Entegris(ENTG) - 2024 Q1 - Quarterly Results

Executive Summary & Business Outlook Entegris reported strong Q1 2024 results, exceeding guidance and reducing debt, with a positive outlook for market recovery and outperformance Q1 2024 Performance Highlights Entegris reported strong Q1 2024 financial results, exceeding guidance and completing strategic divestitures while reducing debt - CEO Bertrand Loy highlighted a positive start to the year with sales of $771 million at the high end of guidance, and adjusted EBITDA and non-GAAP EPS exceeding guidance[2] - The company completed all planned divestitures of non-core assets with the sale of the Pipeline and Industrial Materials (PIM) business[2] - Over $400 million of debt was paid down during the quarter using proceeds from the PIM sale and cash on hand[2] - Management believes the semiconductor market is healthier with normalizing inventories and expects a gradual market recovery throughout 2024, with Entegris continuing to outgrow the market[2] Q1 2024 Financial Results Summary (in thousands) | Metric | Q1 2024 (Mar 30, 2024) | Q1 2023 (Apr 1, 2023) | Q4 2023 (Dec 31, 2023) | | :--- | :--- | :--- | :--- | | GAAP Results | | | | | Net Sales | $771,025 | $922,396 | $812,291 | | Gross Margin % | 45.6% | 43.5% | 42.4% | | Net Income (Loss) | $45,266 | ($88,166) | $37,977 | | Diluted EPS | $0.30 | ($0.59) | $0.25 | | Non-GAAP Results | | | | | Adjusted Gross Margin % | 45.6% | 44.3% | 42.4% | | Adjusted EBITDA % | 29.0% | 27.3% | 26.0% | | Diluted Non-GAAP EPS | $0.68 | $0.65 | $0.65 | Q2 2024 Outlook Entegris projects Q2 2024 sales between $790 million and $810 million, with non-GAAP EPS of $0.68 to $0.73, representing an 8.5% sequential sales increase - The midpoint of the Q2 sales guidance represents an 8.5% sequential increase, excluding the impact of divestitures[5] Guidance for Q2 2024 (ending June 29, 2024) (in millions) | Metric | Expected Range | | :--- | :--- | | Sales | $790 - $810 | | GAAP Net Income | $64 - $71 | | GAAP Diluted EPS | $0.42 - $0.47 | | Non-GAAP Net Income | $103 - $110 | | Non-GAAP Diluted EPS | $0.68 - $0.73 | | Adjusted EBITDA | ~28% of sales | Business Segment Performance Entegris's Q1 2024 net sales were $771.0 million, with Materials Solutions as the largest segment, while Microcontamination Control led in segment profit Segment Net Sales (in thousands) | Segment | Q1 2024 (Mar 30, 2024) | Q1 2023 (Apr 1, 2023) | Q4 2023 (Dec 31, 2023) | | :--- | :--- | :--- | :--- | | Materials Solutions | $350,036 | $448,330 | $364,965 | | Microcontamination Control | $267,864 | $269,297 | $288,427 | | Advanced Materials Handling | $162,854 | $218,853 | $169,191 | Segment Profit (in thousands) | Segment | Q1 2024 (Mar 30, 2024) | Q1 2023 (Apr 1, 2023) | Q4 2023 (Dec 31, 2023) | | :--- | :--- | :--- | :--- | | Materials Solutions | $67,124 | ($29,522) | $53,204 | | Microcontamination Control | $86,555 | $95,997 | $97,558 | | Advanced Materials Handling | $24,606 | $48,165 | $20,463 | Materials Solutions (MS) The Materials Solutions segment provides materials-based solutions including CMP slurries, deposition materials, and process chemistries - The MS segment provides materials-based solutions including chemical mechanical planarization (CMP) slurries and pads, deposition materials, and process chemistries[6] Microcontamination Control (MC) The Microcontamination Control segment offers advanced filtration solutions for purifying critical liquid chemistries and gases in semiconductor manufacturing - The MC segment offers advanced filtration solutions to purify critical liquid chemistries and gases used in semiconductor manufacturing[7] Advanced Materials Handling (AMH) The Advanced Materials Handling segment develops solutions for protecting, monitoring, transporting, and delivering critical materials like wafers and liquid chemistries - The AMH segment develops solutions to protect, monitor, transport, and deliver critical materials like wafers and liquid chemistries[8] Consolidated Financial Statements Entegris reported Q1 2024 net sales of $771.0 million and net income of $45.3 million, with reduced assets and long-term debt Statements of Operations Entegris's Q1 2024 statements of operations show net sales of $771.0 million and a significant improvement in net income to $45.3 million from a prior-year loss - Operating income in Q1 2024 was significantly higher than Q1 2023, which was impacted by an $88.9 million goodwill impairment charge[19] Q1 2024 Statement of Operations Highlights (in thousands) | Line Item | Q1 2024 (Mar 30, 2024) | Q1 2023 (Apr 1, 2023) | | :--- | :--- | :--- | | Net Sales | $771,025 | $922,396 | | Gross Profit | $351,820 | $401,685 | | Operating Income | $117,592 | $13,466 | | Net Income (Loss) | $45,266 | ($88,166) | | Diluted EPS | $0.30 | ($0.59) | Balance Sheets Entegris's balance sheet reflects a decrease in total assets to $8.36 billion and a reduction in long-term debt to $4.17 billion as of March 30, 2024 - The decrease in total assets was driven by the reclassification and sale of assets held-for-sale, which dropped from $278.8 million to $8.0 million[21] Balance Sheet Highlights (in thousands) | Line Item | Mar 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $340,682 | $456,929 | | Total current assets | $1,575,447 | $1,977,327 | | Total assets | $8,364,723 | $8,812,591 | | Long-term debt | $4,172,942 | $4,577,141 | | Total shareholders' equity | $3,430,170 | $3,408,594 | Statements of Cash Flows Entegris generated $147.2 million in operating cash flow, with investing activities driven by business sales proceeds and financing activities primarily for debt repayment - Investing activities were primarily driven by $249.6 million in net proceeds from the sale of businesses[23] - Financing activities included payments of long-term debt of $643.3 million, partially offset by proceeds from new long-term debt of $224.5 million[23] Q1 2024 Cash Flow Highlights (in thousands) | Activity | Q1 2024 (Mar 30, 2024) | Q1 2023 (Apr 1, 2023) | | :--- | :--- | :--- | | Net cash provided by operating activities | $147,186 | $151,871 | | Net cash provided by (used in) investing activities | $181,016 | ($357) | | Net cash used in financing activities | ($439,861) | ($6,482) | Reconciliation of GAAP to Non-GAAP Measures Entegris provides non-GAAP metrics, with Q1 2024 adjusted net sales of $737.1 million and non-GAAP EPS of $0.68, primarily excluding amortization and restructuring costs Net Sales and Gross Profit Reconciliation This section reconciles GAAP net sales and gross profit to non-GAAP figures, primarily by adjusting for divestitures and restructuring costs Reconciliation of Net Sales (in thousands) | Line Item | Q1 2024 | Q1 2023 | Q4 2023 | | :--- | :--- | :--- | :--- | | Net sales (GAAP) | $771,025 | $922,396 | $812,291 | | Less: Divestitures | (33,907) | (144,038) | (46,843) | | Adjusted Net sales (Non-GAAP) | $737,118 | $778,358 | $765,448 | Reconciliation of Gross Profit (in thousands) | Line Item | Q1 2024 | Q1 2023 | Q4 2023 | | :--- | :--- | :--- | :--- | | Gross profit (GAAP) | $351,820 | $401,685 | $344,680 | | Restructuring costs | — | 7,377 | 28 | | Adjusted gross profit (Non-GAAP) | $351,820 | $409,062 | $344,708 | Operating Income & EBITDA Reconciliation This section reconciles GAAP operating income to adjusted EBITDA, with key adjustments including amortization of intangible assets and impairment charges - Major adjustments to operating income in Q1 2024 included $50.2 million for amortization of intangible assets and $13.0 million for impairment of long-lived assets, offset by a $4.8 million gain on sale of businesses[28] Reconciliation to Adjusted EBITDA (in thousands) | Line Item | Q1 2024 | Q1 2023 | Q4 2023 | | :--- | :--- | :--- | :--- | | Net income (loss) | $45,266 | ($88,166) | $37,977 | | GAAP - Operating income | 117,592 | 13,466 | 101,017 | | Adjustments* | 60,496 | 191,306 | 67,251 | | Adjusted operating income | 178,088 | 204,772 | 168,268 | | Depreciation | 45,343 | 46,775 | 42,558 | | Adjusted EBITDA | $223,431 | $251,547 | $210,826 | Net Income & EPS Reconciliation This section reconciles GAAP net income and EPS to non-GAAP figures, primarily adjusting for amortization, asset impairment, and debt extinguishment - Key adjustments to arrive at non-GAAP net income for Q1 2024 included adding back $50.2 million for amortization, $13.0 million for asset impairment, and $11.6 million for loss on debt extinguishment, offset by a $4.8 million gain on business sales and a $13.5 million tax effect[30] Reconciliation to Non-GAAP Net Income & EPS (in thousands) | Line Item | Q1 2024 | Q1 2023 | Q4 2023 | | :--- | :--- | :--- | :--- | | GAAP net income (loss) | $45,266 | ($88,166) | $37,977 | | Non-GAAP net income | $103,772 | $97,782 | $97,943 | | Diluted GAAP EPS | $0.30 | ($0.59) | $0.25 | | Diluted Non-GAAP EPS | $0.68 | $0.65 | $0.65 | Outlook Reconciliation This section provides the Q2 2024 outlook reconciliation, with primary adjustments for amortization of intangible assets and deal-related costs - The primary adjustments for the Q2 2024 outlook are expected to be $48 million for amortization of intangible assets and $2 million for deal, transaction, and integration costs, with an associated income tax effect of ($11) million[33] Q2 2024 Outlook Reconciliation (in millions) | Metric | GAAP Outlook | Adjustments | Non-GAAP Outlook | | :--- | :--- | :--- | :--- | | Net Income | $64 - $71 | $39 | $103 - $110 | | Diluted EPS | $0.42 - $0.47 | $0.26 | $0.68 - $0.73 |