Q1 2026 Entegris Inc Earnings Call

April 30, 2026

Speaker #1: Hello and welcome to the ENTEGRIS 1st Quarter 2026 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode. And the floor will be open for your questions following the presentation.

Operator: Hello, and welcome to the Entegris Q1 2026 earnings conference call. At this time, all participants have been placed in 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 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. So that 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 0. I would now like to turn the call over to Jeffrey Schnell, VP of Investor Relations.

Operator: Hello, and welcome to the Entegris Q1 2026 Earnings Conference Call. At this time, all participants have been placed in 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 that 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 Jeffrey Schnell, VP of Investor Relations.

Speaker #1: If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2.

Speaker #1: So that 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 0.

Speaker #1: I would now like to turn the call over to Jeffrey Schnell, VP of Investor Relations.

Speaker #2: Good morning, everyone. Earlier today, we announced the financial results for the first quarter of 2026. Before we begin, I would like to remind listeners that our comments today will include some forward-looking statements.

Jeffrey Schnell: Good morning, everyone. Earlier today, we announced the financial results for Q1 2026. 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 at entegris.com. Joining me on the call today is David Reeder, our CEO.

Speaker #2: 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.

Speaker #2: 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 and Regulation G.

Jeffrey Schnell: 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 at entegris.com. Joining me on the call today is David Reeder, our CEO. With that, I'll hand the call over to David Reeder.

Speaker #2: You can find reconciliation tables in today's news release as well as on the IR page of our website at ENTEGRIS.com. Joining me on the call today is Dave Reeder, our CEO.

Speaker #2: With that, I'll hand the call over to Dave.

Jeffrey Schnell: With that, I'll hand the call over to David Reeder.

Speaker #3: Thanks, Jeff, and good morning. The first quarter was a solid start to the year as we continued to execute with focus and discipline against the constructive and improving semiconductor industry environment.

David Reeder: Thanks, Jeff. Good morning. The Q1 was a solid start to the year as we continued to execute with focus and discipline against the constructive and improving semiconductor industry environment. We are delivering on our commitments. Revenue increased 5%, slightly above the midpoint of our range, while most other metrics, including adjusted gross margin, EBITDA margin, and non-GAAP EPS all exceeded our guidance range. I am encouraged by these results and we remain focused on the significant opportunities ahead to fully capitalize on the organization's long-term growth and earnings potential. As I mentioned, total revenue increased 5% in the Q1 as compared to the prior year, driven by a 7% increase in our APS segment and a 3% improvement in MS.

Speaker #3: We are delivering on our commitments. Revenue increased 5%, slightly above the midpoint of our range, while most other metrics, including adjusted gross margin, EBITDA margin, and non-GAAP EPS, all exceeded our guidance range.

Speaker #3: I am encouraged by these results, and we remain focused on the significant opportunities ahead to fully capitalize on the organization's long-term growth and earnings potential.

Speaker #3: As I mentioned, total revenue increased 5% in the first quarter as compared to the prior year, driven by a 7% increase in our APS segment and a 3% improvement in MS. Our unit-driven revenue, which is correlated to MSI, increased approximately 7% year over year driven by growth in liquid filtration, advanced deposition, and selective etch, all of which are critical product lines for our customers' new technology nodes.

David Reeder: Our unit-driven revenue, which is correlated to MSI, increased approximately 7% year over year, driven by growth in liquid filtration, advanced deposition, and selective etch, all of which are critical product lines for our customers' new technology nodes. We're pleased to see the continued growth in liquid filtration, which posted its third consecutive record quarter. CapEx-driven revenue decreased modestly year over year in Q1, mostly driven by accelerating order patterns in the prior year quarter in response to tariff actions. Given our current bookings patterns, we expect 2026 CapEx revenue to increase throughout the remainder of the year and contribute more meaningfully to our overall growth profile, driven by strong WFE growth and improving fab construction trends, which support not only the latter half of 2026, but also growth expectations in 2027 and beyond.

Speaker #3: We're pleased to see the continued growth in liquid filtration which posted its third consecutive record quarter. CAPEX-driven revenue decreased modestly year over year in the first quarter, mostly driven by accelerating order patterns in the prior year quarter in response to tariff actions.

Speaker #3: Given our current bookings patterns, we expect 2026 CAPEX revenue to increase throughout the remainder of the year and contribute more meaningfully to our overall growth profile, driven by strong WFE growth and improving fab construction trends, which support not only the latter half of 2026 but also growth expectations in 2027 and beyond.

Speaker #3: Our overall results reflect the improving demand landscape across our end markets and regions. This includes double-digit Q1 growth in Taiwan and broader Asia, supported by strong plan of record positions as well as improving demand within advanced logic and memory, driven in part by AI-enabled applications.

David Reeder: Our overall results reflect the improving demand landscape across our end markets and regions. This includes double-digit Q1 growth in Taiwan and broader Asia, supported by strong plan of record positions, as well as improving demand within advanced logic and memory, driven in part by AI-enabled applications. Turning to profitability, gross margins improved in Q1 2026. The key drivers to the strengthened margins on both a year-over-year and sequential basis were productivity and efficiency actions across our manufacturing network and supply chain, favorability from the useful life accounting change in Q1, and product mix. Jeffrey Schnell will provide more details on this later, but we are pleased with the structural improvement in margins and expect to build on this progress in the future. Additionally, we are continuing our efforts to optimize our manufacturing network.

Speaker #3: Turning to profitability, gross margins improved in the first quarter of 2026. The key drivers to the strengthened margins, on both a year-over-year and sequential basis, were productivity and efficiency actions across our manufacturing network and supply chain, favorability from the useful life accounting change in the first quarter, and product mix.

Speaker #3: Jeff will provide more details on this later, but we are pleased with the structural improvement in margins and expect to build on this progress in the future.

Speaker #3: Additionally, we are continuing our efforts to optimize our manufacturing network. We closed another subscale facility during the quarter in Chandler, Arizona, further advancing our operational initiatives.

David Reeder: Additionally, we are continuing our efforts to optimize our manufacturing network. We closed another subscale facility during the quarter in Chandler, Arizona, further advancing our operational initiatives. These actions represent an important proof point in our ongoing efforts to drive scale, optimize our footprint, improve efficiency, and better position the business for growth and improved operating leverage as volumes increase. Free cash flow was also a highlight for the quarter. We delivered $144 million of free cash flow, approximately 18% of sales, despite headwinds from normal working capital seasonality. Our strong free cash flow enabled us to accelerate our deleveraging as we repaid approximately $50 million of our term loan in the quarter. We believe this trend will continue and now expect to reduce net leverage to approximately 3 times by the end of 2026.

David Reeder: We closed another subscale facility during the quarter in Chandler, Arizona, further advancing our operational initiatives. These actions represent an important proof point in our ongoing efforts to drive scale, optimize our footprint, improve efficiency, and better position the business for growth and improved operating leverage as volumes increase. Free cash flow was also a highlight for the quarter. We delivered $144 million of free cash flow, approximately 18% of sales, despite headwinds from normal working capital seasonality. Our strong free cash flow enabled us to accelerate our deleveraging as we repaid approximately $50 million of our term loan in the quarter. We believe this trend will continue and now expect to reduce net leverage to approximately 3 times by the end of 2026. Turning our commentary to the semiconductor market.

Speaker #3: These actions represent an important proof point in our ongoing efforts to drive scale, optimize our footprint, improve efficiency, and better position the business for growth and improved operating leverage as volumes increase.

Speaker #3: Free cash flow was also a highlight for the quarter. We delivered $144 million of free cash flow, approximately 18% of sales. Despite headwinds from normal working capital seasonality, our strong free cash flow enabled us to accelerate our de-leveraging as we repaid approximately $50 million of our term loan in the quarter.

Speaker #3: We believe this trend will continue, and now expect to reduce net leverage to approximately 3 times by the end of 2026. Turning our commentary to the semiconductor market.

David Reeder: Turning our commentary to the semiconductor market. We now expect mid to high single-digit industry MSI growth for the remainder of 2026, which correlates to approximately 75% of our business. This contemplates an improved DRAM outlook, a similar unit outlook compared to last quarter in advanced logic and NAND, and a continued mixed outlook within mainstream logic. The outlook for fab spending is also improving, which correlates to the remaining 25% of our business, both fab construction and WFE. Let me now address the end markets. Advanced logic, which represents approximately 40% of our total revenue, remains well-positioned for strong growth in 2026, primarily driven by accelerating demand for leading-edge compute. Utilization rates at the most advanced nodes are already operating near effective capacity, and the industry is responding with aggressive capacity investments to support the demand for next-generation nodes.

Speaker #3: We now expect mid to high single-digit industry MSI growth for the remainder of 2026, which correlates to approximately 75% of our business. This contemplates an improved DRAM outlook, a similar unit outlook compared to last quarter and advanced logic and NAND, and a continued mixed outlook within mainstream logic.

David Reeder: We now expect mid to high single-digit industry MSI growth for the remainder of 2026, which correlates to approximately 75% of our business. This contemplates an improved DRAM outlook, a similar unit outlook compared to last quarter in advanced logic and NAND, and a continued mixed outlook within mainstream logic. The outlook for fab spending is also improving, which correlates to the remaining 25% of our business, both fab construction and WFE. Let me now address the end markets. Advanced logic, which represents approximately 40% of our total revenue, remains well-positioned for strong growth in 2026, primarily driven by accelerating demand for leading-edge compute. Utilization rates at the most advanced nodes are already operating near effective capacity, and the industry is responding with aggressive capacity investments to support the demand for next-generation nodes.

Speaker #3: And the outlook for fab spending is also improving. Which correlates to the remaining 25% of our business, both fab construction and WFE. Let me now address the end markets.

Speaker #3: Advanced logic with represents approximately 40% of our total revenue, remains well positioned for strong growth in 2026, primarily driven by accelerating demand for leading-edge compute.

Speaker #3: Utilization rates at the most advanced nodes are already operating near effective capacity, and the industry is responding with aggressive capacity investments to support the demand for next-generation nodes.

Speaker #3: Additionally, as two-nanometer technology enters a more meaningful production ramp this year, we expect strong growth in two-nanometer wafer output. Process complexity, meaningfully increases with sub-five-nanometer nodes driving higher ENTEGRIS content per wafer and aligning with our strong positions of record.

David Reeder: As 2 nanometer technology enters a more meaningful production ramp this year, we expect strong growth in 2 nanometer wafer output. Process complexity meaningfully increases with sub 5 nanometer nodes, driving higher Entegris content per wafer and aligning with our strong positions of record. The memory market, which represents approximately 30% of our revenue, is also structurally strong, underpinned by AI workloads and technology roadmaps that are reshaping DRAM and NAND architectures. In DRAM, demand continues to accelerate, driven by increased AI consumption. As announced, we expect DRAM capital investments to continue at pace, supporting accelerated DRAM MSI growth beyond 2026. NAND demand and MSI are also expected to increase in 2026, though it remains more nuanced than DRAM. This view is supported by both leading-edge technology transitions and AI-driven storage requirements.

Speaker #3: The memory market, which represents approximately 30% of our revenue, is also structurally strong. Underpinned by AI workloads and technology roadmaps that are reshaping DRAM and NAND architectures.

Speaker #3: In DRAM, demand continues to accelerate, driven by increased AI consumption, additionally and as announced, we expect DRAM capital investments to continue a pace, supporting accelerated DRAM MSI growth beyond 2026.

Speaker #3: NAND demand and MSI are also expected to increase in 2026, though it remains more nuanced than DRAM. This view is supported by both leading-edge technology transitions and AI-driven storage requirements.

David Reeder: This view is supported by both leading-edge technology transitions and AI-driven storage requirements. The key short-term growth driver in NAND for Entegris will be layer scaling and the resulting incremental Entegris content, with wafer start activity expected to improve in H2 2026 and into 2027. Vertical scaling materially increases process complexity, elevating the importance of yield, precision manufacturing, and advanced process steps and materials. These technology shifts are expected to result in double-digit increases in content per wafer for Entegris.

Speaker #3: The key short-term growth driver in NAND for ENTEGRIS will be layer scaling and the resulting incremental ENTEGRIS content, with wafer start activity expected to improve in the latter half of 2026 and into 2027.

David Reeder: The key short-term growth driver in NAND for Entegris will be layer scaling and the resulting incremental Entegris content, with wafer start activity expected to improve in H2 2026 and into 2027. Vertical scaling materially increases process complexity, elevating the importance of yield, precision manufacturing, and advanced process steps and materials. These technology shifts are expected to result in double-digit increases in content per wafer for Entegris. Lastly, mainstream logic. The recovery and outlook in this end market, which represents approximately a third of our business, remains mixed. We continue to expect tempered MSI growth in mainstream logic through 2026, improving thereafter as new capacity additions, specifically in memory, begin to ease near-term supply concerns, especially with respect to price-sensitive consumer products. As it relates to CapEx, we are incrementally more positive on the portion of our business related to industry CapEx.

Speaker #3: Vertical scaling materially increases process complexity, elevating the importance of yield, precision manufacturing, and advanced process steps and materials. These technology shifts are expected to result in double-digit increases in content per wafer for Entegris.

Speaker #3: And lastly, mainstream logic. The recovery and outlook in this end market, which represents approximately a third of our business, remains mixed. We continue to expect tempered MSI growth in mainstream logic through 2026, improving thereafter as new capacity additions, specifically in memory, begin to ease near-term supply concerns, especially with respect to price-sensitive consumer products.

David Reeder: Lastly, mainstream logic. The recovery and outlook in this end market, which represents approximately a third of our business, remains mixed. We continue to expect tempered MSI growth in mainstream logic through 2026, improving thereafter as new capacity additions, specifically in memory, begin to ease near-term supply concerns, especially with respect to price-sensitive consumer products. As it relates to CapEx, we are incrementally more positive on the portion of our business related to industry CapEx. The return to growth in fab spending is materializing. This is driven by selective but substantial global capacity additions and pull forwards, primarily in leading edge logic and memory.

Speaker #3: As it relates to CapEx, we are incrementally more positive on the portion of our business related to industry CapEx. The return to growth in fab spending is materializing.

David Reeder: The return to growth in fab spending is materializing. This is driven by selective but substantial global capacity additions and pull forwards, primarily in leading edge logic and memory. Additionally, forecasts for WFE spending remain strong as these projects advance. Entegris is well positioned to deliver value for our customers and to capture the multi-year growth opportunities we expect will emerge as we progress through 2026 and into 2027. To summarize, there are several industry and operational tailwinds fueling Entegris's growth. The industry outlook remains constructive. Semiconductor fundamentals are favorable and support growth in 2026 and beyond. This is driven by advanced logic and DRAM with a more stable near-term outlook for NAND and mainstream logic. Stronger order patterns and increasing backlog provide increased visibility and confidence across our unit and CapEx-driven businesses. Next, technology transitions will continue to drive upside for Entegris.

Speaker #3: This is driven by selective but substantial global capacity additions and pull-forwards primarily in leading-edge logic and memory. Additionally, forecasts for WFE spending remain strong, as these projects advance, ENTEGRIS is well positioned to deliver value for our customers and to capture the multi-year growth opportunities we expect will emerge as we progress through 2026 and into 2027.

David Reeder: Additionally, forecasts for WFE spending remain strong as these projects advance. Entegris is well positioned to deliver value for our customers and to capture the multi-year growth opportunities we expect will emerge as we progress through 2026 and into 2027. To summarize, there are several industry and operational tailwinds fueling Entegris's growth. The industry outlook remains constructive. Semiconductor fundamentals are favorable and support growth in 2026 and beyond. This is driven by advanced logic and DRAM with a more stable near-term outlook for NAND and mainstream logic. Stronger order patterns and increasing backlog provide increased visibility and confidence across our unit and CapEx-driven businesses.

Speaker #3: To summarize, there are several industry and operational tailwinds fueling ENTEGRIS's growth. The industry outlook remains constructive. Semiconductor fundamentals are favorable in support growth in 2026 and beyond.

Speaker #3: This is driven by advanced logic and DRAM with a more stable, near-term outlook for NAND and mainstream logic. Stronger order patterns and increasing backlog provide increased visibility and confidence across our unit and CapEx-driven businesses.

Speaker #3: Next, technology transitions will continue to drive upside for Entegris. Materials intensity and process complexity continue to increase. Beyond node transitions, we differentiate by innovating alongside our customers to advance their technology roadmaps, which is where Entegris creates the most value.

David Reeder: Next, technology transitions will continue to drive upside for Entegris. Materials intensity and process complexity continue to increase. Beyond node transitions, we differentiate by innovating alongside our customers to advance their technology roadmaps, which is where Entegris creates the most value. We are driving a stronger operational focus. We are executing with discipline to improve our operational performance, accelerate growth, and strengthen our financial profile. Finally, I want to recognize our employees for their focus, discipline, and execution. Their dedication enables all of us to deliver upon our commitments.

David Reeder: Materials intensity and process complexity continue to increase. Beyond node transitions, we differentiate by innovating alongside our customers to advance their technology roadmaps, which is where Entegris creates the most value. We are driving a stronger operational focus. We are executing with discipline to improve our operational performance, accelerate growth, and strengthen our financial profile. Finally, I want to recognize our employees for their focus, discipline, and execution. Their dedication enables all of us to deliver upon our commitments. Before turning the call over to Jeff, I'd like to highlight that following a rigorous search process, Sukhi Nagesh has been appointed as our new Chief Financial Officer effective May 18. Welcome to the team, Sukhi. His engineering background, significant semiconductor industry experience, deep financial expertise, and strong operational discipline make him the ideal CFO for Entegris.

Speaker #3: And we are driving a stronger operational focus. We are executing with discipline to improve our operational performance, accelerate growth, and strengthen our financial profile.

Speaker #3: Finally, I want to recognize our employees for their focus, discipline, and execution. Their dedication enables all of us to deliver upon our commitments. Before turning the call over to Jeff, I’d like to highlight that, following a rigorous search process, Suki Nagash has been appointed as our new Chief Financial Officer, effective May 18.

David Reeder: Before turning the call over to Jeff, I'd like to highlight that following a rigorous search process, Sukhi Nagesh has been appointed as our new Chief Financial Officer effective May 18. Welcome to the team, Sukhi. His engineering background, significant semiconductor industry experience, deep financial expertise, and strong operational discipline make him the ideal CFO for Entegris. Having previously worked with Sukhi, I am confident that his leadership will be instrumental as we continue to execute our strategy to unlock Entegris' full potential. With that, let me turn the call over to Jeff to discuss the financials.

Speaker #3: Welcome to the team, Suki. His engineering background, significant semiconductor industry experience, deep financial expertise, and strong operational discipline make him the ideal CFO for Entegris.

Speaker #3: Having previously worked with Suki, I am confident that his leadership will be instrumental as we continue to execute our strategy to unlock Entegris's full potential.

David Reeder: Having previously worked with Sukhi, I am confident that his leadership will be instrumental as we continue to execute our strategy to unlock Entegris' full potential. With that, let me turn the call over to Jeff to discuss the financials.

Speaker #3: With that, let me turn the call over to Jeff to discuss the financials. Thanks, Dave. Good morning. Q1 sales were $812 million, an increase of 5% year over year and above the midpoint of our guidance range.

Jeffrey Schnell: Thanks, Dave. Good morning. Q1 sales were $812 million, an increase of 5% year over year and above the midpoint of our guidance range. Gross margin on a GAAP and non-GAAP basis was 46.9%, above the high end of our guidance range. These results included approximately 50 basis points of one-time items, which we do not expect to recur at similar levels in subsequent quarters. The sequential improvement in Q1 was driven by productivity and execution across our network, including more consistent performance and ongoing cost controls, favorable product mix, and favorability from the useful life accounting change in Q1, which was in line with prior guidance. Operating expenses on a GAAP basis were $239 million in Q1 and were $189 million on a non-GAAP basis.

Speaker #3: Gross margin on a gap and non-gap basis was 46.9%, above the high end of our guidance range. These results included approximately 50 basis points, of one-time items, which we do not expect to recur at similar levels in subsequent quarters.

Speaker #3: The sequential improvement in Q1 was driven by productivity and execution across our network, including more consistent performance and ongoing cost controls, favorable product mix, and favorability from the useful life accounting change, in the first quarter, which was in line with prior guidance.

Speaker #3: Operating expenses on a gap basis were $239 million, in Q1, and were $189 million on a non-gap basis. Adjusted EBITDA in Q1 was $226 million, or 27.8% of revenue, also above our guidance range.

Jeffrey Schnell: Operating expenses on a GAAP basis were $239 million in Q1 and were $189 million on a non-GAAP basis. Adjusted EBITDA in Q1 was $226 million, or 27.8% of revenue, also above our guidance range. The GAAP tax rate in Q1 was 1%, and the non-GAAP tax rate was 8%, which includes an unforecasted release of a tax reserve. GAAP diluted EPS was $0.60 per share in Q1, and non-GAAP EPS was $0.86 per share, which exceeded our guidance range.

Jeffrey Schnell: Adjusted EBITDA in Q1 was $226 million, or 27.8% of revenue, also above our guidance range. The GAAP tax rate in Q1 was 1%, and the non-GAAP tax rate was 8%, which includes an unforecasted release of a tax reserve. GAAP diluted EPS was $0.60 per share in Q1, and non-GAAP EPS was $0.86 per share, which exceeded our guidance range. Switching to our segments. Material Solutions delivered Q1 sales of $351 million, up approximately 3% year over year. Year over year growth was led by double-digit increases in advanced deposition materials and selective etch chemistries, along with continued strength in CMP consumables, underscoring the durability of demand for key technologies.

Speaker #3: The gap tax rate in Q1 was 1%, and the non-gap tax rate was 8%, which includes an unforecasted release of a tax reserve. Gap diluted EPS was 60 cents per share in the first quarter, and non-gap EPS was 86 cents per share, which exceeded our guidance range.

Speaker #3: Switching to our segments, material solutions delivered Q1 sales of $351 million. Up approximately 3% year over year. Year-over-year growth was led by double-digit increases in advanced deposition materials and selective etch chemistries, along with continued strength in CMP consumables, underscoring the durability of demand for key technologies.

Jeffrey Schnell: Switching to our segments. Material Solutions delivered Q1 sales of $351 million, up approximately 3% year over year. Year over year growth was led by double-digit increases in advanced deposition materials and selective etch chemistries, along with continued strength in CMP consumables, underscoring the durability of demand for key technologies. Adjusted operating margin was 22%, in line with the prior year period, and increased by approximately 100 basis points sequentially, reflecting improved performance across the manufacturing network.

Speaker #3: Adjusted operating margin was 22%, in line with the prior year period, and increased by approximately 100 basis points sequentially, reflecting improved performance across the manufacturing network.

Jeffrey Schnell: Adjusted operating margin was 22%, in line with the prior year period, and increased by approximately 100 basis points sequentially, reflecting improved performance across the manufacturing network. Advanced Purity Solutions delivered Q1 sales of $464 million, representing approximately 7% year over year growth. Results were driven by continued strong demand across the portfolio, including the third consecutive record quarter in liquid filtration, a 3-year revenue high in FOUPs, and growth in gas filtration. Adjusted operating margin was 29.1% for the quarter, expanding both year over year and sequentially, reflecting strong operational execution and productivity, favorable product mix, and the majority of the favorability from the useful life change. Switching to cash flow.

Speaker #3: Advanced purity solutions delivered Q1 sales of $464 million, representing approximately 7% year-over-year growth. Results were driven by continued strong demand across the portfolio, including the third consecutive record quarter in liquid filtration, a three-year revenue high in FOOPS, and growth in gas filtration.

Jeffrey Schnell: Advanced Purity Solutions delivered Q1 sales of $464 million, representing approximately 7% year over year growth. Results were driven by continued strong demand across the portfolio, including the third consecutive record quarter in liquid filtration, a 3-year revenue high in FOUPs, and growth in gas filtration. Adjusted operating margin was 29.1% for the quarter, expanding both year over year and sequentially, reflecting strong operational execution and productivity, favorable product mix, and the majority of the favorability from the useful life change.

Speaker #3: Adjusted operating margin was 29.1% for the quarter, expanding both year-over-year and sequentially, reflecting strong operational execution and productivity, favorable product mix, and the majority of the favorability from the useful life change.

Speaker #3: Switching to cash flow, free cash flow in the first quarter was strong, at $144 million, representing a free cash flow margin of 18%, a continuation of the positive trend from the second half of 2025.

Jeffrey Schnell: Switching to cash flow. Free cash flow in Q1 was strong at $144 million, representing a free cash flow margin of 18%, a continuation of the positive trend from H2 2025. The increase in free cash flow compared to the prior year was driven by three factors: the improvement in earnings, an increase in cash from operations, primarily due to working capital discipline, and lower CapEx in the period. CapEx is expected to increase as the year progresses, will remain meaningfully below 2025 levels. We continue to expect strong free cash flow generation in 2026.

Jeffrey Schnell: Free cash flow in Q1 was strong at $144 million, representing a free cash flow margin of 18%, a continuation of the positive trend from H2 2025. The increase in free cash flow compared to the prior year was driven by three factors: the improvement in earnings, an increase in cash from operations, primarily due to working capital discipline, and lower CapEx in the period. CapEx is expected to increase as the year progresses, will remain meaningfully below 2025 levels. We continue to expect strong free cash flow generation in 2026. Turning to our capital structure. During Q1, we reduced our term loan by $50 million, building on the $300 million reduction in 2025.

Speaker #3: The increase in free cash flow compared to the prior year was driven by three factors: the improvement in earnings, an increase in cash from operations—primarily due to working capital discipline—and lower CapEx in the period.

Speaker #3: CapEx is expected to increase as the year progresses, but will remain meaningfully below 2025 levels. We continue to expect strong free cash flow generation in 2026.

Speaker #3: Turning to our capital structure, during the first quarter, we reduced our term loan by $50 million. Building on the $300 million reduction in 2025, we currently have $400 million remaining on our term loan, which is the only variable-rate debt in our capital structure.

Jeffrey Schnell: Turning to our capital structure. During Q1, we reduced our term loan by $50 million, building on the $300 million reduction in 2025. We currently have $400 million remaining on our term loan, which is the only variable rate debt in our capital structure. At quarter-end, our net debt was $3.3 billion, and net leverage was 3.6x. As Dave articulated, we expect to improve our net leverage ratio to approximately 3x by the end of 2026, underscoring our commitment to deleveraging.

Jeffrey Schnell: We currently have $400 million remaining on our term loan, which is the only variable rate debt in our capital structure. At quarter-end, our net debt was $3.3 billion, and net leverage was 3.6x. As Dave articulated, we expect to improve our net leverage ratio to approximately 3x by the end of 2026, underscoring our commitment to deleveraging. Moving on to the Q2 outlook. We expect Q2 sales to range from $815 to $845 million, a year-over-year increase of approximately 5% at the midpoint.

Speaker #3: At quarter end, our net debt was $3.3 billion, and net leverage was $3.6 times. As Dave articulated, we expect to improve our net leverage ratio to approximately three times by the end of 2026, underscoring our commitment to deleveraging.

Speaker #3: Moving on to the second quarter outlook. We expect two Q sales to range from $815 million to $845 million. A year-over-year increase of approximately 5% at the midpoint.

Jeffrey Schnell: Moving on to the Q2 outlook. We expect Q2 sales to range from $815 to $845 million, a year-over-year increase of approximately 5% at the midpoint. Gross margin is expected to be between 46.25% and 47.25%, both on a GAAP and non-GAAP basis, a modest improvement at the midpoint from the underlying gross margin level achieved in Q1, but more than 200 basis points of improvement year over year. We expect GAAP operating expenses of approximately $241 million and non-GAAP operating expenses of approximately $194 million, which reflects higher variable comp relative to 2025 and other intentional investments to support the expected growth across our portfolio.

Speaker #3: Gross margin is expected to be between 46.25 and 47.25 percent, both on a gap and non-gap basis, a modest improvement at the midpoint from the underlying gross margin level achieved in Q1.

Jeffrey Schnell: Gross margin is expected to be between 46.25% and 47.25%, both on a GAAP and non-GAAP basis, a modest improvement at the midpoint from the underlying gross margin level achieved in Q1, but more than 200 basis points of improvement year over year. We expect GAAP operating expenses of approximately $241 million and non-GAAP operating expenses of approximately $194 million, which reflects higher variable comp relative to 2025 and other intentional investments to support the expected growth across our portfolio. EBITDA margin of 27.5% at the midpoint, driven by incremental improvements in gross margins.

Speaker #3: But more than 200 basis points of improvement year over year. We expect gap operating expenses of approximately $241 million and non-gap operating expenses of approximately $194 million.

Speaker #3: Which reflects higher variable comp relative to 2025 and other intentional investments to support the expected growth across our portfolio. EBITDA margin of 27.5% at the midpoint, driven by incremental improvements in gross margins.

Jeffrey Schnell: EBITDA margin of 27.5% at the midpoint, driven by incremental improvements in gross margins. Net interest expense of approximately $46 million, which accounts for debt paydown to date. We expect our non-GAAP tax rate to return to a more normalized level of approximately 15% in Q2. We expect GAAP EPS between $0.53 and $0.61 per share and non-GAAP EPS between $0.76 and $0.84 per share. We expect depreciation to remain largely stable for the balance of 2026 at approximately $35 million per quarter.

Speaker #3: Net interest expense of approximately $46 million, which accounts for debt paydown to date. We expect our non-GAAP tax rate to return to a more normalized level of approximately 15% in Q2.

Jeffrey Schnell: Net interest expense of approximately $46 million, which accounts for debt paydown to date. We expect our non-GAAP tax rate to return to a more normalized level of approximately 15% in Q2. We expect GAAP EPS between $0.53 and $0.61 per share and non-GAAP EPS between $0.76 and $0.84 per share. We expect depreciation to remain largely stable for the balance of 2026 at approximately $35 million per quarter. Looking ahead to our Q3 revenue expectations, historical industry seasonality supports a sequential improvement in Q3. With our current visibility, which we'll refine on our Q2 call, we expect revenue to grow by approximately 5% from the midpoint of the Q2's guidance range. Finally, I'd like to update a few modeling items for the full year of 2026.

Speaker #3: We expect gap EPS between $53 and $61 cents per share, and non-gap EPS between $76 and $84 cents per share. And we expect depreciation to remain largely stable for the balance of 2026, at approximately $35 million per quarter.

Speaker #3: Looking ahead to our third quarter revenue expectations, historical industry seasonality supports a sequential improvement in the third quarter. With our current visibility, which will refine on our second quarter call, we expect revenue to grow by approximately 5% from the midpoint of the second quarter's guidance range.

Jeffrey Schnell: Looking ahead to our Q3 revenue expectations, historical industry seasonality supports a sequential improvement in Q3. With our current visibility, which we'll refine on our Q2 call, we expect revenue to grow by approximately 5% from the midpoint of the Q2's guidance range. Finally, I'd like to update a few modeling items for the full year of 2026. We expect net interest expense to be slightly below $190 million. The non-GAAP tax rate to be approximately 15%, diluted share count of approximately 154 million for Q2 and for the full year, CapEx of $250 million, and depreciation of approximately $140 million. Lastly, we have set a date for our Investor Day in New York City in early November 2026, and we'll share the save the date information soon. With that, operator, let's open the line for questions.

Speaker #3: Finally, I'd like to update a few modeling items for the full year of 2026. We expect net interest expense to be slightly below $190 million.

Jeffrey Schnell: We expect net interest expense to be slightly below $190 million. The non-GAAP tax rate to be approximately 15%, diluted share count of approximately 154 million for Q2 and for the full year, CapEx of $250 million, and depreciation of approximately $140 million. Lastly, we have set a date for our Investor Day in New York City in early November 2026, and we'll share the save the date information soon. With that, operator, let's open the line for questions.

Speaker #3: The non-GAAP tax rate to be approximately 15%. Diluted share count of approximately 154 million for Q2 and for the full year. CapEx of $250 million.

Speaker #3: And depreciation of approximately $140 million. Lastly, we have set a date for our investor day in New York City in early November 2026, and we'll share the Save the Date information soon.

Speaker #3: With that, operator, let's open the line for questions.

Speaker #1: Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press star one on your telephone keypad.

Operator: Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press star one on your telephone keypad. Please limit yourself to one question and one follow-up. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. Once again, we ask that you pick up your handset when posing your questions to provide optimal sound quality. Our first question will come from Melissa Weathers with Deutsche Bank. Please go ahead.

Speaker #1: Please limit yourself to one question and one follow-up. If at any point your question has been answered, you may remove yourself from the queue by pressing star two.

Speaker #1: Once again, we ask that you pick up your handset for posing when posing your questions to provide optimal sound quality. Our first question will come from Melissa Weathers with Deutsche Bank.

Speaker #1: Please go ahead.

Melissa Weathers: Hi, everybody. Thanks for letting me ask a question, and looking forward to working with Kuki in the coming months. I guess for my first question, thank you for all the color that you gave in the comparative marks on the market environment that you're seeing. I guess, could you flesh out a little bit more what you're seeing? It's pretty obvious AI is very strong, but I think on the consumer electronic side, the demand is, the jury is still out on where fab utilizations are shaping out for those kinds of products. Just any more color you can provide on those non-AI markets would be really helpful.

Speaker #2: Hi, everybody. Thanks for letting me ask your question. And looking forward to working with Tricky in the coming months. So I guess for my first question, thank you for all the thank you for all the call that you gave in the comparative marks on the market environment that you're seeing.

Speaker #2: I guess, could you flesh out a little bit more what you're seeing? It's pretty obvious AI is very strong, but I think on the consumer electronics side, the demand is the jury's still out on where fab utilizations are shaking out for those kinds of products.

Speaker #2: So does any more color you can provide on those non-AI markets would be really helpful.

Speaker #3: Sure. And good morning, Melissa. Good to speak to you again. Look, we view the mainstream market as mixed, with memory availability and pricing impacting price-sensitive computer products.

David Reeder: Sure. Good morning, Melissa. Good to speak to you again. Look, we view the mainstream market as mixed with memory availability and pricing, you know, impacting price-sensitive computer products. We view that as being offset, however, by power management, data center related strength, and other ancillary AI related strength. You know, on the one hand, you've got potentially some pressure on the consumer products due to the availability and pricing of memory, but yet on the other hand, you have some strength still associated in mainstream with kind of the broader build-out of AI. We kind of view that as a put and take. We view capacity utilization right now, in mainstream as being, you know, somewhere between 75% and 80%.

Speaker #3: And then we view that as being offset, however, by power management, data center-related strength, and then other ancillary AI-related strength. So on the one hand, you've got potentially some pressure on the consumer products due to the availability and pricing of memory, but yet on the other hand, you have some strength still associated in mainstream with kind of the broader build-out of AI.

Speaker #3: So we kind of view that as a put and take. We view capacity utilization right now in mainstream as being somewhere between 75 and 80 percent.

David Reeder: We kind of view that as a put and take. We view capacity utilization right now, in mainstream as being, you know, somewhere between 75% and 80%. There have been some foundries that have reported that have broken that 80% barrier for the first time in several years since 2022 peak. We view that as positive. We do think that that market is improving, we are looking at it right now with the current view of being mixed. Did you have a follow-up, Melissa?

David Reeder: There have been some foundries that have reported that have broken that 80% barrier for the first time in several years since 2022 peak. We view that as positive. We do think that that market is improving, we are looking at it right now with the current view of being mixed. Did you have a follow-up, Melissa?

Speaker #3: There have been some foundries that have reported that have broken that 80% barrier. For the first time in several years since 2022 peak, so we view that as positive.

Speaker #3: We do think that that market is improving. But we're looking at it right now with the current view of being mixed. Did you have a follow-up, Melissa?

Speaker #2: Yes, I did. Thank you. Thanks for all that. On the CapEx x side, I think the numbers we're hearing from WFE companies and you can see all the fab announcements going on, it seems like we're going to have a pretty historic fab build-out cycle coming.

Melissa Weathers: Yes, I did. Thank you. Thanks for all that. On the CapEx side, I think the numbers we're hearing from WFE companies, and you can see all the fab announcements coming on, it seems like we're going to have a pretty historic fab build-out cycle coming. Any more color on how we should think about the CapEx portion of your business, whether it's FOUPs or the sub fab systems that you guys do. I think presenting that ahead of these big fab build-outs would be really helpful.

Speaker #2: So does any more color on how we should think about the CapEx portion of your business, whether it's FOOPS or the sub-fab systems that you guys do?

Speaker #2: I think presenting that ahead of these big fab build-outs would be really helpful.

Speaker #3: Sure. Let me give you a quick refresher on our CapEx portion of our business. So, as a reminder, about 25% of our revenue is CapEx-related.

David Reeder: Sure. Let me give you a quick refresher on our CapEx portion of our business. As a reminder, about 25% of our revenue is CapEx related, and of that 25%, about 1/3 is WFE and about 2/3 is fab construction. When you think about Entegris, we typically benefit from kind of 3 cycles of demand when the market enters an upcycle and starts building out new fabs. Fab construction related product lines increase first. They then, you typically see revenue approximately 12 months, maybe 9 to 12 months after groundbreaking. That tends to be centered more towards gas purification and fluid management products in our portfolio. WFE related product lines and initial filtration during tool qualification start to ramp up. That typically happens somewhere between, call it, 12 and 18 months after groundbreaking.

Speaker #3: And of that 25%, about a third is WFE, and about two-thirds is fab construction. So when you think about Integris, we typically benefit from kind of three cycles of demand.

Speaker #3: When the market enters an up cycle, and starts building out new fabs. So fab construction-related product lines increase first. They typically see revenue approximately 12 months, maybe 9 to 12 months after groundbreaking.

Speaker #3: That tends to be centered more towards gas purification, and fluid management products in our portfolio. Then WFE-related product lines and initial filtration during tool qualification start to ramp up.

Speaker #3: That typically happens somewhere between call it 12 and 18 months after groundbreaking. You'll start to see product lines like gas filtration, AMC, LMC bulk filtration, start to increase for us.

David Reeder: You'll start to see product lines like gas filtration, AMC, LMC bulk filtration, start to increase for us. Finally, you'll start to see the unit-driven product lines. You'll see that demand start to increase, and that's kind of 24 months. After the fab construction piece, after the tool placement and qualification piece, then you start to get kind of the unit-driven business coming in on the tail end somewhere around 2 years after groundbreaking. Those are kind of the three waves. 75% of our business is unit driven, 25% of our business, CapEx driven. From an end market perspective, we would characterize memory, probably being in wave 1 of this cycle, and I'm really referring more to DRAM right now than NAND.

Speaker #3: And then finally, you'll start to see the unit-driven product lines. You'll see that demand start to increase. And that's kind of 24 months. So after the fab construction piece, after the tool placement and qualification piece, then you start to get kind of the unit-driven business coming in on the tail end somewhere around two years after groundbreaking.

Speaker #3: So those are kind of the three waves. Seventy-five percent of our business is unit-driven, 25% of our business is CapEx-driven. And then from an in-market perspective, we would characterize memory as probably being in wave one of this cycle.

David Reeder: From an end market perspective, we would characterize memory, probably being in wave 1 of this cycle, and I'm really referring more to DRAM right now than NAND. NAND has not announced a lot of incremental fabs or incremental capacity builds at this stage. They've been a bit more focused on driving incremental layers or bit density. Memory though, I would say, is kind of in the wave 1 of this phase really with DRAM at the forefront. Advanced logic is going through rolling portions of this phase. Probably in the wave 2 and wave 3 portion, obviously with some new fabs that have been announced.

Speaker #3: And I'm really referring more to DRAM right now than NAND. NAND has not announced a lot of incremental fabs or incremental capacity builds at this stage.

David Reeder: NAND has not announced a lot of incremental fabs or incremental capacity builds at this stage. They've been a bit more focused on driving incremental layers or bit density. Memory though, I would say, is kind of in the wave 1 of this phase really with DRAM at the forefront. Advanced logic is going through rolling portions of this phase. Probably in the wave 2 and wave 3 portion, obviously with some new fabs that have been announced.

Speaker #3: They've been a bit more focused on driving incremental layers or bit density. So memory, though, I would say is kind of in the wave one of this phase, really, with DRAM at the forefront.

Speaker #3: And then advanced logic is going through rolling portions of this phase. So probably in the wave two and wave three portion, but obviously with some new fabs that have been announced.

Speaker #1: Thank you. Our next question will come from Elizabeth Sun with Citi. Please go ahead.

Operator: Thank you. Our next question will come from Elizabeth Sun with Citi. Please go ahead.

Elizabeth Sun: Hi. Good morning. Thanks for taking my question.

Speaker #4: Hi, good morning. Thanks for taking my question. I guess my first question is on the growth margin side. You're Q1 growth margin had a nice improvement quarter over quarter and also above your guidance.

David Reeder: Good morning.

Elizabeth Sun: I guess my first question is on the gross margin side. Your Q1 gross margin had a nice improvement quarter-over-quarter and also above your guidance. Q2 to improve a little bit, I guess, more on volume. I guess going forward, looking into H2 and maybe beyond in 2027, how should we think about gross margin path? Are going to continue to rationalize some factories and improve manufacturing efficiency?

Speaker #4: And you Q2 improved a little bit, I guess, with more on volume. But I guess going forward, looking into the second half and maybe beyond in '27, how should we think about growth margin path?

Speaker #4: Are you going to continue to rationalize some factories and improve manufacturing efficiency?

Speaker #3: Thank you for the question, Elizabeth. I can't tell you how pleased it actually makes me to field some questions about gross margin. Particularly because we believe that we're in a period of sustained structural gross margin expansion.

David Reeder: Thank you for the question, Elizabeth. I can't tell you how pleased it actually makes me to field some questions about gross margin, particularly because we believe that we're in a period of sustained structural gross margin expansion. As we think about gross margin and what we're trying to drive, as I've mentioned previously, we're simplifying and refining our manufacturing network. We're relentlessly driving higher productivity, higher fixed cost absorption, better yields. There is a tremendous amount of work ahead of us, and it will be lumpy, but we are focused on delivering our full gross margin potential, which we think is significantly higher than where we are today. Getting directly to your question on Q1 gross margin.

Speaker #3: And so as we think about gross margin and what we're trying to drive, as I've mentioned previously, we're simplifying and refining our manufacturing network.

Speaker #3: We're relentlessly driving higher productivity, higher fixed cost absorption, better yields. There is a tremendous amount of work ahead of us. And it will be lumpy.

Speaker #3: But we are focused on delivering our full gross margin potential, which we think is significantly higher than where we are today. So getting directly to your question on Q1 gross margin, first off, our 46.9% that we posted on an on-gap and gap basis we did benefit from about 50 bips of one-time items in the first quarter.

David Reeder: Getting directly to your question on Q1 gross margin. First off, our 46.9% that we posted on a non-GAAP and GAAP basis, we did benefit from about 50 basis points of one-time items in Q1. If you normalize for that would put Q1 at about 46.4%. That's about 240 basis points improvement sequentially. Bridging you from Q4, about 100 basis points of that 240 basis points improvement was related to the useful life change that we made at the beginning of this year, very much in line with what we guided at the beginning of the quarter, and as highlighted in our 10-Q.

David Reeder: First off, our 46.9% that we posted on a non-GAAP and GAAP basis, we did benefit from about 50 basis points of one-time items in Q1. If you normalize for that would put Q1 at about 46.4%. That's about 240 basis points improvement sequentially. Bridging you from Q4, about 100 basis points of that 240 basis points improvement was related to the useful life change that we made at the beginning of this year, very much in line with what we guided at the beginning of the quarter, and as highlighted in our 10-Q. Productivity and other specific efficiency initiatives, including improved plant performance, comprised the remaining 140 basis points.

Speaker #3: So if you normalize for that, that would put first quarter at about 46.4%. That's about 240 bips improvement sequentially. Bridging you from fourth quarter, about 100 bips of that 240 bips improvement was related to the useful life change that we made at the beginning of this year.

Speaker #3: Very much in line with what we guided at the beginning of the quarter, and as highlighted in our 10-Q. Productivity and other specific efficiency initiatives, including improved plant performance, comprise the remaining 140 basis points.

David Reeder: Productivity and other specific efficiency initiatives, including improved plant performance, comprised the remaining 140 basis points. That kind of bridges you from 44%, where we exited Q4 2025, to where we delivered Q1 2026. Kind of bridging you for Q2 as well. Again, I'll go back to the Q4 simply because that's kind of a fully loaded quarter with respect to KSP as well as Rockrimmon, two of our newer facilities. You know, at midpoint for Q2, we guided gross margin at 46.75%. That's about a 275 bp improvement from Q4, which again was 44%. We're expecting about 150 bps to be related to the useful life change and about 125 bps driven by improvement in our manufacturing network as well as ongoing productivity and efficiency actions, including the closure of the two facilities over the last 2 quarters.

Speaker #3: So that kind of bridges you from 44% where we exited fourth quarter of '25 to where we delivered first quarter of '26. And then kind of bridging you for second quarter as well, again, I'll go back to the fourth quarter simply because that's kind of a fully loaded quarter.

David Reeder: That kind of bridges you from 44%, where we exited Q4 2025, to where we delivered Q1 2026. Kind of bridging you for Q2 as well. Again, I'll go back to the Q4 simply because that's kind of a fully loaded quarter with respect to KSP as well as Rockrimmon, two of our newer facilities. You know, at midpoint for Q2, we guided gross margin at 46.75%. That's about a 275 bp improvement from Q4, which again was 44%.

Speaker #3: With respect to KSP as well as Rockrimmon, two of our newer facilities. At midpoint for Q2, we guided gross margin at 46.75%. That's about a 275-bip improvement from fourth quarter, which again was 44%.

Speaker #3: We're expecting about 150 bips to be related to the useful life change. And about 125 bips driven by improvement in our manufacturing network, as well as ongoing productivity and efficiency actions, including the closure of the two facilities over the last two quarters.

David Reeder: We're expecting about 150 bps to be related to the useful life change and about 125 bps driven by improvement in our manufacturing network as well as ongoing productivity and efficiency actions, including the closure of the two facilities over the last 2 quarters. Also included in this guidance, I did want to highlight, included in this guidance is incremental production staffing and related project costs to enable incremental capacity in the future quarters of 2026 as well as into 2027. Embedded in our Q2 guide are some incremental costs that you have to incur ahead to be able to unlock and enable kind of more capacity in the Q3, Q4, and then the H1 of 2027 as well.

Speaker #3: Also included in this guidance, I did want to highlight included in this guidance is incremental production staffing. And related project costs to enable incremental capacity in the future quarters of 2026, as well as into 2027.

David Reeder: Also included in this guidance, I did want to highlight, included in this guidance is incremental production staffing and related project costs to enable incremental capacity in the future quarters of 2026 as well as into 2027. Embedded in our Q2 guide are some incremental costs that you have to incur ahead to be able to unlock and enable kind of more capacity in the Q3, Q4, and then the H1 of 2027 as well. We're quite pleased with with our gross margin trajectory. Did you have another question, Elizabeth?

Speaker #3: So embedded in our second quarter guide are some incremental costs that you have to incur ahead to be able to unlock and enable kind of more capacity in the third quarter, fourth quarter, and then the first half of 2027 as well.

Speaker #3: So we're quite pleased with our gross margin trajectory. And did you have another question, Elizabeth?

David Reeder: We're quite pleased with with our gross margin trajectory. Did you have another question, Elizabeth?

Speaker #4: Yes. Thanks for the details on gross margin. I guess the next one is on the Congress on the CFO appointment. I happened to to notice that he has a lot of experience in M&A and corporate development.

Elizabeth Sun: Yes. Thanks for the details on gross margin. I guess, the next one is on the congrats on the CFO appointment. I happen to know this, he has a lot of experience in M&A and corporate development. I'm just wondering, does this signal you guys are ready to do more M&As once your, you know, net leverage going, is below like 3 times as your, as you talk about your target?

Speaker #4: So I'm just wondering does that signal you guys are ready to do more M&As once your net leverage is below like three times as you talk about your target?

Speaker #3: It's probably one. We are incredibly happy to announce Suki. I'm looking forward to getting him on board. I wish he could have started today.

David Reeder: It's probably one, we are incredibly happy to announce Sukhi. I'm looking forward to getting him on board. I wish he could have started today, actually, but he will be joining us in mid-May, and I can't wait to work with Sukhi again. Just to kind of recap a little bit about Sukhi, I think many of you probably know him, but to kind of recap Sukhi's background. He started in semiconductors in the mid-nineties on the wafer fab equipment side. We actually started in semis at a similar period in time. He actually started as an engineer, much like myself, in semiconductors. He started as an engineer. He actually has a master's in engineering.

Speaker #3: Actually, but he will be joining us in mid-May. And I can't wait to work with Suki again. Just to kind of recap a little bit about Suki, I think many of you probably know him.

Speaker #3: But to kind of recap Suki's background, he started in semiconductors in the mid-'90s. And on the way for fab equipment side. So we actually started in semis at a similar period in time.

Speaker #3: He actually started as an engineer, much like myself, in semiconductors. He started as an engineer—he actually has a master's in engineering, unfortunately. It's not in chemical engineering like me, but he does have a strong mechanical engineering degree.

David Reeder: Unfortunately, it's not in chemical engineering like me, but he does have a strong mechanical engineering degree as a background, and he got to kind of, you know, cut his teeth on the WFE side of the business early in his career. He followed that up with an MBA, sell-side analysts experience, a lot of corporate experience, investor relations, corporate development, corporate strategy. He was an interim CFO. Finally, I got a chance to work with Suki Krishnan at GlobalFoundries. He was there when I joined the company, and he did a phenomenal job of really leading that IPO.

Speaker #3: As a background, he got to kind of cut his teeth on the WFE side of the business earlier in his career. He followed that up with an MBA and some sell-side analyst experience.

Speaker #3: A lot of corporate experience, investor relations, corporate development, corporate strategy. He was an interim CFO. And then finally, I got a chance to work with Suki at Global Foundries.

Speaker #3: He was there when I joined the company. And he did a phenomenal job of really leading that IPO. So for all those reasons, after a very extensive process, we had a chance to sit down with Suki and convince him to join the team of athletes that we're assembling here at Integris and couldn't be happier to have him on board.

David Reeder: For all those reasons, after a very extensive process, we had a chance to sit down with Su Ki and convince him to join the team of athletes that we're assembling here at Entegris, and couldn't be happier to have him on board. Specific to your question on corporate strategy or corporate development, right now we're focused on delivering our leverage reduction, our deleveraging plan. You know, initially this year we told you that we thought we would be under 3.5x of net leverage. We're already at 3.6x of net leverage, and we updated you that we thought we would be closer to 3x of net leverage by the end of the year.

Speaker #3: Specific to your question on corporate strategy or corporate development, right now we're focused on delivering our leverage reduction, our de-leveraging plan. And initially this year, we told you that we thought we would be under three and a half times of net leverage where already at 3.6 times of net leverage, and we updated you that we thought we would be closer to three times of net leverage by the end of the year.

Speaker #3: Very happy with the profitability that we're driving. Very happy with the free cash flow that we're driving. And so as we progress through the year, we pay off our term loan.

David Reeder: Very happy with the profitability that we're driving, very happy with the free cash flow that we're driving. As we progress through the year, we pay off our term loan, which is something that we're planning this year in 2026 now. We feel like, with that, as well as with increased profitability, we'll be well-positioned in 2027 to at least start to consider other alternatives, whether it's shareholder return or other opportunities in the market. Thank you, Elizabeth.

Speaker #3: Which is something that we're planning this year in 2026 now. We feel like with that, as well as with increased profitability, we'll be well positioned in 2027 to at least start to consider other alternatives.

Speaker #3: Whether it's shareholder return or other opportunities in the market. Thank you, Elizabeth.

Speaker #1: Our next question will come from Timothy Arcury with UBS. Please go ahead.

Operator: Our next question will come from Timothy Arcuri with UBS. Please go ahead.

Speaker #5: Thanks a lot, Dave. Can you talk about just some of the puts and takes on gross margin and how to think about incremental margins from here?

Timothy Arcuri: Thanks a lot. Dave, can you talk about just some of the puts and takes on gross margin and how to think about incremental margins from here? I know Taiwan has been sort of 100 basis point headwind. Is that still the case? When does that go away? Can you talk about Colorado? I think that was only gonna go away next year. Can you sort of walk through, you know, how these sort of roll off? Thanks.

Speaker #5: I know Taiwan has been sort of a 100 basis point headwind. Is that still the case? And when does that go away? And then can you talk about Colorado?

Speaker #5: I think that was only going to go away next year. So, can you sort of walk through how these sort of roll-off things?

Speaker #3: Sure. So with that bridging you again, given the details we've provided, I think the best way to think about gross margin is that as we continue to grow volume from here, we should continue to get gross margin improvement from here.

David Reeder: Sure. Without bridging you again, given the details we've provided, I think the best way to think about gross margin is that as we continue to grow volume from here, we should continue to get gross margin improvement from here. That will be both in fixed cost absorption as well as incremental efficiencies that we can drive through our manufacturing network. Given the strength in order book that we started seeing in the middle of Q1, we are still looking to optimize our manufacturing network, but we are balancing that rate and pace with respect to make sure that we can still deliver the demand in what looks like a very constructive semiconductor backdrop.

Speaker #3: And so that will be both in fixed cost absorption as well as incremental efficiencies that we can drive through our manufacturing network. Now, given the strength and order book that we started seeing in the middle of first quarter, we are still looking to optimize our manufacturing network, but we're balancing that rate and pace with respect to make sure that we can still deliver the demand in what looks like a very constructive semiconductor backdrop.

Speaker #3: So we're taking a bit probably more measured approach to that as we kind of continue through this year to make sure that we can satisfy our customers with the lead times that they expect and deserve.

David Reeder: We're taking a bit probably more measured approach to that as we kind of continue through this year to make sure that we can satisfy our customers with the lead times that they expect and deserve. Specific to KSP is dilutive to our P&L today, as you know and as you articulated. We think that by the end of this year with the ramp that's ongoing, which it's quite a good trajectory with respect to where we were, you know, a couple of quarters ago, to where we are now. It is still a work in process. We will have that facility by the time we get to the end of the year, probably breaking even on a P&L basis, plus, minus.

Speaker #3: Specific to KSP, KSP is diluted to our P&L today as you know and as you articulated. We think that by the end of this year, with the ramp that's ongoing, which it's quite a good trajectory with respect to where we were, a couple of quarters ago, to where we are now.

Speaker #3: But it is still a work in process. We will have that facility by the time we get to the end of the year, probably breaking even on a P&L basis plus minus.

David Reeder: We'll start to potentially, you know, move it into a less dilutive state. We'll probably still be dilutive in 2027, but less dilutive, significantly less dilutive, once we're kind of exiting a fourth quarter 2026 run rate into 2027. Colorado this year is all qualification. Last year was facilitizing, qualifying the equipment, and opening the facility, staffing the facility. This year is further staffing the facility and qualifying products with customers. We're expecting very little revenue out of Colorado Rockrimmon this year, with the hope of ramping Colorado in early 2027. For that reason, both facilities will be dilutive to us in 2026.

Speaker #3: And then we'll start to potentially move it into a less diluted state. We'll probably still be diluted in '27, but less diluted, significantly less diluted.

Speaker #3: Once we're kind of exiting fourth quarter of '26, run rate into '27. Colorado this year is all qualification. And so this year is really—last year was facilitizing, qualifying the equipment, and opening the facility.

David Reeder: Colorado this year is all qualification. Last year was facilitizing, qualifying the equipment, and opening the facility, staffing the facility. This year is further staffing the facility and qualifying products with customers. We're expecting very little revenue out of Colorado Rockrimmon this year, with the hope of ramping Colorado in early 2027. For that reason, both facilities will be dilutive to us in 2026. KSP becoming less so towards the end of the quarter, and then improving or towards the end of the year, I should say, and then improving in 2027. Colorado dilutive, fully dilutive in 2026, and then starting to ramp revenue in 2027. Did you have a follow-up, Tim?

Speaker #3: Staffing the facility. This year is further staffing the facility and qualifying products with customers we're expecting very little revenue out of Colorado, Rockrimmon this year.

Speaker #3: With the hope of ramping Colorado in early 2027. So for that reason, both facilities will be diluted to us in '26. KSP becoming less so.

David Reeder: KSP becoming less so towards the end of the quarter, and then improving or towards the end of the year, I should say, and then improving in 2027. Colorado dilutive, fully dilutive in 2026, and then starting to ramp revenue in 2027. Did you have a follow-up, Tim?

Speaker #3: Towards the end of the quarter, and then improving or towards the end of the year, I should say. And then improving in '27. Colorado diluted fully diluted in '26.

Speaker #3: And then starting to ramp revenue in '27. Did you have a follow-up, Tim?

Speaker #5: I did, Dave. Yeah. So can you talk about China and just what's going on in China? Are you seeing any more competition there? We're hearing about some folks trying to do CMP there and becoming a little more becoming a little more of a competition for you.

Timothy Arcuri: I did, Dave. Yeah. Can you talk about China and just what's going on in China? Are you seeing any more competition there? We're hearing about some folks trying to do, you know, CMP there and becoming a little more, you know, becoming a little more of a, you know, competition for you. Can you talk about that?

Speaker #5: So can you talk about that?

David Reeder: Sure. I'll actually touch on a couple of regions, since I know the 10-Q is not out yet. It'll be filed later today, where you'll get to see the full regional breakdown. I'll just give you a little swing around Asia. Strong growth from Taiwan, up 18% on a year-over-year basis in Q1. Broader Asia in general, so including all of Asia, up double digits, slightly more than 10% on a year-over-year basis in Q1. Migrating specifically into China. China modestly down in Q1. Obviously, it does remain a key long-term market for us.

Speaker #3: Sure. I'll actually touch on a couple of regions since I know the 10Q is not out yet. It'll be filed later today. Well, you'll get to see the full regional breakdown.

Speaker #3: I'll just give you a little swing around Asia. Strong growth from Taiwan up 18% on a year-over-year basis. In first quarter, broader Asia in general.

Speaker #3: So including all of Asia, up double digits slightly more than 10% on a year-over-year basis. In first quarter, and then migrating specifically into China.

Speaker #3: China modestly down. In the first quarter. So obviously, it does remain a key long-term market for us. But when you look at the first quarter performance, that modest decline was largely driven by some of the CapEx-related businesses.

David Reeder: Obviously, it does remain a key long-term market for us. When you look at the Q1 performance, that modest decline was largely driven by some of the CapEx related businesses that were down double digits, largely reflecting some dislocated order patterns that were in the H1 of last year related to tariffs, as Jeff mentioned in his script. If you were to exclude those, we feel like it would have been a bit more of a normal quarter in China. The H1 we do expect to be kind of impacted by some of those order patterns that were pull ins for the H1 of last year related to tariffs.

David Reeder: When you look at the Q1 performance, that modest decline was largely driven by some of the CapEx related businesses that were down double digits, largely reflecting some dislocated order patterns that were in the H1 of last year related to tariffs, as Jeff mentioned in his script. If you were to exclude those, we feel like it would have been a bit more of a normal quarter in China. The H1 we do expect to be kind of impacted by some of those order patterns that were pull ins for the H1 of last year related to tariffs. We feel like we have a strong competitive position in our franchise product lines in China, filtration, FOUPs, slurries.

Speaker #3: That were down double digits largely reflecting some dislocated order patterns that were in the first half of last year related to tariffs as Jeff mentioned in his script.

Speaker #3: And so if you were to exclude those, we feel like it would have been a bit more of a normal quarter in China. But the first half, we do expect to be kind of impacted by some of those order patterns that were pull-ins for the first half of last year related to tariffs.

Speaker #3: We feel like we have a strong competitive position in our franchise product lines in China. Filtration, food, slurries, yield and performance matter in China.

David Reeder: We feel like we have a strong competitive position in our franchise product lines in China, filtration, FOUPs, slurries. Yield and performance matter in China the same way it does in the rest of the world. At this stage, we view China largely as de-risked. We think we're gonna have a solid H2, and we think we're gonna have a solid 2026 in China.

David Reeder: Yield and performance matter in China the same way it does in the rest of the world. At this stage, we view China largely as de-risked. We think we're gonna have a solid H2, and we think we're gonna have a solid 2026 in China.

Speaker #3: Those same way it does same way it does in the rest of the world. At this stage, we view China largely as de-risked. And we think we're going to have a solid second half.

Speaker #3: And we think we're going to have a solid 2026 in China.

Speaker #1: Thank you. Our next question will come from Vivesh Ladea with BMO. Please go ahead.

Operator: Thank you. Our next question will come from Bhavesh Lodaya with BMO. Please go ahead.

Speaker #6: Hi. Good morning, Dave. And welcome to looking forward to our discussion. Following up on your CapEx, WFE CapEx out of the business, Dave, as we see higher volumes start moving through your system, I would presume it comes with pretty strong incremental margins.

Bhavesh Lodaya: Hi. Good morning, Dave, and welcome, Sukhi.

David Reeder: Hi.

Bhavesh Lodaya: Looking forward to our discussion today. Following up on your CapEx, WFE CapEx side of the business, Dave, as we see higher volumes start moving through your system, I would presume it comes with pretty strong incremental margins, perhaps better than your company average. Maybe if you could provide some color on where margins stand in that business today versus historical peaks, and how should we think about that side as volumes start coming in?

Speaker #6: Perhaps better than your company average. Maybe if you could provide some color on where margins stand in that business today versus historical peaks and how should we think about that side as volumes start coming in?

Speaker #3: Sure. Look, let me start with utilization. We articulated in last quarter that we had about a billion dollars of incremental upside that we could deliver from our staff for it.

David Reeder: Sure. Let me start with utilization. You know, we articulated in last quarter that we had about $1 billion of incremental upside that we could deliver from our manufacturing network. Now obviously, you have to staff for it, you have to position inventory for it, but that's kind of the physical capacity that we have. Whether it's unit-driven volume or CapEx-driven volume, incremental volume is tremendously helpful from a fixed cost absorption perspective when you're sitting at the type of utilization rates that we're sitting at today. Without getting, like, kind of too far into the details of unit-driven CapEx or unit-driven margin versus CapEx-driven margin, incremental volume does help us in a pretty meaningful way with respect to fixed cost absorption as it drives our plant utilization higher.

Speaker #3: You have to position inventory for it, but that's kind of the physical capacity that we have. And so, whether it's unit-driven volume or CapEx-driven volume, incremental volume is tremendously helpful from a fixed cost absorption perspective.

Speaker #3: When you're sitting at the type of utilization rates that we're sitting at today. So without getting kind of too far into the details of unit-driven CapEx, our unit-driven margin versus CapEx-driven margin, incremental volume, does help us in a pretty meaningful way with respect to fixed cost absorption as it drives our plant utilization higher.

Speaker #3: And we do expect our plant utilization to grow higher as we progress through the year. In the absence, even in the absence of any other specific initiatives that we have.

David Reeder: We do expect our plant utilization to grow higher as we progress through the year, even in the absence of any other specific initiatives that we have. From that perspective, we're very much pleased with what kind of the CapEx order books looks like today. We have been booked, you know, kind of through the latter half of 2026, if not into 2027, on some of these CapEx items. We do expect gross margin to grow modestly as we deliver that fixed cost absorption with incremental volume. Did you have a follow-up, Bhavesh Lodaya?

Speaker #3: So from that perspective, we're very much pleased with what kind of the CapEx order books looks like today. We have been booked kind of through the latter half of 2026, if not into '27, on some of these CapEx items.

Speaker #3: And we do expect gross margin to grow modestly as we deliver that fixed cost absorption with incremental volume. Did you have a follow-up, Vivesh?

Speaker #6: Yeah. And a different one. So there's been a meaningful amount of inflation in terms of polymers and chemical feedstocks. Are you seeing any challenges in procurement or pricing for your raw materials?

Bhavesh Lodaya: Yeah, and a different one. There's been a meaningful amount of inflation in terms of polymers and chemical feedstocks. Are you seeing any challenges in procurement or pricing for your raw materials? Do your contracts with your customers build in just a simple pass-through of these costs, or is it a lag as you price it through to your customers?

Speaker #6: And then do your contracts with your customers build in just a simple pass-through of these costs? Or is there a lag as you price it through to your customers?

Speaker #5: Well, we have seen some modest inflation. Actually, let me start with the contracts. We do have for some key suppliers we do have some contractual terms with respect to price increases as well as our long-term agreements with them to take a certain amount of volume.

David Reeder: We have seen some modest inflation. Let me start with the contracts. We do have for some key suppliers, we do have some contractual terms with respect to price increases as well as our long-term agreements with them to take a certain amount of volume. There are key suppliers to us that have relatively fixed contracts, both from a pricing perspective as well as a volume perspective, that we have to, you know, we have to abide by and as do they. For the vast majority of our supply chain, however, we have, you know, we have agreements, we will do, you know, certain annual negotiations. We feel like those annual negotiations were pretty productive for us.

Speaker #5: So there are key suppliers to us that have relatively fixed contracts both from a pricing perspective as well as a volume perspective. That we have to we have to abide by.

Speaker #5: And as do they. For the vast majority of our supply chain, however, we have agreements but then we will do certain annual negotiations we feel like those annual negotiations were pretty productive for us.

Speaker #5: We feel like we're in a good spot cost-wise from an inflationary perspective. With perhaps one exception, and I'll touch briefly on it, the Iran-Middle East conflict as you know, it's a fluid situation.

David Reeder: We feel like we're in a good spot cost-wise, from an inflationary perspective, with perhaps one exception, and I'll touch briefly on it. You know, the Iran, Middle East conflict. As you know, it's a, it's a, it's a fluid situation, one that I'm sure everyone in the industry, including yourselves, are monitoring. It's probably a bit too early to quantify the full cost impact there, but we have seen some early cost pressure on raw materials related to some of the availability coming out of the Middle East, and specifically that's in the areas of some of the noble gases as well as some of the resins.

Speaker #5: One that I'm sure everyone in the industry, including yourselves, are monitoring. It's probably a bit too early to quantify the full cost impact there.

Speaker #5: But we have seen some early cost pressure on raw materials related to some of the availability coming out of the Middle East and specifically that's in the areas of some of the noble gases as well as some of the resins.

David Reeder: It looks like right now, at least our position on this right now is that we think it could be temporary, and so we've just absorbed those costs. To the extent that this cost pressure kind of persists, either in logistics cost or raw feedstock costs for us, then we would evaluate increasing pricing in the future. But at this point in time, we view the inflationary pressure as largely as expected. Some unexpected that I just mentioned related to the conflict in the Middle East, absorbed in our P&L for now and we'll reserve the right in the future if it becomes too big of a burden to go back and kind of renegotiate some of the pricing with our customers.

Speaker #5: It looks like right now, at least our position on this right now is that we think it could be temporary. And so we've just absorbed those costs.

Speaker #5: To the extent that this cost pressure kind of persists, either in logistics costs or raw feedstock costs for us, then we would evaluate increasing pricing in the future.

David Reeder: To the extent that this cost pressure kind of persists, either in logistics cost or raw feedstock costs for us, then we would evaluate increasing pricing in the future. But at this point in time, we view the inflationary pressure as largely as expected. Some unexpected that I just mentioned related to the conflict in the Middle East, absorbed in our P&L for now and we'll reserve the right in the future if it becomes too big of a burden to go back and kind of renegotiate some of the pricing with our customers. From kind of, as we sit today, I would say steady as she goes. To continue to be reviewed as we progress through 2026. Thanks, Bhavesh.

Speaker #5: But at this point in time, we view the inflationary pressure as largely as expected. Some unexpected that I just mentioned related to the conflict in the Middle East, absorbed in our P&L for now, and will reserve the ride in the future if it becomes too big of a burden to go back and kind of renegotiate some of the pricing with our customers.

Speaker #5: So from kind of as we sit today, I would say steady as she goes. To continue to be reviewed as we progress through 2026.

David Reeder: From kind of, as we sit today, I would say steady as she goes. To continue to be reviewed as we progress through 2026. Thanks, Bhavesh.

Speaker #5: Thanks, Vivesh.

Speaker #1: Our next question will come from Jim Schneider with Goldman Sachs. Please go ahead.

Operator: Our next question will come from James Schneider with Goldman Sachs. Please go ahead.

Speaker #7: Good morning. Thanks for taking my question. I was wondering if, Dave, if you could maybe kind of comment on what you think has changed the most in terms of the way for Start Outlook for the year?

James Schneider: Good morning. Thanks for taking my question. I was wondering if David, you could maybe kind of comment on what you think has changed the most in terms of the wafer start outlook for the year. It sounds like that is mainly DRAM either increasing utilization rates or pull-ins in terms of capacity. I was wondering if you've given a color on that, and then maybe if you could explicitly address the analog sector where it seems like we have the stand to improve the most from a utilization perspective this year.

Speaker #7: It sounds like that is mainly DRAM either increasing utilization rates or pull-ins in terms of capacity. But I was wondering if you've given a color on that.

Speaker #7: And then maybe if you could explicitly address the analog sector where it seems like we have the stand to improve the most from a utilization perspective this year.

Speaker #3: Sure. Thanks, Jim. So, what's changed the most from when we spoke to you in February until today? I think that at the beginning of February, the forecast for the industry was that fab construction would be up below single digits.

David Reeder: Sure. Thanks, Jim. What's changed the most from, you know, when we spoke to you in February until today? I think at the beginning of February, the forecast for the industry was that fab construction would be up low single digits. I think when you look at fab construction today, the forecast for the industry is high single digits. That's a pretty meaningful change. It doesn't mean that we'll get necessarily that revenue in period in 2026. As I mentioned early in the call, from groundbreaking to kind of first revenue for us is around 12 months. That's a big change. Fab construction going from, you know, kind of low single digits, essentially flat to high single digits.

Speaker #3: And I think when you look at fab construction today, the forecast for the industry is high single digits. So that's a pretty meaningful change.

Speaker #3: It doesn't mean that we'll get necessarily that revenue in period in '26 as I mentioned earlier in the call. From groundbreaking to kind of first revenue for us is around 12 months.

Speaker #3: But that's a big change. Fab construction going from kind of low single digits essentially flat to high single digits. I think that kind of speaks to the state of the industry.

David Reeder: I think that, you know, kind of speaks to the state of the industry, the current utilization, particularly for advanced logic and memory, and I think that bodes well for kind of the setup for 2027. I think that was a meaningful change, not a big change for us, again, in period for 2026. I think the foreshadowing for 2027, and the setup is quite good. MSI, you know, we were originally forecasting that MSI would be low to mid-single digits. We did update the forecast for MSI to be kind of mid to high single digits. I would say modest change there on units, and I would say that was a little bit of a blend between advanced logic, DRAM, as well as some incremental NAND.

Speaker #3: The current utilization, particularly for advanced logic and memory, and I think that bodes well for kind of the setup for 2027. So I think that was a meaningful change.

Speaker #3: Not a big change for us, again, in period for '26. But I think the foreshadowing for '27 and the setup is quite good. MSI, we were originally forecasting that MSI would be low to mid single digits we did update the forecast for MSI to be kind of mid to high single digits.

Speaker #3: So I would say modest change there on units. And I would say that was a little bit of a blend between advanced logic DRAM as well as some incremental NAND and then I would say we're still kind of expecting flat from our expectation in February with respect to mainstream.

David Reeder: I would say we're still kind of expecting flat from our expectation in February with respect to, with respect to mainstream. I think those are kind of like the big puts and takes between our February call and our market commentary in February and where we sit today in April. To get to the second question that you had, which was really around mainstream. You know, mainstream, I think if you, if you stood back and looked at it objectively, I think you'd say that Q1 has probably been a little bit better than we originally expected.

Speaker #3: So I think those are kind of the big puts and takes between our February call and our market commentary in February and where we sit today in April.

Speaker #3: To get to the second question that you had, which was really around mainstream. Mainstream, I think if you stood back and looked at it objectively, I think you'd say that the first quarter has probably been a little bit better than we originally expected.

David Reeder: I think from that perspective, you know, there were, again, some of our customers that have recently released, not all of them have, but some of them that have released have kind of talked about improving inventory in the channel. They've talked about utilizations. If they're a manufacturer that have broken kind of the 80% level, which for many of them have not been breached since the peak in 2022. All of them, I think, have kind of highlighted memory availability. Strength in kind of AI-related and data center-related products, but memory availability potentially being a concern. I think we view that market, as I mentioned earlier, as kind of mixed. We've kind of included a mixed view.

Speaker #3: So I think from that perspective, there were again some of our customers that have recently released not all of them have. But some of them that have released have kind of talked about improving inventory in the channel.

Speaker #3: They've talked about utilizations. If they're a manufacturer, that have broken kind of the 80% level, which for many of them have not been breached since the peak in '22.

Speaker #3: And then all of them, I think, have kind of highlighted memory availability. So strength in kind of AI-related and data center-related products but memory availability potentially being a concern.

David Reeder: All of them, I think, have kind of highlighted memory availability. Strength in kind of AI-related and data center-related products, but memory availability potentially being a concern. I think we view that market, as I mentioned earlier, as kind of mixed. We've kind of included a mixed view. Again, this is 30% of our revenue. We've included a mixed view in our guidance for 2026, as well as kind of an initial flash that we gave you for Q3 2026 as well. Thank you, Jim.

Speaker #3: So I think we view that market, as I mentioned earlier, as kind of mixed. We've kind of included a mixed view. Again, this is 30% of our revenue.

David Reeder: Again, this is 30% of our revenue. We've included a mixed view in our guidance for 2026, as well as kind of an initial flash that we gave you for Q3 2026 as well. Thank you, Jim.

Speaker #3: We've included a mixed view in our guidance for '26 as well as kind of an initial flash that we gave you for third quarter of '26 as well.

Speaker #3: Thank you, Jim.

Speaker #1: Thank you. Our next question will come from Charles. She with Needham. Please go ahead.

Operator: Thank you. Our next question will come from Charles Shi with Needham. Please go ahead.

Speaker #8: Hi. Thanks, Scott. Good morning. Dave, I'm Sukiya. I'll start off with the first question around your exposure in advanced packaging. We know this is one of the growth areas for materials, and probably one of the variables between you and your closest peer in terms of some of the near-term performance.

Charles Shi: Hi. Thanks. Good morning, Dave and Sukhi. I'll start with the first question around your exposure in advanced packaging. We know this is one of the growth areas for materials, and probably one of the variable between you and your closest peer in terms of some of the near-term performance. We know you probably were going to talk a little bit more about that at the Investor Day, but the Investor Day is probably still six months out, so we still would love to hear some thoughts, early thoughts, any new actions undertaking right now at Entegris. We know you talk about the thermal material. You talk about some of the carrier stuff.

Speaker #8: We know you probably were going to talk a little bit more about that at the investor day, but the investor day probably is still six months out.

Speaker #8: So, we still would love to hear some thoughts—early thoughts—any new actions being undertaken right now at Entegris? We know you talk about the thermal material.

Speaker #8: You talk about some of the carrier stuff. Is there anything more than that right now in your thinking that Integris can get a little bit more exposure in advanced packaging, for one, we do think CMP seems to be a very important area especially with the adoption of a more hybrid bonding type of advanced packaging and that you do have good amount of CMP slurry path business, but I want to get some thoughts there first.

Charles Shi: Is there anything more than that right now in your thinking that Entegris can get a little bit more exposure in advanced packaging? For one, we do think CMP seems to be a very important area, especially with adoption of a more hybrid bonding type of advanced packaging. You do have good amount of a CMP slurry pad business, but I want to get some thoughts there first. Thank you.

Speaker #8: Thank you.

Speaker #3: Thanks for your question, Charles. And look, we agree with you. We think the advanced packaging market is an attractive market. Unfortunately, our exposure to advanced packaging right now is limited due to just the prior investments that we didn't make.

David Reeder: Thanks for your question, Charles. Look, we agree with you. We think the advanced packaging market is an attractive market. Unfortunately, our exposure to advanced packaging right now is limited due to just the prior investments that we didn't make necessarily in advanced packaging. That stated, we do have some products that have performed well in this space and that we did, we were able to launch some more minor spends of products to be able to address this market. Specifically advanced flow control for thick resists, delivery solutions for copper plating and photoresist. CMP, as you mentioned, for high bandwidth memory and TSVs in particular, of course the carrier offering.

Speaker #3: Necessarily in advanced packaging. That stated, we do have some products that have performed well in this space, and that we did. We were able to launch some more minor—I would say minor—spins of products to be able to address this market.

Speaker #3: So specifically advanced flow control for thick resist delivery solutions for copper plating and photoresist. CMP, as you mentioned, for high-bandwidth memory and TSVs in particular.

Speaker #3: And then, of course, the carrier offering. So we do have a portfolio of products that we have been able to penetrate the advanced packaging market with.

David Reeder: We do have a portfolio of products that we have been able to penetrate the advanced packaging market with. Our current revenue exceeds a $100 million a year run rate. We're excited about some of the traction that we're getting in this market for the areas where we've been able to kind of make investment and bring products to market. We are excited about some of the products that we have in the pipeline. That's really for the future, however, it's not for today. It's not necessarily for 2026 revenue. The 2026 revenue products are the areas that I highlighted earlier. But we will have more details for you at Investor Day in November, recognizing the nature of the question that November is still about 6 months away.

Speaker #3: Our current revenue exceeds $100 million a year run rate. So we're excited about some of the traction that we're getting in this market for the areas where we've been able to kind of make investment and bring products to market.

David Reeder: Our current revenue exceeds a $100 million a year run rate. We're excited about some of the traction that we're getting in this market for the areas where we've been able to kind of make investment and bring products to market. We are excited about some of the products that we have in the pipeline. That's really for the future, however, it's not for today. It's not necessarily for 2026 revenue. The 2026 revenue products are the areas that I highlighted earlier. But we will have more details for you at Investor Day in November, recognizing the nature of the question that November is still about 6 months away. That's, that's what I can give you today and we're excited about the $100 million-plus that we're driving from the business. Did you have a follow-up, Charles?

Speaker #3: We are excited about some of the products that we have in the pipeline. That's really for the future, however. It's not for today. It's not necessarily for 2026 revenue.

Speaker #3: The 2026 revenue products are the areas that I highlighted earlier. But we will have more details for you at investor day in November. Recognizing the nature of the question that November is still about six months away.

Speaker #3: So but that's what I can give you today. And we're excited about the $100 million plus that we're driving from the business. Did you have a follow-up, Charles?

David Reeder: That's, that's what I can give you today and we're excited about the $100 million-plus that we're driving from the business. Did you have a follow-up, Charles?

Charles Shi: Yes. Dave, since your 10-K came out intra-quarter of the last couple months, we looked at some of the customer specific financials. We did notice that the largest foundry, which is the number 1 customer for you, the revenue from that particular customer last year, I would call probably flat to modestly up, and that was a little bit maybe trailing what I consider that their own growth. Was wondering if you can give us some thoughts, what happened last year, why the growth wasn't keeping up very well with the leading foundry, and any thoughts about this year. Are you able to catch up to their growth?

Speaker #8: Yes. Dave, since you have 10K came out, intra-quarter of the last couple of months, we looked at some of the customer-specific financials. So we did notice that the largest foundry, which is the number one customer for you, the revenue from that particular customer last probably flat to modestly up.

Speaker #8: And there was a little bit maybe trailing. What I consider their own growth was wondering if you can give us some thoughts what happened last year while the growth wasn't keeping up very well with the leading foundry and any thought about this year.

Speaker #8: Are you able to catch up to their growth and obviously we heard you talking about two-nanometer production ramp that is actually happening later this year, but I want to get some thoughts around that.

Charles Shi: Obviously, we heard you talking about 2 nanometer production ramp that is actually happening later this year, but I want to get some thoughts around that. Thank you.

Speaker #8: Thank you.

David Reeder: Sure. Speaking first to last year, to 2025, there was a pretty significant build-out in 2024 that from a CapEx perspective was meaningful, that put some pressure on year-over-year comps. We actually felt pretty good about the unit volume for 2025, obviously we had some year-over-year dynamics in 2025 versus 2024 from a CapEx perspective. Early results here in 2026, which you'll get in our ten Q later today. While I won't talk about specific customers, we can certainly talk about regions. Taiwan was up 18% on a year-over-year basis in Q1. A lot of strength across the portfolio there, strength that we're anticipating will continue. Good results from Taiwan, again, up 18%, year-over-year in Q1.

Speaker #3: Sure. Speaking first to last year, to 2025, there was a pretty significant build-out in '24 that from a CapEx perspective was meaningful. And that put some pressure on year-over-year comps.

Speaker #3: We actually felt pretty good about the unit volume for 2025, but obviously we had some year-over-year dynamics in '25 versus '24 from a CapEx perspective.

Speaker #3: Early results here in 2026, which you'll get in our 10Q later today, and while I won't talk about specific customers, we can certainly talk about regions: Taiwan was up 18% on a year-over-year basis in the first quarter.

Speaker #3: A lot of strength across the portfolio there. Strength that we're anticipating will continue so good results from Taiwan again up 18% year-over-year in Q1.

Speaker #3: And really some good results across broadly across Asia. Asia as a whole was up a little north of 10% on a year-over-year basis. Obviously, that includes Taiwan that was up 18.

David Reeder: Really some good results across, broadly across Asia. Asia as a whole, was up a little north of 10% on a year-over-year basis. Obviously, that includes Taiwan, that was up 18%. It also includes China that was down modestly. The other regions in Asia performed well as well. As you know, we have key customers in Korea, we have key customers in Singapore, we have key customers in Japan. Good to see that kind of broad region perform well, as well as good to see Taiwan perform well. Thank you, Charles.

Speaker #3: It also includes China that was down modestly. So the other regions in Asia performed well as well. And as you know, we have key customers in Korea.

Speaker #3: We have key customers in Singapore. We have key customers in Japan. So good to see that kind of broad region perform well as well as good to see Taiwan perform well.

Speaker #3: Thank you, Charles.

Speaker #1: Thank you. Our next question comes from John Roberts with Mizuho. Please go ahead.

Operator: Thank you. Our next question comes from John Roberts with Mizuho. Please go ahead.

John Roberts: Thank you. Welcome, Sukhi. Back to China, are you through with your requalification of sourcing into China? I think you were actually gonna rationalize some products, just not re-qualify and maybe, is that any headwind to the China sales?

Speaker #5: Thank you. And welcome, Suki. Back to China. Are you through with your requalification of sourcing into China? And I think you're actually going to rationalize some products just not requalify and maybe is that any headwind to the China sales?

Speaker #6: Yeah. China we're I think in Q1, I think about 85% of our revenue for China it was in that zip code. Was from in-region for China.

David Reeder: China, I think in Q1, I think about 85% of our revenue for China, it was in that, in that zip code, was from in-region for China. That's about where we exited in terms of regional qualification in 2025. We'll probably pick up another 5% of the product portfolio that we sell there in 2026. We'll probably take that 85% number up to 90% by the end of this year. Well, I don't anticipate that we'll ever get to 100%. I think there'll be some products that, just given the volume of sales, it won't, it won't justify the expense of relocating their production route. I do think that we'll go from kind of 85%, where we are today, to probably more than 90%.

Speaker #6: That's about where we exited in terms of regional qualification. In 2025, we're probably pick up another 5% of the product portfolio that we sell there in '26.

Speaker #6: So we'll probably take that 85% number up to 90% by the end of this year. I don't anticipate that we'll ever get to 100%.

Speaker #6: I think there'll be some products that just given the volume of sales it won't justify the expense of relocating their production route. But I do think that we'll go from kind of 85% where we are today to probably more than 90.

David Reeder: I do think that we'll go from kind of 85%, where we are today, to probably more than 90%. We do expect to get to 90% throughout the course of 2026. Above 90%, we'll work on in 2027 just with this kind of upper limit of it. It will probably never get to 100%. There'll always be some amount of products that will be impacted either geopolitically or by tariffs. Did you have a follow-up, John?

David Reeder: We do expect to get to 90% throughout the course of 2026. Above 90%, we'll work on in 2027 just with this kind of upper limit of it. It will probably never get to 100%. There'll always be some amount of products that will be impacted either geopolitically or by tariffs. Did you have a follow-up, John?

Speaker #6: But we do expect to get to 90% throughout the course of '26. And then above 90, we'll work on in '27 just with this kind of upper limit of it will probably never get to 100.

Speaker #6: So there'll always be some amount of products that will be impacted either geopolitically or by tariffs. Did you have a follow-up, John?

Speaker #5: Yep. In Material Solutions. So, are the constraints in the memory market driving any product shifts within the Material Solutions segment?

John Roberts: Yep. In Materials Solutions, are the constraints in the memory market driving any product shifts within the Materials Solutions segment?

David Reeder: not really product shifts. I think, maybe it's best to break it down and be more specific. NAND, there's some shifts in the market with NAND. NAND is very much focused on driving bit density, and bit density is driven by layer count. As layer count moves from low 200s to You know, 300 or 300-plus layers, it does introduce new materials, for example, moly, which the company has spoken about. We do like that trend, incremental bit density. While it does consume capacity, so you don't get more, you don't get more wafers, you don't get more MSI, but it does consume process steps and capacity.

Speaker #6: Not really product shifts. I think if you look memory total sorry, let me maybe it's best to break it down and be more specific.

Speaker #6: NAND, there's some shifts in the market with NAND. NAND is very much focused on driving bit density and bit density is driven by layer count.

Speaker #6: And as layer count moves from low 200s to 300 or 300-plus layers, it does introduce new materials for example, Molly, which the company has spoken about.

Speaker #6: So we do like that trend incremental bit density while it does consume capacity. So you don't get more you don't get more wafers. You don't get more MSI, but it does consume process steps and capacity.

David Reeder: We feel like that's where the focus on NAND is right now, is on driving bit density, at least in H1, with potentially incremental wafer starts in H2. Incremental bit density drives incremental materials for Entegris, particularly in areas, like moly and selective etch. That's a, that's a trend that we would like to see continue, and we'd also like to see them continue to, you know, fully utilize those fabs to 100% capacity. Both drive bit density and drive more MSI. I think H1 is more of a bit density story. For DRAM's operating really near capacity at this stage.

Speaker #6: And we feel like that's where the focus on NAND is right now is on driving bit density at least in the first half with potentially incremental wafer starts in the second half.

Speaker #6: Incremental bit density drives incremental materials for Integra's particularly in areas like Molly and selective edge. And so that's a trend that we would like to see continue.

Speaker #6: And we'd also like to see them continue to fully utilize those fabs to 100% capacity. So both drive bit density and drive more MSI.

Speaker #6: But I think first half is more of a bit density story. For DRAM, DRAM is operating really near capacity at this stage. So even with being fully utilized or near full utilization and even with potentially some technology changes in DRAM, there's not a significant change in the materials there.

David Reeder: For DRAM's operating really near capacity at this stage. Even with, you know, being fully utilized or near full utilization, and even with potentially some technology changes in DRAM, there's not a significant change in the materials there. I think the most significant change was just simply the HBM once a lot of DRAM kind of migrated into HBM. That is incremental processing. We do have some slurries and some other products in that incremental advanced packaging process steps or in those advanced packaging process steps. That's a trend we'd like to see continue as well. Thank you, John.

David Reeder: Even with, you know, being fully utilized or near full utilization, and even with potentially some technology changes in DRAM, there's not a significant change in the materials there. I think the most significant change was just simply the HBM once a lot of DRAM kind of migrated into HBM. That is incremental processing. We do have some slurries and some other products in that incremental advanced packaging process steps or in those advanced packaging process steps. That's a trend we'd like to see continue as well. Thank you, John.

Speaker #6: I think the most significant change was just simply the HBM once a lot of DRAM kind of migrated into HBM. That is incremental processing.

Speaker #6: We do have some slurries and some other products in that incremental advanced packaging process steps or in those advanced packaging process steps. And so that's a trend we'd like to see continue as well.

Speaker #6: Thank you, John.

Speaker #1: Thank you. Our next question comes from Chris Parkinson with Wolf Research. Please go ahead.

Operator: Thank you. Our next question comes from Chris Parkinson with Wolfe Research. Please go ahead.

Harris Fine: Hi, this is Harris Fine on for Chris. Thanks for taking my question. Just given the geopolitical environment, you know, there are some fears about energy availability. You mentioned noble gas as some key inputs like helium for fabs located in Asia. Just as you run the business and you have conversations with your customers, how would you characterize the degree of concern around that?

Harris Fein: Hi, this is Harris Fine on for Chris. Thanks for taking my question. Just given the geopolitical environment, you know, there are some fears about energy availability. You mentioned noble gas as some key inputs like helium for fabs located in Asia. Just as you run the business and you have conversations with your customers, how would you characterize the degree of concern around that?

Speaker #5: Hi. This is Harris Fine. I'm for Chris. Thanks for taking my question. Just given the geopolitical environment, there are some fears about energy availability.

Speaker #5: You mentioned noble gas as some key inputs like helium for fabs located in Asia. Just as you run the business and you have conversations with your customers, how would you characterize the degree of concern around that?

David Reeder: You know, there haven't been kind of semiconductor-specific concerns around energy. I think in general there's concerns around just energy consumption and availability, especially as you think about data centers, you know, tapping big parts of the grid. We haven't really seen anything specific to semiconductors or semiconductor fabs. Obviously, it's a key consideration when you think about building a fab. Most of those fabs secure that energy in advance for usually for some pretty long periods of time. Did you have a follow-up, Chris?

Speaker #6: We haven't there haven't been kind of semiconductor-specific concerns around energy. I think in general, there's concerns around just energy consumption and availability, especially as you think about data centers tapping big parts of the grid.

Speaker #6: But we haven't really seen anything specific to semiconductors or semiconductor fabs. Obviously, it's a key consideration when you think about building a fab. But most of those fabs secure that energy in advance for usually for some pretty long periods of time.

Speaker #6: Did you have a follow-up, Chris?

Speaker #5: Yes. The other one on the third quarter.

Harris Fine: Yes. The other one on the third quarter.

Harris Fein: Yes. The other one on the third quarter.

Speaker #6: Or Harris, sorry.

David Reeder: Oh, Harris, sorry.

David Reeder: directional. No worries. On the Q3 directional framework, I think, you know, you mentioned historical seasonality supporting a sequential improvement, and I just want to clarify, does that Q3 guide contemplate any cyclical recovery on the mainstream logic side, or is this just contemplating normal seasonality and any cyclical recovery would be upside to what you're communicating?

Harris Fein: directional. No worries. On the Q3 directional framework, I think, you know, you mentioned historical seasonality supporting a sequential improvement, and I just want to clarify, does that Q3 guide contemplate any cyclical recovery on the mainstream logic side, or is this just contemplating normal seasonality and any cyclical recovery would be upside to what you're communicating?

Speaker #5: No worries. On the third quarter directional framework, I think you mentioned historical seasonality supporting a sequential improvement. I just want to clarify because that third quarter guide contemplates any cyclical recovery on the mainstream logic side or is this just contemplating normal seasonality and any cyclical recovery would be upside to what you're communicating?

Speaker #6: Yeah, our third quarter guide today—we just tried to give you a little bit more visibility based on what we're seeing kind of in our order book.

David Reeder: Yeah. Our Q3 guide today, we just tried to give you a little bit more visibility, based on what we're seeing kind of in our order book. Q3 includes a little bit of seasonality. It also includes some of the visibility that we've received in our order book, particularly with respect to CapEx. We wanted to, you know, give you a flash of what we thought that looks like. Now that 5% sequential guide from Q2 to Q3 from our Q2 midpoint, that would be about 8% year-over-year growth if you were to do that math and then look at Q3 kind of guide 2026 versus Q3 2025 actuals.

Speaker #6: So, third quarter includes a little bit of seasonality. It also includes some of the visibility that we've received in our order book, particularly with respect to CapEx.

Speaker #6: And so we wanted to give you a flash of what we thought that looks like. Now, that 5% sequential guide from second quarter to third quarter from our second quarter midpoint, that would be about 8% year-over-year growth if you were to do that math and then look at third quarter kind of guide '26 versus third quarter '25 actuals.

David Reeder: We feel like that's a, that's a pretty good guide at this stage, given where we are in 2026. We're pretty happy about that, and it's really just including some seasonality, some of the current order book that we currently have visibility to, and it really doesn't include anything, any meaningful recovery with respect to mainstream. Thanks, Harris.

Speaker #6: So we feel like that's a pretty good guide at this stage given where we are in 2026. So we're pretty happy about that. And it's really just including some seasonality some of the current order book that we currently have visibility to.

Speaker #6: And it really doesn't include anything any meaningful recovery with respect to mainstream. Thanks, Harris.

Speaker #1: Our next question will come from Edward Yang with Oppenheimer. Please go ahead.

Operator: Our next question will come from Edward Yang with Oppenheimer. Please go ahead.

Speaker #7: Hey, Dave. Appreciate the time and good to see the improvement. First question is on R&D. And that's been ticking down every quarter for the last several quarters now.

Edward Yang: Hey, Dave. Appreciate the time and good to see the improvement. First question is on R&D, and that's been ticking down every quarter for the last several quarters now. I'm just wondering what's driving that. Related to your R&D engine, you know, how does the pipeline look for POR wins that you could leverage above and beyond cyclical recovery?

Speaker #7: And just wondering what's driving that. And related to pipeline look for POR wins? That you could leverage above and beyond cyclical recovery?

Speaker #6: Sure. Thanks, Edward. There's certainly no intention to kind of tick down revenue is growing kind of faster than we originally expect, then you tend to get this phenomenon where you kind of set a budget for about 10% of revenue to be invested back into R&D.

David Reeder: Sure. Thanks, Edward. There's certainly no intention to kind of tick down R&D. Obviously as if revenue is growing kind of faster than we originally expect, then you tend to get this phenomenon where, you know, you kind of set a budget for about 10% of revenue to be invested back into R&D, you get kind of these, let's call them period gaps. We do feel good about, you know, roughly this 10% level of revenue being reinvested back into R&D. We feel like that's a, that's a pretty good benchmark. Again, plus or minus, and it's very different by business, and where different businesses are in their growth cycle and maturity cycle as well as R&D intensity cycle.

Speaker #6: And so you get kind of these let's call them period gaps. But we do feel good about roughly this 10% level of revenue being reinvested back into R&D.

Speaker #6: We feel like that's a pretty good benchmark. Again, plus minus, and it's very different by business and where different businesses are in their growth cycle and maturity cycle as well as R&D intensity cycle.

David Reeder: From that perspective, we feel like our model of roughly 10% of revenue invested in R&D is, it for a bunch of reasons, is the right one. Pipeline for PORs, we actually feel pretty good about both our current plans of record, our current market share, as well as the PORs that are currently in our pipeline that we are, you know, competing for. You know, as manufacturing becomes more complex, as you move to higher layer counts and memory, as you move to more advanced packaging for DRAM, that requires incremental slurries, incremental pads, incremental filtrations.

Speaker #6: But from that perspective, we feel like our model of roughly 10% of revenue invested in R&D is for a bunch of reasons, is the right one.

Speaker #6: Pipeline for PORs, we actually feel pretty good about both our current plans of record, our current market share, as well as the PORs that are currently in our pipeline.

Speaker #6: That we are competing for. So as manufacturing becomes more complex, as you move to higher layer counts and memory, as you move to more advanced packaging for DRAM, that requires incremental slurries, incremental pads, incremental filtrations.

Speaker #6: And then, of course, as you move advanced logic, from kind of 2 nanometer to sub-2 nanometer, the landscape and the precision required and the contamination and material purity required, those requirements all get orders of magnitude harder.

David Reeder: Of course, as you move advanced logic from kind of 2 nanometer to sub 2 nanometer, the landscape and the precision required and the contamination and material purity required, those requirements all get orders of magnitude harder. We feel like that plays very well both to our development cycle, as well as to our current product line. I feel very good about our innovation engine. It's something that we're looking forward to showcase a little bit at our investor day in November. Some more to come. Thanks, Edward.

Speaker #6: And we feel like that plays very well both to our development cycle as well as to our current product line. So I feel very good about our innovation engine.

Speaker #6: It's something that we're looking forward to showcase a little bit at our investor day in November. So some more to come. Thanks, Edward.

Speaker #1: Thank you. And this does conclude the Q&A portion of today's call. So I'd like to turn it back over to Jeffrey Schnell for any additional or closing remarks.

Operator: Thank you. This does conclude the Q&A portion of today's call. I'd like to turn it back over to Jeffrey Schnell for any additional or closing remarks.

Speaker #6: Yeah. Thanks, everybody, for joining our call today. And we look forward to discussing more with you in the coming quarters.

Jeffrey Schnell: Yeah. Thanks everybody for joining our call today, and we look forward to discussing more with you in the coming quarters.

Speaker #1: Thank you, ladies and gentlemen. This concludes today's ENTEGRIS first quarter 2026 earnings conference call. Please disconnect your line at this time and have a wonderful day.

Operator: Thank you, ladies and gentlemen. This concludes today's Entegris Q1 2026 Earnings Conference Call. Please disconnect your line at this time and have a wonderful day.

Q1 2026 Entegris Inc Earnings Call

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