Ultra Clean Acquires Dynamic Manufacturing Solutions
15 April 2019
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.
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.
This press release contains, or may be deemed to contain, "forward-looking statements" (as defined in the US Private Securities Litigation Reform Act of 1995) which reflect our current views with respect to future events and financial performance. We use words such as "anticipates,", "projection", "forecast", "believes," "plan," "expect," "future,"' "intends," "may," "will," "should," "estimates," "predicts," and similar expressions to identify these forward-looking statements. Forward looking statements included in this press release include, without limitation, statements regarding the acquisition of DMS by UCT, the benefits of the transaction and future results and opportunities for the combined company. Forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: (1) the ability of UCT to successfully integrate DMS's operations and employees; (4) unexpected costs, charges or expenses resulting from the transaction; (5) UCT's ability to successfully grow its or DMS's business; (6) potential adverse reactions or changes to business relationships resulting from the announcement of the transaction; (7) the retention of key employees, customers or suppliers; and (9) legislative, regulatory and economic developments, including changing business conditions in the semiconductor industry markets overall and the economy in general as well. These risks and other factors also include, among others, those identified in "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations'' and elsewhere in UCT's Form 10-K, Forms 10-Q and other reports and statements filed with the Securities and Exchange Commission. Forward-looking statements are made and based on information available to the company on the date of this press release. The company assumes no obligation to update the information in this press release.
Vice President Investor Relations
Dynamic Manufacturing Solutions
Unaudited Reconciliation of Adjusted EBITDA to Net Income
$ in millions (subject to rounding)
Research & Development Expense
Franchise Taxes (income)
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SOURCE Ultra Clean Holdings, Inc.