Good morning, and welcome to Entegris Fourth Quarter Earnings and Analyst Update Webcast. Last night, we released our fourth quarter earnings and we posted the earnings slides and earnings prepared remarks on the IR site. We will not be presenting the prepared remarks for Q4 live in today's session. So please refer to those online, if you already have it. In today's session, we will present a brief analyst update presentation. And then we will take Q&A on both the presentation and Q4 earnings. We expect the webcast today will be approximately an hour and 15 minutes, including the Q&A. Some webcast-related housekeeping items: if you're experiencing any technical problems, please click on the little 'I' on the left-hand bar of the screen to troubleshoot or chat with tech support. You can minimize or enlarge your slide window at any time by clicking on the top-right corner of the box. The slides will advance automatically throughout the webcast. The Q&A session will be at the end of the presentation. Please submit your questions in the Q&A box located in the bottom-left corner of the screen. You can also email questions to Beth and me directly. In the resource box, you will find a copy of today's presentation slides and a few other items of interest. One other item of note in the appendix of today's presentation, we have included for your reference, consolidated results and divisional results for 2023 that exclude last year's divestitures and the PIM business for the full-year and by quarter. The speakers today are Bertrand Loy, President and CEO; and Linda LaGorga, our CFO. Before we begin, I would like to remind listeners that our comments today will include some 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 those risks and uncertainties is contained in our most recent annual report and subsequent quarterly reports that we have 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 reconciliation tables in the presentation, which is posted on our IR page of our website. With that, I'll hand over to Bertrand.

Good morning, and thank you for joining us. Today's analyst update will be brief. The main purpose is to provide you with a refreshed financial model, focused on our core business and excluding all completed and planned divestitures. Before I move on to the update, a quick recap of our results we posted last night. We are very pleased with the quality of our execution in 2023. Our unit-driven model displayed resilience during the current industry downturn. And we closed 2023 with strong fourth quarter sales and EPS results, both above our guidance. For the year, we outperformed the market by 6 points, driven in large part by our strong position at the leading-edge technology nodes and the backlog we had entering the year. In addition, we divested three non-core businesses and used the proceeds and free cash flow to pay off $1.3 billion of debt. In terms of our guidance for 2024, we believe we have taken a prudent view of the industry in the short-term while being fully prepared for what we believe is likely to be a significant snapback in the market. On to the agenda for the briefing today. I will talk about Entegris' business model, our sales growth algorithm, and provide an overview of our three divisions. Linda will cover our capital structure, capital allocation priorities, our updated target model, and our updated three-year financial targets. Then we will take questions on both the analyst update presentation and our fourth quarter earnings. Here is what I would like to impress upon you today. Entegris' unit-driven business model is unique, highly differentiated, and has strong competitive moats. While 2023 was a challenging year, we remain as optimistic as ever about the long-term growth prospects for the semiconductor industry. The industry is entering a period of unprecedented technology change and device complexity. Our core value proposition in materials science, materials purity, and end-to-end solutions has become increasingly enabling and critical for our customers. All of this means the market is moving toward Entegris. And this ultimately translates into rapidly expanding Entegris content per wafer and strong outperformance for the years to come, reinforcing Entegris as a value compounder with attractive organic sales growth leading to significant EBITDA and EPS expansion, especially given our commitment to lower our debt. For the past decades, our mission has not changed. We help our customers improve their productivity, performance, and technology by providing enhanced materials and process solutions for the most advanced manufacturing environments. Our platform is now comprised of three divisions and I will provide more detail on each of them in a moment. 75% of our revenue is unit-driven or recurring. These unit-driven products can be chemistries and materials that are used daily in semiconductor manufacturing fabs or they can be advanced filters and other consumable products that are single-use and are replaced frequently. The remaining 25% of our revenue is CapEx-driven products. They can be gas filters, dispense systems, and other components that we sell to equipment makers. Or they can also be wafer carriers, gas purification systems, or fluid-handling solutions that we sell when new fabs are built. You can see in the middle of the slide that our customer base is unique as our solutions are widely used across the broad industry ecosystem. And as you can see further to the right when it comes to our fab customers, we have greater exposure to logic and foundry, representing about 70% of our fab revenues while memory customers represent the rest, approximately 30%. This profile, unique in the industry, provides greater resilience and stability to our business model and financial performance on a cross-cycle basis. On the next slide, I want to touch on the three dimensions of our competitive advantage that we have built over decades. No one in the industry comes close to these combined capabilities, especially while being almost exclusively focused on semi. First, on the left, the customer value-creation flywheel. I am sure that you've read Jim Collins' book, 'Good to Great'. So you will recognize the flywheel concept, which is meant to call out the major steps the organization needs to go through to create and compound customer value over time. It thoughts up to five years ahead of new node transitions when a customer asks us to help them solve key challenges they are expecting to face. We then start our development work, share samples, and ultimately provide them with the new enabling solution. Finally, we must quickly ramp production to high volumes at extremely high levels of quality. The point is, it is hard to do. And doing it right time and again creates customer trust. And this is the virtuous cycle depicted here. The next dimension of our competitive advantage is our commitment to industry leadership in the areas of technology, global infrastructure, and operational excellence. On the technology front, we have a very strong foothold. But we steadily continue to invest in research and product development to effectively partner with our customers on incrementally more complex challenges requiring earlier involvement. On the global infrastructure front, our customers are increasingly expecting us to be close to them. So, we have ramped our investments in local manufacturing and local tech centers in all major markets. These investments are proving to be a great source of differentiation for us, accelerating learning and customer engagement. The last ring of this graphic is operational excellence. Our customers continue to expect tighter process windows, more process stability, and process control, which we achieve with greater automation, process cleanliness, and greater control of our supply lines. The final dimension is our end-to-end offering, which obviously has been greatly strengthened by our combination with CMC Materials. No other materials companies serving the semiconductor industry comes close to our breadth of technology capabilities. And we believe this brings huge value to our customers and ultimately means better device performance, lower cost of ownership, and faster time to solution. Despite the recent downturn, our views have not changed. And we continue to expect global semiconductor revenue to reach $1 trillion by 2030. The digitalization of our lives is accelerating. It is reshaping in very fundamental ways everything around us, which will drive exponential demand for faster, more energy-efficient, and more reliable semiconductors. These themes are all well understood, and I do not believe I need to belabor them today. My message here is simply that the semiconductor industry is a great place to be. And this is particularly true for Entegris, as you will see on the next slide. Our customers have a major overarching goal, and that is to improve chip performance. And to do this, they have two major tools in their toolbox: more complex chip architectures and miniaturization of the critical dimensions on the wafer. To enable this, our customers' technology road maps are calling for new materials and ever greater process purity to achieve optimal yields and optimal costs. At Entegris, we operate at the intersection of materials science and materials purity. And this is precisely what our customers need right now. This is what we mean when we say the market is moving to Entegris. From a materials science perspective, these more complex structures mean more layers, more process steps, and more novel materials. This translates into more material spend per wafer and greater content per wafer for Entegris, particularly in new leading-edge logic and 3D NAND nodes. From a materials purity perspective, greater miniaturization is making yield management exponentially more challenging and more expensive for our customers. The point here is our solutions help our customers improve their yields. For example, using our advanced filters can positively impact yields in a fab by several points. The punch line of this slide is that the compounding process complexity of our customers' technology roadmaps is making our solutions increasingly valuable to our customers. And this is expected to translate into expanding Entegris content per wafer, expanding served market, and ultimately, it is expected to fuel our market outperformance. These more complex chip architectures and demanding applications like AI are requiring new enabling solutions. Solutions like the ones listed on this slide. This is great for Entegris because we are engaged on all these fronts, deploying our unique breadth of capabilities in material science and materials purity to develop enabling solutions, unique solutions, which will result in new revenue streams for Entegris. So, what does that all mean for Entegris? Well, let me summarize this and introduce, in fact, reaffirm our organic growth algorithm. First, we expect our core market, the semiconductor industry, to grow twice GDP growth. And then we continue to expect to outperform the industry by three to six points. This outperformance will be driven by greater Entegris content per wafer, as we have discussed, and market share gains as we continue to capitalize on our unique portfolio of capabilities to create highly differentiated, mission-critical solutions for our customers. We have made and will continue to make significant investments to realize these growth opportunities. Our R&D investments reflect our commitment to supporting our customers' technology road maps and are critical to winning positions in new nodes. This is why our R&D spending was up last year, even in a challenging industry environment. And going forward, we expect our R&D spending to be approximately 9% of sales. Our investments in production capacity are also vital for us to fully realize our long-term growth. In the last two years, our CapEx has been elevated, as we invested in two new facilities in Taiwan and Colorado, and going-forward, we expect our CapEx to come back down to 10% of sales. And by the way, we should be close to 10% this year in 2024. Moving on to our three divisions, and let's start with our newest, Materials Solution. MS is the combination of the SCM and APS divisions, forming a single, almost 100% unit-driven platform. With MS, our customers will benefit from a more robust end-to-end solutions set critical to their road maps. A solution set that improves device performance, reduces time to yield, and provides superior cost of ownership for our customers. Some of the major product lines include advanced deposition materials, CMP slurries and pads, etching and cleaning chemistries, and other specialty materials and gases. All three of last year's divestitures came out of this division. We believe we can achieve four to six points of growth in excess of the industry as we unlock the full potential of our platform and execute on some very exciting opportunities in new materials like molybdenum, etching chemistries, and CMP slurries. With this growth and a highly differentiated solution set, we believe we can steadily improve MS margins from 16% last year to 22% to 24% over time. The Advanced Materials Handling division manufactures fluid and wafer handling products that ensure higher purity levels and ultimately drive higher yields, both within our customers' ecosystems as well as within the fab environment. 60% of AMH revenue is related to new fab construction projects and wafer fab equipment. These capital-driven products include wafer carriers, also known as FOUPs, EUV pods, sensing and control solutions, and high-purity wires and tubing. 40% of the business is unit-driven and comprised of products such as chemical containers and finished wafer packaging. Going forward, we expect top-line growth of two to four points in excess of the industry and operating margins in the low-to-mid 20s. The Microcontamination Control division provides products that address a rapidly growing need in the semiconductor industry for purity and consistency of chemicals and materials. These solutions have become essential for our customers in their quest for yield optimization and long-term device reliability. As feature sizes continue to shrink and as new materials are adopted, the permissible sizing and classes of contaminants, as well as their concentration levels, are becoming exponentially more stringent. As a result, the push to achieve ever greater process purity translates into the need for more advanced filters, greater frequency of replacement of these filters, and also includes the introduction of more points of filtration deeper upstream in the fab supply lines. All of this is expected to drive an outperformance of five to seven points for MC. And given the growing value of these solutions for our customers, we expect operating margins to reach 35% to 37%. I will now hand it over to Linda.

Thank you, Bertrand, and good morning. Today, I plan to cover a few key topics. First, I will focus on our debt structure and our capital allocation priorities, then I will turn to the forward-looking financial opportunity for Entegris. The punch line of this slide is that our debt structure is rock-solid. We ended 2023 with a total debt of $4.7 billion after paying down $1.3 billion last year, a tremendous accomplishment. Debt pay-down into 2023 was driven by proceeds from the divestitures of QED and Electronic Chemicals, the business we sold to Element Solutions and free cash flow. The blended interest rate on the portfolio is a very attractive 5.1%. Our debt is comprised of both fixed-rate notes and what remains as the term loan after last year's pay-down. While the term loan is technically variable, we have hedged almost the entire $1.4 billion. So, we currently have close to 0% variable-rate debt. Other important points to note: we have no maturities until 2028 and no maintenance covenants on the debt. So again, our current debt is well-structured and de-risked. Looking at our capital allocation priorities going forward, our clear near-term priority is to further reduce our debt with a focus on the term loan. We expect gross leverage to be below 4 times by the end of 2024 and net leverage to be below 3.5 times. Debt paydown is a powerful contributor to our earnings. Each $100 million of debt pay-down equals approximately $0.04 of EPS. The focus on debt paydown will continue to be balanced with making critical investments in our future. As Bertrand mentioned earlier, we plan to invest approximately 9% of revenue in R&D and approximately 10% of revenue in capital expenditures. Also to maximize our debt repayment, we will drive further working capital improvements and continue what we started in 2023. This is an area of particular focus for me. We will also maximize cash repatriation, and in general, minimize our cash levels. This will be another major focus area for us. We also expect to average about $450 million of global cash on our balance sheet over the course of the year. Moving past the near-term, we will seek to complement our organic growth with strategic acquisitions. We have a track record of creating shareholder value through M&A. So, expect us to remain active on that front at the appropriate time. We will, of course, continue to pay a dividend. And we may consider share repurchases in the future. But for now, share repurchases remain on hold. So next, I want to spend some time on the future earnings power of the company. Not only have we shared this target model externally, but we also use this framework to plan, and more importantly, to run our business. It's pretty straightforward. As you can see, the model shows margin and EPS outcomes at different revenue levels. Core to the model is the assumption of a 40% flow-through to EBITDA line over time. That flow through will be driven by gross margin expansion and SG&A leverage over the next several years. A few other critical assumptions in this model: first, we assume an annual interest expense of approximately $230 million that remains constant in all revenue cases. This implies no additional debt pay-down going forward. Of course, we do expect to continue to pay down the term loan. That is, this is an illustrative model. We simplified the interest assumption by holding it constant. The model also assumes a tax rate of approximately 16%, depreciation of 5.5%, and share count of 152 million shares. Again, for all scenarios. Now, focusing on our three-year financial targets. Bertrand spoke earlier about our sales growth algorithm and our demonstrated performance as a value compounder. So, what does this mean in numbers? Starting from the left, we expect an approximately 11% sales growth CAGR from 2023 to 2026. The 2023 baseline excludes last year's divestitures and the business we sold to Element Solutions. In addition, we have excluded PIM from the 2023 baseline as we intend to sell the PIM business. That 11% growth rate assumption is essentially the midpoint of the range Bertrand laid out. This top-line CAGR, coupled with the 40% EBITDA flow-through leads to an EBITDA margin of approximately 31% by 2026, which amounts to a CAGR of 15%. Key drivers of this, as I mentioned on the previous slide, are gross margin expansion and SG&A leverage. Taking a closer look at the gross margin improvement opportunity, the drivers of this are expected to be volume growth overall, ramping volumes in our Taiwan and Colorado facilities, and the benefits of product mix. For your reference, the 2023 gross margin headwind from our Taiwan facility was approximately 70 basis points. We expect that this headwind will start to alleviate as we've ramped volume shipments in the second half of this year. Next, we expect EPS to be greater than $5 by 2026. This growth is driven by the EBITDA expansion and a few other key assumptions. First, we are assuming that the $1.4 billion term loan is paid off completely and only the existing bonds remain outstanding. This leads to an annual interest expense of approximately $160 million by 2026. This is different than our target model slide I just showed where we assumed no additional debt pay-down. And as I mentioned on the previous slide, we have assumed a tax rate of approximately 16% and a share count of approximately 152 million. Wrapping things up, we believe our model is highly differentiated. We remain very optimistic about the long-term secular growth of the semiconductor industry. The market is moving to us, meaning our unique position and value-add is leading to higher Entegris content per wafer and outperformance. Our capital structure is very solid and rapidly improving, which gives us a lot of optionality moving forward. Finally, the market growth and our outperformance lead to attractive sales growth, and with the leverage in our model and our commitment to pay down our debt, accelerated EPS growth. Thank you. This concludes our presentation. And I will turn it back to you, Bill, to moderate the Q&A.

Thank you, Linda. We will move on to the first question. This question was asked in various forms by different individuals. Bertrand, could you discuss the factors contributing to the Q4 results exceeding our expectations and the six areas of outperformance for 2023? What are the key drivers?

Obviously, we were very pleased with the way we finished 2023. All three divisions performed very well. MC and AMH were in line or slightly above forecast in Q4. And MS had a very strong finish. Remember that the MS division had the most exposure to memory, which was a headwind, was earlier in the year. But of course, converted into a tailwind as the memory segment started to recover late 2023. Another factor impacting the MS performance in Q4 was the existence of some pull-ins, customer pull-ins, customers trying to take advantage of rebates available to them during calendar 2023. But overall, a very strong finish to what was a very good year for Entegris. To put that in context, remember that we were very busy in 2023. We completed the acquisition of CMC Materials, leading a very aggressive integration project, completing this integration within 13 months post-close. As part of this integration, we successfully divested three large businesses generating $1.3 billion of proceeds into process, which we applied to our debt as we had promised to do. We also managed very effectively the slow industry environment while maintaining strong investments into our future. As you saw, we increased R&D spending in 2023, we largely completed the KSP investment in Taiwan, and we initiated a new investment in Colorado. And as you know, all of those significant projects can be the source of a lot of distraction, a lot of de-focus in the organization, and that was not the case. We outperformed the industry by 6 points. We also delivered very healthy levels of EBITDA in 2023 and 27%, which is in line with our commitments. So, we are exiting 2023 with a very strong platform that obviously we expect to build upon as we presented today. So it bodes well for 2024 and for the years to come.

Okay. So Chris Kapsch from Loop has a little bit of a double-down on that question. So looking at the MC performance, MC performed really well last year in a down market. What are the drivers of that? Is it leading-edge, is it mainstream, what are the major drivers of that?

Right. So, thank you for asking that follow-on question. I mean obviously if the MS division was the star of our Q4 results, the star of the full-year 2023 was our MC division. MC benefited from a strong backlog, getting into 2023, but that's really not the full story. The demand for products and solutions continued to be very strong throughout the year and I want to maybe highlight a few of them. Our gas purification system, for example, continues to perform at a very elevated level. As a matter of fact, our Q4 revenue for gas purification systems was at a record level. And that is a function of steady fab construction activity and the fact that those systems became mostly industry standards now for several years. The other part of the Microcontamination division that performed really strongly in 2023 was the liquid filtration platform. You heard me. The quest for materials purity is unabated in this industry. Our customers are really trying to chase higher yields and long-term reliability of their devices. And to do that, they need to continue to increase the purity requirements, chasing ever smaller contaminants and making the permissible concentration levels more stringent. So these forces were at work in 2023. And that's the reason why MC essentially outperformed the industry by close to 16 points, so a massive outperformance level in 2023. And that's a trend that we expect to continue going forward. And that's actually the basis for the level of outperformance we expect to see for the next two to three years, an outperforming level of five to seven points as I presented earlier.

Next question from Toshiya from Goldman. Can you break down the 4% industry growth for 2024 between MSI and CapEx end-markets?

So remember that 2024 will be a recovery year for the industry. And by that I mean that different segments of the industry will be recovering at different times and at different rates. The recovery will be led by advanced logic and DRAM; 3D NAND is expected to stay relatively muted, especially early in the year. And of course mainstream fabs have just entered the downturn just a few months ago. We expect fairly significant wafer start reductions and utilization rates compression, especially in the first quarter of this year. So that's the lay of the land. And that's what we took into account when quantifying our expectations for the industry. So we expect MSI, in that context, to be up about 5%. And here again, I'm talking about 2024 compared to 2023. And we expect the industry CapEx to be essentially flat. And here again, remember that I'm talking about the total industry CapEx, not just WFE. So if you blend those two numbers, you get to that 4% industry growth in 2024.

And then I'll ask a follow-up from Atif from Citi, which would be okay, that's the market growth, and then we talked about our level of outperformance for 2024. What are the drivers of that outperformance in 2024?

Well, the drivers are essentially the drivers we called out in the presentation, right? We expect to continue to benefit from greater Entegris content per wafer. We expect some node transitions in 3D NAND in particular in 2024. And we also expect a number of advanced logic manufacturers to start getting ready for significant node transitions late in the year and preparing for 2025. So all of that will contribute to that four to five points of outperformance in 2024.

Next question. John Roberts, Mizuho. So, AMH revenue margin decline in Q4. Can you maybe provide some color around the drivers of that and then maybe put into context how the AMH performance last year.

Maybe I can start with the performance, Linda, and then you can add on the margin. So if you think about AMH, as we have mentioned multiple times, AMH had actually a very significant backlog entering 2024. And that really helped them sustain elevated revenue levels in the first half of the year. That backlog disappeared in Q3 of 2023, and that's really the impact that you're seeing in Q4 of 2023. Moving forward, we would expect AMH to steadily recover through the year in 2024.

And regarding margins for AMH in Q4, a couple of drivers I'd call out. First, there was some volume deleveraging based on the revenue. And secondly, some one-time impacts including a rebalancing between our divisions of the variable compensation. So as Bertrand said, we are very much expecting a recovery of those margins as we go into Q1 and the rest of 2024.

Okay. This will be a combined question. So Chris Kapsch from Loop and David Silver. So first on Chris Kapsch: can you talk a little bit about the progress of the sales synergies from CMC? And then David Silver asked a little bit about some examples from the products that we got from that acquisition and how are those doing in the end-to-end solution?

Okay. So, we're very pleased with the way the combination with CMC Materials is shaping out. I talked about a few different metrics, but more importantly, the way the two teams have come together is extremely gratifying. And I'm also very, very pleased with the quality of the customer engagements that we've seen in the last 18 months. So all of that contributed to actively seeking new opportunities, different ways to combine and co-optimize solutions across our various platforms, ways to optimize our post-CMP cleaning chemistries based on a better understanding of the slurry blend and mix, ways of optimizing our slurry filtration platform based on a better understanding of the slurry. So all of that has been taking place as you would expect. You should know that as a matter of fact, we had a compensable goals last year looking at the opportunity pipeline and the funnel. And you should know that actually we not only met that particular objective, but we far exceeded that objective. And that is what is giving us confidence when we talk about the potential of the MS platform going forward. And this is why actually, we are committed to outperforming the market by four to six points in MS for the years to come.

Okay, next question for Linda. So Mike Harrison from Seaport. EBITDA margins, 26% in Q4. How do you see the cadence of EBITDA margins as we go into Q1 and then throughout next year? And what are the drivers?

So, as we go into next year, as we said, the guidance for EBITDA margin is approximately 29%. In Q1, the guidance is approximately 27%. Bertrand mentioned we are expecting a gradual recovery throughout the year. So you'll see a gradual uptick also in our EBITDA margins. As we look at the drivers, first, there is some volume leverage as an aspect of a driver. There is mix. We always are and will remain very focused on productivity, helping with our margins across-the-board. And one other item I will mention is, last year, I talked a bit about the impact of our inventory reductions on margins. This year, we're absolutely still focused on working capital. But that impact as we continue to reduce inventory will not be as great as it was. Now, all that are the positives. We will still have headwinds in 2024 from the ramp of KSP. I mentioned in the comments that in 2023, those headwinds were approximately 70 basis points. You should think of those headwinds in 2024 as about the same to slightly more. Now what will happen in 2024 with KSP is the impact will be heavier in the first half and then will start to alleviate that in the second half. Pulling this altogether, we're going to continue to balance between investment and cost. And as we talked about, we're going to manage to that 40% EBITDA flow-through. So, that gives you the context of how I see 2024 EBITDA margins coming together.

Okay. Another question for you, Linda, from Bhavesh from BMO is can you update us, we've obviously presented some information in the presentation, how are you looking at leverage going forward?

Yes. So I mentioned in the presentation that by the end of 2024, we expect gross leverage to be less than 4 times and we expect our net leverage to be less than 3.5 times. As we continue to go forward beyond 2024, we will continue to focus on deleveraging. But we will also retain some optionality. The great news is, as I talked about in the presentation, is we have a rock-solid capital structure. And so, as we move forward, we want to balance between the deleveraging and some of the optionality we will have going forward. The most important thing is we will continue as we've demonstrated to be prudent in our capital allocation strategies.

Aleksey from KeyBanc asked about the importance of guiding 9% R&D as a percentage of sales and whether this drives outperformance. Could you provide some insights on that?

Yes, multiple different ways to think about that number and why the number has been growing over time. The first one is the complexity of the challenges our customers are inviting us to collaborate on is, as I mentioned, growing. You should also know that because of that we are invited to collaborate with our customers earlier in their technology process development cycle. So all of that contributes to that greater spend. And then there's just the number of new opportunities ahead of us. The fact that we expect Entegris content per wafer to continue to grow is just indicative of the fact that our customers see the value that Entegris can provide, see the value of that end-to-end solution capability that we are marketing. They understand that it's going to be key to not only device performance, but also time to yield and ultimately time to node transition, all of which are extremely important for our customers. But to do that and to really realize the opportunities ahead of us, we have to be willing to invest in R&D. And that's something that we did in the current downturn in 2023. And that's the level of investment that we are committed to maintaining and increase for the years to come.

Okay. Charles Shi. Can you talk about the market and revenue progression as we go through 2024? And then I'll add a little flavor on that. And he asks about, okay, so we talked about MSI and CapEx for this year. How do you see that kind of going forward as well?

Yes. So, first, let's start with the first quarter, right? I mean, we are guiding sequentially down 4%, which is in line with normal seasonal cycles. And again, a reflection of the fact that many of our customers in advanced logic and of course in mainstream logic have indicated a sequential compression in fab utilization. From there on we expect actually a steady sequential increase in revenue as again, we expect growth in advanced logic. We expect further recovery in memory. And we expect also more stable conditions at some point in the year from our mainstream customers.

Excellent. Question from Aleksey on Taiwan, the facility there. The volumes ramping in the second half. What does that mean for the first half and where are we at with the facility?

Maybe I can take the first part. Linda, if you want, maybe elaborate a little bit on the margin impact. But let me just say that we are very pleased with the progress we have made in the construction phase of our KSP investment. Today, we have about 200 employees on site. Our internal qualifications are progressing rapidly and progressing well. And in a few cases, customer qualifications have already started. So, we expect revenue to be generated out of that facility in the second half of the year. I mean, we are already taking some orders, customer orders, but they are actually very small right now. We would expect the level of revenue from the KSP facility to reach somewhere between $40 million to $50 million for the year in 2024.

Right. So taking that to the margin side. Think about it across four quarters, in the first couple of quarters, we have cost. And then as Bertrand said, the revenues will start ramping up. That will start to offset some of that cost. So we still have a headwind from KSP in 2024, but we're starting to alleviate that as we progress through 2024, and that will continue into 2025.

And then we will ask a similar question. You talked a little bit about this, Linda, already, from Toshiya. You talked about EBITDA drivers and trends. So how would you position gross margin trends improvement opportunities going forward?

A lot of the trends that enhance EBITDA are related to the gross margin aspect. For instance, productivity plays a significant role in improving gross margin. Additionally, the volume increases are also impactful on gross margin. The volume growth contributes to EBITDA by providing leverage on sales and SG&A. As we expand and that volume increases, we will see better plant utilization. These are some of the key drivers to consider as we look at the evolution of gross margin throughout 2024.

Bertrand from Aleksey here from KeyBanc. How would you describe the opportunity in gate all-around?

So during the presentation we highlighted a number of new opportunities. Gate all-around being one of them. And this is just another flavor of those 3D architectures that we expect to proliferate in the industry in the years to come. Specifically around the gate all-around, we expect to see opportunities around new precursor materials, slurries, and other polishing solutions, as well as etching chemistries and solutions for ion implant as well. So we believe that we are in the very early innings of the adoption of that particular architecture. And as you saw in the analysis in terms of wafer content, we expect that to be a big driver for the increase. We expect to see from 5 nanometer all the way to 1.4 nanometer in advanced logic.

A little bit of a follow-up there in terms of applications. Silicon carbide, slurries and pads, what's obviously for us, silicon carbide did really well this year. Slurries any updates, any color you can provide there.

Yes. So this is a great area of focus for the company. We mentioned that today, it is still a fairly small part of our business. Think about revenue levels in the $40 million to $50 million range on an annual basis. But that business did double from 2022 to 2023, and we expect that business to continue to do extremely well. And here I'm talking really about slurries. But remember that there are a lot of other opportunities for us around power electronics. So beyond slurries, we have great opportunity for the bad solutions that really work hand-in-glove with the slurries that we are providing our customers in Power Electronics. There are also great opportunities in terms of gas purification systems and in terms of post-CMP clean. So, I think this is a market segment that is emerging, that is growing very fast, and an area where we are very focused.

Okay, next question, Linda, Tim Arcuri from UBS. How would you compare the three-year target from September 2022 to the one we provided today, EPS target. How do you compare those on a like-for-like basis?

Absolutely. Good question. So our current three-year target, if you look out to 2026, we do have less revenue. It's driven by two key factors. Number one, divestitures. So as we said, we had the 2023 divestitures which we all know about. Also, we exclude PIM as we look at this three-year target model. Secondly, the 2023 downturn has been longer than expected. So that does impact the long-term revenue number. Now, on the good news front, our divestiture program has been ahead of schedule. That's really important here. So, we got the divestitures done faster, paid down debt faster, and have a lower interest rate as a result of that. So that's really critical as we think about where we are when we look at 2026. There's a couple of other key positives. The tax rate is a bit lower and the divestitures give us a bit of EBITDA accretion. So you factor that all in and you look at 2026 and the three-year target, and the punch line is, at the same revenue levels, we are delivering more EPS. So it's a very good outcome when we look at this three-year target model.

Okay, Bertrand, David Silver has a question about how our interactions with customers are changing with these more complicated technology road maps and what we need to do more with them.

So, first of all, with the technology road maps becoming more challenging, with our customers in fact trying to accelerate the transition to new process technology, opportunity is really abound for Entegris. So, the level of engagement has increased as they see Entegris as a very unique partner, and frankly, in many cases, an indispensable partner for them to achieve new levels of device performance, acceptable yields, and again, compress time to solution. So, as I've mentioned, we are investing more in R&D. We are more specifically investing a lot in locked-in regional tech centers. We already have a very significant investment in Taiwan. We announced late 2023 a similar investment in Korea in order to again engage more effectively locally with all of the technology leaders in this space. Those local investments in tech centers are in fact a great differentiator. Very few, if any of our competitors really provide those capabilities and those options for our customers. And I think it really reinforces the quality of the customer interaction. It also speeds up the cycles of learning both for our customers as well as us for Entegris. So, we are very focused on continuing to improve the quality of this very symbiotic relation that we have developed with our customers for many years now.

Okay, so this is probably for Linda. So Bhavesh from BMO. And I'm going to combine something to this as well. So he's talking about Material Solutions down sequentially in the margins post divestiture. And how do you see Material Solutions margins going forward, obviously, we presented a pretty significant improvement in the model. So, provide some color around that.

Yes, of course. So, first of all. I think, Bhavesh, what you're referring to is from Q3 to Q4, we have somewhat flat margins. This first piece comes back to the divestitures. If you remember, Bertrand mentioned that the divestitures that took place in 2023 were all in the MS division. These divestitures had low OpEx. So while we have gross margin accretion, particularly when you look at MS on its own with these low OpEx businesses, you don't see the accretion on the division profit line. But as we go forward MS, as we spoke about earlier and as Bertrand mentioned, has tremendous opportunity. First, it's a unit-driven business. We are going to see volumes ramp up. We're going to see the benefits of that across the MS Portfolio. In addition, we will continue to invest, R&D is critical, but we will get SG&A leverage. This applies to the company as well as MS. If you think about the ramp as sales go up, something like sales and marketing is not going to increase at the same rate as our sales are increasing. So with all the opportunities around the solutions set, really the core of why we brought the divisions together, we really see this opportunity and are comfortable with how we're thinking about the longer-term margin potential for MS.

Okay. And then a little bit on this, on this on a divisional basis the progression of MC margins going forward. What are the improvement drivers for MC margins going forward?

So MC, there are a lot of similarities across the various divisions. As we said, 2024, a gradual recovery. But our long-term view on the market we've talked about and it's very positive. So there's MC will again, we have the benefit of the portfolio. And as our customers do need more filtration products, this is a very attractive portfolio, attractive from a mix perspective. And so, therefore, we will get that benefit. We'll get the volume leverage. And as KSP ramps, some of that is happening in the second half of 2024 more into 2025, that's really going to help us from a margin perspective on MC also.

So, in terms of perhaps a couple of questions regarding the CHIPS Act, Bertrand, could you provide some updates on the progress and what expectations people should have?

Yes. So, as you remember, we made a big announcement last year around an investment in a new facility in Colorado. Multiple phases to this investment. Phase 1 is the one that we initiated last year. Phase 1 is about $280 million. And we believe that this project is very much in line with the overall objectives of the U.S. CHIPS Act, which as you know, is trying to promote the development of a domestic supply chain or resilient domestic supply chain and de-risk supply chain risks for the many new fabs that are expected to be built here in the U.S. So we've been in dialogue, active dialogue with the CHIPS program office. We believe that those discussions have been very constructive and very positive. And we would update you when we have more specifics to share.

Okay, going a little bit on some of the end-markets and some of the products here, Bhavesh from BMO. We talked a lot about molybdenum, anything, any color you could add around why is that important and what does it look like going forward?

Yes. We have been talking a lot about molybdenum as an example of the new class of precursor materials that we expect the industry to turn to as they look for thinner film materials with similar or better electrical performance. We expect those materials to be first introduced in the 3D NAND architectures and then at some point in advanced logic as well. So we have been spending a lot of time positioning our solution offering with the leading 3D NAND players. Remember that we believe that we have very unique capabilities around those solid precursors, not just the ability to provide the material but also to provide an industry-leading delivery system that can very effectively deliver the material onto the wafer at a very attractive total cost of ownership. So, we believe that the 3D NAND players will likely adopt molybdenum whether they adopt this new molecule at 200 layers or we have to wait until 300 layers remains a question mark. But I think we are very, very close. And I think our confidence level has increased significantly in the last several years. So, again, this is exciting. This is one of the reasons why you see the increase in SAM in terms of Entegris content per wafer opportunity in 3D NAND essentially doubled from what it is today at 176 layers and when we think about what it could be tomorrow at 500 layers.

Yes, a little follow-up in a few questions that came through. In the last Analyst Day, we talked about the filtration benefits or in content per wafer similar to what you were just talking about. Is that the same story where the content per wafer and filtration is still very positive going forward? And what are the drivers?

Yes. I mean the story remains the same, and you can actually see evidence of that in the level of outperformance we expect to see in our Microcontamination division. The only reason we have not normalized that opportunity on a per-wafer basis is simply that it's just getting harder to do because the opportunity for us in terms of advanced filtration usage, it's not just in the fab environment, which is something that we can track fairly precisely. But that opportunity is really expanding upstream in the supply lines. And that gets actually a lot harder to track and to link precisely to a particular device architecture. As you know, in order to achieve atomic levels of purity, fab customers are increasingly asking their bulk chemical manufacturers to achieve significantly higher levels of purity. And as a result of that, we are seeing greater introduction of new points of filtration upstream in the supply lines. Those new points of filtration are using more advanced filters. And the frequency of change-outs are also increasing. So all of these are the fundamental drivers for our Microcontamination business. So nothing has changed. It's just hard for us to pin that to a particular technology node and to normalize that wafer number.

Okay, this will be the final question from Toshiya from Goldman. Obviously, debt paydown is the priority in the near term. M&A historically has been a big driver of growth for the company. So the question, Bertrand, is what are we looking for when we start to do M&A again? What are the characteristics that we're looking for in a potential target?

Look, I think we are blessed at Entegris with a very exciting platform, a platform that provides a lot of optionality. I mean, obviously, the organic growth story is very compelling. But on top of that, I think that we can certainly create additional, long-term shareholder value by very selectively going after M&A targets. This is what we've done in the past 10 years. This is what you should expect us to continue to do. And we have demonstrated that we are really good integrators of businesses. And I think what I was mentioning earlier around how well the integration of CMC has gone, it's probably the latest proof point to that statement. Having said all of that, I will go back to what Linda said our first order of priority right now is to bring the debt down. So expect us to do that and to be focused on that. But keep in mind that there are a lot of options available to us to deploy our capital and to create additional value for our shareholders going forward.

Great. Well, thank you very much for joining us on the webcast today. We will provide a recording that will go up on our website by the end of the day. If you have any further questions, please reach out to me. We really look forward to seeing many of you in the coming weeks. Thank you again and have a great day.