A solution set that improves device performance, reduces time to yield, and provides superior cost of ownership for our customers. Some of the major product lines include advanced deposition materials, CMP slurries and pads, etching and cleaning chemistries, and other specialty materials and gases. All three of last year’s divestitures came out of this division. We believe we can achieve four to six points of growth in excess of the industry as we unlock the full potential of our platform and execute on some very exciting opportunities in new materials like molybdenum, etching chemistries and CMP slurries. With this growth and a highly-differentiated solution set, we believe we can steadily improve MS margins from 16% last year to 22% to 24% over time.
The Advanced Materials Handling division manufacturers fluid and wafer handling products that ensure higher purity levels and ultimately drives higher yields, both within our customers’ ecosystems as well as within the fab environment. 60% of a AMH revenue is related to new fab construction projects and wafer fab equipment. These capital-driven products include wafer carriers also known as FOUPs, EUV pods, sensing and control solutions and high-purity wires and tubing. 40% of the business is unit driven and comprised of products such as chemical containers and finished wafer packaging. Going forward, we expect topline growth of two to four points in excess of the industry and operating margins in the low-to mid-20s. The Microcontamination Control division provides products that address a rapidly growing need in the semiconductor industry for purity and consistency of chemicals and materials.
These solutions have become essential for our customers in their quest for yield optimization and long-term device reliability. As feature sizes continue to shrink and as new materials are adopted, the permissible sizing and classes of contaminants as well as their concentration levels are becoming exponentially more stringent. As a result, the push to achieve ever greater process purity translates into the need for more advanced filters, greater frequency of replacement of these filters, and also includes the introduction of more points of filtration, deeper upstream in the fab supply lines. All of this is expected to drive an outperformance of five to seven points for MC. And given the growing value of these solutions for our customers, we expect operating margins to reach 35% to 37%.
I will now hand it over to Linda.
Linda LaGorga: Thank you, Bertrand, and good morning. Today, I plan to cover a few key topics. First, I will focus on our debt structure and our capital allocation priorities, then I will turn to the forward-looking financial opportunity for Entegris. The punch line of this slide is that our debt structure is rock-solid. We ended 2023 with a total debt of $4.7 billion after paying down $1.3 billion last year, a tremendous accomplishment. Debt pay-down into 2023 was driven by proceeds from the divestitures of QED and Electronic Chemicals, the business we sold to Element Solutions and free-cash-flow. The blended interest rate on the portfolio is a very attractive 5.1%. Our debt is comprised of both fixed-rate notes and what remains as the term-loan after last year’s pay-down.
While the term-loan is technically variable, we have hedged almost the entire $1.4 billion. So, we currently have close to 0% variable-rate debt. Other important points to note. We have no maturities until 2028 and no maintenance covenants on the debt. So again, our current debt is well-structured and derisked. Looking at our capital allocation priorities going forward, our clear near-term priority is to further reduce our debt with a focus on the term loan. We expect gross leverage to be below 4 times by the end of 2024 and net leverage to be below 3.5 times. Debt paydown is a powerful contributor to our earnings. Each $100 million of debt pay-down equals approximately $0.04 of EPS. The focus on debt pay-down will continue to be balanced with making critical investments in our future.
As Bertrand mentioned earlier, we plan to invest approximately 9% of revenue in R&D and approximately 10% of revenue in capital expenditures. Also to maximize our debt repayment, we will drive further working capital improvements and continue what we started in 2023. This is an area of particular focus from me. We will also maximize cash repatriation, and in general, minimize our cash levels. This will be another major focus area for us. We also expect to average about $450 million of global cash on our balance sheet over the course of the year. Moving past the near-term, we will seek to complement our organic growth with strategic acquisitions. We have a track record of creating shareholder value through M&A. So, expect us to remain active on that front at the appropriate time.
We will, of course, continue to pay a dividend. And we may consider share repurchases in the future. But for now share repurchases remain on-hold. So next, I want to spend some time on the future earnings power of the company. Not only have we shared this target model externally but we also use this framework to plan, and more importantly, to run our business. It’s pretty straightforward. As you can see the model shows margin and EPS outcomes at different revenue levels. Core to the model is the assumption of a 40% flow-through to EBITDA line over-time. That flow through will be driven by gross margin expansion and SG&A leverage over the next several years. A few other critical assumptions in this model. First, we assume an annual interest expense of approximately $230 million that remains constant in all revenue cases.
This implies no additional debt pay-down going-forward. Of course, we do expect to continue to pay-down the term-loan. That is, this is an illustrative model. We simplified the interest assumption by holding it constant. The model also assumes a tax-rate of approximately 16%, depreciation of 5.5%, and share count of 152 million shares. Again, for all scenarios. Now, focusing on our three year financial targets. Bertrand spoke earlier about our sales growth algorithm and our demonstrated performance as a value compounder. So, what does this mean in numbers? Starting from the left, we expect an approximately 11% sales growth CAGR from 2023 to 2026. The 2023 baseline excludes last year’s divestitures and the business we sold to Element Solutions.
In addition, we have excluded PIM from the 2023 baseline as we intend to sell the PIM business. That 11% growth rate assumption is essentially the midpoint of the range Bertrand laid out. This topline CAGR, coupled with the 40% EBITDA flow-through leads to an EBITDA margin of approximately 31% by 2026, which amounts to a CAGR of 15%. Key drivers of this as I mentioned on the previous slide, are gross margin expansion and SG&A leverage. Taking a closer look at the gross margin improvement opportunity. The drivers of this are expected to be volume growth overall, ramping volumes in our Taiwan and Colorado facilities and the benefits of product mix. For your reference, the 2023 gross margin headwind from our Taiwan facility was approximately 70 basis points.
We expect that this headwind will start to alleviate as we’ve ramped volume shipments in the second half of this year. Next, we expect EPS to be greater than $5 by 2026. This growth is driven by the EBITDA expansion and a few other key assumptions. First, we are assuming that the $1.4 billion term-loan is paid-off completely and only the existing bonds remain outstanding. This leads to an annual interest expense of approximately $160 million by 2026. This is different than our target model slide I just showed where we assumed no additional debt pay-down. And as I mentioned on the previous slide, we have assumed a tax rate of approximately 16% and a share count of approximately 152 million. Wrapping things up, we believe our model is highly differentiated.
We remain very optimistic about the long-term secular growth of the semiconductor industry. The market is moving to us, meaning our unique position and value-add is leading to higher Entegris content per wafer and outperformance. Our capital structure is very solid and rapidly improving, which gives us a lot of optionality moving forward. Finally, the market growth and our outperformance leads to attractive sales growth and with the leverage in our model and our commitment to pay down our debt accelerated EPS growth. Thank you. This concludes our presentation. And I will turn it back to you Bill to moderate the Q&A.
A – Bill Seymour: Thank you, Linda. [Operator Instructions] So we will move on to the first question. This is a question that came in different forms from different people. So, Bertrand, talk about the drivers of the Q4 results above guidance and then the 6 points of outperformance for 2023. What are the drivers?
Bertrand Loy: Obviously, we were very pleased with the way we finished 2023. All three divisions performed very well. MC and AMH were in-line or slightly above forecast in Q4. And MS had a very strong finish. Remember that the MS division has the most exposure to memory, which was a headwind, was earlier in the year. But of course, converted into a tailwind as the memory segment started to recover late 2023. Another factor impacting the MS performance in Q4 was the existence of some pull-ins, customer pull-in, customers trying to get will take advantage of rebates available to them during calendar 2023. But overall very strong finish to what was a very good year for Entegris. To put that in context, remember that we were very busy in 2023.
We completed the acquisition of CMC Materials, leading a very aggressive integration project, completing this integration within 13 months post-close. As part of this integration, we successfully divested three large businesses generating $1.3 billion of proceeds into process, which we applied to our debt as we had promised to do. We also managed very effectively the slow industry environment, while maintaining strong investments into our future. As you saw, we increased R&D spending in 2023, we largely completed the KSP investment in Taiwan, and we initiated a new investment in Colorado. And as you know, all of those significant projects can be the source of a lot of distraction, a lot of de-focus in the organization, and that was not the case.
We outperformed the industry by 6 points. We also delivered very healthy levels of EBITDA in 2023 and 27%, which is in-line with our commitments. So, we are exiting 2023 with a very strong platform that obviously we expect to build upon as we presented today. So it bodes well for 2024 and for the years to come.
Bill Seymour: Okay. So Chris Kapsch from Loop has little bit of a double-down on that question. So looking at the MC performance, MC performed really well last year in a down-market. What are the what are the drivers of that? Is it leading-edge, is it mainstream, what are the major drivers of that?
