MKS: Positioned for the Age of Miniaturization & Complexity - November 2021 - MKS ...
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MKS: Positioned for the Age of
November 2021
Miniaturization & Complexity
Use of Forward-Looking Statements
This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 regarding the future financial performance, business prospects and growth of MKS. These statements are only predictions based on current assumptions and
expectations. Any statements that are not statements of historical fact (including statements containing the words “will,” “projects,” “intends,” “believes,” “plans,” “anticipates,” “expects,” “estimates,”
“forecasts,” “continues” and similar expressions) should be considered to be forward-looking statements. Actual events or results may differ materially from those in the forward-looking statements
set forth herein.
Among the important factors that could cause actual events to differ materially from those in the forward-looking statements are manufacturing and sourcing risks, including the impact and
duration of supply chain disruptions and component shortages, the ability of MKS to complete its acquisition of Atotech Limited (“Atotech”), the terms of MKS’ existing term loan, the terms and
availability of financing for the Atotech acquisition, the substantial indebtedness MKS expects to incur in connection with the Atotech acquisition and the need to generate sufficient cash flows to
service and repay such debt, MKS’ entry into Atotech’s chemicals technology business, in which MKS does not have experience and which may expose it to significant additional liabilities, the risk of
litigation relating to the Atotech acquisition, the risk that disruption from the Atotech acquisition materially and adversely affects the respective businesses and operations of MKS and Atotech, the
ability of MKS to realize the anticipated synergies, cost savings and other benefits of the Atotech acquisition, competition from larger or more established companies in MKS’ and Atotech’s
respective markets, the ability of MKS to successfully grow its business and the businesses of Atotech, Photon Control Inc. (“Photon Control”), which it acquired in July 2021, and Electro Scientific
Industries, Inc. (“ESI”), which it acquired in February 2019, potential adverse reactions or changes to business relationships resulting from the announcement, pendency or completion of the Atotech
acquisition, conditions affecting the markets in which MKS and Atotech operate, including the fluctuations in capital spending in the semiconductor industry and other advanced manufacturing
markets, and fluctuations in sales to MKS’ and Atotech’s major customers, the ability to anticipate and meet customer demand, the challenges, risks and costs involved with integrating the
operations of the companies we have acquired, potential fluctuations in quarterly results, dependence on new product development, rapid technological and market change, acquisition strategy,
volatility of stock price, international operations, financial risk management, and the other factors described in MKS’ Annual Report on Form 10-K for the year ended December 31, 2020 and any
subsequent Quarterly Reports on Form 10-Q, as filed with the U.S. Securities and Exchange Commission (the “SEC”). MKS is under no obligation to, and expressly disclaims any obligation to, update
or alter these forward-looking statements, whether as a result of new information, future events or otherwise after November 19, 2021, the date this presentation was published to MKS’ website.
1
Use of Non-GAAP Financial Measures; Financial Information
This presentation includes measures that are not in accordance with U.S. generally accepted accounting principles (“Non-GAAP financial measures”). These Non-GAAP financial measures should be
viewed in addition to, and not as a substitute for, MKS’ reported GAAP results, and may be different from Non-GAAP financial measures used by other companies. In addition, these Non-GAAP
financial measures are not based on any comprehensive set of accounting rules or principles. MKS management believes the presentation of these Non-GAAP financial measures is useful to
investors for comparing prior periods and analyzing ongoing business trends and operating results. Please see the Appendix entitled “GAAP to Non-GAAP Reconciliations” at the end of this
presentation for reconciliations of our Non-GAAP financial measures to the comparable GAAP financial measures.
MKS is not providing a quantitative reconciliation of forward-looking Non-GAAP operating margin and diluted earnings per share to the most directly comparable GAAP financial measures because
it is unable to estimate with reasonable certainty the ultimate timing or amount of certain significant items without unreasonable efforts. These items include, but are not limited to, acquisition and
integration costs, acquisition inventory step-up, amortization of intangible assets, restructuring and other expense, asset impairment, debt issuance costs and the income tax effect of these items.
These items are uncertain, depend on various factors, including, but not limited to, our pending acquisition of Atotech and our recently completed acquisition of Photon Control, and could have a
material impact on GAAP reported results for the relevant period. All MKS financial information also excludes any contributions from the pending acquisition of Atotech.
2
MKS Value Proposition
Enabling key
Semi subsystems
technology trends
leader with
with foundational
broadest portfolio
solutions
Focus on
Positioned for
miniaturization
growth in
and technical
complementary
complexity drives
Advanced Markets
shareholder value
3
Broad and Deep Capabilities Addressing Multiple End Markets
Semiconductor Advanced Markets
• Deposition • Industrial Technologies
– Atomic Layer Deposition, Plasma Advanced Electronics Manufacturing
Enhanced Chemical Vapor Deposition 2021E Revenue(1) – PCB, Electronic Components, Advanced
Packaging, Solar, Display
• Etching Industrial
– Extreme Vertical Structures – Process Industries, Telecom/Datacom,
62% Industrial Manufacturing
• Lithography
– 193nm Immersion, EUV
38% • Life & Health Sciences
– Analytical & Medical Instrumentation,
Biopharma, Bioimaging, Surgery
• Metrology & Inspection
• Critical Wet Processing • Research & Defense
– Imaging/Infrastructure, Protection/
– Dissolved Reactive Gases
Surveillance, Electronics/Biological
Research, Ultrafast Laser Studies
(1)Revenue percentages from Semiconductor Market and Advanced Markets consist of year-to-date reported percentages through Q3 2021, plus management’s estimated breakdown of revenue from these markets for Q4 2021.
4
Strong Multi-Year Secular Drivers
Semiconductor Mechanical to
5G+ and IoT
Demand/Complexity Laser-Based
Proliferation
Drives WFE(1) Manufacturing
(1)Wafer Fabrication Equipment spend.
MKS is Uniquely Positioned for
Market share gains Accelerating adoption Enablement of smaller,
as equipment of Lasers, Optics feature-rich advanced
spend increases and Photonics electronics
Customer Challenges: Miniaturization – Density – New Materials
5
The Trends We Have Seen in Semi Are Coming to Advanced Markets
Precision Engineering Enables Technology Advances from Wafer to Workpiece
Semiconductor Advanced Markets
Deposition, Etch, Laser-Based
Lithography, Manufacturing
Inspection/Metrology Processes
Smaller Geometries (nm) MINIATURIZATION Finer Features (µm)
Vertical Scaling COMPLEXITY Higher Density
Novel Materials CHEMISTRY Novel Materials
POWER PLASMA & REACTIVE GAS PRESSURE OPTICS LASERS OPTICAL SUBSYSTEMS MOTION SYSTEMS
6
Leader in Critical Subsystems For Semiconductor Manufacturing
MKS: Broadest Critical Subsystem Provider in WFE Ecosystem
DEPOSITION CRITICAL WET METROLOGY &
LITHOGRAPHY
& ETCH PROCESSING INSPECTION
• RF Power • Dissolved • Optics & Optical • Optics & Optical
Reactive Gas Subsystems Subsystems
• Plasma &
Reactive Gas • Lasers • Precision Motion
Addresses
• Pressure & • Precision Motion • Vibration Control
Vacuum >85% of • High Performance • Light Source
Measurement
WFE(1) DUV Thin Film Assemblies
• Gas Delivery & Coating
Pressure Control
• Temperature
Sensing
(1)Company estimate.
8
Semiconductor Market’s Critical Solutions Provider
1999 (PRE-IPO) 2000
Deposition & Etch 2010 2015 2016
Lithography &2021
Inspection
Leveraging Surround the Chamber® Portfolio to Drive Growth
9Addressing Semi Customers’ Most Complex Challenges
RF Power Plasma & Reactive Gas
Enables drilling billions of holes
Enables depositing thin films
with aspect ratios >55:1, perfectly
conformally – one atomic layer
straight & parallel; equivalent to
at a time, billions of atoms
hitting a target >1 mile away MKS is a Leader across with zero defects
with a deviation of 0.5 mile away
10MKS Semi Business Has Outperformed WFE
40% 25.0
Executing On Surround 10-year Average CAGR
the Chamber® 30%
MKS Annual Semi Outperformance
• SAM expansion, technology MKS 10-Year Organic Trend
MKS has
20.0
enablement, portfolio breadth 20%
WFE 10-Year Trend(1)
8% increased WFE
share by 40%
CAGR in the last decade
6%
Capitalizing on Key
15.0
10%
CAGR
Technology Inflections
• Due to unique innovation 0%
10.0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
model
-10%
MKS outgrows WFE 200bps on average
Time-To-Market 5.0
• Drives increased customer -20%
intimacy
-30% 0.0
(1)Company estimates.
From 2000 to 2020, WFE Share Growth of ~150%(1)
11Leveraging Expertise Into Advanced Markets
Stage is Set for Broad Adoption of Laser Manufacturing
2000 - 2010 2010 - 2020 2020+
Hyper-
Advanced Smartphones,
Connectivity,
Devices Wearables, IoT
Miniaturization
Large electronic Very small Extremely small
components, electronic form-factor,
less processing components, continued
power, bulky extremely fast acceleration of
design processing power processing power
Mechanical Laser Laser
Manufacturing Manufacturing Manufacturing
Processes Select Use-Cases Broad Adoption
Precision Laser Growth Opportunity in Electronics Manufacturing
13Leader in Laser Solutions & Systems
Critical Solutions for Laser Processing System Level Expertise
Beam Delivery
& Conditioning
Process Control
Laser Source
Motion &
Positioning
Leveraging Surround the Workpiece® Portfolio to Drive Growth
14Addressing Critical Need for Precision Manufacturing
Precision Motion
Lasers
& Positioning
Enable processing materials Enable moving an object at 5
with power output as much as billion atoms per second but
that of a nuclear power plant with a positional accuracy of
compressed into a trillionth the width of a few atoms
of a second Laser Systems
Integrate these
Precision
Beam Delivery
& Conditioning
Capabilities Light Measurement
Enables laser power measurement
Enable targeting of the laser
from 300 femtowatts to 120
beam across the length of a
kilowatts, equivalent to a power
football field to a spot the
range from one light bulb to
width of a human hair
100x total sunlight on earth
15Pending Acquisition of Atotech – A Leading Chemistry Solutions Provider
2020 2020 2020
Revenue Mix Revenue Stream Revenue By End Market
Equipment Metal
Coatings
GMF Auto
Surface
Electronics Finishing Advanced
Electronics
Consumables
Electronics General Metal Finishing (GMF)
● Advanced PCB, semiconductor IC packaging applications ● Decorative & functional surface finishing applications
● Equipment & consumables model creates sticky business ● Exposure to key trends such as premiumization, electrification
● Serves 28 of the top 30 PCB manufacturers(1) ● Serves >6,000 customers across diverse industrial end-markets(1)
(1)Atotech June 2021 Investor Presentation.
Specialty Chemistry Solutions for Advanced PCBs, IC Packaging & Surface Finishing
16Optimizing the Interconnect Demands an Integrated Approach
Increased device MKS: Atotech Combination of
complexity driving
Advanced PCB Electronics: Advanced PCB
Advanced PCB and capabilities and
via Drilling Process
Packaging innovation, expertise are unique
Systems, Lasers, Chemistry and
especially in mobile and will accelerate new
Optics, Motion Equipment
devices roadmaps
HDI PCB - THEN HDI PCB - NOW
Number of vias has increased
by more than 4x from
250,000 to >1 million
Line/space and via size has
decreased by more than 60%
Adjacent Expertise Creates Significant Market Share Opportunities
17Atotech’s GMF Well-Positioned For Attractive Secular Trends
Electrification Cr (VI) Wastewater 5G Infrastructure Renewable
Premiumization
& Lightweight Replacement Reduction & Smartphones Energy
• Enhanced • Driven by strict • Constant trend • Tighter global • Plating of new • Cost-efficient
plating of new environmental towards higher operating plastics for 5G solutions for
plastics and regulations quality requirements antennas solar cells
lightweight • Demand for • Durability • Non-magnetic • Corrosion
metals new chrome requirements coatings for protection for
• Solutions for colors camera wind turbines
contact housings
corrosion • Electroless
nickel for
mobile device
housings
18Strong Value Creation Track Record
Strong Operating & Financial Profile …
2015-2021E
2015 2021E(1)
CAGR
Total Revenue $0.8B $2.9B +24%
• Semiconductor Market $0.6B $1.8B +22%
• Advanced Markets $0.3B $1.1B +29%
Leading Product Categories(2) 7 16
Non-GAAP Operating Margin 20% 27%
Non-GAAP Diluted Earnings per Share $2.22 $11.22 +31%
(1)Consistsof year-to-date reported revenue, Non-GAAP Operating Margin and Non-GAAP Diluted Earnings per Share, as applicable, through Q3 2021, plus the midpoint of our Q4 2021 guidance provided on October 28, 2021.
Breakdown of revenue from Semiconductor Market and Advanced Markets consists of year-to-date reported revenue through Q3 2021, plus management’s estimated breakdown of revenue from these markets for Q4 2021
(2)Product categories where Company estimates it is #1 or #2 in market share.
(3)From December 31, 2015 to November 1, 2021.
MKS Stock Appreciation 325%(3)
20… Drives Accelerating Free Cash Flow Generation …
$450 $1.4B
$400
$350
$300
$538M
$250
$200 Strong Through-Cycle Free Cash Flow(1)
$150
$399M
$100 $107M
$50
$0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD Q3'21
(1)Free cash flow is net cash provided by operating activities less purchases of property, plant and equipment.
2019 “Trough” Greater than any “Peak” in MKS History through 2016
21… Creating Balance Sheet Optionality
$3.2 Billion Allocated Over Last 5 Years(1)
Successful integrations of Newport, ESI and Photon
ACQUISITIONS
Control position MKS for future growth 41% $1,294
Collaborative approach through OCTO drives MKS
PRODUCT DEVELOPMENT
innovation engine and optimizes R&D investment 25% $ 787
Continued focus on de-levering; execute repricing
DEBT MANAGEMENT
events when opportune 15% $ 491
Increased investments to continue to support above-
CAPEX
market growth rates 10% $ 313
Initiated dividend in 2011; cumulative increase of 47%
DIVIDEND
since inception 7% $ 213
SHARE BUYBACK Opportunistic repurchases allow flexibility 2% $ 75
(1)Capital deployment from Q4 2016 through Q3 2021.
75%+ of Capital Reinvested in Growth Initiatives
22M&A is Core to MKS Growth Strategy
2000 - 2010 2010 - 2015 2015 - Present Pending
2000 2002 2012 2016 2019 2021 2021*
Astex ENI Plasmart Newport ESI Photon Atotech
Plasma & RF Power RF Power Light & Equipment Control Specialty Chemicals
Reactive Gas Motion & Solutions Optical Sensors for PCBs,
for Temperature IC Packaging
Control & Finishing
Surround the Chamber® Optimize the
Surround the Chamber®
Surround the Workpiece® InterconnectSM
Photon Control Atotech will enable
23 deals combining Newport and ESI set MKS to optimize the
expands our
transformational and tuck-ins, Track record of efficient foundation for Advanced interconnect
Surround the
expanding capabilities and access Integration and de-levering Markets growth similar to
Chamber® *Expected to close in
to key markets early Semi acquisitions
offering 2021
Significant Opportunities to Further Extend Technology and Market Position
23Positioned for the Age of Miniaturization & Complexity
Growth Financial Value
Drivers Execution Creation
$
● A leading critical subsystem ● Delivered on promised ● Strong through-cycle free cash
provider in Semi Market synergies flow provides balance sheet
optionality
● Advanced Markets poised to ● Culture of continuous cost
capitalize on growing need for improvement ● Attractive long-term earnings
laser-based processing growth outlook
● Consistent track record of
● Strategic acquisitions de-levering post acquisitions ● End-market diversity and
accelerate growth and broaden execution underpin strong
capabilities financial returns
24Appendix – GAAP to Non-GAAP Reconciliations
Schedules Reconciling Selected Non-GAAP Financial Measures
(In millions, except per share data) FY15
Revenue $ 813.5
Income from operations $ 156.6
Inventory charge related to exit of product groups (Note 1) 0.5
Sale of previously written-down inventory (Note 2) (2.1)
Restructuring and other (Note 3) 2.1
Amortization of intangible assets 6.8
Non-GAAP Income from Operations $ 163.9
Non-GAAP Operating Margin 20%
Net income $ 122.3
Inventory charge related to exit of product groups (Note 1) 0.5
Sale of previously written-down inventory (Note 2) (2.1)
Restructuring and other (Note 3) 2.1
Amortization of intangible assets 6.8
Release of tax reserves (Note 4) (7.7)
Tax effect of Non-GAAP adjustments (Note 5) (2.8)
Non-GAAP net earnings $ 119.1
Non-GAAP net earnings per diluted share $ 2.22
Weighted average diluted shares outstanding 53.6
26Schedules Reconciling Selected Non-GAAP Financial Measures
YTD
(In millions) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q3'21
Net cash provided by (used in) operating activities $ 20 $ 14 $ (0) $ 66 $ 64 $ 78 $ 119 $ 93 $ 5 $ 163 $ 156 $ 137 $ 76 $ 102 $ 138 $ 180 $ 355 $ 414 $ 245 $ 513 $ 445
Purchases of property, plant and equipment $ 15 $ 8 $ 6 $ 18 $ 10 $ 11 $ 15 $ 13 $ 4 $ 16 $ 16 $ 18 $ 12 $ 13 $ 12 $ 19 $ 31 $ 63 $ 64 $ 85 $ 63
Free cash flow $ 5 $ 6 $ (7) $ 48 $ 54 $ 68 $ 104 $ 79 $ 1 $ 148 $ 140 $ 119 $ 64 $ 89 $ 126 $ 161 $ 324 $ 351 $ 181 $ 428 $ 382
27Notes to the Schedules Reconciling Selected Non-GAAP Financial Measures
Non-GAAP financial measures adjust GAAP financial measures for the items listed in this appendix. These Non-GAAP financial measures should be viewed in addition to, and not as a substitute for,
MKS' reported GAAP results, and may be different from Non-GAAP financial measures used by other companies. In addition, these Non-GAAP financial measures are not based on any comprehensive
set of accounting rules or principles. MKS management believes the presentation of these Non-GAAP financial measures is useful to investors for comparing prior periods and analyzing ongoing
business trends and operating results.
Note 1: We recorded inventory charges related to the exit of certain product groups.
Note 2: We recorded a credit in cost of sales related to the sale of excess and obsolete inventory previously written down to net realizable value.
Note 3: Restructuring and other costs in 2015 included charges related to the outsourcing of an international manufacturing operation and the consolidation of certain foreign manufacturing
locations.
Note 4: We recorded reserve releases related to the settlement of audits and expiration of the statute of limitations.
Note 5: Non-GAAP adjustments are tax effected at the applicable statutory rates resulting in a difference between the GAAP and Non-GAAP tax rates.
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