ENTG - Earnings call transcript Q4 2017

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Operator

Good day, everyone, and welcome to the Entegris Fourth Quarter 2017 Earnings Call. Today’s call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Steve Cantor, Vice President of Corporate Relations. Please go ahead, sir.

Steven Cantor

Thank you. thanks our and everyone, morning, for call. joining Good financial our December fourth today, we and for the announced ended Earlier quarter results fiscal XX. year

on access our can copy our release website You at a www.www.entegris.com. press of

I also begin, with will in number will our in call, to today of forward-looking our some and the uncertainties financial this measures we remind which we listeners would Before include involve statements detail filings SEC. that non-GAAP These On reports statements. defined in refer risks and comments to the by a Regulation outlined like are G. as SEC

You facility note today’s to now press that, me with in Massachusetts, call. Loy, President you can XX for Analyst release Please be table And the today will Graves, March website. an and and holding Greg our begin find a will we meeting and reconciliation information more headquarters CFO. and are register. our in call contact Bertrand on the and on Bertrand on that, can Bertrand? CEO; at

Bertrand Loy

you, provide quarter. some on our financial provide and performance and more the for XXXX. comments outlook follow our make Steve. for I XXXX an details Greg results on will Thank first guidance will with

We open line will then for questions. the

three grew rate growth of debt this and bottom at adjusted top exceeded respectively. I our and We you semiconductor value-added successful of We quarter value-creating by returning fourth shareholders. to new We at a a I ago, sales confirmed all capped degree publicly line. of engagements. growth was a acquisitions, customer achieving that commitment expanded market framework in record recall cash with our in is EPS as XXXX rate Our our our history. skepticism. cycle. our the markets refinanced XXXX solutions XX%, and the The optimism repayment year divisions. grew balances billion, three that XX-year grow internal new XXXX investments, financial across our non-GAAP growth with expressed XX% EBITDA of fiscal in notes most served We multi-year Entegris’ conviction XX% line $X.X and to for part some to twice the senior allocation strong our our that midst capital my years industry the When by met Indeed, favorable

As we for industrial is IoT, being we smartphones data logic XD automotive, and exciting devices is Demand transforming economy, robotics. for mobile growing technology accelerating compelling times new demand the that high-end higher-performing and ahead. by XXXX, enter expand new seeing Supported there enabling as is semiconductors of applications and is centers, computing. new edge PCs, now computing applications. beyond many well chip computing more cloud lie stable applications growing well that devices evidence graphics global intelligence, a in chips as NAND in number driven artificial emerging by and and are

is the it our from certainly we to While and is of our materials proposition enable Entegris’ outperformance. market tailwind purity XXXX, materials-related benefited required market value expansion processes. that integration robust solutions, customers semiconductor new Entegris’ in is portfolio production levels in driving value the of our of at of the

the technology set, breadth our industry. in technology which and key diversity the of our our market of us and strengths inflections of multitude portfolio of a the One is participate customer to allows across

changed. solutions, primary this drivers market. and Our for growth inflections: two but to semiconductor briefly in XXXX I these was ability about our of been XD to NAND, has continued part markets the node due until grow in Up these. each of and shrink XX% will logic emergence have three of outperform to the talk and of recently, foundry Entegris’ Chinese advanced the

fab accounted compared opened up customers for of The have and With NAND, to challenges last emergence growing process solutions and complexity new sales XX% solutions for divisions. all structures XD to memory-related in related of XX% XXXX, NAND our opportunities the XD across three approximately across year. portfolio of our

solutions in advanced significant new FOUPs handling the fabs. benefited memory investment Our from advanced and fluid

the materials, new enjoy up ramped production, As continue are we new filtration fabs properties XX layers daily and XX from formulated they deposition additional and these materials, our opportunities In our solutions, particular, deposition new revenue innovations as to embraced to our structural started which customers, electrical memory to beyond. by advanced offer which and increase to be in their used number cleans process cycles. for better production integrate of

Second, and continue very highly complex smaller Advanced the are expect geometries which susceptible ratios, to structures ever with feature nodes at high the purity to logic increase. contaminants. advanced requirements advanced memory and

trends solutions Our to purity advanced to they processes. our optimal purification filtration offer in these into being greater combined and of XXXX, a advanced becoming own critical that if we increasingly new including filters and manufacturing chemical XX% solutions drove filtration their purification pushed most up fabs in expected achieve selectivity for and chain manufacturers increase as These are and products, the are bulk as supply are number levels introduced up More sales requirements new yields. retention. want the more,

these of our to times deposition as contribute applications. our ramp and and we XXXX. two for and relationships construction to Spectrum for fabs qualifications specialty the certain China increase benefit in to partners, reduce partnerships number expect and for gases continue these China’s Third, underway, capacity are and drive growth products mainstream growth, into Chinese Jingxing, strategy new sales customer we lead materials. with to local and our we our XX%, support grew a we in entered and leading-edge of future To both by from

levels $XXX the grew and were XXXX, we grew generated China, activity of IoT from reflecting Peninsula. devices, which record level by year of both increased XXXX, and In performance solutions XXXX. we XX% cash free from in XX% and of Europe, of compared million, We to strategy, increased $XXX investments in compared our another or million revenue to XX%, sales, strong in continue U.S., across result elements flow free as nearly and cash Korea in is to in flow included Japan internal and these internal year of grew driven of X% $XX our us we XX% flow in increased capital activity touch our automotive acceptance on of OEM broader in $XXX we respectively, million our XX%, demand to fab and We investments, growth our to strong EBITDA million, repayment achieved Beyond XX%, to biochemical I’ll our R&D cash XXXX. sales, memory our In XX% CapEx. acquisitions, XX% We from shareholders. of debt This logic cash on or and balancing XX% of with sorry, pleased enabling in the cash investments, operating and and flow. and each returning deliver also customers. increased allocation strong in high the last production briefly.

capacity investments in CapEx advanced number coatings a initiatives added Our of growth in of capabilities support deposition, manufacturing new and graphite, and filtration. specialty

customers competitors. scientific upgraded from believe the us our respond metrology allow U.S., adding investments capabilities. talent these technical us advanced to We our and to and centers will our Taiwan faster We in and differentiate further also

two acquisitions, we transactions terms past completed the In months. XX in small of

processes. or The expect solutions line, our cash. the monitoring announced product and to And gaining and profitable line for Systems, to Trinzik. you in we of our can particle recently, purchase in critical CMP. systems, in PSS chain acquisitions. PSS by expand automating sizes global now and fluid of proposition we Particle terms call, benefit analysis XXXX value access quality Both Entegris yield $XX technology businesses real-time supply will two prevent These enables successful, are first from April filtration Trinzik Sizing million was in channels. of exemplify customers costly PSS Entegris acquisition PSS, that a the established, distribution of in teams our what in from growing excursions

we the our During $XXX of year, of million our per repaying cadence $XX million repaid quarter. loan, term also continuing

the repurchase dividend of shareholders, share. $X.XX $XX Finally, ongoing through initiation $XX to share quarterly a we million returned quarterly and of million million program $XX through an per

ahead, XXXX. expect markets continue As both technology we I our to look accelerating, in outperform transitions with trends and demand we to

top goal the of As growth objective between to a of X% our five X% for result, grow X% line ahead compounded XX% year and our to is years. over our the next

turn mile of want for dedication Greg, the collective their to express strive to new and their will direct efforts, is the pride success extra Entegris’ support gratitude the levels excellence. I I to to call the as detail. we they the customers of our go call every day the as continue reach Entegris the and Greg financial teams to result now their to to turning my of for Before and the world work. quality around

Gregory Graves

full-year to of Thank QX and you, grew QX. a $XXX fourth record which year performance, sales XX% pleased flow. from million sales, levels cash reflected X% had with our We from Bertrand. be earnings of and reasons ago many and quarter

loss million senior related per basis, our year. Our of was non-GAAP $XX of XX% refinancing earnings notes. guidance reform of per the share costs the our which GAAP from $XX the above a $X.XX, of QX share $X.XX tax and high-end million-plus of impact QX we up of reflected to and On last achieved

continued our again QX third reflected from benefit to adjusted executed well gross an higher teams the which and gross in from margin very of XX.X%, improved we Our margins XX.X% operating performance as of volumes. quarter, manufacturing

gross expect were We Non-GAAP to up expenses in to be XX% QX. expectations in slightly with operating QX and from $XX QX in million, margin our our approximately XX%. line

the Non-GAAP QX. operating expenses operating in XX.X%, We $XX line expect $XX non-GAAP quarter. in million million margin first to to was be with roughly

a $XX the the accumulated U.S. of benefit Our of $XX revaluation million deferred on for comprised taxes, and liabilities. GAAP charge our full-year net $XX XX% a million million related $X rate to profits related for was tax charge potential one-time withholding future the to million, offset part reflecting by of in foreign XXXX, tax tax

was Excluding XX%. these rate tax impacts, our non-GAAP

impact For we of expecting from reform outside the which be anticipated derived the to majority XXXX, tax distribution reduced our reflecting XX%, geographic rate U.S. favorable of the is of and are to the approximately income, non-GAAP

XXXX. of law give $XX quarter a significantly it While was the the the a XX% cash ability us for record our in did rate, tax global lower EBITDA repatriate Adjusted or does new amount revenue. not million, significant of tax to

EBITDA, at EBITDA model rate nearly revenue which in to represents consistent growing leverage generated with the and sales. more full-year objective demonstrates growth For a in revenue twice the is $XXX have of our XXXX than adjusted EBITDA increase the XX% prior The of is XXXX, operating year. XX% of and over million relative we in our

was up applications, performance year strong of ago. from photo for a of is as Gore last XX. from was of product The from strong Engineered wet and in an liquid SCEM and driven last in QX. million non-GAAP The tool adjusted for as with Trinzik even margin QX, XXXX continued XX.X%, of XXXX QX in materials in performance line NAND our etch strength essentially acquired April ahead shipments. QX were filters solutions in from strength been QX, division. gas Handling, reflected node purifier operating of we deposition Control, the has QX. growth well from grew XX.X%, industry AMH’s plan, of a from adjusted and our year year was $XXX operating XX% from to sales from grew Materials, the and clean manufacturing qualification MC sales demand new grew applications. million by MC from strong Fiscal XX.X% filter for SCEM and Microcontamination margin by XX.X% by Specialty and equipment advanced XX% result we favorable achieved slightly sales or products of up year bulk In margin that for XXXX. and – quarterly AMH, $XXX and SCEM, of driven Billerica Chemicals million XX.X% ago. XX%. of sales Turning were MC, Fiscal segment for advanced In $XXX moved up XX.X%, Advanced a finalizing or Materials QX. XXXX were less down Fiscal up or from XX.X% of in facility. XX% adjusted are mix. as for The XD XX% the operating primarily grew of non-GAAP sales into QX, up sales

components as last business of its from QX, align sales to AMH During the grew to this X% of up strong number the sales year a achieve The QX. million implemented were a $XXX fab products, handling targets. new year-over-year of profitability we handling year, as as well quarter of and fluid improvement tools. for million, and In $XX QX. and CMP long-term for QX the reflected well in strength $XX XX% XX our from wafer steps from and X.X turns from was was as revenue. cash from free or third shipments product declined flow the new and infrastructure projects, OEM of were in – flow million clean of days, modest wet operations etch X.X DSO Cash inventory quarter a XX%

sheet. the balance to Turning

During the our $XXX The to took successful terms refinance quarter, existing acquisitions. on to market from capital offering of to favorable not favorable rate interest notes the potential a only of $XXX offering to for to but X.XXX, million notes. we advantage us incremental accretive debt lowered use $XXX million X% raise allowed million of complete

our an flexibility. investment the debt new financial style In has significantly addition, that grade increases package covenant

net year-end, total consistent cash our debt leverage X.X quarter, during the we expectations. term our the with included $XXX of CapEx Uses reduced and of additional loan $XX quarter was At During by times. million. million million long-term was an $XX our

full-year, the CapEx. in For invested $XX million we

expect XXXX filtration, investments support $XXX million to We materials our solutions. and advanced to to gas specialty million in to specialty approximately and related $XXX growth deposition, spend product in introductions ongoing new

was balance our $XXX As $XXX of approximately U.S. million cash million, the was in of December XX, which

are in earlier, a our we repatriate to meaningful cash of As options reviewing mentioned amount XXXX.

provide to intend revenue million At EPS Meeting At $XXX levels, expect for $XXX QX, these from to to share. to we non-GAAP to $X.XX target our In we top line upcoming million. model. summary, – more March, Turning sales operating $X.XX are to we with expect the color and per our our specifically, reflect be refresh and we plan outlook Analyst in to and range to to performance, are financial pleased earnings operating on relative our flow-through and our growth achieving growth. our we

portion pursuant strategy Our continues generate allocation business to to deploy our the flow with and law. capital new increase to significant available cash will the tax

the leveraged questions. and we product momentum about Things, NAND our portfolio as industry excited XXXX. are positive that we’ll a Internet key such take with Operator, XD trends Finally, and – is industry now to since for prospects of

Operator

[Operator sir. first Instructions] Goldman you, Sachs. Hari go Thank with We’ll to Toshiya

Toshiya Hari

Great. congrats for perspective, would guide could on hoping Bertrand, individual was if and QX more taking provide much comments you for be on on the segments a whole. bit a strong Thanks some question results. you and you little I very the color made the on of from QX for guess, expectations XXXX? that what PSS, as a XXXX revenue I growth great? from and are contribution your And the touch any both your can

Bertrand Loy

Toshi. you, Thank

so – you have probably three Just questions.

then bit Let final I then take assumptions and guidance, me the questions of about XXXX full-year some little with start PSS. I’ll the will expand on QX guidance the a your behind

the trend. to But we better environment. So than encounter to business around expect normal QX better perform overall, guidance, expect we mixed the industry to continue fairly industry our seasonal and than

the that, activity NAND I in advanced of a and – and So customers fabs. likely logic if levels I similar be we our XD levels more little at steady that, we of expect will want of color to lower lower to older utilization bit would sequentially in utilization in give type a expect say foundry offset logic, most And well. as by that number the

the that in will most So in down of net likely MSI effect be sequentially modesty QX.

roughly. expect first-half up CapEx CapEx the would expect be we And front, in the to relatively sequentially, industry strong the QX, specifically, XX% we year. X% the in of to On to be

long-term midpoint, versus with So is growth. basis up our consistent the X% over at sequential so the very a points increase industry, XXX about which essentially QX, guidance represents our

So that’s for QX.

question very in was optimistic. to the continue again, And around full-year next your XXXX, So be guidance. XXXX we

a like fabs, MSI the in grow DRAM, X% to of driven be revenues, again, IT know, for in quarter in to XD and in about expect and great Three XXXX year expect for the you NAND XXXX, we level to as XXXX. good the year industry our is Entegris. at by expect of another and IoT very XXXX. We we activity And drive demand

expect If at And that positive of expect to underlying year. most the CapEx but roughly. we the for first-half full-year would CapEx, about grow you impact the of look the for industry industry X% the – we impact at to trends

front-end other business, least. words, in for mostly loaded our at So

during as that’s if by what outperforming for points. going the proposing we you the come continuing momentum to to capitalize products are XXX So basis in XXXX the blend new we on that about invested a product really essentially new of that also in to that fully XXX to new that we of leverage launched number industry all and expect we is XXXX. XXXX guidance And capacity from

obviously weeks one XXXX. the around commentary yes, PSS. news over acquisition – you’re of right, few of the And the my that’s big So last is we

very terms I more is think proud process of are in to to very this that a and unique being add of technology measurement concentration in provides We size able of levels our accurate that technology portfolio, particles fluids.

that One applications excited process. to think compromise of very in I agglomeration is most it’s slurries CMP major could in identify ability – And yields itself. we’re the the excited of the that technology about really the we’re

it’s think, in filtration our But the own of we’re for are very its technology encouraged course, potential a I exciting pull-through product. opportunity very right. by

nicely be XXXX we technology, accretive business great as that grow well. expect expect to and in overall, So to very in that we XXXX a

Toshiya Hari

you quantify could from Bertrand, impact Great. perhaps PSS? the

Bertrand Loy

is about The revenue million. – for PSS $XX on a million between to full-year basis $XX

Toshiya Hari

much. initiatives update there Okay. QX. an in on was very then and to guiding upside Greg, big would is Great, a thank you a three-year on here much. AMH margin And great? some for the give standpoint? to two so on delivering continue Thanks basis, as QX gross obviously, guys longer-term front, do of into from a potential and that QX, I guess, gross upside for margin be you QX if follow-up how so contribution you well us perhaps restructuring the and the in can what the And well

Gregory Graves

Yes.

guided XX%. at impacted manufacturing Mix were So on the strong performance with margin, was regard I XX.X% XX% we by the quarter volumes. said in We say to higher slightly – the really gross was to side to I would negative. quarter. actually

at quite even QX. mix So not in XX.X%, our as mean, as good was I

three think to the always would a – this not up just could too road, into you I range. it stretch but business, I far, have can As years or we XX% sort we’re think the the out us said I get move that I’m don’t going two we I as if that your see range. was don’t there. of think customers just let the question. to XX% going into get of where first go part down And

question, of that, could your you part Second Toshiya? repeat

Toshiya Hari

and… AMH

Gregory Graves

Oh, AMH, yes.

the saw second we’re reduction, of happen exiting was until to – the we – the AMH process the Much And facility, that headcount doesn’t quarter, going end just and current doesn’t benefit I smaller we probably in of until So really the of that. so execute areas impact would the business of, made other is, say, business, benefit quarter, exiting we end happen of the where we’re in we’re – which so a the benefit see QX that. we’re a that that the didn’t in also exiting either.

Toshiya Hari

much. clear. Thank you Okay, very so

Gregory Graves

much happens QX, exiting, that in to out restructuring incremental see at and So of we’re that say out results. by of end business mid-year not the of now the the I of as facility from smaller between QX get impact QX, we see business better we’re But in that, get the time. you’ll would that and going

Toshiya Hari

Thank it. Got you.

Operator

next with Stifel take Patrick from Nicolaus. We’ll Ho our question

Patrick Ho

quarter little first and more on Chinese. in on opportunity very and a the the nice you Thank emerging color congrats maybe bit Bertrand, the year. much

higher it bit growth little a there give really sounds of most in continue. near-term? you’re those of leading-edge, the in well you You is you’re growth color like Can saw where You the that to little of growth seeing at expecting terms a and segments least two in as activity? strong XXXX, that bit as seem mainstream, one mentioned

Bertrand Loy

Patrick. Hi,

directed So the there drivers that – are really beyond the in China. saw three big for we year

first the So mentioned. ones that you the two are

some advanced say, true logic fabs probably levels the mainstream well, third into of true to primary that So then built around memory advanced business all activity strong of XXXX biggest in one, expect in fabs would the was and the, XXXX. our activity we for I in and That uncovered fabs, continue what was driver But fabs. in which of we was also that obviously opportunities were in trend XXXX, China. as was that new in that the XXXX the

a is the very significant entered in we We’ve us. We important that So some again, into for investments. XXXX. region – two about talked very partnerships China made

course process completed QX, QX, I be in qualifications. a those QX And are of late in expect early of would the completing would We – to of most customer the of that number qualifications early China, open all our to in up that grow new a also that put us a position would allow lot lead And us continue will to of in shorten China. of great times. capacity in to

again, XX% great and So in a China, in we XX% growing high-growth XXXX. last about for in years performance the four been expectations have We’ve we where XXXX. grew to China – great continue at in

Patrick Ho

That’s you my been in year. bit helpful. good, us margin of as of levers particularly that Can some the need How do the terms given over actually And hit? you color investments you’re in like your to really targets little how this revenues has do some some to give a point, have past Greg regions maybe the as OpEx ramped for revenues now China? strong that question of guess, of of you’re, at the these ramp, follow-up continue which and management, operating I starting you of drive managing Great. manage

Gregory Graves

Yes.

really in take pieces. I’ll So two that

SG&A I out our you nearly were it efficient at year-over-year, in have of legal, stripped corporate side. like – mean, the have more the IT, pretty, it’s flat focus. would I’ll On look if I the pretty trying finance, HR, to just variable consistently you functions. increases compensation, areas the kind but related higher primary, been the on mean, laser I we if SG&A what side, it’s SG&A – I’m – a mean, to to become call, would

more But because a year-over-year. say, would getting ER&D. it’s a good side liked little and ER&D in we the and like some technical pretty of just words, bit at would were there perspective, people the part, the spending we probably and little have bit essentially we mean, On from to ER&D we’re invest would on matter dollar other choices a spend dollar we I In flat hire to our faster. dollars better investments. amount yields I better make a we’re how we around today ER&D

Patrick Ho

Great. Thank you very much.

Operator

Our Company. next Mok Needham question Edwin comes from with and

Edwin Mok

Great. Thanks for taking my question.

have So follow-up Patrick’s I question guess, question I side. the with on a cost

talk about the You are across making guys obviously, we that and different businesses? Is kind cost other benefits. of some start like to sounds guys progress any steps across you planning AMH, any improvement model, by of XQ the the for, see

Gregory Graves

At spending that of are regard, have around in constantly, our costs. budgeting like this in different I don’t We specific sort mean, we analysis Edwin. I what of point, we’re areas. we thing any in lot zero-based use watching functional said,

discipline, just like ago. it’s a don’t have we a that AMH, realigned quarters but of So couple we me, to business initiative consistent where specific a

Bertrand Loy

is I only cost. need of would that. very part providing our in I affordable add obviously So customers an be this focused at unique We to being industry, indeed, to technology to mean, right? this on just

is of part structure but cost culture. add optimize of ways our our something for So that our constantly also to leverage looking manufacturing getting sites, line SG&A our to is in

top bottom and XXXX, but top bottom would what at faster our you the objective the in were really to of our relation I growing generate to through as twice pleased again, be line of flow going not look if And growth, in context a some to to exceed in generated XXXX in line we XXXX, our than be very XXXX. position the again So the growth. to it’s grow that line expect line in we would expect exciting we same at meet rate

Edwin Mok

that’s helpful. Okay,

mostly color is quantifies try new you that would SCEM about what the new it Is that could some some this market, in business, talk XD of that successful of that On ramping. are had NAND of or think, like end some be product success different in of coming I into you you I’ll and or areas, helpful? some highlight, from that kind give product examples these terms the

Bertrand Loy

lot products, you’re Edwin in a So, – success of the that of so driven in case the new by will XXXX. was outperformance be number right, XXXX really of again

in there two benefit continue we trends that benefited So expect and in big to we XXXX that are XXXX. to

The properties is, first with mentioned, know, better that’s be for material the one you we’ve materials their XD memory NAND big increase you customers times. as that to intensity in multiple density. new fabs, as related describing advanced really been will And critical and those to electrical

have with have lot we in opportunities a invested a new So exciting of very and we new metals, pipeline gate capacitors, R&D established interlayer dielectric, dielectric.

XXXX. the we last So to a number market of one two year of the will in that’s new continue products But that to launch we’ve launched and trends.

about ago. probably have greater that the in been fabs is trend logic both process as adopted years are they trend, chemistries. and pushing memory These requirements demanding about we’ve purity the requirement you chains and since other logic, are for memory purity advanced all The remember, really in cleanliness from And this their in started greater need And currently commented biochemical for by manufacturers semiconductor up those makers. the supply suppliers. of XX greater advanced their

very, And a their speculate that products and of in are edge And that be of very emergence lot right trailing for reason will we now. trend industrial reliance important. being the will fabs. would the similar in trend that actually I the So leaving is emerging that’s automotive a used the are see where we that applications,

the but to would fabs, that chips. about to I concerned legacy optimize I’m and control only are solutions latent years, are of used we not becoming here their more reliability expect contamination And again, So customers the a see the be reliability talking number in to long-term of about will those increasingly improve that starting products. defects

So very large. solutions for actually and at our a control be contamination that breakthrough filtration exciting could

Edwin Mok

terms in expect question color. Thank just a you. right adding on facility that Is or on really largely That’s Korea you completed Korea of should now? facility, we Last Great. more? Where right? that have I good capacity in stand the some

Bertrand Loy

that couple I that years being Well, describing about utilized relates facility ago a question only up of made back to that then really significantly XX%. to we it’s And the facility was two to ago, think, probably the true as a underutilized. your statement Korea we XX% years when were

We solutions element of is Jangan lot to of we Korea. activity the a that in coating of a in the actually outsource also plan some or the the will AMH in manufacturing restructuring manufacturing of transferring One a deposition lot process used new are in of new Korea. consisting be of lot in-sourcing materials, made

So filling contribute up going facility. also to that’s this to

would and today, I capacity, I’m running probably at XX% So are really capacity utilization. talking about here about we floor estimate that

can margin again, the again be could area at you having as the opportunity benefits of overall up that we actually down fill that as some continue to an So look gross sites to our that road.

Edwin Mok

Great. one, other That’s Thank the I’m you. on. asking

Operator

Deutsche Sidney We’ll next go Ho with Bank. to

Sidney Ho

my Thanks questions. for taking

repeat XX% which get new If the what to ago you your of X% to some was that to two X% year, and the are consensus And factors expect upside? to XXXX, factors the XXXX, are to these drivers? when you expecting you do a grow of year look X% to drove growth the of to in back what forecast in three this

Bertrand Loy

in what I products what big the we more for performed terms new CapEx. we in guided well. XXXX, of year mean, for difference we year. the really ended So, you And that’s XXXX, wafer driver look originally primary starts projections Sidney, the with in up year back the the and started to industry terms throughout in year modest if really at of some the delivering our between and

that mean, that industry really one the part a not the was I in really So surprise, XXXX. of, was but drove outperformance

trends bullish very I solutions. a about contamination are And say our will increase NAND will And the our talk that when all know also bullish our fabs be So that opportunities talking I to deposition adding XXX on on platform of around positive around think emerging their we we’re hearing, would older that to as XXXX, from some control with capacity also XX-nanometer business our customers news have about potentially Entegris. well but existing between memory, divisions that, opportunities to FOUP materials, would we expect on and are vertical and and fabs XX%. tighten with the node. nodes, to cases, density excited IoT we three about about millimeter XX% upgrading benefit in this benefit very And some and pretty I’m we significant of at business. impact

But that. the say CapEx, we couple degree of Now have lot I’m cautiously logic And quarters. more and advanced wouldn’t optimistic that, on cautiously have I’m visibility visibility of some and of I for optimistic we foundry. beyond a next also on

the the for we guidance really I provided that’s that would characterize XXXX. way So

continue you are and forecast we our Now updating our will impact we our gathering and obviously Entegris constantly views to industry will new how report we share earnings. around the information with as evolving and future it

Sidney Ho

Okay, thanks.

Bertrand Loy

place good – a good that, But I to X% would for it’s XX% a the now, to year. start is say

Sidney Ho

helpful. That’s

on follow-up Just that. a

And have that not how to would year? pretty remind of business to business is? us kind do Any that grow is helpful? growth You a color node. process what leading-edge be tied this that rate business big you you expect Can sizable

Bertrand Loy

disclose pace really that, would XX% Yes, be that we precisely at and do fab But won’t the numbers, XX% our to than a very to industry I of today. grow MSI. trailing-edge, don’t that these business would is able so about actually business expect say I to faster

Gregory Graves

going everything a provides and on would would year, mean, below not. happened of, it said, the you business legacy some think I of nodes, said, that’s But asked I part of thing in them. I if about growth – growth had a to a And that when grow? have XXX lot and those you what it’s the years would what’s is ever helped I seen of – do really you mean, other year, going have drove the Sydney, about growth wafer if think I me rates stability say, for what last it, we’ve last have three double-digit think would shippers, lot products, millimeter the mean, and that legacy base. a ago, and I legacy mean, call which in the with I’ll that you no. sort you you

Sidney Ho

you with me, question tuck-in it your for you on M&A Got What for the transactions. did like think how to it. strategy? two is last the can deals acquisitions one ones larger Maybe like look you appetite M&A, – M&A your for based years looks about great. on ago? a few us walk through you smaller last Maybe continue it That’s looks just like on side, based

Bertrand Loy

say Sydney, last over in two we that least, the of the the in find an I we near-term. this to of comments, we’re months So, And transactions that type transactions. to prepared more I expect Remember forward, us indicative to do find to high-quality announced indicated of my the transactions should are going mid-size type is pursuing kind of at XX affordable for what that, combination to you as at likely businesses are would prices. do a small trying

Sidney Ho

much. very Okay. Thank you

Operator

Twigg with KeyBanc. We’ll go Weston next to

Weston Twigg

I mind. if don’t thanks Hi, for Actually, taking a my few, have question. you

to in the was first say, output much seems and one in, growth faster a related was growth just XXXX, huge number CapEx. in faster The rate than XX% like wafer likely Korea

to that again was share what So main and gains on continue the just XXXX? else it Was or does something in comment driver? wanted

Bertrand Loy

one year. So, the yes, grew the highlights Korea we in that was XX% of of

also these timely but it very investments we that recall, we Jangan a local capability in and there, Korea. our you center technical As We very And number talked of the were investments have off. we made about significant in and Korea. paid manufacturing actually expanded

they of been solutions. deposition realizing evaluating that As new our process I in more control memory They’re materials. advanced a contamination customers a also mentioned, advanced need have lot of

perfect. investments There to with our playgrounds So customers. have were a many timing as those Korean we were result, for across a our again, us And great the opportunities collaborate of uncovered many, portfolio.

that fabs. opportunities deposition and solutions, gas becoming examples be of the to filtration advanced material. for both products, our and which standards are would liquid the advanced And those extended fluidic really advanced So industry of

recipe the that’s favorable So question, and for factors as drivers the impact the same your yes, success expect well. in same have to XXXX. in we a to XXXX And

Weston Twigg

on helpful revenue, kind the just versus on revenue. flattish couple of got EPS a of that’s higher you guidance One, A other questions. EPS Okay, an color.

kind wondering factor – other changing or Just would what mix what’s of guidance? a some that deliver as that

Gregory Graves

a with it’s of I mean, – our we million Yes, of midpoint, a terms that quarter QX and dollars guidance midpoint OpEx I the guidance. couple And essentially have mean, higher reflects $XX at is million with It’s midpoint flat in higher the QX, higher was compensation in revenue. of quarter higher typically slightly primarily, in costs.

Weston Twigg

Okay.

So – come that down OpEx come down? would would the

Gregory Graves

Yes, well higher well depending as on usually the a slightly benefits they ER&D overall meaningful pretty business have in QX higher. we’ll have QX, performance, in here as

Weston Twigg

it. Got

Okay. Then….

Gregory Graves

I we I that’s gross mean, how I higher guided, we comparable the the slightly OpEx, kind But that’s guided mean, so algorithm. of margin guided

Weston Twigg

Makes sense.

Okay. And then just…

Gregory Graves

tax tax – rate in little QX, higher bit In rate will next the tax XX% be And the was about QX. the We a rate non-GAAP for talked year. XX.

Weston Twigg

at capacity lot demand. then finally, coming about not a Good There’s wafer is point, silicon on and the somewhat wafer new okay. least still line to And of just wondering early production constraints, XXXX. relative constrained in just

expansion? to silicon actually ability related MSI if impact would your wafer constraints to wondering I’m So grow

Bertrand Loy

it again, case. of So factored would based kind we into that’s estimates, our And risk believe, not do be the our a current we guidance. that on

Weston Twigg

Okay. Very helpful. Thanks.

Operator

to with Kapsch go Loop Markets. Capital We’ll Chris next

Chris Kapsch

on Yes, above trends. our a the good morning. I had for first quarter guidance seasonal implied follow-up and the

get expected are the talking leading, MSI first foundry producers a said seasonality about in of down, couple industry you And for quarter. to that. then logic there’s acute that think, obviously bellwether I the and be

So or really XD, benefit My implied that consumption getting the for amplified skewed market. – XX transition the XXX. from sounds quarter? as flows XD amplified end XX question towards seeing, first to these memory sort the folks above it benefit at from is you’re that producing you continued are what influencing the from healthy benefit benefit first-half more year, from of mentioned, the that you CapEx customers are Are already that guide eventually to is first is an that XD seasonal through are of getting as to an material transitioned you quarter. XX, it the just is like, really But this obviously, strong a is

Bertrand Loy

both from a So of we But our from we product product will for come trends. QX, the from areas. if standpoint, again, really line growth major behind three expect benefit think story to those about is guidance it which you

talked about new product in we be length and introductions would first the that liquid at The SCEM filtration in and past.

enjoy equip in terms expect defacto industry, I continue and of and gases filters, I solutions as strong And number of And as number those December. in from expect I new specialty the of of those the become of into benefits a lot added mentioned earlier. going China fluid would we in that factor lot new have in to And to in standard the in expect activity our products open fact, particular. fabs. really capacity I of new fluidic performance other as The the that online from expect to for a then expect to Korea we came fabs a mean, business. handling QX a continue would I we is, – will opportunities matter a very so advanced solutions the QX. capacity that those result I to new And continue lastly, for in a gas up built

Chris Kapsch

what Bertrand. how additional maybe XX edge then Okay. if nodes I XX Thank My just on And they’re older to a don’t very for requirements even trailing you see as you requirements? is and or follow-up about filtration or some fabs, older. that interesting itself, question how it’s implement – another are But increased appropriate question that nanometer at color, the looking purity case fabs comments know contamination trend, Thank now the – I’m for leading-edge about? is those are curious increased on that’s as being is sort purity are or if you adopted suppliers legacy tighter you. filtration, the imposing requirements that’s that fab it extra of also those their forthcoming description, or an fabs requirements

Bertrand Loy

fab-based. the question, would bit a the At limited expectations supply hard is we so totally the industry, emergence moment, solutions. us But that, types in to great of the now fairly development similar will speculate again, size little it’s impact to into I very it’s really a chain. of It’s this very and relatively opportunities be. would fab-based recent requirements a the for right for upstream what But Again, really Chris. mostly see are this –

Chris Kapsch

those latent defects requirements. fabs, did it then you chips trailing tighter that, – adopting did the – Is suggest more think, I in could you it you– – focus for And addressing produce? yields, these they the could be or may clarify Got on is edge doing what you about the as that it. just

Bertrand Loy

the aimed lot those at at fairly filtration those frankly, are a past, optimization. purification lot fabs older in in already and But operating yield. high yield of were So the of the a fabs solutions used

and focus done killer So really opportunity create defects, lies trying remove their for that is the of But or chips. around where not reliability the that reliability undermine on to really really it’s long-term to defects most because focus the the again, could it’s part.

Chris Kapsch

you. That’s Thank helpful.

Operator

[Operator Instructions] We’ll Harrison Seaport go Global Securities. next to Mike with

Michael Harrison

And which stands region, strong, you were I the asked wondering morning. was good or is Taiwan relatively it as end Korea is share out you color can Was some just being maybe but growth, Hi, the growth on there if loss, is intentional or decline about at some was losses market-driven, by on us that chart are share weak. that driven very give that? the there? it other looking What by?

Bertrand Loy

Yes.

I of, after would phase a year record in of digestion more really Taiwan was a XXXX XXXX. in say, So

for be had particular. we XXXX, in as record FOUP products you recall And know, those can can distort in a our very you If and sales sales lumpy trends.

the you of of And China. in Taiwanese the our made and customers those remember in fact in XXXXs China. many were opportunities recorded other for – is to made revenues we So investments by that,

the XXXX another that’s our we with Taiwan year. expectation when was our So started in in performance to in say that line way

Michael Harrison

is little strong X% sequential guidance growth talk All maybe And a over few business seasonality about and bit the very over about the the you changed right. years? wondering it’s Your suggesting can of a just if QX. how past

I some customers some it’s be think, seasonality mixed for decline that looking QX. may be look QX the bit of sequential more typical of of the you them there, from if little out at a a would into with

there that than markets we to just are are faster materials are things – or there? or the other other seeing you gains the you overall semiconductors, So at guys other grow – share work are expecting

Bertrand Loy

Yes.

So the short is yes. answer

characterizing. the do in you the I faster what when we to that’s the is expect, sequentially mentioned, characterized QX. expecting to semiconductor think, as growth. very indeed than But I grow seasonal solutions MSI contract expect see are better than continue we a the underlying materials expect to business We allow number And again, we trends marketplace you’re to and new that in well do of will our us what to

Michael Harrison

product wondering give the that leading additional kind question of can you’re unit-driven could versus last on your if Then you is, terms of me for just in seeing markets break lines right indicators in now the serve right. confidence All that out growth? growth you markets? wondering you’re I’m CapEx-driven that what seeing

Bertrand Loy

activity. by if of revenue you our is fab majority driven again, call, So

expect technology in And that believe logic fabs. once business So edge or at strong our in be MSI NAND trailing fabs of mostly consumable going competitors. again MSI have perform growth X%. and activity of roadmap. grow XX% that products in would other XD our the about we we number our on a And of XXXX driven so ahead that will unit-driven. we by again, new XD and to words we into And Again, have will of be XXXX positioned revenue ahead

to for in continue mentioned, for already FOUP fluid our see and to logic platform, solutions would expect opportunities fabs. comments, becoming the state-of-the-art memory I activity particular. X%, mentioned build new the On continued China, Korea at and by And that, we driven fab about CapEx CapEx there, think, in to I as I as handling previous would CapEx industry also mentioned side, in grow solutions up – I our advanced in expect advanced in and great the I which

Michael Harrison

All right. Thanks very much.

Operator

We’ll take Silver David Morningstar. final with question our from

David Silver

start with lithography. Yes. thank on guess, to you. big Hi, I a picture wanted EUV question I

more big recollection process my to materials conference pickup they I manufacturers, just And of pretty listening wondering, calls the one EUV two where in processes shipments displace going or inherently was equipment. that equipment I’m quarterly So the a were to noted was for is that intensive.

quickly then comment this if anticipate could equipment portfolio? off wondering work? I’m you you just technology to expect so how affecting you. for you on Thank to how And that first And demand overall all, your transition see put

Bertrand Loy

Yes.

be So Entegris. overall, EUV we a for the adoption net positive to expect

after So right growth But we of on steps we to we’ll be option to smaller see, remember, of see as fairly at of in node, the steps the that wafer. the as critical process describe, small process used And to a you’re the one rate. you EUV such, albeit that we growth hand, that node in continue number limited will in a will layers. number reduction expect rate believe a

So that’s the hand. one on

On open a EUV opportunities the the will hand, of of adoption other new for number Entegris.

resist we will to require scanner solutions, new filtration, and and also EUV better expect itself we Specifically, contamination around control packaging that develop better solutions around radicals. expect

do So serve we those are not new opportunities, new applications that today.

been EUV very we’ve of by support the I engaged industry participants years we So, And many to ready would adoption only industry with very are all in that, of the for say XXXX. the now.

David Silver

initiatives CapEx? could And then in you. me in of that for Great. your if Thank included could the XXXX, million you portion I $XXX the CapEx you million to also very growth growth versus sustaining XXXX much are? wouldn’t ask projection of you your of the you mind, remind what for newer portions $XXX if Thank that. highlight Could

Gregory Graves

gas really the prep XX% of other our to our probably two deposition we falls gas – of containers. the it surface One cylinders containers In We a that surface our own is chemical our in words, or pieces. the businesses. Sure. in and We of business. XX% number own is It’s and fleet business. modification into own growth-related

If container we clearly businesses of grow, those capacity. more And growth-related. are so those sort need

got The talk in business Those to We’ve liquid CapEx But there growth. our XXXX. couple other of a business. deposition our is growth-related to – the significant a are about in majority major we investment filtration coming of vast in got a piece XXXX. instances. is We’ve support investment that our

David Silver

Speakers] it question more squeeze [Multiple be in, Would one Okay. or I okay if are

Bertrand Loy

Yes.

just we’re Just quick David, running so one. long here, of one kind

David Silver

up much. very you Thank follow I’ll fine. that’s No, problem. No offline.

Bertrand Loy

you. thank Okay,

Gregory Graves

Thank you.

Operator

remarks. session. for conference back This to closing turn our like concludes Steven I’d the Cantor to question-and-answer

Steven Cantor

right. All you. Thank

remind on Before closing today’s call, of want I Morgan can a information facility conferences the contact to to headquarters to a again, everyone our that, Thank day. and for call, month, Goldman about be XX the great Conferences, in this Stanley, and me our note you we March and joining in again, and you, do our Analyst for Day Massachusetts, Investor will participating more couple at and have also register.

Operator

Ladies and conclude gentlemen, this thank for today’s does participation. conference. We you your

You may now disconnect.

Entegris (ENTG) 6 Feb 182017 Q4 Earnings call transcript