Ultra Clean Acquires Dynamic Manufacturing Solutions

HAYWARD, Calif., April 15, 2019 /PRNewswire/ -- Ultra Clean Holdings, Inc.("UCT") (Nasdaq: UCTT), today announced that it has purchased substantially all of the assets of Dynamic Manufacturing Solutions, LLC ("DMS"), a semiconductor weldment and solutions provider.

Based in Austin, Texas, adjacent to UCT's existing weldment facility, DMS offers a complete range of weldment solutions, from build to print outsourcing, to turnkey design and product realization. DMS provides world class contract manufacturing in welding solutions, UHP weld assemblies, gas and chemical delivery solutions, process and facility modules, engineering services, and electrical and mechanical design and assembly solutions primarily to the semiconductor industry.

"The acquisition of DMS further enhances UCT's strong position in the gas delivery market," said Jim Scholhamer, CEO. "DMS has a history of providing top quality fabrication of ultra-high purity weldments, which is highly complementary to UCT's existing offerings and operations. This transaction should allow us to leverage economies of scale, strengthen our manufacturing capabilities and enhance our competitive position. We expect the acquisition to improve UCT's profitability and be accretive to earnings."

"The combination of DMS and UCT will result in an even stronger presence in the weldment segment of the WFE industry and significantly strengthens our ability to provide high-value solutions for our customers," said Robb Misso, Co-Founder & CEO of DMS. "In my new position as Vice President, Global Weldments for UCT, I am excited at the prospect of capitalizing on the many opportunities to grow our combined weldment business on a global scale."

Under the terms of the asset purchase Agreement, UCT paid $30.0 million in cash for DMS, subject to certain post-closing adjustments as provided in the acquisition Agreement. UCT may pay up to $12.5 million in additional cash earn-out payments to the former owners of DMS if the combined weldment business achieves certain gross profit and gross margin targets for the twelve months ending June 26, 2020. In 2018, DMS generated revenue of $48.4 million, net income of $2.1 million and Adjusted EBITDA of $5.6 million. This equates to a price multiple of 5.4X 2018 DMS Adjusted EBITDA, not including the potential earn-out.

Needham & Company, LLC served as financial advisor to UCT in the acquisition and Davis Polk & Wardwell LLP served as legal advisor to UCT. 

Guidance

We expect this acquisition to generate over $5 million in Adjusted EBITDA in 2019 despite declines in revenue reflective of overall industry demand. This transaction is expected to be immediately accretive to UCT's net income and should add up to $0.02 to UCT's GAAP EPS and $0.05 to $0.07 to UCT's non-GAAP EPS in 2019. UCT expects to incur one-time transaction costs of approximately $1 million.

About Ultra Clean Holdings, Inc.

Ultra Clean Holdings, Inc. is a leading developer and supplier of critical subsystems, ultra-high purity cleaning and analytical services primarily for the semiconductor industry. Ultra Clean offers its customers an integrated outsourced solution for major subassemblies, improved design-to-delivery cycle times, design for manufacturability, prototyping and component manufacturing, and tool chamber parts cleaning and coating, as well as microcontamination analytical services. Ultra Clean is headquartered in Hayward, California. Additional information is available at www.uct.com.

Non-GAAP Financial Measures

This release and the accompanying table include a discussion of DMS's Adjusted EBITDA, which is a non-GAAP financial measure that is provided as a complement to results provided in accordance with accounting principles generally accepted in the United States of America ("GAAP"). DMS defines "Adjusted EBITDA" as net income (loss) plus research & development expense, depreciation expense, interest expense, provision for (benefit from) franchise taxes, and other one-time expenses. In addition, the definition of Adjusted EBITDA used in this press release may not be comparable to the definitions as reported by other companies. We believe DMS's Adjusted EBITDA is relevant and useful information because it provides UCT and investors with additional measurements to analyze DMS's past operating performance and enterprise value. A reconciliation of DMS's Adjusted EBITDA to net income is provided in the accompanying table. Non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. A reconciliation of our guidance for DMS's contribution to UCT's non-GAAP net income per share for 2019 is not available due to the uncertainty of the timing of the one-time transaction costs and other items associated with the acquisition and cannot be reasonably predicted or determined at this time. As a result, such reconciliation is not available without unreasonable efforts and we are unable to determine the probable significance of the unavailable information.

Contact:

Rhonda Bennetto

Bennetto

250-307-9030

Based in Austin, Texas, adjacent to UCT's existing weldment facility, DMS offers a complete range of weldment solutions, from build to print outsourcing, to turnkey design and product realization. DMS provides world class contract manufacturing in welding solutions, UHP weld assemblies, gas and chemical delivery solutions, process and facility modules, engineering services, and electrical and mechanical design and assembly solutions primarily to the semiconductor industry.

"The acquisition of DMS further enhances UCT's strong position in the gas delivery market," said Jim Scholhamer, CEO. "DMS has a history of providing top quality fabrication of ultra-high purity weldments, which is highly complementary to UCT's existing offerings and operations. This transaction should allow us to leverage economies of scale, strengthen our manufacturing capabilities and enhance our competitive position. We expect the acquisition to improve UCT's profitability and be accretive to earnings."

"The combination of DMS and UCT will result in an even stronger presence in the weldment segment of the WFE industry and significantly strengthens our ability to provide high-value solutions for our customers," said Robb Misso, Co-Founder & CEO of DMS. "In my new position as Vice President, Global Weldments for UCT, I am excited at the prospect of capitalizing on the many opportunities to grow our combined weldment business on a global scale."

Under the terms of the asset purchase Agreement, UCT paid $30.0 million in cash for DMS, subject to certain post-closing adjustments as provided in the acquisition Agreement. UCT may pay up to $12.5 million in additional cash earn-out payments to the former owners of DMS if the combined weldment business achieves certain gross profit and gross margin targets for the twelve months ending June 26, 2020. In 2018, DMS generated revenue of $48.4 million, net income of $2.1 million and Adjusted EBITDA of $5.6 million. This equates to a price multiple of 5.4X 2018 DMS Adjusted EBITDA, not including the potential earn-out.

Needham & Company, LLC served as financial advisor to UCT in the acquisition and Davis Polk & Wardwell LLP served as legal advisor to UCT. 

Guidance

We expect this acquisition to generate over $5 million in Adjusted EBITDA in 2019 despite declines in revenue reflective of overall industry demand. This transaction is expected to be immediately accretive to UCT's net income and should add up to $0.02 to UCT's GAAP EPS and $0.05 to $0.07 to UCT's non-GAAP EPS in 2019. UCT expects to incur one-time transaction costs of approximately $1 million.

About Ultra Clean Holdings, Inc.

Ultra Clean Holdings, Inc. is a leading developer and supplier of critical subsystems, ultra-high purity cleaning and analytical services primarily for the semiconductor industry. Ultra Clean offers its customers an integrated outsourced solution for major subassemblies, improved design-to-delivery cycle times, design for manufacturability, prototyping and component manufacturing, and tool chamber parts cleaning and coating, as well as microcontamination analytical services. Ultra Clean is headquartered in Hayward, California. Additional information is available at www.uct.com.

Non-GAAP Financial Measures

This release and the accompanying table include a discussion of DMS's Adjusted EBITDA, which is a non-GAAP financial measure that is provided as a complement to results provided in accordance with accounting principles generally accepted in the United States of America ("GAAP"). DMS defines "Adjusted EBITDA" as net income (loss) plus research & development expense, depreciation expense, interest expense, provision for (benefit from) franchise taxes, and other one-time expenses. In addition, the definition of Adjusted EBITDA used in this press release may not be comparable to the definitions as reported by other companies. We believe DMS's Adjusted EBITDA is relevant and useful information because it provides UCT and investors with additional measurements to analyze DMS's past operating performance and enterprise value. A reconciliation of DMS's Adjusted EBITDA to net income is provided in the accompanying table. Non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. A reconciliation of our guidance for DMS's contribution to UCT's non-GAAP net income per share for 2019 is not available due to the uncertainty of the timing of the one-time transaction costs and other items associated with the acquisition and cannot be reasonably predicted or determined at this time. As a result, such reconciliation is not available without unreasonable efforts and we are unable to determine the probable significance of the unavailable information.

Contact:

Rhonda Bennetto

Vice President Investor Relations

250-307-9030

Web Site: http://www.uct.com

Dynamic Manufacturing Solutions

Unaudited Reconciliation of Adjusted EBITDA to Net Income

$ in millions (subject to rounding)

                                                                                             FY'18

Net Income                                                                          $   2.1

Research & Development Expense                                         1.2

Depreciation                                                                              1.5

Interest Expense                                                                        0.3

Franchise Taxes (income)                                                         (0.0)

One-time expenses                                                                    0.5

Adjusted EBITDA                                                                     $  5.6


 

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