Element Solutions Inc Q4 FY2024 earnings call

• Element Solutions had an outstanding 2024 with record adjusted EBITDA and free cash flow. - Outperformed markets by penetrating fastest growing emerging niches in electronics. - Improved margins with over 100 basis points of EBITDA margin expansion in 2024. - Sold McDermott Graphics Solutions for $325 million to optimize portfolio. - Made strategic investments in power electronics manufacturing and research footprint, ending 2024 with strong balance sheet (net leverage 2.8 times, 90%+ fixed rate debt).

Electronics segment: Organic sales grew 7%, with Semiconductor Solutions up 14% (driven by fab utilization, new fab ramps, advanced packaging demand), Circuitry Solutions up 10%, and Assembly Solutions up 1% (benefiting from consumer, mobile, and computing end markets in Asia). Industrial and Specialty segment declined 1%, with Industrial Solutions down 2% but earnings growth due to margin expansion, and Energy Solutions up 8% organically. Semiconductor Solutions revenue exceeded $300 million in 2024, growing at a 5-year CAGR of 14%.

• Anticipate continuation of 2024 trends into 2025, expecting electronics segment organic growth in high single digits. - Potential upside from stronger smartphone refresh cycle and Western automotive recovery. - FX headwinds expected in 2025, with a $15 million year-over-year headwind in adjusted EBITDA. - Expect to spend roughly $65 million on CapEx in 2025.

• Uncertainty in global industrial production, which could be a risk not contemplated in guidance. - Impact of potential tariffs on demand. - FX volatility remaining a significant variable affecting financial results.

Q: Josh Spector asked about Element Solutions' relative performance vs electronics markets over two years and future outperformance.

A: Ben Gliklich responded that Element outperformed in both weaker and stronger periods by penetrating fastest growing subsegments of electronics hardware, expecting continued outperformance in secular growing high-value subsegments.

Q: Bhavesh Lodaya asked about customer communication and product development cycles.

A: Ben Gliklich noted short cycle nature, limited visibility on customers' unit sales, with higher uncertainty in legacy markets and strong demand at leading edge in advanced chips.

Q: Chris Parkinson asked about data points for upside surprise and risks.

A: Ben Gliklich pointed to FX volatility as the biggest variable, with Western automotive health and smartphone unit growth as tailwinds, and industrial production weakness as a risk.

Q: Michael Harrison asked about PCB market bifurcation and assembly business expectations.

A: Ben Gliklich explained advanced PCB segments growing faster than legacy, and assembly business benefiting from higher value applications despite metal price headwinds.

Q: Mike Harrison asked about M&A market and capital deployment.

A: Ben Gliklich stated balance sheet is strong, looking for high-quality tuck-in M&A opportunities, with capacity for repurchase and incremental debt paydown.