DISCO CORPORATION All rights reserved
Apr. 23, 2020
FY2019 Financial Results and FY2020 Forecast
DISCLAIMER Statements in this PowerPoint with respect to DISCO's current strategies, plans, estimates, and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of DISCO. These statements are based on management's assumptions and beliefs in light of the information currently available to it and therefore you should not place undue reliance on them. DISCO cautions you that a number of important factors could cause actual results to differ materially from those discussed in the forward-looking statements, and you should not make decision on your investment thoroughly based on these statements. Such factors include, but not limited to, (i) general economic conditions and levels of demand in DISCO's markets; (ii) developments in technology and resulting changes in semiconductor and/or electronic component manufacturing process; (iii) levels of capital investment for manufacturing semiconductors and/or electronic components; (iv) expansions of the area for products and technologies using semiconductors and/or electronic components and its expanding speed; (v) DISCO's ability to continue to offer products and services corresponding to developments of new semiconductors and/or electronic components and new technologies for manufacturing them; (vi) exchange rates, particularly between the yen, the U.S. dollar, and the euro, and other currencies.
DISCO CORPORATION All rights reserved
Change in Accounting Policy
2
Due to change in accounting policy, starting from FY2019, the timing of
revenue recognition has been changed to Inspection/Acceptance Basis.
BeforeManufacture/OrderInquiry Shipment
Sale
Inspection/Acceptance
After Manufacture/OrderInquiry Shipment
Sale
Inspection/Acceptance
DISCO CORPORATION All rights reserved
FY2019 Highlights
3
Net sales GP margin Operating income Ordinary income margin
141.0 B
Third highest
CAPEX
60.1 %
R&D Total assets Ordinary income margin averaged over four-year
period
FCF ROE EPS Annual dividend
36.4 25.8%
25.9 15.9 274.3
5.6 769JPY438JPY
27.4%
12.7 %Per share
New record High level High levelPrevious year: JPY 147.5 B Previous year: 58.9% Previous year: JPY 38.6 B Previous year: 26.2%
Previous year: JPY 15.3 B Previous year: JPY 15.4 B Previous year: JPY 258.1 B Previous year: 26.7%
Previous year: JPY 12.7 B Previous year: 13.6% Previous year: JPY 802 Previous year: JPY 322
JPY BJPY
BJPY BJPY BJPY
BJPYNew Record
DISCO CORPORATION All rights reserved4
FY2019 4Q Earnings Results (Consolidated)
FY2019 FY2019 FY2018
Millions of Yen 4Q 3Q Amount (%) 4Q Amount (%)
Net Sales 38,784 34,435 4,350 12.6% 33,186 - -
Gross Profit 23,045 21,036 2,009 9.5% 19,700 - -
Gross Profit Margin 59.4% 61.1% -1.7p - 59.4% - -
SG&A 12,263 12,598 -335 -2.7% 11,975 - -
Operating Income 10,781 8,438 2,344 27.8% 7,725 - -
Ordinary Income 11,296 8,492 2,804 33.0% 8,008 - -
Ordinary Income Margin 29.1% 24.7% 4.4p - 24.1% - -
Income before income taxes
and minority interests11,268 8,734 2,534 29.0% 7,920 - -
Net Income 8,275 6,333 1,942 30.7% 6,236 - -
QoQ YoY
Inspection/Acceptance basis
Sales: QoQ Increased drastically for precision processing equipment and steady for precision processing tools.GP margin: QoQ Declined due to change in product composition.SG&A: QoQ Declined slightly, but R&D expenses remain at a high level.
DISCO CORPORATION All rights reserved
FY2019 Earnings Results
5
Note: Due to the change in the accounting policy, a comparison has not been compiled.
FY2019 FY2018
Millions of Yen Full Year Full Year Amount (%)
Net Sales 141,083 147,500 - -
Gross Profit 84,792 86,910 - -
Gross Profit Margin 60.1% 58.9% - -
SG&A 48,341 48,264 - -
Operating Income 36,451 38,645 - -
Ordinary Income 38,314 38,974 - -
Ordinary Income Margin 27.2% 26.4% - -
Income before income taxes
and minority interests38,277 38,256 - -
Net Income 27,653 28,824 - -
YoY
DISCO CORPORATION All rights reserved
Reference: Quarterly Results Overview Based on Previous Accounting Policy
6
Reference information; According to previous accounting policy, shipment basis.
Shipment Basis
FY2019 FY2019 FY2018
Millions of Yen 4Q 3Q Amount (%) 4Q Amount (%)
Net Sales 39,856 35,194 4,662 13.2% 33,186 6,670 20.1%
Gross Profit 23,495 21,812 1,683 7.7% 19,700 3,794 19.3%
Gross Profit Margin 58.9% 62.0% -3.1p - 59.4% -0.5p -
SG&A 12,278 12,610 -331 -2.6% 11,975 303 2.5%
Operating Income 11,216 9,201 2,015 21.9% 7,725 3,491 45.2%
Ordinary Income 11,569 9,152 2,416 26.4% 8,008 3,561 44.5%
Ordinary Income Margin 29.0% 26.0% 3.0p - 24.1% 4.9p -
QoQ YoY
Sales: YoY Increased drastically for equipment and consumables.GP margin: YoY Declined due to change in product composition.SG&A: YoY Remains at a high level, centered on R&D expenses.
DISCO CORPORATION All rights reserved7
Reference: Full Year Results Overview Based on Previous Accounting Policy
Shipment Basis
Sales: YoY Decrease in blade dicing saw shipments due to decline in customer willingness to invest.GP Margin: YoY Increased due to change in product composition.SG&A: YoY Remains at a high level, centered on R&D expenses.
FY2019 FY2018
Millions of Yen Full Year Full Year Amount (%)
Net Sales 139,220 147,500 -8,280 -5.6%
Gross Profit 83,791 86,910 -3,119 -3.6%
Gross Profit Margin 60.2% 58.9% 1.3p -
SG&A 48,307 48,264 43 0.1%
Operating Income 35,483 38,645 -3,162 -8.2%
Ordinary Income 36,701 38,974 -2,273 -5.8%
Ordinary Income Margin 26.4% 26.4% 0.0p -
YoY
DISCO CORPORATION All rights reserved8
Due to the change in accounting policy, the timing of revenue recognition has been changed to Inspection/Acceptance Basis.
Quarterly Consolidated Financial Results
0%
10%
20%
30%
40%
50%
0
100
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500
FY10
1Q
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3Q
4Q
FY11
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4Q
FY12
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FY13
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FY14
1Q
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FY15
1Q
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FY16
1Q
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FY17
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FY18
1Q
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3Q
4Q
FY19
1Q
2Q
3Q
4Q
Net Sales Operating Income Ordinary Income Margin
100 million yen (Oku yen)
Performance remains steady. Profit rates continue to be over 20%.(FY19_4Q Net sales: 27.8%, Ordinary income: 29.1% Operating income: 21.3%)
DISCO CORPORATION All rights reserved9
Accounting policy change
Quarterly Consolidated Sales Breakdown by Product
Note: Composition percentages are listed as additional information on the DISCO website.
0
100
200
300
400
500
FY15
1Q
2Q
3Q
4Q
FY16
1Q
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4Q
FY17
1Q
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4Q
FY18
1Q
2Q
3Q
4Q
FY19
_1Q
2Q
3Q
4Q
Industrial Products
Others
Maintenance Parts
Consumables
Precision Processing
Equipment
100 mill ion yen (Oku yen)
DISCO CORPORATION All rights reserved10
Consolidated Sales Breakdown by RegionAccounting policy change
0
100
200
300
400
500
FY15
_1Q
2Q
3Q
4Q
FY16
_1Q
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FY17
_1Q
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FY18
_1Q
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4Q
FY19
_1Q
2Q
3Q
4Q
North America
Europe
Japan
Asia
100 million yen (Oku yen)
FY19_4Q Overseas sales ratio: 84.8%
DISCO CORPORATION All rights reserved11
Quarterly Consolidated Shipment/Orders
0
100
200
300
400
500
600
FY10
1Q
2Q
3Q
4Q
FY11
1Q
2Q
3Q
4Q
FY12
1Q
2Q
3Q
4Q
FY13
1Q
2Q
3Q
4Q
FY14
1Q
2Q
3Q
4Q
FY15
1Q
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3Q
4Q
FY16
1Q
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FY17
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FY18
1Q
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3Q
4Q
FY19
1Q
2Q
3Q
4Q
Order Backlog from shipment basis Shipment Figures Order
100 million yen (Oku yen)
Shipment Basis
FY19_4Q Orders received: Approx. JPY 47.3 B, Shipments: Approx. JPY 39.8 B,Order backlog: JPY 27.0 BAlthough there have been many inquiries, due to leadtime adjustments caused by COVID-19, an order backlog has accumulated.
DISCO CORPORATION All rights reserved
FY15
_1Q
2Q
3Q
4Q
FY16
_1Q
2Q
3Q
4Q
FY17
_1Q
2Q
3Q
4Q
FY18
_1Q
2Q
3Q
4Q
FY19
_1Q
2Q
3Q
4Q
Non-semiconductors
Other semiconductors
Optical
semiconductors
Package
IC
12
Non-consolidated Sales by Usage of Dicing Saws
Shipment Basis
QoQ: Increased due to increase in other semiconductors and optical semiconductors.YoY: Continued recovery centered on semiconductors, in contrast to the same time last year, during which there was deceleration.
DISCO CORPORATION All rights reserved
FY15
_1Q
2Q
3Q
4Q
FY16
_1Q
2Q
3Q
4Q
FY17
_1Q
2Q
3Q
4Q
FY18
_1Q
2Q
3Q
4Q
FY19
_1Q
2Q
3Q
4Q
Non-semiconductors
Wafer manufacturing
Other semiconductors
Optical semiconductors
IC
13
Non-consolidated Sales by Usage of Grinders
Shipment Basis
QoQ: Continued high-level investment in a wide range of utilizations, centered on memory and other semiconductors.YoY: Increased significantly in comparison to the same time last year, due to an increase in a wide range of utilizations other than IC.
DISCO CORPORATION All rights reserved
FY15
_1Q
2Q
3Q
4Q
FY16
_1Q
2Q
3Q
4Q
FY17
_1Q
2Q
3Q
4Q
FY18
_1Q
2Q
3Q
4Q
FY19
_1Q
2Q
3Q
4Q
14
Consolidated Consumable* Sales
No decline in demand was observed in Q4 (Jan. – Mar.), which typically experiences seasonal decline, and QoQ increased.
DISCO CORPORATION All rights reserved15
Balance Sheet (Summary)
FY2019 FY2019
Millions of Yen 4Q 3Q Amount
Cash and deposits 87,909 84,862 3,047
Notes and account receivable 25,614 23,570 2,044
Inventories 50,369 46,842 3,528
Total current assets 169,990 160,197 9,793
Property, plant and equipment 93,415 88,890 4,525
Total noncurrent assets 104,334 98,680 5,654
Total assets 274,325 258,878 15,447
Current liabilities 46,905 39,686 7,219
Noncurrent liabilities 529 497 33
Total liabilities 47,435 40,183 7,252
Total net assets 226,890 218,694 8,196
Total liabilities and net assets 274,325 258,878 15,447
Equity Ratio 82.2% 84.0% -1.8p
Total assets: Increase in inventory due to busy period at the factories. Increase in tangible fixed assets with construction of new building at the factories
Liabilities: Increase in current liabilities, such as accounts payable and income tax payable.Net assets: Increase in earned surplus.
DISCO CORPORATION All rights reserved16
Cash Flow (Summary) FY2019 FY2018
Millions of Yen Full Year Full Year Amount
Net cash provided by (used in) operating
activities31,299 27,311 3,988
Income before income taxes and minority
interests38,277 38,256 21
Depreciation and amortization 6,612 6,095 517
Decrease (increase) in notes and
accounts receivable-trade-5,202 8,695 -13,899
Decrease (increase) in inventories -33 -3,744 3,711
Increase (decrease) in notes and
accounts payable-trade-466 -3,785 3,319
Income taxes (paid) refund -5,425 -17,204 11,779
Others -2,461 -1,001 -1,461
Net cash provided by (used in) investing
activities-25,660 -14,513 -11,147
Purchase of property, plant and
equipment-24,868 -14,436 -10,432
Free cash flow 5,639 12,798 -7,159
Net cash provided by (used in) financing
activities-10,580 -12,982 2,403
Cash dividends paid -10,741 -13,001 2,259
Net change in of cash and cash equivalents -5,568 -193 -5,375
Cash and cash equivalents at beginning of
period85,351 85,545 -194
Cash and cash equivalents at end of period 79,782 85,351 -5,569
•Sales CF: Approx. JPY 31.2 B (increase)
•Investment CF: Approx. JPY 25.6 B (decrease)
•Financial CF: Approx. JPY 10.5 B (decrease)
•Free cash flowApprox. JPY 5.6 B (increase)
Cash balance at end of March: Approx. 79.7 B
Increase in assets mainly due to profit before tax
Mainly expenses related to the construction of new buildings at the factories
Chino factory: Approx. JPY 10.3 BKuwabata factory: Approx. JPY 4.4 B
Mainly payment of dividends
DISCO CORPORATION All rights reserved17
Dividend Policy and Dividend Payments
Dividend Policy• Decisions concerning the distribution of surpluses are made at the general shareholders meetings, in the case of final dividends, and by the Board of Directors, in the case of interim
dividends. • 1. Adopting a performance-linked dividend policy and aiming at giving clearer priority to shareholder returns, our target dividend payout ratio is 25% of the consolidated half-yearly net income.
There will be interim and final dividends, each of which will be equivalent to 25% of the half-yearly consolidated net income.• 2. Irrespective of the level of income, a reliable dividend of ¥10 per half-year will be maintained. This means that the minimum yearly dividend will be ¥20.• 3. Unless there is a loss, if the year-end balance of cash and deposits after payment of dividends and income taxes is greater than the projected funding requirements for the acquisition of
technology resources, such as through patent purchases and investments in venture businesses, facility expansion, the retirement of interest-bearing debt, and other purposes, one-third of that surplus will be added to dividends.
[Remarks]The ¥20 payout stipulated in our stable dividend policy may be reviewed if there are consolidated net losses for three consecutive years.
114 91
87 102
121
245
0
100
200
300
400
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
1H Dividend Per Share 2H Dividend Per Share Additional Dividends
(Yen)
Financial performance for FY19 – Half-year: JPY 91, Year-end: JPY 347 (Additional dividend: JPY 245) Total JPY 438
Financial performance for FY18 – Half-year: JPY 114, Year-end: JPY 208 (Additional dividend: JPY 121) Total JPY 322
DISCO CORPORATION All rights reserved
Reference: Calculation of Surplus Distribution as Additional Dividends
18
Year-end
balanceSurplus
funds
Necessary
funds
1. Linked to financial
performance and
condition
2. Provision based
on a plan 1/3
JPY 86.0 B JPY 59.5 B JPY 26.4 B
JPY 8.8 B
Operating funds
Facility expansion
Refund ofinterest bearing debt
Taxes and dividends
Technical purchases (including M&A)
Consolidated sales
Previous year÷ 12 months x 2
Average of past 3 yearsConsolidated sales
x 10%
D zone in Kuwabata plant
B building in Nagano plant
JPY
23.5B
JPY
14.0B
-
JPY
4.0B
JPY
18.0B
1
2
Contents of necessary funds:
Additional
dividends
Current Forecast
Note: Excludes some liabilities determined at the end of the term. Rounded down.
DISCO CORPORATION All rights reserved19
Earnings Forecast 1Q FY2020
Note: From FY19, the timing of revenue recognition has been changed to inspection/acceptance basis. Assumed exchange rate: USD 1 = JPY 100, EUR 1 = JPY 115Currency sensitivity (consolidated, annualized) USD: Approx. JPY 600 – 700M, EUR: Approx. JPY 30 M
100 million yen (Oku yen) Forecast
FY191Q
2Q 3Q 4QFY201Q
Net Sales 328 351 344 388 337
Operating Income 71 101 84 108 76
Ordinary Income 81 104 85 113 77
Net Income 57 73 63 83 55
Operating Income Margin 21.7% 28.8% 24.5% 27.8% 22.6%
Ordinary Income Margin 24.7% 29.7% 24.7% 29.1% 22.8%
Net Income Margin 17.5% 20.8% 18.4% 21.3% 16.3%
Shipment Figures 322 320 352 399 491
DISCO CORPORATION All rights reserved
Sales Forecast By Product
20
Shipment BasisQoQ FC
FY20_1Q
DGP (for thin wafers) 70%
Normal Grinders 20%
Grinders 40%
Blade Dicers 50%
Laser Saws 80%
Dicers 60%
Precision Processing Equipment 60%
Consumables -10%
Others -5%
DISCO CORPORATION All rights reserved
R&D/CAPEX Forecast
0
50
100
150
200
250
300
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
100 million yen(Oku yen) CAPEX Depreciation R&D Expenses
21
FY20 ForecastFacility investment: Including new buildings at Kuwabata and Chino factories Approx. JPY 18 B (JPY 25.9 B in FY19)Depreciation: Expected to be similar to last year Approx. JPY 6.5 B (JPY 6.6 B in FY19)R&D: Planning proactive R&D Approx. JPY 16.5 B (JPY 15.9 B in FY19)
DISCO CORPORATION All rights reserved
70 70 70
50 50 50
115
60
30
15
F Y 2 0 1 8( A c t u a l )
F Y 2 0 1 9( E s t i m a t e d )
F Y 2 0 2 0( E s t i m a t e d )
F Y 2 0 2 1( E s t i m a t e d )
CAPEX Expenses
22
Expense for purchasing equipment and facilities
Zone D at Kuwabata Plant
Others
100 million yen (Oku yen)
17.5BBuilding B at Chino Plant
14BZoneD at Kuwabata Plant
Others
FY20 ForecastExpenses related to purchased equipment and facilities: Approx. JPY 7 BZone D at Kuwabata factory: Planning to pay 1/3 corresponding to the construction period Approx. JPY 5 BBuilding B at Chino factory: Planning to pay final payment at completion Approx. JPY 6 B
DISCO CORPORATION All rights reserved
FY16 FY17 FY18 FY19
Dicer
Grinders
Precision
blades and
wheels
1,342
1,674
1,475
1,411
313
510
386 365
55.5%59.2% 58.9%
60.1%
23.6%
31.5%
26.4%27.2%
0%
10%
20%
30%
40%
50%
60%
70%
0
200
400
600
800
1,0 00
1,2 00
1,4 00
1,6 00
1,8 00
FY2016 FY2017 FY2018 FY2019
Net Sales Operating Income
Gross Profit Margin Ordinary Income Margin
Shipment Trends
Equipment: While dicing saw shipments remain low, grinders stay firm.
Currently active inquiries for mass production from OSATs.
Consumables: Achieved record high. Demand for stock for mass production.
While shipments trended low, profitability increased due to steady
improvements (GP margin: 60%).
Although sales and profit declined, the annual dividend amount was JPY
438 (New record), in accordance with the dividend policy.
DISCO Business Environment and Operations: FY2019 Full Year Summary
23
Annual Shipmenttrends
Inspection/Acceptance
Basis
Annual Trends (JPY 100 B)
DISCO CORPORATION All rights reserved
Customer willingness to invest is strong, and shipments are expected to achieve a new
record in the first quarter.
Large amount of inquiries regarding investment in mass production, mainly from
China.
Closely monitoring market trends, particularly with leadtime adjustments in some
cases, due to COVID-19.
Promote continuous efforts towards business continuity management.
Maintain factory production and shipping systems by reinforcing existing infectious
disease prevention measures with stricter criteria for allowing employees to return to
work.
No changes to plant facility expansion policy
- Kuwabata plant expansion: Increasing production capacity of precision processing
equipment and precision processing tools (blades/wheels)
- Chino plant expansion: Increasing production capacity as the second production base
■ Focus on organizational management and business management, which will strength
the company (Will Accounting and PIM based on DISCO Values).
Forecast for FY2020
24
444
491
FY16
_1Q 2Q 3Q 4Q
FY17
_1Q 2Q 3Q 4Q
FY18
_1Q 2Q 3Q 4Q
FY19
_1Q 2Q 3Q 4Q
FY20
_1Q
Forecast
Quarterly Financial Performance Trends (JPY 100 M)
DISCO CORPORATION All rights reserved25
[Reference]
Half-Year and Fiscal Year Transition Graph
DISCO CORPORATION All rights reserved26
Half-Year1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Non-semiconductors
Other semiconductors
Optical
semiconductors
Package
IC
Non-consolidated Sales by Usage of Dicing Saws
Shipment Basis
DISCO CORPORATION All rights reserved27
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Non-semiconductors
Wafer
manufacturing
Other
semiconductors
Optical
semiconductors
IC
Semiconductor
Non-consolidated Sales by Usage of Grinders
Half-YearShipment Basis
DISCO CORPORATION All rights reserved
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
28
Consolidated Consumable* Sales
Half-YearShipment Basis
DISCO CORPORATION All rights reserved29
Non-consolidated Sales by Usage of Dicing Saws
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
Non-semiconductors
Other semiconductors
Optical semiconductors
Package
IC
Full-yearShipment Basis
DISCO CORPORATION All rights reserved30
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
Non-semiconductors
Wafer
manufacturing
Other
semiconductors
Optical
semiconductors
IC
Semiconductor
Non-consolidated Sales by Usage of Grinders
Full-yearShipment Basis
DISCO CORPORATION All rights reserved
Consolidated Consumable* Sales
31
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
Full-yearShipment Basis