Entegris (NASDAQ:ENTG) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Entegris expects increased free cash flow in Q4, despite capital expenditure and working capital needs to support customer growth, with more detailed targets to be shared at their Capital Markets Day.
The company is experiencing strong growth in its microenvironment business, particularly in new fab construction and wafer protection, with a significant market share and successful expansion plans including a new facility in Colorado.
Entegris is optimistic about its filtration and purification business, as advanced semiconductor manufacturing requires higher purity standards, aligning well with their market leadership and expected growth in this sector.
Full Transcript
Sukhi Nagesh (Senior Vice President and Chief Financial Officer)
Some significant investments there to capture those opportunities. Did you have a follow-up, Pete?
Pete
Yes, very helpful, thank you. Also wanted to just ask on cash flow expectations, do you expect to deliver higher free cash flow in fourth quarter versus third quarter? I guess. Any working capital considerations to call out? And just wondering overall what is a reasonable normalized free cash flow conversion rate that you’re expecting going forward?
Sukhi Nagesh (Senior Vice President and Chief Financial Officer)
Yeah, look, we’ll provide more information on our free cash flow targets at our Capital Markets Day, but more near term for Q4, we do have some capex spending and working capital requirements to support the growth that we’re seeing from our customers. And that’s what’s embedded in our guidance that we provided to you. Thank you, Pete.
Pete
Thanks a lot.
OPERATOR
Thank you. And we’ll go next now to Mike Harrison with Seaport Research Partners.
Mike Harrison (Analyst at Seaport Research Partners)
Hey, good morning. Congrats on a nice quarter. You mentioned in APS that you were seeing good growth in microenvironment, but then you also said you were benefiting from better mix. I guess my question is, is that microenvironment business a better margin business than it used to be or should we still think of that as being kind of a below segment average margin?
Sukhi Nagesh (Senior Vice President and Chief Financial Officer)
Yeah, hey, we don’t talk about margins on a specific product line, honestly. But I think when we sell our products, we expect to get the value for our products. And most of our products have a pretty good margin structure. Dave, you want to add anything to that?
David Reeder (Chief Executive Officer)
Yeah, I think just talking briefly about the microenvironments business. When you think about new fab construction and think about those fabs that need overhead transport for wafers for the protection, security, and the contamination control environment of those wafers. We invented the FOUPs, you know, 30 plus years ago as a company. That’s an area where we have a very significant market share in that market. It is a market that is growing meaningfully, and that’s an area where we’re participating as you would expect as the market leader in that space.
So quite happy with that business and the way that it’s growing and the way the team is executing. And we look forward to ramping that Colorado facility where we’re going to get a lot of those new units for the Americas. So happy with how that business is performing. Do you have a follow-up, Mike?
Mike Harrison (Analyst at Seaport Research Partners)
Yeah, just another one on APS and the filtration and purification opportunity. You guys in the past have projected that advanced nodes would be kind of multiples of prior nodes in terms of the purity requirements and the revenue associated with that. As you’re seeing some of these new nodes actually move into production and starting to move into higher volume manufacturing. Just curious how the filtration and purification revenue is comparing to your projections.
Is it tracking expectations or is it maybe even a little bit better than you anticipated?
David Reeder (Chief Executive Officer)
You know, I think when you think about, you know, migrating down to 2 nanometers and even below, I mean 2 nanometers is 20 angstroms and a molecule, you know, a large molecule, is about five, five angstroms. So I mean you’re essentially down at the atomic scale. I know we’ve talked about it a while, but we’re truly down to the atomic scale. I think contamination requirements have increased something like three orders of magnitude over the last 25 years.
It’s incredible how tight the controls are for contamination for the latest generation of semiconductor manufacturing. And so as the leader in filtration and purification, we think that bodes well for us. We’ve talked about this for a long time about how advanced manufacturing drives higher requirements both on the material side so that you can enable performance and on the purity side so that you can protect yield. And I think both divisions, you’re starting to see them, you know, really come together from a company perspective where you can no longer just worry about one.
Increasingly you need both of those divisions to have a successful process. And so the promise of the business looks like it’s finally coming to fruition. I think you’re seeing that on the contamination control side as you referenced. And we’re very happy with the performance and trajectory of the business and we certainly look forward to talking more about that at Capital Markets Day. Thank you.
OPERATOR
Thank you. And gentlemen, it appears we have no further questions this morning. So that will bring us to the conclusion of Entegris third quarter 2026 conference call. We would like to thank you all so much for joining us today and wish you all a wonderful day. Goodbye.
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