Atotech Reports Q2 2021 Results, Raises 2021 Full Year Guidance

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Atotech, a leading specialty chemicals technology company and a market leader in advanced electroplating solutions, reported record financial results for the second quarter of 2021 and raised its revenue and Adjusted EBITDA guidance for the full year 2021. Chemistry organic revenue growth, a key performance indicator for the Company, increased 24% over the second 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, Atotech’s Chief Executive Officer said, “We are very satisfied by our outstanding second quarter performance. As anticipated, our exposure to secular growth trends and the continuing economic recovery from the Covid-19 pandemic have led to a strong recovery of our revenues. Our robust business model, which combines a lean cost structure and strong operating leverage, allowed us to translate our excellent revenue growth into record Adjusted EBITDA and strong Free Cash Flow.”

“The supportive trends we have witnessed since the beginning of this year, including the build-out of 5G smartphone production and demand for new solutions in advanced semiconductor packaging, continue to build momentum. Atotech’s comprehensive systems and solutions approach, combining leading R&D capabilities and global reach allows us to leverage that demand.”

“As expected, in Q2 we saw higher freight costs from the disruption of global supply chains. However, over the course of the quarter, these began to improve and we feel confident in our ability to contain these costs in the second half of 2021.”

Second-quarter 2021 Results

Total revenue was $377 million for the second quarter of 2021, an increase of 44% over the prior year period. Total organic revenue, which reflects total revenue excluding the impact of FX and palladium, increased 32%. FX was a 9% tailwind and palladium increased total revenue by 3% for the quarter. These strong quarterly results were driven by organic growth in chemistry revenue of 24%, reflecting double-digit increases in both the Electronics (“EL”) and General Metal Finishing (“GMF”) segments.

Adjusted EBITDA was $118 million for the second quarter of 2021, a 63% increase over the prior year period, reflecting strong chemistry organic volume growth, stable pricing, and FX tailwinds, partially offset by increased costs associated with supply chain inefficiencies.

Diluted earnings per share was $0.15 for the period ended June 30, 2021, and Adjusted EPS was $0.29.

Adjusted EBITDA margin was 31% for the second quarter of 2021, an increase of 370 basis points. The improvement reflects the revenue recovery from the second quarter of 2020, the most pandemic-affected quarter last year and operating leverage on chemistry organic revenue, partially offset by the impact of palladium pass-through, the product mix of chemistry versus equipment, and supply chain inefficiencies.

Second-quarter 2021 Segment Highlights

Electronics: Revenue for the second quarter of 2021 in our Electronics segment was $248 million, an increase of 33% over the prior year period. Total organic revenue grew 21%, consisting of 9% chemistry organic growth and a 115% increase in equipment organic revenue. Palladium pass-through increased revenue by 4% and FX was an 8% tailwind for the quarter.

The Electronics organic revenue increase was driven by sustained high demand for the Company’s advanced semiconductor packaging and IC substrate solutions. End-market demand for computing applications and widespread 5G handset adoption continued to gain momentum in the second quarter. Similarly, the demand for our equipment continued to accelerate as PCB and semiconductor manufacturers worldwide increased their production capacity and upgraded their technology.

Adjusted EBITDA for our Electronics segment was $85 million for the second quarter of 2021, a 36% increase over the prior year period, primarily driven by strong chemistry volume growth. Adjusted EBITDA margin increased by 70 basis points to 34.3%, reflecting operating leverage on chemistry organic growth, offset by a product-mix effect from lower gross margin equipment revenues.

Full Year 2021 Guidance

Regarding the Company’s 2021 outlook, Peter Frauenknecht, Atotech’s Chief Financial Officer said, “As a result of our very strong first half and our improved outlook for the second half of the year, we are raising our revenue and Adjusted EBITDA guidance. We now 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 $435 million to $450 million, which represents a $18 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 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 transaction was unanimously approved by the MKS and Atotech boards of directors and is subject to Atotech shareholder approval, 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.