Q4 2023 Entegris Inc Earnings Call

February 14, 2024

<unk> the earnings slides and earnings prepared remarks on the IR site, we will not be presenting the prepared remarks for Q4 live in today's session. So please refer to those online if you already have it in today's session. We will present, a brief analyst update presentation and then we will take Q&A on both the presentation and.

Q4 earnings.

We expect the webcast today will be approximately an hour and 15 minutes, including the Q&A.

Some webcast that housekeeping items, if you're experiencing any technical problems. Please click on the little eye on the left hand bar of the screen to troubleshoot or chat with tech support you can minimize or in larger slide window at any time by clicking on the top right corner of the box the slides will advance automatically.

<unk> throughout the webcast Q&A session will be at the end of the presentation. Please submit your questions in the Q&A box located in the bottom left corner of the screen. You can also email questions to Beth and me directly and the resource box you will find a copy of today's presentation slides and a few other items of interest.

One other item of note in the appendix of today's presentation. We have included for your reference consolidated results and divisional results for 2023 that exclude last year's divestitures and the pin business for the full year and by quarter.

The speakers today are <unk>, president and CEO and Lynda La Gorda, our CFO.

Before we begin I would like to remind listeners that our comments today will include some forward looking statements. These statements involve a number of risks and uncertainties and actual results could differ materially from those projected in the forward looking statements.

Additional information regarding those risks and uncertainties is contained in our most recent annual report and subsequent quarterly reports that we have filed with the SEC.

Please refer to the information on the disclaimer slide in the presentation.

On this call. We will also refer to non-GAAP financial measures as defined by the SEC in regulation G.

You can find reconciliation tables and the presentation, which is posted on our IR page of our website.

With that I'll hand over to Bertrand.

Good morning, and thank you for joining us today's analyst update will be brief.

The main purpose is to provide you with a refreshed financial model focused on our core business and excluding all completed and planned divestitures.

Before I move on to the update a quick recap of our results we posted last night.

We are very pleased with the quality of our execution in 2023.

Our unit driven model displayed resilience during the current industry downturn and.

And we closed 2023 with strong fourth quarter sales and EPS results both above our guidance.

For the year, we outperformed the market by six points driven in large part by our strong position at the leading edge technology nodes and the backlog we had entering the year.

In addition, we divested three noncore businesses and used the proceeds and free cash flow to pay off $1 $3 billion of debt.

In terms of our guidance for 2024.

We believe we have taken a prudent view of the industry in the short term while being fully prepared for what we believe is likely to be a significant snap back in the market.

Onto the agenda for the briefing today.

I always talk about Integra citizens business model, our sales growth algorithm and provide an overview of our three divisions.

Linda will cover our capital structure capital location priorities, our updated target model and our updated three year financial targets. Then we will take questions on both the analyst update presentation and our fourth quarter earnings.

Here is what I would like to impress upon you today.

Integra says unit driven business model is unique highly differentiated and has strong competitive moats.

While 2023 was a challenging year, we remain as optimistic as ever about the long term growth prospects for the semiconductor industry.

The industry is entering a period of unprecedented technology change and device complexity.

Our core value proposition in materials science materials purity and end to end solutions has become increasingly enabling and critical for our customers.

All of this means the market is moving towards integrity and this ultimately translates into a rapidly expanding integrity content per wafer and strong outperformance for the years to come reinforcing integrity as a value compounded with attractive.

Organic sales growth, leading to significant EBITDA and EPS expansion, especially given our commitment to lower our debt.

For the past decades.

Mission has not changed we help our customers improve their productivity.

Performance and technology by providing enhanced materials and process solutions for the most advanced manufacturing environments.

Our platform is now comprised of three divisions.

I will provide more detail on each of them in a moment.

75% of our revenue is unit driven or recurring these unit driven products can be chemistries and materials that are used daily in semiconductor manufacturing fabs or they can be advanced filters and other consumable products there are single.

Use and all replaced frequently.

The remaining 25% of our revenue is capex driven products.

There can be gas filters dispense systems and other components that we sell to equipment makers.

Or they can also be wafer carriers gas purification systems, all fluid handling solutions that we sell when new Fabs are built.

You can see in the middle of the slide that our customer base is unique as our solutions are widely used across the broad industry ecosystem.

And as you can see further to the right when it comes to our fab customers, we have greater exposure to logic and foundry representing about 70% of our fab revenues why memory customers represent the rest approximately 30%.

The remaining 25% of our revenue is capex driven products.

Can be gas filters dispense systems and other components that we sell to equipment makers or they can also be wafer carriers gas purification systems, all fluid handling solutions that we sell when new Fabs are built.

This profile.

Nick in the industry provides greater resilience and stability to our business model and financial performance on a cross cycle basis.

You can see in the middle of the slide that our customer base is unique as our solutions are widely used across the broad industry ecosystem.

On the next slide I want to touch on the three dimensions of our competitive advantage.

We have built over decades.

No one in the industry comes close to these combined capabilities, especially while being almost exclusively focused on semi.

First on the left.

This profile unique in the industry provides greater resilience and stability to our business model and financial performance on a cross cycle basis.

The customer value creation flywheel.

I am sure that you've read Jim Collins book, Good to great. So you will recognize the flywheel concept, which is meant to call out the major steps the organization needs to go through to create and compound customer value overtime.

On the next slide I want to touch on the three dimensions of our competitive advantage.

That we have built over decades.

Its thoughts up to five years ahead of new node transitions when a customer asks us to help them solve key challenges they are expecting to face.

No one in the industry comes close to these combined capabilities, especially while being almost exclusively focused on semi.

First on the left.

The customer value creation flywheel.

We then started development work sure samples and ultimately provide them with the new enabling solution.

Finally, we must quickly ramp production to high volumes at extremely high levels of quality the point.

Is.

It is hard to do.

And doing it right time, and again creates customer trust and this is the virtuous cycle depicted here.

Its thoughts up to five years ahead of new node transitions when a customer asks us to help them solve key challenges they are expecting to face.

The next dimension of our competitive advantage is our commitment to industry leadership in the areas of technology global infrastructure and operational excellence.

We then started development work sure samples and ultimately provide them with a new enabling solution.

On the technology front, we have a very strong foothold, but we steadily continued to invest in research and product development to effectively partner with our customers on incrementally more complex challenges requiring earlier involvement.

Finally, we must quickly ramp production to high volumes at extremely high levels of quality the point.

Is.

It is hard to do.

And doing it right time, and again creates customer trust and this is the virtuous cycle depicted here.

On the global infrastructure front, our customers are increasingly expecting us to be close to them. So we have ramped our investments in local manufacturing and local tech centers in all of our major markets. These investments are proving to be a great source of differentiation for us.

The next dimension of our competitive advantage is our commitment to industry leadership in the areas of technology global infrastructure and operational excellence.

Accelerating learnings and customer engagement.

The last string of this graphic is operational excellence, our customers continue to expect tighter process windows more process stability and process control, which we achieve with greater automation process cleanliness and greater control of our supply lines.

The global infrastructure front, our customers are increasingly expecting us to be close to them. So we have ramped our investments in local manufacturing and local tech centers in all our major markets.

The final dimension is our end to end offering, which obviously has been greatly strengthened by our combination with CMC materials no. Other materials companies, serving the semiconductor industry comes close to our breadth of technology capabilities and we believe.

These investments are proving to be a great source of differentiation for us accelerating learnings and customer engagement.

This brings huge value to our customers and ultimately means better device performance lower cost of ownership and faster time to solution.

Despite the recent downturn our views have not changed and we continue to expect global semiconductor revenue to reach one trillion dollars by 2030.

The digitalization of our lives it's accelerating it is reshaping and very fundamental ways everything around us, which will drive exponential demand for faster more energy efficient and more reliable semiconductors.

<unk> huge value to our customers and ultimately means better device performance lower cost of ownership and faster time to solution.

These themes are all well understood and I do not believe I need to belabor them today.

Despite the recent downturn our views have not changed and we continue to expect global semiconductor revenue to reach one trillion dollars by 2030.

My message here is simply that the semiconductor industry is a great place to be and this is particularly true for Integra is as you will see on the next slide.

Yeah.

Our customers have a major overarching goal and that is to improve chip performance.

And to do this they have two major tools in their toolbox.

More complex chip architectures, and miniaturization of the critical dimensions on the wafer.

These themes are all well understood and I do not believe I need to belabor them today.

To enable this our customers' technology roadmaps are calling for new materials and ever greater process purity to achieve optimal yields an optimal cost.

My message here is simply that the semiconductor industry is a great place to be and this is particularly true for Integra is as you would see on the next slide.

And Integra is we operate at the intersection of material science and materials purity and this is precisely what our customers need right. Now. This is what we mean when we say the market is moving to Integra is.

Our customers have a major overarching goal and that is to improve chip performance.

And to do this they have two major tools in their toolbox.

More complex chip architectures, and miniaturization of the critical dimensions on the wafer.

From a material science perspective, these more complex structures mean more layers more process steps and more novel materials. This translates into more material spend per wafer and greater content per wafer for integra is particularly in.

To enable this our customers' technology roadmaps are calling for new materials and ever greater process purity to achieve optimal yields an optimal cost.

New leading edge logic, and three D NAND nodes.

From a materials purity perspective.

Great and miniaturization is making yield management exponentially more challenging and more expensive for our customers.

From a material science perspective, these more complex structures mean more layers more process steps and more novel materials.

Point here is our solutions help our customers improve their yields.

For example, using our advanced filters can positively impact yields in a fab by several points.

This translates into more material spend per wafer and greater content per wafer for integrity, particularly in new leading edge logic and three D NAND nodes.

The punchline of this slide is that.

Is that the compounding process complexity of our customers' technology Roadmaps is making our solutions increasingly valuable to our customers and this is expected to translate into expanding integrity content per wafer expanding served market and ultimately it is expected to fuel.

From a materials purity perspective, greater miniaturization is making yield management exponentially more challenging and more expensive for our customers. The point here is our solutions help our customers improve their yields and for example, using our advanced <unk>.

Our market outperformance.

These more complex chip architectures and demanding applications like AI.

<unk> can positively impact yields in a fab by several points.

Are requiring new enabling solutions solutions like the ones listed on this slide this is great for Integra is because we are engaged on all these fronts deploying our unique breadth of capabilities in material science and mature its purity to develop enabling.

The punchline of this slide is.

That the compounding process complexity of our customers' technology Roadmaps is making our solutions increasingly valuable to our customers and this is expected to translate into expanding integrity content per wafer expanding served market and ultimately it is expected to few.

<unk> unique solutions, which will result in new revenue streams for Integra.

Our market outperformance.

So.

What does that all mean for Integra is well, let me summarize this and introduce in fact reaffirm our organic growth algorithm.

These more complex chip architectures and demanding applications like AI are requiring new enabling solutions solutions like the ones listed on this slide. This is great for Integra is because we are engaged on all these fronts.

First we expect our core market the semiconductor industry to grow at twice GDP growth and then we continue to expect to outperform the industry by three to six points.

Deploying our unique breadth of capabilities in materials science and mature its purity to develop enabling solutions unique solutions, which will result in new revenue streams for integrity.

This outperformance will be driven by greater integrity content per wafer as we have discussed and market share gains as we continue to capitalize on our unique portfolio of capabilities to create highly differentiated mission critical solutions for our customers.

So.

What does that all mean for Integra is well, let me summarize this and introduce in fact reaffirm our organic growth algorithm.

We have made and will continue to make significant investments to realize these growth opportunities.

First we expect our core market the semiconductor industry to grow at twice GDP growth and then we continue to expect to outperform the industry by three to six points.

Our R&D investments reflect our commitment to support our customers' technology road maps and are critical to winning positions in new nodes.

This is why our R&D spending was up last year, even in a challenging industry environment.

And going forward, we expect our R&D spending to be approximately 9% of sales.

Our investments in production capacity are also vital for us to fully realize our long term growth.

We have made and will continue to make significant investments to realize these growth opportunities.

And the last two years, our Capex has been elevated as we invested in two new facilities in Taiwan in Colorado.

Our R&D investments reflect our commitment to support our customers' technology road maps and are critical to winning positions in new nodes.

And going forward, we expect our capex to come back down to 10% of sales and <unk>.

This is why our R&D spending was up last year or even in a challenging industry environment.

By the way, we should be close to 10% this year in 'twenty 'twenty four.

And going forward, we expect our R&D spending to be approximately 9% of sales.

Moving on to our three divisions.

And let's start with our newest materials solution.

Our investments in production capacity are also vital for us to fully realize our long term growth.

MFS is the combination of the SCM and Aps divisions to form a single almost 100% unit driven platform.

And the last two years, our Capex has been elevated as we invested in two new facilities in Taiwan in Colorado.

With M S. Our customers will benefit from a more robust end to end solution set critical to their Roadmaps AIDS solution set that improves device performance reduces time to yield and provides superior cost of ownership for our customers.

Going forward, we expect our capex to come back down to 10% of sales and by the way we should be close to 10% this year in 'twenty 'twenty four.

Moving on to our three divisions, and let's start with our newest materials solution.

Some of the major product lines include advanced deposition materials, CMP slurry isn't badge, itching and cleaning chemistries and other specialty materials some guesses.

MFS is the combination of the SCM and Aps divisions to form a single almost 100% unit driven platform.

All three of last year's divestitures came out of this division.

With M S. Our customers will benefit from a more robust end to end solution set critical to their roadmaps H solution set that improves device performance reduces time to yield and provides superior cost of ownership for our customers.

We believe we can achieve four to six points of growth in excess of the industry as we unlock the full potential of our platform and execute on some very exciting opportunities in new materials like molybdenum etching Chemistries and C. N P series.

Some of the major product lines include advanced deposition materials, CMP slurry isn't badge, itching and cleaning chemistries and other specialty materials some guesses.

With this growth and a highly differentiated solution set we believe we can steadily improve EMS margins from 16% last year to 22% to 24% over time.

All three of last year's divestitures came out of this division.

The advanced materials handling division manufacturers fluid and wafer handling products that ensure higher purity levels and ultimately drives higher yields both within our customers' ecosystems as well as within their fab.

With this growth and a highly differentiated solution set we believe we can steadily improve EMS margins from 16% last year to 22% to 24% over time.

Bad environment.

60% of MH revenue is related to new fab construction projects and wafer fab equipment.

These capital driven products include wafer carriers also known as <unk>.

E U V pods sensing and control solutions and high purity virus and tubing.

40% of the business is unit driven and comprised of products such as chemical containers and finished wafer packaging.

<unk> environment.

Going forward, we expect top line growth of two to four points in excess of the industry and operating margins in the low to mid twenties.

60% of MH revenue is related to new fab construction projects and wafer fab equipment.

These capital driven products include wafer carriers also known as <unk> <unk>.

The micro contamination control division provides products that address a rapidly growing need in the semiconductor industry for purity and consistency of chemicals and materials.

E U V pods sensing and control solutions and high purity vibes in tubing.

40% of the business is unit driven and comprised of products such as chemical containers and finished wafer packaging.

These solutions have become essential for our customers in their quest for yield optimization and long term device reliability.

Going forward, we expect top line growth of two to four points in excess of the industry and operating margins in the low to mid twenties.

As feature sizes continue to shrink and as new materials are adopted the permissible sizing and classes of contaminants as well as their concentration levels.

The micro contamination control division provides products that address a rapidly growing need in the semiconductor industry for purity and consistency of chemicals and materials.

All becoming exponentially more stringent.

As a result, the push to achieve ever greater process purity.

Translates into the need for more advanced filters greater frequency of replacement of these filters and also includes the introduction of more points of filtration deeper upstream in the fab supply lines.

These solutions have become essential for our customers in their quest for yield optimization and long term device reliability.

As feature sizes continue to shrink and as new materials are adopted the permissible sizing and classes of contaminants as well as their concentration levels.

All of this is expected to drive an outperformance of five to seven points for M C.

And given the growing value of these solutions for our customers, we expect operating margins to reach 35% to 37%.

All becoming exponentially more stringent.

As a result, the push to achieve ever greater process purity.

I will now hand, it over to Linda.

Thank you for time and good morning.

Today I plan to cover a few key topics.

First I will focus on our debt structure and our capital allocation priorities.

Then I will turn to the forward looking financial opportunity for NK grass.

All of this is expected to drive an outperformance of five to seven points for M C.

The punchline of this slide is that our debt structure is rock solid.

And given the growing value of these solutions for our customers, we expect operating margins to reach 35% to 37%.

We ended 20 twenty-three with total debt of $4 $7 billion after paying down $1 $3 billion last year, a tremendous accomplishment.

I will now hand, it over to Linda.

Debt pay down in 2023 was driven by proceeds from the divestitures of QED and electronic chemicals.

Linda: Thank you for your time.

Linda: Good morning.

Linda: Today I plan to cover a few key topics.

Linda: First I will focus on our debt structure and our capital allocation priorities.

Business, we sold to element solutions and free cash flow.

The blended interest rate on the portfolio is a very attractive 5.1%.

Linda: Then I will turn to the forward looking financial opportunity for NK grass.

Linda: The punchline of this slide is that our debt structure is rock solid.

Our debt is comprised of both fixed rate notes and what remains of the term loan after last year's Paydown.

Linda: We ended 2023 with total debt of $4 $7 billion after paying down $1 $3 billion last year.

While the timeline is technically variable we've hedged almost the entire $1.4 billion.

Linda: Mendes accomplishment.

So we currently have close to zero percent variable rate debt.

Linda: Debt pay down in 2023 was driven by proceeds from the divestitures of QED and electronic chemicals.

Other important points to note.

No maturities until 2028.

Linda: Business, we sold to element solutions and free cash flow.

And no maintenance covenants on the debt.

Linda: The blended interest rate on the portfolio is a very attractive five 1%.

So again, our current debt is well structured and derisked.

Looking at our capital allocation priorities going forward are clear near term priority is to further reduce our debt with a focus on the term loan.

Linda: Our debt is comprised of both fixed rate notes and what remains of the term loan after last year's pay down.

Linda: While the timeline is technically variable we've hedged almost the entire $1.4 billion.

We expect gross leverage to be below four times by the end of 'twenty 'twenty four and.

Linda: So we currently have close to zero percent variable rate debt.

Net leverage to beat the low three five times.

Speaker Change: Other important points to note.

Debt pay down is a powerful contributor to our earnings.

Speaker Change: No maturities until 2028.

Each $100 million of debt Paydown equals approximately four cents of E. P. S.

Speaker Change: And no maintenance covenants on the debt.

Speaker Change: So again, a current that is well structured and derisked.

The focus on debt pay down will continue to be balanced with making critical investments in our future.

Speaker Change: Looking at our capital allocation priorities going forward are clear near term priority is to further reduce our debt with a focus on the term loan.

As Brian mentioned earlier, we plan to invest approximately 9% of revenue in R&D and approximately 10% of revenue in capital expenditures.

Speaker Change: We expect gross leverage to be below four times by the end of 'twenty 'twenty, four and net leverage to be below three five times.

Also to maximize our debt repayment, we will drive further working capital improvements and continue what we started in 2023.

Speaker Change: Debt pay down is a powerful contributor to our earnings.

This is an area of particular focus for me.

Speaker Change: Each $100 million of debt Paydown equals approximately four cents of E. P. S.

We will also maximize cash repatriation and in general minimize our cash levels.

Speaker Change: The focus on debt pay down will continue to be balanced with making critical investments in our future.

This will be another major focus area for us.

Speaker Change: As Berkshire mentioned earlier, we plan to invest approximately 9% of revenue in R&D and approximately 10% of revenue in capital expenditures.

We also expect to average about $450 million of global cash on our balance sheet over the course of the year.

Moving past the near term, we will seek to complement our organic growth with strategic acquisitions.

Speaker Change: Also to maximize our debt repayment, we will drive further working capital improvements and continue what we started in 2023.

The track record of creating shareholder value through M&A.

So expect us to remain active on that front at the appropriate time.

Speaker Change: This is an area of particular focus for me.

Speaker Change: We will also maximize cash repatriation and then general minimize our cash levels.

We will of course continue to pay a dividend.

And we may consider share repurchases in the future, but for now share repurchases remain on hold.

Speaker Change: This will be another major focus area for us.

Speaker Change: We also expect to average about $450 million of global cash on our balance sheet over the course of the year.

So next I want.

Want to spend some time on the future earnings power of the company.

Not only have we shared this target model externally, but we also use this framework to plan and more importantly to run our business.

Speaker Change: Moving past the near term, we will seek to complement our organic growth with strategic acquisitions, we have a track record of creating shareholder value through M&A.

It's pretty straightforward as you can see the model shows margin and E. P. S outcomes at different revenue levels.

Speaker Change: So expect us to remain active on that front at the appropriate time.

Speaker Change: We will of course continue to pay a dividend.

Core to the model is the assumption of a 40% flow through to EBITDA line overtime.

Speaker Change: And we may consider share repurchases in the future, but for now share repurchases remain on hold.

That flows available will be driven by gross margin expansion and SG&A leverage over the next several years.

Speaker Change: So next.

Speaker Change: I wanted to spend some time on the future earnings power of the company.

A few other critical assumptions in this model.

Speaker Change: Not only have we shared this target model externally, but we also use this framework to plan and more importantly to run our business.

First.

We assume an annual interest expense of approximately $230 million that remains constant and all rather new cases.

Speaker Change: It's pretty straightforward as you can see the model shows margin and E. P. S outcomes at different revenue levels.

This implies no additional debt pay down going forward.

Of course, we do expect to continue to pay down the term loan.

Speaker Change: Core to the model is the assumption of a 40% flow through to EBITDA line overtime.

But as this is an illustrative model, we simplified the interest assumption by holding it constant.

Speaker Change: That flows available will be driven by gross margin expansion and SG&A leverage over the next several years.

The model also assumes a tax rate of approximately 16% depreciation of five 5%.

Speaker Change: A few other critical assumptions in this model first.

And share count of 152 million shares again for all scenarios.

Speaker Change: We assume an annual interest expense of approximately $230 million that remains constant and all revenue cases.

Now focusing on our three year financial targets.

Try and spoke earlier about our sales growth algorithm on it and our demonstrated performance as a value compound here.

Speaker Change: This implies no additional debt pay down going forward.

Speaker Change: Of course, we do expect to continue to pay down the term loan.

So what does this mean in numbers.

Speaker Change: That is this is an illustrative model, we simplified the interest assumption by holding it constant.

Starting from the left we expect an approximately 11% sales growth CAGR from 2023 to 2026.

Speaker Change: The model also assumes a tax rate of approximately 16% depreciation of five 5%.

For 2023 baseline excludes last year's divestitures.

Speaker Change: And share count of 152 million shares again for all scenarios.

And the business, we felt the element solutions.

In addition, we have excluded Pam from the 20th twenty-three baseline as we intend to sell the pin business.

Speaker Change: Now focusing on our three year financial targets.

That 11% growth rate assumption is essentially the midpoint of the range, but trying laid out.

Speaker Change: Try and spoke earlier about our sales growth algorithm, it and our demonstrated performance as a value compound here.

This topline CAGR, coupled with the 40% EBITDA flow sale leads to an EBITDA margin of approximately 31% by 2026.

Speaker Change: So what does this mean in numbers.

Speaker Change: Starting from the left we expect an approximately 11% sales growth CAGR from 'twenty to 'twenty three 'twenty 'twenty six.

Which amounts to a CAGR of 15%.

Speaker Change: The 2023 baseline excludes last year's divestitures.

Key drivers of this as I mentioned on the previous slide our gross margin expansion and SG&A leverage.

Speaker Change: And the business, we felt the element solutions.

Speaker Change: In addition, we have excluded Pam from the 20th twenty-three baseline as we intend to sell the pin business.

Taking a closer look at the gross margin improvement opportunity.

Speaker Change: That 11% growth rate assumption is essentially the midpoint of the range, but trying laid out.

The drivers of this are expected to be volume growth overall.

Ramping volumes in our Taiwan in Colorado facilities, and the benefits of product mix.

Speaker Change: This topline CAGR, coupled with the 40% EBITDA flow through leads to an EBITDA margin of approximately 31% by 2026.

For your reference the 'twenty two 'twenty three gross margin headwind from our Taiwan facility was approximately 70 basis points.

Speaker Change: Which amounts to a CAGR of 15%.

We expect that this headwind will start to alleviate as we ramp volume shipments in the second half of this year.

Speaker Change: Key drivers of this as I mentioned on the previous slide our gross margin expansion and SG&A leverage.

Next we expect EPS to be greater than $5 by 2026.

Speaker Change: Taking a closer look at the gross margin improvement opportunity.

Speaker Change: The drivers of this are expected to be volume growth overall.

This growth is driven by the EBITDA expansion and a few other key assumptions.

Speaker Change: Ramping volumes in our Taiwan in Colorado facilities, and the benefits of product mix.

First we are assuming that the $1 4 billion dollar term loan is paid off completely.

Speaker Change: For your reference the 'twenty two 'twenty three gross margin headwind from our Taiwan facility was approximately 70 basis points.

And only the existing bonds remain outstanding.

This leads to an annual interest expense of approximately $160 million by 2026.

Speaker Change: We expect that this headwind will start to alleviate as we ramp volume shipments in the second half of this year.

This is different than our target model slide I just showed well.

Speaker Change: Next we expect EPS to be greater than $5 by 2026.

Well, we assumed no additional debt pay down.

And as I mentioned on the previous slide we have assumed a tax rate of approximately 16% and a share count of approximately 152 million.

Speaker Change: This growth is driven by the EBITDA expansion and a few other key assumptions.

Speaker Change: First we are assuming that the $1 4 billion dollar term loan is paid off completely.

Yeah.

Wrapping things up we believe our model is highly differentiated.

Speaker Change: And only the existing bonds remain outstanding.

We remain very optimistic about the long term secular growth of the semiconductor industry.

Speaker Change: This leads to an annual interest expense of approximately $160 million by 2026.

The market is moving to us, meaning our unique position in value add is leading to higher integrity content per wafer and outperformance.

Speaker Change: This is different than our target model slide I, just showed where we assumed no additional debt pay down.

Our capital structure is very solid and rapidly improving which gives us a lot of optionality moving forward.

Speaker Change: And as I mentioned on the previous slide we have assumed a tax rate of approximately 16% and a share count of approximately 152 million.

Finally, the market growth and our outperformance leads to attractive sales growth.

Speaker Change: Wrapping things up we believe our model is highly differentiated.

And with the leverage in our model and our commitment to pay down our debt accelerated EPS growth.

Speaker Change: We remain very optimistic about the long term secular growth of the semiconductor industry.

Thank you. This concludes our presentation and I will turn it back to you bill to moderate the Q&A.

Speaker Change: The market is moving to us, meaning our unique position in value add is leading to higher integrous content per wafer and outperformance.

Thank you Linda just a quick reminder, for the audience you can please put your Q&A questions in the Q&A box.

Speaker Change: Our capital structure is very solid and rapidly improving.

And we are also on the console we have some resources in there and one of those is the presentation. We have a few other things. So we will move on to the first question.

Speaker Change: Which gives us a lot of Optionality moving forward.

Speaker Change: Finally, the market growth and our outperformance leads to attractive sales growth.

This is a question that came in.

Speaker Change: And with the leverage in our model and our commitment to pay down our debt accelerated EPS growth.

Different forms from different people.

So we're trying to talk about the drivers of the Q4 results above guidance and then the six points of outperformance for 2023, what are the drivers.

Speaker Change: Thank you. This concludes our presentation and I will turn it back to you bill to moderate the Q&A.

Yeah.

Obviously, we were very pleased with the way we finished 2023.

Bill: Thank you Linda just a quick reminder, for the audience you can please put your Q&A questions in the Q&A box.

All three divisions performed.

Very well.

M C N M age where in line or slightly above forecast in Q4.

Bill: And we are also on the console we have some resources in there and one of those is the presentation. We have a few other things. So we will move on to the first question.

NMS I had a very strong finish remember that the M. S Division has the.

Speaker Change: This is a question that came in.

The most exposure to memory, which was a headwind earlier in the year.

Speaker Change: Different forms from different people.

Speaker Change: <unk> talk about the drivers of the Q4 results above guidance and then the six points of outperformance for 2023, what are the drivers.

But of course converted into a tailwind as the memory segment started to recover a late 2023, another factor impacting the EMS performance in Q4 was the existence of some pull ins customer pull ins customers trying to get or take advantage of.

Speaker Change: Yeah.

Speaker Change: Obviously, we were very pleased with the way we finished 2023.

Speaker Change: All three divisions performed.

Speaker Change: Well.

Speaker Change: M C N image, where in line or slightly above forecast in Q4.

Rebates available to them doing.

Calendar 2023, but overall very strong finish to what was a very good year for Integra is.

Speaker Change: NMS I had a very strong finish remember that the EMS division has the.

Speaker Change: The most exposure to memory, which was a headwind earlier in the year.

To put that in context remember that we were very busy in 2023, we completed the acquisition of CMC materials, leading a very aggressive.

Speaker Change: But of course converted into a tailwind as the memory segment started to recover a late 2023 another factor impacting the EMS performance in Q4 was the existence of some pull ins customer pull ins customers trying to get.

Integration project completing disintegration within 13 months post close.

Speaker Change: Or take advantage of rebates available to them doing.

As part of this integration, we successfully divested three large businesses generating $1 $3 billion of proceeds into process, which we applied to our debt as we had promised to do.

Speaker Change: Calendar 2023, but overall very strong finish to what was a very good year for integra.

Speaker Change: To put that in context remember that we were very busy in 2023, we completed the acquisition of CMC materials, leading a very aggressive.

We also managed very effectively.

The slow industry environment, while maintaining.

Strong investments into our future as you saw we increased R&D spending in 2023, we largely completed the case be investment in Taiwan, and we initiated a new investment in Colorado and as you know all of those significant projects can be.

Speaker Change: Integration project completing disintegration within 13 months post close.

Speaker Change: As part of this integration, we successfully divested three large businesses generating $1 $3 billion of proceeds into process, which we applied to our debt as we had promised to do.

The source of a lot of distraction in a lot of the focus in the organization and that was not the case, we outperformed the industry by six points. We also delivered.

Speaker Change: We also managed very effectively.

Speaker Change: The slow industry environment, while maintaining.

Very healthy levels of EBITDA in 'twenty, 'twenty, 327%, which is in line with our commitment. So we are exiting 2023 with a very strong platform a platform that we obviously, we expect to build upon as we presented.

Speaker Change: Strong investments into our future as you saw we increased R&D spending in 2023, we largely completed the case be investment in Taiwan, and we initiated a new investment in Colorado and as you know all of those significant projects can be.

Good.

Two days, so it bodes well for 2024 and for the years to come.

Speaker Change: The source of a lot of distraction in a lot of defocus in the organization and that was not the case, we outperformed the industry by six points. We also delivered.

Okay. So Chris Capps from loop has a little bit of a double down on that question. So looking at the M. C performance M. C performed really well last year in a in a down market. You know what are the what are the drivers of that is it leading edge is it is it a mainstream what are the.

Speaker Change: Very healthy levels of EBITDA in 'twenty, 'twenty, 327%, which is in line with our commitment. So we are exiting 2023 with a very strong platform a platform that obviously, we expect to build upon as we present.

What are the major drivers of that right.

So thank you for asking that follow on question I mean, obviously if.

The EMS Division was the star of our Q4 results. The star of the full year of 2023 was our M. C Division M.

Speaker Change: Good too.

Speaker Change: Today, so it bodes well for 2024 and for the years to come.

Speaker Change: Okay. So Chris <unk> from loop has a little bit of a double down on that question. So looking at the M. C performance M. C performed really well last year in a in a down market. You know what are the what are the drivers of that is a leading edge is it is it a mainstream what are the.

M C benefited from a strong backlog getting into 2023, but that's really not the.

The food story and the demand for our products and solutions continued to be very strong through the year and I wanted to maybe highlight a few of them are gas purification system for example.

Speaker Change: What are the major drivers of that right.

Speaker Change: So thank you for asking that follow on question I mean, obviously if.

Continues to perform.

A very elevated level as a matter of fact, our Q4 revenue for gas purification systems was at a record level and that is a function of steady fab construction activity and the fact that those systems become mostly industry standards now for for several years.

Speaker Change: The EMS Division was the star of our Q4 results.

Speaker Change: The star of the full year of 2023 was our M C Division.

Speaker Change: M C benefited from.

Speaker Change: Strong backlog getting into 2023, but that's really not the full story the demand for products and solutions continue to be very strong through the year and I'm wondering maybe highlight a few of them are gas purification system. For example continues to perform.

The other part.

Of the micro contamination division that went that performed really strongly in 2023 was the liquid filtration platform.

You heard me.

Speaker Change: At very elevated level as a matter of fact, our Q4 revenue for gas for a vacation systems was at a record level and that is a function of steady fab construction activity and the fact that those systems have become mostly industry standards now for for several years.

The quest for materials purity.

Is unabated in this industry, our customers are really trying to chase.

Higher yields and long term reliability of their devices and to do that they need to continue to increase the purity of requirements.

Speaker Change: Yes.

Speaker Change: The other part.

Chasing ever smaller contaminants and making the customer the permissible concentration levels more stringent. So these forces were at work in 2023.

Speaker Change: The micro contamination division that went that that performed really strongly in 2023 was the liquid filtration platform.

Speaker Change: You heard me.

Speaker Change:

Speaker Change: The quest for materials purity is unabated in this industry, our customers are really trying to chase higher yields.

And that's the reason why AMC essentially outperformed the industry by close to 16 points of massive outperformance lever.

Speaker Change: And long term reliability of their devices and to do that they need to continue to increase the purity of requirements.

In 2023, and that's a trend that we expect to continue going forward and that's actually the basis for the level of outperformance, we expect to see for the next two to three years and outperforming level of five to seven points as I presented earlier.

Speaker Change: Tracing ever smaller contaminants and making the customer the permissible concentration levels more stringent so these.

Okay next question.

Speaker Change: Forces.

From Toshiba from Goldman So if you can.

Speaker Change: We're at work in 2023.

If you can break down the 4% industry growth for 2020 for MSI versus Capex and markets.

Speaker Change: And that's the reason why M C essentially outperformed the industry by close to 16 points of massive outperformance lever in 2023, and that's a trend that we expect to continue going forward and that's actually the basis for the level of our.

So remember the 'twenty 'twenty four will be a recovery year for the industry and by that I mean that.

Different segments of the industry will be recovering or.

At different times and at different rates.

Speaker Change: Performance, we expect to see for the next two to three years and outperforming level of five to seven points.

The recovery will be led by advanced logic and DRAM.

Speaker Change: As I presented earlier.

Speaker Change: Okay next question.

Three D. NAND is expected to stay relatively muted, especially early in the year and of course mainstream Fabs at just entered the downturn just a few months ago, and we expect fairly significant wafer start reductions in utilization rates compression, especially.

Speaker Change: Tushar from Goldman So if you can.

Tushar: If you can break down the 4% industry growth for 2020 for MSI versus Capex and markets.

Tushar: So remember the 'twenty 'twenty four will be a recovery year for the industry and by that I mean that.

In the first quarter.

Tushar: Different segments of the industry will be recovering.

Quarter of this year so that's.

Speaker Change: At different times and at different rates.

That's the lay of the land and that's what we took into account when.

Speaker Change: The recovery will be led by advanced logic and DRAM.

Quantifying our expectation for the industry. So we expect MSI in that context to be up about 5%.

Speaker Change:

Speaker Change: Three D. NAND is expected to stay relatively muted, especially early in the year and of course mainstream Fabs I've just entered the downturn just a few months ago, and we expect fairly significant wafer start reductions in utilization rates compression, especially.

Here again, I'm talking about 2024 compared to 2023.

And we expect.

The industry Capex to be essentially flat then here again remember that I'm talking about.

The total industry Capex not just Wi Fi. So if you blend those two numbers you get to that 4% industry growth in 2024.

Speaker Change: In the first quarter.

Speaker Change: Quarter of this year so that's.

Speaker Change: That's the lay of the land and that's what we took into account when.

And then I'll ask a follow up from a T from city, which would be okay. That's the market growth and then we talked about our level of outperformance for 2024, what are the what are the drivers of that outperformance in 2024.

Speaker Change: Quantifying our expectation for the industry. So we expect MSI in that context to be up about 5%.

Speaker Change: Here again, I'm talking about 2024 compared to 2023.

What are the drivers are essentially two drivers we called out.

Speaker Change: And we expect the.

In the presentation right we.

Speaker Change: The industry Capex to be essentially flat and here again remember that I'm talking about the.

Expect to continue to benefit from greater Integrous content per wafer we expect.

Speaker Change: The total industry Capex not just Wi Fi. So if you blend those two numbers you get to that 4% industry growth in 2024.

Some node transitions in three D. NAND in particular in 2024, and we also expect a number of advanced logic manufacturers to start getting ready for them.

Speaker Change: And then I'll ask a follow up from a T from city, which would be okay. That's the market growth and then we talked about our level of outperformance for 2024, what are the what are the drivers of that outperformance in 2024.

You know significant node transitions are late in the year and preparing for 2025. So all of that will contribute to that four to five points of outperformance in 2024.

Speaker Change: What are the drivers are essentially two drivers we called out in the presentation right. We.

Speaker Change: Expect to continue to benefit from greater Integrous content per wafer we expect.

Our next question John Roberts Mizuho, So MH revenue margin decline in Q4 can you maybe provide some color around the drivers of that and then maybe put into context, you know how the image performance last year.

Speaker Change: Some node transitions in three D. NAND in particular in 2024, and we also expect a number of advanced logic manufacturers to start getting ready for a significant.

Maybe I can start with the performance Linda and then you can add on the margin.

So if you think about a M H.

Speaker Change: Significant node transitions.

As we've mentioned multiple times same age had actually a very significant backlog entering 2024 and that really help them sustain.

Speaker Change: Late in the year and preparing for 2025, so all of that will contribute to that four to five points of outperformance in 2024.

Elevated revenue levels in the first half of the year that backlog disappeared.

Speaker Change: Our next question John Roberts Mizuho.

In Q3 of 2023, and that's really the impact that you are seeing in AR in Q4 of 2023 going forward. We would expect the aim age to steadily recover through the year in 2024.

John Roberts: So MH revenue margin decline in Q4 can you maybe provide some color around the drivers of that and then maybe put into context.

John Roberts: The image performance last year.

John Roberts: Maybe I can start with the performance Linda and then you can add on.

Speaker Change: On the margin.

Linda: So if you think about a M H.

Yeah and regarding margins for an H in Q4, a couple of drivers I'd call out first there there was some volume deleveraging based on the revenue.

Linda: As we have mentioned multiple times same age had actually a very significant backlog entering 2024 and that really helped them sustained.

Secondly, some some one time impacts, including a rebalancing between our divisions of the variable compensation. So as Bertrand said very much expecting a recovering of those margins as we go into Q1 and the rest of 2024.

Linda: Elevated revenue levels in the first half of the year that backlog disappeared.

Speaker Change:

Speaker Change: In Q3 of 2023, and that's really the impact that you are seeing in in Q4 of 2023 going forward, we'd expect the inmates to steadily recover through the year in 2024.

Okay.

This will be a combined question, so Chris Capps from loop and David Silver.

So first on the Chris capture of item number one is we're trying to can you talk a little bit about the progress of the sale synergies from CMC and then Dave.

Speaker Change: Yeah and regarding margins for A&H in Q4, a couple of drivers I'd call out first there there was some volume deleveraging based on the revenue and secondly, some some one time impacts, including a rebalancing between our divisions of the variable compensation. So if we're trying to.

David Silver asked a little bit about some examples from the products that we got from that acquisition and how are those doing in the end to end solution.

Okay.

So.

Speaker Change: <unk> very much expecting a recovering margins as we go into Q1 and the rest of 2024.

We're very pleased with the way the combination with CMC materials is shaping out I talked about.

Speaker Change: Okay.

Speaker Change:

A few different metrics, but more importantly, the way the two teams have come together is extremely gratifying and I'm also very very pleased with the quality of the customer engagements.

Speaker Change: This will be a combined questions are Chris Capps from loop and David Silver.

Chris Kapsch: So first on the Chris capture of item number one is we're trying to can you talk a little bit about the progress of the sale synergies from CMC and then.

That we've seen in the last 18 months, so all of that contributed to.

Chris Kapsch: David Silver asked a little bit about some examples from the products that we got from that acquisition and how are those doing in the end to end solution.

You know actively seeking new opportunities different ways to combine and co optimized solutions across our various platforms ways too.

Chris Kapsch: Okay.

Speaker Change: So.

Speaker Change: We're very pleased with the way the combination with CMC materials is shaping out I talked about.

Optimize our post CMP cleaning chemistries base.

Speaker Change: A few different metrics, but more importantly, the way the two teams have come together is extremely gratifying and I'm also very very pleased with the quality of the customer engagements.

Based on the better understanding of the slurry blends and mix.

Ways of optimizing our.

Slurry filtration platform based on the better understanding of the Sirona. So all of that has been taking place as you would expect.

Speaker Change: That we've seen in the last 18 months, so all of that contributed to.

Speaker Change: You know actively seeking new opportunities different ways to combine and co optimized solutions across our various platforms ways too.

You should know that as a matter of fact, we had a compensable or GOR last year.

Looking at the opportunity pipeline and funnel.

Speaker Change: Optimize our post CMP cleaning chemistries.

And you should know that actually we not only met that particular objective, but we far exceeded that objective and that is what is giving us confidence when we talk about the potential of Dms platform going forward and this is why actually we are committed to outperforming the market by.

Speaker Change: On the better understanding of the slurry blends and mix.

Speaker Change: Ways of optimizing our.

Speaker Change: Slurry filtration platform based on the better understanding of the true I mean, so all of that has been taking place as you would expect.

Four to six points in in MFS for the years to come.

Speaker Change: You should know that as a matter of fact, we had a compensable or GOR of last year.

Okay next question for Linda So Mike Harrison from Seaport, EBITDA margins, 26% in Q4.

Speaker Change: Looking at the opportunity pipeline and funnel.

How do you see the cadence of EBITDA margins as we go into Q1 and then throughout next year and what are the drivers.

Speaker Change: And you should know that actually we not only met that particular objective, but we far exceeded that objective and that is what is giving us confidence when we talk about the potential of Dms platform going forward and this is why actually we are committed to outperforming the market by.

So as we go into next year as we said the guidance for EBITDA margin of approximately 29%.

In Q1, the guidance is approximately 27%.

Try and mentioned, we're expecting a gradual recovery throughout the year. So you'll see a gradual uptake also in our EBITDA margins.

Speaker Change:

Speaker Change: Four to six points in in MFS for the years to come.

Speaker Change: Okay next question for Linda So Mike Harrison from Seaport, EBITDA margins, 26% in Q4.

As we as we look at the drivers first there's some volume leverage as an aspect of a driver.

Theres mix at.

Michael Joseph Harrison: How do you see the cadence of EBITDA margins as we go into Q1 and then throughout next year and what are the drivers.

We always are and will remain very focused on productivity, helping with our margins across the board and one other item I will mention is you know last year I talked a bit about the impact of our inventory reductions on margins.

Michael Joseph Harrison: So as we go into next year as we said the guidance for EBITDA margin of approximately 29%.

Michael Joseph Harrison: In Q1, the guidance is approximately 27%.

This year, we're absolutely still focused on working capital.

Michael Joseph Harrison: Try and mentioned, we're expecting a gradual recovery throughout the year. So you'll see a gradual uptake also in our EBITDA margins.

But the but that impact as we continue to reduce inventory it will not be as great as it was.

Now all of that or the positives, we will still have headwinds in 2024 from the ramp of K S. P. I mentioned in the comments that in 2023, those headwinds were approximately 70 basis points.

Michael Joseph Harrison: As we as we look at the drivers and first there's some volume leverage as an aspect of a driver.

Michael Joseph Harrison: Theres mix.

Michael Joseph Harrison: We always are and will remain very focused on productivity, helping with our margins across the board and one other item I will mention is you know last year I talked a bit about the impact of our inventory reductions on margins.

You should think of those headwinds in 'twenty four is about the same to slightly more now what will happen in 'twenty 'twenty four with K S. P is the impact will be heavier in the first half and then we'll start to alleviate that in the second half.

Michael Joseph Harrison: This year, we're absolutely still focused on working capital.

Pulling this all together, we're going to continue to balance between investment and cost and as we talked about we're going to manage to that 40% EBITDA flow through so that gives you the context of how I see 2024, EBITDA margins coming together.

Speaker Change: But that does that impact as we continue to reduce inventory will not be as great as it was.

Speaker Change: Now all of that or the positives, we will still have headwinds in 2024 from the ramp of K S. P. I mentioned in the comments that in 2023, those headwinds were approximately 70 basis points.

Okay. Another question for you Linda.

Speaker Change: You should think of those headwinds in 'twenty for US is about the same to slightly more now what will happen in 2020 four with K S. P is the impact will be heavier in the first half and then we will start to alleviate that in the second half.

The vast from BMO is can you update us we obviously presented some information in the presentation. How are you looking at leverage going forward.

Yes.

I mentioned in the presentation that by the end of 2024, and we expect gross leverage to be less than four times and we expect our net leverage to be less than three and half times.

Speaker Change: Pulling this all together, we're going to continue to balance between investment and cost and as we talked about we are going to manage to that 40% EBITDA flow through so that gives you the context of how I see 2024, EBITDA margins coming together.

We continue to go forward beyond 2024, we will continue to focus on deleveraging, but we will also retain some optionality.

Speaker Change: Okay. Another question for you Linda.

The Great news is as I talked about in the presentation is we have a rock solid capital structure.

Linda: The vast from BMO is can you update us.

Linda: He presented some information in the presentation. How are you looking at leverage going forward.

And so you know as we move forward, we want to balance between the deleveraging and some of the Optionality will have going forward. The most important thing is we will continue as we've demonstrated to be prudent in our capital allocation strategies.

Linda: Yes.

Linda: I mentioned in the presentation that by the end of 'twenty 'twenty four we expect gross leverage to be less than four times and we expect our net leverage to be less than three and half times.

Linda: We continue to go forward beyond 2024, we will continue to focus on deleveraging, but we will also retain some optionality.

And this comes from Alexia <unk> from Keybanc.

Got into 9% R&D as a percentage of sales.

Is this why is it why is this critical and is this part of is this a driver for the outperformance maybe just put some color around that.

Linda: The Great news is as I talked about in the presentation is we have a rock solid capital structure.

Linda: And so you know as we move forward, we want a balance between the deleveraging and some of the Optionality will have going forward. The most important thing is we will continue as we've demonstrated to be prudent in our capital allocation strategies.

Yeah them multiple different ways to actually think about that number and what why that number has been growing over time and the first one is.

The complexity of the challenges our customers are inviting us.

To collaborate on is as I mentioned.

Linda: Bertrand this comes from Alexia <unk> from Keybanc.

Growing.

Bertrand: Got into 9% R&D as a percentage of sales.

You should also know that because of that we are invited to collaborate with our customers.

Bertrand: Is this why is it why is this critical and is this part of is this a driver for the outperformance maybe just put some color around that.

Earlier in the technology process development cycle, so all of that contributes to that.

Bertrand: Yeah them multiple different ways to actually think about that number and what why that number has been growing over time and the first one is.

That greater spend and then there's just the number of new opportunities ahead of us.

The fact that we expect the integration content per wafer to continue to grow is just indicative of the fact that our customers see the value of.

Bertrand: The complexity of the challenges our customers are inviting us.

Bertrand: To collaborate on is as I mentioned.

Speaker Change: You know growing.

Data integrity is current provide see the value of that end to end solution capability that we are marketing they understand that it's going to be key to not only device performance, but also time to yield and ultimately.

Speaker Change:

Speaker Change: You should also know that because of that we are invited to collaborate with our customers earlier in their technology process development cycle. So all of that contributes to.

Speaker Change: That greater spend and then there's just the number of new opportunities ahead of us.

You know time to node transitions all of which.

Speaker Change: The fact that we expect the integration content per wafer to continue to grow is just indicative of the fact that our customers see the value.

Are extremely important for our customers, but to do that and to really realize the opportunities ahead of us we have to be willing to invest in R&D and that's something that we did.

Speaker Change: Data integrity is current provide see the value of that end to end solution capability that we are marketing they understand that it's going to be key to not only device performance, but also time to yield and ultimately.

In the.

The current downturn in 2023, and that's the level of investment that we are committed to maintaining an increase for the years to come.

Okay.

She.

Ken can you talk about the.

You know market and revenue progression as we go through 'twenty four and then I will I'll add a little flavor on on that and he asked about okay. So we talked about MSI in Capex for this year or how do you see that kind of going forward as well.

Speaker Change: You know time to node transitions all of which.

Speaker Change: Are extremely important for our customers, but to do that and to really realize the opportunities ahead of us we have to be willing to invest in R&D and that's something that we did.

Yeah. So first let's start with the first quarter right. I mean, we are guiding sequentially down 4%, which is in line with normal seasonal order cycles and again, a reflection of the fact that many of our customers in advanced logic and of course in mainstream logic I've indicated a.

Speaker Change: In the.

Speaker Change: The current downturn in 2023, and that's the level of investment that we are committed to maintaining an increase for the years to come.

Speaker Change: Okay.

Speaker Change: She.

Speaker Change: Ken can you talk about the.

So a compression in fab utilization.

Ken: You know market and revenue progression as we go through 'twenty four and then I will I'll add a little flavor on on that and he asks about okay. So we talked about MSI in Capex for this year.

From there on we expect actually steady.

Sequential increase in revenue as.

Ken: How do you see that kind of going forward as well.

Again, we expect growth in advanced logic, we expect further recovery in memory and we expect also.

Speaker Change: Yeah. So first let's start with the first quarter right. I mean, we are guiding sequentially down 4%, which is in line with normal seasonal order cycles and again, a reflection of the fact that many of our customers in advanced logic and of course in mainstream logic I've indicated a.

More stable conditions at some point.

In the year.

From our mainstream customers.

Excellent.

Question from Alexia <unk>, Taiwan the facility there.

Speaker Change: Compression in fab utilization.

The.

The volumes ramping in the second half what does that mean for the first half and where are we at with that facility.

Speaker Change: From there on we expect actually steady.

Speaker Change: Sequential increase in revenue as.

Maybe I can take the first part Linda if you wanted to elaborate a little bit on the margin impact, but let me just say that we are very pleased with the progress we have made.

Ken: Again, we expect growth in advanced logic, we expect further recovery in memory and we expect also.

Ken: More stable conditions at some point in.

In the construction.

Struction phase of all case B investment today, we have about 200 employees on site.

Ken: In the year is for from our mainstream customers.

Our internal qualifications are progressing rapidly and progressing well and in a few cases customer qualifications of already started so we expect revenue to be generated out of that facility in the second half of the year I mean, we are already taking some more.

Ken: Excellent.

Speaker Change: Question from Alexia <unk>, Taiwan the facility there.

Alexia: The volumes ramping in the second half what does that mean for the first half and where are we at with that facility.

Speaker Change: Maybe I can take the first part Linda if you want maybe elaborate a little bit on the margin impact, but let me just say that we are very pleased with the progress we have made.

There's customer orders, but they are actually very small right now we would expect the level of revenue from the case be facility to reach some.

Speaker Change: In.

Speaker Change: The construction phase of our case B investment today, we have about 200 employees on site are internal qualifications are progressing rapidly and progressing well and in a few cases customer qualifications of already started.

Somewhere between $40 million to $50 million four for the year in 2024.

Great.

To the margin side think about it.

Our quarters in the first couple of quarters, we have cost them and then as Bertrand said the revenues will start ramping up that will start to offset some of that cost them. So you know we still have a headwind from from K S. P. N 2024, but were starting to alleviate that as we.

Linda: So we expect revenue to be generated out of that facility in the second half of the year. I mean, we are already taking some orders customer orders, but they are actually very small right. Now we would expect the level of revenue from the case be facility to reach some.

The 'twenty 'twenty four and that will continue into 2025.

Speaker Change: Somewhere between $40 million to $50 million four for the year in 2024.

And then I will ask a similar question you talked a little bit about both as Linda already from til Shea.

Speaker Change: Alright, so taking that into the margin side think about it across the board.

You talked about EBITDA drivers and trends so how would you position gross margin trends and improvement opportunities going forward.

Speaker Change: Waters in the first couple of quarters, we have cost.

Speaker Change: And then as Bertrand said the revenues will start ramping up that will start to offset some of that cost.

Well a lot of the trends that improve EBITDA I mentioned that I mentioned really are around the gross margin aspect. So I mentioned for example productivity a lot of that productivity will come.

Speaker Change: So you know we still have a headwind from from K S. P. In 2024, but we're starting to alleviate that as we progress through 2024 and that will continue into 2025.

Around gross margin.

In addition, some of the volume ramps really impacted the gross margin now volume ramps also when it comes to EBITDA give us some SG&A leverage so it's both but as we grow in that volume ramps, we will get more plant utilization.

Speaker Change: And then I will ask a.

Speaker Change: Similar question, you talked a little bit about this linda already from til Shea.

Til Shea: You talked about EBITDA drivers and trends so how would you position gross margin trends and improvement opportunities going forward.

So those are some of the big drivers that come to my mind as we think about that evolution of gross margin throughout 2024.

Linda: Well a lot of the trends that improve EBITDA I mentioned that I mentioned really are around the gross margin aspect. So I mentioned for example productivity a lot of that productivity will come around gross margin. In addition, some of the volume ramps really impacted the gross margin.

Bertrand it would from a lexi here from Keybanc.

And what's how would you qualify the opportunity and gate all around.

So during the presentation, we highlighted a number of new opportunities gate, all around being one of them.

Til Shea: Now volume ramps also when it comes to EBITDA give us sale SG&A leverage so it's both but as we grow in that volume ramps, we will get more plant utilization.

And this is just another flavor of those three the architectures that we expect to proliferate in any industry in the years to come so specifically around gate all around we expect to see opportunities around new precursor materials.

Til Shea: So those are some of the big drivers that come to my mind as we think about that evolution of gross margin throughout 2024.

Speaker Change: We're trying to lead from a lexi here from Keybanc.

Slurry is another polishing solutions as well as Ajay.

Speaker Change: And what's how would you qualify the opportunity and gate all around.

<unk> Chemistries and solutions for ion implant as well so.

Speaker Change: So during the presentation, we highlighted a number of new opportunities.

We believe that we are in the very early innings of the adoption of that particular architecture.

Speaker Change: Kato around being one of them.

Speaker Change: And this is just another flavor of those three D architectures that we expect to proliferate in any industry in the years to come so specifically around gate all around we expect to see opportunities around new precursor materials.

And as you saw on the analysis in terms of wafer.

Content.

We expect that to be a big driver for the increase we expect to see from five nanometer all the way to 1.4 nanometer in advanced logic.

Speaker Change: Salaries and other polishing solutions as well as edging.

A little bit of a follow up there in terms of applications silicon carbide slurry and pads whats obviously for our silicon carbide did really well. This year slurry is any updates any color you can provide there.

Speaker Change: <unk> Chemistries and solutions for ion implant is a wild so.

Til Shea: We believe that we are in the very early innings of the adoption of that particular architecture.

Yeah. So this is a great area of.

Til Shea: And as you saw on the analysis in terms of wafer.

Our focus for the company, we mentioned that today. It is still a fairly small part of our business think about the revenue levels in the $40 million to $50 million range on an annual.

Til Shea: Content.

Til Shea: We expect that to be a big driver for the increase we expect to see from five nanometer all the way to 1.4 nanometer in advanced logic.

But that business did double from 2022 to 2023, and we expect that business to continue to do extremely well and here I'm talking really about salaries, but remember that there are a lot of other opportunities for us around power.

Til Shea: A little bit of a follow up there in terms of applications silicon carbide slurry and pads whats obviously for our silicon carbide did really well this year's flurries any updates any color you can provide there.

Speaker Change: Yeah. So this is a great area of.

<unk>.

So beyond stories, we have great opportunity for the pad solutions that really work hand in glove with our distilleries that we are.

Speaker Change: Focus for the company, we mentioned that today. It is still a fairly small part of our business think about the revenue levels in the $40 million to $50 million range on an annual.

Providing our customers in power electronics. They are also great opportunities in terms of gas.

Til Shea: But that business did double from 2022 to 2023, and we expect that business to continue to do extremely well and here I'm talking really about salaries, but remember that there are a lot of other opportunities for us around.

Gas purification systems and in terms of a.

Bush CMP clean so I think this is.

The market segment that is emerging that is growing very.

Fast and an area, where we are very focused.

Til Shea: Power electronics.

Til Shea: So beyond stories, we have great opportunity for the pad solutions that really work hand in glove with distilleries that we are.

Okay next question, Linda Tim Arcuri from UBS, how would you compare the three year.

<unk> from September 22 to the one we provided today EPS target how do you compare those on a like for like basis.

Til Shea: Providing our customers in power electronics. They are also great opportunities in terms of.

Good question.

Til Shea: Our gas purification systems and in terms of.

So our current three year target have you look out to 2026, we do have lost revenue it's due.

Til Shea: Our CMP clean so I think this is.

Driven by two key factors number one divestitures. So as we said we had the 'twenty two 'twenty three divestitures, which we all know about also we exclude Pam as we look at this three year target model.

Til Shea: The market segment that is emerging that is growing very fast.

Til Shea: Fast and an area, where we are very focused.

Speaker Change: Okay next question, Linda Tim Arcuri from UBS, how would you compare the.

Secondly, the 'twenty two 'twenty three.

Til Shea: Yes.

Downturn has been longer than expected so that does impact the long term revenue number.

Speaker Change: Three year target from September 22 to the one we provided today EPS target how do you compare those on a like for like basis.

Now on the good news front.

Our divestiture program has been ahead of schedule.

Speaker Change: <unk> good question.

And that's really important here, so got the divestitures done faster pay down debt faster.

Speaker Change: So our current three year target have you look out to 2020 six we do have lost revenue it's.

Linda: It's driven by two key factors number one divestitures. So as we said we had the 'twenty two 'twenty three divestitures, which we all know about also we exclude Pam as we look at this three year target model.

And have a lower interest rate as a result of that so that's really critical as we think about where we are when we look at 2026.

There's a couple of other key positive the tax rate is a bit lower and the divestitures give us a bit of EBITDA accretion. So you factor that all in and you look at 2026 and the three year target and the punch line is at the same revenue level.

Speaker Change: Secondly, the 'twenty two 'twenty three downturn has been longer than expected. So that does impact the long term revenue number.

Speaker Change: And the good news front, our divestiture program has been ahead of schedule.

Speaker Change: That's really important here, so got the divestitures done faster pay down debt faster.

We are delivering more EPS. So it's a very good outcome. When we look at this three year target model.

Speaker Change: And have a lower interest rate as a result of that so that's really critical as we think about where we are when we look at 2026.

Yeah.

Okay Butch answer David Silver has a question.

About.

With these and we.

Speaker Change: There's a couple other key positives.

Dresses in the presentation, a little bit, but with these more complicated technology road maps, how is our interactions with our customers changing.

Speaker Change: The tax rate is a bit lower and the divestitures give us a bit of EBITDA accretion. So you factor that all in and you look at 2026 and the three year target and the punchline is it the same revenue levels, we're delivering more.

In the leading edge and what do we need to do more with them.

So first of all.

With the technology Roadmaps, becoming more challenging.

Our customers in fact.

Speaker Change: P. S. So it's a very good outcome when we look at the three year target model.

Trying to accelerate the transition to new process technology.

Speaker Change: Yeah.

Speaker Change: Okay Butch answer David Silver has a question.

Opera.

Opportunities really a bond for four integra is.

David Silver: About you know with these.

So the level of engagement has increased as the sea integrity is a very unique partner and frankly in many cases, an indispensable partner for them to achieve.

Speaker Change: Dresses in the presentation, a little bit, but with these more complicated technology road maps, how is our interactions with our customers changing.

Speaker Change: The leading edge and what do we need to do more with them.

Butch: So first of all.

New levels of device performance acceptable years, and again compressed time to solution.

Speaker Change: With the technology, Roadmaps, becoming more challenging with our customers in fact.

So as I've mentioned, we are investing more in R&D, we are more specifically investing a lot in our regional tech centers, we already have a very significant investment in Taiwan, We announced late 2023, a similar investment in Korea in order to.

Speaker Change: Trying to accelerate the transition to new process technology.

Speaker Change:

Speaker Change: Opportunities really a bond for four integra is.

Speaker Change: So the level of engagement has increased as the sea integrity is very unique.

Again engage more effectively locally with all of the technology leaders in this space.

Speaker Change: Partner and frankly in many cases, an indispensable partner for them to achieve.

Speaker Change: New levels of device performance acceptable years, and again compressed time to solution.

Local investments.

In Tech centers are in fact, a great differentiator.

Very few if any of our competitors really provide those capabilities and doors you know of.

Speaker Change: As I've mentioned, we are investing more in R&D, we are more specifically investing a lot in our regional tech centers.

Options for our customers and I think it really reinforces the quality of the customer interaction. It also speeds up the cycles of learning both for our customers as well as us for Integra is so we are very focused on continuing to improve the quality of these very symbiotic relation.

Speaker Change: We already have a very significant investment in Taiwan, We announced late 2023, a similar investment in Korea in order to again engage more effectively locally with all of the technology leaders in this space.

That we have developed with our customers for many years now.

Speaker Change: Dawson local investments in tech centers.

Speaker Change: In fact, a great differentiator.

Okay. So this is probably for Linda so the vast from BMO and I'm going to combine something to this as well so he's talking about material solutions down sequentially.

Speaker Change: Very few if any of our competitors really provide those capabilities and doors.

Speaker Change: Options for our customers and I think it really reinforces the quality of the customer interaction. It also speeds up the cycles of learning both for our customers as well as as for Integra is so we are very focused on continuing to improve the quality of these very symbiotic.

In the margins post divestiture and how do you see material solutions margins going forward.

Obviously represented a pretty significant improvement.

And the model so.

Provide some color around that.

Yes of course, so so first of all I think that that's what you're referring to is.

Speaker Change: Correlation that we have developed with our customers for many years now.

From Q3 to Q4, we had somewhat flat.

Speaker Change: Okay. So this is probably for Linda so the vast from BMO and I'm going to combine something to this as well so he's talking about material solutions down sequentially.

Margins. This this first piece comes back to the divestitures, if you remember or try and mentioned that the divestitures that took place in 2023 were all in the EMS Division.

Speaker Change: In the margins post divestiture and how do you see material solutions margins going forward obviously.

These divestitures had low opex, so while we have gross margin accretion.

Speaker Change: Obviously represented a pretty significant improvement in the in the model so.

Particularly when you look at M. S on its own with these low opex businesses, you don't see the accretion on the division profit line.

Speaker Change: Provide some color around that.

Speaker Change: Yes of course, so so first of all I think that that's what you're referring to is.

But as we go forward and mass as we spoke about earlier and as Bertrand mentioned has tremendous opportunity first this is a unit driven business. We are going to see volumes ramp up we're going to see the benefits of that across the Ms portfolio.

Speaker Change: From Q3 to Q4, we had somewhat flat.

Speaker Change: <unk> margins.

Speaker Change: This first piece comes back to the divestitures. If you remember Bertrand mentioned that the divestitures that took place in 2023 were all in the EMS Division.

In addition, we will continue to invest R&D is critical but we will get SG&A leverage this applies to the company as well as M. S.

Speaker Change: These divestitures had low opex, so while we have gross margin accretion and particularly when you look at M. S. On its own with these low opex businesses, you don't see the accretion on the division profit line.

Do you think about the ramp as sales goes up something like sales and marketing is not going to increase at the same rate as our sales are increasing so with all the opportunities around the solutions that really the core of why we brought the divisions. Together you know we really see this opportunity and are comfortable with how we're thinking about the longer term.

Speaker Change: But as we go forward and mass as we spoke about earlier and as Bertrand mentioned has tremendous opportunity first this is a unit driven business. We are going to see volumes ramp up we're going to see the benefits of that across the Ms portfolio in.

Our margin potential for en masse.

Okay.

And then a little bit on this one is for on a divisional basis. The progression of M. C margins going forward what are the improvement drivers for M C margins going forward.

Speaker Change: In addition, we will continue to invest R&D is critical but we will get SG&A leverage this applies to the company as well as M. S. Yeah. If you think about the ramp as sales goes up something like sales and marketing is not going to increase at the same rate as our sales are increasing.

And see you know theres a lot of similarities across the various divisions as we said 'twenty 'twenty for a gradual recovery, but our long term view on the market we've talked about it and it's very positive. So there's a M. C work again, we have the benefit of the portfolio.

Speaker Change: So with all the opportunities around the solutions that really the core of why we brought the divisions together, we really see this opportunity and are comfortable with how we're thinking about the longer term margin potential for en masse.

And as our customers do need more filtration products. This is a very attractive portfolio attractive from a mix perspective, and so therefore, we will get that benefit we will get the volume leverage and as KSP ramps.

Speaker Change: Okay, and then a little bit on this on this for on a divisional basis the progression of M. C margins going forward what are the improvement drivers for M seed margins going forward.

Some of that's happening in the second half of 'twenty four more into 25, that's really going to help us from a margin perspective on M. C. L film.

Speaker Change: Well so M. C. You know theres a lot of similarities across the various divisions as we said 'twenty 'twenty for a gradual recovery, but our long term view on the market we've talked about it and it's very positive. So there is a N C work again, we have the benefit of the portfolio.

So in terms of maybe there's a couple of questions around.

Speaker Change: And as our customers do need more filtration products. This is a very attractive portfolio attractive from a mix perspective, and so therefore, we will get that benefit we will get the volume leverage and as KSP ramps.

The chips Act Bertrand So maybe you can provide a couple of updates on the progress there and what people should expect.

Yeah, so as you'll remember we made a big announcement last year.

Around an investment in a new facility in Colorado.

Speaker Change: Some of that's happening in the second half of 'twenty four more into 25, that's really going to help us from a margin perspective on M. C. Also.

Multiple phases to this investment.

One is the one that we initiated last year phase one is about $280 million.

And we believe that this project is very much in line with the overall objectives of the U S. Ships' Act, which as you know is trying to promote the development of the domestic supply chain are resilient.

Speaker Change: So in terms of maybe a couple of questions around.

Speaker Change: The chips Act Bertrand So maybe you can provide a couple of updates on the progress there and what people should expect.

Bertrand: Yeah, so as you'll remember we made a big announcement last year.

Bertrand: Around an investment in a new facility in Colorado.

Domestic supply chain and Derisk, our supply chain risks for the many new fabs that are expected to be bid here in the U S. So we've been.

Bertrand: Multiple phases to this investment phase one is the one that we initiated last year phase one.

In dialogue active dialogue with the chips program office, we believe that those discussions have been very constructive and very positive.

Bertrand: Is about $280 million.

Bertrand: And we believe that this project.

Bertrand: Is very much in line with the overall objectives of the U S Ships' Act.

And we will update you when we have more specifics to share.

Okay going a little bit on some of the end markets and some of the products here, but <unk> can.

Bertrand: Which as you know is trying to promote the development of the domestic supply chain a resilient domestic.

From BMO, we talked a lot about molybdenum any anything any color you can add around why is that important and what does it look like going forward.

Bertrand: Domestic supply chain and Derisk, our supply chain risks for the many new fabs that are expected to be bid here in the U S. So we've been in.

Yeah, we have been talking a lot about molybdenum as an example of the new <unk>.

Bertrand: In dialogue active dialogue with the chips program office, we believe that those discussions have been very constructive and very positive.

Class of precursor materials that we expect the industry to turn to as they look for.

<unk> materials with similar or better electrical performance, we expect those materials to be first introduced in the three D. NAND architectures and then at some point in advanced logic as well. So we have been spending a lot of time.

Bertrand:

Bertrand: And we would update you when we have more specifics to share.

Bertrand: Okay going a little bit on some of the end markets and some of the products here, but.

Bertrand: From BMO, we talked a lot about molybdenum any anything any color you can add around why is that important and what does it look like going forward.

Positioning our solution offering with the leading three D. NAND players remember that we believe that we have a very unique capabilities around those solid precursors not just the ability to provide the material, but also to provide.

Speaker Change: Yeah, we have been talking a lot about molybdenum as an example of the new.

Speaker Change: Class of precursor materials that we expect the industry to turn to.

Bertrand: Look for.

Bertrand: <unk> materials with similar or better electrical performance, we expect those materials to be first introduced in the three D. NAND architectures and then at some point in advanced logic as well. So we have been spending a lot of time.

And industry, leading delivery system that can very effectively.

Deliver the material onto the wafer at very.

Attractive total cost of ownership.

So.

We believe that the three D NAND.

Bertrand: Positioning our solution offering with the leading three D. NAND players are remember that we believe that we have a very unique capabilities around those solid precursors not just the ability to provide the material, but also to provide.

Layers will likely adopt molybdenum, whether the adopt this new molecule.

200 layers or we have to wait until 300 layers remains a question Mark.

But I think we are very very close and I think.

Bertrand: And industry, leading delivery system that can very effectively.

Confidence level has increased significantly in the last several years. So again this is exciting.

Bertrand: <unk> delivered a material onto the wafer at very attractive.

Is one of the reasons why you see the increase in.

Bertrand: Attractive total cost of ownership.

Bertrand: So.

Sam in terms of internet content, but wafer opportunity in three D NAND essentially double from what.

Bertrand: We believe that the three D NAND.

Bertrand: Players will likely adopt.

Bertrand: Danone, whether the adopt this new molecule.

What it is today at 176 layers and when we think about what it could be tomorrow at 500 layers.

Bertrand: 200 layers or we have to wait until 300 layers remains a question Mark.

Yeah, and a little a follow up in a few questions that came through in last analyst day, we talked about the filtration.

Bertrand: But I think we are very very close and I think our confidence level has increased significantly in the last several.

Benefits or into content per wafer similar to what you were just talking about.

Speaker Change: So again this is exciting.

Is that the same story, where the content per wafer and filtration is still.

Bertrand: Is one of the reasons why you see the increase in.

Very positive going forward and what are the drivers, yes, I mean the.

Bertrand: Sam in terms of Internet content per wafer opportunity in three D NAND essentially doubled from.

The story remains the same and you can actually see evidence of that in the level of outperformance, we expect to see in our micro contamination division. The only reason we have not normalized that opportunity on a per wafer basis is simply that it's just getting harder to do because the opportunity for us.

Bertrand: What it is today at 176 layers and when we think about what it could be tomorrow at 500 layers.

Speaker Change: Yeah, and a little a follow up in a few questions that came through in last analyst day, we talked about the filtration.

In terms of advanced filtration usage is not just in the fab environment, which is something that we could track fairly precisely but that opportunity is really expanding upstream in the supply lines and that gets actually a lot harder to treat.

Bertrand: Benefits or into content per wafer similar to what you were just talking about.

Bertrand: Is that the same story, where the content per wafer and filtration is still.

Bertrand: Very positive going forward and what are the drivers, yes, I mean the.

Bertrand: The story remains the same and you can actually see evidence of that in the level of outperformance, we expect to see in our micro contamination division. The only reason we have not normalized that opportunity on a per wafer basis is simply that it's just getting harder to do because the opportunity for us.

To track.

And to link precisely to a particular device architectures as you know.

In order to achieve atomic levels of purity of fab customers are increasingly asking their bulk chemical manufacturers to achieve significantly higher levels of purity and as a result of that we are seeing greater introduction of new points of filtration.

Bertrand: In terms of advanced filtration usage is not just in the fab environment, which is something that we could track fairly precisely but that opportunity is really expanding upstream into supply lines and that gets actually a lot harder to.

<unk> upstream into supply lines, those new points of filtration.

Are using <unk>.

More advanced filters in the frequency of change out is also increasing so all of that are the fundamental drivers for our micro contamination business. So nothing has changed it's just hard for us to pin that to a particular technology node and to normalize that to eat away for a number.

Bertrand: You know to track and to link precisely to a particular device architectures.

Bertrand: All in all.

Bertrand: Order to achieve atomic levels of purity of fab customers are increasingly asking their bulk chemical manufacturers to achieve significantly higher levels of purity and as a result of that we are seeing greater introduction of new points of fluctuations.

Okay. This will be the final question from Toshiba from Goldman.

Obviously debt Paydown is a priority in the near term M&A historically has been a big driver of growth for the company. So the question Bertrand is what are we looking for.

Bertrand: Upstream into supply lines, those new points of filtration <unk>.

Bertrand: Are using <unk>.

Bertrand: More advanced filters in the frequency of change out is also increasing so all of that are the fundamental drivers for our micro contamination business. So nothing has changed it's just hard for us to pin that to a particular technology node and to normalize that to at a wafer number.

When we start to do M&A again, what are the characteristics that we're looking for in a potential target.

Look I think we are blessed and integra with with a.

Very exciting platform a platform that provides a lot of optionality I mean, obviously your organic growth story is very compelling but on top of that I think that we can certainly create additional long term shareholder value by very selectively.

Speaker Change: Okay. This will be the final question from Toshiba from Goldman.

Bertrand: No.

Speaker Change: Obviously debt Paydown is a priority in the near term.

Bertrand: M&A historically has been a big driver of growth for the company. So the question Bertrand is what are we looking for.

To go after.

You know M&A targets. This is what we've done in the past 10 years. This is what you should expect us to continue to do and we have demonstrated that.

Goldman: When we start to do M&A again, what are the characteristics that we're looking for in a potential target.

Bertrand: Look I think we are blessed and integra with with a.

We are a really good integrator of businesses and I think what I was mentioning earlier.

Bertrand: Very exciting platform a platform that provides a lot of optionality I mean, obviously your organic growth story is very compelling but on top of that I think that we can certainly create additional long term shareholder value by very selectively.

Around how wild integration of CMC is gone is probably the latest proof point to that statement I think said all of that I will go back to what Linda said, our first order of priority right now is to bring the debt down so expect us to do that and to be focused on that but keep.

Bertrand: To go after.

Bertrand: You know M&A targets. This is what we've done in the past 10 years. This is what you should expect us to continue to do and we have demonstrated that.

In mind that there are a lot of options available to us to deploy our capital and to create additional value for shareholders going forward.

Bertrand: You know we are a really good integrator of businesses and I think what I was mentioning earlier.

Great well. Thank you very much for joining us on the webcast today, we will provide a a recording will go up on our website by the end of the day. If you have any further questions. Please reach out to me, we really look forward to seeing many of you in the coming weeks. Thank you again and have a great day.

Bertrand: Around how wild integration of CMC is gone is probably the latest proof point to that statement I think said all of that I will go back to what Linda said, our first order of priority right now is to bring the debt down so I expect us to do that and to be focused on that but keep.

Bertrand: In mind that a lot of options available to us to deploy our capital and to create additional value for shareholders going forward.

Speaker Change: Great well. Thank you very much for joining us on the webcast today, we will provide a a recording will go up on our website by the end of the day. If you have any further questions. Please reach out to me, we really look forward to seeing many of you in the coming weeks. Thank you again and have a great day.

Bertrand: Okay.

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