Good morning and welcome to the CUNY Third Quarter 2026 conference and webcast call. Currently, all callers have been placed in a listen-only mode. Following the management's prepared remarks, the call will be open for your questions. At any time, if you should need operator assistance, press star zero. In the interest of time, please limit yourself to one question and one follow-up, and please also be advised that today's call is being recorded. I will now turn the call over to Meg Miller, Vice President of Global Communications. You may begin.

Thank you and welcome to our third quarter 2026 earnings call. Joining me today are Jon Kemp, our Chief Executive Officer, and Ken Roosie, our Chief Financial Officer, who joined us just a few weeks ago. Earlier today, we issued our earnings release, along with a supplemental slide presentation, which can be found on our investor relations website. Before we begin, I'd like to remind you that today's discussion will include some forward-looking statements. These statements represent our best view of predictions and expectations for the future, but numerous risks and uncertainties may cause actual results to differ. Please refer to our earnings release and SEC filings for discussion of these risks. will also be discussing certain non-GAAP financial measures, and I refer you to our earnings materials for information regarding our non-GAAP financial measures and reconciliations to the most directly comparable GAAP measure. With that, it's my pleasure to turn it over to Jon.

Thank you, Meg, and good morning, everyone. Let me start by introducing you to Ken Risby, our new CFO. Ken brings a proven track record as a public company CFO, as well as significant experience in the semi-industry.

While Ken has only been with us a few weeks, it's clear that he shares our commitment to growth, operating discipline, and long-term value creation.

He's already been engaging closely with our teams, and I'm pleased to have him with us today as we build on the progress of our first year as an independent company. Over the past 12 months, we've executed a focused strategy that builds on more than 50 years of technology leadership to become the premier solution provider across the semiconductor value chain. That strategy is delivering results as AI accelerates two industry shifts, shrink and stack. The next era of computing is being shaped not only by smaller, more powerful chips, but also by stacking more of them into 3D architectures. As designs add layers and complexity, materials intensity multiplies, making our innovation even more critical to performance, yield, and reliability. This is a powerful long-term growth driver and means more community content in every device. Our broad portfolio, deep customer relationships, and local execution model enable us to engage early with system-level solutions from the front end to the back end. As the pace and magnitude of industry capital investments increase, this means additional content and share gain opportunities. As customers scale, our design wins enable durable growth and attractive returns for our shareholders. Our third quarter results provide clear evidence that this strategy is translating into strong financial performance. Net sales were $1.6 billion, with organic growth of 22% year-over-year. Adjusted operating EBITDA was $503 million, growing 36% year-over-year.

And adjusted earnings per share increased 55% year-over-year to $1.46.

This marked our 10th consecutive quarter of profitable organic growth, reinforcing our technology leadership and consistent execution. In semiconductor technologies, We had strong performance with organic sales growth of 16% year-over-year and an adjusted EBITDA margin of 36%.

Advanced logic and memory remained impactful drivers of our strong quarterly results.

Higher fab utilization and advanced note scaling drove demand for our semi-fab materials. In addition, demand for Calres, our semiconductor equipment consumables business, primarily tied to deposition and etch, has grown significantly this year. Interconnect Solutions had another great quarter, with organic sales growth of 29% year-over-year and an adjusted EBITDA margin of 31%. Thermal Management, Advanced Packaging, and AI Printed Circle Boards remain this segment's fastest growing platforms driven by AI tailwinds and rising data center demand. Our third quarter results show that we're executing well. Our technology is delivering value for customers and the transition to shrink and stack is creating meaningful opportunities for our business. CUNY has one of the industry's broadest material solutions portfolios, spanning front-end materials used to manufacture advanced chips through back-end advanced packaging, interconnect, and thermal solutions. That breadth positions us to solve increasingly complex challenges across the chip and broader system. In advanced packaging, CUNY is helping drive a major shift in semiconductor performance, Our integrated platform spans semi-fab materials like CMPM lithography as well as interconnect materials like plating technology, dielectrics, and fine line patterning. These solutions enable the high performance integration and complex manufacturing processes required for advanced packaging architectures like COAS, EMIB, and HBM. We're also working with customers earlier in the design process than ever before on future architectures like panel-level packaging, hybrid bonding, and glass core substrates. Those earlier conversations allow us to bring our industry-leading portfolio and deep engineering expertise together into system-level solutions that help customers improve yield, accelerate development, and scale next-generation architectures. Thermal management is our fastest-growing platform and has become fundamental to AI performance. For example, as more powerful logic chips and memory modules are tightly packed into AI applications, heat builds quickly and can limit performance and reliability.

Our expansive portfolio manages heat at every level, from the chip and memory components to the board and broader system, giving us more opportunities to help customers optimize system efficiency and maximize AI compute.

Our decades-long experience gives us a deep understanding of customer roadmaps and where devices are headed so we can bring together the right materials and engineering expertise for their most critical solutions.

Through Apple's American Manufacturing program, we're advancing materials and technologies for semiconductor manufacturing and advanced electronics.

including CUNY's US produced camera film for the variable aperture camera system in the iPhone 18 Pro. The innovation examples I shared become a lasting growth engine when our materials earn a place in a customer's manufacturing process. That's the power of a process of record or POR win and why they're at the heart of our business model.

Once our material is qualified in a customer's process, it can generate repeatable revenue through the life of that technology. Here's what that means. On average, our PORs last 5 to 10 years, and as production scales, every wafer or system creates steady, repeatable demand. Let me give you one example of how we're seeing that model play out today. We've secured multiple POR winds across today's leading technologies for advanced nodes, advanced packaging, and thermal management.

These winds are driving substantial growth with more capacity still to come both this year and in 2027.

More recently, we've strengthened our leadership position with an increasing number of significant POR wins for 2 nanometer and HBM4, which are now entering production. Each technology transition results in higher materials intensity and more content per wafer. We are actively engaged in the next wave of growth with the new generations of advanced logic and memory. Overall, we're on pace to exceed last year's record POR wins with the majority tied to shrink and stack inflections.

That progression from early customer engagement to qualification, production, and years of repeatable revenue gives us confidence in durable multi-year growth across the stack. Beyond our leading POR positions, the industry trends we're seeing reinforce our confidence in the growth trajectory ahead.

First, healthy customer utilization is supporting demand for our consumables today. Advanced Logic and DRAM fabs are tracking in the high 80% range, while NAND and Mainstream Logic continue to improve with most customers in the low to mid 80s.

customers are investing in new capacity to address strengthening demand across the semiconductor value chain.

We're tracking more than 15 advanced fabs and a handful of mature node fabs with production targeted within the next year.

For our business, the key timing is when those facilities start running wafers.

Once equipment is installed, process qualifications can take 12 to 18 months. From there, materials demand builds as customers ramp toward full capacity. While the scale of the industry build-out is significant, the increase in total wafer volume will come over time. For CUNY, that creates a multi-year opportunity as our qualified materials scale with customer production and reinforces our confidence over the long term.

Finally, AI adoption is broadening beyond data centers into physical AI across factory automation, aerospace and defense, and autonomous driving. Our materials help enable these applications, extending our growth opportunities across a more diverse set of end markets. Now, let me pass it over to Ken to cover our results in more depth. Thank you, Jon, and good morning. I'm very excited to be here with you and the talented team at CUNY. In my first month, what has stood out most is the unique combination of our industry-leading materials portfolio that spans a semiconductor ecosystem, our commitment to innovation, and a culture focused on winning through collaboration and execution. Materials innovation makes every new generation of chips and broader system improvements possible. And CUNITY sits at the center of this. As Jon highlighted earlier, by partnering with customers early on their technology roadmaps, we have an ability to secure POR wins that can provide years of repeatable revenue and give us the confidence in our ability to drive long-term sustainable growth in our business. I'm excited to partner with Jon and the leadership team to ensure we allocate capital with discipline and maximize the value from the innovations we enable. Beyond revenue growth, we will be increasingly focused on improving our gross margin profile and driving long-term earnings per share expansion. From a capital allocation perspective, our priorities remain the same. Our first priority is to continue strengthening our organic business and to further scale our industry-leading positions. Second, we will evaluate opportunities to augment our portfolio through M&A but will remain disciplined and returns focused in our approach. Our thermal business Laird is an excellent example of this approach. And finally, we will continue to return capital back to our shareholders through share repurchases and dividends while maintaining a strong and resilient balance sheet. Now, let me turn to our performance in the third quarter. We delivered another quarter of strong results. Net sales were 1.6 billion, an increase of 22% year-over-year and 9% sequentially. Adjusted gross margin was 47.8%, up 270 basis points year-over-year and 120 basis points sequentially. Adjusted operating EBITDA was $503 million, up 36% year-over-year and 17% sequentially. And adjusted EBITDA margin was 32.3%. Adjusted earnings per share for the third quarter was $1.46, up 55% year-over-year and 23% sequentially. The combination of strong volumes, operating leverage, and favorable mix supported our overall financial performance. Now, turning to our segment results for both semiconductor technologies and interconnect solutions. Both segments delivered their highest net sales and adjusted operating EBITDA of the year. Semiconductor Technologies had net sales of $797 million in the third quarter, an increase of 15% year-over-year and 7% sequentially. Semiconductor Technologies adjusted gross margins for the quarter were 50.2%. Adjusted operating EBITDA was $285 million for the third quarter. The primary growth drivers continue to be our advanced nodes portfolio, which grew 25% year-over-year and now represents approximately 44% of our semiconductor-related revenue, up from 42% in the first half of the year. In our interconnect solution segment, we deliver net sales of $759 million in the third quarter, An increase of 30% year-over-year and 11% sequentially. InterConnect Solutions adjusted gross margin for the quarter for 45.3%. An adjusted operating EBITDA was $236 billion for the third quarter. Thermal management, advanced packaging, and AI PCBs continued their strong momentum and were helped by Consumer Electronics' seasonal builds during the quarter. Now, let me turn to our balance sheet and cash flow metrics. We exited the third quarter with cash and cash equivalents of $1.1 billion. Adjusted free cash flow generation was strong at $320 million. bringing us to $607 million of adjusted free cash flow year-to-date. This reflects strong operating performance and execution of our disciplined capital allocation strategy. Our total debt outstanding is approximately $4 billion with net leverage at approximately 1.7 terms. Capital expenditures were $78 million for the quarter and $290 million year-to-date as we continue to invest in our organic growth initiatives. For the year, we expect to invest approximately $450 million. We also continue to deliver capital returns to shareholders. through our quarterly dividend and $25 million of share repurchases during the quarter. Year-to-date, we have returned $125 million through share repurchases and our dividend. Turning to our outlook, we are raising our full-year revenue expectations by $200 million and adjusted EPS by 50 cents at the midpoint. Our full-year outlook reflects our strong continued momentum and expectations of 2026 MSI Wafer Star growth to be in the high single-digit to low double-digit range, increasing from previous expectations. Building on our strong year-to-date results, we're raising our full-year outlook. Net sales is now expected to be between 5.77 to 5.83 billion dollars. Adjusted operating EBITDA is now expected to be between 1.785 billion to 1.805 billion dollars. And adjusted EPS is now expected to be between $4.95 to $5.05. and finally, adjusted free cash flow is now expected to be between $800 to $900 million. Based on our guidance for the fourth quarter, we're expecting another strong quarter of year-over-year performance with approximately 26% net sales growth at the midpoint. In the Semi and ICS segments for 2026, We expect the strong year-over-year growth momentum to continue at approximately 15% and 30% respectively at the midpoint of our guidance. Our guidance also takes into account normal seasonality and customer inventory management at year end. At the midpoint of our updated guidance for the full year, we now expect to deliver 22% net sales growth Over 28% adjusted EBITDA growth and adjusted EPS growth of approximately 50%. John, I'll turn it back to you. Thank you, Ken. Our first year as an independent company has shown our ability to translate strategy into measurable results that strengthen our ability to deliver durable, profitable growth. We've bolstered our end-to-end portfolio with a broad range of innovations and new product launches, reinforcing our position as an industry technology leader. We've invested in targeted capacity expansion in attractive high-growth areas like CMP solutions, lithography, and thermal management, aligned with customer roadmaps and supported by POR wins and disciplined return expectations. and we've deepened customer and ecosystem partnerships with industry leaders, engaging earlier than ever in the innovation cycle, creating sustainable pathways to grow future content and share. More recently, our inclusion in the Philadelphia Semiconductor Index places us among important peer groups, reflecting our critical role across the semiconductor value chain. Together, these milestones demonstrate clear growth principles, Invest where we have differentiated technology and visible customer demand. Partner closely with customers to earn critical design selections and scale efficiently as those programs move into production. As we look forward to 2027, my conversations with customers reinforce confidence in the strength of demand and the momentum ahead. We expect the acceleration we've seen in 2026 to continue as AI advanced nodes and system integration expands the challenges our materials can solve.

We're still early in this evolution with meaningful runway as customers bring next generation chips and systems into high volume production.

Thank you to our customers for their trust and collaboration. and to our people who continue to execute with focus and discipline to capture the opportunities ahead.

Operator, you can open the line for questions.

Thank you. If you would like to ask a question at this time, please press star 1 on your telephone keypad. If you need to remove yourself from the queue, press star 2. In the interest of time, we ask that you limit yourself to one question and one follow-up, free queuing if needed. And we'll take our first question from Jim Schneider with Goldman Sachs. Please go ahead.

Good morning. Thanks for taking my question. As you think about the Q4 guidance you provided and then into the first part of next year, you talked about inventory management at year end. That's normal seasonality for you. Maybe talk about what you're seeing in terms of customer order patterns for Q1 and how should we be thinking about, you know, remind us of your normal Q1 seasonality and sort of like what you would think You'll be able to perform better or worse than that, sort of given the multiple moving pieces with the strength and interconnect offset by some consumer electronics weakness.

Hey, Jim, it's Ken, and thank you for the call or the question here. We are really excited about the year. As you saw, our guidance was up by $200 million to $5.8 billion. And if you look, what does that imply for Q4? It means that our Q4 revenues are up 26%. at the midpoint on a year-over-year basis. So we're seeing a continued strength on a year-over-year basis where, as you highlighted, we will see normal seasonality on the consumer portion of our business and potentially some customer inventory management that we normally see. As we head into Q1, we're not going to provide guidance for Q1, but what we would normally see is that In Q1, things would be up modestly. So in that kind of low single-digit range would be the historical trend from Q4 into Q1 based on historical patterns.

That's very helpful, Ken. Thanks, Simmons. Good talk to you again. Maybe just as a follow-up, you know, the gross margin execution was significantly better than last quarter. I know Mix was playing a role in that. And I believe, John, you had given some previous comments during the quarter about, you know, being able to take gross margins to sort of the 50% range over time. Maybe kind of talk about the path to get there on the timeframe for achieving that. Thank you.

Sure, maybe I'll start and then I'll turn it over to John here, Jim. Thanks for the question again. So if you look at the margin profile of the company, we had actually great margins here in Q3 at 47.8%. And if you step back and look over the last year, we've seen tremendous improvement in our ICS margins. So those have improved by north of 300 basis points. if you looked from a year ago. And so seeing improvement as a result of product mix, improving across both segments, continued focused on operational excellence in our factories, and that is resulting in an improved margin profile for the company. If you look at this year versus last year based on the guidance for 26 versus 25, you can also see that our margins are improving. As we think about hitting that 50% mark, and that will come over time, it will be a combination of those three factors. The continued focus, on delivering advanced technologies both within our semiconductor portfolio and our interconnect portfolio, a continued focus on operational excellence in our factories and getting the right absorption there, and then customer engagement, really focusing on how we're engaging with our large customers and ensuring that we're getting the value for the technology we're delivering to the semiconductor ecosystem. Thanks, Ken.

The only thing I would add there is really that one of the trends that we're observing is the pace of innovation accelerating, and that's giving us more opportunities to both increase content as well as accelerate the pace of new product introduction.

When we launch new products, our focus has always been to make sure that we're getting the value of the technology that we bring to the customers.

And so as the pace of innovation accelerates, that gives us an opportunity to not only increase the content but also to increase the value, which also will translate to progress on that gross margin pathway.

Thank you. Our next question will come from Chris Parkinson with Wolf Research. Please go ahead.

Great, thank you so much for taking my question. Jon, I'd love to hear your updated thoughts and kind of drilling down to that prior question on assets to your portfolio. There's been a lot going on this year nationally, but it seems like you're still carrying a lot of momentum across C&P, so I'd love to hear your thoughts on any differentiating your outlook for your slurry portfolio versus pads, and then also whether or not you're beginning to see even more momentum in some of the investments that you've been making in lithium materials throughout the first half.

Thank you.

Yeah, Chris, thanks for the question. I think broadly, starting at a high level, we're really pleased with the progress that we're making across the company in all of our businesses. We're seeing really nice growth distribution coming from Really almost all of the product lines, certainly as we talked about before, the CMP materials have been some of the fastest growing parts of our portfolio. And I think what we're seeing, especially in the most advanced technologies, is the opportunity to engage with customers more at a system level perspective on how we can combine high performing pads with cleans and slurries. to create an overall solution that will help them improve performance, reliability, and yield. And particularly as we move into the most advanced nodes from three to two, and this becomes especially important as we get to those angstrom era nodes, the number of conversations that we're having with customers on how to leverage, create leverage across those technology platforms is increasing. We've got nice POR wins in every business, in the lithography business. I'm excited with some recent progress that we've made, particularly in the memory space, and with some of the sublayers around EUV lithography, where our teams continue to do exceptionally well, and we're really well-positioned with customers. As our customers start to bring more of their advanced technology to market, that'll give us content are all rising content in every tech progress. And just as a quick follow-up, you know, now that you're roughly, I guess, a few more days than a year in, you've obviously been making a lot of investments, as we're just discussing, you know, the first year as an independent company. Where are you the most happy, and how do those investments lead into your conviction that you're going to be able to continuously outgrow, you know, MSI, PCD square meters, and some of the things that you've been discussing on the conference circuit? I'd love to hear just thoughts one year in. Thank you.

Thanks, Chris.

Great question. As I reflect, you know, I'm super pleased with how the business has been performing. If I had to sum it up in one word, it would be momentum, right? And it's momentum across a couple of areas. Obviously, you know, we're really uniquely well-positioned to be able to partner with customers across the semiconductor stack from the front end to the back end, which is really helping us capitalize on both the shrink and stack inflection. But maybe two areas that I would highlight. Number one is the The structural upgrade to the interconnect business with the pace and the magnitude that advanced packaging, AI PCBs and thermal has hit the market has just created a structural upgrade to that part of our portfolio. And you're seeing that momentum now over the last several quarters. And we expect that those structural changes to the back end of the semiconductor stack to continue and many more. Thank you for joining us today. to be able to support demand not only this year but into 27 and 28, keeping these elevated growth rates accelerating into the future.

Dan, anything else you'd add? Yeah, so just two things to highlight just coming in in the last month. When we look at the PORs, and John highlighted this earlier, the PORs that we have on the ST business are accelerating. What we're seeing today is really from wins that we had a couple years One of the things that I'm most excited about coming in is really that acceleration of those POR wins, which have longevity, you know, five, ten years plus many times. And then number two is the number of advanced nodes and advanced packaging fabs that are coming online here over the next 12, 18 months. I think we highlighted, you know, we're tracking 15 plus advanced fabs and advanced packaging fabs. Those are going to use CUNY technology. They're going to use more content than some of the mature fabs. So we're really excited by the team and the R&D efforts of the entire team to partner with our customers and help accelerate that growth profile over the long term.

Thank you. Our next question comes from John McNulty with BMO Capital Markets. Please go ahead.

Hi, this is Margarita on for John McNaughty. Thanks for taking my question and congrats on a great quarter. So within interconnect solutions, can you break down a little bit the relative growth contributions from packaging, PCB and thermal management? And how should we think about the sustainability of this growth moving into 2027?

Yeah, thanks, Marguerite. That's a great question. So we're really pleased with the exceptional performance in our ICS segment, which has been a recurring theme all year. Year to date, you know, we've got 29% organic growth in the ICS segment. It's really being driven by AI-led demand, rising advanced packaging, and the structural upgrade to that part of the portfolio. Maybe the easiest way to think about it is to think about what we talk about as kind of the big three growth drivers that are the fastest growing, highest value parts of that platform, and then kind of the rest of ICS. So the big three, the largest of those three is thermal management, and then advanced packaging, and then AI PCBs is the smallest. It's also kind of the newest growth engine. We were really happy in the third quarter, you know, those Three combined represent about 30% of the total ICS segment, and they grew again by more than 50% during the third quarter. So continuing that growth momentum that we've seen kind of throughout this year and excited about the increasing number of POR wins and the PORs that are skating as our customers continue to build out their technology roadmap and the increasing number of system-level engagements that our teams are seeing. When you think about the rest of ICS, that we're still outperforming the market significantly because what we're seeing is mid-teens growth in the rest of ICS, really driven by strong performance from our EMI shielding business from Laird across both automotive and data center applications, high reliability circuitry in places like aerospace and defense, and Strong Performance and Premium Consumer Electronics, which has been a much more resilient part of the market, combined with nice content gains. So when you put all of that together, what we see broadly is rising system-level complexity that's creating a structural advantage over time for QNITY materials to solve key system-level challenges across signal integrity, power delivery, and heat management, across the technology stack.

Great, thank you. And then specifically on the data center and market, just curious as to how you're thinking about the sustainability of the build-out in the next few years. We've seen some reports of large project delays and just overall pushback around the pace of investment. So from CUNY's perspective, Do you see those growth?

Yeah, thanks, Marguerite. We're certainly watching the trends and engaging with our customers on those topics as well. As I said in my prepared remarks, I believe that AI is the most transformative technology of our time, and we're still in the early days of adoption as AI capabilities and high-performance computing start to penetrate every area of the modern economy. Obviously, a lot of that growth in the early days of AI has been driven by data center. And within data centers, we're seeing an accelerating adoption of the most advanced technologies across both shrink and stack. that our conversations with customers suggest that demand is strong with an increasing number of engagements and rising material intensity. And we expect there to be healthy momentum as we go into next year within data center. But it's not just a data center story. What we're also excited about is increasing activity as we see AI capabilities move from the cloud to the edge in physical AI across machines, vehicles, and Devices. They're taking those same shrink and stack technologies and deploying it inside those architectures as well, leaving us really well positioned to pick up rising content in each one of those application areas. So maybe just to summarize that, we see significant momentum for AI and high-performance compute across the semi-industry. And CUNY is well-positioned to capture really a multi-year growth opportunity across the technology stack from front-end to back-end, regardless of the end market in which it appears.

Thank you. Our next question will come from Frank Mitch with Birmingham Research. Please go ahead.

Thank you. Good morning, and yes, another impressive quarter. I wanted to come back on the advanced node side and come back to the question of the sustainability of growth because we've seen a couple quarters here, 20% plus growth in advanced nodes, and you highlighted that you got the 44% of the portfolio in the third quarter. You had outlined that invested a You know, your near-term or mid-term target to get to 50% of the portfolio in advanced nodes. And just curious, as you look at the landscape today, you know, A, what's the sustainability of that growth, and B, when do you think you'll get to that 50% intermediate-term target?

Yeah, Frank, great question. So really happy with the progress that we're making across our semiconductor portfolio. We've got PORs that are scaling in every product line there, and most of them are really targeted at the most advanced technologies. So obviously what we're seeing this year is the confluence of the power of that innovation engine and those PORs that really were won in kind of 2023 and 2024 is when we won the PORs that are scaling this year. And what I'm pleased to see is across all of the advanced logic and all of the advanced memory players, they're having some success in scaling their most advanced technology. And that's been a significant accelerator of the growth of that part of our portfolio. When I think about the PORs, you know, we typically work on things two to three years in advance. So the record PORs that we had last year and really happy we're on pace to exceed that record POR wins this year, that's really looking towards the future. And those are for Angstrom-era nodes across 16, 14, and even 10. So when I combine the number of POR wins that our business is seeing, with the impressive fab build-out that we talked about with more than a dozen advanced node fabs and advanced packaging fabs that are taking place that will start to scale over the next few years. That's what gives me confidence in our ability to continue generating outsized growth from our advanced node portfolio. And clearly, we're going to reach that 50% threshold well before the 2020 well before the end of the decade, like we talked about at Investor Day.

Terrific. That's very helpful. And, Ken, nice to meet you over the phone. You highlighted that your net leverage is down to 1.7 times. I'm curious, as you look at the portfolio, what do you feel is the optimal leverage ratio for CUNY to have? And any comments you want to make about capital allocation around that? That would be helpful. Thank you.

Yeah, sure, Frank, and thanks, and good to meet you. I would say if we step back, you're spot on. We're at 1.7 turns. What we've said is we want to keep that below three turns on a net basis historically, and we're in very Thank you for joining us. We see, as Jon highlighted earlier, such great opportunities to continue to scale our leadership positions in these critical and key markets for the semiconductor ecosystem. Number two, we will continue to look at ways that we can augment our portfolio from a technology standpoint but do so in a very disciplined manner in terms of M&A. and Laird is an excellent example of that. And then finally, returning capital back to shareholders. And we've done that over the course of the last nine months or so. We've returned about $125 million, these are the dividends and share repurchases. So the priorities remain the same. I would say coming in, what I am most excited about is the opportunity we have to continue to enhance our leadership position in Materials Innovation. It's really a fantastic team, a fantastic R&D engine that we have here, so really excited about the future.

Thank you. Our next question will come from Alexey Yefremov with Barclays. Please go ahead.

Thanks. Good morning, everyone. This is a long-winded question, so I apologize in advance. You're outgrowing MSI in your semi-business by about five points this year, and then your related third of all advanced packaging business is growing at sort of three acts of your semi-business. So the two parts are one, can you semi-business keep on growing by 500 base points or higher? And then should we think about your thermal and packaging business sort of scaling at about the same rate, so 3x or so of the semi-business over the next year or two?

Let me address the first part of that question, and then I'll turn it back over to John here. So this is Ken. Good to meet you virtually here. If we look at the overall MSI numbers that we're seeing, for 26, we talked about a high single-digit, low double-digit type of growth rate. Our current expectations for next year would be in that similar ballpark based on what we're seeing today. Obviously, that can change. So that's how we would frame the overall MSI numbers. And our goal is obviously to do better than MSIs based on the content we are providing for advanced nodes and advanced technologies. In terms of the ICS business, We have had great momentum if we think about 2026 versus 2025. Or if you look at Q3 versus Q3, we won't call a specific number in terms of the growth rates there, but also continue to outperform the underlying markets. And we've seen this uptake in the big three around our thermal products, around our AIPCBs. and many more. to continue to see nice growth as we head into 2027. Yeah, maybe that, maybe, Alexi, a good question, and maybe what I would add to that is the way we think about it is the outperformance is really driven primarily by the ability of our customers to scale their most advanced technologies.

So as you think about, and that's a, That's a combination of scaling their technologies as well as bringing the expected capacity expansions online in a timely fashion. So what I would say is assuming that our customers are successful with commercializing their technology roadmaps, and I talked about before in the prior question, we've already secured the POR wins for a lot of those advanced technologies. So if they scale and if the timing of those capacity expansions is what we expect, then the magnitude of the outperformance will be sustained.

Thank you. Very helpful. And I guess it's not very hard to imagine that growth rate next year is very high as well, maybe similar to this year. If we are in this kind of pretty high gross world, do you have enough capacity today or over the next year to serve, let's call it 20% gross or so, or will you be constrained in any meaningful way?

Yeah, so let me take the first piece, and I think John's going to take the second piece on supply here in terms of the industry. We're not going to call 2027 today in terms of guidance. We have guided for 2026. You've seen, based on our guidance, really strong performance on a year-over-year basis, something in the neighborhood of 22% growth at the midpoint for 2026 versus 2025. As we look into next year, I think one of the and many more. And we'll provide a little bit more context on our next earnings call in terms of the specifics around the guide for 2027. In terms of our capacity, and I alluded to this a bit earlier, we have healthy capacity to support growth. We do have a handful of select projects where because the growth rates have been so high, we have accelerated some of our investments to make sure that we have the sufficient capacity to meet demand.

Those projects are well underway and in flight. So we feel good about our ability to support 2027 volumes as well as to continue to scale even beyond that into 2028 and beyond. Because of our local for local operating model and our really well built out footprint, we've got good visibility to demand based on the combination of our conversations with customers on their expected volume combined with the visibility that our POR wins give us. and we can typically invest in capacity inside of what our customers can. And so that modular capacity comes online within our existing footprints in different geographies which allows us a very high return and a very efficient way to bring on incremental capacity to the market. and then we take that one step further by working across our broader supply chain network to ensure both resiliency and flexibility of supply so that we don't create any disruptions anywhere across that value chain.

Thank you. Our next question will come from Edward Yang with Oppenheimer. Please go ahead.

Hey, Jon, and welcome aboard, Ken. Thanks for taking my question. The first one would just be circling back to Jim's earlier question on gross margin, which was a very nice surprise. You were looking for some seasonal softness there from higher consumer electronics mix. So did that actually materialize in the quarter and you just outperformed through that? And related to that, you know, we're finally starting to see some genuine demand headwinds and non-AI and consumer devices. You know, how is CUNY navigating that?

Yeah, so I'll let Ken maybe take the first question on margins, and I'll take the second one on broader industry demand. Sure.

And very good to meet virtually here. So if you look at the margin profile, you're spot on. In Q3, we did have excellent gross margins, 47.8% overall for the company. Some of that was really helped by the continued performance of the ST business where those margins are in that 50% range and then the continued improvement from ICS driven by product mix where the margins are just over that 45% range as well. What I would point to is really this progression that we made on a year-over-year basis. If you looked at the profile of the overall business, last year we were in that 46% range. This year we're trending in that 47% plus range here for 2026 year to date thus far. So we'll continue to make progress. I think one of the focus areas that we have as a company as we head into 2027 is just making sure That we get the value for the innovations we continue to deliver to this ecosystem from the new products, from the R&D investments, from the capital investments we're making. So it will be a focus. And as we talked about maybe a couple of the questions ago is really over a period of time, how do we migrate this business to be north of 50%? So that will come over time and it will be a focus of ours. Thanks, Ken, and Ed, great question.

Maybe if I take a step back on the broader consumer electronics landscape, obviously some challenges more broadly in that market, but most of those challenges are really focused on the low to mid-end of the market. We don't have a ton of exposure to that part of the market. Most of our content and exposure is really in premium devices, which has been much more resilient. and on top of the more resilient demand performance we've also got rising content wins in several of those premium devices and so net-net that's resulted in consumer electronics actually being a net positive to grow for the year. Now it's not growing as fast as Some of the other applications, but it's still a positive contributor for growth for the year. And we expect rising content and a little more resilient demand from the premium end to continue as we go forward. The other thing I would say is, and this applies to sort of the margin profile in the third quarter as well, is the AI-led demand across the broader and market mix. is more than offsetting any decline that we see from consumer electronics by a fairly wide margin. And I guess the key point is that wherever chips and electronic content is going, whether that's data centers or smartphones or satellites, CUNY is well-conditioned to pick up that demand.

Okay, that's great to hear. My follow-up would just be on CapEx. So you maintained your CapEx guide at $460 million, but year-to-date you're underspending that by quite a bit, $290 million. So are you likely to undershoot on CapEx, or were there any constraints year-to-date on spending that you expect to ease in the fourth quarter to allow you to hit that CapEx target?

Yeah, so the target is still that $450 to $470 million range, but this is really based on cash capex, so there's always some timing elements. The target and the goal is still to spend that level here just based on the demand trends we're seeing out in 27 and beyond. There may be some timing elements where some of that may move into Q1, but we'll evaluate as we move through the Q4 time frame, but I would Put in your mind that it is still in that 450 to 470 range in terms of our target profile for 2016.

Thank you. Our next question comes from Melissa Weathers with Bridget Bank. Please go ahead.

Hi there. Thank you for letting me ask the question, and Ken, welcome to the call. I wanted to touch on a business you guys called out in the prepared remarks earlier. The CalRES side of things. Can you just remind us how big is that side of the business? And I know it's levered to like WFE and FAB infrastructure kind of CapEx. So can you help walk us through what you're seeing in that business and how fast we can think about it growing?

Yeah, thanks, Melissa. Great question. And it's kind of a hidden gem inside our portfolio. And CalRES is a great business. The way I would characterize it, it's maybe mid-teens within our semiconductor segment. The functionality, this is a seals business, so when you think about equipment that goes in the fab, a lot of that equipment, particularly for any of the process steps that are run under vacuum, which is primarily deposition and etch. They need a seal in order to ensure the integrity of the vacuum, and that sealing equipment often has to expand the temperature range from cryogenic to plasma. So you've got some extraordinarily challenging physical and environmental requirements, and you've got to make sure that you don't have any contamination inside the chamber as well. and CalRez is the market leader in terms of being able to provide the functionality that is necessary. And then as you use those vacuum chambers over time within the fab, those O-rings have to be replaced. That's why I call it a little bit of an equipment consumable business. and many more. Thank you, John. And then maybe one for Ken.

I know you're early in the seat, but with the company having spun out a year ago, there's some startup costs and public company costs, things like that. And your predecessors had put in some or had talked about some programs to kind of reshape that spending profile over time. So any like preview you can give us on how you're thinking about OPEX spending going forward, any priorities and anything you might do the same or differently than the prior plan?

So in terms of the transformation efforts that we've highlighted previously, those continue on. What you're seeing is us reinvest some of the benefits in terms of how we free up capacity on the manufacturing side. So we are reinvesting some of those benefits, but we are very much focused on the transformation efforts within the company. and many more in delivering those results and those will be embedded into our P&L on a billboard basis. We've realized some of this already as I mentioned just from the capacity standpoint. The other piece is around IT independence That is a critical area for us. We actually had a significant milestone here just recently in Q4. Now we have north of 70% of our sales are now on CUNY standalone systems. So that continues to make progress. The entire team within CUNY has done a fantastic job. to make this happen here in Q4. And we'll continue that as we move through 2027 to be fully independent. From a spending standpoint going forward, I'll go back to my earlier comments here. that as we think about the growth profile and where we are over a multi-year period, we're going to continue to invest in the business. So that's a portion of the CapEx and capital to support the customer ramps and roadmaps. But it's also on the R&D side and go-to-market side as well. We are a leader in innovation in the materials space. and we want to continue to maintain that position. As we highlighted before, and just from my perspective, having been around this ecosystem for 25 years and in different parts of the ecosystem, the materials is so important to advancing technology at CUNY and we're sitting at the center of this innovation. So we're really excited about that opportunity. We'll provide more context as we move into our yearly guide for 27 next call.

Thank you. Our next question comes from John Roberts with Mizuho. Please go ahead.

Thanks. Congrats on nice progress here, and welcome, Ken. This may be a stupid question, but as liquid cooling penetrates data centers, does the attach of the cooling plate to the devices represent an opportunity for CUNY? Or is that too low-tech and done away from your customers?

Look, John, you know, it's not a stupid question at all. It's a very good question because all of our customers are trying to figure out how to manage heat across the entire stack from the chip to the package to the broader system, and they're looking at any and all available technologies because heat is the ultimate performance killer in a device, right? So your question is a good one. What I would say is really... Because the power of the next-gen compute that is going into many of these applications, it requires cooling kind of at every level. And so I think about a lot of these things as complementary technologies, not competing technologies. And if anything, there's increasing opportunities for more thermal content in every device. You've seen us make a number of new product launches this year. that are kind of tailored solutions across our thermal portfolio, whether that's as a chip package or device level. And we're continuing to work closely with customers on how do we optimize thermal performance across the entire architecture of the system, including collaborating from both Paul Amerik, Thank you.

Thank you. That does conclude our question and answer session. Ladies and gentlemen, this brings us to the end of today's call and webcast. We appreciate your participation. You may disconnect your line at any time and have a wonderful day.