Entegris Reports Q3 2023 Revenue of $888M; Sees Rising Customer Interest in Innovative Solutions

Entegris, Inc. reported Q3 2023 revenue of $888 million, an 11% decrease YoY and 1% sequentially. GAAP net income was $33.2 million ($0.22 per share), including expenses like goodwill impairment and integration costs. Non-GAAP net income was $103.6 million ($0.68 per share). Q4 2023 sales are expected to be down around 2% sequentially, with GAAP EPS of $0.25-$0.30 and non-GAAP EPS of $0.55-$0.60. Customer interest is rising in Entegris' comprehensive solutions and collaborative materials development capabilities, particularly in materials like molybdenum. These solutions lead to faster development and speedier product launches, positioning Entegris as an innovation and growth partner.

Entegris, Inc. reported its third-quarter financial results for 2023, with revenue totaling $888 million, reflecting an 11% decrease compared to the same quarter in the previous year and a 1% sequential decrease. The company's GAAP net income for the third quarter was $33.2 million, resulting in earnings per diluted share of $0.22. These figures included various expenses, such as goodwill impairment, amortization of intangible assets, integration costs related to an acquisition, and other net costs. On a non-GAAP basis, the company achieved a net income of $103.6 million, with non-GAAP diluted earnings per share of $0.68.

For the fourth quarter of 2023, the company expects sales to be down approximately 2% sequentially, with a range of $770 million to $790 million in sales and diluted earnings per common share between $0.25 and $0.30 on a GAAP basis, while non-GAAP earnings per share are expected to range from $0.55 to $0.60.

Entegris operates in three segments: Materials Solutions (MS), Microcontamination Control (MC), and Advanced Materials Handling (AMH), catering to the semiconductor and high-tech industries. The company held a conference call to discuss its results on November 2, 2023. 

Entegris is experiencing rising customer interest in their comprehensive solutions and collaborative capabilities for materials development, such as molybdenum. Customers appreciate the benefits, such as faster development and improved speed, resulting in quicker product launches. This positions Entegris as a valuable partner in their customers' innovation and growth endeavors.

Switching to molybdenum (Mo) in semiconductor manufacturing for 2 nm affects multiple processes. Mo offers conductivity without needing barrier layers and is cost-effective, but its corrosion risk requires adapting steps like deposition and etching. For chemical mechanical planarization (CMP), slurries and pads must be refined to protect Mo, with lower oxidizer concentrations and customized pad designs. Word line etching, particularly for 3D NAND, faces challenges with conventional etchants and cleans, necessitating specialized etchants that prevent residue. High-purity materials and rigorous filtration are essential for yield, with in situ monitoring and multiple-stage filtration to minimize contamination. Transitioning to Mo demands a comprehensive approach to select chemicals, pads, and filters to optimize the process and yield. Close collaboration with suppliers that provide integrated solutions can smooth the transition, as using a single supplier can expedite material compatibility testing and streamline the switch.

Source - Entegris.com

The memory market presents a mixed scenario. DRAM has shown anticipated improvement, but 3D NAND remains subdued, with declining wafer starts in Q3 and no significant recovery expected in Q4. These conditions align with previous industry forecasts. Looking ahead to 2024, specific details are not yet available, but there is an expectation of increased wafer starts. More precise information will be provided in the Q4 earnings report in February, as it's currently too early to offer comprehensive insights into the upcoming year's market dynamics.

In the current year, the company has observed that all node transitions in the logic sector have occurred according to schedule, which has had a positive impact on its business performance, notably in Taiwan during the third quarter. However, within the memory segment, the company had previously forecasted delays and a lack of transitions in 3D NAND, and these expectations have been met. The initial anticipation was for many customers to adopt 200-plus layer architectures by the year's end, but this transition has not materialized as predicted. The company is now looking forward to the possibility of high-volume production at 200 layers or more in early 2024, marking a revised timeline for this development.

Sources:

Entegris, Inc. (ENTG) Q3 2023 Earnings Call Transcript | Seeking Alpha

New Materials: Smoothing the Transition to Molybdenum (entegris.com)

Migrating to Molybdenum: Comprehensive IC Solutions to Streamline the Transition (entegris.com)

Entegris Acquires MPD Chemicals

BILLERICA, Mass. Entegris, Inc. (NASDAQ: ENTG), a leader in specialty chemicals and advanced materials solutions for the microelectronics industry, today announced it acquired MPD Chemicals, a provider of advanced materials to the specialty chemical, technology, and life sciences industries. This acquisition will continue to grow and diversify Entegris’ engineered materials portfolio, which was recently expanded with the acquisition of Digital Specialty Chemicals (DSC).

Digital transformation is driving the development and technical capability requirements of modern technologies like artificial intelligence, virtual reality, and autonomous vehicles. To achieve the performance for these technologies, manufacturers have adopted new, more complex chip designs. These changes have increased the demands on the materials used in all steps of semiconductor processing. Along with the recent acquisition of DSC, the acquisition of MPD Chemicals will expand Entegris’ capabilities in the development and production of new organosilane, and organometallic materials. These materials are critical to innovation in the specialty chemical and semiconductor industries.

“Acquiring MPD Chemicals demonstrates our commitment to enabling the semiconductor technology roadmap through investments in purification, delivery, and advanced materials,” said Bertrand Loy, president and CEO of Entegris. “The deposition material market is one of the fastest growing market segments in semiconductor applications, driven by the adoption of new materials and more complex, chip architectures. Our recent investments in this space expands our ability to provide our customers the manufacturing scale and capabilities to enable their most demanding applications.”

Entegris acquired MPD Chemicals for approximately $165 million in cash, subject to customary purchase price adjustments. Entegris funded the acquisition from its available cash. MPD Chemicals will be a part of the Specialty Chemicals and Engineered Materials (SCEM) segment.

Entegris and Versum Materials to Combine in $9 Billion Merger of Equals to Create A Premier Specialty Materials Company

BILLERICA, Mass. & TEMPE, Ariz.--(BUSINESS WIRE)--Entegris, Inc. (NASDAQ:ENTG), a leader in specialty chemicals and advanced materials solutions for the microelectronics industry, and Versum Materials, Inc. (NYSE:VSM), a leading specialty materials supplier to the semiconductor industry, today announced that they have agreed to combine in a merger of equals. The combined company will be a premier specialty materials company for the semiconductor and other high-tech industries.

Under the terms of the agreement, which was unanimously approved by the Boards of Directors of both companies, Versum Materials stockholders will receive 1.120 shares of Entegris for each existing Versum Materials share. Upon completion of the merger, Entegris stockholders will own 52.5 percent and Versum Materials stockholders will own 47.5 percent of the combined company1. The combined company will have a pro forma enterprise value of approximately $9 billion, based on the closing prices of Entegris and Versum Materials on January 25, 2019, and approximately $3 billion in revenue and approximately $1 billion in Adjusted EBITDA on a pro forma basis for calendar year 20182.

The combined company will retain the Entegris name and will be headquartered in Billerica, Massachusetts, and will maintain a strong operational presence in Tempe, Arizona.

Upon closing of the transaction, Entegris CEO Bertrand Loy will serve as Chief Executive Officer, Entegris CFO Greg Graves will serve as Chief Financial Officer, and Versum Materials General Counsel Michael Valente will serve as General Counsel of the combined company, supported by a highly experienced and proven leadership team that reflects the strengths and capabilities of both companies.

The combined company’s Board of Directors will have nine members, consisting of four directors from the existing Versum Materials board, including Seifi Ghasemi, Chairman of the Versum Materials Board, who will serve as Chairman of the Board of the combined company, and five directors from the existing Entegris Board, including Bertrand Loy.

Entegris President and Chief Executive Officer, Bertrand Loy said, “We are excited to combine with Versum Materials to create a premier specialty materials company for the semiconductor and other high-tech industries. The combined company will be ideally positioned to more effectively help our customers achieve higher yields and new levels of performance and reliability, and together, we will be well positioned to take advantage of long-term secular semiconductor growth, and to tackle new industry process challenges. I have great respect for the Versum Materials team and look forward to joining forces as we embark on this next chapter and create new value for our stockholders, employees and customers.”

Versum Materials President and Chief Executive Officer, Guillermo Novo said, “We could not ask for a better partner in Entegris. This merger will create greater benefits and growth opportunities than either company could have achieved on its own. It dramatically accelerates our goal of portfolio diversification – creating an end-to-end materials solutions provider across the entire semiconductor manufacturing process. With enhanced global scale and world class technical expertise, we’ll be poised to drive further innovation and support investments across our technology, infrastructure, and additional capabilities – enabling us both to better serve our customers and provide expanded opportunities for our employees.”

Compelling Strategic and Financial Benefits of the Merger

Enhanced product breadth and depth: Entegris and Versum Materials have highly complementary portfolios that combined will bring customers enhanced technical capabilities. This merger will create the world’s first comprehensive and effective end-to-end materials solutions provider across the entire semiconductor manufacturing process. The combined company is expected to have a full suite of diversified product offerings including Advanced Materials, Specialty Gases, Microcontamination Control, Advanced Materials Handling, and Delivery Systems and Services. 

World class technology: The combined company’s world class technology and R&D capabilities will better enable it to:

• Address customers’ evolving needs for new materials as device architectures become more complex;
• Capitalize on the increasing demand for purity and help drive improved yield; and
• Accelerate the development and time to market of new technologies that align with the industry technology roadmap.
• Global scale and operational excellence: A much broader, global scale will enable the combined company to reach additional customer touch points, and have increased relevance in key geographies. By combining its extensive global manufacturing network, the company will be able to improve delivery times and drive new levels of operational efficiencies and excellence.
• Increased financial strength and flexibility: The combined company will have approximately $3 billion in revenue and approximately $1 billion in Adjusted EBITDA on a pro forma basis for calendar year 20183. It will be well capitalized with a strong balance sheet and a pro forma net leverage ratio of 1.1x4. In addition, it will have flexibility to invest, make acquisitions, and return capital to stockholders, while enjoying greater earnings stability and margin growth potential.
• Significant stockholder value creation: The combination is expected to generate more than $75 million of annual cost synergies in manufacturing, logistics, procurement and SG&A rationalization within 12 months post close. In addition, the combined company is expected to realize significant revenue growth synergies from cross-selling opportunities, with further potential upside from capex and revenue synergies.