Leading innovation from within Disclaimer This presentation has - PowerPoint PPT Presentation

IQE plc 2019 Trading Update Roadshow Leading innovation from within

Disclaimer This presentation has been prepared by IQE plc solely for information purposes and should not be considered to be an offer or solicitation to buy, sell or subscribe for any securities, financial instruments or any rights attaching to such securities or financial instruments. In particular, this presentation does not constitute an offer to sell, or the solicitation of an offer to acquire or subscribe for, securities in any jurisdiction where such offer or solicitation is unlawful. This presentation is not comprehensive and does not contain all of the information material to an investor. This presentation may contain forward-looking statements. Forward-looking statements can be identified as anything other than statements of historical fact contained in this presentation and by their nature are subject to uncertainty and risks. Forward-looking statements are statements regarding our intent, belief or current expectations and are not guarantees of future performance. Actual performance and results may differ materially from those described in this presentation. Readers are cautioned not to place undue reliance on these forward-looking statements. This presentation is directed only at (i) persons outside the United Kingdom to whom it is lawful to communicate it, or (ii) persons having professional experience in matters relating to investments who fall within the definition "investment professionals" in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order"), or (iii) high net worth companies, unincorporated associations and partnerships and trustees of high value trusts as described in Article 49(2) of the Order and any other persons who fall within other applicable exemptions under the Order, provided that in the case of persons falling into categories (ii) and (iii), the communication is directed only at persons who are also "qualified investors" as defined in Section 86 of the Financial Services and Markets Act 2000 (together, "Relevant Persons"). Any investment or investment activity to which this presentation relates is available only to, and will be engaged in only with, Relevant Persons. This Presentation must not be acted on or relied on by persons who are not Relevant Persons. You represent and agree that you are a Relevant Person. This presentation is not directed to nor intended for distribution or use by any person or entity, in any jurisdiction where to do so would constitute a violation of the relevant laws of that jurisdiction. The information contained in this presentation is provided as at the date of presentation and is subject to change without notice. Whilst the presentation has been prepared in good faith, no representation or warranty, express or implied, is give by IQE plc or its representatives as to the accuracy or completeness off the information or opinions in the presentation. IQE plc and its representatives shall have no liability whatsoever, whether under contract, tort, trust or otherwise, to you or any other person resulting from the use of, or reliance on, any information in this presentation. Any dispute, action or other proceeding relating to this presentation shall be adjudicated within the exclusive jurisdiction of the courts of England. All material in this presentation shall be governed by the laws of England and Wales. Trading Update – 24 th March 2020 1 All figures for 2019 are unaudited

Trading Update: 2019 Full Year Financials

Trading Update 2019 Overview Financial Highlights Operational Highlights Revenue Adj EBITDA New mega-foundry in The leading global supplier £16.2m Newport in mass production £140m of advanced compound 9 semiconductor wafers In line with November Trading Update; Down 10% year-on-year 12% Adj EBITDA Margin Wireless Photonics FY19 capital Global footprint revenues revenues investment Tools in USA (Pennsylvania, North production £68.2m £42.1m Carolina, Massachusetts, or production Washington), ready Europe (Newport, Cardiff, £31.9m PPE Milton Keynes) £69.8m Taiwan expansion completed £10.2m R&D & -23% Asia (Taiwan, Singapore) in Q2 2019 - increase in Purchased Intangibles year-on- +4.4% year-on-year wireless capacity by year Listed on the FTSE AIM index 40 % Founded Staff Adj Cash generated from Operations 1988 641 £16.5m 100% EBITDA cash conversion Trading Update – 24 th March 2020 3 All figures for 2019 are unaudited

2019 Financial Performance In line with November Trading Update guidance Revenue £’m Adjusted EBITDA £’m Adjusted Operating Profit £’m 37 32 27 156 29 155 140 133 26 22 19 114 16 17 (5) FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 Loss from operations in line with Revenue down 10% YoY Adj EBITDA reduced due to high expectations operating leverage • £140m revenue in line with November Trading Update (£136m to £142m) • £4.7m Adj operating loss in line with • £16.2m EBITDA • FX tailwind of £6m November Trading Update (“mid -single-digit • Year-on-year reduction resulting from lower operating loss”) • Year-on-year reduction primarily as a result revenues and the costs associated with of two key customers: increased capacity ‒ Wireless customer affected by changes in Global Markets ‒ Photonics customer affected by technical issues independent of IQE Trading Update – 24 th March 2020 4 All figures for 2019 are unaudited

2019 Business Unit Segmentation Revenue Segmentation Operating Profit Segmentation Revenue FY19 FY18 Adjusted Operating FY19 FY18 £’m Restated Profit Restated £’m Wireless Revenue 68.2 87.9 Wireless 6.6 16.5 Photonics Revenue 69.8 66.8 Photonics * 1.3 10.2 CMOS++ 2.0 1.6 CMOS++ (1.3) (1.3) Total Revenue 140.0 156.3 Corporate Costs (11.3) (9.5) Total Adjusted Operating (4.7) 16.0 Profit * Photonics profit was low in 2019 due to low utilisation of Photonics reactors including the newly constructed Newport Mega-Foundry. The inherent margin potential of Photonics exceeds that of the more mature Wireless segment and given the high operating leverage of production facilities, operating margins are expected to increase significantly with volume growth. Trading Update – 24 th March 2020 5 All figures for 2019 are unaudited

Revenue Segmentation Business Unit Breakdown 2019 Geographical Segmentation (approximate splits) (approximate splits) 100% 100% 100% 20% 29% 30% 35% 75% 75% 75% 9% 30% 10% 50% 50% 50% 70% 61% 55% 25% 25% 25% 50% 0% 0% 0% Wireless Photonics FY19 FY18 GaAs GaN VCSEL Infra Red InP Americas Europe Asia Trading Update – 24 th March 2020 6 All figures for 2019 are unaudited

Capex Capex Cashflows £’m PPE Additions £’m £32m £30m £39m £11m £26m £16m £11m £6m FY16 FY17 FY18 FY19 FY16 FY17 FY18 FY19 Other Expansion Asset Finance Other Expansion Cash used for capex Expansion phase of infrastructure Intangible Capitalisation investment completed • Cash Capex of £32 million at the lower end of • £10.2 million intangibles capitalised in FY 2019 (£12m in FY18) the 2019 guidance of £30 – £40 million • Newport Mega-Foundry has nine production- ready tools and one to follow in Q2 2020 • Expansion capex makes up £29.3m (92%) of • Continued investment in future compound cash capex in FY19 • Taiwan expansion has increased site capacity semiconductor technologies by 40% • Underlying cash capex has consistently reduced year on year since FY16 • Future tool capex to scale for volume is discretionary and linear with future revenue opportunity Trading Update – 24 th March 2020 7 All figures for 2019 are unaudited

Cashflow and Net Debt Reflective of trading and the completion of capacity expansion Adjusted Operating Cashflow Net Debt £’m £’m 46 21 31 24 23 (16) (23) 17 17 (40) FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 Net Debt in line with expectations Operating Cashflow in line with prior year • £16.0m at lower end of November Trading Update guidance (£15-20m) • £17m cash from operations before • Strong balance sheet with access to material exceptional items additional debt facilities (increased to c£57m • 100% Adj EBITDA cash conversion during FY19) • IQE will continue to evaluate actions to balance the preservation of cash with the long- term need of the business Trading Update – 24 th March 2020 8 All figures for 2019 are unaudited

Strategy and Business Update

Market Context In the short- term, global trade conditions have been disruptive to IQE’s business performance. In the medium to long-term, IQE is well positioned to adapt to changing global technology markets. 5G Growth Driver Changing Markets Disruption Adaptable Well positioned The deployment of 5G Global trade conditions The speed of market IQE’s global As the macro trends networks represents a have resulted in changes has been rapid manufacturing of 5G and connected multi-year mega changes in global and highly disruptive footprint and position devices play out, IQE replacement cycle and technology markets in the short-term as materials solutions remains uniquely one which will provider, supplying the placed to capitalise on transform how we all whole market, mean expanding global live and work we are well placed to markets for compound adapt semiconductors 10 Trading Update – 24 th March 2020