18. My name is Steve Cantra. I'm the Vice President of Corporate Relations. Thank you for being here. I do want to mention that this meeting is being webcast live and will be available also on demand on our website.
Before we start, I do want to remind you that we will be making forward looking statements this morning. And there are a number of risks and uncertainties associated with those statements, and I encourage you to read our file with the SEC very carefully to We have, hopefully, will be a very interesting agenda for you. We have 2 speakers and a couple other people here in the room that will be available for Q and A. So first we'll hear from Bertrand Loire, CEO. Also, we'll have a presentation or part of presentation will be from Clint Harris, who runs our microcontamination control business.
Greg Graves, our CFO, will be available for Q And A. And we also have in the room, Chris Roman, who is, here in the front. So Chris is now responsible for running the business unit in which SAES Pure Gas, our recent acquisition will now report. I do want to ask you to hold your questions into the end of the prepared presentation, which should last approximately a half hour. With that, I'd like to turn it over to Bertrand.
Thank you, Steve. Good morning, everyone. So the agenda today is pretty straightforward. We will take the time to reaffirm some of the themes we developed during our recent Analyst Day, but most importantly, we want to talk about the SAES Pure Gas acquisition, a transaction that we announced and closed a few weeks ago. So we'll talk about the business itself, we talk about how it fits into the portfolio.
And we will talk about how it impacts some of the financial objectives that we have set out for the company for the next 2 to 3 years. What we will not do today, we are obviously in a quiet period right now. So we will not talk about our second quarter performance. We will not talk about short term trends impacting our business. We will do all of that when we report our earnings on July 26.
So with that, let me get started. This slide is a slide that I presented during the United States in March. This is a slide that states and describes some of the key attributes that make integrates a very unique investment option. As you recall, we have a very broad and diverse customer base, our solutions are sticky. The majority of our revenue are recurring in nature and even with the addition of sales that profile actually is not meaningfully changed in excess of 70% of our revenues come from consumable products.
We have a very broad product offering and certainly that breadth of capabilities makes us somewhat agnostic to any technology shift. And Clint will talk about that in the context of how this new gas purification system platform will help us at a time when the industry is contemplating the introduction of EUV in production. So primary markets for Entegris, as you know, is the semiconductor industry. This is an industry where the process challenges are the most complex. As a result, this is where we can extract the most value for what we details around why we believe chips will continue to proliferate, why chip demand will continue to increase You are at Semicon West.
I'm sure you're going to hear that from a lot of other people. Instead, we're going to talk about trends that are going to be very favorable to Entegris and what we do. And will put us in a position to grow our SAM, grow our share and ultimately continue to have a very nice growth trajectory of 5% to 8% CAGR over the next 3 years. So the industry, the semiconductor industry is constantly in search of ways to improve the performance of the semiconductor devices. And this is how we expect the industry to do that, miniaturization, Frank, scaling will continue to be a factor, but increasingly, the industry will be turning to new ways to improve the performance of the chip.
And it's going to come from the steady introduction of new materials, materials with better electrical properties, better structural properties, So that's number 1. Number 2 will also be the introduction of new chip designs relying on more complex RT sectors. And right now, of course, what everybody is talking about is the 3 d NAND structure with those very high aspect ratios all of those trends, those 3 trends will actually play to the strength, of Entegris. So how is that? Well, first of all, we will continue to benefit from greater materials intensity.
And I will define that in two ways. So for us, material intensity means that those more complex architectures will require more process steps to be manufactured. More process steps means more chemistries and materials being consumed, and that's going to benefit us. Obviously, the second way I would define materials intensity is the steady move away from commodity materials and the increasing reliance on highly engineered materials, customer specific solutions, to again, to get to that next level of performance. So those trends We'll benefit a number of our product lines just to mention a few, formulated planes, specialty gases, all of that will all of those product lines, which belong to our SCEM division, will benefit from those from this greater materials intensity.
Another big trend and big opportunity, obviously, for Entegris, is around purity, purity matters a lot, but also purity is increasingly all the purity levels required in the semiconductor manufacturing process. Are much harder to achieve. So why does it matter? Well, QAT really in a grid to a great extent conditions the performance of the device, the purity of your dielectric material will condition the energy efficiency of your device. And ultimately, it will also define how reliable over time your device will be, and we also know that the purity will have a huge impact on the cost of your device.
We all know that those very, very tiny contaminants can have a very significant, can represent very significant, economic losses for the industry. And we try to to capture all of that in the bottom corner of this slide. And I know you're familiar with those numbers, so I'm not going to go over that. So those trends will benefit greatly the microcontamination division where we believe we have a clear leadership position in liquid and gas filters and purification solutions. So those various stringent purity levels are going to be important, but very, very hard to achieve.
And what it really means is that it's going to require a very close collaboration throughout the ecosystem. And what it means is that we will see more filtration points not just in the fabs, not just in the sub fabs, but in the bulk manufacturers, manufacturing processes, and upstream with their own suppliers. So greater SAM as a result of the introduction of more filtration points, more frequency of replacement of those filters. It's one thing. The other big, trend that we will benefit from is the fact that increasingly the industry would have to be absolutely paranoid about every piece of metal or plastic that those chemistries will be in contact with way upstream in the supply chain And that's going to represent a huge opportunity for our fluid handling business, and for our packaging business, in particular, We are the expert, in terms of clean, stable, metal free plastic based solutions.
And we're going to benefit greatly from, all of the complexity associated with achieving those very, very high levels of purity. So if you think about Integris, our mission is really to provide a very comprehensive set of solutions to deal with all of those process challenges around engineered materials around purity and around handling those chemistries and process materials. And this is really how you need to think about those 3 divisions. And I think that we are better positioned than anybody else in the industry to help solve those problems. We know chemistry, we know materials We know how they actually interact with 1 another.
We have some of the best application knowledge in the space and we are the leader in contamination role. And that makes us actually the best qualify to help solve those upcoming process challenges in the industry. So in that context, again, purity is becoming increasingly important for the industry purity is also becoming harder to achieve. So the acquisition of SAES in that context was really a no brainer. Clint will talk about the products, we'll talk about the value proposition, we'll talk about how it impacts his goals in a minute.
I'm sure it's going to be bragging a little bit also about the fact that the addition of sales makes the microcontamination division, the largest division and integrase now, which is good. We're all very happy for you, Clint. And so I will give him a chance to talk about all of that. But I wanted to just go over some of the key facts around this transaction one last time. Remember, the purchase price was about 355 1,000,000, which is about 9 times EBITDA net of $5,000,000 of savings that we intend to realize.
We closed, we announced the transaction and closed it within 2 weeks of the announcement, but that deal is closed as of the end of June. This is a very profitable business. And we financed it with cash on hand. So obviously, a very nice accretion, starting this year. As you can see on this slide.
So with that, I will give the podium to Clint and to talk somewhat more about StaceyCare.
You, Bertrand. Good morning, everyone. I appreciate you taking the time to listen, to the Entegris story and a little bit more about the MC division. As Bertron pointed out, we are the largest division within Entegris I actually did not expect Bertrand to brag about that. I kind of expected Bertron to brag about France making it to the World Cup finals but okay.
But I do appreciate the comments. So talking a little bit more about the microcontamination control division, we are a rapidly growing group last year, we grew about 20%. And generally speaking, we expect our sales growth to outperform the market. So as we've spoken about before, the microcontamination control division is forecasted to outperform the semiconductor market by about 200 to 400 basis points. We are a profitable division.
Overall, our profitability is in the mid-30s. We expect that with the SAES acquisition, that profitability will remain in that target range. And we serve a relatively large market, about $1,700,000,000 that market is growing. And if you look at our business, as we approach approximately $600,000,000 in sales for the division, You can see that we have some headroom to grow. All right.
Our business itself is made up of solutions both for purifying and filtering liquids. So some of the specialty liquids that semiconductor fabs use to clean and process, semiconductor chips, ranging from wet chemistries to CMP slurries, to photo resist, as well as filtration and purification solutions for gases, specialty gases, as well as bulk gases that are used in semiconductor processing. Our portfolio from a integra standpoint, a legacy integra standpoint prior to the SAES acquisition, we had a strong position gas filtration as well as in small point of use, PoU purifiers, where SAES fits in is really to augment our portfolio with much larger systems using bulk gas purification. So if we talk a little bit specifically about SAES, SAES has been in business for several decades They are a leading provider of high throughput, high volume gas purification systems. They were a a the division we acquired says pure gas was a unit of an Italian based company.
The they also were growing quite rapidly actually in at growth rates of just a little bit in excess of what we saw with Integra. The last year, sales were about $91,000,000 and a fairly goal with EBITDA of about $33,000,000. Operations are based here in California and San Luis Obispo. It's a beautiful part of California. If you haven't had the chance to visit, I'd love to host you in the future.
And the product that SAFE provides are not only provided for the semiconductor markets, but also some adjacent spaces such as flat panel, LED, and those markets we see also rapidly growing in needing additional gas purification solutions. So if we look at this chart and there's many, many words, many boxes on this chart, talking about the portfolio of gas filtration and gas purification. But if I was to leave you with kind of a fundamental concept It's that Entegris Now has the unique capability to provide end to end solutions where the gas enters or is manufactured in a fab all the way through the sub fab right up into the process tool to the point where it is deposited or used to etch the wafer. The gas purification solutions that we provide are used throughout semiconductor processing, but very heavily in etch deposition as well as in lithography. Many of you are probably aware of the growth that we've seen with etch and deposition as we've seen more layers for 3 d NAND, as well as double and quadruple patterning.
But there's also a trend for more gas purification in the lithography space especially as we transition to EUV, which is a vacuum based process and uses, a very clean gases in the process. Our systems are differentiated from the competition in our ability to provide PPQ parts per quadrillion level purity. Our ability to provide total solutions to a semiconductor fab across all of the gases, whether it's common gas like nitrogen or more esoteric gases, like argon, or helium, used in the semiconductor processing. So our customers will come to us to provide turnkey solutions And they also turn to us to solve some of their critical challenges as they're developing new process tools. So as I mentioned before, Entegris legacy Entegris brought a core competency around gas filtration that are used in OEM process tools.
So many of the OEMs often turn to us to address their needs for next generation systems. So with that, I think I'll turn it back over to Bertrand.
Thank you, Clint. So for many years now, we've been very clear about the fact that our preference, to create long term shareholder value is to, you know, find the right acquisitions. I'm glad that once again with the acquisition of SAES, we'll be in a position to do that. We've also been very, very clear and very consistent in defining our acquisition framework with all of you. And again, Sage fits this framework really, really well.
The framework is here, something again, that we've had many opportunities to describe to you. So when we think about where we want to be targeting our acquisition efforts, We think about it in the context of technology. So we would like to add to our materials platform. We would want to add to our separation technology, that's code name for filtration and verification. We want to add to certain sensing and control capabilities and we want to be adding to our advanced packaging platforms as well.
When you think about it in the context of market, We will certainly stay very focused on the semiconductor industry. Again, this is our primary core market, but we will not necessarily limit ourselves. To the semiconductor industry. We think that there are many ways for us to create value using our core capabilities outside of semiconductors and we're going to be trying to look for those opportunities around the corners as well. We have had, I think you would agree with me very solid financial discipline around every single deals that we have done over the last several years.
And when we talk about financial discipline for think about it in many different ways, but primarily around the level of accretion, we'll be able to deliver 2 years after transaction is consumed, about the level of ROIC 3 years after the deal, but also we want to be sure that all of those acquisitions will be putting us in a position to continue to outpace the industry, something that we have now done very, very successfully for the last 4 years and certainly something that we intend to continue to do. So if you look back in the rearview mirror, those are the major acquisitions that we closed over the last 4 years, ATMI in 2014, about $360,000,000 in revenue. So that was adding to our materials platform adding to our packaging, technology platform as well. Twinsec was the liquid filtration product line. So again, separation technology.
PSS was really around that sensing and control focus, allowing us to detect agglomeration of slurries in the slurry bash. So again, adding to our capabilities around the CMP module. And then the last acquisition as Clint was describing CACE, which is really allowing us to strengthen our leadership position around gas purification. So again, very consistent with the acquisition framework. So the question is, okay, what does that mean to some of the financial objectives that you presented a few months ago, while this the next couple of slides are going to try to address that question.
If you start on the very left side of that slide, you would see a column listing our 2017 performance. This is a proof this is a P and L on an as reported basis. The next column is quantifying the impact of the addition of SAES and PSS. So revenue of $106,000,000. You can see a very healthy operating margin of 33%, well in excess of our corporate average.
And you can see the pro form a EPS impact of those 2 recent acquisitions. So that gives you the pro form a for 2017. Recall that during the Analyst Day, we were trying to project forward to what this could mean in 2020 assuming a CAGR, not a CAGR, but assuming a CAGR of 7% for the next 3 years. So that would actually, get the top line to something just short of 1,000,000,000 We are continuing to be very committed to not only grow the top line, but also continue to expand the bottom line So our commitment to expanding our EBITDA margin by 200 to 300 basis points remains intact. And that should actually translate into a an EPS number of about $2.30 to $2.40 roughly.
So the organic component. Our business continues to generate very healthy levels of cash flow over time, our balance sheet will strengthen. And we will have many different ways, many different alternatives to actually improve this EPS picture. So what are those alternatives? Well, with all of add about $0.20 to the EPS number.
Alternatively, we could actually choose to invest that excess cash into, similarly attractive M and A, again, fitting that framework that I was describing. So that could actually yield about 25 percent. So we think again, that's another financial metric that we're using routinely to select the acquisition targets. We want to be sure that they would ultimately generate returns greater than what we would be able to achieve just buying back our shares. So $0.25, if we were to, to just reinvest the cash we generate.
And if we were willing to add some additional debt to the balance sheet. And here, we are just assuming a leverage ratio of 3.5 we would be in a position to add about a dollar to the organic EPS. So in summary, I think that integrates, as a great platform, very differentiated value proposition a great team, a very strong balance sheet that we intend to deploy. And I think we have a very credible pathway to generate an EPS of approximately $3 by 2020. So with that, I will invite Clint and Greg to join me on stage and we will open up for questions.
Yes, go ahead, Patricia.
Toshiya Hari Goldman Sachs. Thank you very much for hosting this event. I had a question on SAES. You talked about the business outperforming the broader market by 500 basis points over the past couple of years. Was that a function of share gains or the SAM growing faster than the overall CapEx number?
And secondly, if you can touch a little bit on the competitive landscape, that'll be helpful.
Sure. So, so the answer to your first question is predominantly space has been growing faster than market because, a few things. 1, the market has been demanding higher and higher gas purity. So they've, semiconductor fabs have required more purification systems in their fab, to face really was in a sweet spot of the market with these with much larger gas purification systems systems that provide a very high throughput, high volume gas purification. And that fits the needs of many of the mega fabs that are being built, for Fernand, as well as some of the expansion of the market that we've seen in China, as well as the fact that they were able to successfully leverage their designs to enter into flat panel and LED markets as well.
So fundamentally, it's a it really that the market was expanding and SACE was riding that wave from a technology side. From a competition standpoint, no one has the portfolio of end to end solutions that NTG has. And that provides us with a significant competitive edge. It enables us to talk with both with fabs, with OEMs, as well as with others in the market. And solve their solutions by off or solve their problems by offering solutions that are kind of multiple component solutions.
There are other competitors out going forward. But I think from a technology standpoint, as well as an end to end solution standpoint, Entegris is a strong edge.
Great. And then as a follow-up, my understanding is that, again, in terms of SAES, the business is tied to CapEx and more specifically, new fab build outs. What's sort of the potential for you guys to capture more of a recurring type revenue stream on a 2, 3 or bit? So, so first of all, there is
a portion of states of business that was more on the point of use, purification, the smaller purifiers which do have the ability for reoccurring revenue, whether it's regenerating or replacing those units There is the opportunity to grow a service piece of the business, which is something that we are going to be looking at going forward. But broadly, if I look at the gas filtration and purification portfolio as a whole, I think there are opportunities to to focus on that re occurring revenue piece.
On SAGE and combining that with your microcontamination business, right? How much is SAGE business come from outside the semi market? And how much synergy do you think is possible that you can bring your either liquid or gas filtration solution into those markets potentially drives them in revenue synergies? Number?
Yes. So I don't think we've disclosed yet the percentage outside of semi. But to answer the second part of your question, one of the things that I'm actually most excited about with bringing SAFE into the portfolio is our ability to leverage their channels into some of those other markets to bring existing Integra's products as well as to leverage those existing integris Technologies to develop new purification solutions for those adjacent markets.
It's just just to be clear that their largest market is semi door, right? Yes, sir. Yes, at least.
The order of magnitude semi is what
So, Simeon, I think is in the order of magnitude about 70% to 80%.
So vast majority of the business, Simeon, okay, let's just at least baseline that, okay, great. Thank you. And then just, I guess, Greg, on the updated model, it's like next two part question. First, it's just the increased 3 years target. Those are only based on the these transaction to transaction you just completed.
Is that correct?
Yes.
So, I
mean, if you had built a model coming out of the Analyst Day, the difference in the models essentially. We're starting with $350,000,000 less in cash and we'll generate $100,000,000 or more over the next few years from the 2 acquisitions that we've made. And so you've got, you've got, like I said, your starting point is a little lower, but your cash generation over the period is a little higher.
And then I guess just a question on M and A. This seems like it's a great fit for the company. Seems like you guys are doing well on your M and pipeline. Is that where you kind of think about, your M and A strategy? Seems like that's the company is putting more focus on that.
Should we expect companies to have more targeted larger transaction to try to ship off this $3 earnings that you guys talked about and using leverage. It seems like you need to use leverage to get above that $3,000,000. We're trying to kind of talk about high level strategically how we think
So I would say that the implication of me saying that acquisition is our primary focus in terms of creating long term shareholder value means that we have an active M and A initiative internally or we have the pipeline that would include small and midsize and other size companies. I think it's just a question again at the end of question of actionability in many cases. And what we're really trying to do, as much as we can, is really to have negotiated transactions because that's the best way, frankly, to just reach a fair agreement on value, on the current environment auction processes can be prohibitively expensive. So, so that could be actually a limiting factor, but So yes, I mean, again, acquisition is a big area of focus for us. We've been talking about it and thrilled that we been able to announce actually 3 deals of different transactions this year, which is good.
And I hope this can continue.
Just a question I'm trying to understand, is your market fully mature as far as your existing markets that you're looking for expansion or why not focus on trying to grab more market share? Is there are you worried about any kind of pricing pressure if it is at
surgery? No, I think that we feel that our market is Our primary market, the semiconductor industry is extremely vibrant. I think we are extremely well positioned to capture a lot of opportunities. A lot of the growth that we've been describing that 5% to 8% growth, is going to come mostly exclusively from from the semiconductor industry. Having said that, I think it would be a very smart decision for us to continue to look around the corner.
Think that with fairly modest investments, we should be able to find applications for some of our fluid handling solutions on our packaging products from our filtration products in biomedical life sciences applications and some of the industries. So to the extent we can do that, effectively with relatively modest investments. I think that's something that you as an investor want us to do and that's what we're trying to focus on.
And maybe I'll just jump in from the business side, from a division side. We are absolutely laser focused on growth through capturing market share. We have the opportunity certainly with my division, significant growth potential by capturing market share. We find that increasingly, it's harder and harder for other companies to get into the space and offer solutions for 7 nanometer, 5 nanometer technologies. And as a result, we're capturing more market share at the leading edge.
And then at the same time, our breadth of solutions, our capability is enabling us to go back and capture market share in some of the mainstream semiconductor fabs as well.
Could you just give us a pro form a 2017 basis, the mix between units and CapEx revenue roughly?
I think Bertrand said, you're roughly in that 70, 72 units. I mean, typically, we've talked about being in the mid to high 70s, if you think about putting $90,000,000 of revenue on a $1,500,000,000 base, it's a 5% swing toward the CapEx.
And then on your 3 year growth objectives, what level of CapEx in the industry are you assuming is going to be spent to attain a 5% to 8% CAGR? Very modest. Actually, it's essentially our industry CapEx projection is
essentially flat over the period. That's the assumption that we're using. So a very conservative assumption. The one thing I would want to also say is that we have a fairly unique definition of what the CapEx product is. So for us, a CapEx product can be a FOUP, could be a gas filter, can be a valve So the valve will not get replaced unless it fails and then our valves typically don't fail.
But if the gas filter will be replaced, but not nearly as fast as the liquid filter. That's why we qualify your gas filter as CapEx. But When those gas filters are used with very corrosive gases, they will get replaced every 2 or 3 years. When you think about Foops, Foods traditionally have been lasting about 4 to 5 years. With the advanced fabs, we expect the fabs to have to replace the fruits every 3 to 4 years.
So again, what we call CapEx, a lot of companies would actually call consumable. And so I think we have to be careful the choice of words as well.
Great. And then my last question is, as you look to next year, would you effect potentially the recent acquisition to, have a better growth rate than the objective that you have should all the fabs that are scheduled to be built are built. Yes.
Yes, I think that we definitely see, so first of all, the growth numbers that I shared with you, I stand behind those numbers, but there's We see a lot of opportunity ahead as we're integrating Safe Pure Gas to leverage the 2 capabilities of the 2 companies to grow our market.
I just have another one on addressable market. So I think you guys have touched upon it in the past. And I think I'm sensing it's a theme at semicon, at least in the couple of people that I've talked to that, sort of up and down the supply chain, purity increasingly is important, even at like the very basic chemical level that they need purity requirements. And so in that lens, how has your addressable market increased over the last 5 years and how do you think it will sort of grow relative to the baseline market that these customers that might not use your product in the past are now using your product?
So I'll take maybe the first shot I didn't let you expand. But yes, I mean, when So I introduced some of the trends behind what's happening in the ecosystem, right? So it's the introduction of more filtration point across the ecosystem way upstream in the supply chain. The need for greater frequency of the filter replacement. So all of that is going to contribute to that same expansion.
And then really that's really what's behind what Clint was presenting. When Clint says that he expects his division to grow at 200 to 400 basis points in excess of the market. It's going to come from all of that. Again, purity is becoming increasingly important. Remember for not just yield, but increasingly for the performance of the chip itself and the reliability of the device.
And those are increasingly important attributes. Even not just for the leading edge, if you think about reliability for a sensor in an autonomous car, this is going to become actually increasingly important. So I think that we are ideally positioned to capture some of those trends in the industry. And I don't know if you want to maybe characterize that. It'll be more in terms of certain modules.
Yes.
So let me give one example, which is indicative of the trend you mentioned. So if you look at EUV, EUV oftentimes people think about the challenges associated with with the exposure equipment. But of course, there's a very large ecosystem that needs to be developed to support the EUV transition. One of the key elements of that is EUV photo resist. Right now, EUV photo resists about $10,000 a gallon.
For UV photo resistant. It's very expensive. In order to bring those costs down and meet the purity levels required for that photo resist, we see the resist suppliers who we often work with are now starting to push their filtration requirements to their sub suppliers. Of the individual components. And so that's one case where with the EUV ecosystem, we see that that growth of filtration and purification that's going down stream.
And so I think we're going to see that trend really across the industry more and more.
And that's kind of thing is probably something that you can absolutely understand for very critical chemistries like resist, but It's also true for some very basic commodity IPI is a commodity chemistry, but this chemistry is now subject to very, very stringent Observatory requirements that would actually lead those manufacturers to have to use much better filters much better containers to transport the chemistry after it's made. And all of that actually will translate into great opportunities. Funds.
How would you characterize the SAES business versus point of use versus bulk? Is it predominantly bulk? And then are they Integris customers? Do they use any Integris filtration?
Yes. So, so it's predominantly bulk systems that SACE was providing. And most of the customers, we had some overlap But there are some cases where Seys was servicing, its companies, especially in some of these adjacent industries where Entybridge didn't have much of a footprint. So as I mentioned before, I'm pretty excited about that as a potential synergistic opportunity to grow sales of other Entegris products.
Do they sell are you going to change distribution and do they sell direct
to the
OEMs or is it to the foundry
So it's a it's actually a blend. They sell some of it's direct, and some of it is actually some of the gas companies as well. And we intend in kind of keeping much of that model, the transitioning to, to, Integra sales channel as appropriate.
Just quickly on the operating margins, looks like they're coming down about four points from what you expected in March. And you're still seeing that two points of marketing of operating expansion. With that, maybe changing the distribution channels and changing some of the operating synergies as you kind of go through, is there an opportunity to bring those operating margins up a little bit higher, maybe closer to where they were in the past.
So the operating margins recall in March, we showed 2 sets of operating margins. The margins Clint showed today are no different than what he showed in March. We showed in March sort of where we've been operating. And then we said we had a change in our accounting convention where we were driving more corporate costs back the divisional P and Ls. So the numbers that you see today are clearly different than you would have seen 6 months ago And we had a page in the deck in March that showed sort of the before and after.
But there's no there's no trying to, am I not Because I don't, there's no change in the inherent profitability.
I mean, I'm looking at the slides from March, and it's showing that the 3 year outlook is 38% to 40% on the microcontamination control business. And then on these slides, it's showing 34 to 36.
To go back and
Yes. So what Greg described is actually what you're you're looking at. I believe there's a schedule in the back of the handout here and on the presentation, which gives you the revised operating margins for the segments, which will align with what we're showing today. So there's no change in the operating margin other than the change in the reporting or accounting convention that Greg described. Did you have another question?
Just want to get your thoughts, I guess it's a broader question.
So I
want to get your thoughts on the trade war situation between China and the U. S. Both of it saves gas business because it's I think it's 40% of the revenue coming from there. Is there any strategic thing that can impact that. And more maybe more broadly your organic business, I think, has grown very nicely and has a good exposure there.
Yes. So, Sydney, I mean, I wish I could give you an answer that would address all of your questions, but I don't. I mean, I think first, I would say that right now based on what we know today, the trade tariffs, again, as we understand them as of today, we'll have very little impact on our business. It really amounts to something just north of a $1,000,000 of additional costs for us. Very insignificant.
Now what comes after that, it's anybody's guess in speculation. So I don't know and I won't comment on any speculation. But as of right now, I think those tariff wars have not amounted too much for us.
Is there any geographic difference in terms of end markets like stronger in Japan or less strong in Japan or whatever, between SAES and your core business, I would say it's other acquisitions in your core business. Is there any at all?
A little bit. Faith definitely was very strong in China. And, we're actually very excited because we picked up a very strong team of people from, say, pure DAS that are based in China. So they had some strength there. And I would say broadly speaking, Entegris has quite a bit more strength in Japan.
And that's in part due to the fact that we have a large manufacturing as well as R&D infrastructure there. So I look at those 2 markets and I think there's opportunities for, once again, some growth for Entegris long term to leverage those 2 factors.
And then similar implied in that answer is, John, similar strength across the other geographies.
The acquisitions of staff that you're keeping after letting go and management?
Yes. So, so broadly speaking, we're very excited. We, there's approximately 180 people that came to Integris as part of the acquisition. With the growth that we see with the talents they bring broadly speaking, we're keeping much of that talent coming on board.
I'm going to remember that, I mean, we have been, acquisitive. I think that we have a really good track record in, how well we've been able to integrate those various acquisitions that we've done over the years We have a team that has done that multiple times. I think we have a good playbook and I agree with you. I think that based on everything I've been hearing from both PSS and SAS, those teams are actually really, really excited to be part of Integris. They see the value we can bring.
They see the value of having access to quality organizations that they could only dream of access to a global platform that would actually serve them well in a number of different parts of the world. So I think that again those product lines will blossom as part of fintechlers.
Thanks. Thanks for the follow-up. Bertrand, I had a question on your M and A pipeline. The SAES acquisition, I didn't know about SAES before you guys bought company. You talked about monitoring the company for multiple decades.
How many of these companies are you monitoring today? Is it a couple of companies or 10, 15, 20? Obviously, without going into specific names,
Well, let's just say that, yes, so thank you for recognizing that. And yes, so there are others other companies that we think would be extremely attractive and probably would, or could be unknown at to you. They're also again, the sales was part of a larger industrial company. And I think that we are also pursuing those types dialogues. So hopefully again, we can find a lot more sales type acquisitions to realize over for you is.
I think there's one more question.
Short follow-up, but Could you give the reasons for why the company sold Chase if it was doing so well? Obviously, it was a negotiated sale. So if you don't make sense, evaluation, but why would they want to get rid of it?
Yes. So again, it's a dialogue we've had for many years. The family were was who funded sales were still very much involved in the capital of the company. And I think for the longest time, the family would not agree on the strategic decision to divest that particular business. And I think we managed to in stem that it was the right time and do I think to do at the right value and, we managed to get all of the stars to align.
So persistence, it's patience, it's being deliberate. And that's why we have a team focusing on acquisition. We know that it takes time sometimes to find, first of all, to find those, how do you say that in English? The George and Ralph for and then to make it happen. So again, back to Toshiya's question is I hope that we can find actually a few more of those, that we can talk about over the next few years.
Great. Well, I want to thank everyone both in the room and on the webcast for joining the meeting today. We're scheduled to announce our second quarter results on July 20 6 and we look forward to continuing the conversation then. Thank you all.