Good day, everyone, and welcome to the Entegris Second Quarter 2019 Earnings Release Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Bill Stammore, VP of Investor Relations. Please go ahead, sir.
Good morning, everyone. Earlier today, we announced the financial results for our second quarter of 29 team. 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 which are outlined in detail in our reports and filings with the SEC. Please refer to measures as defined by the SEC and Regulation G.
You will find a reconciliation table in today's press release as well as on our website. I'd also like to remind you that there's a slide presentation on the results posted on our website that may be referenced during the call today. On the call today are Bertrand Loy, our CEO and Greg Graves, our CFO. I'll hand it over to Bertrand.
Thank you, Bill. I will make some comments on our second quarter performance. We see the industry environment and our expectations for the rest of the year. I will also discuss the organizational changes we announced today. Greg will follow with more details on our financial results, discuss our updated capital allocation framework and provide guidance for the third quarter of 2019.
We'll then open the line for questions. During the second quarter, headwinds in the market resulted in a softer and anticipated quarter for both the industry and integrase. Let me provide some additional color. The memory market continued to languish. As inventories at memory makers remain high.
As a result, utilization rates and wafer starts remained low at most memory customers. In addition, production levels in mainstream fabs were somewhat weaker than expected as escalated trade tensions impacted industrial in the automotive end markets. Finally, the industry CapEx continued to weaken during the quarter. However, on a positive note for Integris, we continue to see great momentum with our advanced solutions in new nodes, particularly in logic and foundry. Our FCM division, as expected, rebounded from a soft first quarter, led by record sales and double digit organic sequential growth of Advanced Deposition Materials.
Our CapEx driven businesses stabilized and have now a healthy book to bill ratio as we start Q3. Last week, we acquired NPD Chemicals, further enhancing our Advanced Materials portfolio. And finally, We continue to return cash to shareholders with the recently announced 14% increase in our quarterly dividend and over $50,000,000 of share repurchases since the beginning of the year, including $15,000,000 in the second quarter. While this has been the most challenging year the industry has faced in some time, integrates has weather the storm relatively well. Having said that, Entegrisys culture is guided by an intense focus on customer centricity and relentless dedication to excellence.
Accordingly, we continuously pursue opportunities to improve our customer engagement and create conditions that yield greater leverage in our overall business model. We are implementing organizational changes that will enable us to be more responsive to our customers, increase our competitiveness and allow for scalable growth as well as result in significant cost savings. These changes are focused on streamlining the organization and optimizing our customer engagement model. We anticipate the efficiencies gained by these changes will result in more than $20,000,000 in annual cost savings or one point of EBITDA. These actions will largely be in place by the beginning of fourth quarter this year.
Last week, we acquired MPD Chemicals, a provider of Advanced Materials to the Specialty Chemicals, Technology And Life Sciences Industries. MPD will further enhance our engineered and advanced materials portfolio, which was recently expanded with the acquisition of digital specialty chemicals. Or DSC in March. The Deposition Materials market is 1 of the fastest growing market segments in semiconductor applications, driven by the adoption of new materials in more complex chip architectures. MPD will improve Integris scale and synthesis capabilities, particularly in organosilene materials.
Our existing capabilities combined with DSC and MPD will give us the technology and proven capability effectively compete in advanced nodes. In addition, NPD will provide us access to a number of exciting adjacent markets. NPD was acquired for approximately $165,000,000 in cash. It is expected to have sales approaching $40,000,000 for the full year of 2019 and be accretive to earnings in 2020. MPD will be part of our SCE and business.
Looking ahead to the second half of the year, To start, we believe the second quarter represents a button for Entegris. From an industry point of view, memory makers are still working through inventory, but logic and foundry is solid. But to be clear, our confidence is not a bet on a significant market recovery in the second half. Our confidence instead is based on the strength which will drive the adoption of many new products across all three divisions. In addition, after several quarters of weakness, We believe that and now starting to see steadier order patterns.
In closing, we believe that secular semiconductor demand will continue to be a track is enabled by technologies like IoT, 5G, and AI, our society will continue to need more embedded chips Greater materials intensity and greater materials purity will be the 2 defining factors of the next generation of semiconductor performance. Our unit driven business model is resilient, differentiated and defensible. Integris has never been better positioned and more relevant for our customers to achieve higher heels and the targeted levels of cheap performance and reliability. As we have shown with the reorganization announced today, and the recent acquisitions, we are continually assessing and dynamically managing our portfolio to drive growth and improve returns. And while results were challenging in the second quarter, we have continued to make the necessary capital and R&D investments in our business to enable long term growth.
Finally, We expect 2019 to be a record year for Entegris and we are reaffirming our annual guidance. We expect our sales in 2019 to be approximately $1,600,000,000, and we expect both GAAP and non GAAP EPS to exceed $1.90. I will now turn the call to Greg for the financial details. Greg?
Thank you, Bertrand. Our overall second quarter performance was mixed relative to our expectations. Q2 sales of $379,000,000 were at the bottom end of our sales guidance range and were down 1% from a year ago and 3% sequentially. Q2 GAAP diluted earnings per share was $0.91. GAAP EPS included $122,000,000 of net proceeds received from the terminated Versum transaction.
On a non GAAP basis, EPS of $0.39 was below expectation. Moving on to gross margins, GAAP and non GAAP gross margin were both 44% in Q2 The year on year decline in non GAAP gross margin was driven primarily by the addition of the pure gas business acquired from states to the portfolio. Lower sales volume, weaker product mix and an insurance claim We expect gross margin to be approximately 46% on a GAAP and non GAAP basis in Q3 driven by higher sales volumes and improved mix. GAAP operating expenses were 111,000,000 and included approximately $17,000,000 of amortization of intangible assets and other discrete charges totaling approximately $5,000,000. Non GAAP operating expenses in Q2 We expect non GAAP operating expenses primarily due to the additional OpEx related to MPD Chemicals.
GAAP operating income was 55,000,000 and non GAAP operating income was $77,000,000. Our GAAP tax rate was 25.9 percent for the 2nd quarter and included a total 6 percentage point impact in discrete items related to new tax regulations and the tax impact of the Zoom termination payment. We expect our full 20.4% and does not include the discrete items previously mentioned. We continue to expect our full year non GAAP tax rate to be approximately 21%. Adjusted EBITDA for the quarter was $95,000,000 or 25 percent of revenue.
Turning to our performance by division. Q2 sales of $128,000,000 for specialty chemicals and engineered materials or SCEM declined 5% from a year ago. Strong growth in advanced deposition was offset by declines in the rest of the portfolio. Sales trends improved from the decline in the 1st quarter with sequential sales up 2% in the 2nd quarter driven by advanced depositions, specialty gases and specialty coatings. Adjusted operating margin for SCEM was 19.4%.
The decline in in previous quarters. In addition, and as a reminder, the second quarter last year included the benefit of a 2,500,000 insurance claim. Q2 sales of $150,000,000 for microcontamination control or MC were up 20% from last year. The strong year on year growth in the quarter was driven by the addition Sales declined 5% sequentially, driven by liquid filtration, which had a record quarter in Q1, as we benefited from the initial phases of node transition. Adjusted operating margin for MC was 28.7%.
The modest decline from last year was primarily due to the addition of Q2 sales for Advanced Materials Handling or AMH of $108,000,000 was down 18% from last year. The year over year decline in sales was driven small non core cleaning business last year. Sales declined 7% sequentially as industry capital spending continued decline and we experienced weakness in sales to certain chemical customers who are negatively impacted by the continued decline in memory. Adjusted operating margin for AMH was 14%. AMH margins were primarily impacted by the lower sales volumes As Bertrand indicated, sales signals for our capital driven businesses have improved, and that will be helpful to AMH going forward.
Cash flow from operations for the 2nd quarter was $231,000,000 and free cash Both operating cash flow and free cash flow were favorably impacted by Us of cash during the quarter included CapEx of $26,000,000. We expect to spend approximately $110,000,000 on CapEx in 2019 to support new product introductions, improve technical capabilities, in growth in our filtration and liquid packaging businesses. During Q2, we used $9,000,000 for our quarterly dividend and we repurchased 400,000 shares for approximately $15,000,000 at an average price of $36. As Bertrand set up earlier, I'd like to spend a few minutes to lay out more formally than we've done in the past, our capital allocation principles. Over the last 6 years, we've allocated approximately $3,000,000,000 of capital, including investing $640,000,000 in with the goal of growing structure, which is intended to ensure our financial flexibility, while retaining sufficient firepower for potential opportunistic acquisition.
We target a minimum cash balance of approximately $200,000,000 globally and a debt rating of VA1 or better. Going forward, our capital allocation priorities are the following: the first priority is internal investments in R&D And CapEx. The second priority is value accretive acquisitions. The 3rd priority is return of capital in the form of dividends and share buybacks. Let's look at each of these more closely.
Internal investments in R&D And CapEx have been a key component to our growth in generated very good returns historically. All R and D and CapEx are decided upon and prioritized based on rigorous ROI analysis. On an ongoing basis, we would expect to continue investing approximately 8% of our annual sales in R&D and 7% in CapEx. Acquisitions have historically been the largest area of capital allocation for us and have been a key component of our growth. As shown with the acquisition of MPD, we will continue to be active in M And A intend to be a consolidator in the industry.
Our overall criteria are acquisitions that broaden our technology and product portfolio in our core Semiconductor market and other adjacent markets. Specifically within the scope of engineered materials, filtration technology, and advanced packaging. Our targeted financial criteria for acquisitions include accretion by year 2 that is greater than we could achieve through buybacks or debt reduction high single digit ROIC by year 3 and growth enabling capabilities or market expansion. The 3rd priority is return of capital with dividends and share buybacks. Our target is to return 60 percent of our annual free cash flow to shareholders through dividends and buybacks.
For dividends, we intend to pay an ongoing dividend with incremental increases as free cash flow warrants. For share repurchases, historically, we have targeted approximately $10,000,000 per quarter of ongoing repurchases. Going forward, we expect repurchases to be approximately $15,000,000 per quarter as we did in Q2 In addition, we'll continue with opportunistic buybacks like we did at the end of last year when appropriate. Naturally, these capital allocation parameters could change depending on the level of acquisition activity. Turning to our outlook for Q3.
And we expect Entegris specific drivers will allow us to outgrow the market in the second half. On margins, we expect sequential improvement to come primarily from higher sales volumes, improved mix, better execution and the start of realization of cost reductions associated with the organizational changes discussed earlier. Putting it all together, in Q3, we expect sales to range from $385,000,000 to $400,000,000 and we expect GAAP EPS to In summary, we continue to Operator, we'll now take
We will
now take our first question from Shiahari with Goldman Sachs. Please go ahead.
Hi, good morning guys. Good morning. Good morning. I had 3, if I may. First, in terms of the operating model improvements that you guys talked about, I was hoping you could elaborate a little bit more in terms of what you're doing exactly.
Perhaps like segment or product line to the extent possible and, kind of the split between COGS and OpEx. That would be my first question. Thanks.
Yes. So, Toshiya, let me give you maybe a high level context for what we're trying to do here, which is really part of the broad strategic initiatives that we started in the fall of last year. And that we put on hold during the merger discussion with Versum. So as a company, we're always looking at ways to improve our operational efficiency, improve our customer intimacy. And what we really want to do is to make sure that we can find ways to reduce our time to solution, and ways to more closely align our development and engineering teams with our customer facing team.
So, you should expect actually the reorganization to have an impact across multiple financial statement lines. Most notably in SG And A, but it will really impact each of the 3 divisions. And the whole idea behind that again is to make us more responsive to customers, more competitive, and also allow us to be more effective in integrating future acquisitions.
Got it. Thank you. And then my second question is on the second half outlook. Bertrand, you talked about setting pretty conservative assumptions for the broader market and more kind of relying on company specific drivers. And I think that's consistent with what you had said 3 months ago, but curious what sort of assumptions have you embedded in your second half numbers or your full year guide, both in terms of wafer starts as well as CapEx in the second half?
Perhaps relative to the first half. And then more on the company specific stuff, if you can remind us, what what the goals are in terms of some of the product lines that you talked about 3 months ago, like graphite, specialty coatings, some of the node transitions that your customers, things like that? Thank you.
Yes. So let me start with some of the assumptions that we use for the second half of the year. And as we said, we are using what I think is a set of fairly conservative assumptions We expect, MSI to be flat in the second half of the year versus the first half. We expect CapEx to continue to slide and to put that in a quantitative form, I would say, CapEx down probably another 9% in the second half versus the first half. So a lot of the growth that we expect to generate in the back end of the year will come from no transition.
And, we have felt a little bit of that already in Q1 of this year. We expect to see actually additional momentum in logic and fund back end of the year, we also expect to see the benefit of a number of memory customers transitioning to additional layers in the back end of the year. So The impact will be felt, mostly in microcontamination and SCM. And as you mentioned, it's going to be Specialty Coatings, Deposition Materials, Selective, Edge, Chemistry as well as as well as, advanced liquid filtration solutions.
Great. And then my last one, in terms of some of the geographical information that you give out in your deck, I was positively surprised by how Korea kind of hung in. And I was negatively surprised by how weak Taiwan was in Q2 on a sequential basis. I would have thought given customer commentary, in memory, I would have expected weaker performance in Korea. And then on the flip side, given the largest sound of the customer's comments into Q3, I would have expected better trends in Taiwan.
So if you can kind of comment on both regions, what went on during the quarter? And what the outlook was into the 2nd half? Thank you. That's all I had.
Sure. So let's start with Korea. So Korea, sequentially, good performance. We saw a stabilization of level of activity in the memory fabs. So no further deterioration, which was good.
And we picked up actually some activity on new fab fraction in Korea. So that's really what explains the relatively good performance in Q2 given the overall industry context We expect the picture to continue to improve in the back end of the year as we expect, some modest improvement in fab activity and memory in in Korea. In the case of Taiwan, if you look at the first half performance, we are growing actually 6% organically in in Taiwan, first quarter of this year compared to first quarter of last year. So, so that's what I would have expected. We knew that we benefited from a number of unusually high orders in Q1 related to a number of ramps and tape out activity.
And as we said in Q1 results, we, we really were expecting a softening in micro contamination in particular sequentially. We saw that in Taiwan. On the going forward in Taiwan, we expect a big reacceleration in the back end of the year, and we expect Taiwan to have a very, very solid year for us.
We will now take our next question from Sidney Ho with Deutsche Bank. Please go ahead.
Great. Thank you and good morning. My first question is, I appreciate you reaffirm your full year guidance of $1,600,000,000 So based on your Q3 guidance, it would imply the pretty healthy rebound of sales in Q4 of at least 10% and EPS of 55 a sense of more. Can you maybe walk us through? I know you talk about Q3 dynamics, but what exactly driving the Q4 growth assumptions there?
So, Sydney, I would probably reiterate what I was just saying, answering Toshiya's question. It's all about the node transitions. We expect additional momentum coming from that, both in Logic as well as in memory. That will primarily impact positively the microcontamination and SCM. Businesses.
And you should expect a sequential increase of increases in Q3 and then in for both of those divisions.
Okay. That's helpful. Maybe switching to the gross margin, the gross margin, obviously, in Q2 was a little challenging. And I think you guys talked about the year over year decline. I just try to understand the quarter over quarter decline as well.
And is that does that kind of seem to cross the different segments? And related to that, Q3 is going back to 46%. What's driving the recovery of that on a sequential basis?
Yes, I can let Greg potentially add some more financial details to your question. But before he does that, I'd like to provide maybe some high level perspective. And what I want you to appreciate is that sometime halfway into the quarter. So say mid to late May, we realized that the environment would be a little bit softer than expected. And then we also realized that the mix would not be very favorable in Q2.
So in other words, we realized in May that we were most likely testing the low end of our EPS guidance. So as a management team, we looked at our options. We considered slamming the brakes, but in the end, we decided not to do that. And instead, what we tried to do is really to curb some discretionary spendings. But again, we chose not to flex down the labor costs, SG and A or R and D.
And I really think it was the right decision. So why was that the right decision? Well, First, if you think about margin and cost of goods sold, we were getting in May and of course today, we even have further evidence that the back end of the year will be very strong for Entegris. So we felt that it would have been very foolish to flex down our direct labor, in the plants in Q2 only to have to rehire and retrain, workers a few months later. So that's the way I would answer your gross margin question.
But to extend my comment to other parts of the P and L, I would say that we also chose to continue to spend in R&D. I mean, our development teams have been working very closely with customers on a number of promising opportunities. And it was very important for us to allow proper funding, both in CapEx and in R&D, which we did in order to continue to increase the quality of the opportunity pipeline. So it's not don't get me wrong. It's not pleasant not to deliver on the on an EPS number and to be slightly below the guidance.
But in this particular instance, it was a calculated choice, and I think it was the right choice.
Yes. And Cindy, just to follow-up your question, the decline really was across division. Their volumes were down in 2 of the 3 divisions. And then the 3rd division, which would be SCEM where volumes were up, We were impacted more by mix.
Okay. Great. Thanks. Thanks for the color. That's great.
Maybe one last question for me. In terms of the MPD chemicals acquisition, how much should we expect the revenue contribution from them in Q3. And Greg, when you talk about the accretion next year, what magnitude of accretion are you kind of expecting Thanks.
Yes. So we'd expect next in Q3, we'd expect, revenue to be in the high single digits. Don't own it for the whole of we don't own it for the whole of the quarter. And when we think about accretion next year, we think about kind of 5 $0.10 per share.
We will now take our next question from Amanda Scarnati with Citi. Please go ahead.
Hi, good morning. Just want to talk a little bit about the China business. It looks like it was up quite a bit in the second quarter, but I've been hearing a lot lately that China's increasingly tying subsidies or incentivizing subsidies to use sort of non U. S. Suppliers.
Have you been seeing any of that in the market and sort of what drove that strong growth in China this quarter?
Yes. Good morning, Amanda. So let me just say that our business is not really been directly impacted by any of the trade tensions or export restrictions. And, we don't expect that to be the case going forward. So what drove the nice sequential growth is really, a number of new wins at actually some of our large Chinese, domestic fab customers.
So very, very pleased to see that we've been able to find ways to continue to engage with domestic Chinese fab customers and continue to win new business in spite of being a U. S. Suppliers. So I agree with you that there is a long term risk that you characterize that, some of the Chinese fab customers may choose to lessen their reliance on US suppliers. But as of right now, we have not seen any of that impact meaningfully our business.
And then just going back to the margin question, as you sort of work through your due diligence with the Versum acquisition. Did you notice anything different in how they approach margins in different ways in which you can sort expand your EBITDA margins. I know you talked today about the little bit of restructuring that you're doing. But is there anything in there that could be, something longer term that you could work on in your model?
I mean, Amanda, we don't I think we plying before, we certainly learned some things not from a competitive perspective, but around sort of business process and organization. And I think some of what we announced today and Bertrand has already talked about would be a byproduct of that. As it relates to the gross margin, specifically. I would say we didn't really learn anything specific. I mean, we I feel good about how we execute and how we manage our gross margin line more specifically how our team manages the supply chain and the factories.
We will now take our next question with Chris Kapsch from Loop Capital Markets. Please go ahead, sir.
I just had a, really a follow-up on the formal comments that Bertrand you had about sort of witnessing an inflection of sorts or stabilization of orders. I'm just wondering if you could characterize that, by either fab, foundry logic memory, just any sort of characterization about, why you feel that there's some evidence of inflection? Any sort of color around that? And then I have one follow-up.
So the the, usually, the greater level of visibility that we have is directly related to to those node transitions. So, and we are seeing that in advanced logic and foundry and in advanced memory, The other area, which was actually a very important signal that we've been waiting to see is really in our CapEx driven business. And across all of our CapEx driven business lines, we are actually seeing very, very high the book to bill ratios. And that's the first time in a very long time. So in other words, we believe that we are no longer trying to catch a falling knife on that part of our business and that gives us a lot more comfort for what's ahead.
Okay. That's helpful. And then just the follow-up is on the sequential rebound that you're suggesting you see in margins. And so maybe your, the answer to my other question sort of explains that, but is it just a function of the node transitions driving demand for advanced products that's helping margin sequentially and continued weakness in the equipment side or if you could just provide some color there? Thank you.
Sequential improvement in the margin really, Chris, is we expect things to return to a more normalized level in terms of both mix and we expect some moderate increase in the volume. So if you look over the last six quarters or so. I mean, we've been right with the exception of early last year where we had some peak margins. We've been right at about 46%. There's nothing systemic on the margins.
Our ASP trends are good. We continue to execute well. So it really boils down to continuing to see some improvement in mix and some better volumes.
We'll now take our next question, Patrick Ho with Stifel. Please go ahead.
Thank you very much. Maybe first off for you, Bertrand, in terms of the materials intensity for logic and foundry, it's clear that there are new device structures, the the smaller line which are driving more materials engineering. Can you give a little bit of color whether you're seeing new materials use in either advanced acquisition action areas like that or it's just that the content for existing materials has increased at some of these new node shrinks?
So Patrick, this is actually, we're seeing both. We are seeing greater materials intensity as a result of greater gate density in the new architectures. But we also, I mean, the material intensity is also defined by the introduction of new highly engineered materials. That's is certainly an area where we see growth, far exceeding the industry growth. This is an area where we have the objective of establishing integrase as a leading supplier.
And that's really what has led us to the acquisition of DSC and MPD. We wanted to increase our capabilities in that area. We wanted to have access to high volume manufacturing synthesis capabilities. We wanted to take greater control on our supply chain. We wanted to be in a position to, purify the materials that, we are supplying to our customers and really offer to our customers a very complete a series of capabilities from synthesis to purification and delivery of those new materials, all of which present daunting challenges that I believe integrates will be uniquely positioned to solve.
So again, what we're seeing on the logic side of things in terms of industry road map. It's very, very exciting. What we're seeing on the memory side is also equally thing and that's why we're still focused on those opportunities.
Great, that's helpful. And maybe, Greg, as my follow-up question in terms of the R and D investments, you guys continue to make a pretty strong play on that front. Which has led to a lot of these new products that are now starting to pay dividends. How do you look at R&D spending over the next year or so in terms of, I guess, future product developments and opportunities that are still forthcoming in future years. Particularly on the material side of things?
Yes. So first of all, I would just say on D, all of our any project of any significance has an ROI attached to it. And I mean, it's a very sort of analytically driven approach in terms of where we invest our ER and D dollars. Think I said as part of the capital allocation discussion, I mean, we were at 8% of, revenue in the most recent quarter. We've been trending sort of around 7% level.
Our commitment going forward is to be in that 8 ish range. So And if you look at our OpEx year over year, I mean, we've been pretty consistent on the ER and D front. I mean, in terms of that's the lifeblood of the company. So I think you can expect us to continue to prioritize spending on ER and D even as we make adjustments in other areas.
Great. We will now
take our next question from David Silver with C. L. King. Please go ahead.
I guess a couple of questions. First one would just be kind of on a baseline. So I think Bertrand you were you mentioned that you expect second half of twenty nineteen to be flat sequentially with the first half in terms of MSI. I don't recall, but could you just clarify what your expectations are for the first half? In other words, what the baseline for the first half might be, whether it's MSI or wafer starts or whatever you consider the relevant metric?
Thanks.
Right. So the first half of twenty nineteen compared to the first half of twenty eighteen, MSI was down about 2% as per our estimates. And, CapEx was down about 12% as per our estimates. Is that your question, David?
Yes, just wondering how you're looking at the market. So thank you for that color. Occasion. And then the second thing, go ahead.
No. And so I was just maybe trying to provide a slightly different perspective on our full year 2019 guidance. I mean, we are, assuming strong industry headwinds to the tune of -8 percent year over year. So 2019 over 2018. And you get there with the assumption that CapEx will be down in the high teens year over year and MSI will be down 3% to 4% year over year.
So to offset that, we expect to pick up about 6 100 basis points from a number of acquisitions that we did, over the last 12 months. And then we expect to generate about 500 basis points of organic growth in excess of the industry. So So the only thing that has changed really between this quarter last quarter is the view that the market and the industry is probably a little bit weaker than we were estimating a few months back.
Well, no, that's interesting. And just a quick follow-up the 500 basis points of organic growth above the market baseline, that's higher than your traditional targets, I guess, your longer term targets for your overall business mix. Is that correct?
That's correct. Our long term target would be 200 to 300 basis points over the industry. We expect we will be actually beating that target is something you would expect us to do given the number of node transitions that we are seeing this year.
Yes. Okay. Thank you for that. That was more than I anticipated. Appreciate it.
I wanted to ask a quick question maybe for Greg. And I hope I'm not too confusing, but you laid out your M and A criteria very clearly and I wanted to focus on accretion, with this year's 2 acquisitions, I guess, digital and MPD And so more than $200,000,000 of CapEx and sorry, of expenditure. And I'm assuming or should I assume that the combination of those 2 will be accretive over the next 12 months? And then I'm also would ask you to maybe parse the $20,000,000 of cost savings. In other words, would the acquisitions be accretive ex the implementation of the $20,000,000 in annualized cost savings?
Or is that inclusive? I mean, in other words, is there a little counting there, does a meaningful portion of the anticipated, efficiencies come from integrating MPD and digital or is it more broad based and they would be accretive and meet your targets on a standalone basis?
Yes, they're really, 2 very kind of discrete events or projects, so to speak. With regard to MPD, we've got the we had the question a little bit earlier and we said $0.05 to $0.10 accretive in 2020. I'm sorry. And we'd expect DSC is a much smaller transaction, but we would expect that to be accretive in 2020 as well.
Alright. Thanks very much.
We will now be taking our last question from Krish Sankar with Cowen and Company. Please go ahead.
Hi, thanks for taking my question. I had a few of them. First on Bertrand, these guys break out your revenue by end customer type like DRAM NAND logic, etcetera?
No, we don't do that with a very high degree of precision. We have given some directional perspective to that, but we don't do that on a quarterly basis.
Got it. Got it. That's fine. And then how much of the weakness you saw in Q2 was related to some of your memory customers throttling back wafers?
So it wasn't really coming from our memory customers directly, but we saw some indirect impact, from their supply chains, particularly, bulk chemical manufacturers lowering their their production levels and that had an impact on both our pure drums and that's AMH but also sales of, some liquid filters and that would be MC. So though, and that's something that we have not really probably well forecasted going into Q2.
Got it. Got it. And then the last question Bertrand is, if some of your customers, memory customers are talking about moving wafers from DRAM into CMOS image sensors, If they do such a thing, is that good, bad, or is it agnostic for Entegris?
I think it's a case by case answer and I wouldn't want to go into customer specifics, but I you should not be worried about those types of rumors. Got it. Thank you very much.
Thank you.
That is all the time we have for questions. I'd like to turn the conference back over to the presenters for any additional or closing remarks.
That'll be it for today. Thank you for joining the call. Have a great day.
This concludes today's call. Thank you for your participation. You may now disconnect.