My name is Steve Cantor. 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 filings with the SEC very carefully to understand those risks. This morning, we have a, hopefully, will be a very interesting agenda for you. We have two speakers and a couple other people here in the room that will be available for Q&A. First, we'll hear from Bertrand Loy, our CEO.
We'll have a presentation, or part of a presentation will be from Clint Haris, who runs our Microcontamination Control business. Greg Graves, our CFO, will be available for Q&A. We also have in the room Chris Roman, who is over here in the front. 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 until 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. The agenda today is pretty straightforward. We will take the time to reaffirm some of the themes we developed during our recent Analyst Day. Most importantly, we want to talk about the SAES Pure Gas acquisition, a transaction that we announced and closed a few weeks ago. We'll talk about the business itself, we'll 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 two to three years. What we will not do today, we are obviously in a quiet period right now, 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 26th.
With that, let me get started. This slide is a slide that I presented during the Analyst Day in March. This is a slide that states and describes some of the key attributes that make Entegris 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 SAES, that profile actually has 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. 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.
Primary market 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 do. Semiconductor is a great place to be. I will not bore you with a lot of 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%-8% CAGR over the next three years.
The industry, the semiconductor industry, is constantly in search of ways to improve the performance of the semiconductor devices. This is how we expect the industry to do that. Miniaturization, shrink, scaling will continue to be a factor, but increasingly, the industry will be turning to new ways to improve the performance of the chips. It's going to come from the steady introduction of new materials with better electrical properties, better structural properties. That's number 1. Number 2 will also be the introduction of new chip designs relying on more complex architectures. Right now, of course, what everybody's talking about is the 3D NAND structure with those very high aspect ratios. All of those trends, those three trends, will actually play to the strength of Entegris. How is that? Well, first of all, we will continue to benefit from greater materials intensity.
I will define that in two ways. 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 get to that next level of performance. Those trends will benefit a number of our product lines. Just to mention a few, formulated cleans, specialty gases, all of those product lines which belong to our SCEM division will benefit from this greater materials intensity. Another big trend and big opportunity, obviously, for Entegris is around purity.
Purity matters a lot, but also the purity levels required in the semiconductor manufacturing process are much harder to achieve. Why does it matter? Well, purity really, 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. 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 represent very significant economic losses for the industry. We try to capture all of that in the bottom corner of this slide. I know you're familiar with those numbers, I'm not going to go over that.
Those trends will benefit greatly the Microcontamination Control division, where we believe we have a clear leadership position in liquid and gas filters and purification solutions. Those very stringent purity levels are going to be important, but very hard to achieve. What it really means is that it's going to require a very close collaboration throughout the ecosystem. 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 manufacturing processes and upstream with their own suppliers. Greater SAM, as a result of the introduction of more filtration points, more frequency of replacement of those filters, is one thing.
The other big trend that we will benefit from is the fact that increasingly, the industry will 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. 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 high levels of purity. If you think about Entegris, 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. This is really how you need to think about those three divisions.
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 one another. We have some of the best application knowledge in the space, and we are the leader in contamination control. That makes us actually the best qualified to help solve those upcoming process challenges in the industry. In that context, again, purity is becoming increasingly important for the industry. Purity is also becoming harder to achieve. The acquisition of SAES in that context was really a no-brainer. Clint will talk about the products, will talk about the value proposition, will talk about how it impacts his goals in a minute.
I'm sure he's going to be bragging a little bit also about the fact that the addition of SAES makes the Microcontamination Control division the largest division at Entegris now, which is good. We're all very happy for you, Clint. I will give him a chance to talk about all of that. I wanted to just go over some of the key facts around this transaction one last time. Remember, the purchase price was about $355 million, which is about nine times EBITDA net of the $5 million of savings that we intend to realize. We announced the transaction and closed it within two 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.
Obviously, a very nice accretion starting this year, as you can see on this slide. With that, I will give the podium to Clint to talk somewhat more about SAES.
Thank you, Bertrand. Good morning, everyone. I appreciate your taking the time to listen to the Entegris story and a little bit more about the MC division. As Bertrand pointed out, we are the largest division within Entegris. I actually did not expect Bertrand to brag about that. I kind of expected Bertrand to brag about France making it to the World Cup finals.
It's a nice first quote.
Okay. I do appreciate the comment. Talking a little bit more about the Microcontamination Control division. We are a rapidly growing group. Last year, we grew about 20%, generally speaking, we expect our sales growth to outperform the market. 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. We serve a relatively large market, about $1.7 billion. That market is growing. If you look at our business, as we approach approximately $600 million in sales for the division, you can see that we have some headroom to grow.
Our business itself is made up of solutions both for purifying and filtering liquids, some of the specialty liquids that semiconductor fabs use to clean and process semiconductor chips, ranging from wet chemistries to CMP slurries to photoresists, 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 legacy Entegris standpoint, prior to the SAES acquisition, we had a strong position in 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. 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. The division we acquired, SAES Pure Gas, was a unit of an Italian-based company.
They also were growing quite rapidly, actually at growth rates of just a little bit in excess of what we saw with Entegris. The last year, sales were about $91 million and fairly profitable with an EBITDA of about $33 million. Operations are based here in California in 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. The products that SAES 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 and needing additional gas purification solutions. If we look at this chart, and there's many words, many boxes on this chart talking about the portfolio of gas filtration and gas purification.
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 3D NAND, as well as double and quadruple patterning. 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 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 a common gas like nitrogen or more esoteric gases like argon or helium used in semiconductor processing. Our customers will come to us to provide turnkey solutions. They also turn to us to solve some of their critical challenges as they're developing new process tools. As I mentioned before, legacy Entegris brought a core competency around gas filtration that are used in OEM process tools. Many of the OEMs often turn to us to address their needs for next-generation systems. With that, I think I'll turn it back over to Bertrand.
Thank you, Clint. For many years now, we've been very clear about the fact that our preference to create long-term shareholder value is to find the right acquisitions. I'm glad that once again, with the acquisition of SAES, we've been in a position to do that. We've also been very clear and very consistent, in defining our acquisition framework with all of you. Again, SAES fits this framework really well. The framework is here, something again that we've had many opportunities to describe to you. When we think about where we want to be targeting our acquisition efforts, we think about it in the context of technology. 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 purification.
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 markets, 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. 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, a very solid financial discipline around every single deals that we have done over the last several years.
When we talk about financial discipline, for us, we 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. 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 successfully for the last 4 years and certainly something that we intend to continue to do. If you look back in the rear view mirror, those are the major acquisitions that we closed over the last 4 years. ATMI in 2014, about $360 million in revenue. That was adding to our materials platform, adding to our packaging technology platform as well. Trinzik was the liquid filtration product line.
Again, separation technology. PSS was really around that sensing and control focus, allowing us to detect agglomeration of slurries in the slurry batch. Again, adding to our capabilities around the CMP module. Then the last acquisition, as Clint was describing, SAES, which is really allowing us to strengthen our leadership position around gas purification. Again, very consistent with the acquisition framework. The question is, okay, what does that mean to some of the financial objectives that you presented a few months ago? 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 P&L on an as reported basis. The next column is quantifying the impact of the addition of SAES and PSS. Revenue of $106 million.
You can see a very healthy operating margin of 33%, well in excess of our corporate average. You can see the pro forma EPS impact of those two recent acquisitions. That gives you the pro forma for 2017. Recall that during the analyst day, we were trying to project forward to what this could mean in 2020, assuming a CAGR of 7% for the next three years. That would actually get the top line to something just short of $1.8 billion. We are continuing to be very committed to not only grow the top line, but also continue to expand the bottom line. Our commitment to expanding our EBITDA margin by 200 to 300 basis points remains intact. That should actually translate into an EPS number of about $2.30 to $2.40, roughly. That's the organic component.
Our business continues to generate very healthy levels of cash flow. Over time, our balance sheet will strengthen. We will have many different ways, many different alternatives to actually improve this EPS picture. What are those alternatives? Well, with all of the excess cash that we intend to generate over the next few years, we could buy back our shares, and that would add about $0.20 to the EPS number. Alternatively, we could actually choose to invest that excess cash into similarly attractive M&A. Again, fitting that framework that I was describing. That could actually yield about $0.25. 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.
$0.25 if we were to just reinvest the cash we generate. 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 $1 to the organic EPS. In summary, I think that Entegris has a great platform, very differentiated
-value proposition, a great team, a very strong balance sheet that we intend to deploy. I think we have a very credible pathway to generate an EPS of approximately $3 by 2020. With that, I would invite Clint and Greg to join me on stage, and we will open up for questions. John. Oh.
Yeah, go ahead, Keshav.
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? Secondly, if you can touch a little bit on the competitive landscape-
Sure
that'd be helpful.
Sure. The answer to your first question is predominantly, SAES has been growing faster than the market because, a few things. One, the market has been demanding higher and higher gas purity, so the semiconductor fabs have required more purification systems in their fab. Two, SAES really was in a sweet spot of the market with much larger gas purification systems that provide a very high throughput, high volume gas purification. That fits the needs of many of the mega fabs that are being built for NAND, 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. Fundamentally, the market was expanding and SAES was riding that wave from a technology side.
From a competition standpoint, no one has the portfolio of end-to-end solutions that Entegris has. That provides us with a significant competitive edge. It enables us to talk both with fabs, with OEMs, as well as with others in the market and solve their problems by offering solutions that are kind of multiple component solutions. There are other competitors out there that offer individual pieces of the puzzle, and we will continue to see that competition going forward. I think from a technology standpoint, as well as an end-to-end solution standpoint, Entegris has a strong edge.
Great. 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-
Sure
type revenue stream on a two, three-year basis?
First of all, there is a portion of SAES' business that was more on the point of use purification, the smaller purifiers, which do have the ability for recurring 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. Broadly, if I look at the gas filtration and purification portfolio as a whole, I think there are opportunities to focus on that recurring revenue piece.
Great. Thanks. Michael Nathanson. First, I guess, just a follow-up question on SAES and combining that with your Microcontamination business, right? How much of SAES business come from outside of 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 that potentially drives some revenue synergies down the road?
Yeah. I don't think we've disclosed yet the percentage outside of semi. To answer the second part of your question, one of the things that I'm actually most excited about with bringing SAES into the portfolio is our ability to leverage their channels into some of those other markets to bring existing Entegris products, as well as to leverage those existing Entegris technologies, to develop new purification solutions for those adjacent markets.
Just to be clear, their largest market is semi though, right?
Yes.
Okay.
Yes.
At least.
The order of magnitude, semi is what, Clint?
Semi, I think is in the order of magnitude about 70%-80%.
Okay. Vast majority-
Yes
of the business, semi. Okay. Let's just at least baseline that. Okay, great. Thank you. Then just, I guess, Greg, on the updated model. Two-part question. First is just the increased three-year target. Those are only based on these two transactions you just completed. Is that correct?
Yeah. If you had built a model coming out of the Analyst Day, the difference in the models, essentially, we're starting with $350 million less in cash. We'll generate $100 million or more over the next few years from the two acquisitions that we've made. You've got, like I said, your starting point's a little lower, but your cash generation over the period's a little higher.
I guess just a question on M&A. This seems like it's a great fit for the company, seems like you guys are doing well on your M&A pipeline. Is there a way you can think about your M&A strategy? It seems like that company's putting more focus on that. Should we expect companies to have more targeted larger transactions to try to push above this $3 earnings that you guys talked about and using leverage? It seems like you need to use leverage to get above that three bucks. For Frank, can you talk about high level strategically, how you think about it?
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&A initiative internally, or we have a pipeline that would include small and mid-size and larger size companies. I think it's just a question, again, at the end of actionability in many cases. 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. In the current environment, auction processes can be prohibitively expensive. That could be actually a limiting factor, but, yes. Again, acquisition is a big area of focus for us.
We've been talking about it and thrilled that we've been able to announce actually three deals for different transactions this year, which is good, I hope this can continue.
Can you talk a little bit-
That's Steve.
Oh, Steve.
Hey, 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? Why not focus on trying to grab more market share? Are you worried about any kind of pricing pressure if it is that saturated now?
No, I think that we feel that our primary market, the semiconductor industry, is extremely vibrant. I think we are extremely well-positioned to capture a lot of those opportunities. A lot of the growth that we've been describing, that 5%-8% growth, is going to come mostly exclusively 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. I think that with fairly modest investments, we should be able to find applications for some of our fluid handling solutions, some of our packaging products, some of our filtration products in biomedical life sciences applications and some other industries. To the extent we can do that effectively with relatively modest investments, I think that's something that you as an investor would want us to do, and that's what we're trying to focus on.
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. As a result, we're capturing market share at the leading edge. 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 forma 2017 basis, the mix between units and CapEx revenue, roughly?
Yeah. I think Bertrand said, you're roughly in that 70, 72 units. Typically, we've talked about being in the mid to high 70s. If you think about putting $90 million of revenue on a billion and a half dollar base, it's a 5% swing toward the CapEx.
On your three-year growth objectives, what level of CapEx in the industry are you assuming is going to be spent to attain a 5%-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.
Okay.
Very conservative assumption. The one thing I would want to also say is that we have a fairly unique definition of what a CapEx product is. For us, a CapEx product can be a FOUP, it could be a gas filter, it can be a valve. The valve will not get replaced unless it fails, and our valves typically don't fail. A gas filter will be replaced. Not nearly as fast as a liquid filter. That's why we qualify a gas filter as CapEx. When those gas filters are used with very corrosive gases, they will get replaced every two or three years. When you think about FOUPs traditionally have been lasting about four to five years. With the advanced fabs, we expect the fabs to have to replace the FOUPs every three to four years.
Again, what we call CapEx, a lot of companies would actually call consumable. I think we have to be careful about the choice of words as well.
Great. My last question is, as you look to next year, would you expect 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.
Yeah, I think that we definitely. First of all, the growth numbers that I shared with you, I stand behind those numbers, but we see a lot of opportunity ahead as we're integrating SAES Pure Gas to leverage the two capabilities of the two companies to grow our market.
Questions?
I just have another one on addressable market. 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 up and down the supply chain, purity increasingly is important, even at the very basic chemical level, that they need purity requirements. In that lens, how has your addressable market increased over the last five years, and how do you think it will grow relative to the baseline market that these customers that might not use your product in the past are now using your product?
I'll take maybe the first shot at it, I will let you expand. But yes, I introduced some of the trends behind what's happening in the ecosystem, right? It's the introduction of more filtration points across the ecosystem, way upstream in the supply chain. The need for greater frequency of the filter replacement. All of that is going to contribute to that SAM expansion. Really that's what's behind what Clint was presenting. When Clint says that he expects his division to grow at 200 to 400 basis point 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. Those are increasingly important attributes. 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. I think that we are ideally positioned to capture some of those trends in the industry. I don't know if you want to maybe characterize that a bit more in terms of-
Yeah
certain modules.
Let me give one example, which is indicative of the trend you mentioned. If you look at EUV. EUV, oftentimes people think about the challenges associated with the exposure equipment. 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 photoresist. Right now, EUV photoresist is about $10,000 a gallon for EUV photoresist. It's very expensive. In order to bring those costs down and meet the purity levels required for that photoresist, 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. That's one case where, with the EUV ecosystem, we see that growth of filtration and purification that's going downstream.
I think we're going to see that trend really across the industry more and more.
That kind of thing is probably something that you can absolutely understand for very critical chemistries like resist, photoresist. It's also true for some very basic commodity. IPA is a commodity chemistry, but this chemistry is now subject to very, very stringent purity requirements that will actually lead those manufacturers to have to use much better filters, much better containers, to transport the chemistry after it's made. All of that actually will translate into great opportunities for us.
How would you characterize the SAES business versus point of use versus bulk? Is it predominantly bulk? Are they Entegris customers? Do they use any Entegris filtration?
Yeah. It's predominantly bulk systems that SAES was providing. Most of the customers, we had some overlap, but there are some cases where SAES was servicing companies, especially in some of these adjacent industries, where Entegris didn't have much of a footprint. As I mentioned before, I'm pretty excited about that as a potential synergistic opportunity to grow sales of other Entegris products.
Are you going to change distribution, and do they sell direct to the OEMs, or is it to the foundries?
It's actually a blend. They sell, some of it's direct, and some of it is actually through some of the gas companies as well. We intend in kind of keeping much of that model, but transitioning to Entegris sales channel as appropriate.
Just quickly on the operating margins. It looks like they're coming down about 4 points from what you expected in March. You're still seeing that 2 points of operating expansion. With that, maybe changing the distribution channels and changing some of the operating synergies as you 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?
Can I take it?
I'll take it. I think I know where we're going. The operating margins, recall in March, we showed two 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'd been operating, and then we said we had a change in our accounting convention, where we were driving more corporate costs back to the divisional P&L. 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.
Is that the change in trend you're referring to, Amanda?
Because there's no change.
There's no other change that I can think of
inherent profitability.
I mean, I'm looking at the slides from March, and it's showing that the three-year outlook is 30%-40% on the Microcontamination Control business. On these slides, it's showing 34%-36%.
I'd have to go back and look
Yes. What Greg described is actually what 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. 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?
Thanks for doing your presentation. Just want to get your thoughts, and I guess this is a broader question. I want to get your thoughts on the trade war situation between China and the U.S., both for the SAES gas business, because I think it's 40% of the revenue coming from there. Is there any strategic thing that can impact that? Maybe more broadly, your organic business, I think, has grown very nicely and has a good exposure there.
Sidney, I wish I could give you an answer that would address all of your questions, but I don't. First, I would say that right now, based on what we know today, the trade tariffs, again, as we understand them as of today, will have very little impact on our business. It really amounts to something just north of $1 million of additional cost for us. Very insignificant. What comes after that? It's anybody's guess and speculation. I don't know, and I won't comment on any speculation. As of right now, I think those tariff wars have not amounted to 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, SAES and the other acquisitions in your core business? Is there any at all?
A little bit. SAES definitely was very strong in China, and we're actually very excited because we picked up a very strong team of people from SAES Pure Gas that are based in China. They had some strength there. I would say, broadly speaking, Entegris has quite a bit more strength in Japan. That's in part due to the fact that we have a large manufacturing as well as R&D infrastructure there. I look at those two markets, and I think there's opportunities for, once again, some growth for Entegris long term to leverage those two factors.
Implied in that answer is similar strength across the other geographies.
I guess this brings up the other question is, in terms of the acquisitions of staff that you're keeping, staff you're letting go, management.
Broadly speaking, we're very excited. There's approximately 180 people that came to Entegris 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.
Remember that we have been acquisitive. I think that we have a pretty 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 SAES, those teams are actually really, really excited to be part of Entegris. 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. I think that, again, those product lines will blossom as part of Entegris.
Thanks for the follow-up. Bertrand, I had a question on your M&A pipeline. The SAES acquisition, I didn't know about SAES before you guys bought the company. You talked about monitoring the company for multiple decades. How many of these SAES-type companies are you monitoring today? Is it a couple of companies or is it 10, 15, 20? Obviously, without going into specific names.
Well, let's just say that. Thank you for recognizing that. Yeah, there are other companies that we think would be extremely attractive and probably could be unknown to you. Again, SAES was part of a larger industrial company. I think that we are also pursuing those types of dialogues. Hopefully, again, we can find a lot more SAES-type acquisitions to realize over the next few years.
I think there's one more question.
A short follow-up, could you give the reasons for why the company sold SAES if it was doing so well? Obviously, it was a negotiated sale, so it makes sense from some valuation, but why would they want to get rid of it?
Yeah. Again, it's a dialogue we've had for many years. The family who founded SAES was still very much involved in the capital of the company. I think for the longest time, the family would not agree on the strategic decision to divest that particular business. I think we managed to convince them that it was the right time and the right thing to do at the right value. We managed to get all of the stars to align. It's persistence, it's patience, it's being deliberate. That's why we have a team focusing on acquisition. We know that it takes time sometimes, first of all, to find those, how do you say that in English, the jewels in rough? Then to make it happen.
Again, back to Toshiya's question, 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 26th, and we look forward to continuing the conversation then. Thank you all.