Entegris, Inc. (NASDAQ:ENTG) Q3 2024 Earnings Call Transcript

Entegris, Inc. (NASDAQ:ENTG) Q3 2024 Earnings Call Transcript November 4, 2024

Entegris, Inc. misses on earnings expectations. Reported EPS is $0.511 EPS, expectations were $0.78.

Operator: Welcome to the Entegris Third Quarter 2024 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions] I would now like to turn the call over to Bill Seymour, Vice President of Investor Relations.

Bill Seymour: Good morning, everyone. Earlier today, we announced the financial results for our third quarter of 2024. Before we begin, I would like to remind listeners that our comments today will include 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 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 and Regulation G.

You can find a reconciliation table in today’s news release as well as on our IR page of our website at entegris.com. And finally, as a reminder, we have included in the appendix of the earnings slide presentation for your reference, consolidated and divisional P&L that exclude divestitures for the first quarter of 2024 and for all four quarters of 2023. On the call today are Bertrand Loy, our CEO; and Linda LaGorga, our CFO. With that, I’ll hand the call over to Bertrand.

Bertrand Loy: Thank you, Bill, and good morning. Our third quarter revenue, excluding divestitures, grew 7% year-on-year, but was below our expectations. Despite the softer top line, gross margin, EBITDA margin and non-GAAP EPS were within our guidance. The industry recovery is happening but it is happening slower than anticipated and visibility continues to be limited. Customers with strong exposure to AI applications are performing well but the rest of the industry remains challenged. And because Entegris serves all parts of the industry ecosystem, including areas like mainstream and NAND, which remain muted. Demand for our products is softer than our original expectations. In addition, 2024 continues to be a year of limited technology transitions which limits our incremental wafer content gain opportunity and our level of outperformance this year.

Taking a closer look at our quarterly performance breakdown, MS division sales were up 14% year-on-year, excluding divestitures. Growth was particularly strong in CMP slurries and pads, advanced deposition materials and etching chemistries. The MS division continues to benefit from the combination of the SCM and APS divisions which has allowed us to leverage cost efficiencies to increase our R&D investment in support of our customers’ technology roadmaps. AMH and MC division sales were up slightly in the third quarter year-on-year. Growth this year in AMH and MC has been impacted by the lower demand from mainstream logic customers, slower new fab construction activity and reduced backlog, which positively benefited sales last year. At Entegris, we are continuously looking at ways to streamline and optimize our operations.

To that end, we have decided to combine our AMH and MC divisions. They both support the same mission of enabling materials purity. They both serve similar customer segments. They also serve similar applications inside and outside the fab and AMH is actually one of MC’s largest suppliers. With this combined structure, we will develop greater product synergies, optimize our go-to-market strategy and further increase and differentiate the value we create for our customers. As a result of this combination, we expect to generate $10 million to $15 million in annualized cost savings that will be reinvested to maintain adequate investment levels in R&D and increased investments in new operational capabilities to better meet our customers’ evolving expectations while we continue to operate within the framework of our published target model.

A few other important items I would like to highlight. Our team at our new facility in Kaohsiung, Taiwan continues to make good progress. Customer qualifications ahead of the N2 ramp are progressing and remain our number one priority. We are also progressing rapidly at our new Colorado site. Construction of the building for Phase 1 is essentially complete. Tool installations are starting this quarter, and we expect to ramp up production in the second half of 2025. In addition, we continue to negotiate the final terms of the CHIPS grant award and look forward to completing the process in the coming months. Our investments in Taiwan and Colorado will provide manufacturing capacity to support the significant growth we expect in the coming years.

Given the muted industry recovery we have been experiencing for the past several quarters, we remain focused on balancing cost and maintaining strong profitability while continuing to engage with customers on their technology roadmaps and continuing to fund critical investments that improve our competitiveness and position us for the upturn. On that note, we are pleased with the POR positions we have secured for key new logic and memory nodes. In particular, our efforts in molybdenum or moly deposition materials are progressing well. We have already received several key POR wins in moly and are well positioned for more. We are particularly excited about these POR positions as they represent incremental Entegris content per wafer opportunities in part because we do not make the deposition materials moly replaces.

We continue to expect moly will be implemented in the upcoming 3D NAND node transitions expected next year and in logic, sometime later. These wins validate that our customers’ technology road maps continue to be opportunity-rich for Entegris, as the drive for more complex device architectures and further miniaturization. The resulting process complexity is making our expertise in material science and materials purity increasingly valuable, which is expected to fuel our market outperformance and incremental content per wafer opportunities in the years to come. Let me now turn the call over to Linda. Linda?

Linda LaGorga: Good morning, and thank you, Bertrand. Our sales in the third quarter of $808 million were up 7% year-over-year, excluding the impact of divestitures. On an as-reported basis, our sales were down approximately 9% year-over-year and down 1% sequentially. Foreign exchange negatively impacted revenue by $1 million year-over-year and positively impacted revenue by $3 million sequentially in Q3. Our sales in the third quarter were below our expectations, driven by a softer overall semi market, especially in mainstream and 3D NAND, and discrete supply chain constraints. Gross margin on a GAAP and non-GAAP basis was 46% in the third quarter within our guidance range. Operating expenses on a GAAP basis were $236 million in Q3.

Operating expenses on a non-GAAP basis in Q3 were $186 million below our guidance. Adjusted EBITDA in Q3 was 28.8% of revenue within our guidance range. Net interest expense was $50 million in Q3. The GAAP tax rate in Q3 was approximately 10%, and the non-GAAP tax rate was 13%. GAAP diluted EPS was $0.51 per share in the third quarter. Non-GAAP EPS was $0.77 per share within our guidance range. Sales for our MS division in Q3 were $347 million. Sales were up 14% year-on-year, excluding the impact of divestitures, sales were up 1% sequentially. The largest contributors to the sales increase were CMP slurries and advanced deposition materials. Adjusted operating margin for MS was 20.7% for the quarter, approximately flat sequentially. Our AMH division sales in Q3 of $182 million were up 1% year-on-year and were down 3% sequentially.

The sequential decline was primarily driven by lower demand of our CapEx-driven microenvironments products. Adjusted operating margin for AMH was 16.8% for the quarter. The 140 basis point sequential increase in margin was primarily driven by lower spending. Q3 sales for our MC division of $287 million were up slightly year-on-year and were down 2% sequentially. Revenue was down across most major product lines, except for gas filtration. Adjusted operating margin for MC was 33.7% for the quarter up 180 basis points sequentially. The sequential increase in the margin was driven by lower spending and a more favorable mix. Moving on to cash flow, third quarter free cash flow was $115 million. CapEx for the quarter was $82 million. We now expect to spend approximately $300 million in total CapEx in 2024, down from our previous expectation of $350 million.

While not reflected in the Q3 balance sheet, shortly after the end of the quarter, we paid down $65 million of the term loan from cash on hand, which means to date, we have paid down approximately $1.9 billion of total debt since the close of the CMC acquisition. The blended interest rate on the debt portfolio is approximately 4.9% and since the term loan is fully hedged, currently, 100% of our debt is fixed. As of the beginning of October, our gross debt was approximately $4.1 billion, and our net debt was approximately $3.8 billion. Gross leverage was 4.6 times and net leverage was 4.2 times. We will continue to use our free cash flow to repay debt, and we remain committed to reducing our leverage. Moving on to our fourth quarter outlook, we expect sales to range from $810 million to $840 million.

This equates to a year-on-year revenue growth of approximately 8%, excluding divestitures. We expect the EBITDA margin to range from 28.5% to 29.5%, consistent with the flow-through of our target model we shared at our Analyst Day. We expect GAAP EPS to be $0.49 to $0.56 per share and non-GAAP EPS to be $0.75 to $0.82 per share. Let me provide additional modeling information for Q4. We expect gross margin of 45.5% to 46.5% both on a GAAP and non-GAAP basis. GAAP operating expenses of $232 million to $236 million and non-GAAP operating expenses of $186 million to $190 million. We also expect depreciation of approximately $48 million, net interest expense of approximately $52 million and a non-GAAP tax rate of approximately 15%. I’ll now hand it back over to Bertrand for some closing remarks.

Bertrand Loy: Thank you, Linda. In closing, for the full year, excluding divestitures, we expect sales to grow 4%, and we expect EBITDA to grow 8%, continuing to demonstrate the leverage that exists in our model. As Linda noted, we also remain committed to paying down debt and lowering our leverage. While 2024 is a year of transition for the semiconductor industry, looking ahead, we remain very confident about the growth prospects for both the industry and for Entegris. In the meantime, we continue to manage through a soft market environment, focused on delivering strong profitability in line with our target model, while making the necessary investments to position us for the future. With that, operator, let’s open the line for questions.

Operator: Thank you. The floor is now open for questions. [Operator Instructions] Our first question is coming from Toshiya Hari with Goldman Sachs. Please go ahead.

Q&A Session

Toshiya Hari: Hi, good morning. Thank you so much for taking the question. Bertrand, I guess on 2024 and your view into 2025. I think based on your updated outlook, you’re taking down 2024 revenue by about $85 million. I know you spoke to a couple of factors driving the reduction. But if you can sort of expand on what you’re seeing in mainstream and NAND, that will be super helpful. And then into 2025, you talked a little bit about molybdenum. I think there’s an expectation for gate all around to provide a tailwind to business as well. How are you thinking about your ability to outperform the market? And if you can sort of provide some quantitative feel into 2025, the rate of outperformance. That would be super helpful. Thank you.

Bertrand Loy: Yes. Thank you, Toshiya. So let me start with our view on the market for 2024, which has evolved. I mean, obviously, about a quarter ago, we’re expecting the industry to grow at about 3% of use or more moderate with the expectation that the industry will be growing at about 1% to 2%. And that comes from wafer starts up modestly, think about plus 1% range roughly, and that’s a function of strength in advanced logic, obviously, but memory remains very subdued and mainstream remains very challenged. So the net of that, again, wafer starts up about 1% in 2024. Industry CapEx is also a little bit of a state of two cities with WFE up and improving, and we expect WFE to be up in the mid-single digit in 2024 but it stops construction activity has declined, and we expect that to be a headwind for CapEx. So overall CapEx, our view is that it’s going to be up in the low single digit in 2024.

So in that context, we expect to outperform the industry by about three points this year on a constant currency basis. A lot of the growth is obviously coming from our Materials Solutions division. But again, I think it’s a difficult industry backdrop for us to outpace the industry simply because there hasn’t been a lot of node transition this year. None in logic, and very modest transitions in memory. So – and you’re inviting me to provide maybe and contrast the picture going into 2025. And qualitatively, I would agree with your implied statement. We expect the industry to be in a better state, and we expect to see more activity in terms of node transitions, both in logic as well as in memory, where we expect in NAND, in particular, we expect the transition to 300 layer plus devices and hopefully, the introduction of molybdenum next year.

And all of that actually should create the conditions for us to be able to operate on the higher end of our market outperformance range of three to six points.

Toshiya Hari: That’s really helpful. And then as my follow-up, on the molybdenum opportunity, you mentioned adoption in 2025. I was hoping you could sort of contextualize the opportunity for us. I know for Entegris, no one product group or application accounts for a large percentage of revenue, but I do get this question a lot from investors, how should we think about the magnitude of the tailwind in 2025 as hopefully a couple of your customers make that transition. And I know you talked about logic adopting molybdenum in the out years as well. So how big is the opportunity for you into 2025 and how big could it be over the medium to long run? Thanks.

Bertrand Loy: Yes, Toshiya, as you will understand, I won’t provide a quantification to my answer simply because the timing of the adoption is still not entirely set. So a lot of things can move and obviously, will impact the magnitude of the moly [ph] opportunity for us in 2025. But we feel really good about our competitive standing. We believe that we have developed a film that is of great quality. And we believe that we have developed a comprehensive delivery solution for the material that actually provides the lower cost of ownership for our customers, both of which being obviously very important for our customers, especially at a time when they need to decide when to introduce molybdenum in high-volume manufacturing. So we feel good about where we stand today. Obviously, a lot of work for everyone in the ecosystem before moly is fully adopted in high volume, but we feel good about where we stand today.

Toshiya Hari: Got it. Thanks, Bertrand.

Operator: Thank you. And our next question is coming from Bhavesh Lodaya with BMO Capital Markets. Please go ahead.

Bhavesh Lodaya: Hi. Good morning, Bertrand. Maybe to follow up on that conversation. So in the current backdrop of slower mainstream growth, you are exiting the year with a sales growth of around 8% year-over-year. Now expectations are up for MSI to grow faster next year. You also have more fab start-ups next year. So is it fair to say all else equal, you would see top line growth of at least 8% next year and then hopefully, a faster or a stronger outperformance over that?

Bertrand Loy: Look, I will not quantify our views about 2025 on this call today. It’s just too early for us to do that. But as I said, I think there are reasons to be optimistic in terms of the industry and MSI in particular, we believe that the inventory digestions that have been a major headwind in memory and in mainstream will largely be behind us or should be behind us as we turn into 2025. We also expect better conditions for a PC refresh cycle going into 2025. So all of that should be a basis for better industry fundamentals for 2025. But again, I’m not going to comment, and I’m not going to quantify all of that on this call today.

Bhavesh Lodaya: Understood. And maybe a couple of questions on your Taiwan TSP [ph] facility. Is the time line for customer qualifications in line with what your expectations were? Are they on time? Are they slower? And then are you still seeing the $40 million of sales that you expected for this year?

Bertrand Loy: Yes. So I think the qualifications are progressing well, and they remain our number one priority, right? It’s very important for us to try to qualify as many of the case [indiscernible] products ahead of the N2 ramp next year. So if you look at the fluid handling and the deposition materials, the qualifications are mostly complete. For our liquid filters it’s taking a little bit longer as expected, and it’s taking longer because we chose actually to not take a copy exact approach when transferring the manufacturing capacity there. We changed both the process and we changed the supply chain. By that, I mean, we wanted to be relying more on local chemical suppliers or regional chemical suppliers. So all of that will yield long-term benefits for sure in terms of shorter lead times and a more resilient supply chain, but it just takes longer for both us and our customers to qualify the line, but we’re pleased with the progress.

Bhavesh Lodaya: Thank you.

Operator: Thank you. And our next question is coming from John Roberts of Mizuho. Please go ahead.

John Roberts: Thank you. Well, AMH and MC be reported separately in the December quarter?

Bertrand Loy: Yes, they will.

John Roberts: Okay.

Bertrand Loy: No, no. You said separately. No, no, no, no. We will combine, I’m sorry, yes, we will combine them starting Q4 of this year.

John Roberts: Okay. And then what kept you from doing this earlier? And what keeps you from combining MS as well and going to just being a one-segment company?

Bertrand Loy: Well, I think that there are really two parts to our value proposition. One is really around materials purity and then the other one is really around Material Solutions. So we went through a little bit of an experiment last year when we combined SCM and EPS, and that experiment paid off. I think we were able to generate cost synergies, which did allow us to increase the level of reinvestment into R&D. And we’ve seen actually evidence of the returns on those investments in the form of the success that we’re seeing in moly, the deposition materials but also moly etch. Also great progress in slurry. If you look at advanced foundries, we believe that for the next node, we should have twice as much revenue in terms of slurry revenues.

And that’s again a function of the new level of investment in R&D and a new focus that we’ve been able to drive within that division. So that experiment worked really well last year for SCM and EPS. And we thought that it was time to actually do the same for AMH and MC. So we – something that we had been thinking about in the past, to your point, but I think we were emboldened by what we saw in SCM, EPS. So again, as I said, very similar customers, very similar applications, think about the solutions we develop for the bulk, chemical manufacturers, the solutions that you will find in the chemical loops in the subfabs, but of course, also all of the solutions in the wet tools in the fab floor. So a lot of affinity between the two divisions, which will allow us to generate cost savings by eliminating the redundant cost of the support functions for two divisions.

I would expect also a more optimum go-to-market strategy with a greater customer coverage, greater impact. And ultimately, I think that by combining the R&D organizations, I would expect to unlock new product development synergies, which ultimately will drive further differentiation. So I think that – I think two segments, two divisions is the right way to organize the company, and it’s very consistent, by the way, with the way we’ve been describing our value proposition to investors and to customers.

John Roberts: Thank you.

Operator: Thank you. And we will take our next question from Melissa Weathers with Deutsche Bank. Please go ahead.

Melissa Weathers: Hi, there. Thank you for allowing me ask the question. On the leading edge side, can you help us – I know we’ve got for good news on the gate-all-around side, even the three-nanometer nodes appear to be doing well. So can you help us reconcile the weakness that you’re seeing and the strength that you’re seeing on the AI side at the leading edge? And then especially ahead of the gate-all-around node ramps, can you talk about like any lumpiness? Or how does the customer behavior like purchasing patterns differ at the beginning of a node cycle versus once they ramp into high-volume production?

Bertrand Loy: Yes. So I mean, I think, look, if you look at our revenue going into Advanced Foundry, I mean, we are seeing very healthy growth, as you would expect, right? And we don’t offer customer details on those calls, but if you look at Taiwan as a proxy, you will see that year-to-date, we are growing at 15%. And again, it’s a combination of a number of different players on this particular geography. So highlighting the strength of Advanced Foundry and the benefit of AI-related demand. When it comes to your second question around the shape of the revenue opportunity during a node transition – so when it comes to consumable products, it starts with early orders of filters to flush the lines. And we are actually seeing some of that in Q4 of this year.

And we’re going to see an acceleration of that in the beginning of next year. And then you will see actually the first orders for chemistries and materials. I expect to see some of that in the first quarter of next year. And the levels of demand for both of those products will start normalizing after you go through the first phase of inefficiencies that are inherent to those types of ramps. So it’s always something that we discover with the customers. It’s hard to entirely forecast. But – so that’s the way to think about the evolution of the opportunity in the early stages of a ramp.

Melissa Weathers: Thank you. That kind of helps with my next question. But – so now that you’ve re-segmented a couple of times, you’ve divested a few businesses. Can you help us think about like normal seasonality? And I don’t want you to like guide 2025 or anything, but are there any big quarters, especially with your consumables business and your materials business? Any big quarters or lower quarters that we should appreciate?

Bertrand Loy: Well, I think the last few years have been anything but normal. So it’s a little bit hard to talk about normal seasonality. But I would say in a normal year, Q1 is usually a slower quarter and that you see actually an acceleration in Q2, Q3.

Melissa Weathers: Thank you.

Bertrand Loy: Sure.

Operator: Thank you. And we will take our next question from Atif Malik with Citi. Please go ahead.

Atif Malik: Hi. Thanks for taking my questions. My first one is for Linda. Linda, in your prepared remarks, you talked about the 3Q being a bit weaker because of discrete supply chain constraints. Can you expand on that comment?

Bertrand Loy: Yes, I can take that, Atif. It’s also – there were two issues really impacting our MC division, one impacting our gas purification system platform, and the other one impacting our liquid filtration platform. The first really had to do with getting access to a very specific valve. It’s been an ongoing problem, but we became a real issue in Q4. The second impacting our liquid filtration products was really contaminated batch of HCl. So hydrochloric asset that – so we are in the process of sorting through those two issues, I would expect to see some improvement in both cases in Q4, but it will largely take until the beginning of next year for us to be totally out of those two supply chain issues impacting MC.

Atif Malik: Got it. Thank you, Bertrand. And from next one Bertrand, I remember in the June quarter earnings, you guys saw stability in China and can you talk about what you saw in domestic China or overall China in September quarter? And what are you seeing into the December quarter?

Bertrand Loy: Yes. Our business in China continues to do well. That we – if you look at China as a region, China has been growing at about 16% on a compounded average growth rate for the last four, five years. China is about a 20% region for us. So it’s meaningful, but we don’t quite have the same level of exposure as some of the equipment makers. But I would expect that number to be in the 20% to 25% range simply because a lot of new fabs have been built in China, and we would expect those fabs to start ramping production in the months and quarters to come. So again, good, steady business and demand from our Chinese customers.

Atif Malik: Thank you.

Operator: Thank you. And we will take our next question from Charles Shi with Needham. Please go ahead.

Charles Shi: Hi. Good morning. Hi Bertrand. I do want to have a follow-up question on the overall market environment here. I think 90 days ago, you were directionally correct, mainstream going lower into second half of the year. And you were right about NAND not quite seeing a recovery but I think so far, the theme of this call looks like mainstream and NAND seems to be the main factors contributing to the weakness. Wonder versus 90 days ago, can you give us a little bit of color of what has changed more to the worst, especially for these two segments, especially combined with what you just said, China seems to be continue to do well. It looks like non-China; especially on the mainstream side has done a lot worse, mind if you provide some more color to that? Thank you.

Bertrand Loy: Yes, Charles, I think you’re right. I think mainstream has been more troubled than we were expecting. We’ve seen steady reduction in fab utilization. We’ve seen customers being intensely focused on reducing inventory levels of products in the Entegris products and that extends even to SiC. SiC remains a bright spot for mainstream customers, but our use for SiC-related demand has come down and has continued to come down. We started the year thinking that SiC would be up for us about in excess of 50%. We revised that to up around 30% based on customer forecast at the end of Q3 – at the end of Q2. And right now, we believe that SiC will only be up 10%, so it’s up, it remains a bright spot for mainstream fab. But overall, mainstream fab activity is down quite a bit.

If we look at it, just as an entire segment for us, it’s down in the high single-digit in terms of – and that’s, I think, consistent with the level of MS side that we estimate for mainstream fabs in 2024.

Charles Shi: So the other question about China, it sounds like I look at historical numbers that the China was roughly in the low- to mid-teens. This year it looks like it’s going to be 20%-ish or maybe plus. What’s the long-term – what’s the projection here? I think I heard you saying 20%, 25%. Just want to clarify, is it the long-term projection of China contribution or maybe I misheard? Thank you.

Bertrand Loy: Yes. This is exactly true. So you’re right that about four, five years ago, China was representing about 15%, 17% of our revenue. Today, it’s tracking at about 20%. We expect longer term that number to be between 20% and 25%, mostly consumable products going into mainstream fabs.

Charles Shi: Does that – is that a reflection of maybe China taking more share in the mainstream production or something else?

Bertrand Loy: I think it’s just the volume of activity in China. I think the jury is still out in terms of market share from Chinese players versus non-Chinese players. I don’t think I have enough visibility to comment on that.

Charles Shi: Thanks Bertrand.

Bertrand Loy: Sure.

Operator: Thank you. And we will take our next question from Tim Arcuri with UBS.

Tim Arcuri: Thanks a lot. Bertrand, can you talk about export controls? There was an article in the Journal this morning about the U.S. cutting off the ability to buy Chinese components. And I suspect when this stuff comes out, that it will also go the other way that they’re going to make 100 for the local Chinese companies to buy from the U.S.-based supply chain as well. So and it seems like it’s going deeper into the supply chain at this time. So can you talk just about that? And is there any accommodation in the December guidance or like how you’re thinking about next year for this?

Bertrand Loy: Yes, Tim, I mean, I think you’re right. I mean this is a fast-evolving topic. Like you, we are keeping track of what we’re hearing from regulators. But as of right now, we have nothing really new to report, right? Our focus is to comply on known regulations and I don’t think we are prepared to really speculate on potential future regulations. And to your question about have we included any – have we tried to quantify any negative impact to potential future regulations to our outlook, the answer is no?

Tim Arcuri: Okay. Okay. And then maybe could you give us an idea between the segments for MS and this newly combined MC and AMH. Are they – is one of them any better in December than the other?

Bertrand Loy: Yes. So I think we expect MC to be the fastest-growing division in Q4. Again, there’s a lot of work to be done to resolve or to partially resolve some of the supply chain issues. But I would expect MC to report a record quarter in well, we won’t report MC specifically. But that business, as you know, has been performing really well. I would expect them to reach a new high level of revenue that is greater than what we were achieving during the pandemic level. So again, that business is doing really well. I think the next fastest division would be MS, it’s a Materials Solutions. But as Linda will remind me again, we’ll report along the lines of two segments in Q4.

Tim Arcuri: Okay. Thank you, Bertrand.

Bertrand Loy: Sure.

Operator: Thank you. And we will take our next question from Christopher Parkinson with Wolfe Research. Please go ahead.

Christopher Parkinson: Hey, good morning. Bertrand, can we just get your latest thoughts on how we should think about Entegris’ opportunity as it relates to data centers and HBC in terms of just how that theme has progressed throughout the year? Thank you.

Bertrand Loy: Yes. But I think the hyperscalers obviously have been driving a lot of the demand for AI chips and we’ve – like everybody else, we’ve benefited from the strong activity in advanced foundry. We believe that, that trend is going to continue into 2025, and that’s going to be another, hopefully, a positive driver for the semiconductor recovery in 2025. But as I said, I’m not quite ready to quantify any of those statements on this call today.

Christopher Parkinson: Okay. And just maybe a quick comment on just how we should be thinking about the effect of the Taiwan ramp in the second half. And how should we think about that as it relates to progress into 2025, so not necessarily the quantification? And then also maybe just a quick comment or update on Colorado Springs would be very helpful. Thank you.

Linda LaGorga: Sure. So as we think about KSP and Colorado, obviously, we do have ramp inefficiencies. We do include that in our published target model that we published an Analyst Day, and we will continue to manage to the 40% EBITDA flow-through. To give you a sense, in 2024 year-over-year, the Taiwan facility impact on gross margin is about 80 basis points year-over-year. And then as you move into 2025, we’re going to have more sales ramping up in the Taiwan facility that will help alleviate those pressures. But approximately mid-year Colorado is going to be coming online, and we’re going to have some gross margin inefficiencies there. So you move into 2026 and as sales ramp, that’s when you’re going to start to see those inefficiencies from the ramps alleviate.

Christopher Parkinson: Thank you.

Operator: Thank you. And we will take our next question from Aleksey Yefremov with KeyBanc Capital Markets. Please go ahead.

Aleksey Yefremov: Thanks. Good morning. Bertrand in moly, did you win other products in deposition materials and what is the opportunity beyond deposition materials? What product categories are mostly benefiting from this?

Bertrand Loy: Yes. That’s a great question. So when we talk about moly material first, in the deposition space, you have the ampule, you have the delivery cabinets and a number of Entegris ancillary solutions around those two platforms. And then you have the research chemistry. So for NAND, it’s going to be Moly Etch. And we are working very diligently to get POR wins there as well. And then when moly is then introduced in logic, there will be polishing step, which doesn’t exist in the 3D NAND application, and we are working, as you would expect, on developing a slurry solution for moly polishing down the road.

Aleksey Yefremov: And just a bigger picture question on no transitions. Again, since the last call, is your view on sort of the benefit or the magnitude of node transitions in 2025, has it changed at all for better or worse?

Bertrand Loy: As of right now, the answer is no. Our view remains unchanged. As I mentioned, we expect a fair amount of activity in advanced logic. And I cited obviously the all-important transition to 300 layers in 3D NAND and hopefully, again, the inclusion of moly as part of that transition. But as I said, I think this is still fluid. Customers direct the timing of those node transitions. I hope to be in a better position to give a little bit more precision to all of that in our Q4 earnings call in late January, early February.

Aleksey Yefremov: Thank you.

Operator: Thank you. And we will take our last question from Mike Harrison with Seaport Research Partners. Please go ahead. Please go ahead Mike Harrison your line is open. Please double check the mute function at your device. And it appears that we have no further questions at this time. I will now turn the floor back over to Bill Seymour for closing remarks.

Bill Seymour: Thank you, and thank you for joining our call today. Please reach out to me directly if you have any follow-ups. Thank you again, and have a good day. This concludes our call.

Operator: Thank you. This concludes today’s Entegris Third Quarter 2024 Earnings Conference Call. Please disconnect your line at this time, and have a wonderful day.