Entegris, Inc. (ENTG) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary presents a mixed picture. Financial performance appears stable, but guidance is weak due to uncertainties around fab CapEx and memory shortages. Product development shows potential, especially with AI-related growth, but timing remains unclear. Market strategy and expenses seem well-managed, though concerns about fluid management and FOUPs persist. Shareholder returns weren't highlighted significantly. The Q&A section reveals uncertainties and management's reluctance to provide clear guidance, which tempers optimism. Overall, the sentiment is neutral, reflecting stable but cautious outlook.
Key Financial Performance
Q4 Sales $824 million, down 3% year-over-year and up 2% sequentially. The year-over-year decline was attributed to lower sales in certain product lines, while sequential growth was driven by increased production volumes.
Gross Margin (Q4) 43.8% on a GAAP basis and 44% on a non-GAAP basis. Sequential increase was driven by increased production volumes across manufacturing facilities.
Adjusted EBITDA Margin (Q4) 27.7% of revenue, above guidance, driven by increased production volumes and favorable product mix.
Non-GAAP EPS (Q4) $0.70 per share, above guidance, supported by higher production volumes and operational efficiencies.
Materials Solutions Sales (Q4) $362 million, flat year-over-year and up 4% sequentially. Sequential growth was driven by advanced deposition materials, particularly moly deposition within NAND.
Advanced Purity Solutions Sales (Q4) $465 million, down 5% year-over-year and up 1% sequentially. Year-over-year decline was due to lower sales in fluid handling and FOUPs, partially offset by strong growth in liquid filtration.
Free Cash Flow (2025) $404 million, representing a free cash flow margin of 12.7%, nearly a 300 basis point increase year-over-year. Improvement was driven by disciplined focus on working capital and reduced inventory growth.
CapEx (2025) $299 million, approximately 9% of sales, reflecting completion of a multiyear manufacturing CapEx investment cycle.
Net Debt (End of 2025) $3.4 billion, with net leverage at 3.8x. The company paid down $300 million of the term loan during the year.
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Operating Highlights
CMP consumables, liquid filtration, and selective etch: Unit-driven revenue grew approximately 2% in 2025, led by these products.
Advanced deposition materials: Sequential growth driven by demand for moly deposition within NAND.
Next-generation DRAM and HBM products: Expected rollout in 2026, creating accretive content per wafer opportunities.
NAND-specific product lines: Strong POR wins with solid share across deposition materials, CMP, and selective etch applications.
Node transitions in logic and memory: Increased demand for 2-nanometer devices and migration to 300-layer NAND expected to drive growth in 2026.
Industry MSI growth: Expected mid-single-digit growth in 2026, led by advanced logic and DRAM.
AI-driven demand: AI applications driving significant growth in advanced logic and NAND markets.
Manufacturing footprint rationalization: Exited Chester, Pennsylvania facility and plan to rationalize another facility in 2026.
New facilities ramp-up: Taiwan facility ramping production; Colorado facility to complete key customer product qualifications in 2026.
CapEx reduction: 2026 CapEx expected to decline to $250 million, with long-term levels at 7%-8% of sales.
Free cash flow improvement: Free cash flow margin reached 12.7% in 2025, with further improvement expected in 2026.
Local-for-local manufacturing: Approximately 85% of China revenue in Q1 2026 to be supplied by Asia facilities, with further increases expected.
Customer intimacy: Secured strong POR positions in advanced nodes for logic and memory, expanding served available market.
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Risk or Challenges
Fab CapEx slowdown: The decline in industry fab construction CapEx in 2025 negatively impacted the company's CapEx-driven revenue, particularly in FOUP and fluid handling product lines within the APS division.
Manufacturing footprint rationalization: The company is exiting facilities, such as the Chester, Pennsylvania facility, and plans to rationalize at least one additional facility in 2026, which could pose operational challenges during the transition.
Mainstream logic market recovery: The recovery in mainstream logic markets remains slow and mixed, with MSI still below 2022 levels, potentially impacting revenue growth.
Memory shortages: Ongoing memory shortages may weigh on the industry's ability to supply some mainstream end markets, potentially affecting the company's operations.
Ramp of new facilities: The ramping of new facilities in Taiwan and Colorado has incurred costs and operational challenges, impacting margins in the APS division.
Debt levels: The company has a high gross debt of approximately $3.7 billion and net debt of $3.4 billion, with a net leverage ratio of 3.8x, which could constrain financial flexibility.
Product mix and operating expenses: Unfavorable product mix and timing of operating expenses have negatively impacted margins in the APS division.
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Guidance & Outlook
2026 Revenue Growth: The company expects to benefit from node transitions in both logic and memory, with increased demand for 2-nanometer devices and advancements in NAND and DRAM technologies. Industry MSI growth is anticipated to increase, driven by advanced logic, DRAM, and NAND demand.
Capital Expenditures (CapEx): CapEx is expected to decline to $250 million in 2026, with a longer-term return to historical levels of approximately 7% to 8% of sales. The company has completed a multiyear manufacturing CapEx investment cycle, enabling significant revenue growth with limited further investment.
Free Cash Flow: Free cash flow margin is expected to increase in 2026, supported by higher operating cash flow and reduced CapEx. This will aid in debt reduction, targeting net leverage below 3.5x by the end of 2026.
China Manufacturing: Approximately 85% of China revenue in Q1 2026 will be supplied by Asia facilities, with this proportion increasing through 2026, enhancing local-for-local manufacturing capabilities.
Semiconductor Market Trends: Mid-single-digit industry MSI growth is expected in 2026, with significant growth in advanced logic driven by AI-enabled applications. NAND and DRAM are also expected to see strong demand and pricing trends, with potential for increased fab capacity in 2027.
Fab Construction Spending: Industry fab construction spending is expected to grow modestly in 2026, reversing a decline in 2025, with more meaningful acceleration anticipated in 2027.
Q1 2026 Financial Outlook: Sales are expected to range from $785 million to $825 million, with gross margin between 44.5% and 45.5%. Non-GAAP EPS is projected between $0.70 and $0.78 per share.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Are you expecting an environment in 2026 where you can get back to growing in the 3% to 6% range faster than underlying markets?
A:David Reeder explained that the industry backdrop for 2026 appears more constructive than 2025, with advanced logic being fully utilized and memory showing potential. He mentioned that node transitions and fab CapEx, particularly in the second half of 2026, could drive outperformance. However, the timing and pace of node transitions and the volatility of fab CapEx remain uncertain.
Q:What is the margin trajectory for 2026, and how should we think about it?
A:Linda LaGorga stated that gross margin has stabilized and is expected to improve with volume leverage, ramping of the Taiwan facility, and rationalization of facilities. These factors will drive gross margin improvement and contribute to EBITDA growth.
Q:What is the MSI target for 2026, and how does it relate to WFE and CapEx?
A:David Reeder indicated that MSI is expected to grow in the mid-single digits for 2026. He noted that WFE is expected to be strong, contributing to about one-third of CapEx-related revenue, while fab construction CapEx, which makes up two-thirds, is expected to pick up significantly in the second half of the year.
Q:Can you outgrow the market by a significant margin in 2026?
A:David Reeder stated that while the company aims to outperform, they are guiding one quarter at a time. He highlighted the uncertainty around fab CapEx and its impact on revenue, which makes it difficult to provide a definitive answer.
Q:What updates can you provide on the concerted selling effort directed to mainstream customers?
A:David Reeder explained that the company is focusing on penetrating mainstream customers' wallets across the complete product portfolio. He noted that silicon carbide, which was a headwind in 2025, is now stable and improving slightly in 2026.
Q:Are you seeing any changes in competitive intensity in the China market?
A:David Reeder stated that the fundamentals in China are similar to the rest of the world, with a focus on yield and performance. The company has concentrated on qualifying more manufacturing overseas to guarantee supply to Chinese customers, which has improved competitiveness.
Q:When do you expect the NAND business to pick up, and why is it delayed compared to customers?
A:David Reeder noted that while NAND pricing has firmed, wafer starts have been measured. Node transitions in NAND are driving premium pricing and higher content per wafer, but increased wafer starts are still awaited. The company expects NAND to be more of a second-half driver in 2026.
Q:What is your view on China business growth in 2026, and what was the growth in 2025?
A:David Reeder expects growth in China in 2026, driven by CapEx-related areas, liquid filtration, and CMP products. Linda LaGorga mentioned that China accounted for approximately 21% of sales in both 2024 and 2025, with actual dollars slightly down.
Q:What is the potential impact of memory shortages on the electronics market in 2026?
A:David Reeder flagged memory shortages as a potential issue for the second half of 2026, particularly for mainstream logic, but noted that it is not factored into the first or second quarter outlook.
Q:When will the capacity shutdowns impact gross margins?
A:David Reeder stated that the rationalization of one facility in 2025 and another in the first half of 2026 will provide modest benefits to gross margins throughout 2026.
Q:What is the percentage of total revenue from AI-related products?
A:David Reeder mentioned that about 60% of the company's revenue in 2025 was driven by advanced nodes, which include AI-related products. This percentage is expected to grow as AI drives more demand for advanced logic and memory.
Q:What is the expectation for advanced packaging revenue in 2026?
A:David Reeder stated that advanced packaging, which represented roughly $100 million in 2025, is expected to grow in 2026. The company is focusing on new product lines and expects more significant benefits in 2027 and beyond.
Q:What is the total revenue exposure to memory, and how does it benefit from layer count versus wafer count?
A:David Reeder explained that memory accounts for about 30% of total revenue, split equally between NAND and DRAM. While the company benefits from both layer count and wafer count, incremental wafer starts provide slightly more benefit.
Q:Has the go-to-market approach changed for winning new PORs?
A:David Reeder stated that the company continues to focus on technology road maps while also emphasizing cross-selling across product lines to provide complete solutions to customers.
Q:What are the weaker parts of the business, and how are they expected to perform in 2026?
A:David Reeder identified fluid management and FOUPs as weaker areas in 2025 due to lower fab construction CapEx. These areas are expected to recover in 2026 as fab construction CapEx stabilizes or grows.
Q:What is the outlook for MSI over the next 3 to 4 years?
A:David Reeder explained that advanced logic and DRAM are fully utilized, requiring incremental capacity for growth. NAND utilization is around 85%, with growth driven by layer count. Mainstream logic, which constitutes the bulk of MSI, remains mixed and slow to recover.
Q:How do content gains factor into outperformance metrics?
A:David Reeder stated that content gains from layer count are included in outperformance metrics as they contribute to incremental revenue.
Q:Will fluid management and FOUPs be down or flat in the March quarter?
A:David Reeder noted that order patterns for fluid management and FOUPs have improved for 2026, but the timing of revenue recognition between the first and second quarters will depend on deliveries.
Q:Review of Unclear Management Responses
A:Management appeared to avoid giving a direct answer to questions about outgrowing the market by a significant margin in 2026 and the specific timing of NAND business recovery. Additionally, there was hesitancy in providing a clear outlook for fab CapEx and its impact on revenue, as well as the exact timing of gross margin improvements from capacity shutdowns.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
CMP consumables
DRAM HBM
HBM product
NAND MSI
PORs node
ability
cash flow
commitment
construction spending
content wafer
decline
demand
device
digit
driver
end market
etch
fab capacity
fab construction
facility
generation
handling product
industry MSI
industry fab
layer
mainstream
manufacturing
output
priority
product line
share
term
trend
unit
utilization
ENTG Transcript
Entegris, Inc. (ENTG) Q4 2025 Earnings Call Transcript
Unknown2-10
The earnings call summary presents a mixed picture. Financial performance appears stable, but guidance is weak due to uncertainties around fab CapEx and memory shortages. Product development shows potential, especially with AI-related growth, but timing remains unclear. Market strategy and expenses seem well-managed, though concerns about fluid management and FOUPs persist. Shareholder returns weren't highlighted significantly. The Q&A section reveals uncertainties and management's reluctance to provide clear guidance, which tempers optimism. Overall, the sentiment is neutral, reflecting stable but cautious outlook.
Entegris, Inc. (ENTG) Q3 2025 Earnings Call Transcript
Unknown10-30
The earnings call summary presents a mixed outlook. While there are positive elements such as strong product development and a long-term growth outlook, the company's cautious approach to near-term revenue and utilization, as well as uncertainties in the semiconductor market, lead to a neutral sentiment. The Q&A section highlights management's focus on operational efficiency and leverage reduction but also reveals concerns about demand recovery and capacity utilization. The lack of a clear positive catalyst or negative shock suggests a neutral stock price movement prediction.
Entegris, Inc. (ENTG) Q2 2025 Earnings Call Transcript
Unknown7-30
The earnings call summary and Q&A reveal mixed signals. While there are positive elements such as resumed Chinese orders, optimistic second-half expectations, and strategic investments in manufacturing, there are also concerns about trade uncertainties, gross margin pressures, and the lack of specific Q4 guidance. The guidance for Q2 is cautious, reflecting a volatile environment. Given these factors and the absence of a market cap, the overall sentiment leans towards neutral, suggesting a potential stock price movement within -2% to 2% over the next two weeks.
Entegris at Bernstein Conference: Strategic Growth and Resilience
Neutral5-28
ENTG Slides
ENTG Report
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