ENTEGRIS INC Q1 FY2025 earnings call

• Revenue grew 5% year-on-year excluding divestitures, slightly below guidance range. Gross margin, EBITDA margin, and non-GAAP EPS were at the midpoint of guidance.
• Materials Solutions sales up 8% year-on-year, with CMP slurries and pads delivering strong growth (almost 20% YOY). Advanced Purity Solutions up 3% YOY, driven by micro contamination control solutions but offset by contraction in FOUPs and fluid handling.
• Progress on new Colorado manufacturing site: on-track with initial equipment qualifications, first CHIPS Act grant milestone complete, expecting customer qualifications in second half of 2025. Kaohsiung facility making progress, expecting most liquid filter qualifications by end of 2025. Emphasized global manufacturing footprint and regionally integrated supply-chains strategy.
• Progress on moly deposition materials: excellent engagements with major 3D-NAND players, achieving POR wins, and making progress on novel wet-etch chemistries for moly-etch. Also, recent win with IPA purifiers for addressing trace metal contamination in HBM production.
• Focus on controlling cost structure, retaining ~75% of $15 million cost savings from APS division formation instead of fully reinvesting. Committed to paying down debt, aiming to reduce gross leverage to below 4 times.

In the first quarter, Materials Solutions sales were $341 million, up 8% year-on-year excluding divestitures, contributing a certain percentage to the total revenue. Advanced Purity Solutions sales were $434 million, up 3% year-on-year, but down 11% sequentially due to a sharp contraction in FOUPs and fluid handling revenue. Excluding divestitures, total revenue grew 5% year-on-year, with Materials Solutions up 8% and Advanced Purity Solutions up 3%.

• Q2 revenue guidance range widened to $735 million to $775 million due to tariff impacts. Excluding China, business remains strong.
• Expected gross margin of approximately 45% in Q2 (GAAP and non-GAAP). GAAP operating expenses expected to be $225 million to $229 million, non-GAAP operating expenses $179 million to $183 million. EBITDA margin expected ~27.5%, net interest expense ~$50 million, non-GAAP tax rate ~12%, GAAP EPS between $0.34 and $0.41, non-GAAP EPS between $0.60 and $0.67.
• 2025 outlook: provided broader revenue guidance for Q2, not updating full-year outlook yet, focusing on controlling cost, engaging with customers, and paying down debt.

• Uncertainty from new tariff regimes making it difficult to precisely quantify direct and indirect impact on customers and business.
• Tariffs on U.S. imports of raw materials and finished goods, with near-term modest impact on gross margins as mitigation plans are implemented with timing lag.
• Temporary impact to topline related to sales to China, with uncertainty of shipments of U.S.-made products into China affecting sequential sales.

Q: On the comments about direct impacts from tariffs and China and the outlook, could you help us understand the context of the Q2 guidance?

A: Bertrand Loy explained that entering Q2, business is strong with steady fill rate and strong book-to-bill ratio. Ex-China business is solid. China introduced new tariffs on U.S. imports, with Chinese customers putting inbound shipments from U.S. on hold, potentially impacting Q2 by up to $50 million. However, alternate Asia manufacturing sites are being qualified and efforts are underway to mitigate the impact.

Q: How has the timing of moly ramp changed given macro uncertainty?

A: Bertrand Loy stated that despite macro uncertainty, major node transitions are still on track. Most major 3D-NAND players will transition to moly in the second half of 2025, and Logic nodes like N2 and 18A are expected to ramp in the second half of 2025, positioning Entegris to capitalize on incremental opportunities in the back half of the year.

Q: Linda, can you walk us through the revenue impact from China and its effect on gross margin?

A: Linda LaGorga said there are tariffs on U.S. imports, and they have plans to mitigate tariff impacts over time through pricing surcharges, duty programs, and regionalized in-sourcing. However, there is a modest near-term impact on Q2 gross margins as mitigation plans are implemented with a timing lag, reflected in the guidance.