10-QPeriod: Q3 FY2023

ENTEGRIS INC Quarterly Report for Q3 Ended Jul 1, 2023

Filed August 3, 2023For Securities:ENTG

Summary

Entegris, Inc. (ENTG) reported solid revenue growth for the second quarter of 2023, driven significantly by the acquisition of CMC Materials. Net sales increased by 30% year-over-year to $901.0 million. While gross profit saw an increase, the gross margin percentage declined due to unfavorable sales mix and lower factory utilization. The company generated a net income of $197.6 million for the quarter, a substantial increase from the prior year, largely influenced by a significant gain from the termination of an alliance agreement, which contributed $154.8 million. However, operating income before this gain was impacted by higher interest expenses related to debt financing for the CMC acquisition and increased selling, general, and administrative expenses. The company is also actively managing its portfolio by divesting non-core assets, including the Electronic Chemicals business, which is now classified as held-for-sale, and has completed the sale of the QED business. These strategic moves aim to streamline operations and focus on core competencies.

Financial Highlights

53 data points
Beta

Revenue

$888.24M

41.3% Gross Margin

Net Income

$197.65M

22.3% Net Margin

EPS (Diluted)

$0.22

Total Assets

$9.82B

Cash & Equivalents

$594.02M

Free Cash Flow

$140.31M

Financial Statements
Beta
Revenue$888.24M
Cost of Revenue$521.16M
Gross Profit$367.07M
R&D Expenses$66.81M
SG&A Expenses$116.05M
Operating Income$117.06M
Interest Expense$77.82M
Net Income$197.65M
EPS (Basic)$0.22
EPS (Diluted)$0.22
Shares Outstanding (Basic)150.13M
Shares Outstanding (Diluted)151.23M

Key Highlights

  • 1Net sales for Q2 2023 increased 30% to $901.0 million, largely due to the integration of CMC Materials.
  • 2A significant gain of $154.8 million was recognized from the termination of an alliance agreement with MacDermid Enthone.
  • 3Gross margin percentage declined to 42.6% from 44.8% due to unfavorable sales mix and lower factory utilization.
  • 4Net income more than doubled year-over-year to $197.6 million, boosted by the alliance termination gain.
  • 5Operating expenses, particularly SG&A and R&D, increased substantially, primarily driven by costs associated with the CMC Materials acquisition and integration.
  • 6The company continues to streamline its portfolio, with the Electronic Chemicals business classified as held-for-sale and the sale of the QED business completed.
  • 7Debt levels remain significant, with total debt of $5.49 billion, although interest expense has increased due to the financing of the CMC acquisition.

Frequently Asked Questions

The primary driver of Entegris's revenue growth in the second quarter of 2023 was the acquisition of CMC Materials, which contributed approximately $264 million in sales for the quarter. This acquisition significantly expanded the company's reach and product offerings.

The termination of the alliance agreement with MacDermid Enthone resulted in a significant pre-tax gain of $154.8 million for Entegris in the second quarter of 2023. This gain substantially boosted the company's net income for the period.

Entegris has completed the divestiture of its QED business and has classified its Electronic Chemicals (EC) business as held-for-sale, with an expected closing before the end of 2023. These actions are part of a strategy to optimize its business portfolio.

Entegris's total debt remains substantial, standing at $5.49 billion as of July 1, 2023. The company has seen a significant increase in interest expense, rising from $32.0 million in Q2 2022 to $80.9 million in Q2 2023, primarily due to the debt financing undertaken for the CMC Materials acquisition.