Entegris, Inc.

Good day and welcome to the Integris fourth quarter 2021 earnings release conference call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Bill Seymour, VP of Investor Relations. Please go ahead, sir.

Good morning, everyone. Earlier today, we announced the financial results for our fourth quarter and full year 2021. Before we begin, I would like to remind listeners that our comments today will include some forward-looking statements. These statements involve a number of risks and uncertainties, and actual results could differ materially from those projected in the forward-looking statements. Additional information regarding these risks and uncertainties is contained in our most recent annual report and subsequent quarterly reports that we have filed with the SEC. Please refer to the information on the disclaimer slide in the presentation. On this call, we will also refer to non-GAAP financial measures as defined by the SEC in Regulation G. You can find reconciliation tables in today's news release, as well as on the IR page of our website at integris.com. On the call today are Bertrand Lelat, our CEO, and Greg Graves, our CFO. With that, I'll hand the call over to Bertrand.

Thank you, Bill, and good morning to all. I will start by saying that I am extremely pleased with our fourth quarter results, which capped off another record year for Integris. I'm very proud of what our team achieved in 2021, especially in light of the challenging operating environment we faced throughout the year. During the fourth quarter, sales of $635 million grew 23% year on year and 10% sequentially. Our growth was strong across all three divisions as we benefited from robust industry growth and record demand for our products and solutions. EBITDA margin increased significantly to over 31% of sales and non-GAAP EPS of 96 cents was up 35% year over year. These fourth quarter results exceeded expectations and were driven in large part by our team successfully fighting through many of the supply chain hurdles that impacted us last year. Looking at the full year 2021, we achieved record sales of $2.3 billion, up 24%. All three of our divisions experienced strong top line growth and delivered significant margin expansion in 2021. Our outperformance for the year in semiconductor applications was driven in large part by our strong position and wins with leading edge solutions like liquid filtration, advanced deposition materials, selective edge, and other areas of increasing importance to our customers across the semiconductor ecosystem. In addition to our semiconductor focused solutions during 2021, Sales of the Aramis high purity bags used for COVID-19 vaccines exceeded $50 million. And looking further ahead, we are generating strong interest for these solutions for use with non-COVID biologics. Wrapping up the financial results for 2021, gross margins increased, albeit modestly, due to the COVID-related cost pressures. But we, once again, showcase the leverage in our model with EBITDA up 29% and non-GAAP EPS up 35% year on year. During 2021, we allocated $489 million of capital, which included reinvestments in our business of $211 million in CapEx and $168 million in R&D. and will return $111 million to shareholders in dividends and buybacks. On top of that, we repaid $150 million of net debt. Our 2021 Corporate Social Responsibility Program was another highlight for the year. Some of our accomplishments include publishing our first CSR annual report, contributing an additional $3 million to the Integris Foundation, which is focused on providing STEM scholarships to women and individuals from underrepresented communities. To date, Integris has contributed $5 million to the fund, with the goal of investing more than $30 million in STEM scholarships and internships by 2030. During the year, the percentage of diverse members of our board of directors increased to almost 40%, well on our way to our 2030 goal of 50%. And from an ESG ratings point of view, we increased our EcoVadis rating to silver and our MSCI score to an A rating. On the M&A front, we completed the acquisition of BISF's Precision Microchemicals business, which we have already migrated to our SAP platforms. We are currently running 100% of our global operations on one single instance of ACP, which allows greater end-to-end process optimization and visibility. These advantages have served us very well in the past two years, as we have effectively managed complex supply chain risks very effectively across our global platform. With all of our recent tuck-in acquisitions integrated into SAP, this provides obviously a great foundation for the future integration of CMC materials. Which then leads me to our pending acquisition of CMC materials. As I said, when we announced this transaction, we have long had tremendous respect for CMC materials technology, its team, and its reputation for operational excellence. We are very excited about the potential of this transaction to meaningfully expand our served markets, enhance our customer relationships, and create new value for our customers. As a reminder, the combined company will have a resilient business model with approximately 80% of unit-driven revenue. And we expect the transaction to be significantly accretive to non-GAAP earnings in the first year following close. We continue to expect the transaction will close in the second half of 2022 once we satisfy all of the customary closing conditions, including approval by CMC materials shareholders and approvals on the United States and certain foreign antitrust and competitive laws. On that point, last week, the mandatory waiting period on the US antitrust laws expired without any objection to the acquisition. And the date for the CMC shareholder vote to approve the transaction was set for March 3rd. In addition, we have started to focus on integration planning so we can hit the ground running immediately after the close. During the period between sign and close, we will be spending a great deal of time analyzing the various parts of CMC's portfolio of businesses to assess their respective long-term strategic fit to the combined platform, actively identify areas of revenue synergies and potential candidates for sale. No final determination has been made as of today on this final point. And of course, as you know, until closing, Integris and CMC will continue to operate as two completely separate businesses. Wrapping up 2021, our excellent operating performance showcase the strength of our team's execution and our highly differentiated unit-driven business model. As I said throughout last year, given the persistent supply chain issues, I cannot say enough how proud and grateful I am of the dedication, resilience, and perseverance of our team. Looking ahead to 2022, semi-market demand is expected to remain very strong, driven by robust chip demand and high industry capex. All of this bolstered by accelerated digitalization, smartphones, IoT, and high-performance computing, to name just a few. The semiconductor industry ecosystem was tested in 2021 and responded well, given the circumstances. We expect 2022 will likely be another year where the industry will struggle to meet the strong demand. And while the supply chain issues are expected to ease, we expect they will persist to some degree for most of 2022 as a result of the lingering COVID-induced supply chain inefficiencies. Looking at our business, we expect our sales growth in 2022 to range from 15 to 17%. Let me unpack that for you. To start, for the full year 2022, we expect the market, based on our unit capex mix, will be up approximately 10%. And given our strong position and wins in the new logic and memory nodes, we expect to outperform the market by approximately three to five points, consistent with what we laid out during our recent analyst day. In addition, we expect a little bit more than two points of growth from the impact of the BASF precision microchemicals business acquisition and continued growth in our life sciences high purity bag business. We also expect EBITDA flow-through to continue to be in line with our target model, and we expect to achieve a full year 2022 non-GAAP EPS in excess of $4.10. To be clear, the guidance I just provided does not include the impact from the pending CMC acquisition. In summary, this is an exciting time for Integris. We have increased conviction in the secular growth of the semiconductor market, demand for our products and solutions continues to be at record levels, and our relevance in the value chain has never been higher. In addition, the pace of node transitions for both logic and memory continue to be strong, and device architectures are becoming much more complex. This is great news, as you know, for Integris, because the unique set of capabilities we have built around process materials and materials purity will be key enablers of these new chip architectures. And as we have laid out, this will translate into a steadily expanding Integris content per wafer. Finally, I want to take a moment to thank our customers for the trust and confidence they place in Integris. And once again, thank the Integris teams around the world for their incredible work and grit in such dynamic times. Now let me turn the call to Greg.