Entegris reports results for third quarter of 2022
Billerica, mass.--(business wire)--entegris, inc. (nasdaq: entg), today reported its financial results for the company’s third quarter ended october 1, 2022. third-quarter sales were $993.8 million, an increase of 71% from the same quarter last year. third-quarter gaap net loss was $73.7 million, or $0.50 loss per diluted share, which included $65.3 million of amortization of intangible assets, $20.8 million of integration costs, $31.9 million of deal and transaction costs, $58.4 million contractual and non-cash integration costs and $2.4 million interest expense, net. non-gaap net income was $127.8 million for the third quarter and non-gaap earnings per diluted share was $0.85. all the results presented herein are shown on a “as reported” basis and not on a “proforma” basis, and as a result do not include cmc materials’ results in prior periods. bertrand loy, entegris’ president and chief executive officer, said: “our execution was solid in the third quarter, and we are pleased with our proforma 18 percent year-to-date top line growth, especially in light of the growing economic uncertainty and unfavorable impact of foreign currencies. during the quarter, we continued to benefit from strong demand for our advanced solutions, which are of growing importance to our customers’ leading-edge technology roadmaps and new facility investments.” mr. loy added: “we are also pleased with our steady progress on the cmc materials integration. as a part of our assessment of the various parts of the cmc portfolio, we recently announced that we entered into a definitive agreement for infineum to acquire the pipeline and industrial materials business. going forward, our focus will be on driving revenue and cost synergies, and continuing to pay down the debt.” mr. loy added: “for the full year 2022, despite softening in the semiconductor market and the impact of the new u.s. government export restrictions, we expect to achieve strong growth, well in excess of the market. looking ahead, our differentiated unit-driven model and experienced team will be key as we navigate the uncertain environment.” quarterly financial results summary (in thousands, except percentages and per share data) gaap results october 1, 2022 october 2, 2021 july 2, 2022 net sales $993,828 $579,493 $692,489 operating income $14,889 $139,357 $157,970 operating margin - as a % of net sales 1.5% 24.0% 22.8% net (loss) income ($73,703) $117,461 $99,491 diluted (loss) earnings per common share ($0.50) $0.86 $0.73 non-gaap results non-gaap adjusted operating income $253,207 $152,696 $183,039 non-gaap adjusted operating margin - as a % of net sales 25.5% 26.3% 26.4% non-gaap net income $127,770 $125,383 $136,816 diluted non-gaap earnings per common share $0.85 $0.92 $1.00 fourth-quarter outlook for the fourth quarter ending december 31, 2022, the company expects sales of $930 million to $970 million, net income of $42 million to $50 million and diluted earnings per common share between $0.28 and $0.33. on a non-gaap basis, the company expects diluted earnings per common share to range from $0.75 to $0.80, reflecting net income on a non-gaap basis in the range of $112 million to $120 million. the company also expects ebitda of approximately 29% of sales, for the fourth quarter of 2022. we estimate that the impact of the u.s. government’s announced new export controls restricting the sale of semiconductor technology to certain companies in china will reduce sales by approximately $40 million to $50 million in the fourth quarter of 2022 (reflected in the guidance above). segment results in connection with the completion of the cmc materials acquisition, the company now operates in four segments (which include the new aps division): specialty chemicals and engineered materials (scem): scem provides advanced materials enabling complex chip designs and improved device electrical performance; including high-performance and high-purity process chemistries, gases and materials and safe and efficient delivery systems to support semiconductor and other advanced manufacturing processes. 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. advanced planarization solutions (aps): aps develops an end-to-end chemical mechanical planarization (cmp) solution and applications expertise delivered through advanced materials and high purity chemicals; including cmp slurries, pads, formulated cleans and other electronic chemicals used in the semiconductor manufacturing processes. third-quarter results conference call details entegris will hold a conference call to discuss its results for the third quarter on wednesday, november 2, 2022, at 9:00 a.m. eastern time. participants should dial 888-882-4478 or +1 323-794-2591, referencing confirmation code 8055261. participants are asked to dial in 5 to 10 minutes prior to the start of the call. the call can also be accessed live and on-demand from the investor relations section of www.entegris.com. management’s slide presentation concerning the results for the third quarter will be posted on the investor relations section of www.entegris.com wednesday morning before the call. about entegris entegris is a world-class supplier of advanced materials and process solutions for the semiconductor and other high-tech industries. entegris has approximately 10,000 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). 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 the ongoing impacts of the covid-19 pandemic and the conflict in ukraine on the company’s operations and markets, including supply chain issues and inflationary pressures related thereto; 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 and the impact of the covid-19 pandemic on such 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 company’s expansion of its manufacturing presence in taiwan; 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 the company has made and commercial partnerships the company has established, including the acquisition of cmc materials, inc. (“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; risks related to the covid-19 pandemic on the global economy and financial markets, as well as on the company, its customers and suppliers, which may impact its sales, gross margin, customer demand and its ability to supply its products to its customers; raw material shortages, supply and labor constraints and price increases, pricing and 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 or other transactions; the company’s ability to effectively implement any organizational changes; the company’s ability to protect and enforce intellectual property rights; the ongoing conflict in ukraine and the global response 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, 2021, filed on february 4, 2022, 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 october 1, 2022 october 2, 2021 july 2, 2022 net sales $993,828 $579,493 $692,489 cost of sales 622,157 315,289 382,092 gross profit 371,671 264,204 310,397 selling, general and administrative expenses 226,446 71,032 90,685 engineering, research and development expenses 64,990 41,972 49,248 amortization of intangible assets 65,346 11,843 12,494 operating income 14,889 139,357 157,970 interest expense, net 82,755 9,339 31,343 other expense, net 12,852 1,917 9,619 (loss) income before income tax expense (80,718) 128,101 117,008 income tax (benefit) expense (7,015) 10,640 17,517 net (loss) income $(73,703) $117,461 $99,491 basic (loss) earnings per common share: $(0.50) $0.87 $0.73 diluted (loss) earnings per common share: $(0.50) $0.86 $0.73 weighted average shares outstanding: basic 148,570 135,583 135,895 diluted 148,570 136,631 136,454 entegris, inc. and subsidiaries condensed consolidated statements of operations (in thousands, except per share data) (unaudited) nine months ended october 1, 2022 october 2, 2021 net sales $2,335,963 $1,663,689 cost of sales 1,344,075 899,115 gross profit 991,888 764,574 selling, general and administrative expenses 404,239 215,042 engineering, research and development expenses 160,953 121,692 amortization of intangible assets 90,491 35,616 operating income 336,205 392,224 interest expense, net 126,962 31,563 other expense, net 27,373 29,807 income before income tax expense 181,870 330,854 income tax expense 30,377 39,947 net income $151,493 $290,907 basic earnings per common share: $1.08 $2.15 diluted earnings per common share: $1.08 $2.13 weighted average shares outstanding: basic 140,045 135,383 diluted 140,892 136,556 entegris, inc. and subsidiaries condensed consolidated balance sheets (in thousands) (unaudited) october 1, 2022 december 31, 2021 assets current assets: cash, cash equivalents and restricted cash $754,667 $402,565 trade accounts and notes receivable, net 519,793 347,413 inventories, net 823,637 475,213 deferred tax charges and refundable income taxes 22,024 35,312 other current assets 102,155 52,867 total current assets 2,222,276 1,313,370 property, plant and equipment, net 1,383,693 654,098 other assets: right-of-use assets 95,397 66,563 goodwill 4,405,292 793,702 intangible assets, net 1,969,729 335,113 deferred tax assets and other noncurrent tax assets 18,637 17,671 other 38,380 11,379 total assets $10,133,404 $3,191,896 liabilities and equity current liabilities short-term debt, including current portion of long-term debt $219,787 $— accounts payable 187,697 130,734 accrued liabilities 390,706 199,131 income tax payable 42,831 49,136 total current liabilities 841,021 379,001 long-term debt, excluding current maturities 5,627,698 937,027 long-term lease liability 82,870 60,101 other liabilities 465,498 101,986 shareholders’ equity 3,116,317 1,713,781 total liabilities and equity $10,133,404 $3,191,896 entegris, inc. and subsidiaries condensed consolidated statements of cash flows (in thousands) (unaudited) three months ended nine months ended october 1, 2022 october 2, 2021 october 1, 2022 october 2, 2021 operating activities: net (loss) income $(73,703) $117,461 $151,493 $290,907 adjustments to reconcile net (loss) income to net cash provided by operating activities: depreciation 45,203 22,841 93,489 67,510 amortization 65,346 11,843 90,491 35,616 share-based compensation expense 38,077 7,467 57,544 22,124 loss on extinguishment of debt and modification 2,235 — 2,235 23,338 other 52,533 (1,773) 61,220 (1,976) changes in operating assets and liabilities, net of effects of acquisitions: trade accounts and notes receivable 22,931 (5,127) (34,378) (53,358) inventories (55,394) (45,464) (180,335) (115,187) accounts payable and accrued liabilities 56,162 52,924 83,307 37,577 income taxes payable, refundable income taxes and noncurrent taxes payable (12,089) (8,833) (15,637) (35,275) other 4,231 (1,835) 10,801 13,198 net cash provided by operating activities 145,532 149,504 320,230 284,474 investing activities: acquisition of property and equipment (126,739) (48,885) (318,836) (133,986) acquisition of business, net of cash acquired (4,474,925) — (4,474,925) (2,250) other 1 4,326 1,124 4,416 net cash used in investing activities (4,601,663) (44,559) (4,792,637) (131,820) financing activities: proceeds from revolving credit facility, short-term debt and long-term debt 2,810,439 — 5,416,753 451,000 payments of revolving credit facility, short-term debt and long-term debt (223,000) — (416,000) (601,000) payments for debt extinguishment costs — — — (19,080) payments for dividends (14,929) (10,853) (42,413) (32,650) issuance of common stock 1,787 1,055 10,764 17,872 taxes paid related to net share settlement of equity awards (6,430) (275) (22,747) (15,368) repurchase and retirement of common stock — (20,000) — (50,000) other (89,182) (486) (100,348) (5,287) net cash provided by (used in) financing activities 2,478,685 (30,559) 4,846,009 (254,513) effect of exchange rate changes on cash, cash equivalents and restricted cash (11,118) 333 (21,500) (3,282) (decrease) increase in cash, cash equivalents and restricted cash (1,988,564) 74,719 352,102 (105,141) cash, cash equivalents and restricted cash at beginning of period 2,743,231 401,033 402,565 580,893 cash, cash equivalents and restricted cash at end of period $754,667 $475,752 $754,667 $475,752 entegris, inc. and subsidiaries segment information (in thousands) (unaudited) three months ended nine months ended net sales october 1, 2022 october 2, 2021 july 2, 2022 october 1, 2022 october 2, 2021 specialty chemicals and engineered materials $224,192 $154,605 $179,412 $569,380 $460,707 microcontamination control 280,550 225,877 274,133 821,320 660,497 advanced materials handling 210,405 186,200 224,084 632,602 507,243 advanced planarization solutions 293,854 21,775 28,317 352,816 62,580 inter-segment elimination (15,173) (8,964) (13,457) (40,155) (27,338) total net sales $993,828 $579,493 $692,489 $2,335,963 $1,663,689 three months ended nine months ended segment profit october 1, 2022 october 2, 2021 july 2, 2022 october 1, 2022 october 2, 2021 specialty chemicals and engineered materials $34,228 $33,552 $35,539 $107,459 $98,760 microcontamination control 105,335 78,399 100,109 304,062 227,097 advanced materials handling 42,077 40,503 46,926 135,693 114,691 advanced planarization solutions 18,903 7,539 10,179 40,241 21,832 total segment profit 200,543 159,993 192,753 587,455 462,380 amortization of intangibles 65,346 11,843 12,494 90,491 35,616 unallocated expenses 120,308 8,793 22,289 160,759 34,540 total operating income $14,889 $139,357 $157,970 $336,205 $392,224 entegris, inc. and subsidiaries reconciliation of gaap gross profit to adjusted gross profit (in thousands) (unaudited) three months ended nine months ended october 1, 2022 october 2, 2021 july 2, 2022 october 1, 2022 october 2, 2021 net sales $993,828 $579,493 $692,489 $2,335,963 $1,663,689 gross profit-gaap $371,671 $264,204 $310,397 $991,888 $764,574 adjustments to gross profit: charge for fair value mark-up of acquired inventory sold 61,932 — — 61,932 — adjusted gross profit $433,603 $264,204 $310,397 $1,053,820 $764,574 gross margin - as a % of net sales 37.4 % 45.6 % 44.8 % 42.5 % 46.0 % adjusted gross margin - as a % of net sales 43.6 % 45.6 % 44.8 % 45.1 % 46.0 % 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 october 1, 2022 october 2, 2021 july 2, 2022 october 1, 2022 october 2, 2021 scem segment profit $34,228 $33,552 $35,539 $107,459 $98,760 integration costs — — — — — severance and restructuring costs — 69 — — 167 charge for fair value write-up of acquired inventory sold 5,104 — — 5,104 — scem adjusted segment profit $39,332 $33,621 $35,539 $112,563 $98,927 mc segment profit $105,335 $78,399 $100,109 $304,062 $227,097 severance and restructuring costs — 75 — — 181 mc adjusted segment profit $105,335 $78,474 $100,109 $304,062 $227,278 amh segment profit $42,077 $40,503 $46,926 $135,693 $114,691 severance and restructuring costs — 52 — — 127 amh adjusted segment profit $42,077 $40,555 $46,926 $135,693 $114,818 aps segment profit $18,903 $7,539 $10,179 $40,241 21,832 aps integration 56,828 — — 56,828 — aps adjusted segment profit $75,731 $7,539 $10,179 $97,069 $21,832 unallocated general and administrative expenses $120,308 $8,793 $22,289 $160,759 $34,540 unallocated deal and integration costs (111,040) (1,290) (12,575) (129,869) (3,966) unallocated severance and restructuring costs — (10) — — (54) adjusted unallocated general and administrative expenses $9,268 $7,493 $9,714 $30,890 $30,520 total adjusted segment profit $262,475 $160,189 $192,753 $649,387 $462,855 adjusted amortization of intangible assets — — — — — adjusted unallocated general and administrative expenses 9,268 7,493 9,714 30,890 30,520 total adjusted operating income $253,207 $152,696 $183,039 $618,497 $432,335 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 october 1, 2022 october 2, 2021 july 2, 2022 october 1, 2022 october 2, 2021 net sales $993,828 $579,493 $692,489 $2,335,963 $1,663,689 net (loss) income $(73,703) $117,461 $99,491 $151,493 $290,907 net (loss) income - as a % of net sales (7.4%) 20.3% 14.4% 6.5% 17.5% adjustments to net (loss) income: income tax (benefit) expense (7,015) 10,640 17,517 30,377 39,947 interest expense, net 82,755 9,339 31,343 126,962 31,563 other expense, net 12,852 1,917 9,619 27,373 29,807 gaap - operating income 14,889 139,357 157,970 336,205 392,224 operating margin - as a % of net sales 1.5% 24.0% 22.8% 14.4% 23.6% charge for fair value write-up of acquired inventory sold 61,932 — — 61,932 — deal and transaction costs 31,867 — 2,410 39,285 — integration costs 20,762 1,290 10,165 32,173 3,966 contractual and non-cash integration costs 58,411 — — 58,411 — severance and restructuring costs — 206 — — 529 amortization of intangible assets 65,346 11,843 12,494 90,491 35,616 adjusted operating income 253,207 152,696 183,039 618,497 432,335 adjusted operating margin - as a % of net sales 25.5% 26.3% 26.4% 26.5% 26.0% depreciation 45,203 22,841 24,381 93,489 67,510 adjusted ebitda $298,410 $175,537 $207,420 $711,986 $499,845 adjusted ebitda - as a % of net sales 30.0% 30.3% 30.0% 30.5% 30.0% 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 october 1, 2022 october 2, 2021 july 2, 2022 october 1, 2022 october 2, 2021 gaap net (loss) income $(73,703) $117,461 $99,491 $151,493 $290,907 adjustments to net income: charge for fair value write-up of inventory acquired 61,932 — — 61,932 — deal and transaction costs 31,867 — 2,410 39,285 — integration costs 20,762 1,290 10,165 32,173 3,966 contractual and non-cash integration costs 58,411 — — 58,411 — severance and restructuring costs — 206 — — 529 loss on extinguishment of debt and modification 2,235 — — 2,235 23,338 interest expense, net 2,397 — 22,742 29,822 — amortization of intangible assets 65,346 11,843 12,494 90,491 35,616 tax effect of adjustments to net income and discrete items1 (41,477) (5,417) (10,486) (56,123) (16,749) non-gaap net income $127,770 $125,383 $136,816 $409,719 $337,607 diluted (loss) earnings per common share $(0.50) $0.86 $0.73 $1.08 $2.13 effect of adjustments to net income $1.35 $0.06 $0.27 $1.83 $0.34 diluted non-gaap earnings per common share $0.85 $0.92 $1.00 $2.91 $2.47 diluted weighted averages shares outstanding 148,570 136,631 136,454 140,892 136,556 effect of adjustment to diluted weighted average shares outstanding 1,099 — — — diluted non-gaap weighted average shares outstanding 149,669 136,631 136,454 140,892 136,556 1the tax effect of pre-tax adjustments to net income was calculated using the applicable marginal tax rate during the respective years. 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, 2022 net sales $930 - $970 gaap - operating income $132 - $153 operating margin - as a % of net sales 14% - 16% deal, transaction and integration costs 23 amortization of intangible assets 66 adjusted operating income $221 - $242 adjusted operating margin - as a % of net sales 24% - 25% depreciation 45 adjusted ebitda $266 - $287 adjusted ebitda - as a % of net sales 29 % fourth-quarter outlook reconciliation gaap net income to non-gaap net income december 31, 2022 gaap net income $42 - $50 adjustments to net income: deal, transaction and integration costs 23 amortization of intangible assets 66 income tax effect (19) non-gaap net income $112 - $120 fourth-quarter outlook reconciliation gaap diluted earnings per share to non-gaap diluted earnings per share december 31, 2022 diluted earnings per common share $0.28 - $0.33 adjustments to diluted earnings per common share: deal, transaction and integration costs 0.15 amortization of intangible assets 0.44 income tax effect (0.12) diluted non-gaap earnings per common share $0.75 - $0.80 entegris, inc. and subsidiaries reconciliation of proforma gaap net sales to proforma non-gaap net sales (in thousands) (unaudited) three months ended nine months ended october 1, 2022 october 2, 2021 october 1, 2022 october 2, 2021 3q22 over 3q21 ytd 3q22 over 3q21 proforma gaap net sales $993.8 $889.3 $2,974.8 $2,568.7 11.8 % 15.8 % less: wood treatment — 21.2 11.1 55.8 proforma net sales - non gaap $993.8 $868.1 $2,963.7 $2,512.9 14.5 % 17.9 %
