Entegris, Inc.

Welcome to the Integrist first quarter 2023 earnings conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero. I would now like to turn the call over to Bill Seymour, Vice President of Investor Relations. Sir?

Good morning, everyone. Earlier today, we announced the financial results for our first quarter of 2023. 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 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 antegris.com. On the call today are Bertrand Lawat, our CEO, who's joining us from Taiwan, and Greg Graves, our CFO. With that, I'll hand the call over to Bertrand.

Thank you, Bill. Good morning to all. I would start by saying that I am very pleased with our performance in the first quarter, especially in light of the dynamic semi-market backdrop. During the quarter, we delivered strong results above our guidance on all fronts. Sales were $922 million, EBITDA margins were 27%, and non-GAAP EPS were $0.65. Let me make a few additional comments on our financial performance. While sales were down sequentially for us in the quarter, we believe we significantly outperformed the market. This outperformance was driven in large part by our strong position at the leading edge technology nodes and also from the impact of easing supply chain constraints, particularly for our AMH and MC divisions. In terms of profitability, gross margins were up sequentially and EBITDA margins were essentially flat. Next, I would like to highlight a few very important items that the team is focused on. First, on the CMC integration, the integration is proceeding very well. We are on track to complete the migration to a common ERP platform by the end of the third quarter, which also puts us on track to achieve the 75 million run rate cost synergy target by the fourth quarter as originally planned. As you know, that pay down is also a high priority for us and divestitures of non-core assets are a significant lever we can use to reduce our debt. As you've seen so far this year, we have entered into agreements for the sale of two businesses for a total of $835 million. The first divestiture was QED, which was part of CMC. We sold QED for $135 million. That sale closed in Q1 and in April. We used the proceeds to pay down the bridge loan. And yesterday, We announced an agreement to sell the electronic chemicals business, which was also a part of CMC, to Fujifilm for $700 million at a low teens multiple. We expect the EC sale to close by the end of 2023. We think Fujifilm will be a great owner for the electronic chemicals business. They will be well positioned to support the growing market demand for its high-purity processed chemicals in North America, Europe, and beyond, with the high level of quality and service that FAB customers require. The proceeds for the sale of EC, when realized, will also be used for debt pay down. Another priority for the team has been aligning our cost structure to the current industry environment. To that end, we have taken several actions to lower costs including headcount reductions and a few small site closures. These actions, in addition to the CMC synergies, will help reduce our cost basis. While effectively managing our cost structure is important, we also continue to make investments that are critical to our long-term growth and success. To that end, we have maintained our significant R&D investments with particular focus on differentiated and high-growth products like advanced deposition materials, CMP slurries, and liquid filtration. Also critical to our long-term growth are our announced capacity expansions. Our new manufacturing facility in Taiwan is approaching completion with initial production expected to begin in the third quarter. I was proud to participate in the opening ceremonies of this facility in Kaohsiung yesterday. The site will be a showcase of Integris' commitment, not only as a technology leader, but also as a world-class manufacturer. We believe these attributes represent a real competitive advantage, as the technology roadmaps of our customers become increasingly challenging and require incredibly precise and stable manufacturing capabilities. delivered from their most trusted suppliers. We also expect to break ground soon on our new manufacturing center in Colorado Springs, which is targeted to begin initial commercial operations in early 2025. Both the Taiwan and Colorado Springs facilities are critical to address our long-term capacity needs, and both have excellent financial return profiles. Looking at the rest of 2023, forecasting the industry this year continues to be challenging. However, based on discussions with our customers and using third-party estimates, we expect that semiconductor fab utilization will likely bottom in Q2. For the full year 2023, we now expect the market will be down In the mid-teens, or a bit more than the down 13% we cited on the last earnings call. Given our strong position in the new technology nodes, we now expect to outperform the market on a pro forma basis at or slightly above the high end of the three to six points outperformance range target we discussed in our recent analyst day. Putting it all together, we continue to expect our pro forma sales in 2023 to be down on percentage basis in the high single digits. Wrapping up our outlook for 2023, we also continue to expect EBITDA will be approximately 27% to 28% of revenue for the year. And we expect full year 2023 non-GAAP EPS to exceed $2.30 per share. Our approach this year is playing both defense and offense, being mindful of cost, but also preparing to quickly re-accelerate when signs of an improving market emerge. The semiconductor industry remains poised for significant long-term growth, on the way to $1 trillion by 2030. driven by exciting catalysts such as AI and EVs, to name just a few. In addition, the pace of node transitions continue to be on track, and device architectures are becoming much more complex, trends which ultimately play to our strength. Integracy's breadth of capabilities in material science and materials purity will enable us to offer unique solutions to help our customers improve device performance and shorten their time to yield. These trends and our increasingly mission-critical solutions are translating into rapidly expanding content per wafer and market share growth for Integris. Finally, I want to take a moment to thank our customers for the trust and confidence they place in Integris. And I also want to thank the Integris team for displaying strong adaptability and a keen focus on our customers in a challenging industry environment. Before I hand over to Greg, I want to welcome Linda Lagorga to our team as our new CFO. Linda will be officially joining us next week, and we cannot wait to have her on board. But today, I want to take a minute to again thank Greg for his immense contributions to Integris and for being such a great partner to me and the rest of the leadership team for all these years. So now let me turn the call to Greg. Greg?