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Ladies and gentlemen, again, thank you for your continued patience. Your meeting will begin shortly. Again, if you do need assistance at any time today, please press star zero, and a member of our team will be happy to help you. Thanks again, everyone.

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Welcome to the integris third quarter 2026 earnings conference call. At this time, all participants have been placed on a listen-only mode and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero. I would now like to turn the call over to Jeffrey Schnell, VP of Investor Relations.

Good morning, everyone. Earlier today, we announced the financial results for the third quarter of 2026. 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 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 in Regulation G. You can find reconciliation tables in today's news release, as well as on the IR page of our website at integris.com. Joining me on the call today are Dave Reeder, our CEO, and Sukhi Nagesh, our CFO. With that, I'll hand the call over to Dave.

Thanks, Jeff, and good morning. Integris had a strong third quarter. Revenue increased approximately 25% year-over-year to a record of slightly more than $1 billion. An adjusted gross margin improved materially more than expected, almost reaching 49%. Demand remains strong across advanced logic, advanced memory, and throughout the semiconductor ecosystem, supported by continued investment in AI infrastructure. As customers ramp increasingly complex technologies, they are relying more on Integris for technical performance, quality, and reliability. Our ability to deliver on those commitments is strengthening our customer partnerships and creating new opportunities across the portfolio. Commercial engagement across Integris has never been stronger. We are engaging earlier in our customers' technology roadmaps and seeing a clear progression from co-development to qualifications and plan of record wins. That is increasing our content opportunities and strengthening our leadership position in the industry's most important technology transitions. While the demand environment remains constructive, the quarter also reflects the progress we are making operationally. We have focused on increasing manufacturing output, improving productivity and yield, strengthening and centralizing procurement, and generating a higher return from our installed capacity. Our teams are identifying and resolving emerging constraints, and we're improving our ability to convert strong customer demand into revenue. Growth continued to broaden in the quarter with both APS and MS delivering strong double-digit growth. Regionally, growth was strongest in the markets investing at the leading edge. Taiwan remained our largest growth contributor, but we also had strong momentum across Korea and Southeast Asia. Additionally, double-digit growth in North America highlights the breadth of the growth we are seeing across the semiconductor ecosystem. Unit-driven revenue accelerated from approximately 6% in the first quarter to 20% in the third quarter. That is roughly twice the rate of underlying wafer start growth we expect for the year. This revenue growth reflects both higher industry volumes and increasing integrous content as semiconductor processes become more complex, require new materials, and new plans of record move into production. And that is only one side of our portfolio. Across our CapEx-related businesses, revenue increased from a modest decline at the beginning of the year to more than 35% growth in the third quarter, particularly with respect to WFE. We anticipated some of this strengthening and have been working for several quarters to unlock the significant embedded capacity across our manufacturing network by adding headcount, improving productivity, and increasing inventory to better support customer demand and manage lead times. Those efforts delivered in the third quarter. Our teams increased production, exceeding our expectations, and converted more backlog into revenue, resulting in growth above expectation. Our commercial activity is also translating into tangible wins across the portfolio. Let me give you a few examples. In APS, we recently won a significant EUV filtration application at two nanometers. In MS, we earned an advanced materials plan record with a major smartphone and technology provider. And additionally, we won multiple CMP plans of record in the quarter with leading memory providers. These new plans of record are important proof points. They span both of our segments and multiple technology applications, demonstrating the breadth of opportunities we can address as semiconductor technologies become more complex. As these design wins move into production, they expand Integris' content opportunity and support future growth. Reflecting the strong demand, Book the Bill remained significantly above 1, with backlog up more than 35% sequentially and more than doubling compared to last year. Customers are also providing longer planning horizons, giving us greater visibility into their capacity ramps and the Integris content required to support those ramps. Turning to profitability, We delivered another quarter of adjusted gross margin improvement, reaching 48.9%, while adjusted EBITDA margin exceeded 30%. Adjusted gross margin has expanded more than 500 basis points from a year ago and reached the highest level in more than 25 years. This improvement reflects higher volumes, improved yields, and our continued focus on productivity. They were also achieved despite continued investment to support future incremental customer demand and higher performance-based compensation. And these strong results are independent of any material pricing benefit. The operational improvements we are making are strengthening the underlying earnings power of the business and reinforcing our confidence in additional margin expansion over time. Stronger earnings are also translating to the stronger cash generation and faster deleveraging. During the quarter, we fully repaid the 2029 term loan, another important step in strengthening the balance sheet and increasing our financial flexibility. Sukhi will provide more detail in the financial section. Turning to the outlook, the industry backdrop remains supportive of continued growth and is consistent with the framework we've discussed throughout the year. We expect approximately 8% wafer starts growth in 2026. Leading edge logic and memory have experienced the strongest growth this year with utilization at advanced nodes remaining high. We are also seeing gradual improvement in mainstream utilization, although that part of the market remains the most underutilized. Industry CapEx trends continue to strengthen. Projects are progressing from construction to equipment installation and ultimately to production. The breadth of our portfolio allows us to create value across multiple phases of the investment cycle, as customers build and equip new capacity and as those fabs move into production. The areas attracting the greatest investment, particularly advanced logic and advanced memory, are also among the most materials and purity-intensive areas of semiconductor manufacturing. As technology complexity increases, so do the opportunities for greater integris content, reinforcing the value of our full portfolio. We are encouraged by what we are seeing across the two drivers of integris' business, Healthy wafer demand and significant investment in the capacity that will then subsequently support future wafer growth. In summary, the third quarter was another strong step forward for integris. Growth is accelerating and broadening across the business. Customer engagement is translating into new positions of record, and improved execution is translating to stronger financial performance. The progress we are making is tangible. We are winning with technology and solutions, increasing the output and productivity of our manufacturing network, and strengthening our financial position. There is more work ahead, but the team is delivering against our priorities, and I am encouraged by the progress we've made over the last 62 weeks. I want to thank our employees around the world for their hard work, dedication, and commitment to our customers. And before I close, I want to remind you that we will be hosting our Capital Markets Day on November 9th. and we look forward to seeing many of you there. We have focused today on our third quarter performance and the progress we are making across the business. At our Capital Markets Day, we will discuss what we believe Integris is uniquely positioned to capitalize on the next phase of semiconductor growth, our AI native strategy and our roadmap for long-term value creation. We look forward to seeing you there and if you have any questions regarding the event, please reach out to Jeff. With that, let me turn the call over to Sukhi to discuss the financials.

Thanks, Dave, and good morning, everyone. Q3 results provide strong evidence of the operating leverage and earnings power we see in the business. We delivered record sales of $1.006 billion in Q3, an increase of 25% year-over-year and 14% sequentially. The strong revenue performance was broad-based, with APS up 31% and MS up 16% year over year. GAAP net income was $158 million and non-GAAP net income was $190 million, an increase of 73% from a year ago. Both our top and bottom line results exceeded our guidance. GAAP gross margin was 49.7% and adjusted gross margin was 48.9%, an improvement of 130 basis points sequentially and 530 basis points year-over-year. Sequentially, adjusted gross profit increased approximately 17%, outpacing a revenue growth of 14%. The sequential underlying margin improvement reflects higher volumes, fixed cost absorption, improved yield and productivity. This gross margin improvement also offset a 30% year-over-year increase in direct factory headcount as well as higher performance-based compensation and other investments to support customer demand. Operating expenses on a GAAP basis were approximately $270 million and approximately $223 million on a non-GAAP basis, or 22.1% of sales. The year-over-year increase primarily reflects higher performance-based compensation associated with our stronger results. Adjusted EBITDA was $303 million or 30.2% of sales compared with 27.3% a year ago and 28.4% in the second quarter. That represents approximately 290 basis points of year-over-year margin expansion. The GAAP tax rate in Q3 was 15% and the non-GAAP tax rate was 16%. GAAP diluted EPS was $1.03 per share, and non-GAAP EPS was $1.23 per share, an increase of 71% year-over-year. The combination of approximately 25% revenue growth, 530 basis points of adjusted gross margin expansion, and 71% growth in non-GAAP EPS demonstrates the earnings leverage we are generating. as improved execution translates higher volumes into stronger profitability. Now switching to our segments. Material Solutions delivered third quarter sales of $404 million, up 16% year-over-year and 9% sequentially. Growth accelerated meaningfully from the second quarter, and the segment delivered its highest quarterly revenue since the third quarter of 2023. This growth was broad-based and for all major product categories and regions, reflecting stronger production volumes at advanced nodes and increasing demand for materials used to manufacture at the leading edge. The strength was evident across CMP consumables, advanced deposition materials, specialty gases, and coatings. MS adjusted segment margin was approximately 20.4%. Higher volume and improved productivity drove the margin expansion, offset by continued investments in capacity and resources needed to support customer demand. APS delivered Q3 sales of $605 million, up 31% year-over-year and 18% sequentially, reaching a new quarterly record. Growth was broad across most products and geographies, reflecting the dual exposure of the APS portfolio. Higher production, advanced nose transitions, and incremental contamination control requirements drove increased demand for our filtration and purification products, while accelerating capital investments primarily centered around leading-edge capacity drove demand for our microenvironments, fluid management, and capex-related products. Adjusted operating margin for our APS segment was 34.4% for the quarter. expanding both year-over-year and sequentially. The improvement was driven by higher production volumes driving operating leverage along with productivity improvement and favorable mix. These benefits more than offset higher performance-based compensation and the additional resources we are adding to support customer demand. Switching next to cash flow and balance sheet, we delivered record operating cash flow and record free cash flow of $224 million in the third quarter, or 22.2% of sales. This reflects higher earnings, lower capital spending and continued working capital improvements. The strength of our cash flow generation enabled us to fully retire our term loan in Q3 ahead of schedule. As a result, net leverage improved to 2.9 times at the end of Q3. We now expect to end the year at approximately 2.7 times, reflecting more than a turn of improvement from where we began the year. The combination of stronger earnings, improved cash generation, and debt repayment is increasing our financial flexibility and positioning us to invest in future growth opportunities while maintaining a disciplined approach to capital allocation. Moving on to the details of our fourth quarter outlook. We expect Q4 sales to range between $1.025 and $1.055 billion. At the midpoint, this represents a year-over-year increase of approximately 26%, building on the strong performance we delivered in Q3. Gross margin is expected to be between 49.2 and 49.7%, both on a GAAP and non-GAAP basis. At the midpoint, this represents approximately 50 basis points of improvement sequentially and approximately 550 basis points of improvement year over year. At the midpoint, we expect GAAP operating expenses of approximately $272 million and non-GAAP operating expenses of approximately $227 million, reflecting higher variable compensation and investments to support the growth we are seeing across our portfolio. And at the midpoint, we expect Q4 adjusted EBITDA margin to be approximately 31%, which represents more than 40% growth in adjusted EBITDA year-over-year, significantly outpacing revenue growth and providing further evidence of the operating leverage in our model. Additionally, we expect net interest expense to be approximately $40 million, a non-GAAP tax rate of approximately 15%, and depreciation at approximately $34 million. Based on these assumptions and approximately 154 million shares, we expect GAAP EPS between 1.09 and 1.17 per share and non-GAAP EPS between $1.32 and $1.40 per share. Finally, we expect our capex to be approximately 200 million for 2026, or about one-third lower than last year. Looking ahead to our first quarter revenue expectations, We expect the momentum to continue. Based on our current visibility, fewer days in Q1 versus Q4 and typical industry seasonality, we expect revenue to decline by a mid single digit percentage compared to Q4, but an increase of more than 20% year over year. Stepping back, the financial progression of the business is clear and increasingly visible in our results. We are translating strong revenue growth The floor is now open for questions.

At this time, if you have a question or comment, please press star 1 on your telephone keypad. If at any point your question is answered, you may remove yourself from the queue by pressing star 2. Again, we ask that you pick up your handset when posing your questions to provide optimal sound quality. Thank you. Our first question is coming from Melissa Weathers with Deutsche Bank. Your line is open.

Hi there. Thanks for letting me ask the question. Congrats on the billion-dollar mark. It's very exciting. Thanks, Melissa. So I guess if we could just unpack the upside in the quarter versus what you had guided to, I just want to understand how much of this was, like, incremental supply coming on, how much of it was demand strengthening, and, yeah, just any other help on the supply side that you can give us.

Morning, Melissa. Look, the revenue beat for the third quarter really just came down to execution. Demand was strong. The team's increased production and throughput really beyond our expectations, which allowed us to convert more demand and backlog into revenue. From a strength perspective, we saw strength across the portfolio, particularly in our CapEx-related businesses, as you would expect. Internally, we're continuing to strengthen our ability to serve That demand and that backlog that we see both today as well as in the future. Our commercial engagements remain very strong. Customers are providing longer planning horizons, longer lead times. We're continuing to win new plans of record across both segments of the business. And we're unlocking the capacity that we talked about essentially this time last year in 2025. We're improving productivity. We're increasing ultimately our output, and we're being a stronger, more responsive, more reliable partner. Sukhi, anything you'd add to that? Yeah, sure.

Hi, Melissa. In addition to the revenue growth, it really translated into gross margin expansion about 130 basis points sequentially. And that improvement was mainly due to the higher sales volume that Dave just mentioned here, which generated also a meaningful operating leverage for the company. So really, I mean, the strong production output, factory absorption, all of the yield initiatives that we're doing, lower E&O, inventory, scrap, rework, all of those things added benefit to the margin. This despite, we had higher incentive compensation, labor, and overhead investment to support the RAM. So, taking all this all together, I think we're pretty pleased with how we landed on the gross margin for the quarter. Melissa, did you have a follow-up?

I did. Thank you, guys. So, I guess I appreciate the help you're giving us on the first quarter of next year. It sounds like that might be, I don't know if it's a seasonal down or there's anything else to unpack there, but that could get greedy. Any initial outlook for how you're thinking about 2027 and any ways that we should be thinking about MSI and CapEx growth relative to WSE?

Sure. Look, for 2027, obviously we're not going to provide that guidance today, but we think the industry setup is incredibly constructive Really across all of our major demand drivers, the demand that we're seeing today gives us increasing confidence that the momentum that we're exiting 2026 with will carry over and extend well into 2027. On the unit side, industry forecasts are calling for MSI growth to broadly be consistent with what we saw this year. and ultimately all of that CAPEX that we're adding will eventually turn into wafer starts. So I think that bodes very well for MSI both from 26 migrating into 27 as well as 27 migrating into 28 and beyond. Next year on the CAPEX side, all of our indications certainly seem to point to another strong double-digit growth year for both WFE as well as for fab construction. So really, based on everything we see today and the momentum that we have in the business, we think it's a good setup for us and the industry exiting 2026 with momentum and carrying us into 27. And we'll talk a little bit more about all of that at Capital Markets Day.

We'll take our next question from Elizabeth Sun with Citi. Your line is open.

Hey, good morning. Thanks for taking my question and congrats on the good result and good execution. So I guess my first question is, you are looking at, you have like 25% year-over-year growth in Q3 and you are looking at more than 20% growth in Q4 and Q1 as well. I'm just curious, given your strong backlog, growing backlog, is there any reason for us to think that this kind of stress is not going to continue into next year? and also giving your strong backlog. Are you seeing any, are your suppliers ready for that? Any like emerging constraints on that front?

Thanks. Thanks, Elizabeth. Look, we're really, really happy with the momentum in the business. As you mentioned, Q3 plus 25% year-over-year growth at midpoint of guidance, kind of a similar number. for fourth quarter, and then also a somewhat similar number that we've kind of indicated for first quarter of next year, even with kind of seasonally down, moving from Q4 to Q1. So there's just an incredible amount of momentum in the business in the second half of the year. A little bit of that is market-driven. The lion's share of that is really our performance, and so We're pleased with the demand environment and I would say even more pleased with the way the team has responded to the initiatives that we put in place in the latter half of 2025. And those initiatives are starting to bear fruit for us here in 2026 and I think bode well for 27. From a supplier perspective, you know, if I was to broaden that out just a little bit, when you think about this time last year, I said that we had significantly greater than a billion dollars of incremental capacity in our network. I chose those words fairly carefully to indicate that we had well over for support 2027 demand and even beyond. Obviously, we'll have to spend a little bit to kind of some of those pinch points that you inevitably get, but we feel quite good about our ability to be able to satisfy the demand. From a supplier perspective, we have really been working with our customers closely to one, understand their demand, test their demand, and then take that internally compare that to our capacity and then even further take that down into our supply chain to make sure that our supply chain is also ready to be able to support the demand that we see in front of us. We feel good about that. There will inevitably be some pinch points. You know, we've already proactively identified some and we've been able to work some of those. There will be more in the future, I'm sure, but I think what we all feel good about is how we've been able to kind of ramp to where we are today, you know, identify the ramp that we need for Q4 and Q1 and now we're working on those additional pinch points. Did you have any follow-up, Elizabeth?

Yes, and thanks for the color. Then for my follow-up, maybe a high-level question. So LAM recently, they highlighted that AI is driving demand for different tiers of demand. They're talking about QLC, TLC, and Especially they're talking about SLC emerging as a new tier for AI storage in the agentic AI area. So I'm just curious for integrates. Obviously, it is good for, you know, they do talk about every point of demand shifting towards SLC. It is roughly two points more refer capacity. So that is good on a way for start site. But I'm just curious on the content side, how does Integris content varies across these kinds of different technologies?

So as you know and as we've long talked about at Integris, we welcome technology transitions. We are fairly ubiquitous. across as a provider or as a supplier to all the memory providers, as well as both mainstream and advanced logic for that matter. As the technology becomes more complex, that really gives us the opportunity to outperform with more content, more layers, as you mentioned, more wafer growth in addition to that. So we're excited to see the technology transitions that are being driven by the complexity and the performance that's required to satisfy AI, and we think that that bodes well for integris. Great.

Thanks, Dave.

Thanks, Elizabeth.

We can move to the next question, please.

We'll take our next question now from Brian Chin with Stiefel. Brian, please go ahead.

Hi there. Good morning. Thanks for letting us ask a few questions, and congratulations on the strong results. Yeah, maybe for the first question, there was some third-party reporting on MSI recently that pointed to 2026 growth possibly being in the low teens this year. which is an acceleration from that kind of prior high single-digit forecast that I think you've also cited. Do you feel this provided any tailwind to the unit-driven business segments in second half? Or to your point, Dave, about the execution and conversion being bigger near-term factors, could this pick up an MSI in the back half of this year actually provide more tailwind to you in the earlier phases of next year?

Yeah, we probably subscribe to many of the same MSI third-party reports that you do. We tend to take those reports as content and as context. MSI measures really the wafer shipments in and not the actual wafer starts and then shipments out. So there typically is a little bit of a mismatch between shipments in and then ultimately those wafers moving into production. Because of that, we believe that MSI for the year is probably going to be in kind of the mid to high single digits, call it, you know, seven, eight, you know, maybe even nine percent. But somewhere in that type of zip code is kind of our expectations for the year. We do expect it to be a little bit more weighted to the second half, probably 52% in the second half, 48% in the first half, something to that effect from an annual MSI perspective. So slightly more weighted to the second half. So we are encouraged by the trends in wafer growth. And we did see a slight pickup in mainstream. As you know, Advanced Logic, is pretty fully utilized. As you know, memory is pretty fully utilized. So we did see a little bit of pickup in mainstream, which is probably where the most available capacity kind of resides today. And we're encouraged by that. As you know, our MS business has been accelerating. So in the third quarter, it grew about 16%. on a year-over-year basis, and it's kind of continued to accelerate as we've progressed through the year. So I do think it provides some tailwinds to us, particularly, I think, the CapEx that's going into place, as that CapEx goes from kind of construction to, you know, fab, you know, build out and kit up for tools to fab production. I think that bodes well for longer-term MSI as well. So we feel like we're well-positioned. The team is performing, and customer engagement's never been stronger. Brian, did you have a follow-up?

Yeah, I appreciate that. That was a great color, Dave. Maybe going back to something you mentioned, and maybe also in the prepared remarks, in terms of mainstream, obviously, Thank you for joining us. What mainstream could kind of look like moving into next year?

You know, mainstream, we did see, let's talk broadly first. Mainstream, we did see a little bit of a pickup in mainstream demand, particularly the portions of mainstream that are most tied to AI. So kind of power management, we did see some good performance in kind of industrial automotive. So I do think that there was a little bit of pickup and those portions of the market for mainstream. Again, I'm speaking very broadly at this point. I think for mainstream, we have talked about this kind of all year is that a lot of those mainstream applications or maybe in markets, they require memory. And as you know, memory is incredibly tight. So if the end market requires memory, I think you ultimately have to look and say, well, how much total memory is available and where is it going to go and be allocated? I do think that it creates an upper ceiling, perhaps, on maybe what we can expect from mainstream over the near term until more capacity comes online for memory. Specifically to China, we were flat in the quarter. I think we were up 6% sequentially of memory serves. We're now flat for the year in China, which I think is good momentum because I remember we had some tough comps to Liberation Day from a year ago. And so we've kind of picked up momentum as we kind of went through the year with China. So obviously the rest of the world that's more tied to the most advanced manufacturing has grown the fastest. I do think that China has kind of picked up a little bit throughout the year, and I think that's probably true broadly as well as for us specifically. Thank you for the question, Brian.

Thank you. Thank you. We'll go next now to Alexei Yefremov at Barclays.

Good morning. Congrats on a great quarter. I wanted to ask you first question about the incremental margins. They were quite strong. Is it something we should expect near term given potential need for investments to support this growth? And also if you could address the differences in incremental margins between the two segments.

Yeah, Alexi, thank you for the question. Look, I mean, as you pointed out, our incremental gross margin of close to 60% and our incremental EBITDA margin of greater than 40% is in line with our targets. I think we mentioned this before. That's how we want to run our operations. And so I think it was a bunch of little execution items that we did. A lot of this is self-help, right? We talked a little bit about productivity and yield initiatives, how we were able to even control E&O inventory and scrap. So there was a lot of folks and our manufacturing people did a fantastic job in actually producing more out of our factories in the quarter. And we think this trend is likely going to continue as we head into next year. Do you have a follow-up, Alexei?

Yes, thank you. I think, Dave, you mentioned that some of the pickup and sales sequentially was due to being able to unlock some manufacturing capacity or just productivity. To what extent was this sequential increase sort of market pool versus your internal ability to serve that market demand that maybe already was there?

I think the vast majority of it was our ability to be able to satisfy some demand that was already in front of us, but we were unsure if we were going to be able to complete it in the quarter. We made a couple of comments about how the book to bill has been quite robust. And so if you look at where we significantly outperformed, yes, we outperformed on the CapEx side of the business. But we also outperformed on units as well. So I would say that, you know, CapEx was kind of the biggest contributor or the CapEx related revenue, I should say, is the biggest contributor to the outperformance. But then as we kind of progressed through the quarter, we did have more more unit pull than we originally expected as well. So both demand that was in front of us as well as kind of let's call it quarterly consumption, both of those performed well, but probably slightly higher towards the weighted towards the CapEx business versus the unit driven business for Q3. Thank you, Alexi.

Thank you. We'll go next now to Timothy Archeri with UBS.

Thanks a lot. Dave, I know you're probably going to talk about this. I mean, definitely going to talk about this at the analyst day, but can you maybe give us a little bit of a sneak peek on what the rubric is for growth versus the market? I know you used to say four to six points of outgrowth, but it's been kind of all over the map lately. You were mostly undergrowing. You undergrew in 25 and during the first half of this year, but in this most recent quarter, you were like eight points above the Thanks for the question, Tim.

I'm going to give you an unsatisfying answer, but I won't make you wait completely for Capital Markets Day. For the more complete answer, please show up November 9th at Capital Markets Day. For the short answer, just to help you out a little bit in the interim, Look, it'll be somewhat consistent to what we've articulated in the past, and we'll give you much more color around that at Capital Markets Day.

Okay. And then, Sukhi, can you just speak to the impact from Colorado and KSP on the margins? I know, I mean, you know, you're doing great, and I think KSP is still dilutive this year and probably still next year, and then Colorado is still in qual. and I think it's supposed to be breakeven maybe in late 27, early 28. So can you talk to the impact from those? I guess I'm trying to get like what a clean gross margin would be if those weren't dilutive. Yeah.

Well, so good question, Tim. So let me just say on KSP, we are actually in Q3, we reached breakeven. Big accomplishment for the team here. We actually reached break-even in Q3. And as we look into next year, this quarter and Q4 and next year, we're pretty excited about the ramp we're going to be seeing in KSP South. and I think we mentioned about Colorado that we are currently focused on customer qualifications. The facility is actually operational. It's producing samples right now and we expect revenue to begin next year. So it's about a 12-month lag time between Rock Rim and KSP South. But KSP South is now breakeven on a gross profit standpoint and it'll continue to improve as we head into next year.

And if I could just build on that Build on that briefly. So KSP specifically to enterprise gross margins, dilutive now through most of 2027 as we exit 27. It should be somewhat neutral with respect to enterprise gross margin. And then Colorado is going to run about a year behind kind of what we see happening in KSP. So the numbers that we're delivering today are with that, both of those, fully burdened with both of those facilities in the P&L. We will give you more color on where we think long-term gross margins could reside at capital markets today. Thank you for the question, Tim.

Thank you. We'll go next now to Jim Schneider with Goldman Sachs.

Good morning. Thanks for taking my question. Just to follow up on the prior question, maybe could you just give us your overall view on if we continue to get You know, increases on the revenue side for the next couple of years as the industry seems to think we can. Do you have enough capacity with what you're ramping in Colorado, KSP, etc.? And are you at all rethinking any of the sort of shutdowns or optimization on the existing manufacturing base at all?

Good morning, Jim. Look, we, as you mentioned, we do have strong demand. We have strong momentum. We have run that demand profile essentially against our internal capacity models. We feel quite good about our positioning for 27. We feel pretty good about what we think 28 could be. And so we feel good about our four wall capacity. We think we have a lot of capacity left in the network to optimize and deliver through really the four main points that I've always kind of spoken about. It's network optimization, the centralization of procurement with all of our suppliers, yield, and then of course the productivity initiatives both through labor as well as equipment. So we feel quite good about that capacity. We're going to constantly evaluate that and we also recognize that there will be areas where we do get pinch points will work to relieve those and will selectively spend CapEx to be able to unlock those. Did you have a follow-up, Jim?

Yes, please. And I realize this may be something you tackle at the Investor Day, but I am curious, you know, a little over a year ago when you came into the company, I think you talked about potentially expanding the aperture of customer focus and expanding the sort of like the catchment of sales and the kind of customers Degris pursues. Could you give us any kind of update on how that evaluation is going?

Sure. You know, the summarized update, and we'll go into more details at Capital Markets Day, but the summarized update is we have never had more customer engagement and engineering engagements than we have today. We feel like we are, you know, communicating with our customers and engaging with our customers earlier in the process than ever. That's enabling us to then engage in the roadmaps earlier than ever, and then we think that that's turning into plan of record wins both for the long-term roadmap as well as quick spends and derivative product that you inevitably release based upon new and kind of half-node manufacturing that occurs in the fab. We're incredibly happy with those efforts. I think you're seeing some early signs of those efforts bearing fruit, and we'll talk more about it at Capital Markets Day.

Thank you, Jim. We'll go next now to Chris Parkinson with Wolf Research.

I'll do my best not to ask a Capital Markets Day spoiler. Real quick. The drill into MS and CMP, there's been a lot of debate over the last couple of weeks and months on share gains, momentum, and kind of your position and both stories and to a lesser extent ads. I'd love to hear your updated thoughts on where those businesses are trending, relative expectations, whether or not there are any differences based on the competitive environments in various geographies. I'd just love to hear your kind of broader thoughts as we progress towards the end of the year. Thank you.

Sure. And I'll maybe we'll just talk geographies really quickly and I'll speak broadly and then maybe directly kind of kind of target your question. I mean, for the third quarter on a year over year basis, you know, North America was up 22 percent, Taiwan 41 percent, Southeast Asia 51 percent, Japan 29 percent. I could go on. But we performed well across the geographies. We performed well in the areas where the most advanced manufacturing occurs. That's both logic and memory. And then moving that conversation specifically to the MS division and C&P, MS has picked up momentum as we've gone through this year. And so you saw us kind of in the early part of the year We were growing kind of in the low single digits. We moved into the mid to high single digits. And now we're squarely into the teens, if not migrating into the upper teens. That business is anchored by CMP and the CMP process. So we feel very good about our position in slurries. If there's an area where I wish we had a bit more capacity, it is pads. So that's an area where we have a small pinch point, and we're unlocking that as quickly as we can. But we feel quite good about that business, and we'll talk about it more at Capital Market State. Do you have a follow-up, Chris?

Yeah, I'd love to also hear your quick thoughts. I mean, part of the, you know, you've consistently been talking, speaking about this, you know, incremental billion dollars that you can unlock over the next several years. You gave us some helpful color on KSP as well as Colorado. I'd love to just hear your kind of Broader thoughts now that you've been in the role for just over a year on your overall asset base utilization. Perhaps how you're doing things a little bit differently, just given the growth trajectory and how that continues to evolve. Just a year and a half in or so, just a preliminary assessment would be particularly helpful. Thank you so much. Sure.

Thanks, Chris. Look, I'll try to be brief on this one. We can certainly go into it in more depth at Capital Markets Day. But the way I think about it, there's no more attractive dollar than investing in CapEx at a brownfield site, so at a site that already exists. And the reason why that is because that's where you get the most fixed cost absorption. You get to leverage the existing team, the existing infrastructure. And so each incremental dollar at existing sites is to drive additional scale is a dollar that returns incredibly quickly. And so what you're actually seeing us do is you're seeing us invest dollars, and we are investing to expand capacity today. We're investing at the current sites where we're already located and have critical mass. And so we are not standing pat on exactly the capacity that we enter the year with, even though we've closed three diluted facilities. We actually have more capacity right now than we did when we entered the year. and so we're optimizing the network. We're investing in the places where we have the most scale. Those are the dollars with the highest return and those are the dollars that unlock the most capacity for us. That's what we're going to continue to do is drive scale efficiency and critical mass at those brownfield sites that exist and then ultimately we'll also continue to optimize the network. Thank you for your question, Chris.

Thank you. We'll go next now to Charles Shi with Needham. Hi.

Thanks for taking my questions. Maybe the first one, Dave, I know this is going to be your second guidance to Q1. You guided a single digit, but I look back, the financial history of integrity is minus 5% sequential down in Q1. That's not norm. Your normal seasonality is way less than that. We would love to think maybe in a very big up cycle like this year, maybe going into next year, seasonality should be thrown out of the window. But so why do you think Q1 would be down minus, would be down 5% based on what you're seeing right now?

Hey, Charles, I'll start and then I'll turn it over to Sukhi for the details. As you know, we really only guide one quarter at a time, and that's fourth quarter that, you know, we guided up at midpoint about 25%. We were trying to give you some early indications of color for Q1, and Sukhi, maybe do you want to build on that?

Yeah, look, I mean, like you said, we do guide one quarter at a time, but based on our visibility, Charles, you know, that we have today, and we continue to see very healthy demand and strong momentum, right? And so, but If you look at our Q1, it really reflects normal seasonality and fewer selling days for us. Nothing more than that, especially given that 75% of our business is unit-driven. And so that's why I think we wanted to give you some extra color on how Q1 is going to trend. But the underlying momentum, the orders, what we're hearing from our customers are pretty strong. Did you have a follow-up, Charles?

Yes, maybe not trying to ask you more forward-looking, but maybe looking back, 2026, 8% MSI, let's say CapEx is 30% year-on-year. The blended market growth is somewhere about 14%. If the math is right, you did have 300 bps of outperformance relative to the market this year. Last year, I don't think you had outperformance. I want to ask you, if you look back at 2026, based on your current guidance, out of that 300 bps outperformance, what you see as sustaining, what you see maybe as a little bit transitory at this point? Thank you.

Sure. You know, I guess the first comment I would make is 30%, roughly 30% of our revenue is driven by CapEx. But the majority of that is actually driven by fab starts and fab construction, which doesn't really fall in period for us for 2026. So I would characterize our outperformance as probably a little bit higher than the number referenced, but that's neither here or there. I think looking back at 2026, You know, I think CapEx remains strong as we roll into 2027. Certainly all the third party forecasts seem to indicate that that direction. I think fab construction that didn't fall into period for us for 2026 would probably fall into period for 2027. So I think that that bodes well for us. And then I think MSI, MSI, you know, it's improving and it's improving because of the CapEx That's being put online, but it's also improving because the mainstream picked up just a little bit. So yeah, I think we all kind of know like which fabs are under construction, which fabs are moving into the tooling and production and qualification stage. I think, you know, we can take those and we can kind of map those out over time and make assumptions on how they ramp, all of which I think bodes well. I think the wild card is, you know, MSI, 55% of MSI is driven by mainstream logic. I think the wild card is where does utilization go for mainstream logic? Improves slightly. I think that helps in the second half of this year. Does that improvement continue in 27? And if so, then I think that's, you know, kind of another plus in the positive column. Thank you for your question, Charleston.

Thank you. We'll go next now to Edward Yang with Oppenheimer.

Hi, Dave. Sukhi, thanks for the time. Just a final question on this first quarter revenue moderation you're seeing, chalking up to seasonality. Could you split that between MS and APS? I would think it would be weighted more on the CapEx side of the business.

Actually, it'll be both. I think what we do see will be a double-digit growth for both MS and APS division, Q4 and Q1. So I think overall, if you think about our normal seasonality, it's lesser selling days, right? And so that's why we're going to see a slight dip there. But the momentum, the underlying momentum from customers, the orders are pretty strong. Do you have a follow-up?

Yeah, perfect. Maybe a question for Dave. In the past, again, you've described a multi-wave demand cycle, VAP construction followed by WFE, ultimately higher wafer starts. Just wanted to get a sense, with revenue now accelerating beyond your prior expectations, which inning are we in each of those three waves, and are they starting to overlap?

You know, I really, I mean, each individual fab is kind of its own wave. But I really think that we're probably in the earlier part of the innings. You know, staying with the World Series theme, I think we're in the earlier part of the innings here just simply because of the fab construction that we've seen and how much has been broken ground, how much has been completed with shell, how much has been are all being facilitated in tools. I think we're in the earlier part of these innings and not the latter part. So I think this CAPEX that I think everyone is anticipating to occur in 2027, I think probably the biggest part of units are more like 28, 29, not 27. So I think we're still in the capex portion of the cycle, and perhaps that inflects maybe at the end of 27, perhaps middle of 28, something like that would be my expectation. But we'll see how it goes. As you know, SEMI is very dynamic. Thank you for the question.

We'll go next now to John Roberts with Mizuho.

Hi, this is Saurabh on behalf of John Roberts. Thanks for taking my question. Can you provide some insights from your conversations from your customers that would suggest that they're open to give some pricing?

Yeah, look, on pricing, our approach hasn't really changed much on pricing. We have really deep, long-standing relationships with our customers. and our priorities right now to support them as the demand accelerates and while being appropriately compensated for the value we provide. So it's really important to note that our conversations with the customers right now are around the commercial engagements and how to get the product to them faster. But we always evaluate pricing at the product and customer level. But we, as we said, as Dave mentioned in his prepared remarks, we have not included any material pricing actions in the quarter for Q3 or for Q4. To the extent there's any pricing actions, you know, it'll be on new orders, but not on existing backlog.

And if there's something that I'm incredibly excited about is on a year-over-year basis, I mean, we've improved adjusted gross margin by 530 bps year-over-year, independent of any pricing action. So, You know, the self-help initiatives that we talked about in the latter part of 2025 are starting to bear fruit. And as Sukhi mentioned, we'll have ongoing conversations with customers with respect to making sure that we can deliver products and receive value for that product, correct? Did you have a follow-up?

Yeah, so, and are you expecting to receive more tax refunds in Q4, and what would be the magnitude for that?

No, we are not.

Okay, got it.

Thanks. Thank you. Thank you. We'll go next now to Pete Osterlund at Truist.

Hey, good morning. Thanks for taking the questions. Just wanted to dig into the segment margins a bit. So just starting with the significant step up that you saw from margins in APS. At the revenue levels you're expecting in the near term, are 34% plus segment margins sustainable? Were there any unusually favorable margin dynamics around mix or anything else in the third quarter?

No. Look, from an APS perspective, we don't talk a lot about individual. We don't optimize for the segments at Integris. But the APS business is performing incredibly well. There were really no unusual one-time items that flowed through the APS segment. The team performed well. My expectation is the team will continue to perform well. And I think what you're seeing on the MS side of the business, just for completeness, is you are seeing leverage in the MS side of the business. In fact, I think gross margins were up. I don't know, around 350 bps on a year-over-year basis. I think it's 60 bps sequentially in MS. But we just see tremendous opportunity in that business, and we're increasingly convinced that it's our right to win in the MS business, and so we're making some significant investments there to capture those opportunities.

Did you have a follow-up, Pete? Yes, very helpful. Thank you. I 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?

Yeah, look, we'll provide more information on our free cash flow targets at a 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. Thanks a lot.

Thank you. We'll go next now to Mike Harrison with 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?

Yeah, we don't talk about margins in a specific product line, honestly, but I think when we ask for When we sell our products, we expect to get the value for our products, and most of our products are pretty good margin structure. David, do you want to add anything to that?

Yeah, I think just talking briefly about the microenvironments business, when you think about new fab construction and you 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 Fuchs, 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 I'm so happy with how that business is performing. Do you have a follow-up, Mike?

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?

You know, I think when you think about, you know, migrating down to two nanometers and even below, I mean, two nanometers is 20 angstroms and a molecule, you know, a large molecule is about 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. 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 earlier. 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.

Thank you. And gentlemen, it appears we have no further questions this morning so that will bring us to the conclusion of Integris' third quarter 2026 conference call. We'd like to thank you all so much for joining us today and wish you all a wonderful day. Goodbye.