- Third-quarter revenue of $888 million, decreased 11% from
prior year and 1% sequentially
- Third-quarter GAAP diluted EPS of $0.22
- Third-quarter non-GAAP diluted EPS of $0.68
Entegris, Inc. (NASDAQ: ENTG), today reported its financial
results for the Company’s third quarter ended September 30, 2023.
Third-quarter sales were $888.2 million, a decrease of 11% from the
same quarter last year. Third-quarter GAAP net income was $33.2
million, or $0.22 income per diluted share, which included $15.9
million of goodwill impairment related to the sale of the
Electronic Chemicals business, $51.2 million of amortization of
intangible assets, $10.3 million of integration costs related to
the acquisition of CMC Materials and $5.7 million of other net
costs. Non-GAAP net income was $103.6 million for the third quarter
and non-GAAP earnings per diluted share was $0.68.
Bertrand Loy, Entegris’ president and chief executive officer,
said: “The Entegris team delivered another quarter of solid results
and execution, in what remains a challenging industry environment.
Our revenue was down 1 percent sequentially, in line with
expectations, and we continued to enjoy growth in product lines
that are of increasing importance to our customers.”
Mr. Loy added: “During the quarter, we made great progress on
key commitments and initiatives. The CMC Materials integration is
largely complete, we have divested three non-core businesses so far
this year, and we are focused on improving our cash flow to rapidly
pay down our outstanding debt. In addition, last week, we submitted
an application for Chips Act funding for our new Colorado Springs
facility, which will be critical to strengthen the U.S. domestic
semiconductor ecosystem.”
Mr. Loy added: "The semiconductor industry has likely reached a
bottom in terms of utilization rates. However, the timing of the
industry recovery continues to be uncertain. In this environment,
we are effectively managing costs in the short-term, while making
critical investments for the future. The long-term growth prospects
for the semiconductor industry remain intact and the industry is
entering a period of unprecedented technology change and device
complexity. These trends are very favorable for Entegris, because
our value proposition is unique and increasingly integral to our
customers’ roadmaps, especially in the areas of materials science,
materials purity, and end-to-end solutions. This will ultimately
translate into rapidly expanding content per wafer and superior
growth for Entegris.”
Quarterly Financial Results
Summary
(in thousands, except percentages and per
share data)
GAAP Results
September
30, 2023
October 1,
2022
July 1,
2023
Net sales
$888,239
$993,828
$901,000
Operating income
$117,061
$14,889
$267,614
Operating margin - as a % of net sales
13.2%
1.5%
29.7%
Net income (loss)
$33,212
($73,703)
$197,646
Diluted earnings (loss) per common
share
$0.22
($0.50)
$1.31
Non-GAAP Results
Non-GAAP adjusted operating income
$195,715
$253,207
$200,917
Non-GAAP adjusted operating margin - as a
% of net sales
22.0%
25.5%
22.3%
Non-GAAP net income
$103,588
$127,770
$99,605
Diluted non-GAAP earnings per common
share
$0.68
$0.85
$0.66
Fourth-Quarter Outlook
The Company’s guidance for the fourth quarter ending December
31, 2023, does not include the recently divested Electronic
Chemicals business and only includes a minimal impact from the
alliance agreement with Element Solutions, that was terminated
earlier this year. Excluding the sales of these divested businesses
for the third quarter 2023, fourth quarter 2023 sales are estimated
to be down sequentially approximately 2% at the midpoint of the
fourth quarter 2023 sales guidance range provided below.
For the fourth quarter ending December 31, 2023, the Company
expects sales of $770 million to $790 million, GAAP net income of
$37 million to $45 million and diluted earnings per common share
between $0.25 and $0.30. On a non-GAAP basis, the Company expects
diluted earnings per common share to range from $0.55 to $0.60,
reflecting net income on a non-GAAP basis in the range of $83
million to $91 million. The Company also expects EBITDA of
approximately 26% to 27% of sales, for the fourth quarter of
2023.
Segment Results
The Company operates in three segments (the Materials Solutions
segment resulted from combining the Advanced Planarization
Solutions and the Specialty Chemicals and Engineered Materials
segments):
Materials Solutions (MS): MS provides
advanced consumable materials, such as CMP slurries and pads,
deposition materials, process chemistries and gases, formulated
cleans, etchants and other specialty materials; that enable our
customers’ technical roadmaps, improve device performance, lower
their total cost of ownership and enhance their yields.
Microcontamination Control (MC): MC
offers advanced filtration solutions that improve customers’ yield,
device reliability and cost; by filtering and purifying critical
liquid chemistries and gases used in semiconductor manufacturing
processes and other high-technology industries.
Advanced Materials Handling (AMH): AMH
develops solutions that improve customers’ yields by protecting
critical materials during manufacturing, transportation, and
storage; including products that monitor, protect, transport and
deliver critical liquid chemistries, wafers, and other substrates
for a broad set of applications in the semiconductor, life sciences
and other high-technology industries.
Third-Quarter Results Conference Call Details
Entegris will hold a conference call to discuss its results for
the third quarter on Thursday, November 2, 2023, at 9:00 a.m.
Eastern Time. Participants should dial 800-445-7795 or +1
785-424-1699, referencing confirmation ID: ENTGQ323. Participants
are asked to dial in 10 minutes prior to the start of the call. For
the live webcast and replay of the call, please Click Here.
Management’s slide presentation concerning the results for the
third quarter will be posted on the Investor Relations section of
www.entegris.com in the morning before the call.
About Entegris Entegris is a leading supplier of advanced
materials and process solutions for the semiconductor and other
high-tech industries. Entegris has approximately 9,000 employees
throughout its global operations and is ISO 9001 certified. It has
manufacturing, customer service and/or research facilities in the
United States, Canada, China, France, Germany, Israel, Japan,
Malaysia, Singapore, South Korea, and Taiwan. Additional
information can be found at www.entegris.com.
Non-GAAP Information The Company’s condensed consolidated
financial statements are prepared in conformity with accounting
principles generally accepted in the United States (GAAP). Proforma
net sales, adjusted EBITDA, adjusted gross profit, adjusted segment
profit, adjusted operating income, non-GAAP net income, non-GAAP
adjusted operating margin and diluted non-GAAP earnings per common
share, together with related measures thereof, are considered
“non-GAAP financial measures” under the rules and regulations of
the Securities and Exchange Commission. The presentation of this
financial information is not intended to be considered in isolation
or as a substitute for, or superior to, the financial information
prepared and presented in accordance with GAAP. The Company
provides supplemental non-GAAP financial measures to better
understand and manage its business and believes these measures
provide investors and analysts additional and meaningful
information for the assessment of the Company’s ongoing results.
Management also uses these non-GAAP measures to assist in the
evaluation of the performance of its business segments and to make
operating decisions. Management believes that the Company’s
non-GAAP measures help indicate the Company’s baseline performance
before certain gains, losses or other charges that may not be
indicative of the Company’s business or future outlook, and that
non-GAAP measures offer a more consistent view of business
performance. The Company believes the non-GAAP measures aid
investors’ overall understanding of the Company’s results by
providing a higher degree of transparency for such items and
providing a level of disclosure that will help investors generally
understand how management plans, measures and evaluates the
Company’s business performance. Management believes that the
inclusion of non-GAAP measures provides greater consistency in its
financial reporting and facilitates investors’ understanding of the
Company’s historical operating trends by providing an additional
basis for comparisons to prior periods. The reconciliations of GAAP
gross profit to adjusted gross profit, GAAP segment profit to
adjusted operating income, GAAP net income to adjusted operating
income and adjusted EBITDA, GAAP net income and diluted earnings
per common share to non-GAAP net income and diluted non-GAAP
earnings per common share and GAAP outlook to non-GAAP outlook are
included elsewhere in this release.
Cautionary Note on Forward-Looking Statements This news
release contains “forward-looking statements.” The words “believe,”
“expect,” “anticipate,” “intend,” “estimate,” “forecast,”
“project,” “should,” “may,” “will,” “would” or the negative thereof
and similar expressions are intended to identify such
forward-looking statements. These forward-looking statements may
include statements about supply chain matters; inflationary
pressures; future period guidance or projections; the Company’s
performance relative to its markets, including the drivers of such
performance; market and technology trends, including the duration
and drivers of any growth trends; the development of new products
and the success of their introductions; the focus of the Company’s
engineering, research and development projects; the Company’s
ability to execute on our business strategies, including with
respect to the Company’s expansion of its manufacturing presence in
Taiwan and in Colorado Springs; the Company’s capital allocation
strategy, which may be modified at any time for any reason,
including share repurchases, dividends, debt repayments and
potential acquisitions; the impact of the acquisitions and
divestitures the Company has made and commercial partnerships the
Company has established, including the acquisition of CMC
Materials, Inc. (now known as CMC Materials LLC) (“CMC Materials”);
trends relating to the fluctuation of currency exchange rates;
future capital and other expenditures, including estimates thereof;
the Company’s expected tax rate; the impact, financial or
otherwise, of any organizational changes; the impact of accounting
pronouncements; quantitative and qualitative disclosures about
market risk; and other matters. These forward-looking statements
are based on current management expectations and assumptions only
as of the date of this Quarterly Report, are not guarantees of
future performance and involve substantial risks and uncertainties
that are difficult to predict and that could cause actual results
to differ materially from the results expressed in, or implied by,
these forward-looking statements. These risks and uncertainties
include, but are not limited to, weakening of global and/or
regional economic conditions, generally or specifically in the
semiconductor industry, which could decrease the demand for the
Company’s products and solutions; the level of, and obligations
associated with, the Company’s indebtedness, including the debts
incurred in connection with the acquisition of CMC Materials; risks
related to the acquisition and integration of CMC Materials,
including unanticipated difficulties or expenditures relating
thereto, the ability to achieve the anticipated synergies and
value-creation contemplated by the acquisition of CMC Materials and
the diversion of management time on transaction-related matters;
raw material shortages, supply and labor constraints, price
increases, inflationary pressures and rising interest rates;
operational, political and legal risks of the Company’s
international operations; the Company’s dependence on sole source
and limited source suppliers; the Company’s ability to meet rapid
demand shifts; the Company’s ability to continue technological
innovation and introduce new products to meet customers’ rapidly
changing requirements; substantial competition; the Company’s
concentrated customer base; the Company’s ability to identify,
complete and integrate acquisitions, joint ventures, divestitures
or other similar transactions; the Company’s ability to effectively
implement any organizational changes; the Company’s ability to
protect and enforce intellectual property rights; the impact of
regional and global instabilities, hostilities and geopolitical
uncertainty, including, but not limited to, the ongoing conflicts
between Ukraine and Russia and between Israel and Hamas, as well as
the global responses thereto; the increasing complexity of certain
manufacturing processes; changes in government regulations of the
countries in which the Company operates, including the imposition
of tariffs, export controls and other trade laws and restrictions
and changes to national security and international trade policy,
especially as they relate to China; fluctuation of currency
exchange rates; fluctuations in the market price of the Company’s
stock; and other risk factors and additional information described
in the Company’s filings with the Securities and Exchange
Commission (the “SEC”), including under the heading “Risk Factors”
in Item 1A of the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2022, filed on February 23, 2023,
and in the Company’s other SEC filings. Except as required under
the federal securities laws and the rules and regulations of the
SEC, the Company undertakes no obligation to update publicly any
forward-looking statements or information contained herein, which
speak as of their respective dates.
Entegris, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations
(In thousands, except per share
data)
(Unaudited)
Three months ended
September 30, 2023
October 1, 2022
July 1, 2023
Net sales
$888,239
$993,828
$901,000
Cost of sales
521,165
622,157
516,834
Gross profit
367,074
371,671
384,166
Selling, general and administrative
expenses
116,051
226,446
145,596
Engineering, research and development
expenses
66,810
64,990
71,030
Amortization of intangible assets
51,239
65,346
54,680
Goodwill impairment
15,913
—
—
Gain on termination of alliance
agreement
—
—
(154,754)
Operating income
117,061
14,889
267,614
Interest expense, net
75,594
82,755
78,605
Other expense, net
10,243
12,852
7,724
Income (loss) before income tax
benefit
31,224
(80,718)
181,285
Income tax benefit
(2,127)
(7,015)
(16,491)
Equity in net loss of affiliates
139
—
130
Net income (loss)
$33,212
($73,703)
$197,646
Basic earnings (loss) per common
share:
$0.22
($0.50)
$1.32
Diluted earnings (loss) per common
share:
$0.22
($0.50)
$1.31
Weighted average shares outstanding:
Basic
150,127
148,570
149,825
Diluted
151,229
148,570
150,837
Entegris, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations
(In thousands, except per share
data)
(Unaudited)
Nine months ended
September 30, 2023
October 1, 2022
Net sales
$2,711,635
$2,335,963
Cost of sales
1,558,710
1,344,075
Gross profit
1,152,925
991,888
Selling, general and administrative
expenses
431,514
404,239
Engineering, research and development
expenses
209,746
160,953
Amortization of intangible assets
163,493
90,491
Goodwill impairment
104,785
—
Gain on termination of alliance
agreement
(154,754)
—
Operating income
398,141
336,205
Interest expense, net
239,020
126,962
Other expense, net
13,309
27,373
Income before income tax
expense
145,812
181,870
Income tax expense
2,851
30,377
Equity in net loss of affiliates
269
—
Net income
$142,692
$151,493
Basic earnings per common share:
$0.95
$1.08
Diluted earnings per common share:
$0.95
$1.08
Weighted average shares outstanding:
Basic
149,793
140,045
Diluted
150,816
140,892
Entegris, Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(In thousands)
(Unaudited)
September 30, 2023
December 31, 2022
ASSETS
Current assets:
Cash, cash equivalents and restricted
cash
$594,020
$563,439
Trade accounts and notes receivable,
net
463,083
535,485
Inventories, net
662,169
812,815
Deferred tax charges and refundable income
taxes
67,848
47,618
Assets held-for-sale
1,045,217
246,531
Other current assets
111,223
129,297
Total current assets
2,943,560
2,335,185
Property, plant and equipment, net
1,406,357
1,393,337
Other assets:
Right-of-use assets
83,548
94,940
Goodwill
3,954,036
4,408,331
Intangible assets, net
1,368,363
1,841,955
Deferred tax assets and other noncurrent
tax assets
30,211
28,867
Other
38,541
36,242
Total assets
$9,824,616
$10,138,857
LIABILITIES AND EQUITY
Current liabilities
Short-term debt, including current portion
of long-term debt
—
151,965
Accounts payable
139,637
172,488
Accrued liabilities
340,737
328,784
Liabilities held-for-sale
139,270
10,637
Income tax payable
63,515
98,057
Total current liabilities
683,159
761,931
Long-term debt, excluding current
maturities
5,425,496
5,632,928
Long-term lease liability
71,347
80,716
Other liabilities
276,325
445,282
Shareholders’ equity
3,368,289
3,218,000
Total liabilities and equity
$9,824,616
$10,138,857
Entegris, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(In thousands)
(Unaudited)
Three months ended
Nine months ended
September 30,
2023
October 1,
2022
September 30,
2023
October 1,
2022
Operating activities:
Net income
$33,212
($73,703)
$142,692
$151,493
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation
39,631
45,203
130,125
93,489
Amortization
51,239
65,346
163,493
90,491
Share-based compensation expense
10,280
38,077
52,416
57,544
Loss on extinguishment of debt and
modification
3,593
2,235
10,862
2,235
Impairment of Goodwill
15,913
—
104,785
—
Gain on termination of alliance
agreement
—
—
(154,754)
—
Loss on sale of business and held for sale
assets
—
—
28,579
—
Other
(10,243)
52,533
(27,533)
61,220
Changes in operating assets and
liabilities, net of effects of acquisitions:
Trade accounts and notes receivable
(18,236)
22,931
(295)
(34,378)
Inventories
68,349
(55,394)
63,340
(180,335)
Accounts payable and accrued
liabilities
27,940
56,162
4,345
83,307
Income taxes payable, refundable income
taxes and noncurrent taxes payable
(21,204)
(12,089)
(36,774)
(15,637)
Other
(451)
4,231
(2,369)
10,801
Net cash provided by operating
activities
200,023
145,532
478,912
320,230
Investing activities:
Acquisition of property and equipment
(78,139)
(126,739)
(328,182)
(318,836)
Acquisition of business, net of cash
acquired
—
(4,474,925)
—
(4,474,925)
Proceeds from sale of business
—
—
134,286
—
Proceeds from termination of alliance
agreement
—
—
169,251
—
Other
1,553
1
1,919
1,124
Net cash used in investing
activities
(76,586)
(4,601,663)
(22,726)
(4,792,637)
Financing activities:
Proceeds from revolving credit facility,
short-term debt and long-term debt
100,279
2,810,439
217,449
5,416,753
Payments of revolving credit facility,
short-term debt and long-term debt
(175,279)
(223,000)
(603,950)
(416,000)
Payments for debt issuance costs
—
(88,910)
(3,475)
(99,489)
Payments for dividends
(15,052)
(14,929)
(45,202)
(42,413)
Issuance of common stock
866
1,787
37,633
10,764
Taxes paid related to net share settlement
of equity awards
(1,894)
(6,430)
(11,540)
(22,747)
Other
(345)
(272)
(923)
(859)
Net cash (used in) provided by
financing activities
(91,425)
2,478,685
(410,008)
4,846,009
Effect of exchange rate changes on
cash, cash equivalents and restricted cash
(5,009)
(11,118)
(15,597)
(21,500)
Increase (Decrease) in cash, cash
equivalents and restricted cash
27,003
(1,988,564)
30,581
352,102
Cash, cash equivalents and restricted
cash at beginning of period
567,017
2,743,231
563,439
402,565
Cash, cash equivalents and restricted
cash at end of period
$594,020
$754,667
$594,020
$754,667
Entegris, Inc. and
Subsidiaries
Segment Information
(In thousands)
(Unaudited)
Three months ended
Nine months ended
Net sales
September 30, 2023
October 1, 2022
July 1, 2023
September 30, 2023
October 1, 2022
Materials Solutions
$435,538
$518,046
$440,634
$1,324,502
$922,196
Microcontamination Control
286,217
280,550
283,614
839,128
821,320
Advanced Materials Handling
180,248
210,405
190,356
589,457
632,602
Inter-segment elimination
(13,764)
(15,173)
(13,604)
(41,452)
(40,155)
Total net sales
$888,239
$993,828
$901,000
$2,711,635
$2,335,963
Three months ended
Nine months ended
Segment profit
September 30, 2023
October 1, 2022
July 1, 2023
September 30, 2023
October 1, 2022
Materials Solutions
$56,955
$53,131
$215,738
$243,171
$147,700
Microcontamination Control
101,132
105,335
100,661
297,790
304,062
Advanced Materials Handling
31,642
42,077
35,830
115,637
135,693
Total segment profit
189,729
200,543
352,229
656,598
587,455
Amortization of intangibles
51,239
65,346
54,680
163,493
90,491
Unallocated expenses
21,429
120,308
29,935
94,964
160,759
Total operating income
$117,061
$14,889
$267,614
$398,141
$336,205
Entegris, Inc. and
Subsidiaries
Reconciliation of GAAP Gross
Profit to Adjusted Gross Profit
(In thousands)
Three months ended
Nine months ended
September 30, 2023
October 1, 2022
July 1, 2023
September 30, 2023
October 1, 2022
Net Sales
$888,239
$993,828
$901,000
$2,711,635
$2,335,963
Gross profit-GAAP
$367,074
$371,671
$384,166
$1,152,925
$991,888
Adjustments to gross profit:
Restructuring costs 1
789
—
—
8,166
—
Charge for fair value mark-up of acquired
inventory sold 2
—
61,932
—
—
61,932
Adjusted gross profit
$367,863
$433,603
$384,166
$1,161,091
$1,053,820
Gross margin - as a % of net sales
41.3 %
37.4 %
42.6 %
42.5 %
42.5 %
Adjusted gross margin - as a % of net
sales
41.4 %
43.6 %
42.6 %
42.8 %
45.1 %
1 Restructuring charges resulting from
cost saving initiatives.
2 Represents the additional cost of goods
sold recognized in connection with the step-up of inventory
valuation related to the CMC Materials acquisition.
Entegris, Inc. and
Subsidiaries
Reconciliation of GAAP Segment
Profit to Adjusted Operating Income
(In thousands)
(Unaudited)
Three months ended
Nine months ended
Adjusted segment profit
September 30, 2023
October 1, 2022
July 1, 2023
September 30, 2023
October 1, 2022
MS segment profit
$56,955
$53,131
$215,738
$243,171
$147,700
Restructuring costs 1
519
—
—
7,627
—
Loss from the sale of QED and held for
sales assets of EC 2
—
—
14,936
28,578
—
Goodwill impairment 3
15,913
—
—
104,785
—
Gain on termination of alliance
agreement4
—
—
(154,754)
(154,754)
—
Charge for fair value write-up of acquired
inventory sold 5
—
61,932
—
—
61,932
MS adjusted segment profit
$73,387
$115,063
$75,920
$229,407
$209,632
MC segment profit
$101,132
$105,335
$100,661
$297,790
$304,062
Restructuring costs 1
215
—
—
3,010
—
MC adjusted segment profit
$101,347
$105,335
$100,661
$300,800
$304,062
AMH segment profit
$31,642
$42,077
$35,830
$115,637
$135,693
Restructuring costs 1
467
—
—
1,721
—
AMH adjusted segment profit
$32,109
$42,077
$35,830
$117,358
$135,693
Unallocated general and administrative
expenses
$21,429
$120,308
$29,935
$94,964
$160,759
Less: unallocated deal and integration
costs
(10,301)
(111,040)
(18,441)
(48,717)
(129,869)
Less: unallocated restructuring costs
1
—
—
—
(86)
—
Adjusted unallocated general and
administrative expenses
$11,128
$9,268
$11,494
$46,161
$30,890
Total adjusted segment profit
$206,843
$262,475
$212,411
$647,565
$649,387
Less: adjusted unallocated general and
administrative expenses
11,128
9,268
11,494
46,161
30,890
Total adjusted operating income
$195,715
$253,207
$200,917
$601,404
$618,497
1 Restructuring charges resulting from
cost saving initiatives.
2 Loss from the sale of QED and held for
sales assets of EC.
3 Non-cash impairment charges associated
with goodwill.
4 Gain on termination of alliance
agreement with MacDermid Enthone.
5 Represents the additional cost of goods
sold recognized in connection with the step-up of inventory
valuation related to the CMC Materials acquisition.
Entegris, Inc. and
Subsidiaries
Reconciliation of GAAP Net
Income to Adjusted Operating Income and Adjusted EBITDA
(In thousands)
(Unaudited)
Three months ended
Nine months ended
September 30, 2023
October 1, 2022
July 1, 2023
September 30, 2023
October 1, 2022
Net sales
$888,239
$993,828
$901,000
$2,711,635
$2,335,963
Net income (loss)
$33,212
($73,703)
$197,646
$142,692
$151,493
Net income (loss) - as a % of net
sales
3.7%
(7.4%)
21.9%
5.3%
6.5%
Adjustments to net income (loss):
Equity in net loss of affiliates
139
—
130
269
—
Income tax (benefit) expense
(2,127)
(7,015)
(16,491)
2,851
30,377
Interest expense, net
75,594
82,755
78,605
239,020
126,962
Other expense, net
10,243
12,852
7,724
13,309
27,373
GAAP - Operating income
117,061
14,889
267,614
398,141
336,205
Operating margin - as a % of net sales
13.2%
1.5%
29.7%
14.7%
14.4%
Goodwill impairment 1
15,913
—
—
104,785
—
Deal and transaction costs 2
—
31,867
—
3,001
39,285
Integration costs:
Professional fees 3
6,756
11,377
13,324
32,068
21,698
Severance costs 4
(454)
3,996
965
1,873
3,996
Retention costs 5
45
1,530
362
1,687
1,530
Other costs 6
3,953
3,859
3,789
10,087
4,949
Contractual and non-cash integration
costs:
CMC Retention 7
—
14,477
—
—
14,477
Stock-based compensation alignment 8
—
21,584
—
—
21,584
Change in control costs 9
—
22,350
—
—
22,350
Restructuring costs 10
1,202
—
—
12,444
—
Loss on sale of business and held for sale
assets 11
—
—
14,937
28,579
—
Charge for fair value write-up of acquired
inventory sold 12
—
61,932
—
—
61,932
Gain on termination of alliance agreement
13
—
—
(154,754)
(154,754)
—
Amortization of intangible assets 14
51,239
65,346
54,680
163,493
90,491
Adjusted operating income
195,715
253,207
200,917
601,404
618,497
Adjusted operating margin - as a % of net
sales
22.0%
25.5%
22.3%
22.2%
26.5%
Depreciation
39,631
45,203
43,719
130,125
93,489
Adjusted EBITDA
$235,346
$298,410
$244,636
$731,529
$711,986
Adjusted EBITDA - as a % of net sales
26.5%
30.0%
27.2%
27.0%
30.5%
1 Non-cash impairment charges associated
with goodwill.
2 Deal and transaction costs associated
with CMC Materials acquisition and completed and announced
divestitures.
3 Represents professional and vendor fees
recorded in connection with services provided by consultants,
accountants, lawyers and other third-party service providers to
assist us in integrating CMC Materials into our operations.
4 Represent severance charges related to
the integration of the CMC Materials acquisition
5 Represents retention charges related
directly to the CMC Materials acquisition and completed and
announced divestitures, and are not part of our normal, recurring
cash operating expenses.
6 Represents other employee related costs
and other costs incurred relating to the CMC Materials acquisition
and the completed and announced divestitures. These costs
arise outside of the ordinary course of our continuing
operations.
7Represents non-recurring costs associated
with the CMC Materials retention program that was agreed upon and
set forth in the definitive acquisition agreement.
8 Represents the non-cash incremental
expense associated with adopting retirement vesting obligations on
Entegris equity awards, similar to those of CMC Materials equity
awards.
9 Relates to the change in control
agreements that were in place with management of CMC Materials
prior to the acquisition and the associated expense
post-acquisition.
10 Restructuring charges resulting from
cost saving initiatives.
11 Loss from the sale of QED and
held-for-sale assets of EC.
12 Represents the additional cost of goods
sold recognized in connection with the step-up of inventory
valuation related to the CMC Materials acquisition.
13 Gain on termination of the alliance
agreement with MacDermid Enthone.
14 Non-cash amortization expense
associated with intangibles acquired in acquisitions.
Entegris, Inc. and
Subsidiaries
Reconciliation of GAAP Net
Income and Diluted Earnings per Common Share to Non-GAAP Net Income
and Diluted Non-GAAP Earnings per Common Share
(In thousands, except per share
data)(Unaudited)
Three months ended
Nine months ended
September 30,
2023
October 1,
2022
July 1,
2023
September 30,
2023
October 1,
2022
GAAP net income (loss)
$33,212
($73,703)
$197,646
$142,692
$151,493
Adjustments to net income (loss):
Goodwill impairment 1
15,913
—
—
104,785
—
Deal and transaction costs 2
—
31,867
—
3,001
39,285
Integration costs:
Professional fees 3
6,756
11,377
13,324
32,068
21,698
Severance costs 4
(454)
3,996
965
1,873
3,996
Retention costs 5
45
1,530
362
1,687
1,530
Other costs 6
3,953
3,859
3,789
10,087
4,949
Contractual and non-cash integration
costs:
—
—
—
—
CMC Retention 7
—
14,477
—
—
14,477
Stock-based compensation alignment 8
—
21,584
—
—
21,584
Change in control costs 9
—
22,350
—
—
22,350
Restructuring costs 10
1,202
—
—
12,444
—
Loss on extinguishment of debt and
modification 11
4,532
2,235
4,481
12,893
2,235
Loss on sale of business and held for sale
assets 12
—
—
14,937
28,579
—
Gain on termination of alliance agreement
13
—
—
(154,754)
(154,754)
—
Infineum termination fee, net 14
—
—
—
(10,877)
—
Charge for fair value write-up of acquired
inventory sold 15
—
61,932
—
—
61,932
Interest expense, net 16
—
2,397
—
—
29,822
Amortization of intangible assets 17
51,239
65,346
54,680
163,493
90,491
Tax effect of adjustments to net income
and discrete tax items18
(12,810)
(41,477)
(35,825)
(46,996)
(56,123)
Non-GAAP net income
$103,588
$127,770
$99,605
$300,975
$409,719
Diluted earnings (loss) per common
share
$0.22
($0.50)
$1.31
$0.95
$1.08
Effect of adjustments to net income
$0.46
$1.35
($0.65)
$1.05
$1.83
Diluted non-GAAP earnings per common
share
$0.68
$0.85
$0.66
$2.00
$2.91
Diluted weighted averages shares
outstanding
151,229
148,570
150,837
150,816
140,892
Effect of adjustment to diluted weighted
average shares outstanding
—
1,099
—
—
—
Diluted non-GAAP weighted average shares
outstanding
151,229
149,669
150,837
150,816
140,892
1 Non-cash impairment charges associated
with goodwill.
2 Deal and transaction costs associated
with the CMC Materials acquisition and completed and announced
divestitures
3 Represents professional and vendor
fees recorded in connection with services provided by consultants,
accountants, lawyers and other third-party service providers to
assist us in integrating CMC Materials into our operations. These
fees arise outside of the ordinary course of our continuing
operations.
4 Represent severance charges related to
the integration of CMC Materials.
5 Represents retention charges related
directly to the CMC Materials acquisition and completed and
announced divestitures, and are not part of our normal, recurring
cash operating expenses.
6 Represents other employee-related costs
and other costs incurred relating to the CMC Materials acquisition
and completed and announced divestitures. These costs arise
outside of the ordinary course of our continuing operations.
7Represents non-recurring costs associated
with the CMC retention program that was agreed upon and set forth
in the definitive acquisition agreement.
8Represents the non-cash incremental
expense associated with adopting retirement vesting obligations on
Entegris equity awards, similar to those of CMC Materials equity
awards.
9 Relates to the change in control
agreements that were in place with management of CMC Materials
prior to the acquisition and the associated expense
post-acquisition.
10 Restructuring charges resulting from
cost saving initiatives.
11 Non-recurring loss on extinguishment of
debt and modification of our Credit Amendment.
12 Loss from the sale of QED and held for
sales assets of EC.
13 Gain on termination of the alliance
agreement with MacDermid Enthone.
14 Non-recurring gain from the termination
fee with Infineum.
15Represents the additional cost of goods
sold recognized in connection with the step-up of inventory
valuation related to the CMC Materials acquisition.
16 Non-recurring interest costs related to
the financing of the CMC Materials acquisition.
17 Non-cash amortization expense
associated with intangibles acquired in acquisitions.
18 The tax effect of pre-tax adjustments
to net income was calculated using the applicable marginal tax rate
for each respective year.
Entegris, Inc. and
Subsidiaries
Reconciliation of GAAP Outlook
to Non-GAAP Outlook
(In millions, except per share
data)
(Unaudited)
Fourth-Quarter Outlook
Reconciliation GAAP Operating Margin to
non-GAAP Operating Margin and Adjusted EBITDA Margin
December 31, 2023
Net sales
$770 - $790
GAAP - Operating income
$102 - $114
Operating margin - as a % of net sales
13% - 14%
Deal, transaction and integration
costs
5
Amortization of intangible assets
51
Adjusted operating income
$158 - $170
Adjusted operating margin - as a % of net
sales
21% - 22%
Depreciation
42
Adjusted EBITDA
$200 - $212
Adjusted EBITDA - as a % of net sales
26% - 27%
Fourth-Quarter Outlook
Reconciliation GAAP net income to
non-GAAP net income
December 31, 2023
GAAP net income
$37 - $45
Adjustments to net income:
Deal, transaction and integration
costs
5
Amortization of intangible assets
51
Income tax effect
(10)
Non-GAAP net income
$83 - $91
Fourth-Quarter Outlook
Reconciliation GAAP diluted earnings
per share to non-GAAP diluted earnings per share
December 31, 2023
Diluted earnings per common share
$0.25 - $0.30
Adjustments to diluted earnings per common
share:
Deal, transaction and integration
costs
0.03
Amortization of intangible assets
0.34
Income tax effect
(0.07)
Diluted non-GAAP earnings per common
share
$0.55 - $0.60
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231102670031/en/
Bill Seymour VP of Investor Relations T + 1 952 556 1844
bill.seymour@entegris.com
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