Entegris, Inc.

Good day, everyone, and welcome to the Integris Q3 2022 earnings release call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Bill Seymour, VP of Investor Relations. Please go ahead, sir.

Good morning, everyone. Earlier today, we announced the financial results for our third quarter of 2022. 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 and Regulation G. You can find a reconciliation table in today's news release as well as on our IR page of our website at integris.com. On the call today are Bertrand Lawat, our CEO, and Greg Graves, our CFO. With that, I'll hand it over to Bertrand.

Thank you, Bill, and good morning to all. Let's turn to our results. Sales growth and overall execution were solid in the quarter, especially considering the growing uncertainty in the semi-market. For the quarter, on a pro forma basis, sales were up 14% year-on-year and down 2% sequentially. On a reported basis, sales were up 71% year-on-year and up 44% sequentially. EPIDAR margins were 30% in the quarter, in line with our guidance. And non-GAAP EPS, on an as-reported basis, was down year over year, mostly reflecting the increase in interest expense. Let me make a few additional comments on our sales performance. In the third quarter, growth in our unit-driven solutions was led by liquid filtration, formulated cleans, and CMP consumables, solutions which are of growing importance to our customers' technology roadmaps. Growth also remains strong in the quarter in many of our CapEx-driven solutions, which are linked to new FAB investments. So far this year, we have yet to see any meaningful slowdown in new FAB construction projects, and this has helped sustain strong growth in fluid and wafer handling solutions, as well as gas filtration and purification products. As I said, our overall sales performance was solid in the quarter, especially in light of the emerging industry softness. And while sales were slightly below our guidance, they would have been closer to the midpoint of the range, excluding the impact of foreign exchange and the underperformance of the pipeline and industrial materials business, a business we expect to divest this quarter. Moving on to an update on the CMC integration, as we said in our recent analysis meeting, we've been making fast progress on many critical fronts. The organizational structure was largely finalized during the integration planning pre-close and we are on track to achieve the cost synergy targets we have laid out during our analyst meeting. Achievement of the cost synergies will be driven by the impact of the old changes, as well as other synergies expected to be realized shortly after our migration to common ERP platform by early summer 2023. The next critical component of the integration is the realization of revenue synergies and a lot of progress has been made here as well. We believe our combined offering across our extended CMP module will provide our customers best in class technology with optimum time to yield. This offering and our capabilities are unique in the industry and we believe it will ultimately drive market share gains for Integris over time. The final point I would like to discuss on the integration relates to our assessment of the strategic fit of the various parts of the CMC materials portfolio. On that note, on October 11th, we announced that we entered into a definitive agreement for Infineon to acquire the pipeline and industrial materials business for $240 million. For reference, the EBITDA for PIM is expected to be approximately $25 million this year. As a reminder, PIM was acquired as part of the CMC acquisition and is currently reported in the SEM division. The transaction is expected to close later this year. To help with your analysis, we expect to provide historical financials excluding the PIM business after the transaction closes. I would like to emphasize that deleveraging is one of our highest near-term priorities at Integris, and while divestitures were not included in our debt reduction targets we laid out in our recent Annals meeting, the PIMS sale and other additional sales could accelerate that pay down. Going forward, we will provide updates on other potential divestitures as appropriate. As you know, the United States government announced new export controls restricting the sales of semiconductor technology to certain companies in China. Since the announcement, our teams have been focused on ensuring full compliance with these rules and have seized impacted shipments and services as required. We estimate that these new regulations will reduce our sales by approximately $40 to $50 million in Q4. And this is reflected in our guidance for Q4 and for the year. Now, transitioning to our outlook, Greg will discuss the fourth quarter guidance in more detail, but while demand for most of our products is holding up well, we are taking a more cautious view on the fourth quarter, given the softening in the semi-market and the impact of the US government export restrictions I just mentioned. Given that, we now expect revenue to be approximately $3.3 billion in 2022 on a reported basis and more than $3.9 billion in 2022 on a pro forma basis. This is approximately 13% growth on a pro forma basis representing another year of very strong outperformance for Integris in 2022. We also continue to expect pro forma EBITDA of the combined company to be approximately 30% of revenue in calendar 2022. We recognize there is increased uncertainty in the overall economy and in the semi-space. the positive secular growth drivers of our business have not changed. We continue to believe the semiconductor industry is poised for healthy long-term growth on the way to a $1 trillion level by 2030. And as you know, Integris now offers the industry's most comprehensive electronic materials portfolio, operating squarely at the crossroads of materials science and materials purity, These two core capabilities are quickly becoming the most critical enablers of our customers' technology roadmaps, and these trends are translating to a rapidly expanding content per wafer, and by extension, growth above the market for integris. Wrapping it up, we are pleased with our performance so far this year, and we look forward to delivering solid results for the full year. Looking ahead, with approximately 80% of our revenue now unit-driven, our platform should prove to be resilient relative to other industry participants. You can also expect us to be flexible and pragmatic going into next year, ready to make adjustments as needed, prioritizing cash flow and debt pay down, all the while continuing to make the necessary investments in our business to capture the full long-term growth potential ahead of us. Finally, I want to take a moment to thank our customers for the trust and confidence they placed in Integris, and once again, thank our teams around the world for their incredible work and commitment. Now, let me turn the call to Greg.