Company Overview
Entegris, Inc. (NASDAQ:ENTG) is a leading supplier of critical advanced materials and process solutions for the semiconductor and other high-technology industries. The company has a rich history dating back to 1966, when it was founded as Fluoroware, Inc. Over the past five decades, Entegris has evolved into a diversified technology company that provides innovative solutions across the semiconductor manufacturing ecosystem.
Entegris operates through two main business segments: Materials Solutions (MS) and Advanced Purity Solutions (APS). The MS segment offers materials-based solutions, such as chemical vapor and atomic layer deposition materials, chemical mechanical planarization (CMP) slurries and pads, ion implantation specialty gases, formulated etch and clean materials, and other specialty materials. The APS segment provides filtration, purification, and contamination-control solutions that improve customers' yield, device reliability, and cost by ensuring the purity of critical liquid chemistries and gases, as well as the cleanliness of wafers and other substrates used throughout semiconductor manufacturing processes.
Historical Milestones
The company's history is marked by significant milestones and strategic acquisitions. Entegris was incorporated in Delaware on March 17, 2005, following a merger between Entegris, Inc., a Minnesota corporation, and Mykrolis Corporation, a Delaware corporation. In April 2014, the company expanded its portfolio by acquiring ATMI, based in Danbury, Connecticut. A major leap forward came on July 6, 2022, when Entegris completed its acquisition of CMC Materials, Inc., a Delaware corporation, for approximately $6 billion in cash and stock. This acquisition resulted in CMC Materials becoming a wholly owned subsidiary of Entegris, with its operations integrated into Entegris' consolidated financial statements from July 6, 2022. The acquisition process incurred direct costs of $39.5 million, primarily consisting of professional and consulting fees, which were expensed in the twelve months ended December 31, 2022.
Challenges and Resilience
Throughout its history, Entegris has faced and overcome various challenges. In the past, the company incurred impairment charges related to developing manufacturing capabilities for 450 millimeter wafer shippers and FOUPs, following major semiconductor manufacturers' decisions to postpone such manufacturing indefinitely. Entegris has also dealt with manufacturing difficulties, including critical equipment breakdowns, delayed ramp-ups of newly constructed or expanded manufacturing facilities, and the introduction of impurities in the manufacturing process, which occasionally resulted in lower yields, unmarketable products, or delayed deliveries to customers.
Despite these challenges, Entegris has continued to grow and strengthen its position in the industry. The company leverages its unique breadth of capabilities to assist customers in the semiconductor and other high-technology industries in improving their productivity, product performance, and technology in the most advanced manufacturing environments. To meet the needs of its global customers, Entegris has developed an extensive global infrastructure encompassing design, manufacturing, logistics, distribution, service, and technical support facilities.
Financials
In 2024, Entegris reported net sales of $3.24 billion, an 8% decrease from the prior year, primarily due to the impact of divestitures. Excluding the impact of divestitures, the company's revenue grew more than 5% in 2024, outperforming the overall semiconductor market. The company's Materials Solutions division saw sales increase 11% year-over-year, excluding divestitures, driven by strong demand for CMP consumables, advanced deposition materials, and selective etching products. The Advanced Purity Solutions division reported flat sales in 2024, as strong growth in advanced logic and advanced packaging applications was offset by weakness in mainstream and memory markets.
Entegris' profitability remained strong in 2024, with a gross margin of 45.9% and an adjusted EBITDA margin of 28.7%. The company maintained its focus on operational excellence, investing 9.8% of its net sales in engineering, research, and development (ER&D) activities to drive innovation and support its customers' technology roadmaps.
For the most recent fiscal year, Entegris reported annual net income of $292.79 million and annual operating cash flow of $631.72 million. The company's annual free cash flow stood at $316.12 million. In the most recent quarter, Entegris generated revenue of $849.84 million and net income of $102.24 million.
The decrease in revenue was primarily attributable to the absence of sales totaling $434.24 million associated with divested businesses and a reduction of $23.40 million attributable to unfavorable foreign currency translation effects, partially offset by an increase of $174.92 million of sales due to increased semiconductor market demand.
Performance by geographic markets showed varied results. Sales to customers in North America decreased primarily due to the absence of sales from divested businesses. Sales to customers in Taiwan increased due to increased demand for APS products. Sales to customers in China increased due to increased demand for MS and APS products. Sales to customers in South Korea, Japan, Europe, and Southeast Asia decreased primarily due to the absence of sales from divested businesses.
Liquidity and Financial Position
Entegris maintains a solid financial position with a debt-to-equity ratio of 1.06. The company had $329.21 million in cash and cash equivalents as of the most recent reporting period. Entegris has access to a revolving credit facility with commitments of $575 million. The company's current ratio stands at 3.08, while its quick ratio is 1.86, indicating strong short-term liquidity.
Growth Drivers
One of Entegris' key growth drivers has been its ability to increase its content per semiconductor wafer. As semiconductor device architectures become more complex, the company's expertise in materials science and purity management becomes increasingly valuable to its customers. For example, Entegris has seen strong adoption of its molybdenum-based deposition and etching solutions for advanced 3D NAND and logic devices. These innovative products have enabled the company to further expand its footprint within its customer base.
Future Outlook
Looking ahead to 2025, Entegris expects the overall semiconductor market to grow between 1% and 3%, based on its unit and capital expenditure mix. The company is guiding for revenue growth of approximately 6.5% on a pro forma basis, driven by additional content opportunities in new logic and memory nodes. Entegris also anticipates its EBITDA margin to be slightly above its target model of 29% of revenue, with non-GAAP earnings per share expected to be at or above $3.25.
For the first quarter of 2025, Entegris expects sales to range from $775 million to $805 million, representing year-over-year revenue growth of approximately 7% to the midpoint excluding divestitures. The company anticipates a Q1 2025 gross margin of 45.5% to 46.5% and an EBITDA margin ranging from 28% to 29%. Non-GAAP EPS for Q1 2025 is expected to be between $0.64 and $0.71 per share.
Potential Headwinds
One potential headwind for Entegris in 2025 is the impact of recent restrictions on sales to China, which the company estimates will result in an annual revenue loss of $30 million to $40 million. However, the company remains confident in its ability to navigate this challenge and continue outperforming the overall market.
Industry Trends
The semiconductor industry is poised for significant growth, with global semiconductor revenues expected to exceed $1 trillion by 2030. This growth is driven by advancements in memory technology, the rise of automotive semiconductors, regional self-sufficiency initiatives, purpose-built silicon, and the increasing demand for artificial intelligence (AI) applications. Entegris is well-positioned to capitalize on these trends with its comprehensive portfolio of materials and solutions.
Conclusion
Entegris' strong financial performance, innovative product portfolio, and strategic focus on enabling its customers' technology roadmaps have positioned the company as a critical partner in the semiconductor ecosystem. As the industry continues to evolve, driven by the increasing complexity of semiconductor devices and the growing demand for advanced applications, Entegris is well-positioned to capitalize on these trends and deliver sustained growth and profitability for its shareholders.