Entegris, Inc. (ENTG) Q1 2025 Earnings Report, Transcript and Summary

Good day, everyone. Welcome to the Entegris First Quarter 2025 Earnings Conference Call. At this time, all participants have been placed in 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.

Good morning, everyone. Earlier today, we announced the financial results for the first quarter of 2025. 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 these risks and uncertainties is contained in our most recent annual report and subsequent quarterly reports 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 in Regulation G. You can find reconciliation tables in today’s news release as well as on our IR page at our website at entegris.com. On the call today are Bertrand Loy, our CEO; and Linda LaGorga, our CFO. With that, I’ll hand the call over to Bertrand.

Thank you, Bill, and good morning. Our first quarter revenue grew 5% year-on-year excluding divestitures, slightly below our guidance range. Gross margin, EBITDA margin and non-GAAP EPS were at the midpoint of guidance. Taking a closer look at our quarterly performance by division, Materials Solutions sales were up 8% year-on-year excluding divestitures. As expected, CMP slurries and pads delivered strong year-on-year growth, up almost 20%. Advanced Purity Solutions sales were up 3% year-on-year. This growth was driven by solid demand for our micro contamination control solutions, offset by a sharp contraction in FOUPs and fluid handling revenue. In the quarter, we also continued to make solid progress on several fronts. At our new Colorado manufacturing site, we are on-track with initial equipment qualifications and our first milestone associated with our CHIPS Act grant now complete. We expect to initiate customer qualifications in the second half of this year. Our facility in Kaohsiung, Taiwan also continued to make progress in the first quarter, and we expect to complete most of the liquid filter qualifications by the end of this year. These facilities are good examples of our strategy over the past decade to invest in a broad global manufacturing footprint, offering redundant manufacturing sites for our major strategic product lines. In addition, we have developed well-integrated supply-chain clusters around our largest manufacturing centers. For example, approximately 90% of the raw materials used by our Yonezawa plant in Japan comes from Japanese supplies and our KSP site in Taiwan uses approximately 90% regional suppliers. Likewise, once up and running, we expect our Colorado facility to rely predominantly on U.S. suppliers with nearly 95% of its needs served from domestic suppliers. You can expect us to continue to build on this strategy and evolve our business model to better serve our global customers, to shorten our lead times and derisk our supply chain. In a current trade environment, having a comprehensive global manufacturing footprint with regionally integrated supply-chains represents a significant strategic advantage. And at Entegris, all of the necessary building blocks are in place. We now need and will capitalize on our global manufacturing network. During this uncertain time for the semiconductor industry, we continue to prioritize engagement with our customers to help enable their technology roadmaps. On that note, we are making good progress ahead of commercial volumes of moly deposition materials. We have excellent engagements with all major 3D-NAND players and we are very pleased with the POR wins we have achieved to-date. Our moly deposition film offers the best film conformality and the best cost of ownership in the industry. In addition to the film material, we are also making great progress in developing novel wet-etch chemistries for moly-etch as an alternative to the current dry-etch process the industry is using. Both opportunities are very promising. It will be first adopted in 3D-NAND manufacturing and in a few years in DRAM and Advanced Logic. Another recent win I would like to highlight is with IPA purifiers. Customers in Korea recently came to us concerned about trace metal contamination in IPA chemistries that impacted yields in HBM production. Our teams were quick to respond and promptly developed the required solutions. This is the perfect example of how our customers use Entegris’ unique capabilities to solve emerging complex yield and process challenges and how we continue to increase our served market over time. As these wins illustrate, we are very well-positioned to capture incremental content per wafer and continue to outperform the market in the years to come. Looking forward to the rest of 2025, the environment created by new tariff regimes is the source of significant uncertainty and makes it very difficult to precisely quantify the direct and indirect impact on our customers and on our business. In that context, we are providing a broader than normal revenue guidance for Q2 and will not update our 2025 outlook for now. That said, in this dynamic environment, you can expect us to remain focused on what we control, proactively adjusting our cost structure and investment levels, focusing on improving free cash flow, putting M&A on pause, staying committed to reducing our debt level. And of course, we will continue to closely collaborate with our customers by supporting their node transitions in second half of the year and by engaging on their long-term technology roadmaps. Let me now turn the call over to, Linda. Linda?

Good morning, and thank you, Bertrand. Our sales in the first quarter of $773 million, were up 5% year-over-year excluding the impact of divestitures. On an as reported basis, our sales were flat year-over-year and down 9% sequentially. Foreign exchange negatively impacted revenue by $5 million year-over-year and negatively impacted revenue by $2 million sequentially in Q1. Gross margin on a GAAP and non-GAAP basis was 46.1% in the first quarter. Gross margin was at the midpoint of our guidance range and was up sequentially driven by strong cost management across our supply-chain. Operating expenses on a GAAP basis were $234 million in Q1. Operating expenses on a non-GAAP basis in Q1 were $186 million, better than our guidance range. Adjusted EBITDA in Q1 was 28.5% at the midpoint of our guidance. The GAAP tax rate in Q1 was 11.5% and the non-GAAP tax rate was 15%. GAAP diluted EPS was $0.41 per share in the first quarter. Non-GAAP EPS was $0.67 per share at the midpoint of guidance. Sales for Material Solutions in Q1 were $341 million, up 8% year-on-year excluding the impact of divestitures. Sales were down 5% sequentially in-line with normal seasonality. Adjusted operating margin for MS was 22% for the quarter, up modestly sequentially. Sales for Advanced Purity Solutions in Q1 were $434 million, up 3% year-on-year and down 11% sequentially. The sequential sales decrease was driven by CapEx products including fluid handling products and FOUPs. Adjusted operating margin for APS was 25.4% for the quarter. The decline in margin was driven by lower volume. As we navigate this dynamic environment, we are focused on controlling what we can control, including our cost structure. For example, we’ve elected to retain approximately 75% of the previously announced $15 million of cost savings from the formation of the APS division, instead of fully reinvesting those savings. As always, we remain committed to delivering results in-line with the framework of our Analyst Publish Day target model. Moving on to cash flow. Free cash flow was $32 million. As we mentioned in our last earnings call, we are committed to improving our free cash flow margin and have made free cash flow a compensable goal for the management team and the rest of the organization starting this year. In 2025, we expect our free cash flow margin to be in the low-double-digits. Over the next several years, you can expect steady improvement as we aim at returning to levels similar to where we were pre-pandemic. One of our major focus areas is working capital optimization, in particular inventory, where we have the greatest opportunity as we look to improve lead times and optimize stock levels across our entire network. In addition to working capital improvements, we now expect our capital expenditures to be approximately $300 million in 2025, down from our previous expectation of $325 million. As a reminder, our capital expenditures are weighted more to the first half of the year, driven by strategic investments including Phase I of our Colorado facility. As an aside, I’m pleased to share that we have achieved our first CHIPS Act milestone and expect to receive $9 million in the second quarter. A quick overview of our capital structure. At the end of the quarter, our gross debt was approximately $4 billion and our net debt was $3.7 billion. Gross leverage was 4.4 times and net leverage was 4 times. Our debt is well-structured and derisked. The blended interest rate on our debt portfolio is approximately 4.9%. Since our term loan is fully-hedged, currently 100% of our debt is fixed and there are no maturities on the debt until 2028 and no maintenance covenants on the debt. From a capital allocation standpoint, our single priority remains paying down our debt. We will use all levers at our disposal to reduce our gross leverage to below 4 times. Looking forward, I believe we are well-positioned to navigate through the dynamic tariff and economic environment. We expect to see a temporary impact to our topline related to our sales to China. We are actively working with our customers and suppliers to mitigate to the greatest extent possible the direct tariff impact by leveraging our global footprint and regional supply-chain. Moving on to our Q2 outlook. We are widening our revenue guidance range to reflect our current assessment of the direct tariff impacts. We expect our Q2 sales to range from $735 million to $775 million. Excluding China, our business remains strong. Let me be clear. The lower sequential sales guidance is driven entirely by the uncertainty of shipments of our U.S. made products into China. We expect a gross margin of approximately 45%, both on a GAAP and non-GAAP basis, GAAP operating expenses of $225 million to $229 million and non-GAAP operating expenses of $179 million to $183 million. We expect EBITDA margin of approximately 27.5%, net interest expense of approximately $50 million, and we expect our non-GAAP tax rate to be approximately 12% due to the expiration of a tax reserve, GAAP EPS between $0.34 and $0.41 per share and non-GAAP EPS between $0.60 and $0.67 per share. We also expect depreciation of approximately $51 million. I’ll now hand it back over to Bertrand for some closing remarks.

Thank you, Linda. In closing, the industry environment remains dynamic. In that context, we will remain focused on what we can control, engaging with our customers, managing our cost, delivering strong profitability, improving free cash flow and paying down our debt. In 2025, we are prioritizing critical investments that enable our customers know transitions and technology roadmaps needs. Looking further out, we continue to have high-confidence in the strong long-term growth outlook for the semiconductor industry and for Entegris. Our customers’ technology roadmaps are calling for new materials and ever greater purity levels to improve device performance and achieve optimal years. Our expertise in material science and material security is increasingly valuable. The R&D investments we are making are translating into key wins in new nodes and are expected to fuel our growth and market outperformance in the years to come. With that, operator, let’s open the line for questions.

Absolutely. The floor is now open for questions. [Operator Instructions] Our first question is coming from Melissa Weathers with Deutsche Bank. Please go ahead. Your line is open.

Thank you so much for letting me ask a question. Good morning, everybody. I guess on the comments that you guys have made on the direct impacts from tariffs and China and your outlook, could you help us understand, so is the main message that excluding those direct impacts, everything else is pretty much going as planned as you talked about last quarter, or just help us if we can get a little bit more context on how you’re guiding and how much of that is tariff impact and how much of that is any cyclical weakness? Thank you.

Yes, good morning, Melissa, and good question. And, let me put actually this Q2 guidance in the right context and I may provide a little bit more details than I usually do, but I think the circumstances wants that. So, let’s start with a few facts. I mean, entering Q2, our business is strong. The fill rate is steady. Quarter-to-date, our book-to-bill ratio is strong. It’s actually approaching 1.2. So, that’s good. That’s actually very good. Another important fact, ex-China, our second quarter forecast is also solid. Actually, we expect the ex-China business to be up sequentially in-line with the industry trends that we expect in Q2. Specifically, we expect sequential growth in our consumable product lines consistent with the expected sequential improvement in wafer starts. That’s going to be offset slightly by the sequential contraction in our CapEx product lines and that’s also consistent with the expected sequential contraction in the industry CapEx. But again, net-net, our ex-China business is solid and is expected to be up sequentially. So, that’s good as well. So, and then to your question, I mean, we certainly have this China tariff situation to deal with. China introduced new tariffs on imports from the U.S. Our products unfortunately do not qualify for the temporary exemptions granted by the Chinese government. And as a result, as of right now, Chinese customers have put inbound shipments from U.S. on hold. So, the impact for us, just for Q2, worst case could be up to $50 million again just for Q2. And, that’s the bad news. Now, the good news, as Linda stated multiple times in her prepared comments, is that we have alternate Entegris manufacturing sites across Asia that our China customers could use. Actually they have started qualifying them and we are ourselves in the process of hiring and training additional staff, ramping up our local supply-chain. So realistically, we expect to be able to mitigate some of that impact in Q2 and that gets you somewhere at the midpoint of that guidance range for Q2. And of course, we expect to make more progress in Q3, Q4. And at high-level, we expect these initiatives to have substantially mitigated the China tariff headwinds by the end of the year. So, hopefully, Melissa, that provides the context you were looking for when thinking about the overall business trends and going into Q2.

Great. Thank you for all that color. That’s really helpful. And, I totally understand you guys pulling your 2025 guide given that uncertainty. Maybe a bigger picture question then. On the moly side, it was good to hear that you’re engaged with all of the main memory players on moly. But, given the macro uncertainty and the tariff uncertainty, has there been any change in your customer discussions about their willingness to adopt moly? How has the timing of that moly ramp changed in your mind at all?

Well, it’s a great question. I think that despite the uncertainty that we are all experiencing, the good news is that all major node transitions are still on track. It’s true for the moly adoption in memory. As a matter of fact, all our discussions with the market leaders in 3D-NAND suggests that actually not all of them, but most of them will be transitioning to moly in the second half of the year. So, it’s good for moly, but that statement also applies to Logic. In Logic, we also expect N2 and 18A to ramp into second half of 2025. And, for all of those node transitions, both in Logic and Memory, we are very well-positioned and we are ready to capitalize on the incremental opportunities in back half of the year. And then of course, as more wafers are produced at those nodes going into 2026, that should have a positive impact on our business in 2026 as well.

Great. Thank you.

We’ll take our next question from Charles Shi with Needham. Please go ahead. Your line is open.

Hi, good morning, Bertrand, Linda. Maybe I want to go back to the question on China tariff retaliatory tariff impact on the loss of sales for Q2. I recall going back a few quarters, you were expecting maybe China revenue as a percentage of the total to go above 20% from somewhere around the mid-teens given the increased production, semi-production in China. But, how much of the $50 million loss, let’s say, in Q2 is recoverable, let’s say, in Q3 and Q4? Because do your Chinese customers really have alternative or do you think that there will be some market share loss going forward? The reason why I’m asking this really is about how much of the loss is irreversible and some how much of that you think is reversible, maybe give it a two or three more quarters? Thank you.

Yes, Charles. Fair question. We believe that this is a temporary impact, as Linda mentioned, and I absolutely believe it is. As we’ve said many times before, our China business is strong. There are competitors in China for sure, but we believe that we’ve been competing very effectively. Our brand is strong. We continue to be viewed as valued partners by our customers. And, remember that our solutions really help our customers improve their device performance, improve their yields. This is really at the heart of our value proposition. And, this value proposition is appreciated in China as it is anywhere else in the world. So, we are in active discussions with our China customers. And, when I say China customers, by the way, we’re talking about international companies operating in China as well as domestic Chinese customers, right? And, they have practical experience of some of our other Asia manufacturing centers. They just need to fully qualify certain products coming from those centers and start placing their future demand on those manufacturing centers. So, we know it’s going to take a little bit of time, but we believe it’s entirely recoverable.

Got it. Thanks. Maybe a follow-up question. Really I want to go back to the Q1 results. And, I think we focused a lot on the Q2 what the tariff impact could be on the Q2 guidance, but your Q1 results still coming a little bit below, I believe, the low-end of the guidance, which you guided in February. Wonder, what exactly happened? Why it came in a little bit below your expectation? And, I think you mentioned the CapEx products, fluid handling, FOUPs were some of the weakness, but what exactly you’re seeing, in terms of customer behavior assuming Q1 that’s all pre-tariff, right? Thank you.

Yes, Charles. Yes, so the Q1 performance has nothing to do with tariffs indeed. The topline came in slightly below guidance. And as we’ve said, it really comes from much softer demand than originally expected for our fluid handling and FOUPs products. You know that these products, I mean demand for these products is linked to new fab construction. We have seen significant slowdown in new fab construction activity in all markets frankly, but that’s especially true in China, in Japan, in Korea. And as a result, we’ve seen a much more significant contraction in the revenue for those products in Q1. Having said that, remember that we grew in spite of this CapEx headwind. We grew 5% year-on-year. As I mentioned, strong performance from Materials Solutions up 8%, strong performance of APS, I mean, micro contamination had a very solid quarter. It was offset obviously by the decline in the CapEx products that I mentioned. And then finally, one thing that I just want to be sure you remember Charles when you’re looking at our Q1 performance, especially the year-on-year, remember that there were new U.S. export restrictions announced in December and we had quantified that impact to be about $10 million on a quarterly basis. So, we saw that in Q1. And then, we had some adverse impact from foreign exchange as well. And, I think Linda mentioned that year-on-year was about $5 million. So certainly, those last two points don’t explain the midst, right? I mean, we’re expecting these impacts when sending guidance. But, I think it’s useful context when you look at Q1 results on a year-on-year basis. And, I would argue that the overall performance is pretty solid in that context.

Thanks, Bertrand.

We’ll take our next question from Atif Malik from Citi. Please go ahead. Your line is open.

Thank you for taking my questions. The first one for, Linda. Linda, can you walk us through, you talked about the revenue impact from China, but on the gross margin, the 100 basis points, sequential decline to the June quarter. Can you help us understand the puts and takes, on the cost side, impact from tariffs?

Yes. Thank you for that question. So let me first, since you framed it, let me frame it overall. We’re in a dynamic environment and our guidance is capturing that dynamic environment. To your point on how the tariffs play into gross margin, we do have tariffs on U.S. imports. And, we do import some raw materials and finished goods. So, we are very confident in the plan we have to mitigate those tariff impacts over time on U.S. imports through select pricing surcharges, different duty programs, focus on regionalized in sourcing to limit that tariff impact. But in the near-term, there’s likely to be some modest impact to our Q2 gross margins as we progress our mitigation plans, because there is a bit of a timing lag and this is reflected in our guidance. So, getting back to a little bit more of a big picture between Q1 and Q2 on the margin, you’re correct in saying there’s a bit of an impact from tariffs. But as we look across gross margins and look forward, there’s going to be puts and takes. So, I want to bring you back to looking forward, there’s the volume leverage as we progress throughout the year. We’re going to continue to focus on productivity. We’ll continue to have inefficiencies this year in Taiwan and Colorado, but we’re going to get most of that behind us by 2026. And we’re going to continue to manage our cost structure including gross margin in the context of our Analyst Day. So, while there’s slightly lower gross margins in Q2, we still expect that in 2025, our overall gross margins will be up modestly compared to 2024.

Very helpful. And one for Bertrand. Bertrand, I fully understand, you guys are not commenting on full-year given the macro uncertainty. But just kind of broad strokes, how do you see the CapEx environment going on for second half? Some of the CapEx peers have talked about maybe flattish outlook for CapEx in second half. Some of them are down in second half versus first half. If you can just kind of give your big picture thoughts on the CapEx trend.

Yes. I mean, look, I mean, remember that when we started the year pre-impact from tariffs and the growing uncertainty around that, we probably already had some fairly conservative expectations when it comes to the industry CapEx. I would argue that the current prevailing uncertainty is, in my opinion, going to put some additional pressure on CapEx in the second half of the year. Having said that, we expect that to be somewhat offset by the steady improvement that we expect to see in wafer starts. So again, all of that is are high level considerations that do not really incorporate any considerations and any changes coming from the uncertainty around the tariff and the indirect impact from tariffs.

Thanks.

We’ll take our next question from Timothy Arcuri with UBS. Please go ahead. Your line is open.

Thanks a lot. Bertrand, I also wanted to ask about, how quickly this revenue can come back. I mean, why is this not the match that lights the fire for them to qualify local alternatives? I know that not all of what you sell, there’s not a local alternative for, all of what you sell, obviously. But there are local alternatives for some of what you sell. And so do they actually have enough inventory on hand to just outright be able to continue to operate with China not accepting shipments? I mean, this is a pretty big number relative to what your China exposure is. So, yes. Thanks.

Yes, look, it’s a fair question, Tim. I think the burdens could be on us to be very proactive and very effective in transitioning the China demand to some of those alternate Asia sites. I think that those Asia manufacturing alternatives have a lot to offer. I mean, think about the big investment we made in Taiwan, recent investments in Japan and Korea. So, we are really offering state of the art manufacturing capabilities, we believe. We are offering, again, products that are very uniquely enabling device performance and very uniquely enabling the yields of our customers and that has value. And we certainly hope that this is a point of view that our China customers share with us. And again, all indications are based on the discussions we’ve been having with them in the last month, all indications are that they are very eager to quantify those alternatives. I mean, the proof will be in the pudding obviously, but, I am optimistic.

Okay. Got it. And then, just a two part question. So one, what is the clean revenue guide then for June? So, is the clean revenue guide something like $800 million minus this issue? So, is that the baseline that we should then kind of I mean, obviously, we have to assume how quickly this 50 comes back. But is the $800 million, like that’s the real sort of demand based guidance for June? That’s the first part of the question. And then the second part is, what is your NAND exposure right now? Do you think any of the weak June quarter is related to NAND? Thanks.

Yes. So in reverse order, the NAND exposure right now for us is about 10% of our revenue roughly. And in terms of breaking down our Q2 guidance between China and non-China, I mean, I think we’ve provided a lot of details. I’m not going to go into a lot more details than my answer to the first question. But directionally, the way you think about it is not too far off.

Okay. Thank you.

We’ll take our next question from Chris Parkinson with Wolfe Research. Please go ahead. Your line is open.

Great. Thank you so much. You hit on a few of these, but just to dig down a little bit deeper. In terms of your second half assumptions of just what you’re looking at from the customer level, do you sit on some non-tariff related factors, specifically, moly, no transitions. Is there anything that has actually changed in the last, five to six weeks that would ultimately, further evolve your views on those? And then perhaps just a quick update on the Taiwan ramp as well would be very helpful. Thank you.

Yes. So, in terms of the benefits that we expect to get from the node transitions, as I said, we are very encouraged by our recent discussions with our customers. All of the major node transitions we’re expecting in memory and logic seems to be still on time. And that’s positive because it provides an opportunity for us to increase our content per wafer and that should actually help us sustain very attractive revenue levels in second half of the year. Having said that, I mean, you’re right that today there’s still a lot of unknown around the indirect impact coming from tariffs. I mean, there is a recession which usually could correlate with a slower demand environment for semiconductors, but nobody has been able to really quantify that and I’m certainly not equipped to do that either. So that’s something we’re going to be obviously keeping an eye on. And then there was a third part to your question, which I forgot.

Taiwan.

Taiwan, yes. So Taiwan, yes, we’re making actually really good progress in our Kaohsiung facility. Remember that in 2024, we completed a number of product qualifications, high purity containers, deposition materials, and we initiated qualifications for liquid filters. In 2025, the focus is to complete the remaining qualifications for all major liquid filters. And when it’s all said and done, I would say that I would expect the run rate, the revenue run rate exiting 2025 out of Kaohsiung to exceed $120 million. Remember, the last year, the revenue on a full-year basis was something closer to $15 million. So, a lot of progress is expected in 2025.

That’s very helpful. And just in terms of the intermediate term, obviously, once again, I understand the world is changing, but as we sit here today, how are you thinking about the U.S., market just given the rhetoric of the current administration, trade, the potential for increases in foreign investment. Any updated thoughts just holistically on those topics would be helpful and just how that relates to your thoughts on the Colorado Springs opportunity? Thank you.

Yes, that’s a fair question. I think this is something that we are keeping a very, very close eye on external market research and our own views is that the new fab construction activity will be significantly down this year in 2025. It’s true, as I mentioned, in China, Japan, but also will be likely true here in North America. So right now, when it comes to our Colorado investment, we are going full speed ahead with our Phase I investment. We have actually hit a number of milestones. So, feeling really good about the progress and we’re going to be starting customer qualifications in the second half of this year. We expect production late this year, early next year. Now when it comes to the timing of Phase two, the phase so the next phase of investment, we’re going to be looking at the level of new fab activity in the U.S. We’re going to take that into consideration and we will finalize our decisions later this year. So, no decision at this point.

Very helpful. Thank you so much.

We’ll take our next question from John Roberts with Mizuho. Please go ahead. Your line is open.

Thank you. Sometimes you characterize the business at a high level in terms of mainstream versus advanced applications. I assume advanced is not that affected by China or much less affected, but maybe you could just give us kind of the tone of business in those kind of two big buckets?

Yes, I mean, look, our advanced logic business remained very, very strong. I mean, if you look at our Q1 performance, our revenue in Taiwan was very strong year-on-year as we would expect. And as we capitalized on increased demand linked to AI and advanced logic application. But it’s true that we continue to face some headwind from still fairly reduced levels of operations in mainstream fabs and it was true pretty much around the world, including China in Q1?

Yes. And then I think the public comment period ends today for the new semiconductor tariffs. Have the consultants summarized that for you? Or is there anything that kind of maybe sticks out as unexpected in what may have been submitted in terms of public comments?

No. As I said, I think right now there’s just a lot of unknown, a lot of uncertainty. I think most of our customers are taking a very prudent approach frankly when they think about the balance of the year. And that’s the reason why we didn’t feel equipped to update our annual guidance. I think hopefully things will settle down and hopefully in a few months we will be in a better position to update our full-year guidance.

Thank you.

We’ll take our next question from Mike Harrison with Seaport Research Partners. Please go ahead. Your line is open.

Hi, good morning. I was hoping we could dig in a little bit on the growth that you’re seeing within the micro contamination control portion of the APS segment. I feel like sometimes you have pretty good visibility on your ability to grow in that business. How is visibility today compared to what you think of as normal? Are you seeing any delays or changes in customer order patterns? Any change in filter usage or anything that suggests that maybe your customers are trying to thrift or extend the life of some of those filters? Any color there would be appreciated.

Yes. It’s a good question, Mike. I think you know the answer to the question. I think in advanced logic, there’s still this intense focus on defect management, which is really driving the right behaviors when it comes to using the most advanced filters proactively changing them and doing the right level of preventative maintenance. We are seeing that same behavior now in HBM and I mentioned that in my prepared remark highlighting a new IPA purifier opportunity. So, it’s great to see that as device complexity increases, we are starting to see a greater focus, a greater interest in the micro-contamination control solutions. In the case of this HBM opportunity, we were asked to help reduce the level of trace metal contaminations from three parts per trillion to something less than one part per trillion. I think our solutions actually help the customer get 2.5 parts per trillion, which put that in context, is about half a drop of water in 20 Olympic sized swimming pools. So, those are the types of solutions that we are developing. We are very proud of the value proposition that our products offer. And we’re pleased to see this greater level of focus on purity. But you’re right that when utilization levels are low as they are right now in mainstream, customers will try to stretch the lifetime of the filters. And that’s one of the many reasons why our mainstream business has been sluggish and frankly in the last couple of years now.

All right. And then for Linda, I know you don’t typically talk about the FX impact. You mentioned, I believe, some top line impacts in the first quarter. But with the big swings that we’ve seen in the dollar, can you talk a little bit about the impact you might expect to see in the second quarter, in other parts of the P&L and at the EBITDA level? Is that something that’s leading to some margin weakness in the second quarter as well?

Yes. Thanks, Mike. First, historically, we have not had a meaningful impact on our business from FX. And again, you’re asking about other parts of the P&L, but as I mentioned on the sales side, greater than 75% of our sales are USD. When you get below sales, into the gross margin, which could flow down into EBITDA, when we do have significant and fast moves, we do see some impact, but it has been manageable. So there could be a little bit of impact in Q2, but that is not the primary reason why I’m projecting what we’re projecting for Q2 in our gross margin. As I said, primarily I’d focus on some of the volume deleveraging and then the impact of the direct tariffs from U.S. imports and a bit of a timing lag.

Thanks very much.

We’ll take our next question from Aleksey Yefremov with KeyBanc Capital Markets. Please go ahead. Your line is open.

Thanks and good morning, Bertrand. This is Ryan on for Aleksey. I just wanted to ask one on China first. Did you guys see any evidence of pre-buying, kind of ahead of all the restrictions that have gone in? I understand you mentioned that they’re eager to qualify, some of your product from alternative sourcing. But just wondering if there was any pre-buying you saw ahead of all this?

No. We didn’t really see much of that. And when it comes to Q2, obviously, as I said, I think right now all of our shipments ex U.S., are on hold. So, there is absolutely no pre buying going on right now. And there was none of that in Q1 either.

Understood. Okay. Thank you. And then I just wanted to ask on Advanced Packaging. I mean, it seems like growth is kind of accelerating across the space. Was hoping you might be able to remind us what the size of that business is for you today, maybe what growth kind of looked like in 1Q and kind of what your outlook is like? Thank you.

Yes. Good question, Ryan. So Advanced Packaging for us is still a fairly small market, right? But as we have mentioned multiple times, it’s growing very fast. It actually did more than double in 2024. We saw actually a doubling in Q1 versus actually more than a doubling in Q1 of this year versus Q1 of last year. When we think about the full-year 2025, we expect this business year-on-year to grow more than 25%. And the two big drivers for us in ‘25 are expected to be of high viscosity dispensed solutions. That’s an APS product. And then the other one would be HBM slurries for [TZ] (ph) applications. So again, feeling good about the momentum, feeling good about our ability to uncover new areas where we can contribute value, still small but growing very, very fast.

And there are no further questions on the line at this time. I’ll turn the program back to Bill Seymour for any closing remarks.

Thank you for joining our call today. Please reach out to me personally if you need to follow-up. With that, have a great day and you can disconnect.

Thank you. This concludes today’s Entegris first quarter 2025 earnings conference call. Please disconnect your line at this time and have a wonderful day.