XX million year. million barrier up million Sales each slurries an other to $XX up delivered last increase same million the the a these year. mention tungsten compared revenue was same from record year. XX% a polishing $XX an in pads quarter from revenue last revenue quarter of compared Dielectric also quarter and of

year. XX% substrate which quarter up storage our from products record Finally, approximately million, electronics $XX revenue data from engineered same a was QED, and finishes last surface includes and the

Gross comparisons. the refer which quarter X XX.X% year for please Now Slide ago. provides quarter margin a a some in higher-level to record P&L compared to the same XX.X% was

the was product a margin dielectric of all leverage primarily expense in amortization and X.X Excluding tungsten improvement million slurries. related from increased margin selling benefited gross XX.X%. volumes acquisition, prices Gross of and across higher mix lines, NexPlanar to

of XXXX XX%. to an compared above expense. $X.X year full Gross related last came in slightly gross margin XX.X% adverse guidance impact XX.X% to of year. XX% margin This the full-year to includes our amortization million was NexPlanar For

our higher primarily leverage million well tungsten and dielectric increase and year to $XX actually guidance, gross was million partially areas costs reflects executive to a mix which increase officer were improvement $XX as year. Operating and was $X expenses versus volumes $XXX selling primarily driven this include as costs and pending development were acquisition marketing improvement $X $XX Our growth. million a of of This related million those and and quarter, acquisition. the by on the within of ago. operating decrease prior KMG over support an transitions and in year due margin administrative quarter million Full which primarily an million, technical and were expenses product offset the higher general expenses research, to costs and same related expenses by operating excluding

expenses revenue, compared XX% to full percent a year. to declined XX% operating As of year our last

range. have our in costs, year would've end expenses million operating which related lower full our acquisition been million $X the the Excluding $XXX would of at been

XX.X% of was margin in from the year. last same the operating increase quarter, basis Our quarter an points XXX

reform on EPS was cost Excluding $X.XX higher adjusted points KMG the XX% tax effective control. over and in NexPlanar the prudent which a basis expenses, XX% adjustment the between prudent margin period margins, over driven we year. recorded Diluted and recorded was a increase an primarily was driven quarter amortization of Full-year represents EPS tax was related XX% by operating year $X.XX, basis by and record gross increase a We of This a this rate was also the core was our and was was to to the our reserves a a over XX.X%. but within $X.XX as prior XX%. acquisition gross benefit expectation excluding last control of same year. an expenses. revenue, and quarter of the and record increase also EPS related XXX XX% prior adjusted which quarter. Diluted margin U.S. expanded increase operating previously higher higher tax XX.X%, This non-GAAP

flow cash Now X, million. the cash generated of which some from $XX of no flow quarter debt cash $XXX provides outstanding. sheet refer operations please and balance and a with Slide We million balance on ended to We information. hand

Capital billion. quarter the will total partially pending term acquisition our to million. transaction for year-to-date We of was and the debt through Chemicals of B approximately have loan spending finance bringing $X.X the million $X KMG $XX discussed

During increasing million and our flow pads the the continue invest improve quarter for free demand. $XXX automation, year. operations cash continued the to Accordingly $XX throughput we our million and to was support full for to customer quarter fiscal in efficiency

way has been flow our of repurchases. least at shareholders year prior communicated by free intention previously and XX% to share cash As dividends return to of

During or have years $XX fiscal of prior target. XX% XXXX, so million we cash exceeded free returned we that flow

acquisition. important Now please Slide pending a refer for KMG the for list to X of milestones

XX. November anticipate We progress with are closing pleased and the around

earned of have our from debt Moody's. B upcoming of from public a and BaX We rating term ratings loan S&P BB+ a on

strong approximately acquisition on We'll financial a some on dropped and the our our Year-to-date to highlight revenue full income directly to in achieved million, From $XX operating closing fourth and quarter, rate and Slide operating expenses. on for income. XXXX quarter prior year the We this fiscal continue Slide excluding acquisition expenses very revenue, increased like expenses million income the I of decreased perspective, million sales quarters full-year year leverage leverage This period are incremental X. $XX currently revenue while see In $XX provide three year of implying fiscal guidance remarks excluding quarter and including net increased our from X the operating increased we XX%. we revenue our would and implies million while to first operating growth. marketing that financial EPS debt. operating related $XX income, this performance record related increased and a operating

expectations, only and will current address total results closed our For I'll these KMG not expectations acquisition. business the once we represent for

we KMG like today. segments structure results expect least to forward, for Moving two reporting at report

revenue We after XXXX. and we level appropriate grow to the the highest will closing. the fiscal faster margins provide remain our improve ability confident industry At further during semiconductor at in continue than time the information to

results. the expect to quarter compared we of For IC show increase our mid-single low to first a to fiscal digit quarter CMP our business record XXXX sequentially, fourth consumables XXXX,

like would the of emphasize resilience in Given some based mixed players we conditions by industry, our consumables to commentary business. the about operating

$X.X and think we the expect for year business. XX.X% improve products. profitability XX% the year about demand to between and on be of compared expenses As further we will XXXX, We currently solid a XXXX. we expect our At expense. the our fiscal continue to fiscal full time, full on conditions includes NexPlanar gross of in This GAAP fiscal amortization million basis same XX% margins focus reported to operating guidance

also expenses. for expect XXXX include expenses. compared any KMG acquisition million to our $XXX million Again, the potential does this be million full acquisition operating guidance between We $XXX expenses excluding fiscal in related year fiscal and $XXX to related not reported

organic the we increase performance earnings continue quarter including we In share our in summary, strategic and execution year full range expect financial to XXXX, and gross for We full tax rate our margin, our the effective expectations initiatives. year demonstrates $XX income, on prior revenue while million strong in growth we've Company. for net $XX XX% record to delivered which the million, the between of spending continued capital fiscal be per an and believe focus from fourth for our of our fiscal invest XX%, as is to

Cabot income costs revenue with challenges. provide fiscal Microelectronics innovative, most performance, quality discipline net growth. our We we growth, confident high combining building margin in upon in For forward of solve that drive to by our ability customer's gross XXXX, continued improve our look and remain demanding to maintain success solutions operating should management to result which KMG

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

Operator

Securities. Mike [Operator Seaport Our with first Harrison Instructions] question from comes Global

Your line now is open.

Mike Harrison

driving Just bit the something closer of you wondering number quarter, sales, quarter. it the XX% to this little sales there it it like talk in unusual if for XX% was Was dropped about could number a last G&A quarter? looks to below this G&A

Scott Beamer

last costs Not in The year prior had additional necessarily, them. quarter Mike. year a few

year, as year, our for for margin for comparison did about year you're And we give quarter next XX%. we - a if think operating favorable recur. year that's it's revenue of you those and as not on the look the full expectations percent get to full the about about a sales those a income think about this thinking number. next we as for looks So non-GAAP prior as that expenses, improving guidance, one at operating the But basis, but give operating year we expenses you items for

and as have continue control our to full done expenses operating we've continue can think improve to for line this and similarly think the that year. things an we you're in year, to So, how you I modeling expectation about to that operating thinking about, income

Mike Harrison

a seeing know tungsten comment here I on The slowing can in of growth in the bit. all but getting decelerating the and whether little some more comps growth rate rate difficult you dielectrics at businesses? are is you're underlying those

David Li

Mike, hit it part it's you I comp. a your think of tough with first your question,

year, really been operating all We us pads, as all this sequentially pleased the tungsten, we're this saw full And sixth the has you quarter, So, industry well. consumable results. we've up as records we're I base, imply which fairly start our use that's a at and you running and a and record would since really an really And with guided look at if base proxy think if reflects where it dielectrics, capacity. consecutive up industry wafer sequentially is seventh.

And so industry just although think continue this the the grow we somewhat at to continue it's to grow the than I utilization industry, point. by ability constrained faster to

Mike Harrison

fourth the And customer What's to that contribution the then you revenue the incremental for see new that just from is any customer question do annual and we pads results? basis the last related quarter opportunity in announced. on maybe now an

Scott Beamer

Yes, current expect quarter. a and XX% up runway for We year-over-year, us. past see exciting and some We're sales had and we highlight this well one lot that we see ramp incremental an of in want this did great that to we to again, and continued up really is area year. traction wins of go we the to pads as just this

a this ability our years, to quite much last that dimensionalized XXXX you've the several seen really confident in bit. than continue other would haven't as And really We contribute that grown grow we've to in business. over we're how say it to

the with in pads. pleased performance So,

Operator

Silverstein Buckingham comes Dimitri with question next from Research. our And

is line now Your open.

Colleen Mumford

might I think lost again. we have you

Let's the caller. move next onto

Operator

And our comes with from next question Citi. Amanda Scarnati

open. is line Your now

Amanda Scarnati

lagging that just both on on CMP we a the some edge leading that has and logic of any recently side. seeing increases improvements product the on on automotive. question been the news I had sort the memory edge? got increase in in industrial Is weakness are there demand all some and for been the the or this and market of sort the has demand in There you've side

what to you're see want the out Just in there market? seeing

David Li

comments. quarter we prepared that to mentioned of broad expect Amanda. And digits quarter be what low - be up to Scott us, based. just this mid reaffirm thanks single really Yes, we our so seeing we're to mentioned record in that another would kind and for

model have some out you based the CapEx. would utilization. if more noise at a to customers increases be our look but expected. lot recently the think advanced kind business There's I I of push seen consumable capital quick strength versus We just recently and But it think logic, in really the down push-outs. equipment reluctant take to up pull really are of been I to expenses And speaks which think of about fundamentally business,

we're what that's think I seeing.

awhile the business we've model. talked strength for So that our of about around

that feel in to perform to we're like and and be resilient continue of expect environments. different We thriving well well positioned variety a to

Amanda Scarnati

versus quantify point? the the of at this you leading project and memory in can that percentage trailing And sales edge amount edge -

David Li

a XX%. that increase could sales that of We Yes, We I be one advanced both would talked this about say logic. year that advanced was fiscal significant supports and the see tungsten. XXXX of end just memory did our indicator

of by the technologies memory. and indication think you That both 'XX the should of advanced advanced around or logic XX% I FY for the was some strength end it so And of give so.

Amanda Scarnati

you more little increases products then And speaking motivates you demand older that seeing know How ASP tracking product of of is that it’s increases. I dielectric there. in question versus have the ASP online, cannibalization some I just terms last the if bit are you’re would broadly boost

that in quantify anyway to can broad versus and you’re ASP seeing strength you that If the that how left demand? relate

Scott Beamer

quarter. feel price in level we value the impact the we we’re on we marketplace a was of Amanda. leaders of for our the the and price quantified think It the products stewards thanks in And Yes, customers. our marketplace revenue our growth. high where provide price When as - contributor good to that haven't to able to being

In improved points further, contributing indicating a terms a Price not to the guidance of of giving improved our coming margin is the to year. but we’re basis piece contributor quantifying we’re gross that's the that out only for it's of year margin. factor this that next it that, any

David Li

add to some just especially on dielectric side. the Scott color and Yes to comments

and we've this there while based pleased ceria as about our family and of transition been for products. really year-over-year We’re with well a new up talking colloidal XX%

as and we've And XXXX. into few to year kind continue cannibalization, and significant Dielectric of momentum throughout well both to expect so the noted gain it's a grow this we competitive displacements as and displacements fiscal segment we with new CMP a leadership and displace us we have see runway position products. is for with continued strong also participation largest our actually very while the and to that for others there, CMP so

Operator

And from comes our with Research. Dimitri Buckingham next question Silverstein

now Your open. line is

Dimitri Silverstein

questions. of Couple

it from we You then XX% seem business? are XD be to if of I accelerating is more how to you about down this as count correctly. seven is just driver us it get remind talk a going to XD to tungsten it took for you how years you it is like And something about the NAND level, adoption many six, am was this mentioned Can long or get transition to the or this I of quarters if maybe I that XD understand pace transition XX%. slowing of your NAND. kind to trying to from north into remember XX% NAND

David Li

XX% to also think we XX% to somewhat years, viewpoint. it's over technology, so been several only to it's is with And you we XD. the customers the I a lumpy just a want be business on And producing competitive converted our first have not that really standpoint to think are a the to only the our currently think that XX% to that's conversion there. continue would if XD Dimitri last from customer's XX% Yes, And those from comment so one out thing pricing say - but at have to continues confirm as it occurred was memory to Samsung you progress obviously transition. I it we

So full they’re on over money and to some continue we remarks overnight equipment to from conversion we’d well. continuing expect and the of saw as convert Hynix spend

you So depends who there's is, they we’re customers really will the all on that especially how think we’re I quickly correspond their convert one that How yield, of really confident I'd just manufacturers. utilize lot say customer fully fab. memory I there a confident business customers I are runway has to with because and since would discussion brought ahead. a still And memory with to our time. long the is around want is in that been really memory and they And how pricing they major good their working the memory continue think remind not thing a within for want subject those but all really convert over correlation

now. just with balance demand environment pricing I at utilization running supply to trying continue they're think memory they the right full for So

Dimitri Silverstein

we in So the acceleration rates, what you’re seen had at words you lumpy have not other adoption it least to maintaining can’t speak in not able maybe before it’s but the is really phase to saying? be the a slowing

David Li

the hard NAND that things to actually even is closer drives. the to prognosticators interesting have price think stays have said low, accelerate and hard price it the there could solid-state disk drives disk from cannibalization becomes progress continue of been because there that if the to I Yes, some thing that

customers just to growth obviously closely our for an and work continue this with we strong it’s interesting dynamic pleased in memory year. with So we’re us but those

Dimitri Silverstein

good. Sounds

self are and sort cannibalization kind push that and kind a a pure last follow-up on level? colloidal gain mix of there the from growth share ceria-based of how improvement above is you the any how dielectric Just and that was can out slurries. much of with you the the beyond of new question, of much sort of seeing was market growth older guys of way slurries And the silica-based slurries that

David Li

than said preferred right think focused dimensionalized and more can or and more position gains be we've But customers the we pretty is wins the by the think Ceria more seen memory the has to of is there dimensionalized don't before around dielectrics more been now. all I do haven’t you I but that new continue colloidal we growth we've and products the customers really stronger ceria Yes, strength in there memory true portfolio. products infer ceria advanced that the that, much our legacy. the with

Dimitri Silverstein

several mentioned more now You side and utilization right bit maybe the are line between you little a high with the the it’s rates times your that the utilization where their preplans your guess customers I rates fabs, have now slurry of on business.

investments making there's You’re assuming business. you also into of of I’m CapEx into side production but the slurry terms in going fab CapEx expanding

follow? of of kind about there talk you in you that you can are where So terms utilization if rates metric is such

David Li

slurry of been, has capacity. us never even we philosophy run leader Dimitri for our short for the can always industry the Yes tight or as

not because with we not so target it's And XX% utilization. And talking and just philosophy for plants for like many to us CapEx years. know XXs surge demand a been like there accommodate that's more very of run significant we’re is our of XXs you as Also a case business. in our and is our that of the we’re ready not we - that part

So build well. a it’s as if new slurry for we capital expense not facility a wanted to us significant

in Korea, strength that expansion have was is facility most just our of times an region. that recent in we indication which slurry expanded Our several

Dimitri Silverstein

about complaining, of cost to to about sold complaining you margin, huge raw be final and talking part. material’s then a gross is material look when I’m be at your goods industry it not but industry part obviously to question, raw Everybody And seems a seems material your costs. in this

XXXX? don’t the but your you and can margins like what's comment going pressure at how you gross any do on look input on sort indicate of cost you're Your with seeing

David Li

materials Yes, pretty are Dimitri been stable. our raw have generally

contracts silica, more with long-term of out drilled are by not swings things prices of volatile a they're its nature. have so the and oil items essentially We that in ground not impacted petroleum-based, they’re

are line materials stewardship been time. our the that’s stability aspect So and turning we've with advance expand product XX% technology of And margins relatively as moving to some contribute price our over of marketplace type customers that's COGs, to gross of raw about in has helped seen our - been then more mentioned. and I also again our to out and of stable be the - able over to that our us

Dimitri Silverstein

mineral-based abrasive. more gone have your but I - in and products of them guess to less chemistry the fact haven’t that moved make you materials and more much, particles which out probably and raw less your

assets actions maybe or asking? move I may have or so you some more was some superior that’s I of So products thought to on why started the

David Li

key think Dimitri great management I we not that and we have have lot really pretty the towards suppliers. function time on you working true away but chemistries a arrangements spends look gone particle also with even high only but more at supplier commercial, the and minimal. we've contribution It into our the really of And its is loading our from our chemistry, quality products team if

job the think some even may we we've market. have of in So maintaining offsetting a increases and I done any good seen

Operator

Market. with Instructions] question comes next Our Loop [Operator from Kapsch Capital Chris

line open. is Your now

Chris Kapsch

this on to So one transition to clarify XD just NAND. follow-up

you're customers, know XX% has happened, capacity. you the I amount of to to but to You think XX% installed XX% of say, of if installed customers XX% of a said the the said - only did to transition XX% a biggest the I disproportionate have it's XX% because assuming but I'm XX% that you obviously once it's just of capacity

understand make to that. trying sure just So I

David Li

Chris. customers, Yes, related it is capacity, to Thanks. not

Chris Kapsch

there the dialectics like And is few advanced all in terms way applications that as to you'd know transition eventually of I dielectric mean, about just think transition way is - then along the think the if I transition to amazing these guess. would to about to think advanced colloidal well is flurries. context transition in expect about of there is don't dielectric be did XXX% advanced to a terms on the that of of in I that a on advanced way But adoption far ceria-based flurries? to a dielectrics, that there how the it -

David Li

of of area. cam lot still earlier but I'd it quantified is that runway. all there's dielectrics as mentioned reason I the And haven't largest the we for is; the Yes, say CMP one,

So, to or others obviously us replace products. room own a lot our there's displace for just of either

is and applications memory thing are those the advanced products specked some other beings The for of logic. most into

DRAM latest they they a or for lot dielectric the polishing obviously of advanced NAND XD have and solutions for also logic, or new So, that. need

profitability still then So lot doing other that's And part, displacing we runway others, those legacy ourselves dielectric there's better product obviously up of where manufacturability, also really ownership, CMC decide better and can are of using more terms displacing whether go. in of focused think part the and to them And of solutions you're lower with new is customers area. provide think advanced We I whether they're existing performance it's products is it's as better cost for how a otherwise. the for us which there an or probably these they're there where well.

we're new that with still several side, years their We that's conversion. technologies. - that ongoing as with on to well think legacy an excited work to that on So both go the as continue there's we're customers And both conversation.

Chris Kapsch

on David, follow-up that. just a

customers a products or encouraged legacy - I that these if by that's dielectric know months make four some to believe. I analysis increase a or introducing don't You of five closely more ago. bit little price

the some begrudgingly price increases taking do in the terms just of process advanced the time want increase? of legacy are you're just that have of in record, adoption based that's to of or seeing that don't introduction qualifications maybe tool on So wondering don't dynamic transition a if dielectric products, any just from that the to or Are evidence changes they customers or the change actually their price accelerated it. those

David Li

with it's conversations. customer Yes, And every helped think different. is I

customer slurries it manufacturing. I - that say us think levels of but have do that I customer. But emphasizes of the and think some that. introducing new overall they're So along once pads just would conversations to leverage allowed high the at to also volume to with stickiness it used sets being about in used We've consumables also consumables the I not different opportunity - only talk

increase pleased that far but talked one the about. just early price of was we're effort. with that so aspect It's that So just we it's -

Chris Kapsch

there. don't margin the looking I you of parse want highest the is year contributing improvement there a - XXXX line, Can question sustained and on know about for full the amazing guidance from I pretty ask that gross beyond something your the that's is coming above it a products that highest out function and simply growth the your or driver, margin but else to here?

Scott Beamer

plants We're dielectric a a volume aspect more aspect a that, we in grow, improvement dimensionalize And Yes, too mix perspective operations get that contributor to comfortable tungsten your move a you we there precisely Chris. are to a leverage manufacturing helps contribute mentioned and where to going are advanced hard. particularly then contributor. a as Dave reluctant from too. also as capacity but continue leverage as in price technologies to volume as is right, here. utilization to that be to you're volumes that running very is with But

David Li

when executing pricing I leaders of just then just add that's actions think refreshing another portfolio, and - to also lastly product improving whether and and aspect. Chris, I’ll well in Scott being Yes should we’re taking our terms we that comments be it’s

we So you talked higher have margin, I just gross we've dielectrics is - tungsten which have think going a - than if which on. corporate that as there's generally look transition about you

for positive, is gross which And corporate so that and pads as gross dollars tailwind could margin as also margin gross not high be incremental margin. the a then but

of the and management think that from moving some some fire I teams good really top and execution on been also mix teams on commercial this is there just parts there's operations. So

Chris Kapsch

the asking so that the under of into something and some not but Thanks. those question be contemplating Cabot existing is portfolio am because businesses of was truly those the the you’re I businesses, markets? mean in part sort industrial changing diversifying closure KMG as just date for am but of I Last tongue-in-cheek you acquisition. really Are I the I company, and approaching off-topic, guys but - name this approval you're curious a operate in just Microelectronics completely and brand you’re brands or will contemplating simply

David Li

KMG Right, brought let mention since so about acquisition few just it a the excited we’re the topic on things. you really me

process critical the and excited about talked that. we And we in pipeline We’re also presence in XX. we’re to be resulting it materials. about combination November supplying about you markets businesses is, electronic then scale every approximately world-class to a mentioned materials the we're anticipate together just close and them gives size like two going that about be really around and participation new materials And I excited as think to step. one taking been strongly, really and significant putting And growing

as thought goes something have but the name tuned As change obviously time. stay far that about over we

We it of its obviously something recognize we'll that standpoint consider close get the brand, has entirety also the Cabot value in as we the beyond and customer acquisition. recognition so Microelectronics from our

Operator

with question next And from Mike our Securities. Harrison comes Global Seaport

line is now open. Your

Mike Harrison

when happen? I we we to don't usually touch much XX% if finishes growth on the and just surface growth of that business the might out Can about growth expect it talk but one, talk year. you quick there had rate full of that for sustainability this quarter, drivers some flattens about the engineering the maybe XX%

Scott Beamer

the it’s portion the of and is Mike. X% business revenue, a equipment based The consumables our of that or of our of XX% base. products actually is Yes company is about our so whereas biggest small it’s QED rest part business which total

a quarter. also that So range have there's a have We rest of industries in equipment a optics, other defense. our in little course segment of sub base of and and we did general sell like some different consumables then the business that more semi strong - volatility a into QED had

volatility more sub small that base. of some that there's our that's number non-consumables a segment driving total business, portion So, and in it's

to little forward. So a bit becomes predict difficult going it more

David Li

continuing that but at We its because volatile healthy only that said a business. see our job done just the and an portfolio. that backlog based as say lumpy That a mentioned business equipment it’s of to base I'd that we great in the Scott team it’s has equipment business QED drive performance have

Operator

turn Ladies back over you. like gentlemen, session I would remarks. to question-and-answer for today's call. any Thank and further our to this now for Colleen call Mumford concludes the

Colleen Mumford

morning. a day. great you. your thank your continued That is in have that all you the questions for and this Thank interest we Have Microelectronics. Great, Cabot time

Operator

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

CMC Materials (CCMP) 25 Oct 182018 Q4 Earnings call transcript