Element Solutions Inc Q1 FY2025 earnings call

• Ben Gliklich stated Element Solutions started 2025 strong, with electronics growing mid-single digits organically, benefiting from trends in AI, advanced packaging, data centers, and improved consumer electronics in Asia. - Carey Dorman discussed financial results: organic sales and constant currency adjusted EBITDA grew 5% year over year, adjusted EBITDA of $128M was above guidance, margins impacted by pass-through metal prices but excluding that improved. - Drivers of organic net sales growth in segments: Electronics had double-digit growth across all business units; Industrial and Specialty had declines but expected recovery. - Business mix shifting towards B2B end markets like servers, data centers, and high-performance computing, dampening seasonality and cyclicality.

Element Solutions Inc. had two main segments. The Electronics segment saw organic growth of 10%. Within Electronics, Assembly had stronger consumer electronics demand in Asia and Americas offsetting industrial weakness, with advanced specialty solder paste and engineered assembly solutions for servers/data centers growing. Circulatory Solutions grew 8% organically from data center, memory disk, and circuit board specialty finishes. Semiconductor Solutions had 17% organic net sales growth from wafer-level packaging, with viaform copper damaging product line up over 20%. Power electronics grew nicely with new customer wins. The Industrial and Specialty segment had organic net sales decline of 2%, with core industrial down 1% volume-driven in Europe and offshore sales down due to timing of large orders but expected to recover later in 2025. Revenue contribution: Electronics segment contributed significantly with its double-digit growth, while Industrial and Specialty had a smaller contribution but with recovery expected.

• Maintained full-year adjusted EBITDA guidance of $520M to $540M. - For Q2 2025, expected adjusted EBITDA in range of $120M to $125M, flat sequentially excluding $4M graphics business contribution in Q1. - Assumes tariffs not having sequential demand impact based on April trading being solid, and no demand destruction from tariffs due to uncertainty around implementation.

• Tariffs impacting cost structure, with efforts to localize sourcing and mitigate cost issues. - Macroeconomic volatility and uncertainty around tariff implementation and its effect on demand. - Potential for industrial market weakness to impact performance further if not recovered.

Q: Josh Spector asked about the guidance range and data center exposure.

A: Ben Gliklich said they finished Q1 ahead of plan, tariffs have modest impact on cost which is mitigated, FX tailwind, April trading strong, no demand destruction from tariffs yet, and electronics strength vs industrial weakness drive the guidance range. On data center exposure, circuitry and assembly businesses have over $100M exposure, bumping up against $200M with memory disk.

Q: Bhavesh Lodaya asked about Sir Martin Franklin's ownership and involvement.

A: Martin Franklin said he sold some shares for liquidity reasons, but his long-term vision for the company remains unchanged.

Q: Mike Harrison asked about semiconductor business and data center strength.

A: Ben Gliklich said wafer-level packaging business growing nicely, data center exposure in circuitry and assembly over $200M, B2B markets growing with no slowdown in demand.

Q: Steve Byrne asked about manufacturing rollout and industry business performance.

A: Ben Gliklich said they're localizing supply chain to mitigate tariff impact, nearly finished doubling ArgoMax capacity, active copper manufacturing scaling up, and industrial business had 1% organic sales drop with weakness in Europe but growth in Asia.

Q: Pete Osterline asked about tariff impact on customer conversation.

A: Ben Gliklich said not seeing clear evidence of prebuying from tariffs in their supply chain, growth driven by B2B sales.

Q: John Roberts asked about bonus accrual and seasonal differences.

A: Ben Gliklich said running with full OPEX, and Q2 guide assumes normal seasonal pattern based on consistent demand from Q1.

Q: Jon Tanwanteng asked about April demand and tariff impact.

A: Ben Gliklich said April demand consistent with Q1, assuming same demand environment entering the year.

Q: Ryan asked about cost mitigation from tariffs.

A: Ben Gliklich said mitigating through finding alternative raw material sources, qualifying for USMCA exemptions, and localizing manufacturing to jurisdictions in Asia.

Q: David Silver asked about R&D and consumer electronics.

A: Ben Gliklich said no pause in R&D momentum, continuing work on breakthrough technologies, and consumer electronics had softness in Western smartphones but strength in Asia and Americas non-smartphone areas.