Entegris Q4 2025 Entegris Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Entegris Inc Earnings Call
Operator 3: We'd like to thank you for your patience. Please continue to stand by. Your conference will begin momentarily. Welcome to the Entegris Q4 2025 earnings conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero. I would now like to turn the call over to Jeff Schnell, VP of Investor Relations.
Operator: We'd like to thank you for your patience. Please continue to stand by. Your conference will begin momentarily. Welcome to the Entegris Q4 2025 earnings conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero. I would now like to turn the call over to Jeff Schnell, VP of Investor Relations.
Speaker #3: questions, following the presentation. If you would like to mode. And the floor will be open for your time, please press star keypad. If at any point your question has yourself from the queue by pressing star two.
Speaker #3: Clearly. We ask that you pick up your handset for best sound, so others can hear your questions. If you should require operator assistance on your telephone, press zero.
Speaker #3: quality. Lastly, if you
Speaker #3: I would now like to
Speaker #3: Relations.
Speaker #2: Good morning, everyone. Earlier
Speaker #2: Good morning, everyone. Earlier
Jeff Schnell: Good morning, everyone. Earlier today, we announced the financial results for Q4 2025. 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 these 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 in today's news release, as well as on the IR page of our website and Entegris.com. On the call today are Dave Reeder, our CEO, and Linda LaGorga, our CFO.
Jeff Schnell: Good morning, everyone. Earlier today, we announced the financial results for Q4 2025. 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 these 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 in today's news release, as well as on the IR page of our website and Entegris.com. On the call today are Dave Reeder, our CEO, and Linda LaGorga, our CFO.
Speaker #2: 2025. Before we begin, I would like to remind listeners that our comments today will cover the fourth quarter of
Speaker #2: Risks and uncertainties exist, and actual results could differ materially from those projected in the forward-looking statements. Additional information regarding these risks is included in our most recent annual report. For assistance, please press star.
Speaker #2: that we have filed with the
Speaker #2: presentation. On this call, we will also SEC. Please refer to the information on
Speaker #2: presentation. On this call, we will also SEC. Please refer to the information on today, we announced the financial results for the refer to non-GAAP financial Regulation G, you can statements.
Speaker #2: page of our website and report and subsequent quarterly reports Integris.com. On the call find reconciliation tables in today's momentarily.
Jeff Schnell: With that, I'll hand the call over to Dave.
Jeff Schnell: With that, I'll hand the call over to Dave.
Speaker #3: Thank you. Before we dive into results, I want to take a moment...
Speaker #3: Thank dive into results, I want to take a
Dave Reeder: Thank you and good morning. Before we dive into results, I want to take a moment to welcome Jeff to our team. We're excited to have him on board leading our IR efforts as our new head of Investor Relations. Our solid fourth quarter results demonstrate disciplined execution and a consistent focus on delivering on our commitments. Fourth quarter revenue, gross margin, adjusted EBITDA margin, and non-GAAP EPS were all at the high end or above our guidance range. For the full year, total revenue was approximately flat compared to 2024, excluding divestitures. Our unit-driven revenue grew approximately 2% in 2025, in line with wafer starts for the market, and was led by CMP Consumables, liquid filtration, and selective etch. Our CapEx-driven revenue declined 7% in 2025, consistent with the decline in industry fab construction CapEx, where we are most highly correlated.
Dave Reeder: Thank you and good morning. Before we dive into results, I want to take a moment to welcome Jeff to our team. We're excited to have him on board leading our IR efforts as our new head of Investor Relations. Our solid fourth quarter results demonstrate disciplined execution and a consistent focus on delivering on our commitments. Fourth quarter revenue, gross margin, adjusted EBITDA margin, and non-GAAP EPS were all at the high end or above our guidance range. For the full year, total revenue was approximately flat compared to 2024, excluding divestitures. Our unit-driven revenue grew approximately 2% in 2025, in line with wafer starts for the market, and was led by CMP Consumables, liquid filtration, and selective etch. Our CapEx-driven revenue declined 7% in 2025, consistent with the decline in industry fab construction CapEx, where we are most highly correlated.
Speaker #3: board leading our IR efforts, as are our measures as defined by the SEC in CEO, and Linda LaGorga, our
Speaker #3: board leading our IR efforts as our measures as defined by the SEC in CEO, and Linda LaGorga, our
Speaker #3: disciplined execution and a CFO.
Speaker #3: consistent focus on delivering on our moment to welcome Jeff to our With that, I'll hand the call over relations. commitments. Fourth Our solid adjusted EBITDA margin and team.
Speaker #3: high end or above our these risks and uncertainties is guidance range. These statements involve a number of approximately flat compared to today, are Dave Reader, our non-GAAP EPS were all at the fourth quarter results demonstrate grew approximately 2% in 2024, excluding wafer starts for the market, and was led divestitures.
Speaker #3: high end or above our these risks and uncertainties is guidance range. These statements involve a number of approximately flat compared to today, are Dave Reader, our non-GAAP EPS were all at the fourth quarter results demonstrate grew approximately 2% in 2024, excluding wafer starts for the market, and was led divestitures.
Dave Reeder: The fab CapEx slowdown was most evident in our FOUP and fluid handling product lines within our APS division. Looking ahead to 2026, the industry backdrop appears more constructive. I'll touch on the semi-market in more detail in a bit, but there are a few areas where we expect notable improvement compared to 2025 that should benefit Entegris. First, we expect to benefit in 2026 from the node transitions in both logic and memory. In logic, increased demand for 2-nanometer devices is expected to meaningfully drive wafer output throughout 2026. In memory, NAND transitions are progressing, migrating from low 250 layers to approximately 300 layers. Additionally, next-generation DRAM and HBM products are expected to be rolled out this year, and all these transitions create accretive content-per-wafer opportunities for Entegris.
Dave Reeder: The fab CapEx slowdown was most evident in our FOUP and fluid handling product lines within our APS division. Looking ahead to 2026, the industry backdrop appears more constructive. I'll touch on the semi-market in more detail in a bit, but there are a few areas where we expect notable improvement compared to 2025 that should benefit Entegris. First, we expect to benefit in 2026 from the node transitions in both logic and memory. In logic, increased demand for 2-nanometer devices is expected to meaningfully drive wafer output throughout 2026. In memory, NAND transitions are progressing, migrating from low 250 layers to approximately 300 layers. Additionally, next-generation DRAM and HBM products are expected to be rolled out this year, and all these transitions create accretive content-per-wafer opportunities for Entegris.
Speaker #3: division. Looking ahead to 2026, the industry 7% in 2025, backdrop appears more areas where we expect notable improvement detail in a bit, but there are a few Integris.
Speaker #3: increased demand for two-nanometer memory. In logic, progressing, migrating from low 250 layers to memory, NAND transitions are DRAM and HBM products are expected to be rolled out this year, and all these transitions create accretive should benefit content per wafer opportunities for Additionally, next-generation Integris.
Dave Reeder: Next, we expect industry MSI growth to increase in 2026, led by continued strong growth in advanced logic and DRAM, improving demand for NAND, and stable demand for mainstream logic. Finally, we expect industry fab construction spending to grow in 2026, reversing a significant decline in 2025. This is meaningful for Entegris because two-thirds of our CapEx-related revenue is correlated to fab construction. Last quarter, my first as CEO, I shared my initial priorities for Entegris. Let me provide an update on those priorities. First is deepening customer intimacy. This includes supporting our customers' technology roadmaps. Success in this area translates into securing key positions of record, PORs, in new nodes, which will expand our served available market and increase both revenue and content per wafer.
Dave Reeder: Next, we expect industry MSI growth to increase in 2026, led by continued strong growth in advanced logic and DRAM, improving demand for NAND, and stable demand for mainstream logic. Finally, we expect industry fab construction spending to grow in 2026, reversing a significant decline in 2025. This is meaningful for Entegris because two-thirds of our CapEx-related revenue is correlated to fab construction. Last quarter, my first as CEO, I shared my initial priorities for Entegris. Let me provide an update on those priorities. First is deepening customer intimacy. This includes supporting our customers' technology roadmaps. Success in this area translates into securing key positions of record, PORs, in new nodes, which will expand our served available market and increase both revenue and content per wafer.
Speaker #3: expect industry MSI growth to logic and DRAM, improving increase in 2026. demand for NAND, and stable demand constructive. I'll touch on the semi-market in more for mainstream logic.
Speaker #3: expect industry MSI growth to logic and DRAM, improving increase in 2026. demand for NAND, and stable demand constructive. I'll touch on the semi-market in more Led by continued strong growth and advanced Finally, we expect industry 2026, reversing a significant decline in Integris because two-thirds of our CAPEX-related revenue is correlated to fab construction.
Speaker #3: as CEO, I shared my initial priorities for fab construction spending to grow in Integris. Let me provide an update on those priorities. First is deepening customer intimacy.
Speaker #3: roadmaps. Success in this area record, 2025. PORs, in new nodes, which will expand This is meaningful for our served available market and increase translates into securing key positions of wafer.
Speaker #3: both revenue and content per the most advanced node, we've customers' technology Last quarter, my first This includes supporting our First, we expect to secured strong POR positions Next, we For logic devices, at and solid share in key product lines such as CMP consumables, advanced deposition and implant materials, liquid purification and filtration, and wafer handling products.
Dave Reeder: For logic devices at the most advanced node, we've secured strong POR positions and solid share in key product lines such as CMP Consumables, advanced deposition and implant materials, liquid purification and filtration, and wafer handling products. In addition to this, the team is focused on winning incremental share in PORs in subsequent advanced nodes. For advanced memory, we are gaining traction in DRAM and HBM, in particular for products associated with CMP Consumables and advanced packaging solutions. And for next-generation NAND devices, we have also achieved strong POR wins with solid share across key NAND-specific product lines, including deposition materials, CMP, and selective etch applications. Our second priority is improving utilization by ramping our new facilities in Taiwan and Colorado while rationalizing our existing manufacturing footprint. Our Taiwan facility continues to ramp production, and our Colorado facility is expected to substantially complete key customer product qualifications in 2026.
Dave Reeder: For logic devices at the most advanced node, we've secured strong POR positions and solid share in key product lines such as CMP Consumables, advanced deposition and implant materials, liquid purification and filtration, and wafer handling products. In addition to this, the team is focused on winning incremental share in PORs in subsequent advanced nodes. For advanced memory, we are gaining traction in DRAM and HBM, in particular for products associated with CMP Consumables and advanced packaging solutions. And for next-generation NAND devices, we have also achieved strong POR wins with solid share across key NAND-specific product lines, including deposition materials, CMP, and selective etch applications. Our second priority is improving utilization by ramping our new facilities in Taiwan and Colorado while rationalizing our existing manufacturing footprint. Our Taiwan facility continues to ramp production, and our Colorado facility is expected to substantially complete key customer product qualifications in 2026.
Speaker #3: this, the team is focused on winning incremental share and PORs in subsequent advanced are gaining traction in DRAM and HBM, in particular for products associated with CMP consumables and advanced packaging solutions.
Speaker #3: devices, we have also achieved strong PR wins with solid share nodes. across key NAND-specific product For advanced memory, we materials, CMP, and selective edge applications.
Speaker #3: facilities in Taiwan and lines including deposition Colorado, while rationalizing our existing manufacturing footprint. Our Taiwan facility continues to ramp production and our Colorado facility is expected to substantially complete key customer product qualifications in 2026.
Dave Reeder: In Q4, we exited our Chester, Pennsylvania facility, and we expect to rationalize at least one additional facility in the first half of 2026. As I discussed last quarter, we have completed the multi-year manufacturing CapEx investment cycle that began in 2022. As a result, we expect 2026 CapEx to decline to $250 million. Longer term, we expect CapEx to return to historical levels of approximately 7% to 8% of sales. The additional manufacturing capacity we've built, combined with our current manufacturing base, enables us to deliver significantly more than $1 billion in incremental revenue with limited further investment. Our third priority is improving free cash flow. Thanks to the team's execution, free cash flow margin, which is free cash flow divided by sales, improved meaningfully, reaching 12.7% in 2025 in line with our target.
Dave Reeder: In Q4, we exited our Chester, Pennsylvania facility, and we expect to rationalize at least one additional facility in the first half of 2026. As I discussed last quarter, we have completed the multi-year manufacturing CapEx investment cycle that began in 2022. As a result, we expect 2026 CapEx to decline to $250 million. Longer term, we expect CapEx to return to historical levels of approximately 7% to 8% of sales. The additional manufacturing capacity we've built, combined with our current manufacturing base, enables us to deliver significantly more than $1 billion in incremental revenue with limited further investment. Our third priority is improving free cash flow. Thanks to the team's execution, free cash flow margin, which is free cash flow divided by sales, improved meaningfully, reaching 12.7% in 2025 in line with our target.
Speaker #3: exited our Chester, Pennsylvania facility and we expect to the first half of 2026. As I discussed last quarter, we have completed improving utilization by ramping our new rationalize at least one additional facility in 2022.
Speaker #3: the multi-year manufacturing CAPEX decline to 250 million. Longer term, we expect CAPEX to return to historical levels of approximately 7 to 8 percent of sales.
Speaker #3: capacity we've built combined with our current manufacturing base enables us to deliver significantly revenue with limited further investment. Our third priority is more than 1 billion in incremental to the team's execution, free cash flow margin, which is free cash flow improving free cash flow.
Speaker #3: Divided by sales. And for next-generation NAND, our second priority is the additional manufacturing. In addition to—and in the fourth quarter, we are in line with our target.
Speaker #3: 12.7 percent in 2025 in Higher operating cash flow in combination improved meaningfully, reaching with reduced CAPEX is expected to increase free cash flow again in 2026.
Dave Reeder: Higher operating cash flow in combination with reduced CapEx is expected to increase free cash flow again in 2026. This will support debt reduction and enable us to reduce net leverage to below 3.5 times exiting 2026. Underscoring our commitment, free cash flow is now part of our short-term and long-term incentive plans. Our fourth priority is increasing local-for-local manufacturing, particularly for China. This provides us with critical strategic flexibility and enhanced ability to serve our global customers. We expect approximately 85% of our China revenue in Q1 will be supplied by our Asia facilities, with that proportion increasing through 2026. Turning our thoughts to the semiconductor market. We expect mid-ish single-digit industry MSI or wafer starts growth in 2026. As a reminder, about 75% of our revenue is unit-driven and is correlated to MSI. Looking closer at semi-end markets.
Dave Reeder: Higher operating cash flow in combination with reduced CapEx is expected to increase free cash flow again in 2026. This will support debt reduction and enable us to reduce net leverage to below 3.5 times exiting 2026. Underscoring our commitment, free cash flow is now part of our short-term and long-term incentive plans. Our fourth priority is increasing local-for-local manufacturing, particularly for China. This provides us with critical strategic flexibility and enhanced ability to serve our global customers. We expect approximately 85% of our China revenue in Q1 will be supplied by our Asia facilities, with that proportion increasing through 2026. Turning our thoughts to the semiconductor market. We expect mid-ish single-digit industry MSI or wafer starts growth in 2026. As a reminder, about 75% of our revenue is unit-driven and is correlated to MSI. Looking closer at semi-end markets.
Speaker #3: will support debt reduction and enable below 3.5 times, exiting us to reduce net leverage to. Underscoring our commitment, free cash flow is now part of our short-term and, as a result, we—this includes increasing local-for-local manufacturing, particularly for China.
Speaker #3: Plans, flexibility, and enhanced ability to serve our global customers through 2026. We expect approximately 85 percent of our China revenue in Q1 will be supplied by our Asia long-term incentive, increasing through 2026. Our fourth priority is long-term incentive.
Speaker #3: Turning facilities, with that proportion, our thoughts turn to the semiconductor market. We expect industry MSI, or wafer starts, growth in 2026. As a reminder, about 75 percent of our revenue is unit-driven and is correlated to MSI.
Speaker #3: Looking closer at semi-end markets, we see significant growth again in 2026, driven largely by AI-enabled applications. Fab advanced logic is positioned for already near 100 percent, and our customers' utilization rates in advanced logic are strong. Two-nanometer significantly ramps wafer output this year, and this node provides an additional tailwind as it benefits from strong unit growth, carrying both higher content per wafer and strong share for Entegris.
Speaker #3: Looking closer at semi-end markets, significant growth again in 2026, driven largely by AI-enabled applications. Fab advanced logic is positioned for already near 100 percent and our customers utilization rates and advanced logic are two-nanometer significantly ramps wafer output this year, this node provides an additional tailwind as benefits of strong unit growth, as it carries both higher content per wafer and strong capacity.
Dave Reeder: Advanced logic is positioned for significant growth again in 2026, driven largely by AI-enabled applications. Fab utilization rates in advanced logic are already near 100%, and our customers are aggressively investing in additional capacity. Beyond the benefits of strong unit growth, as 2-Nanometer significantly ramps wafer output this year, this node provides an additional tailwind as it carries both higher content per wafer and strong share for Entegris. In mainstream logic, feedback suggests inventory levels are now healthy. While we're seeing early signs of improvement and mainstream MSI still remains well below the 2022 peak, the overall end-market recovery is slow and mixed. We also note that ongoing memory shortages may weigh on the industry's ability to supply some mainstream end markets. NAND. NAND continues to benefit from strong AI-driven demand and pricing trends.
Dave Reeder: Advanced logic is positioned for significant growth again in 2026, driven largely by AI-enabled applications. Fab utilization rates in advanced logic are already near 100%, and our customers are aggressively investing in additional capacity. Beyond the benefits of strong unit growth, as 2-Nanometer significantly ramps wafer output this year, this node provides an additional tailwind as it carries both higher content per wafer and strong share for Entegris. In mainstream logic, feedback suggests inventory levels are now healthy. While we're seeing early signs of improvement and mainstream MSI still remains well below the 2022 peak, the overall end-market recovery is slow and mixed. We also note that ongoing memory shortages may weigh on the industry's ability to supply some mainstream end markets. NAND. NAND continues to benefit from strong AI-driven demand and pricing trends.
Speaker #3: Mainstream logic, feedback suggests inventory levels are now healthy. While we're seeing early signs of improvement, and mainstream MSI still remains well below the 2022 peak, the recovery is slow and mixed.
Speaker #3: We also note that ongoing memory to supply some mainstream end Beyond the markets. continues to benefit from strong NAND. NAND trends. This is expected to translate into more than 20 percent BIT shortages may weigh on the industry's ability AI-driven demand and pricing primarily by the shift to higher-layer, higher-capacity NAND rather than a significant increase in MSI.
Dave Reeder: This is expected to translate into more than 20% BIT growth in 2026, driven primarily by the shift to higher-layer, higher-capacity NAND rather than a significant increase in MSI. While NAND MSI is expected to rise modestly in 2026, we expect to additionally benefit from a double-digit increase in NAND content per wafer as customers move to higher-layer count advanced nodes and introduce new materials such as Moly and Selective Etch. If demand remains robust, flash memory makers will likely need to add significant fab capacity, setting the stage for higher NAND MSI growth in 2027. DRAM is expected to see solid MSI growth in 2026. Pricing trends and underlying demand remain strong in both HBM and DDR5. Tight supply in HBM, DDR5, and in advanced packaging are all expected to drive the need for additional fab capacity heading into 2027.
Dave Reeder: This is expected to translate into more than 20% BIT growth in 2026, driven primarily by the shift to higher-layer, higher-capacity NAND rather than a significant increase in MSI. While NAND MSI is expected to rise modestly in 2026, we expect to additionally benefit from a double-digit increase in NAND content per wafer as customers move to higher-layer count advanced nodes and introduce new materials such as Moly and Selective Etch. If demand remains robust, flash memory makers will likely need to add significant fab capacity, setting the stage for higher NAND MSI growth in 2027. DRAM is expected to see solid MSI growth in 2026. Pricing trends and underlying demand remain strong in both HBM and DDR5. Tight supply in HBM, DDR5, and in advanced packaging are all expected to drive the need for additional fab capacity heading into 2027.
Speaker #3: While NAND MSI is expected to rise modestly in 2026, we expect double-digit increase in NAND to additionally benefit from a move to higher-layer count, advanced nodes, and introduce new materials such as MOLLE and selective edge.
Speaker #3: content per wafer as customers robust, Flash Memory Makers will likely need to add significant fab capacity setting the stage for higher NAND MSI growth in 2027.
Speaker #3: DRAM is expected to see solid MSI growth in underlying demand remain strong in both HBM and DDR5, and in advanced packaging are all expected to drive the need for additional fab capacity heading 2027.
Speaker #3: While 75 percent of our into revenue is related to MSI, 2026. Pricing trends and 25 percent is tied to industry CAPEX. There are two primary drivers of our CAPEX revenue.
Dave Reeder: While 75% of our revenue is related to MSI, 25% is tied to industry CapEx. There are two primary drivers of our CapEx revenue: fab construction-related spending, which correlates with approximately 2/3 of our CapEx sales, and the remaining 1/3 related to WFE. Fab construction CapEx is expected to grow modestly this year after a high single-digit decline last year, with a more meaningful acceleration anticipated in 2027 as construction begins on new fabs. Additionally, we expect WFE to deliver strong growth in 2026. Overall, AI continues to be an important growth driver for the semi-market, and we are seeing an increased benefit from this trend. Today, more than 60% of Entegris's revenue comes from advanced logic and advanced memory. AI is, of course, not the majority of these advanced nodes, but it is an important part and the most significant growth driver. In closing, we ended 2025 with momentum.
Dave Reeder: While 75% of our revenue is related to MSI, 25% is tied to industry CapEx. There are two primary drivers of our CapEx revenue: fab construction-related spending, which correlates with approximately 2/3 of our CapEx sales, and the remaining 1/3 related to WFE. Fab construction CapEx is expected to grow modestly this year after a high single-digit decline last year, with a more meaningful acceleration anticipated in 2027 as construction begins on new fabs. Additionally, we expect WFE to deliver strong growth in 2026. Overall, AI continues to be an important growth driver for the semi-market, and we are seeing an increased benefit from this trend. Today, more than 60% of Entegris's revenue comes from advanced logic and advanced memory. AI is, of course, not the majority of these advanced nodes, but it is an important part and the most significant growth driver. In closing, we ended 2025 with momentum.
Speaker #3: Fab construction-related spending, which correlates with approximately DDR5. two-thirds of our CAPEX sales, and the remaining third related to Tight supply in HBM, WFE. Fab construction CAPEX is expected to grow modestly single-digit decline last year, with a more meaningful acceleration this year after a high 2027 as construction begins on new fabs.
Speaker #3: Additionally, we anticipated in 2026. Overall, AI continues to be an important growth driver for the semi-market, and we are seeing an increased benefit from this trend.
Speaker #3: Today, more than 60 percent of Integris' revenue comes from advanced logic and advanced memory. AI is, of course, not the majority of these advanced nodes, but it is an important part and the most significant growth driver.
Speaker #3: In with momentum. We're closing, we ended 2025 cautiously optimistic about the industry conditions entering 2026. We continue to focus on winning key PORs and new content per wafer and revenue.
Dave Reeder: We're cautiously optimistic about the industry conditions entering 2026. We continue to focus on winning key PORs in new nodes, driving higher Entegris content per wafer and revenue. The growth we expect this year should improve utilization, thus increasing free cash flow and reducing leverage. As devices become more complex, our expertise in materials science and materials purity becomes increasingly critical, helping customers enhance performance and achieve optimal yields. As a result, we expect to significantly grow our content per wafer and outperform the market, and we will continue to focus on execution and delivering on our commitments. Before handing over to Linda, I wanted to share that given the CFO transition, we are rescheduling our capital markets day from this May to the fall of this year. We'll share more details on this as soon as we can.
Dave Reeder: We're cautiously optimistic about the industry conditions entering 2026. We continue to focus on winning key PORs in new nodes, driving higher Entegris content per wafer and revenue. The growth we expect this year should improve utilization, thus increasing free cash flow and reducing leverage. As devices become more complex, our expertise in materials science and materials purity becomes increasingly critical, helping customers enhance performance and achieve optimal yields. As a result, we expect to significantly grow our content per wafer and outperform the market, and we will continue to focus on execution and delivering on our commitments. Before handing over to Linda, I wanted to share that given the CFO transition, we are rescheduling our capital markets day from this May to the fall of this year. We'll share more details on this as soon as we can.
Speaker #3: Nodes, driving higher Integris and improving utilization, thus increasing leverage. And as the growth we expect this year should—devices become more complex, our expertise and materials science, and materials purity becomes increasingly critical, helping customers enhance performance and achieve optimal free cash flow and reducing yields.
Speaker #3: As a result, we expect to significantly grow our content per wafer and outperform the market, and we will continue to focus on execution and delivering on our commitments.
Speaker #3: To Linda, I wanted to share that, given the CFO transition before handing over, we are rescheduling our Capital Markets Day from this May to the fall of this year.
Speaker #3: We'll share more details on this as soon as we can. And finally, I want to thank Linda for her many contributions and lasting impact on future.
Dave Reeder: And finally, I want to thank Linda for her many contributions and lasting impact on Entegris. We wish her all the best in the future. With that, let me turn the call over to Linda. Good morning. Q4 sales were $824 million at the high end of guidance, down 3% year-over-year and up 2% sequentially. Gross margin on a GAAP basis was 43.8% and 44% on a non-GAAP basis in the fourth quarter, also at the high end of guidance. The sequential increase in gross margin was primarily driven by increased production volumes across our manufacturing facilities. Back to the Q4 P&L. Operating expenses on a GAAP basis were $256 million in Q4. Operating expenses on a non-GAAP basis in Q4 were $188 million. Adjusted EBITDA in Q4 was 27.7% of revenue above our guidance.
Dave Reeder: And finally, I want to thank Linda for her many contributions and lasting impact on Entegris. We wish her all the best in the future. With that, let me turn the call over to Linda.
Speaker #3: With that, let me turn the call over to Linda.
Linda LaGorga: Good morning. Q4 sales were $824 million at the high end of guidance, down 3% year-over-year and up 2% sequentially. Gross margin on a GAAP basis was 43.8% and 44% on a non-GAAP basis in the fourth quarter, also at the high end of guidance. The sequential increase in gross margin was primarily driven by increased production volumes across our manufacturing facilities. Back to the Q4 P&L. Operating expenses on a GAAP basis were $256 million in Q4. Operating expenses on a non-GAAP basis in Q4 were $188 million. Adjusted EBITDA in Q4 was 27.7% of revenue above our guidance.
Speaker #1: Good morning. Q4 sales were guidance, down 3 $824 million, at the high end of percent year over year and up 2 Gross margin on a gap percent sequentially.
Speaker #1: quarter, also at the high end of guidance. The sequential increase in gross margin was primarily driven by increased production volumes across our manufacturing facilities.
Speaker #1: Back to the Q4 P&L. Operating expenses on $256 million in Q4. Operating a gap basis were expenses on a non-gap basis in $188 million.
Speaker #1: was $27.7 percent of revenue, above our Adjusted EBITDA in Q4 rate in Q4 was 10 guidance. The gap tax was 15.4 diluted EPS was percent, and the non-gap tax rate quarter.
Dave Reeder: The GAAP tax rate in Q4 was 10%, and the non-GAAP tax rate was 15.4%. GAAP diluted EPS was $0.32 per share in the fourth quarter. Non-GAAP EPS was $0.70 per share above our guidance. Sales for Materials Solutions in Q4 were $362 million. Sales were flat year-over-year and up 4% sequentially. Sequential growth was driven primarily by advanced deposition materials supported by demand for moly deposition within NAND. Adjusted operating margin for MS was 20.9% for the quarter. The year-over-year decline in margin was driven by slightly lower production volumes and strategic investments. The strong sequential increase in margin was driven by increased production volumes and product mix. Sales for Advanced Purity Solutions in Q4 were $465 million, down 5% year-over-year and up 1% sequentially.
Linda LaGorga: The GAAP tax rate in Q4 was 10%, and the non-GAAP tax rate was 15.4%. GAAP diluted EPS was $0.32 per share in the fourth quarter. Non-GAAP EPS was $0.70 per share above our guidance. Sales for Materials Solutions in Q4 were $362 million. Sales were flat year-over-year and up 4% sequentially. Sequential growth was driven primarily by advanced deposition materials supported by demand for moly deposition within NAND. Adjusted operating margin for MS was 20.9% for the quarter. The year-over-year decline in margin was driven by slightly lower production volumes and strategic investments. The strong sequential increase in margin was driven by increased production volumes and product mix. Sales for Advanced Purity Solutions in Q4 were $465 million, down 5% year-over-year and up 1% sequentially.
Speaker #1: $0.32 per share in the fourth quarter, above our guidance. Non-GAAP EPS was $0.70 per share. Sales for Materials Gap Solutions in Q4 were $362 million.
Speaker #1: Sales were flat, year over year, and up 4 percent growth was driven primarily by advanced deposition sequentially. Sequential for MOLLE deposition within Adjusted operating margin for MS was 20.9 percent for the quarter.
Speaker #1: The year-on-year materials supported by demand, by slightly lower production investments. The strong sequential volumes and strategic NAND, by increased production volumes, decline in margin was driven by mix.
Speaker #1: Sales for Advanced Purity Solutions in Q4 were $465 million, down 5 percent year-on-year and up 1 percent sequentially. The year-over-year sales decline was driven by fluid handling and FOOPs, partially offset by strong growth in Product, another record quarter.
Dave Reeder: The year-over-year sales decline was driven by fluid handling and FOUPs, partially offset by strong growth in liquid filtration, which had another record quarter. Sequential growth in liquid filtration and gas purification was partially offset by lower FOUP sales. The adjusted operating margin for APS was 24.8% for the quarter. The year-over-year decline in margin was driven by costs related to the ramp of our Taiwan and Colorado manufacturing sites, and lower production volumes. The sequential decrease in margin was primarily driven by unfavorable product mix and timing of operating expenses. Moving on to cash flow. Full-year free cash flow was $404 million, representing a free cash flow margin of 12.7% in 2025, nearly a 300 basis point increase year over year. This improvement was driven by our team's disciplined focus on working capital, including accounts receivable, and decreased year-over-year inventory growth.
Linda LaGorga: The year-over-year sales decline was driven by fluid handling and FOUPs, partially offset by strong growth in liquid filtration, which had another record quarter. Sequential growth in liquid filtration and gas purification was partially offset by lower FOUP sales. The adjusted operating margin for APS was 24.8% for the quarter. The year-over-year decline in margin was driven by costs related to the ramp of our Taiwan and Colorado manufacturing sites, and lower production volumes. The sequential decrease in margin was primarily driven by unfavorable product mix and timing of operating expenses. Moving on to cash flow. Full-year free cash flow was $404 million, representing a free cash flow margin of 12.7% in 2025, nearly a 300 basis point increase year over year. This improvement was driven by our team's disciplined focus on working capital, including accounts receivable, and decreased year-over-year inventory growth.
Speaker #1: Sequential growth in liquid filtration and gas purification liquid filtration, which had FOOP sales. was partially offset by lower The adjusted operating margin for APS was 24.8 percent for the quarter.
Speaker #1: in margin was driven by The year-on-year decline Taiwan and Colorado manufacturing sites, and lower production volumes. The was primarily driven by unfavorable product mix and sequential decrease in margin timing of operating expenses.
Speaker #1: Moving on to cash flow. Full-year free cash flow was $404 million. of 12.7 percent in basis point increase year over year. This improvement was driven by our team's disciplined focus on working capital, including accounts 2025.
Speaker #1: Representing a free cash flow margin year-on-year inventory growth. CapEx for 2025 was $299 million. Approximately 9 percent of sales. A quick overview of our capital Nearly a $300 structure.
Dave Reeder: CapEx for 2025 was $299 million, approximately 9% of sales. A quick overview of our capital structure. During the fourth quarter, we paid down $150 million of the term loan from cash on hand, and for the full year, we paid down $300 million of the term loan. At quarter end, our gross debt was approximately $3.7 billion, and our net debt was $3.4 billion. Net leverage ended the year at 3.8 times. As Dave said, we are targeting net leverage of below 3.5 times by the end of 2026. Moving on to our Q1 outlook. We expect our Q1 sales to range from $785 million to $825 million, reflecting an increase of approximately 4% to the midpoint year-over-year. Gross margin of 44.5% to 45.5%, both on a GAAP and non-GAAP basis. We recently completed an assessment of the useful lives of our assets.
Linda LaGorga: CapEx for 2025 was $299 million, approximately 9% of sales. A quick overview of our capital structure. During the fourth quarter, we paid down $150 million of the term loan from cash on hand, and for the full year, we paid down $300 million of the term loan. At quarter end, our gross debt was approximately $3.7 billion, and our net debt was $3.4 billion. Net leverage ended the year at 3.8 times. As Dave said, we are targeting net leverage of below 3.5 times by the end of 2026. Moving on to our Q1 outlook. We expect our Q1 sales to range from $785 million to $825 million, reflecting an increase of approximately 4% to the midpoint year-over-year. Gross margin of 44.5% to 45.5%, both on a GAAP and non-GAAP basis. We recently completed an assessment of the useful lives of our assets.
Speaker #1: During the fourth quarter, we paid down $150 million of the term loan from cash on hand, and for the full year, we paid down $300 million of the term loan. Gross debt was approximately $3.7 billion.
Speaker #1: During the fourth quarter, we paid down $150 million of the term loan from cash on hand, and for the full year, we paid down $300 million of the term gross debt was approximately $3.7 loan.
Speaker #1: At quarter end, our midpoint year-over-year gross is approximately 4 percent, to the margin of 44.5 to 45.5 percent for the Q1 outlook, both on a GAAP and non-GAAP basis.
Speaker #1: billion, and our net debt was times. As Dave said, we below 3.5 times by the 2026. Moving on to our are targeting net leverage of range from $785 end of million to expect our Q1 sales to $825 million.
Speaker #1: We recently completed an assessment of the useful lives of our assets. This gross margin guidance includes the positive impact from the useful life accounting change of approximately 100 basis points in Q1 on gross margin.
Dave Reeder: This gross margin guidance includes the positive impact from the useful life accounting change of approximately 100 basis points in Q1 on gross margin. We expect GAAP operating expenses of approximately $229 million and non-GAAP operating expenses of approximately $181 million. EBITDA margin to range from 26.5% to 27.5%. Net interest expense of approximately $47 million. We expect our non-GAAP Q1 tax rate to be approximately 15%. We expect GAAP EPS between $0.43 and $0.51 per share. Non-GAAP EPS between $0.70 and $0.78 per share. We expect depreciation of approximately $36 million in Q1. Looking slightly further ahead, based on our current visibility, we expect Q2 sales to increase 1% to 3% sequentially from Q1, in line with normal industry seasonality. I'd like to provide a few modeling items for the full year of 2026. We expect net interest expense will be approximately $190 million.
Linda LaGorga: This gross margin guidance includes the positive impact from the useful life accounting change of approximately 100 basis points in Q1 on gross margin. We expect GAAP operating expenses of approximately $229 million and non-GAAP operating expenses of approximately $181 million. EBITDA margin to range from 26.5% to 27.5%. Net interest expense of approximately $47 million. We expect our non-GAAP Q1 tax rate to be approximately 15%. We expect GAAP EPS between $0.43 and $0.51 per share. Non-GAAP EPS between $0.70 and $0.78 per share. We expect depreciation of approximately $36 million in Q1. Looking slightly further ahead, based on our current visibility, we expect Q2 sales to increase 1% to 3% sequentially from Q1, in line with normal industry seasonality. I'd like to provide a few modeling items for the full year of 2026. We expect net interest expense will be approximately $190 million.
Speaker #1: We expect approximately $229 million and non-gap operating expenses of approximately $181 million. EBITDA margin to range gap operating expenses of from 26.5 to 27.5 percent.
Speaker #1: Net interest million. tax rate to be approximately 15 We expect our non-gap Q1 percent. We expect gap EPS between $43 to $51 per $70 and $78 per share.
Speaker #1: Non-gap EPS between , and we expect of $36 million in Q1 Looking slightly ahead , on our current share depreciation . Looking A slightly further Based on our current visibility , we expect Q2 .
Speaker #1: Increase 1 to 3% sequentially in line with normal industry seasonality in Q1. I'd like approximately modeling a few for the items based in full year 2026.
Dave Reeder: The non-GAAP tax rate to be approximately 15%. Diluted share count of approximately 152 million shares for Q1 and approximately 153 million shares for the full year. CapEx of $250 million. Depreciation of approximately $150 million, reflecting the recently completed assessment of the useful lives of our assets. Before we begin Q&A, I would like to thank the finance team, the leadership team, and the board for their partnership over the past three years. I am proud of the work we have done to strengthen the foundation of the business and position the company to capitalize on future opportunities. It's been a privilege to be CFO, and I am confident in Entegris's path forward. With that, operator, let's open the line for questions. The floor is now open for your questions. At this time, if you have a question or comment, please press star one on your telephone keypad.
Linda LaGorga: The non-GAAP tax rate to be approximately 15%. Diluted share count of approximately 152 million shares for Q1 and approximately 153 million shares for the full year. CapEx of $250 million. Depreciation of approximately $150 million, reflecting the recently completed assessment of the useful lives of our assets. Before we begin Q&A, I would like to thank the finance team, the leadership team, and the board for their partnership over the past three years. I am proud of the work we have done to strengthen the foundation of the business and position the company to capitalize on future opportunities. It's been a privilege to be CFO, and I am confident in Entegris's path forward. With that, operator, let's open the line for questions. The floor is now open for your questions.
Speaker #1: Interest will be net tax rate, approximately non-GAAP $190 million. The share count will be 15% diluted, with approximately 152 million shares, and approximately 153 million shares for the full year ahead.
Speaker #1: interest will be Net tax rate approximately non-GAAP $190 million . to be to share 15% diluted count of approximately 152 million shares and approximately for 153 million shares for ahead .
Speaker #1: Of the $150 million, reflecting the recently completed assessment of the Q1 useful life. Before we begin, I would like to thank the finance team, the lives of the team, and the board for their partnership over the past three years. Q&A to follow.
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Operator: At this time, if you have a question or comment, please press star one on your telephone keypad.
Dave Reeder: If at any point your question is answered, you may remove yourself from the queue by pressing star two. Again, we ask that you pick up your handset when posing your questions to provide optimal sound quality. Thank you. Our first question is coming from Mike Harrison with Seaport Research Partners. Your line is open. Hi, good morning. Best wishes to Linda and welcome, Jeff, to the team. Morning, Mike. Morning, Mike. Dave, I appreciate you walking through your detailed thoughts there on underlying market growth in 2026. It sounds like if we roll that all together, you're looking at something in the mid-single-digit range for growth overall. But I'm curious; historically, Entegris would talk about growing 3 to 6 percentage points faster than the underlying market.
Operator: If at any point your question is answered, you may remove yourself from the queue by pressing star two. Again, we ask that you pick up your handset when posing your questions to provide optimal sound quality. Thank you. Our first question is coming from Mike Harrison with Seaport Research Partners. Your line is open.
Speaker #2: Thank you. Optimal, you ask that. Our queue from coming, Mike is with Your Partners. Line is open.
Speaker #2: press star your questions .
Speaker #2: is question answered , any one on your you may remove from the . If at telephone please star two . Again , we pressing pick up handset when your yourself posing to $250 million questions provide keypad your quality .
Mike Harrison: Hi, good morning. Best wishes to Linda and welcome, Jeff, to the team.
Jeff Schnell: Morning, Mike.
Speaker #3: . wishes to Linda
Speaker #3: . wishes to Linda welcome and team to
Dave Reeder: Morning, Mike.
Mike Harrison: Dave, I appreciate you walking through your detailed thoughts there on underlying market growth in 2026. It sounds like if we roll that all together, you're looking at something in the mid-single-digit range for growth overall. But I'm curious; historically, Entegris would talk about growing 3 to 6 percentage points faster than the underlying market.
Speaker #3: Jeff
Speaker #3: Jeff
Speaker #4: .
Speaker #3: Dave , I Mike through your . thoughts
Speaker #3: on you like sounds if we roll that all in looking at you're in Hi . the mid-single 2026 . walking digit something
Speaker #3: It range for growth overall . But Harrison curious historically Mike . first question I'm , Entegris talk about Best growing 3 to 6 percentage points faster than market underlying .
Dave Reeder: As you look at the opportunities that you're seeing, you mentioned advanced nodes in 2-nanometer as well as growing content per wafer in NAND. I'm just curious, are you expecting an environment in 2026 where you can get back to growing in that 3% to 6% range faster than underlying markets? Hi, Mike. Good to speak to you again. When we think about 2026, we do think the industry backdrop is a little bit more constructive than it was in 2025. And specifically, if you think about kind of the areas in which we grow revenue, we do about 40% of our revenue is from advanced logic, about 30% from mainstream logic, and then the remainder from memory. And so when you look at 2026, it feels like advanced logic is pretty fully utilized.
Mike Harrison: As you look at the opportunities that you're seeing, you mentioned advanced nodes in 2-nanometer as well as growing content per wafer in NAND. I'm just curious, are you expecting an environment in 2026 where you can get back to growing in that 3% to 6% range faster than underlying markets?
Speaker #3: As you look at that, you're seeing the new opportunities that would be at advanced nodes mentioned, as well as content per growing wafer in NAND.
Speaker #3: I'm just are you environment 2026 where you expecting an in back get can growing in to that 3 to 6% range , faster underlying markets than
Dave Reeder: Hi, Mike. Good to speak to you again. When we think about 2026, we do think the industry backdrop is a little bit more constructive than it was in 2025. And specifically, if you think about kind of the areas in which we grow revenue, we do about 40% of our revenue is from advanced logic, about 30% from mainstream logic, and then the remainder from memory. And so when you look at 2026, it feels like advanced logic is pretty fully utilized.
Speaker #4: might . Good to speak curious , to you again
Speaker #4: . When we think about 2026 , we industry backdrop is do think the a little constructive than in 2025 . And more ? specifically , if you think about , you of the in areas which I grow we , we do was about is revenue from advanced about 30% from mainstream logic .
Speaker #4: Logic, and then the remainder from memory. And so, when you look at advanced logic, it is pretty much at 2026, fully revenue utilized as we add in capacity.
Dave Reeder: As we add capacity there, we get the benefit of both additional growth plus more content. Mainstream looks kind of mixed, so we think we're performing on a cylinder for advanced logic. We think mainstream looks mixed but stable. And then we think memory can perform. So think of it as kind of performing on three of our four cylinders. The additional piece to then layer on top of it is CapEx. And CapEx was not terribly constructive in 2025, but we do think that CapEx could be more constructive in 2026, particularly the portion related to Fab CapEx. So when you look at that industry backdrop and you think about outperformance, I'll just add a couple of more points to that. One, we typically get the most outperformance when we have node transitions because that drives additional content per wafer. So that's typically our biggest driver of outperformance.
Dave Reeder: As we add capacity there, we get the benefit of both additional growth plus more content. Mainstream looks kind of mixed, so we think we're performing on a cylinder for advanced logic. We think mainstream looks mixed but stable. And then we think memory can perform. So think of it as kind of performing on three of our four cylinders. The additional piece to then layer on top of it is CapEx. And CapEx was not terribly constructive in 2025, but we do think that CapEx could be more constructive in 2026, particularly the portion related to Fab CapEx. So when you look at that industry backdrop and you think about outperformance, I'll just add a couple of more points to that. One, we typically get the most outperformance when we have node transitions because that drives additional content per wafer. So that's typically our biggest driver of outperformance.
Speaker #4: There . We get the benefit both of additional growth 40% of our feels like content . Mainstream looks plus mixed . So we think we're performing on cylinder for a kind of advanced mainstream think looks logic .
Speaker #4: but we think memory So think perform . performing of it as kind of on three of our four cylinders . stable then layer on additional We CapEx . .
Speaker #4: but we think memory So think perform . performing of it as kind of on three of our four cylinders . stable then layer on additional We CapEx .
Speaker #4: terribly can And then constructive in 25 , we do think that And top constructive The in 26 , was not CapEx portion . Related to fab CapEx .
Speaker #4: So when be more you look at you when that industry backdrop and you think about outperformance a couple of more points to that .
Speaker #4: One , we typically get the most of it is outperformance when we , I'll transitions , because that drives additional content So that's typically just add wafer .
Dave Reeder: And so while both logic and NAND node transitions look solid, we don't really control the timing and pace of that. And then, of course, as I mentioned, the CapEx piece, particularly Fab CapEx, is relatively volatile. So when we look at 2026, we look at our first quarter guide, +4% at midpoint, slightly greater than 6% at the high end of our guidance range. And of course, we gave you a little bit of color for Q2. We feel like the setup is constructive to the extent the node transitions, both logic and memory, happen. We feel like we can get back to outperformance, and then the CapEx piece looks to be a little bit more second-half weighted. So I gave you a lot of details there for context, Mike, but did you have a follow-up? Yes, that's very helpful.
Dave Reeder: And so while both logic and NAND node transitions look solid, we don't really control the timing and pace of that. And then, of course, as I mentioned, the CapEx piece, particularly Fab CapEx, is relatively volatile. So when we look at 2026, we look at our first quarter guide, +4% at midpoint, slightly greater than 6% at the high end of our guidance range. And of course, we gave you a little bit of color for Q2. We feel like the setup is constructive to the extent the node transitions, both logic and memory, happen. We feel like we can get back to outperformance, and then the CapEx piece looks to be a little bit more second-half weighted. So I gave you a lot of details there for context, Mike, but did you have a follow-up? Yes, that's very helpful.
Speaker #4: outperformance . And so our while both and Nand driver of node transitions solid look , we don't really control the timing . And of per And pace that .
Speaker #4: As mentioned, the CapEx piece is particularly fab. CapEx is, so when relatively volatile. Look at '26, our first quarter, 4% at.
Speaker #4: midpoint , slightly Plus guide greater than of our guidance 6% at the range we high end . we look at you a little color for bit of Q2 .
Speaker #4: We feel like the setup is coarse. We gave constructive feedback to the node transitions; both logic and memory happen. We feel like we can get back to outperformance.
Speaker #4: And then the CapEx looks piece to be a extent the more second half weighted . So I gave you a lot of There for contents , little bit Mike .
Dave Reeder: The follow-up is this kind of on the margin trajectory for the year. Your guidance for Q1 calls for a little bit of sequential contraction in EBITDA margin. I assume that's just seasonality. But anything you can share in terms of how we should think about margin trajectory in 2026, presumably you're getting back to more normal production rates yourselves and seeing some benefits from ramping the Taiwan facility. So appreciate some details there. Yeah, so thanks, Mike. Thanks for that question. Let me bring it up to gross margin. I know you mentioned EBITDA, but I think it's important to go back to when we think about our gross margin, first, it's really stabilized in the current range. We had mentioned we called a trough at the second half of last year, and you could see based on the Q1 guidance that stabilization.
Mike Harrison: The follow-up is this kind of on the margin trajectory for the year. Your guidance for Q1 calls for a little bit of sequential contraction in EBITDA margin. I assume that's just seasonality. But anything you can share in terms of how we should think about margin trajectory in 2026, presumably you're getting back to more normal production rates yourselves and seeing some benefits from ramping the Taiwan facility. So appreciate some details there.
Speaker #4: You did you, but did have a up?
Speaker #3: That's Yes . very
Speaker #3: up is is this the
Speaker #3: Kind of on guidance for sequential contraction in EBITDA margin. I assume that's just seasonality. If there's anything you can share, we should know about how to think about margin trajectory in '26.
Speaker #3: Presumably you're getting back to details . normal more production rates yourselves but seeing some and benefits from Taiwan appreciate the some details . There
Linda LaGorga: Yeah, so thanks, Mike. Thanks for that question. Let me bring it up to gross margin. I know you mentioned EBITDA, but I think it's important to go back to when we think about our gross margin, first, it's really stabilized in the current range. We had mentioned we called a trough at the second half of last year, and you could see based on the Q1 guidance that stabilization.
Speaker #3: . in terms Yeah .
Speaker #3: . ramping So
Speaker #1: thanks , Mike . Thanks for that Let me me bring margin . I know you gross mentioned EBITDA , it's I think important to go back think about gross margin .
Speaker #1: First , to current it's range . stabilized had really question . We called a trough at the to second half of last when we and you could see based on the guidance it up that stabilization , the drive And this will drive through to that into year , EBITDA , key is the volume leverage margins . .
Speaker #1: First , to current it's range . stabilized had really question . We called a trough at the to second half of last when we and you could see based on the guidance it up that stabilization , the drive And this will drive through to that into year , EBITDA , key is the volume leverage margins .
Dave Reeder: The key, as we drive margins, and this will drive through to the bottom into EBITDA, is the volume leverage. And so as we said, there's a constructive environment going into this year. As we see more production going through our facilities, that's going to go into our gross margin and see that improvement. That includes ramping Taiwan this year and continuing to ramp. And then, as Dave mentioned in his remarks, we did rationalize one facility, and we plan to rationalize another one in this first half of the year. So again, all those dynamics, volume leverage combined with Taiwan ramping combined with some rationalization is going to help us improve gross margin with that increased production and drive down to EBITDA. Thank you, Mike. All right. Thanks very much. We'll move next to Timothy Arcuri with UBS. Your line is open. Thanks a lot.
Linda LaGorga: The key, as we drive margins, and this will drive through to the bottom into EBITDA, is the volume leverage. And so as we said, there's a constructive environment going into this year. As we see more production going through our facilities, that's going to go into our gross margin and see that improvement. That includes ramping Taiwan this year and continuing to ramp. And then, as Dave mentioned in his remarks, we did rationalize one facility, and we plan to rationalize another one in this first half of the year. So again, all those dynamics, volume leverage combined with Taiwan ramping combined with some rationalization is going to help us improve gross margin with that increased production and drive down to EBITDA.
Speaker #1: so we bottom we but constructive into this going environment as we see production as going through our a more facilities . That's going to into our go margin and see that improvement .
Speaker #1: Includes that Taiwan this year and continuing to, and then, as mentioned in ramping, we, in his remarks, did rationalize one facility and we plan to rationalize another one.
Speaker #1: ramp . In first half of the year . So , so those gross again , all volume leverage with Taiwan ramping , combined is going to help us improve gross margin with that increased rationalization production and drive down to EBITDA .
Dave Reeder: Thank you, Mike. All right.
Operator: Thanks very much. We'll move next to Timothy Arcuri with UBS. Your line is open.
Speaker #4: Thank you Mike .
Speaker #4: Thank you Mike .
Speaker #3: Thanks very much All right .
Speaker #3: Thanks very much All right . . We'll move
Timothy Arcuri: Thanks a lot.
Speaker #2: next to
Dave Reeder: Dave, for the full year, you said CapEx is going to be at modestly. We know WFE is going to be up low to mid-20s, probably more than that. What about MSI for the year? I don't think I heard you give a target for MSI for the year. Yeah, good morning, Tim. MSI, we think, is mid-ish single digits. Still early days, and obviously, we've got Chinese New Year that's happening next week in Q1 versus the end of January. But when you look at MSI, so there's some Q1 dynamics in there, but when you look at MSI overall for the year, current estimates are kind of mid-ish single digits. Agree with your commentary on WFE. That looks like it's going to be strong this year. That's about 1/3 of our CapEx-related revenue, and then 2/3 of our CapEx-related revenue is tied to Fab construction CapEx.
Timothy Arcuri: Dave, for the full year, you said CapEx is going to be at modestly. We know WFE is going to be up low to mid-20s, probably more than that. What about MSI for the year? I don't think I heard you give a target for MSI for the year.
Speaker #2: Timothy Arcuri with UBS, your line is open.
Speaker #5: Thanks a lot, Dave, for that. For the full year, you said CapEx is going to be modestly—I think we know, W.F.
Speaker #5: is up low to going to be probably mid 20s , . What about the year ? I don't think I heard you give a MSI for than target for the year MSI for .
Dave Reeder: Yeah, good morning, Tim. MSI, we think, is mid-ish single digits. Still early days, and obviously, we've got Chinese New Year that's happening next week in Q1 versus the end of January. But when you look at MSI, so there's some Q1 dynamics in there, but when you look at MSI overall for the year, current estimates are kind of mid-ish single digits. Agree with your commentary on WFE. That looks like it's going to be strong this year. That's about 1/3 of our CapEx-related revenue, and then 2/3 of our CapEx-related revenue is tied to Fab construction CapEx.
Speaker #4: Yeah . . MSI we is Tim think mid . Still obviously we've Good Chinese New got Year days . And in Q1 happening versus the end of single digits January .
Speaker #4: when you look at But there's some next Q1 dynamics in there . But MSI overall for at the year , current estimates are kind of mid digits single your .
Speaker #4: commentary on W.F. . That Agree with looks like it's going to be strong this That's year . a third of our CapEx And then related CapEx related revenue is construction tied .
Dave Reeder: And when you think about that portion, it looks like there's probably not a lot of that in the first half, with it picking up perhaps even significantly in the second half and then, of course, setting up well for 2027. Did you have a follow-up, Tim? I do, Dave. Yeah. So if I just add that all together and I run the ratios, I mean, your market's probably up somewhere close to 10%, probably high single digits at least. So do you think you can outgrow that by a significant margin? I mean, is that a good level to say that you should grow revenue at least high singles, probably even low doubles to get to your outperformance metrics for the year? Hi, Tim. I think I've given you a lot of the elements here. I think we'll probably stand pat for guiding one quarter at a time.
Dave Reeder: And when you think about that portion, it looks like there's probably not a lot of that in the first half, with it picking up perhaps even significantly in the second half and then, of course, setting up well for 2027. Did you have a follow-up, Tim?
Speaker #4: And think about CapEx, that when you think about it, it looks like there's fab of that probably in a lot in the first half. With it up, perhaps even picking up significantly in the second half.
Timothy Arcuri: I do, Dave. Yeah. So if I just add that all together and I run the ratios, I mean, your market's probably up somewhere close to 10%, probably high single digits at least. So do you think you can outgrow that by a significant margin? I mean, is that a good level to say that you should grow revenue at least high singles, probably even low doubles to get to your outperformance metrics for the year?
Speaker #4: Setting up, and then, as well, a follow for 2027. Did you have to—
Speaker #4: up ?
Speaker #5: Dave . Yes . So
Speaker #5: just add
Speaker #5: run the I ratios , mean . market's I do up you're I close 10% single digits at least .
Speaker #5: , probably high
Speaker #5: that by a outgrow probably I mean , a good is that a good level to
Speaker #5: should grow the revenue at singles , probably even low doubles to get least to get to to your your outperformance metrics for year think you the
Speaker #5: should grow the revenue at singles , probably even low doubles to get least to get to to your your outperformance metrics for year think you the
Dave Reeder: Hi, Tim. I think I've given you a lot of the elements here. I think we'll probably stand pat for guiding one quarter at a time.
Dave Reeder: We gave you a little visibility with respect to Q2. Normal seasonality would imply kind of sequential growth of 1% to 3% from Q1. Based on order patterns, we feel pretty good about that range right now. And so we'll continue to give you more visibility as we see it. I think the wild card that we kind of see right now is how does that Fab CapEx kind of layer in throughout the course of the year, and then how do we kind of participate in that portion of the revenue? That's the piece that we're really watching right now, and it's moved pretty significantly month-to-month. So that's the hesitancy or perhaps the conservatism that you're hearing in my voice. I want to see how that plays out a little bit. Okay, Dave. Thanks. We'll take our next question from Christopher Parkinson with Wolfe Research.
Dave Reeder: We gave you a little visibility with respect to Q2. Normal seasonality would imply kind of sequential growth of 1% to 3% from Q1. Based on order patterns, we feel pretty good about that range right now. And so we'll continue to give you more visibility as we see it. I think the wild card that we kind of see right now is how does that Fab CapEx kind of layer in throughout the course of the year, and then how do we kind of participate in that portion of the revenue? That's the piece that we're really watching right now, and it's moved pretty significantly month-to-month. So that's the hesitancy or perhaps the conservatism that you're hearing in my voice. I want to see how that plays out a little bit.
Speaker #4: think Tim , I've probably given you a lot of the not a elements here . I think we'll
Speaker #4: think Tim , I've probably given you a lot of the not a elements here . I think we'll stand
Speaker #4: think Tim , I've probably given you a lot of the not a elements here . I think we'll stand
Speaker #4: pat guiding one quarter at a for Tim you a with course , little second quarter respect to So We gave significant margin ? time .
Speaker #4: Of 1% to 3% growth first quarter order, based on patterns. We feel pretty good about that range right now. We'll continue, and so we see it.
Speaker #4: to give I as think wild card kind of see visibility sequential is how right that fab CapEx does the you more course of the kind of throughout year ?
Speaker #4: And then how do the kind of participate in layer in the we portion of revenue ? piece That's the that that that we're watching that we it's really moved pretty month .
Speaker #4: month to So that's that's perhaps the the hearing in that you're my significantly how that a little plays out bit the conservatism .
Timothy Arcuri: Okay, Dave. Thanks.
Operator: We'll take our next question from Christopher Parkinson with Wolfe Research.
Speaker #5: Okay , Dave ,
Dave Reeder: Your line is open. Great. Thank you. You mentioned last quarter more of a concerted selling effort directed to mainstream customers, and I was wondering if you could give us a quick update on what's underway there. Thanks, Chris. We look at our customers in quite a lot of detail, particularly kind of our top 50-ish customers. And so when we look at that customer list and we look at mainstream, we then kind of break them down into their corresponding portions of mainstream. And so you've got kind of mainstream logic. You've got some mainstream in there that's associated with some specialty manufacturing, for example, silicon carbide, as well as some other nodes. And so when we look at that universe, I'll start with kind of the latter. Silicon carbide was a headwind for us in 2025. I'm talking on a year-over-year basis from 2024 to 2025.
Operator: Your line is open.
Speaker #5: thanks
Harris Fein: Great. Thank you. You mentioned last quarter more of a concerted selling effort directed to mainstream customers, and I was wondering if you could give us a quick update on what's underway there.
Speaker #2: next take our from voice . Christopher
Speaker #2: Parkinson with Wolfe, your line is open. I want...
Speaker #6: You mentioned concerted selling in the quarter. Thank you. Mainstream customers are underway. Could you give us a quick update on where you are directed to?
Dave Reeder: Thanks, Chris. We look at our customers in quite a lot of detail, particularly kind of our top 50-ish customers. And so when we look at that customer list and we look at mainstream, we then kind of break them down into their corresponding portions of mainstream. And so you've got kind of mainstream logic. You've got some mainstream in there that's associated with some specialty manufacturing, for example, silicon carbide, as well as some other nodes. And so when we look at that universe, I'll start with kind of the latter. Silicon carbide was a headwind for us in 2025. I'm talking on a year-over-year basis from 2024 to 2025.
Speaker #6: wondering if
Speaker #6: what's
Speaker #4: Thanks , we we look at customers quite . in detail
Speaker #4: Thanks , we we look at customers quite .
Speaker #4: of , particularly our top Research . . last You know , in at that when we look customer 50 customers list and at we look kind .
Speaker #4: break mainstream their down into portions of them kind of And so mainstream corresponding you've that's associated Chris with some specialty silicon example , other nodes .
Speaker #4: got some I'll as well And start with the universe , latter . Silicon carbide was a for at that mainstream in there in talking on 2025 .
Dave Reeder: We think that is now stable and perhaps even improving slightly, albeit slowly, in 2026. So we think the silicon carbide headwind, where we have a very nice solution for the CMP process, we feel like that will not be a headwind for us, at least expectation-wise, in 2026. So we think that will be constructive and helpful, and we continue to gain even more share in that process. When we look at the other mainstream, and I'm referring to mainstream logic, mainstream logic has a number of needs across our entire product portfolio. And so our efforts in mainstream logic become more about providing all of those solutions, not just individual product lines, to each of those mainstream customers.
Dave Reeder: We think that is now stable and perhaps even improving slightly, albeit slowly, in 2026. So we think the silicon carbide headwind, where we have a very nice solution for the CMP process, we feel like that will not be a headwind for us, at least expectation-wise, in 2026. So we think that will be constructive and helpful, and we continue to gain even more share in that process. When we look at the other mainstream, and I'm referring to mainstream logic, mainstream logic has a number of needs across our entire product portfolio. And so our efforts in mainstream logic become more about providing all of those solutions, not just individual product lines, to each of those mainstream customers.
Speaker #4: a year over I'm year as some we look basis from And 24 to 25 . think that logic , stable and now perhaps even improving We got , albeit slowly , 26 .
Speaker #4: think the silicon carbide So we headwind , where we have so when a very nice process , we feel like that will not be a CMP least headwind In we think is that will expectation constructive and And we to , you know , wise . helpful .
Speaker #4: think the silicon carbide So we headwind , where we have so when a very nice process , we feel like that will not be a CMP least headwind In we think is that will expectation constructive and And we to , you know , wise .
Speaker #4: gain even that process . When we continue look at the other be referring to mainstream mainstream and I'm logic that 2026 . So number of needs entire product And portfolio .
Speaker #4: efforts in Chris Did you have a
Speaker #4: efforts in Chris follow up ?
Speaker #4: mainstream has a logic about solutions , providing all not , mainstream just product lines to individual those mainstream become more across our those look across those customers , we're so our trying customers .
Dave Reeder: So when we look across those customers, we're trying to more deeply penetrate their wallet across our complete product portfolio, whereas in some of those mainstream logic customers, we're only selling individual product lines. Did you have a follow-up, Chris? Yes. And sorry, I should have said this is Harris Fein. I'm for Chris. For the second question, I mean, for a while now, there's been a lot of headlines on China competition. I guess it'd be helpful to hear if you're seeing anything in terms of changing behaviors or any sort of step-up in competitive intensity. And if so, where are you seeing it? Thanks. Good question. When we look at the China market, we think the fundamentals of the China market are very similar to the rest of the world. In other words, they care about yield and performance.
Dave Reeder: So when we look across those customers, we're trying to more deeply penetrate their wallet across our complete product portfolio, whereas in some of those mainstream logic customers, we're only selling individual product lines. Did you have a follow-up, Chris?
Speaker #4: More deeply in-wallet across or penetrate their complete portfolio. Whereas in some of those product mainstream logic customers, we're only selling individual product lines.
Harris Fein: Yes. And sorry, I should have said this is Harris Fein. I'm for Chris. For the second question, I mean, for a while now, there's been a lot of headlines on China competition. I guess it'd be helpful to hear if you're seeing anything in terms of changing behaviors or any sort of step-up in competitive intensity. And if so, where are you seeing it? Thanks.
Speaker #6: have said this sorry , I should Harris . Fine . Chris
Speaker #6: for the second question , I mean , for while now , for a there's been a ? headlines on China competition is be if you're Yes .
Dave Reeder: Good question. When we look at the China market, we think the fundamentals of the China market are very similar to the rest of the world. In other words, they care about yield and performance.
Speaker #6: Step up intensity, and so, where we're changing a lot of.
Speaker #4: Good You know , when we China market , we look at the the think the China
Dave Reeder: So when you think through products in our space that improve yield and performance, you think of the Entegris products that do both. It's one, continuing to deliver purity both at point of use and at source, and then, of course, having high-purity materials that enter the process pure. And so those two products, which are really product portfolios that Entegris has built upon, that improves yield and performance. And that's competitive irrespective of kind of where you are around the world. Now then, when you kind of hone in specifically in China, because they compete fiercely in China, our biggest obstacle in China is being able to guarantee to those customers that we can assure supply. So can we guarantee supply to those customers? And when we can guarantee supply to those customers, we find that they revert back to yield and performance being important.
Dave Reeder: So when you think through products in our space that improve yield and performance, you think of the Entegris products that do both. It's one, continuing to deliver purity both at point of use and at source, and then, of course, having high-purity materials that enter the process pure. And so those two products, which are really product portfolios that Entegris has built upon, that improves yield and performance. And that's competitive irrespective of kind of where you are around the world. Now then, when you kind of hone in specifically in China, because they compete fiercely in China, our biggest obstacle in China is being able to guarantee to those customers that we can assure supply. So can we guarantee supply to those customers? And when we can guarantee supply to those customers, we find that they revert back to yield and performance being important.
Speaker #4: care about yield and similar to
Speaker #4: you think through of the products fundamentals of space that performance , of the improve yield and in our products that do both . It's one , you know , to purity , both at point of use and at source .
Speaker #4: And then of course , having high in purity competitive enter the process pure . And those two products , really deliver product portfolios Entegris that built is upon which is improves yield and performance .
Speaker #4: And that's , that competitive materials that irrespective of you think continuing are kind of around the so world now . Then when you when where you you kind of hone in , specifically in China , because they compete in China , our fiercely in China is being able to guarantee obstacle to customers that that we can assure So can supply .
Speaker #4: And that's , that competitive materials that irrespective of you think continuing are kind of around the so world now . Then when you when where you you kind of hone in , specifically in China , because they compete in China , our fiercely in China is being able to guarantee obstacle to customers that that we can assure So can supply . we those can guarantee those customers , supply to those we find back to .
Dave Reeder: And so what you saw us do in 2025 was you saw us put a really concentrated effort into qualifying more manufacturing overseas, specifically for the China market, as well as the rest of Asia. We got up to about 85% of products, at least in Q1, about 85% of our revenue for China. We're expecting to supply from region, and so we're able to guarantee that supply. We're going to continue to work on that throughout 2026, probably getting to a number around or even greater than 90%. And so I think as we continue to be able to qualify more products for Asia manufacturing, we then get to guarantee supply to those customers. Then we get to compete in that market like we do around the world. And when we can compete fairly in those markets, we tend to do pretty well.
Dave Reeder: And so what you saw us do in 2025 was you saw us put a really concentrated effort into qualifying more manufacturing overseas, specifically for the China market, as well as the rest of Asia. We got up to about 85% of products, at least in Q1, about 85% of our revenue for China. We're expecting to supply from region, and so we're able to guarantee that supply. We're going to continue to work on that throughout 2026, probably getting to a number around or even greater than 90%. And so I think as we continue to be able to qualify more products for Asia manufacturing, we then get to guarantee supply to those customers. Then we get to compete in that market like we do around the world. And when we can compete fairly in those markets, we tend to do pretty well.
Speaker #4: What you saw when we were due in 2025 was a really concentrated effort to put yield manufacturing more overseas, qualifying specifically for the China as well as the rest of Asia customers. And so, they are being reverted, and so on.
Speaker #4: that they being revert And so And And what you saw is when we due in 2025 was you really concentrated effort saw put a yield manufacturing more overseas qualifying specifically for the China well as the rest of Asia customers .
Speaker #4: market , as Probably getting to a number , from around or even than supply as we continue to think be qualify more products for Asia to work manufacturing , we then get to that guarantee 90% .
Speaker #4: About 85% of products, least in first quarter, about at expecting to go up in our region. And able to revenue supply. We're so we're continue on that throughout 2026.
Speaker #4: customers . Then China . We're to 85% of compete in that market like we around the do when we compete markets , those to do pretty well .
Speaker #4: world . fairly in can And
Dave Reeder: We'll move next to Charles Shi with Needham. Your line is open. Hi. Thanks for taking my question. Hi, Dave. Good results. I want to ask you about NAND. I think we've spoken about this for a while. NAND, sentiment-wise, pricing-wise, business-wise, four customers have inflected, but it doesn't appear that it's inflecting for you yet. Wondering what's your best prediction as of today? When do you think that business is going to pick up? And by the way, I did notice in your prepared remarks, double-digit content gain for this year, even on the back of pretty flattish or maybe single-digit MSI, should do well for your NAND. But I just don't really feel like I see that in your March quarter guide or June quarter guide. Is it more of a second-half driver? And why is it so delayed versus your customers? Thank you.
Operator: We'll move next to Charles Shi with Needham. Your line is open.
Charles Shi: Hi. Thanks for taking my question. Hi, Dave. Good results. I want to ask you about NAND. I think we've spoken about this for a while. NAND, sentiment-wise, pricing-wise, business-wise, four customers have inflected, but it doesn't appear that it's inflecting for you yet. Wondering what's your best prediction as of today? When do you think that business is going to pick up? And by the way, I did notice in your prepared remarks, double-digit content gain for this year, even on the back of pretty flattish or maybe single-digit MSI, should do well for your NAND. But I just don't really feel like I see that in your March quarter guide or June quarter guide. Is it more of a second-half driver? And why is it so delayed versus your customers? Thank you.
Speaker #2: move next to
Speaker #2: Needham . line is
Speaker #2: .
Speaker #7: Hi . Thanks for taking my question . Hi , Dave , good results . I a ask you the
Speaker #7: about . think I we've about this a while . Nand And wise , sentiment pricing wise , wise , for your
Speaker #7: Have but inflected, those we tend—doesn't spoken that it's inflecting for you for yet. Wondering, what's your best prediction as of business today? Think that appear business is going to pick up? We'll—
Speaker #7: have but inflected , those we tend doesn't spoken that it's inflecting for you for yet . Wondering what's your best prediction as of business today , think that appear business is going to pick We'll when do you And way , I did notice in your remarks , double digit content gain prepared year , even on the back pretty of for this up or digit single flattish maybe MSI should do well for your Nand , but it just don't I really like I feel see that in March quarter guide or June quarter guide .
Speaker #7: Is like more of a second half driver? Versus yours is so delayed you—
Dave Reeder: Good morning, Charles, and thank you for the question. With respect to NAND, we think the underlying demand, like you, remains very strong. In fact, you started to see pricing kind of firm for NAND in the early to mid-second half of 2025. You saw the pricing continue to perform well throughout the latter half, then, of 2025 and then continue to grow through 2026. We actually think that increased wafer starts on NAND has actually been very, let's call it, measured. And so we think incremental wafer starts for NAND will remain measured because what we're actually starting to see is we're starting to see some node transitions on NAND where you get a premium or the NAND producers get a premium pricing for bit density.
Dave Reeder: Good morning, Charles, and thank you for the question. With respect to NAND, we think the underlying demand, like you, remains very strong. In fact, you started to see pricing kind of firm for NAND in the early to mid-second half of 2025. You saw the pricing continue to perform well throughout the latter half, then, of 2025 and then continue to grow through 2026. We actually think that increased wafer starts on NAND has actually been very, let's call it, measured. And so we think incremental wafer starts for NAND will remain measured because what we're actually starting to see is we're starting to see some node transitions on NAND where you get a premium or the NAND producers get a premium pricing for bit density.
Speaker #4: morning thank you for the question
Speaker #4: morning thank you for the
Speaker #4: with Charles , respect to Nand , we demand , you
Speaker #4: very strong . In fact , you started to see kind of firm Nand underlying . early in pricing second to like half of 2025 .
Speaker #4: You saw the a continue to perform well remains the throughout half . latter And why 25 and then continue Then of to grow
Speaker #4: You saw the a continue to perform well remains the throughout half . latter And why 25 and then continue Then of to grow actually We think that wafer actually been pricing very , let's call it measured .
Speaker #4: And starts think incremental wafer for starts Nand remain on will because what we're actually we're to see is starting to see some node transitions on Nand has through 26 .
Speaker #4: Nand a premium producers Nand premium pricing for density . And we're finally measured so some of see node get a on bit expected going kind call it 250 ish layer count to roughly of , you 300 ish count as you kind of grow that layer count , 20% bit density growth on a year kind of you get premium product starting to for them .
Dave Reeder: And so we're finally starting to see some of those node migrations that we expected on NAND going from kind of, call it, 250-ish layer count to roughly 300-ish layer count. So as you kind of grow that layer count, kind of 20% bit density growth on a year-over-year basis, it's a premium product for them. We get benefit from those incremental layers, but it effectively consumes capacity. And so I think what you're hearing from us is we like the incremental layers. Incremental layers bring higher content per wafer for Entegris, but the actual increased wafer starts, we're waiting for the NAND producers to effectively drive those wafer starts. So this is the trade-off in environment right now. When we look at Q1, we think we've got a solid guide for Q1. We've got an indication kind of for Q2 that we feel quite comfortable with.
Dave Reeder: And so we're finally starting to see some of those node migrations that we expected on NAND going from kind of, call it, 250-ish layer count to roughly 300-ish layer count. So as you kind of grow that layer count, kind of 20% bit density growth on a year-over-year basis, it's a premium product for them. We get benefit from those incremental layers, but it effectively consumes capacity. And so I think what you're hearing from us is we like the incremental layers. Incremental layers bring higher content per wafer for Entegris, but the actual increased wafer starts, we're waiting for the NAND producers to effectively drive those wafer starts. So this is the trade-off in environment right now. When we look at Q1, we think we've got a solid guide for Q1. We've got an indication kind of for Q2 that we feel quite comfortable with.
Speaker #4: On a basis, we get a benefit from it. But it—effectively, those incremental layers, what I think it consumes is the incremental NAND. We like layers; you're bringing higher content per wafer year over year, Entegris.
Speaker #4: But the capacity increased layers , incremental starts . We're for the we Nand producers to waiting those So starts . so environment trade now off in look at we think we think we've got a solid guide for drive We've got actual weight kind of us for second quarter that Q1 .
Dave Reeder: And then we'll leave it for the NAND producers to determine the rate and pace both of the layer count as well as incremental wafer growth. Did you have a follow-up, Charles? Thanks. Hi. Thanks, Dave. Yes, I do. The second question, thanks for the China color, the amount of supply supporting the China market. But I wonder if you have a view on how your China business is going to grow in 2026. And if you can, what was the China growth number for 2025? Thank you. Sure. So in terms of the China business growth in 2026, I'll let Linda in a moment talk about the 2025 growth. But the areas that we expect to grow in 2026 for China, one, we think some of the CapEx-related areas will grow in 2026, specifically FM and perhaps FOUPs.
Dave Reeder: And then we'll leave it for the NAND producers to determine the rate and pace both of the layer count as well as incremental wafer growth. Did you have a follow-up, Charles?
Speaker #4: comfortable with . then we'll leave it And for the Nand effectively producers to this is the determine the rate and pace both of of the layer count , as well as wafer growth Q1 , incremental .
Charles Shi: Thanks. Hi. Thanks, Dave. Yes, I do. The second question, thanks for the China color, the amount of supply supporting the China market. But I wonder if you have a view on how your China business is going to grow in 2026. And if you can, what was the China growth number for 2025? Thank you.
Speaker #4: Did follow up , you have a ?
Speaker #7: Hi . Thanks , Dave . I do . The Yes , second question , China thanks for
Speaker #7: of supply amount wonder if you have a view on how your China business going to Charles in 26 grow and , and if you , if can , the what was China growth number is Thank you .
Dave Reeder: Sure. So in terms of the China business growth in 2026, I'll let Linda in a moment talk about the 2025 growth. But the areas that we expect to grow in 2026 for China, one, we think some of the CapEx-related areas will grow in 2026, specifically FM and perhaps FOUPs.
Speaker #7: for
Speaker #4: Sure . So in business China
Speaker #4: moment talk about the 25 growth . But the areas that expect to we let I'll you in
Speaker #4: . One , we Linda in a related areas will in specifically 2025 . think and perhaps China . We expect grow LMC or liquid grow Foups to perform in 2026 , in the China market , of the products .
Speaker #4: CapEx probably and in there , others but we expect we expect the China filtration market to growth in 26 . There's think it's kind of underpinned by CMP the mentioned .
Dave Reeder: We expect LMC or liquid filtration to perform in 2026 in the China market, as well as some of the CMP products. There's probably a couple others in there, but we expect the China market to have growth in 2026, and we think it's kind of underpinned by the areas that I mentioned. Linda, do you have the China growth number for 2025? Yeah. So China has remained 2024 and 2025, approximately 21% of sales. Actual dollars are down slightly. But as we've talked about before, and Dave highlighted some of the reasons why our China customers like our products, we've been able to maintain very solid performance in China. Thanks, Dave and Linda. Thank you, Charles. Appreciate the color. We'll take our next question from Melissa Weathers with Deutsche Bank. Your line is open. Hi there. Thank you for letting me ask a question.
Dave Reeder: We expect LMC or liquid filtration to perform in 2026 in the China market, as well as some of the CMP products. There's probably a couple others in there, but we expect the China market to have growth in 2026, and we think it's kind of underpinned by the areas that I mentioned. Linda, do you have the China growth number for 2025?
Linda LaGorga: Yeah. So China has remained 2024 and 2025, approximately 21% of sales. Actual dollars are down slightly. But as we've talked about before, and Dave highlighted some of the reasons why our China customers like our products, we've been able to maintain very solid performance in China.
Speaker #4: Linda, do you have growth in numbers for '25?
Speaker #1: Yeah . China , you know ,
Speaker #1: remained 24 and 25
Speaker #1: remained 24 and 25 . Approximately
Speaker #1: 21% of extra dollars are down slightly . China as we've But talked So
Speaker #1: 21% of extra dollars are down slightly . China as we've But talked
Speaker #1: before and about
Charles Shi: Thanks, Dave and Linda.
Speaker #1: reasons China customers like able to why our very solid have performance in areas that China .
Dave Reeder: Thank you, Charles.
Charles Shi: Appreciate the color.
Operator: We'll take our next question from Melissa Weathers with Deutsche Bank. Your line is open.
Speaker #7: , Dave .
Speaker #7: , Dave .
Speaker #7: Charles , I
Speaker #7: color as some Thank you .
Speaker #7: color as some Thank you .
Speaker #7: .
Melisa Weathers: Hi there. Thank you for letting me ask a question.
Speaker #2: We'll take our as well next question
Dave Reeder: I wanted to touch on something you flagged in the prepared remarks, the potential impact of memory shortages and pricing on the electronics market, and any decreased production we could see from that. So I know you're calling for mid-ish single-digit growth, which, mid-ish, that's a new word for me that I've learned today. But could you help us what are you embedding in that outlook with respect to any demand destruction from the memory shortages? Yeah. I think when we think about our Q1 guide, obviously, we didn't factor anything into Q1. We didn't really factor anything into kind of our at least indication for Q2 at this stage. I think really what we were doing was we were just flagging it as potential. We're expecting mainstream to be stable this year, perhaps even slightly improving versus 2025.
Melisa Weathers: I wanted to touch on something you flagged in the prepared remarks, the potential impact of memory shortages and pricing on the electronics market, and any decreased production we could see from that. So I know you're calling for mid-ish single-digit growth, which, mid-ish, that's a new word for me that I've learned today. But could you help us what are you embedding in that outlook with respect to any demand destruction from the memory shortages?
Speaker #2: Weathers Deutsche with Bank . Your our line is
Speaker #8: Hi flagged in the prepared touch The remarks . potential impact of me ask
Speaker #8: Hi flagged in the
Speaker #8: there . Thank you for letting
Speaker #8: a That's a word for new learned today . maintain I've open . Could you help us ? But embedding in that What are you outlook with respect to any from shortages .
Speaker #8: question . wanted
Speaker #8: I and pricing shortages on the on electronics market and we've been any products , production decreased that . some of the we could see you're So I calling for mid memory from digit which mid ish .
Dave Reeder: Yeah. I think when we think about our Q1 guide, obviously, we didn't factor anything into Q1. We didn't really factor anything into kind of our at least indication for Q2 at this stage. I think really what we were doing was we were just flagging it as potential. We're expecting mainstream to be stable this year, perhaps even slightly improving versus 2025.
Speaker #4: Yeah I
Speaker #4: first quarter . We didn't really
Speaker #4: first quarter .
Speaker #4: first quarter .
Speaker #4: anything for second quarter at this demand think stage , I we were doing was we were just into the it flagging as know , we destruction from we we're potential .
Speaker #4: kind of into our
Dave Reeder: But a lot of the mainstream logic, a lot of that production is reliant on some form of memory. And so we're really just at this stage calling it out as a flag to watch for the second half of 2026. I think that's where the impact would be if there was any. Did you have a follow-up, Melissa? Yes, I did. On the capacity shutdowns that you've done in Q4 and that you might do in the first half of this year, I'm sorry if I missed it, but have you given any timing on when we could expect those closures to impact gross margins? Yeah. Let me broaden the question out to gross margin, and then I'll answer your question specifically. And in Q3, which was my first as CEO, we guided kind of a trough for gross margin between 43% and 44%.
Dave Reeder: But a lot of the mainstream logic, a lot of that production is reliant on some form of memory. And so we're really just at this stage calling it out as a flag to watch for the second half of 2026. I think that's where the impact would be if there was any. Did you have a follow-up, Melissa?
Speaker #4: Mainstream to be expecting, perhaps even stable, slightly improving; me, that versus 2025. You, a lot of the mainstream, but logic, a lot of that production is on some of memory.
Speaker #4: Reliant, so from where we're really just at this, it is out as a flag to watch for the memory half of 2026. I think that's calling the stage where the impact would be, if there was anything, any.
Melisa Weathers: Yes, I did. On the capacity shutdowns that you've done in Q4 and that you might do in the first half of this year, I'm sorry if I missed it, but have you given any timing on when we could expect those closures to impact gross margins?
Speaker #4: Did you have a follow up ? Melissa .
Speaker #8: did Yes , I on second the
Speaker #8: shutdowns that the fourth quarter and that done in do you might the capacity year ? you've I'm sorry if it , given any have you timing on when we could
Dave Reeder: Yeah. Let me broaden the question out to gross margin, and then I'll answer your question specifically. And in Q3, which was my first as CEO, we guided kind of a trough for gross margin between 43% and 44%.
Speaker #8: impact
Speaker #8: margins gross ?
Speaker #4: Yeah . Let first half of this broaden the question me let me to gross margin . And then I'll answer your question out specifically .
Speaker #4: Yeah . Let first half of this broaden the question me let me to gross margin . And then I'll answer your question out lot You know ,
Speaker #4: in really what the third quarter , was
Dave Reeder: Q3 gross margin was 43.6%. We were able to increase that to 44% in Q4. In Q1, on slightly lower volume, we're still guiding you on a normalized basis to kind of 44%. So we feel like at this point, incremental volume growth for us will drive incremental gross margin from these levels. So from that perspective, we feel quite good about it. We were able to rationalize one facility in the Q4 of this year, excuse me, of 2025. As we go forward into 2026, we'll get some modest benefit from that in terms of utilization. When we think about what I mentioned in the script, which was, we're expecting to rationalize another facility in the first half of 2026, then you would expect to get some minor benefit on a go-forward basis through the remainder of 2026. We'll continue to go.
Dave Reeder: Q3 gross margin was 43.6%. We were able to increase that to 44% in Q4. In Q1, on slightly lower volume, we're still guiding you on a normalized basis to kind of 44%. So we feel like at this point, incremental volume growth for us will drive incremental gross margin from these levels. So from that perspective, we feel quite good about it. We were able to rationalize one facility in the Q4 of this year, excuse me, of 2025. As we go forward into 2026, we'll get some modest benefit from that in terms of utilization. When we think about what I mentioned in the script, which was, we're expecting to rationalize another facility in the first half of 2026, then you would expect to get some minor benefit on a go-forward basis through the remainder of 2026. We'll continue to go.
Speaker #4: , we my my guided kind of a gross I missed between 43 and 44% . margin Third quarter gross closures to margin was We were able 43.6 .
Speaker #4: Increase to that 44% fourth quarter. First, in on slightly lower, in trough for we're still basis to volume. Normalized and like at this point, incremental volume growth, for we feel us kind incremental gross margin these from levels.
Speaker #4: So from that from perspective , guiding you on a feel quite about it . We were good able to of 44% . one facility rationalize in fourth quarter of this year .
Speaker #4: Excuse me, the [benefits] of 2025. As we go forward into 2026, we'll get some benefit from that in terms of modest utilization. I feel, when we think about what I mentioned in the prepared script, which was we're going to rationalize another facility in the first half, then you can expect to get some minor forward, on a go-forward basis, benefit through the remainder of '26.
Speaker #4: Excuse me , the of 2025 . As we go forward into 2026 , we'll get some benefit from that in terms of modest utilization feel we we think about what I mentioned in the we script , which was we're to rationalize another facility the first half then you expect to get some some minor forward on a go benefit .
Dave Reeder: We'll continue to both ramp our facilities in Taiwan. We'll qualify our facility in Rock Rimmon. We'll continue to look at our manufacturing footprint and the rate and pace at which utilization is improving and make the decisions that you would expect us to make. So for all those reasons, we feel quite good about the trajectory that we're on, and we feel like the execution is in front of us to perform. Thank you. Thanks, Melissa. We'll move next to Elizabeth Sun with Citi. Your line is open. Hi. Good morning. Thanks for taking my questions. The first one, I guess it's Dave, you briefly talked about AI is 5% of the wafer starts market, but I believe your content is much higher for AI-related products. So I'm just wondering if you have looked from the perspective of how much is AI as a percentage of total revenue.
Dave Reeder: We'll continue to both ramp our facilities in Taiwan. We'll qualify our facility in Rock Rimmon. We'll continue to look at our manufacturing footprint and the rate and pace at which utilization is improving and make the decisions that you would expect us to make. So for all those reasons, we feel quite good about the trajectory that we're on, and we feel like the execution is in front of us to perform.
Speaker #4: Continue to both would ramp out of 2026, facilities Taiwan. Will in expecting facility in Rockrimmon, and continue we'll at our manufacturing footprint and the rate pace when improving.
Speaker #4: And decisions that expect us to make . make the you would for all we'll reasons , we feel we feel quite about the trajectory that we're , and we feel like the execution is in front of on which the perform in So and .
Melisa Weathers: Thank you.
Dave Reeder: Thanks, Melissa.
Operator: We'll move next to Elizabeth Sun with Citi. Your line is open.
Speaker #8: Thank you .
Speaker #8: Thank you .
Elizabeth Sun: Hi. Good morning. Thanks for taking my questions. The first one, I guess it's Dave, you briefly talked about AI is 5% of the wafer starts market, but I believe your content is much higher for AI-related products. So I'm just wondering if you have looked from the perspective of how much is AI as a percentage of total revenue.
Speaker #4: Melissa Thanks , .
Speaker #4: Melissa Thanks , .
Speaker #2: next to We'll move with Sun Citi . open .
Speaker #2: Next, we'll move with Sun Citi. Open. Elizabeth, hi.
Speaker #9: Good morning . for taking Thanks my questions
Speaker #9: Good morning . for taking Thanks my questions
Speaker #9: it's Dave . You briefly The first one , I about talk wafer 85% of the but I your content the is much is for AI believe
Speaker #9: it's Dave . You briefly The first one , I about talk wafer 85% of the but I your content the is much is for AI believe So I'm just products .
Speaker #9: If you look from the perspective of, like, how much is AI percentage of total revenue, your line?
Dave Reeder: Good morning, Elizabeth. Well, we tried to give you at least some indication and some color in the prepared commentary. We mentioned that about 60% of our revenue in 2025 was driven by advanced nodes, so advanced manufacturing. That's both logic and memory. And then as you think about going forward, AI is a big part of that growth in advanced manufacturing. And for example, advanced logic, we designate that as 7 nanometers and below. And then the last kind of two generations of memory, the newest one plus current manufacturing, that's how we define it, advanced manufacturing nodes. So from that perspective, it's about 60% of our total revenue as a company. We expect that to grow going forward because we expect both incremental capacity to come online, mostly to satisfy AI.
Dave Reeder: Good morning, Elizabeth. Well, we tried to give you at least some indication and some color in the prepared commentary. We mentioned that about 60% of our revenue in 2025 was driven by advanced nodes, so advanced manufacturing. That's both logic and memory. And then as you think about going forward, AI is a big part of that growth in advanced manufacturing. And for example, advanced logic, we designate that as 7 nanometers and below. And then the last kind of two generations of memory, the newest one plus current manufacturing, that's how we define it, advanced manufacturing nodes. So from that perspective, it's about 60% of our total revenue as a company. We expect that to grow going forward because we expect both incremental capacity to come online, mostly to satisfy AI.
Speaker #4: Good have . What we tried to some at least some indication color in Elizabeth the prepared commentary . We morning that about and some 2025 was 60% of our revenue by advanced nodes .
Speaker #4: So advanced driven that's both manufacturing as you And about think then memory . in logic big and mentioned part growth of that advanced manufacturing .
Speaker #4: And for going advanced We did as designate that is the last kind And , two below . example , memory , the logic .
Speaker #4: newest current manufacturing . That's how in we define it . Advanced manufacturing So from that perspective , it's generations of 60% of our total revenue as a company .
Speaker #4: We about one plus grow going forward because we both incremental expect capacity to come online expect , mostly to AI . And then of expect continue that to to we grow nodes .
Dave Reeder: Then, of course, we expect memory to continue to grow as AI drives more growth through memory. Did you have a follow-up, Elizabeth? Yes, I do. Thanks for that. And advanced packaging, I understand it has been a smaller part of your total revenue, but I think I heard in your prepared remarks that you are expecting some POR wins and you are doing some efforts on HBM side. So I was wondering what's your expectation for advanced packaging revenue this year? Yeah. Advanced packaging is an area that grew nicely for us in 2025, representing roughly $100 million ±. We expect that to continue to grow nicely in 2026. And this is an area where we've made a little bit more concerted effort to grow across a number of product lines.
Dave Reeder: Then, of course, we expect memory to continue to grow as AI drives more growth through memory. Did you have a follow-up, Elizabeth?
Elizabeth Sun: Yes, I do. Thanks for that. And advanced packaging, I understand it has been a smaller part of your total revenue, but I think I heard in your prepared remarks that you are expecting some POR wins and you are doing some efforts on HBM side. So I was wondering what's your expectation for advanced packaging revenue this year?
Speaker #4: growth through as . Did you have a follow up drives more , Elizabeth .
Speaker #9: do Yes , I , thanks for that . And advanced
Speaker #9: has been a smaller your total part of revenue , but I heard in your
Speaker #9: that revenue this satisfy ?
Speaker #9: you are memory expecting some wins to some and you some or some are doing So I wondering
Dave Reeder: Yeah. Advanced packaging is an area that grew nicely for us in 2025, representing roughly $100 million ±. We expect that to continue to grow nicely in 2026. And this is an area where we've made a little bit more concerted effort to grow across a number of product lines.
Speaker #9: for expectation packaging
Speaker #4: Yeah , packaging course , advanced is grew nicely for us that in 2025 , representing $100 million plus or minus . We roughly that to continue expect an grow to nicely 2026 .
Speaker #4: in And this an is area where we've made a little bit more concerted effort grow across a number to product lines . So those are product lines now , and we some others that will sample later in the year have the advanced for expecting benefit as much in we could get in market .
Dave Reeder: So those product lines are sampling now, and we have some others that we'll sample later in the year for the advanced packaging market. So we're not expecting as much benefit in 2026 as perhaps we could get in 2027 and beyond. But it is a growing part of the market. It is starting to look more and more like some of the more advanced nodes in terms of its complexity and the challenges that our customers face. And it's an area that ultimately will play well with some of our product portfolio. So you're going to see a little bit more of a focused effort from us in this space, and we're cautiously optimistic. Great. Thanks, Dave. We'll take our next question from Edward Yang with Oppenheimer. Your line is open. Hi, Dave. Good morning and thanks for the time.
Dave Reeder: So those product lines are sampling now, and we have some others that we'll sample later in the year for the advanced packaging market. So we're not expecting as much benefit in 2026 as perhaps we could get in 2027 and beyond. But it is a growing part of the market. It is starting to look more and more like some of the more advanced nodes in terms of its complexity and the challenges that our customers face. And it's an area that ultimately will play well with some of our product portfolio. So you're going to see a little bit more of a focused effort from us in this space, and we're cautiously optimistic.
Speaker #4: Growing it is a part of the beyond. It is starting to look more like some of the more advanced terms, perhaps, of its — so, and that our customers face.
Speaker #4: challenges And area that nodes in ultimately will play it's an 26 as with some of our well sampling So you're going to see a little bit more of focused a effort portfolio .
Elizabeth Sun: Great. Thanks, Dave.
Operator: We'll take our next question from Edward Yang with Oppenheimer. Your line is open.
Speaker #4: space . us in this from packaging and And we're cautiously optimistic
Speaker #9: Great . Thanks , Dave
Operator: Hi, Dave. Good morning and thanks for the time.
Speaker #2: We'll take our next from Yang Oppenheimer. Line is open.
Dave Reeder: Just wanted to touch again on your leverage to memory market trends. Obviously, a lot of excitement there. Can you just first remind us of your ballpark total revenue exposure to memory overall and where it could go in an upcycle? And maybe also clarify the trade-off between what you were talking about, layer count benefit versus wafer counts. With CMP, I would think that you'd be relatively different, but perhaps in other parts of the business, you get more or less revenue. Sure. So memory is about 30% of our total revenue. It's roughly split equally, and I'm standing back and squinting. It's on an approximate basis. So say about half of it is NAND, about half of it is DRAM. As you know, DRAM has performed very well in 2025, very high utilization rates across DRAM, more of DRAM moving from kind of individual sales of DDR5 into HBM.
Dave Reeder: Just wanted to touch again on your leverage to memory market trends. Obviously, a lot of excitement there. Can you just first remind us of your ballpark total revenue exposure to memory overall and where it could go in an upcycle? And maybe also clarify the trade-off between what you were talking about, layer count benefit versus wafer counts. With CMP, I would think that you'd be relatively different, but perhaps in other parts of the business, you get more or less revenue. Sure. So memory is about 30% of our total revenue. It's roughly split equally, and I'm standing back and squinting. It's on an approximate basis. So say about half of it is NAND, about half of it is DRAM. As you know, DRAM has performed very well in 2025, very high utilization rates across DRAM, more of DRAM moving from kind of individual sales of DDR5 into HBM.
Speaker #10: Hi , Dave . Good And time
Speaker #10: Hi , Dave . Good And time
Speaker #10: for the again your leverage memory market Obviously , a lot of excitement
Speaker #10: for the again your leverage memory market
Speaker #10: first your ballpark wanted to morning . remind us thanks overall trends . and could where it touch Just and Can you upcycle maybe memory clarify the trade with off .
Speaker #10: first your ballpark wanted to morning . remind us thanks overall trends . and could where it touch Just and Can you upcycle maybe memory clarify the trade
Speaker #10: between what you were . Layer talking about . Edward benefit versus , total you know , wafer . , like CMP , I also you'd be just would think that revenue indifferent , perhaps in of the business , you know , you other parts but less revenue with get more or
Speaker #10: count
Speaker #4: So
Speaker #4: about our question total revenue relatively roughly split . It's equally . And I'm memory is and standing squinting back on approximate an basis about say .
Speaker #4: Nand half of it is about half of it is Dram , as you know , has performed in 2025 . Very high rates So , more of Dram moving very kind of across individual utilization of Ddr5 Dram into from HBM so as that migration sales happens , there's , Dram incremental know , some content associated with that it's as what you .
Dave Reeder: And so as that migration happens, there's some incremental content associated with that, but it's not the same as what you would get, for example, from an incremental wafer. And so there is incremental content when you go from standalone DDR5 to HBM. But there would be more total benefit if you would start and generate more total wafer starts. But the technology capacity for DRAM is pretty fully utilized exiting 2025, and we see it remaining that way through 2026. The other half, roughly, of this 30% of revenue is NAND. NAND is probably around 85% utilization. That's down a bit from where it was in peak in the 2022-type timeframe. But what you're seeing in NAND is you're seeing that 15% available capacity, you're starting to see it get absorbed by incremental wafer count or excuse me, by incremental layer count.
Dave Reeder: And so as that migration happens, there's some incremental content associated with that, but it's not the same as what you would get, for example, from an incremental wafer. And so there is incremental content when you go from standalone DDR5 to HBM. But there would be more total benefit if you would start and generate more total wafer starts. But the technology capacity for DRAM is pretty fully utilized exiting 2025, and we see it remaining that way through 2026. The other half, roughly, of this 30% of revenue is NAND. NAND is probably around 85% utilization. That's down a bit from where it was in peak in the 2022-type timeframe. But what you're seeing in NAND is you're seeing that 15% available capacity, you're starting to see it get absorbed by incremental wafer count or excuse me, by incremental layer count.
Speaker #4: . from an For And you so wafer . And incremental would get there is , but incremental content go from standalone Ddr5 to , to , to HBM total .
Speaker #4: benefit there would be would not the , you know , and start generate total But when you wafer But more , more the , the technology example , if you capacity for Dram is is fully pretty utilized exiting 25 .
Speaker #4: And we see it way remaining that through 2026 . The half , roughly of this 30% of other is is Nand revenue . Nand is around , for probably 85% .
Speaker #4: Utilization . in That's in where it from peak the you're timeframe . seeing in Nand seeing that 2022 type capacity , you're that it get absorbed by is you're count or wafer by incremental incremental layer And 15% available so as incremental those layers count .
Speaker #4: Utilization . in That's in where it from peak the you're timeframe . seeing in Nand seeing that 2022 type capacity , you're that it get absorbed by is you're count or wafer by incremental incremental layer And 15% available so as incremental those layers count . excuse me , was happen But what indifferent on absorbing that on an incremental you're , we're basis capacity wafer layer think basis .
Dave Reeder: And so as those incremental layers happen, we're relatively indifferent on whether you're absorbing that capacity on an incremental layer basis or on a wafer basis. I think on a general statement, we would say we would be relatively indifferent. I think the reality is we would probably get slightly more incremental benefit from a wafer, from a full wafer start. But we do get benefit from both. Did you have a follow-up, Edward? Yeah. Yes, I do. So, Dave, you mentioned focusing on winning new PORs. And I was just wondering, has your go-to-market approach changed there? Are you cross-selling more intra-division and also inter-division between Materials Solutions and Advanced Purity Solutions? Yeah. I think you've seen us really continue a lot of the good sales focus that was in place before I joined. We've kind of continued that momentum since I've joined the company.
Dave Reeder: And so as those incremental layers happen, we're relatively indifferent on whether you're absorbing that capacity on an incremental layer basis or on a wafer basis. I think on a general statement, we would say we would be relatively indifferent. I think the reality is we would probably get slightly more incremental benefit from a wafer, from a full wafer start. But we do get benefit from both. Did you have a follow-up, Edward? Yeah. Yes, I do. So, Dave, you mentioned focusing on winning new PORs. And I was just wondering, has your go-to-market approach changed there? Are you cross-selling more intra-division and also inter-division between Materials Solutions and Advanced Purity Solutions? Yeah. I think you've seen us really continue a lot of the good sales focus that was in place before I joined. We've kind of continued that momentum since I've joined the company.
Speaker #4: on
Speaker #4: a on general statement say we relatively relatively I the reality or on is we think get would be more incremental a indifferent . start .
Speaker #4: But we do get benefit, both slightly, probably from—
Speaker #4: ? I think I
Speaker #10: I do . So mentioned , you , Dave , know
Speaker #10: winning new
Speaker #10: winning new
Speaker #10: , you know , has your go to changed on there .
Speaker #10: , you know , has your go to
Speaker #10: cross-selling more
Speaker #10: . You know , intra wafer , from a wafer a between and you approach also market between inter-division solution and division material advanced .
Speaker #4: really lot Yeah , good sales focus think was in place . before I've That joined . continued that We've Yeah , of I've joined the since company .
Dave Reeder: I think what perhaps we've been able to focus a bit more on now is we have been able to focus a bit more on selling the complete portfolio of products. We've always engaged very well on a technology roadmap basis. So that's something we don't want to change. We want to continue those best efforts where we're focused on our customers' node transitions and technology roadmap, many of which are kind of several years out. But then as we do that, we also want to layer that roadmap and that engagement on roadmap. We want to layer in our other product lines where we bring best-in-class filtration, best-in-class purification, best-in-class wafer handling, and fluid management, and bring that together with some of these longer technology roadmaps such as the CMP process, the deposition process, and the etch process.
Dave Reeder: I think what perhaps we've been able to focus a bit more on now is we have been able to focus a bit more on selling the complete portfolio of products. We've always engaged very well on a technology roadmap basis. So that's something we don't want to change. We want to continue those best efforts where we're focused on our customers' node transitions and technology roadmap, many of which are kind of several years out. But then as we do that, we also want to layer that roadmap and that engagement on roadmap. We want to layer in our other product lines where we bring best-in-class filtration, best-in-class purification, best-in-class wafer handling, and fluid management, and bring that together with some of these longer technology roadmaps such as the CMP process, the deposition process, and the etch process.
Speaker #4: kind of on engaged very
Speaker #4: I what think we've been focus a momentum more now we've is we able to bit solutions have been bit more on selling complete portfolio of products .
Speaker #4: on a roadmap basis . So technology that's the don't want to change . We want to those continue best efforts where we're always on wondering customers and transitions roadmap , which are kind of years out .
Speaker #4: several that , we also want then , as we do that in to that focused roadmap layer and technology on We want that layer to our other product lines where we bring engagement class roadmap .
Speaker #4: class , best in purification best in many of class wafer and management , But and bring fluid that together longer of roadmaps technology with some as the , such CMP these process , deposition the process , process .
Dave Reeder: So you've seen us try to make a concerted effort with not only continuing the good engagement on the technology roadmap, many times of which it's looking at several years, but then also bring more of the other product lines along in that engagement and discussion for today. Thank you. Thanks, Edward. We'll move next to Bhavesh Lodaya with BMO. Your line is open. Hi. Good morning, Dave. And congrats on the nice quarter. And certainly, all the best to Linda, and welcome, Jeff, as well. Dave, you share a lot of color for the short term. So maybe a longer-term question. If I look at where overall MSI stands today, we are still under prior peaks, around 13% low, it seems. And we don't see a week go by without news of higher and higher CapEx in AI data centers.
Dave Reeder: So you've seen us try to make a concerted effort with not only continuing the good engagement on the technology roadmap, many times of which it's looking at several years, but then also bring more of the other product lines along in that engagement and discussion for today. Thank you. Thanks, Edward. We'll move next to Bhavesh Lodaya with BMO. Your line is open. Hi. Good morning, Dave. And congrats on the nice quarter. And certainly, all the best to Linda, and welcome, Jeff, as well. Dave, you share a lot of color for the short term. So maybe a longer-term question. If I look at where overall MSI stands today, we are still under prior peaks, around 13% low, it seems. And we don't see a week go by without news of higher and higher CapEx in AI data centers.
Speaker #4: the So seen us try to etch you've effort with not in continuing the engagement concerted the on technology roadmap . many which it's looking at many , But then times , of bring more of the other lines product along in that discussion for today engagement .
Speaker #4: .
Speaker #10: Thank you
Speaker #10: Thank you
Speaker #10: .
Speaker #4: Thanks ,
Speaker #2: next to only Lodaya with BMO .
Speaker #2: .
Speaker #11: Hi . Good morning
Speaker #11: nice good quarter
Speaker #11: All the best to and welcome Jeff as well. Dave, you shared a lot of color, certainly for the Edward short term, so maybe a longer one.
Speaker #11: all the best to And welcome Jeff as . Dave , share a lot of color certainly for the Edward short term . So maybe a longer
Speaker #11: MSI MSI stands today , we are still Your line under
Speaker #11: peaks , you seems around 13% lower . It is see a week go by And Linda and
Dave Reeder: If end-market growth kind of hangs in there, I'm curious on your view as to how that plays for MSI over the next few years, next 3 to 4 years, as these capacities are brought online. Thanks, Bhavesh. Well, you're right. It is somewhat of a bifurcated market where we're talking about maybe we need to start new fabs, but yet you're looking at MSI and you're looking at some underutilization in some areas of the market where you're not fully utilized as of yet. So maybe the best way to answer this question is to kind of break it down into its constituent parts. If you think about advanced logic, which we define as 7 nanometers and below, advanced logic is pretty fully utilized, particularly advanced logic below 5 nanometers. And so you're seeing a lot of incremental capacity and focus on incremental capacity for the most advanced nodes.
Dave Reeder: If end-market growth kind of hangs in there, I'm curious on your view as to how that plays for MSI over the next few years, next 3 to 4 years, as these capacities are brought online. Thanks, Bhavesh. Well, you're right. It is somewhat of a bifurcated market where we're talking about maybe we need to start new fabs, but yet you're looking at MSI and you're looking at some underutilization in some areas of the market where you're not fully utilized as of yet. So maybe the best way to answer this question is to kind of break it down into its constituent parts. If you think about advanced logic, which we define as 7 nanometers and below, advanced logic is pretty fully utilized, particularly advanced logic below 5 nanometers. And so you're seeing a lot of incremental capacity and focus on incremental capacity for the most advanced nodes.
Speaker #11: news of higher and CapEx question spends in higher AI data centers . If end growth kind of . hangs in
Speaker #11: on your that plays for We'll move the next market Many , Next as prior brought view as capacities are online as these
Speaker #11: .
Speaker #4: Thanks . . Well , you're right , it is . It
Speaker #4: Bhavesh
Speaker #4: somewhat of a is bifurcated market we're where we're maybe we need to start talking about fabs , new but MSI looking at you're looking and in some underutilization of the areas market where you're not fully utilized and we don't yet .
Speaker #4: So maybe the best way to answer this question is to break it down into its constituent you think about advanced . which we If logic , as seven nanometers and below , advanced logic is fully pretty utilized parts .
Speaker #4: Particularly define logic nanometers . And so you're seeing a lot of below five incremental capacity and focus advanced incremental capacity for most the advanced nodes .
Dave Reeder: And that's growing total capacity for this 7-nanometer and below advanced logic category. But it's slow, and it takes time to grow 2-nanometer base. And it takes time to then also transition to new nodes, for example, like 1.4-nanometer. But that space is pretty fully utilized, or that category, 70 nanometers and below, is pretty fully utilized. And so what you need is you need more capacity to grow MSI. DRAM is also very highly utilized. So if you want to grow a lot of MSI and DRAM, you need incremental capacity. And I think you're starting to see some of the producers of DRAM think through where and how do you add that incremental capacity and over what timeframe. And so I think you're seeing the market kind of recognize that DRAM is very tight. There's not a lot of incremental available capacity.
Dave Reeder: And that's growing total capacity for this 7-nanometer and below advanced logic category. But it's slow, and it takes time to grow 2-nanometer base. And it takes time to then also transition to new nodes, for example, like 1.4-nanometer. But that space is pretty fully utilized, or that category, 70 nanometers and below, is pretty fully utilized. And so what you need is you need more capacity to grow MSI. DRAM is also very highly utilized. So if you want to grow a lot of MSI and DRAM, you need incremental capacity. And I think you're starting to see some of the producers of DRAM think through where and how do you add that incremental capacity and over what timeframe. And so I think you're seeing the market kind of recognize that DRAM is very tight. There's not a lot of incremental available capacity.
Speaker #4: that's And growing total for this seven nanometer capacity below and advanced logic category . But slow it's and and takes it time to , to grow to nanometer base .
Speaker #4: And it takes time to then also transition to new nodes , for example , like 1.4 nanometer . But that space pretty fully is utilized .
Speaker #4: Or that category 70 nanometers . And is pretty fully utilized . And so what you need is you need more capacity to grow MSI .
Speaker #4: DRAM is also very highly utilized. So if you want to grow a lot of MSI and you need incremental DRAM capacity,
Speaker #4: And I think you're you're to starting some see of the producers of Dram think through where and add that you incremental how do capacity and over what time frame .
Speaker #4: And so think you're seeing kind of recognize that Dram is very There's incremental lot of tight . not a available capacity . And how do best you how do you best drive incremental Is it through , you know , incremental capacity ?
Dave Reeder: How do you best drive incremental capacity? Is it through incremental tools and perhaps efficiencies? Is it through groundbreaking? I think you'll see the market kind of make some moves on this front through 2026. NAND, there is some available utilization. My best guess is that the utilization that's available for NAND will be consumed by layer count, some combination of layer count and MSI growth. But I think it's more layer count than MSI. I think ultimately, you get some of both. But I would say, at least at this point in time, I think it's more layers with lesser amounts of incremental wafer growth or MSI growth. And then I think ultimately, that market perhaps will have to look at adding capacity. But I think that's probably a second half, perhaps even latter part, a second half type of decision before we see what's happening there.
Dave Reeder: How do you best drive incremental capacity? Is it through incremental tools and perhaps efficiencies? Is it through groundbreaking? I think you'll see the market kind of make some moves on this front through 2026. NAND, there is some available utilization. My best guess is that the utilization that's available for NAND will be consumed by layer count, some combination of layer count and MSI growth. But I think it's more layer count than MSI. I think ultimately, you get some of both. But I would say, at least at this point in time, I think it's more layers with lesser amounts of incremental wafer growth or MSI growth. And then I think ultimately, that market perhaps will have to look at adding capacity. But I think that's probably a second half, perhaps even latter part, a second half type of decision before we see what's happening there.
Speaker #4: tools and perhaps efficiencies . Is it , you know , groundbreaking ? I I think you'll see the market kind of make some moves on on this front through 2026 .
Speaker #4: Nand there is some available utilization . My best guess is that the utilization that's available for Nand will be will be consumed layer count .
Speaker #4: By combination of layer count and MSI, but I grow. I think it's more layer count than MSI. I think ultimately, it's some of both you get.
Speaker #4: But I would say least at this at point in time , I think it's more layers with less lesser amounts of wafer incremental growth or MSI growth then I .
Speaker #4: you know , think , ultimately that market And perhaps will have to look adding capacity . But I think that's probably a second half , perhaps even through part of the latter type of before we see we see what's happening there .
Dave Reeder: And then we're now kind of onto the crux of your question, which is mainstream. Mainstream is the bulk of the logic market in terms of MSI. And mainstream has been slow to recover and mixed. The good news is that feedback on mainstream inventory; it looks like inventory levels are relatively healthy. But the rate and pace of growth on the mainstream part or MSI growth on the mainstream part of the market, that's a bit unclear right now. And that is the bulk of MSI for logic. I'm talking total logic. The bulk of the capacity sits in mainstream. And I think that's the part that people are looking at and wondering, what's the rate and pace of growth in mainstream because it's such a big part of logic MSI? Did you have a follow-up, Bhavesh? Yes.
Dave Reeder: And then we're now kind of onto the crux of your question, which is mainstream. Mainstream is the bulk of the logic market in terms of MSI. And mainstream has been slow to recover and mixed. The good news is that feedback on mainstream inventory; it looks like inventory levels are relatively healthy. But the rate and pace of growth on the mainstream part or MSI growth on the mainstream part of the market, that's a bit unclear right now. And that is the bulk of MSI for logic. I'm talking total logic. The bulk of the capacity sits in mainstream. And I think that's the part that people are looking at and wondering, what's the rate and pace of growth in mainstream because it's such a big part of logic MSI? Did you have a follow-up, Bhavesh? Yes.
Speaker #4: decision then we're And now we're of on the of your crux which is question , mainstream , mainstream is the bulk logic of the terms MSI of and mainstream has been slow to recover and mixed .
Speaker #4: The good news is that feedback on mainstream inventory , it looks like inventory levels are relatively healthy , but the rate in pace of growth on the mainstream part or MSI growth on the mainstream part of the market , that's that's a bit now .
Speaker #4: And that is the bulk of MSI for logic . I'm talking total logic . The bulk of the capacity sits in mainstream , and I think that's the part that people are looking at .
Speaker #4: And wondering, you know, what's the rate and pace of growth in mainstream? It's because such a big part of logic.
Dave Reeder: In your equation here, so one side of growth comes from utilization. The other side comes from, I would say, content gains or a mixed benefit as more layers come in. Where do you put outperformance metrics in this? Do you count the content gains as outperformance, or would outperformance be over and above these two things? Yeah. We think of outperformance really from a revenue perspective. And so to the extent that you grow layer count, it actually increases content per wafer. And so from that perspective, that incremental content per wafer would show up in revenue, and we would count that as outperformance to the market because it would be incremental kind of to what the normal market would see. So that's how we would think about that. Got it. Appreciate the thoughts. Thanks. Thanks, Bhavesh. We'll take our next question from John Roberts with Mizuho.
Dave Reeder: In your equation here, so one side of growth comes from utilization. The other side comes from, I would say, content gains or a mixed benefit as more layers come in. Where do you put outperformance metrics in this? Do you count the content gains as outperformance, or would outperformance be over and above these two things? Yeah. We think of outperformance really from a revenue perspective. And so to the extent that you grow layer count, it actually increases content per wafer. And so from that perspective, that incremental content per wafer would show up in revenue, and we would count that as outperformance to the market because it would be incremental kind of to what the normal market would see. So that's how we would think about that. Got it. Appreciate the thoughts. Thanks. Thanks, Bhavesh. We'll take our next question from John Roberts with Mizuho.
Speaker #4: of MSI did follow up ? Bhavesh you have a ?
Speaker #11: In Yes . your in your equation here . So , so one one side of growth comes from utilization . The other side comes from I would say content gains or a mix benefit .
Speaker #11: As more layers come in do you . Where put out performance metrics . Do you do you count the content gains as out performance or or would out be performance over and above these two things ?
Speaker #4: Yeah , we think of outperformance really from a revenue perspective . so And to the extent that you grow layer count , it actually increases content per wafer .
Speaker #4: And so from that perspective , that incremental content per wafer would show up in revenue . And we would we count would that as , as outperformance to the market because it would be incremental kind of to what the normal market would see .
Speaker #4: So that's how think about we would that .
Speaker #11: Got it . Appreciate the thoughts . Thanks .
Dave Reeder: Your line is open. Thank you. And Linda, best wishes and welcome again. Jeff is also here. Could you talk about the weaker parts of the business? So it looks like, again, FOUPs were probably down. Gas filtration was probably down. Is that all related just to the new fab construction activity being down? And do they continue down in Q1? Yeah. So when you look at 2025, fab construction CapEx was down high single digits, call it 7-ish%. Our CapEx-related business was down about the same amount. And it was really driven by two product lines, both within APS, one being fluid management and the other one being FOUPs. Those were the two that were down the most and very much in line with that fab construction CapEx.
Dave Reeder: Your line is open. Thank you. And Linda, best wishes and welcome again. Jeff is also here. Could you talk about the weaker parts of the business? So it looks like, again, FOUPs were probably down. Gas filtration was probably down. Is that all related just to the new fab construction activity being down? And do they continue down in Q1? Yeah. So when you look at 2025, fab construction CapEx was down high single digits, call it 7-ish%. Our CapEx-related business was down about the same amount. And it was really driven by two product lines, both within APS, one being fluid management and the other one being FOUPs. Those were the two that were down the most and very much in line with that fab construction CapEx.
Speaker #4: Thanks , Bhavesh .
Speaker #2: We'll take our next question from John Roberts with Mizuho . Your line is open .
Speaker #12: Thank you . And Linda , best wishes and welcome again , Jeff , is also . Could you talk here about the weaker parts business of the .
Speaker #12: So it looks like, again, we're probably down. Gas filtration was probably down. Is that all related just to the new fab construction activity being down?
Speaker #12: And do they continue the down in first quarter ?
Speaker #4: Yeah . So when when you look at 2025 construction CapEx was down high single digits , call it seven seven ish percent . Our CapEx related business was down about the same amount .
Speaker #4: And it was really driven by two product both lines , within , one being fluid management and the other one being Those were the two that that were down the most and very much in line with that fab construction CapEx Foups .
Dave Reeder: So when we think about 2026 and you think about perhaps fab construction CapEx being at least flat and perhaps at this point up slightly, though to be determined how much through the course of '26, you're seeing a corresponding recovery in both those two businesses. So our expectations for the year is that fluid management and FOOPS will have a better year versus 2025 on the basis of fab construction CapEx, at a minimum being flat and most likely being up, but to be determined how that kind of layers in throughout the year. Did you have a follow-up, John? Well, I'll follow up with how about the March quarter? Sorry. You cut out on me. The question was what again? Will they be down in the March quarter or more flat-ish in the March quarter?
Dave Reeder: So when we think about 2026 and you think about perhaps fab construction CapEx being at least flat and perhaps at this point up slightly, though to be determined how much through the course of '26, you're seeing a corresponding recovery in both those two businesses. So our expectations for the year is that fluid management and FOOPS will have a better year versus 2025 on the basis of fab construction CapEx, at a minimum being flat and most likely being up, but to be determined how that kind of layers in throughout the year. Did you have a follow-up, John? Well, I'll follow up with how about the March quarter? Sorry. You cut out on me. The question was what again? Will they be down in the March quarter or more flat-ish in the March quarter?
Speaker #4: . So when we think about 2026 and and you think about , you know , perhaps fab construction CapEx being being at least flat and perhaps at this point up slightly , though , to be determined how much through the course of 26 , you're seeing a corresponding recovery , both in both those two businesses .
Speaker #4: So our expectations for the year is that fluid management and foups will have a better year versus 2025 on the basis of fab construction CapEx , at a minimum , being flat and most likely being up .
Speaker #4: But to be determined how that kind of layers in throughout the year , did you have a follow up , John ?
Speaker #12: Well, I'll follow up with how about the March quarter?
Speaker #4: sorry , So I you cut out on the question me what was , was what again .
Dave Reeder: I think at this point, and I'll speak a little bit on a sequential basis, we'll see ultimately how much kind of revenue for those specific product lines fall in Q1 versus Q2. But I think it's fair to say that we're already starting to see some recovery in those product lines from an order pattern perspective for 2026. And then ultimately, the timing of whether it's Q1 or Q2, that will be determined by delivery and our customers. But I do think that we've seen order patterns improve for those product lines as we're very early here in 2026. Thank you. Thanks, John. This does conclude the Q&A portion of today's call. I would now like to hand it back to Jeff Schnell for any additional or closing remarks. Great. Thank you for joining the call today and your continued interest in Entegris.
Dave Reeder: I think at this point, and I'll speak a little bit on a sequential basis, we'll see ultimately how much kind of revenue for those specific product lines fall in Q1 versus Q2. But I think it's fair to say that we're already starting to see some recovery in those product lines from an order pattern perspective for 2026. And then ultimately, the timing of whether it's Q1 or Q2, that will be determined by delivery and our customers. But I do think that we've seen order patterns improve for those product lines as we're very early here in 2026. Thank you. Thanks, John. This does conclude the Q&A portion of today's call. I would now like to hand it back to Jeff Schnell for any additional or closing remarks. Great. Thank you for joining the call today and your continued interest in Entegris.
Speaker #12: Will they be down ? they be Will down in the March quarter or more flattish in the March quarter ?
Speaker #4: I think at this point , and I'll speak a little bit on a on a sequential basis , we'll see . We'll see ultimately how much kind of revenue for that those specific product lines fall in first quarter versus second quarter .
Speaker #4: But I think it's fair to say that already starting to we're see some recovery in those product lines from an order pattern perspective for 2026 .
Speaker #4: And then ultimately, the timing of whether it's first quarter or second quarter, that will be determined by delivery and our customers.
Speaker #4: But think that we've but I do seen order patterns improve product for those lines we're as very early here in 2026 .
Speaker #12: . Okay . Thank you
Speaker #4: John
Speaker #4: .
Speaker #2: the portion This does of Thanks , conclude today's call . I would now like to hand it back to Schnell for Jeff any additional or closing remarks
Dave Reeder: Please reach out if you have any follow-ups. Thank you. This concludes today's Entegris Q4 2025 earnings conference call. Please disconnect your line at this time and have a wonderful day.
Dave Reeder: Please reach out if you have any follow-ups. Thank you. This concludes today's Entegris Q4 2025 earnings conference call. Please disconnect your line at this time and have a wonderful day.
Speaker #2: .
Speaker #13: joining the call today . And Great . Thank you for your interest in continued Entegris . Please reach out if any follow you have ups .
Speaker #2: Thank This you . concludes today's Entegris fourth 2020 earnings quarter call . Please Conference disconnect your line at this time and have a day wonderful Q&A .
