10-QPeriod: Q3 FY2018

ENTEGRIS INC Quarterly Report for Q3 Ended Sep 29, 2018

Filed October 25, 2018For Securities:ENTG

Summary

Entegris, Inc. reported a strong third quarter and first nine months of 2018, with net sales increasing by 15% and 16% year-over-year, respectively. This growth was driven by robust demand from the semiconductor industry, reflecting high fab utilization rates and increased capital spending. The company successfully integrated two significant acquisitions in the first half of 2018: SAES Pure Gas (SPG) and Particle Sizing Systems (PSS), which contributed meaningfully to revenue growth. Despite increased operating expenses related to integration and expansion, Entegris demonstrated improved profitability, with net income rising significantly and gross margins expanding due to favorable product mix and increased sales volume. The company's balance sheet remains solid, though cash and cash equivalents decreased due to acquisitions and share repurchases, offset by continued positive operating cash flow. Management expressed confidence in the company's ability to meet its financial obligations and investment needs for the foreseeable future.

Financial Highlights

53 data points
Beta

Revenue

$398.60M

45.6% Gross Margin

Net Income

$48.06M

12.1% Net Margin

EPS (Diluted)

$0.34

Total Assets

$2.10B

Cash & Equivalents

$294.89M

Free Cash Flow

$56.24M

Financial Statements
Beta
Revenue$398.60M
Cost of Revenue$216.88M
Gross Profit$181.72M
R&D Expenses$29.96M
SG&A Expenses$62.36M
Operating Income$67.97M
Interest Expense$7.99M
Net Income$48.06M
EPS (Basic)$0.34
EPS (Diluted)$0.34
Shares Outstanding (Basic)141.56M
Shares Outstanding (Diluted)143.03M

Key Highlights

  • 1Net sales increased 15% year-over-year to $398.6 million for the third quarter of 2018, and 16% for the first nine months to $1.15 billion.
  • 2The Microcontamination Control (MC) segment showed significant growth, with net sales up 30% in Q3 and 23% for the nine-month period, bolstered by the acquisition of SAES Pure Gas (SPG).
  • 3Gross profit margin improved to 45.6% in Q3 2018 from 45.0% in the prior year, attributed to increased sales and improved product mix.
  • 4Entegris successfully completed the acquisitions of SAES Pure Gas (SPG) for approximately $352.4 million and Particle Sizing Systems (PSS) for $37.3 million, integrating them into its operations.
  • 5Net income for the nine months ended September 29, 2018, grew to $160.0 million, or $1.12 per diluted share, compared to $113.4 million, or $0.79 per diluted share, in the prior year.
  • 6Cash and cash equivalents decreased to $294.9 million at September 29, 2018, from $625.4 million at December 31, 2017, primarily due to acquisition spending and share repurchases.
  • 7The company maintained compliance with its debt covenants and expects its current liquidity, operating cash flow, and credit facilities to be sufficient for its needs over the next twelve months.

Frequently Asked Questions

Both acquisitions significantly contributed to Entegris's revenue growth. The SPG acquisition, in particular, bolstered the Microcontamination Control segment, driving a substantial increase in net sales for both the third quarter and the nine-month period. PSS also added to the Advanced Materials Handling segment's revenue. While these acquisitions increased operating expenses due to integration costs, they were accretive to overall revenue and are expected to enhance Entegris's market position.

Entegris experienced strong revenue growth in the first nine months of 2018, driven by robust demand from the semiconductor industry, characterized by high fab utilization and increased capital spending. While the company acknowledges the cyclicality of the industry, the broad-based demand across its segments and the strategic acquisitions position it well to capitalize on current market conditions. Management expressed confidence in meeting financial obligations, suggesting a positive short-to-medium term outlook.

Entegris funded its acquisitions primarily through existing cash on hand and, to a lesser extent, debt. While cash and cash equivalents decreased significantly from the end of 2017 to September 29, 2018, due to these cash outflows, the company maintained compliance with its debt covenants. Entegris also utilized its ABL Facility and international credit facilities. Management believes that its current liquidity, operational cash flow, and available credit lines are sufficient to meet its working capital and investment requirements for the next twelve months.

Entegris's effective tax rate for the nine months ended September 29, 2018, was 17.8%, down from 20.6% in the prior year. This reduction is primarily due to the Tax Cuts and Jobs Act of 2017, which lowered the U.S. corporate tax rate to 21%. This benefit was partially offset by the inclusion of global intangible low taxed income (GILTI). The company is still finalizing its accounting for certain aspects of the Tax Cuts and Jobs Act, with adjustments possible in future reporting periods.