Element Solutions Inc Q4 FY2025 earnings call

• Element Solutions had record year in 2025, executing model of operational excellence and prudent capital allocation. - Electronics business saw 10% organic revenue growth in 2025, with Q4 acceleration driven by data center and high-performance computing. - Specialty segment margins expanded 250 basis points in 2025 due to higher value selling, supply chain initiatives, etc. - Divested flexographic printing business in Q1 2025 and redeployed capital into acquisitions of Micromax and EFC Gases & Advanced Materials, closed in early 2026. - Micromax is global leader in advanced electronics inks, etc., enhancing Element's position in electronics supply chain. - EFC provides high-purity specialty gases, growing in fast-growing markets like semiconductor fabrication. - 2025 had record adjusted EBITDA and EPS despite Graphics divestiture and industrial weakness. - Full year 2025 net sales $2.6 billion, up 6% organically. - Generated $256 million adjusted free cash flow in 2025, $83 million in Q4. - 2025 CapEx $61 million, 2026 expected CapEx ~$75 million including new acquisitions. - Strong balance sheet at end of 2025 with $627 million cash and net debt to adjusted EBITDA ratio 1.8x.

Electronics business had 10% organic revenue growth in 2025, with 13% organic growth in Q4 driven by data center and high-performance computing. In Q4, Electronics segment organic growth was 13% across all 3 business verticals: Circuitry up double digits due to AI-related investment, Assembly Solutions up 12% from consumer electronics and high-performance computing, Semiconductor Solutions up 13% from advanced packaging and power electronics. Specialties had 4% organic growth, with 9% growth in Energy Solutions and core Industrial surface treatment flat. For 2025, Electronics net sales increased 10% organically, Specialties grew 1% organically. Adjusted EBITDA for 2025 was $548 million, record adjusted EPS of $1.49. Fourth quarter adjusted EBITDA was $136 million, up 8% year-over-year on constant currency excluding divestitures impact. Assembly business had pass-through metals creating margin headwind, and metal price increase impacted adjusted EBITDA.

2026 adjusted EBITDA guidance range $650 million to $670 million, inclusive of EFC and Micromax acquisitions and assuming current FX rates and metal prices. Includes modest FX tailwind and $5 million headwind from lapping Graphics stub period contribution, implying high single-digit organic adjusted EBITDA growth. Adjusted EPS growth mid- to high teens. 2026 CapEx expected ~$75 million. Target roughly 50% EBITDA conversion to free cash flow, though metal pricing may cause seasonality.

Noise on top line due to metals price volatility which may impact adjusted EBITDA seasonality and short-term cash flow. Risk of memory prices rising affecting consumer electronics demand but potential positive impact from data center demand benefiting Element. Uncertainty around end market growth in industrial verticals affecting Specialty segment. Uncertainty in quantifying revenue synergies from acquisitions due to long sales cycles and highly qualified products.

Q: Congrats on a nice finish to the year. Talked about Electronics margin performance, metal price impact.

A: Metal price spike and hedge losses in Q4 had hit, absent that would have been above guidance range, recaptured in 2026. Incremental margins expected normal.

Q: Concerns about rising memory prices affecting Electronics business.

A: Memory price rise due to data center demand surge, Element benefits from data center demand despite potential consumer electronics impact.

Q: New product adoption in 2026, acceleration vs 2025.

A: Multiple factors like higher-end application technology skew, new products like Kuprion, Argomax contributing to outgrowth.

Q: Electronics growth in 2026, bull case.

A: Could see double-digit organic growth if end markets continue as seen, but guide towards end market expectations.

Q: Relative growth rates in Electronics segment, HPC, data center vs legacy.

A: PCB market expected to outgrow, Circuitry, Semi businesses outperforming, Assembly business accelerated due to new products.

Q: Kuprion new product, customer receptivity, ramp.

A: Customer pull strong, ramping production at first site, second site planned, pipeline exceeds capacity.

Q: 1Q guidance range wider.

A: Metal price impact in Jan, acquisitions seasonality feathering in.

Q: Thoughts on Specialty segment and EFC fit.

A: EFC fits in Specialty as niche, value enhancing, mid-single-digit growth expected.

Q: Acquisitions performance in 2025, guide inclusion.

A: Micromax ~$40M EBITDA in 2025, EFC ~$30M, guide includes growth, integrations going well.

Q: PCB market outlook 2026, factor into business.

A: Use Prismark data, 6% growth expected, focus on meter squared.

Q: Energy Solutions price volume in 2026.

A: ~half price half volume growth, mid-single-digit grower next year.

Q: Kuprion in copackage optics, wafer level packaging products.

A: Kuprion in Through-Glass Vias, wafer plating, advanced interconnect products used in wafer level packaging.

Q: Large customer contract in Specialty segment.

A: Large equipment sale in Q3 2024, replaced by higher-margin chemistry sales in 2025.

Q: Kuprion plant ramp, contribution.

A: Ramp in second half 2026, multiple millions revenue in 2026, material EBITDA contribution in 2027.

Q: Specialty segment margins 2026.

A: Expected to expand if mid-single-digit growth achieved.

Q: 2026 free cash flow target.

A: Roughly 50% EBITDA conversion, maybe tick lower due to metal pricing seasonality.

Q: Top line synergies from acquisitions.

A: Hard to quantify revenue synergies due to long sales cycles, but businesses better inside Element, expect acceleration in growth.