10-QPeriod: Q2 FY2018

ENTEGRIS INC Quarterly Report for Q2 Ended Jun 30, 2018

Filed July 26, 2018For Securities:ENTG

Summary

Entegris, Inc. (ENTG) reported strong performance for the second quarter of 2018, driven by robust demand in the semiconductor industry. Net sales increased by 16% year-over-year, reaching $383.1 million, attributed to high fab utilization and increased capital spending. The company also completed two significant acquisitions during the period: Particle Sizing Systems, LLC (PSS) for $37.3 million and SAES Pure Gas (SPG) for $341.2 million net of cash acquired, which are expected to expand its product offerings and market reach. Profitability improved, with gross profit up 21% and operating income increasing significantly. The company's effective tax rate also decreased due to the Tax Cuts and Jobs Act of 2017. Despite a notable decrease in cash and cash equivalents, primarily due to acquisition funding, the company maintains a solid liquidity position and expects sufficient resources to meet its operational needs. The integration of acquired businesses and continued focus on innovation are key strategic priorities.

Financial Highlights

51 data points
Beta

Revenue

$383.06M

47.6% Gross Margin

Net Income

$54.35M

14.2% Net Margin

EPS (Diluted)

$0.38

Total Assets

$2.07B

Cash & Equivalents

$257.11M

Free Cash Flow

$88.51M

Financial Statements
Beta
Revenue$383.06M
Cost of Revenue$200.68M
Gross Profit$182.38M
R&D Expenses$30.23M
SG&A Expenses$65.20M
Operating Income$74.93M
Interest Expense$8.30M
Net Income$54.35M
EPS (Basic)$0.38
EPS (Diluted)$0.38
Shares Outstanding (Basic)141.70M
Shares Outstanding (Diluted)143.24M

Key Highlights

  • 1Net sales increased by 16% to $383.1 million in Q2 2018 compared to Q2 2017, driven by strong demand in the semiconductor industry.
  • 2The company completed two acquisitions: Particle Sizing Systems (PSS) for $37.3 million and SAES Pure Gas (SPG) for $341.2 million net of cash, expanding its business segments.
  • 3Gross profit increased by 21% to $182.4 million, with gross margin improving to 47.6% from 45.7% year-over-year due to improved factory utilization.
  • 4Operating income saw a substantial increase, reflecting the sales growth and improved operational efficiency.
  • 5Cash and cash equivalents decreased significantly from $625.4 million to $257.1 million, largely due to funding acquisitions.
  • 6Long-term debt stood at $650.2 million at the end of the quarter.
  • 7The effective tax rate decreased to 17.2% for the first six months of 2018 compared to 21.7% in the prior year, influenced by the Tax Cuts and Jobs Act.

Frequently Asked Questions

Revenue growth was primarily driven by strong demand from the semiconductor industry, reflecting high fab utilization rates and increased capital spending. This led to across-the-board demand for the company's products.

The acquisitions of PSS for $37.3 million and SPG for $341.2 million (net) significantly expanded Entegris's portfolio. SPG, in particular, is a material acquisition that bolsters the Microcontamination Control division. These acquisitions are expected to contribute to future growth and market expansion, though they also contributed to the decrease in cash reserves.

Profitability improved significantly. Gross profit increased by 21% due to higher sales volume and improved factory utilization, leading to a higher gross margin of 47.6%. Operating income also saw substantial growth, reflecting the strong revenue performance and operational efficiencies.

While cash and cash equivalents decreased due to acquisition funding, Entegris maintains a solid liquidity position with $257.1 million in cash and available credit facilities. The company believes its existing resources and operating cash flow will be sufficient to meet its working capital and investment requirements for at least the next twelve months.