GlobeNewswire Inc | Nov 9, 2021 06:00AM EST

November 09, 2021

-- Generates third quarter revenue of $383 million, an increase of 18% over the prior-year period, including chemistry organic revenue growth of 6% -- Reports net income of $19 million, an increase of 75% compared to Q3 2020 -- Delivers Adjusted EBITDA of $112 million, a 10% increase over the prior-year period -- Net leverage decreased to 3.1x -- Confirms guidance for full year 2021 organic revenue growth, which is expected to be in the range of 13% to 14%, including full year chemistry organic revenue growth of approximately 10% -- Narrows guidance for full year 2021 Adjusted EBITDA1, which is anticipated to be in the range of $440 million to $450 million.

BERLIN, Germany, Nov. 09, 2021 (GLOBE NEWSWIRE) -- Atotech (NYSE: ATC), a leading specialty chemicals technology company and a market leader in advanced electroplating solutions, today reported financial results for the third quarter of 2021. The company maintained its revenue guidance and narrowed the Adjusted EBITDA guidance range for the full year 2021. Chemistry organic revenue growth, a key performance indicator for the Company, increased 6% over the third quarter of 2020. Chemistry organic revenue growth reflects chemistry revenue growth excluding the impact of foreign exchange translation (FX) and palladium pass-through (palladium).

Management Commentary

Geoff Wild, Atotechs Chief Executive Officer said, We are pleased by our strong third quarter performance. Atotech delivered results fully in-line with our expectations and our nine-months results are at record levels, despite the continuing disruption of global supply chains. The strength of demand and the resilience of our business model enables us to feel comfortable reiterating our full-year guidance.

This quarter, we saw strong demand in our Electronics segment for our semiconductor-related businesses as well as IC-substrates. In our GMF segment, we experienced good demand for construction-related products, partially offset by a slowdown in demand from the automotive OEMs, which was primarily felt towards the end of the quarter. We also observed increasing demand for our sustainability-related products.

As expected, in Q3 we saw freight costs decline from the first half; however, this improvement was counter-balanced by broad-based inflationary pressure, including raw material price increases. As a result, we have implemented price increases to our customers to mitigate those effects and will be rolling those price increases out over the coming months.

Third-quarter 2021 Results

Total revenue was $383 million for the third quarter of 2021, an increase of 18% over the prior-year period. Total organic revenue, which reflects total revenue excluding the impact of FX and palladium, increased 10%. Over the quarter, FX provided a 4% tailwind and palladium increased total revenue by a further 4%. These results were supported by organic growth in chemistry revenue of 6%.

Adjusted EBITDA was $112 million for the third quarter of 2021, a 10% increase over the prior-year period, reflecting the chemistry organic volume growth and FX tailwinds, partially offset by increased costs associated with higher raw-material, freight and energy costs.

Diluted earnings per share was $0.10 for the period ended September 30, 2021, and Adjusted EPS was $0.27.

Adjusted EBITDA margin was 29% for the third quarter of 2021. The decline reflects the margin dilution from higher palladium prices as well as broad-based inflation in raw material costs.

Third-quarter 2021 Segment Highlights

Electronics: Revenue for the third quarter of 2021 in our Electronics segment was $254 million, an increase of 23% over the prior-year period. Total organic revenue grew 13%, consisting of 7% chemistry organic growth and a 60% increase in equipment organic revenue. Palladium pass-through increased revenue by 6% and FX was a 4% tailwind for the quarter.

The Electronics organic revenue increase was driven by continued demand for the Companys advanced semiconductor packaging and IC-substrate solutions. End-market demand for computing applications and automobile electrification continued to gain momentum, but the overall slowdown in the Automobile sector for Electronics was also noticeable. As in prior quarters this year, the global build-out of production capacity for PCBs and semiconductors translated into strong demand for our equipment.

Adjusted EBITDA for our Electronics segment was $84 million for the third quarter of 2021, an 18% increase over the prior-year period, primarily driven by chemistry volume growth. Adjusted EBITDA margin was 33%, a decline of 135 basis points, driven by dilution from higher palladium prices and the product-mix effect from lower gross- margin equipment revenue.

General Metal Finishing: Revenue for the third quarter of 2021 in our GMF segment was $129 million, an increase of 9% over the prior-year period. Total organic GMF revenue increased 5%, consisting of 6% chemistry organic revenue growth and a 29% decline in organic revenue for equipment. Palladium and FX added 1% and 3% to revenue for the quarter, respectively.

Chemistry organic revenue growth was primarily a function of continued recovery from the pandemic-depressed markets of 2020, supported by continued strength in sanitary and construction end-markets as well as sustainability projects. Automotive end-market demand slowed towards the end of the quarter.

Adjusted EBITDA for our GMF segment was $28 million, an 8% decline compared to the prior-year quarter, primarily reflecting broad-based inflation in raw materials.

Full Year 2021 Guidance

Regarding the Companys 2021 outlook, Peter Frauenknecht, Atotechs Chief Financial Officer said, As a result of our solid third quarter, we reiterate our revenue guidance. We continue to expect full year 2021 total organic revenue growth to be in the range of 13% to 14%, including full year organic growth in chemistry revenue of approximately 10%, which excludes the impact of FX and palladium pass-through. Additionally, we now expect full year 2021 adjusted EBITDA to be in the range of $440 million to $450 million, which represents a $2.5 million improvement over our prior guidance, at the mid-point.

MKS Transaction

On July 1, 2021, MKS Instruments, Inc. (MKS), a global provider of technologies that enable advanced processes and improve productivity, and Atotech Limited announced that they had entered into a definitive agreement pursuant to which MKS will acquire Atotech for $16.20 in cash and 0.0552 of a share of MKS common stock for each Atotech common share (the MKS Transaction). The MKS Transaction is to be effected by means of a scheme of arrangement under Article 125 of the Companies (Jersey) Law 1991 (as amended).

The MKS Transaction has been unanimously approved by the MKS and Atotech boards of directors and each of the resolutions put to the Companys shareholders at the court meeting and the general meeting convened in connection with the MKS Transaction, which were each held on November 3, 2021, were passed by the requisite majority of votes. The closing of the MKS Transaction remains subject to the approval of the Royal Court of Jersey, regulatory approvals, and other customary closing conditions, and is expected to close by the fourth quarter of 2021.

Conference Call

In light of the pending transaction with MKS, the Company will not host a conference call today.

Cautionary Statement Regarding Forward-Looking Statements

This communication contains forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as expect, anticipate, intend, plan, believe, seek, see, will, would, target, and similar expressions and variations or negatives of these words.

These forward-looking statements, which are subject to risks, uncertainties, and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies, and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, and such differences could be material. We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances.

More information on potential factors that could affect Atotechs financial results is available in Forward-Looking Statements, the Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of Operations within Atotechs most recent Annual Report on Form 20-F, and in other documents that we have filed with, or furnished to, the U.S. Securities and Exchange Commission (the SEC), and such factors include, but are not limited to: the uncertainty of the magnitude, duration, geographic reach, impact on the global economy of the COVID-19 pandemic, as well as the current and potential travel restrictions, stay-at-home orders, and other economic restrictions implemented to address it; uncertainty, downturns, and changes in our target markets; foreign currency exchange rate fluctuations; reduced market acceptance and inability to keep pace with evolving technology and trends; loss of customers; increases in costs or reductions in the supplies of raw materials that may materially adversely affect our business, financial condition, and results of operations; our ability to provide products and services in light of changing environmental, health and safety, product liability, financial, and other legislation and regulation; our failure to compete successfully in product development; our ability to successfully execute our growth initiatives, business strategies, and operating plans; whether the secular trends we expect to drive growth in our business materialize to the degree we expect them to, or at all; material costs relating to environmental and health-and-safety requirements or liabilities; underfunded defined benefit pension plans; risk that the insurance we maintain may not fully cover all potential exposures; failure to comply with the anti-corruption laws of the United States and various international jurisdictions; tariffs, border adjustment taxes, or other adverse trade restrictions and impacts on our customers value chains; political, economic, and legal uncertainties in China, the Chinese governments control of currency conversion and expatriation of funds, and the Chinese governments policy on foreign investment in China; regulations around the production and use of chemical substances that affect our products; the United Kingdoms withdrawal from the European Union; weak intellectual property rights in jurisdictions outside the United States; intellectual property infringement and product liability claims; our substantial indebtedness; our ability to obtain additional capital on commercially reasonable terms may be limited; risks related to our derivative instruments; our ability to attract, motivate, and retain senior management and qualified employees; increased risks to our global operations including, but not limited to, political instability, acts of terrorism, taxation, and unexpected regulatory and economic sanctions changes, among other things; natural disasters that may materially adversely affect our business, financial condition, and results of operations; the inherently hazardous nature of chemical manufacturing that could result in accidents that disrupt our operations and expose us to losses or liabilities; damage to our brand reputation; Carlyles ability to control our common shares; risks relating to the proposed MKS Transaction, including that such transaction may not be consummated, any statements of belief and any statements of assumptions underlying any of the foregoing; and other factors beyond our control.

Additional Information and Where to Find It

Shareholders may obtain a free copy of the scheme document published by Atotech on September 28, 2021 in relation to the MKS Transaction (the Scheme Document) and other documents Atotech files with the SEC (when available) through the website maintained by the SEC at www.sec.gov. The Scheme Document is also available free of charge on Atotechs investor relations website at investors.atotech.com together with copies of materials it files with, or furnishes to, the SEC.

No Offer or Solicitation

This communication is for information purposes only and is not intended to and does not constitute, or form part of, an offer, invitation or the solicitation of an offer or invitation to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to the proposed MKS Transaction or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law.

The proposed MKS Transaction will be implemented solely pursuant to the scheme of arrangement, subject to the terms and conditions of the definitive agreement between MKS and Atotech, dated July 1, 2021, which contains the full terms and conditions of the proposed MKS Transaction.

Non-IFRS Financial Measures

This communication contains certain non-IFRS financial measures designed to complement the financial information presented in accordance with IFRS because management believes such measures are useful to investors. However, our use of these non-IFRS financial measures may vary from that of others in our industry. Our non-IFRS metrics have limitations as analytical tools, and you should not consider them in isolation or as alternatives to consolidated net income (loss) or other performance measures derived in accordance with IFRS as measures of operating performance, operating cash flows or liquidity. The Company believes that these measures are important and supplement discussions and analysis of its results of operations and enhances an understanding of its operating performance. See the Appendix for a reconciliation of the non-IFRS financial measures.

About Atotech

Atotech is a leading specialty chemicals technology company and a market leader in advanced electroplating solutions. Atotech delivers chemistry, equipment, software, and services for innovative technology applications through an integrated systems-and-solutions approach. Atotech solutions are used in a wide variety of end-markets, including smartphones and other consumer electronics, communications infrastructure, and computing, as well as in numerous industrial and consumer applications such as automotive, heavy machinery, and household appliances.

Atotech, headquartered in Berlin, Germany, is a team of 4,000 experts in over 40 countries generating annual revenues of $1.2 billion (2020). Atotech has manufacturing operations across Europe, the Americas, and Asia. With its well-established innovative strength and industry-leading global TechCenter network, Atotech delivers pioneering solutions combined with unparalleled on-site support for over 9,000 customers worldwide. For more information about Atotech, please visit us at atotech.com.

Financial Statement Tables

ATOTECH LIMITED Income Statement

Three months ended (unaudited)($ in millions), except earnings per share Sept 30, Sept 30, 2021 2020Revenue $ 383.0 $ 325.4 Cost of sales, excluding depreciation and (193.2 ) (142.9 )amortizationDepreciation and amortization (44.0 ) (44.3 )Selling, general and administrative expenses (72.2 ) (71.3 )Research and development expenses (14.2 ) (13.2 )Restructuring benefit (expenses) (0.1 ) (0.1 )Operating profit (loss) 59.3 53.7 Interest expense (14.5 ) (36.2 )Other income (expense), net (2.1 ) 10.8 Income (loss) before income taxes 42.7 28.3 Income tax expense (23.3 ) (17.3 )Consolidated net income (loss) $ 19.4 $ 11.1 Earnings per share Basic earnings (loss) per share 0.10 (0.25 )Diluted earnings (loss) per share 0.10 (0.25 )

Three months ended (unaudited)($ in millions) Sept 30, 2021 Sept 30, 2020Consolidated net income (loss) $ 19.4 $ 11.1 Other comprehensive income (loss) Actuarial gains and losses 1.5 (4.7 )Tax effect (0.5 ) 1.4 Items not potentially reclassifiable to statement of 1.1 (3.3 )incomeCurrency translation adjustment (35.2 ) 65.5 Hedge reserve (0.1 ) (3.6 )Thereof: Income (cost) of Hedging (OCI II) 0.3 3.7 Items potentially reclassifiable to statement of (35.3 ) 61.9 income (loss), net of taxTotal other comprehensive income (loss), net amount $ ) $ 58.7 (34.3Comprehensive loss $ ( ) $ 69.7 14.9

ATOTECH LIMITED Condensed Consolidated Balance Sheets

As of (unaudited)($ in millions) Sept 30, 2021 Dec. 31, 2020Assets Non-current assets Property, plant and equipment $ 330.5 $ 359.4Intangible assets 1,369.2 1,471.0Goodwill 786.6 804.1Right-of-use assets 87.4 104.1Other financial assets 5.3 70.3Other non-financial assets 3.1 2.7Total non-current assets 2,582.2 2,811.6Current assets Inventories 182.5 145.4Trade receivables 272.4 262.0Other financial assets 17.3 24.9Other non-financial assets 31.8 24.1Tax assets 49.4 46.4Cash and cash equivalents 286.4 320.1Total current assets 839.8 822.9Total assets $ 3,422.0 $ 3,634.5Liabilities & shareholders? equity Shareholders? equity Common shares and preferred shares 19.5 102.1Paid-in surplus and retained earnings 795.0 261.6Currency translation adjustment and other 57.0 120.0reservesTotal shareholders? equity 871.5 483.7Non-current liabilities Borrowings $ 1,548.6 $ 2,065.7Deferred tax liabilities 313.4 340.8Employee benefits 155.7 176.2Provisions 12.8 13.2Lease liabilities 54.6 67.7Other financial liabilities 0.0 1.5Total non-current liabilities 2,085.1 2,665.1Current liabilities Borrowings 10.7 0.5Trade payables 225.5 221.0Tax liabilities 84.6 99.2Lease liabilities 13.0 13.8Other financial liabilities 17.7 38.5Other non-financial liabilities 99.8 89.7Provisions 14.1 23.0Total current liabilities 465.5 485.8Total liabilities & shareholders? equity $ $ 3,634.5 3,422.0

ATOTECH LIMITEDConsolidated Statement of Cash Flows

Nine months ended (unaudited)($ in millions) Sept 30, Sept 30, 2021 2020Operating activities Consolidated net income (loss) $ (22.5 ) $ (311.8 )Adjustments to reconcile net income (loss) to cash provided by operating activities:Depreciation and amortization 132.4 404.9 Income taxes and changes in non-current provisions 51.5 35.3 (Gains)/losses on disposals of assets (0.3 ) 0.8 Net (gain)/loss on financial instruments at fair value 40.3 (2.0 )Accrued financial interest costs 58.6 95.3 Amortization of deferred financing cost, including 56.2 12.8 original issuance discountsInterest paid (56.5 ) (95.4 )Taxes paid (95.4 ) (48.8 )Other (10.7 ) (0.1 )(Increase)/decrease in inventories (42.5 ) (15.3 )(Increase)/decrease in trade receivables (13.5 ) 0.7 Increase/(decrease) in trade payables 15.0 (14.6 )Changes in other assets and liabilities (12.8 ) 1.7 Cash flow provided by operating activities 99.6 63.4 Investing activities Acquisition of subsidiaries, net of cash acquired ? (2.7 )Intangible assets and property, plant and equipment (35.1 ) (38.4 )additionsIncrease in non-current loans (0.1 ) ? Proceeds from disposals of intangible assets and 4.4 0.1 property, plant and equipmentRepayments of non-current loans 0.3 0.4 Cash flow used in investing activities (30.5 ) (40.6 )Financing activities Issuance of shares 473.4 ? Issuance of non-current debt 130.1 175.0 Repayment of non-current debt (682.3 ) (187.0 )Changes in current borrowings and bank debt ? (1.6 )Changes in current financial assets and liabilities (1.2 ) (0.4 )Payment of lease liabilities (11.6 ) (11.3 )Payment of deferred finance costs ? (9.2 )Cash flow used in financing activities (91.6 ) (34.6 )Net decrease in cash and cash equivalents (22.4 ) (11.7 )Effect of exchange rates (11.2 ) 9.4 Cash and cash equivalents at the beginning of the period 320.0 302.7 Cash and cash equivalents at the end of the period $ 286.4 $ 300.4

ATOTECH LIMITEDRevenue Data

Three months ended (unaudited)($ in millions) Sept 30, 2021 Sept 30, 2020Type of goods or service Chemistry revenue $ 339.7 $ 296.4Equipment revenue 43.3 28.9Total revenue from contracts with customers 383.0 325.4Geographical market Asia 285.6 235.7Europe 67.6 62.0Americas 29.9 27.6Total revenue from contracts with customers $ 383.0 $ 325.4

ATOTECH LIMITEDSegment Data

Three months ended (unaudited) Sept 30, 2021 Sept 30, 2020($ in millions) EL GMF Total EL GMF TotalRevenue 254.4 128.6 $ 383.0 207.5 117.9 $ 325.4thereof Chemistry revenue 214.0 125.7 339.7 182.6 113.8 296.4thereof Equipment revenue 40.4 3.0 43.3 24.9 4.0 28.9Segment Adjusted EBITDA 84.2 27.7 112.0 71.5 30.0 101.5



ATOTECH LIMITED Reconciliation of Adjusted EBITDA to Consolidated Net Income (Loss)

Three months ended (unaudited)($ in millions) Sept30, Sept30, 2021 2020Consolidated net income (loss) $ 19.4 $ 11.1 Interest expense, net 14.4 34.3 Income taxes 23.3 17.3 Depreciation and amortization (excluding impairment 42.8 41.7 charges)EBITDA $ 99.9 $ 104.3 Non-cash adjustments^(a) 6.8 (7.3 )Foreign exchange loss^(b) (3.8 ) 0.9 Restructuring^(c) 0.1 0.1 Transaction related costs^(d) 8.3 2.7 Management fee^(e) 0.5 0.5 COVID-19 adjustment^(f) 0.2 0.3 Adjusted EBITDA $ 112.0 $ 101.5 thereof EL Segment Adjusted EBITDA $ 84.2 $ 71.5 thereof GMF Segment Adjusted EBITDA $ 27.7 $ 30.0

(a) Eliminates the non-cash impact of (1) share-based compensation, (2) losses on the sale of fixed assets, (3) impairment charges and (4) mark-to-market adjustments related to our foreign currency derivatives entered into in connection with certain redenomination transactions not linked to underlying individual transactions and bifurcated embedded derivatives related to certain redemption features of the 6.250% Senior Notes due 2025 (the Opco Notes) and 8.75%/9.50% Senior PIK Toggle Notes (the Holdco Notes), and (5) valuation adjustments from the revaluation of the earn-out liability initially recognized in 2019. The dollar value of these non-cash adjustments for each period presented above is set forth below:

Three months ended (unaudited)($ in millions) Sept30, 2021 Sept 30, 2020Share based compensation $ 3.6 $ 0.1 Losses on the sale of fixed assets (0.8 ) 0.7 Impairment charges 1.2 2.5 Mark-to-market adjustments 2.7 (10.6 )Valuation adjustments 0.0 (0.0 )Non-cash adjustments $ 6.8 $ (7.3 )

(b) Eliminates net foreign currency transactional gains and losses on balance sheet items. (c) Eliminates charges resulting from restructuring activities principally from the Companys cost-reduction efforts. (d) Reflects an adjustment to eliminate (1) IPO-related costs linked to the existing equity, (2) professional fees paid to third-party advisors in connection with the implementation of strategic initiatives and (3) for the three and nine months ended September 30, 2021 the increased expenses of the D&O insurance in connection with the IPO.(e) Reflects an adjustment to eliminate fees paid to Carlyle. The consulting agreement pursuant to which management fees are paid to Carlyle will terminate on the earlier of (i) the third anniversary of the IPO and (ii) the date upon which Carlyle ceases to own more than ten percent of the outstanding voting securities of the Company. Management does not view these fees as indicative of the Companys operational performance and the removal of these fees from Adjusted EBITDA is consistent with the calculation of similar measures under our old senior secured credit facilities and our new credit agreement as well as the indentures that previously governed the Holdco Notes and Opco Notes. For a description of the consulting agreement with Carlyle, see Item 7.B. Major Shareholders and Related Party TransactionsRelated Party Transactions in our Annual Report on Form 20-F. (f) Eliminates charges in connection with masks, sanitizers, and other COVID-19 related expenses at certain plant and office locations.

ATOTECH LIMITED Chemistry Revenue Growth Reconciliation

Three months ended Sept 30, 2021 (unaudited) Reported Impact of Palladium Organic Revenue Growth Currency Pass-Through Growth Electronics 17 % (4 %) (6 %) 7 %General Metal Finishing 10 % (3 %) (1 %) 6 %Total 15 % (4 %) (4 %) 6 %



1 Adjusted EBITDA is a non-IFRS financial measure. Adjusted EBITDA should be considered in addition to, but not as a substitute for, the information provided in accordance with IFRS. A reconciliation for adjusted EBITDA to the most directly comparable IFRS financial measure is provided in the Reconciliation of Adjusted EBITDA to Consolidated Net Income (Loss) table. We are not able to forecast Consolidated net income (loss) on a forward-looking basis without unreasonable efforts due to the high variability and difficulty in predicting certain items that affect Consolidated net income (loss), including, but not limited to, Income taxes, Interest expense, and Foreign exchange income (loss).

Contacts:

Sarah Spray+1 803 504 4731sarah.spray@atotech.com

Susanne Richter+49 30 349 85 418press@atotech.com