ESI

• Proposed Merger with Solstice Advanced Materials

  • The transaction combines complementary capabilities to create a stronger, broader electronics portfolio spanning chip/PCB fabrication, packaging, and assembly, with expanded exposure to high-growth thermal management and copper interconnect markets.
  • The combined company is projected to deliver over $180 million in actionable cost synergies, with additional upside potential over time. Joint integration planning is underway, led by CFO Carey Dorman on Element's side.
  • Management acknowledges the disappointing stock market reaction to the announcement and is focused on executing integration to demonstrate the transaction's value to shareholders.
  • No additional questions on the merger will be addressed per regulatory and disclosure requirements.

• Core Q2 2026 Operational Performance

  • The company delivered a record quarter, with 15% total organic net sales growth, 33% year-over-year constant currency adjusted EBITDA growth, and a 27% year-over-year increase in adjusted EPS. Excluding pass-through metals impacts, adjusted EBITDA margins expanded 120 basis points year-over-year to 27.8%.
  • Organic growth accelerated for the third consecutive quarter, driven by strong demand from AI infrastructure build-out, and the company is outpacing broader industry growth through focus on high-value, fast-growing subsegments.
  • Recent acquisitions (Micromax, EFC) are performing ahead of plan and contributing meaningfully to adjusted EBITDA growth, with integration progressing smoothly.

• Growth Investment Priorities

  • Couprion, the company's differentiated copper plating technology for thermal management and power delivery applications, is progressing through customer qualification with a growing commercial pipeline and strong partner enthusiasm. The company has increased its 2027 year-end capacity outlook by expanding throughput at the initial Fremont, CA plant and increasing the scope of the second adjacent California site, with construction planning underway for a third site in Connecticut.
  • The company is accelerating capital investment in high-growth product lines including Couprion and thermal interface materials for hyperscale customers, alongside ongoing plant consolidation and supply chain optimization for the industrial business.

• Full year 2026 adjusted EBITDA guidance is raised to a range of $690 to $710 million, up from prior guidance, reflecting stronger than expected first half performance and strategic execution across business units. The range accounts for one-time metal hedge gain benefits realized in the first half of 2026, with associated costs recorded in H2 2025.
• Full year 2026 adjusted EPS growth is guided to approximately 20% year-over-year.
• 2026 annual capital expenditure is now expected to be roughly $100 million, at the higher end of the prior guided range, but still remains less than 3% of total annual sales. All CapEx is allocated to high-return, long-term growth projects.
• Q3 2026 adjusted EBITDA is expected to be approximately $180 million, with demand projected to be sequentially similar to the first half of the year. The guidance incorporates expected headwinds from unrecaptured raw material and logistics inflation tied to the Iran conflict and no material seasonal ramp in the weak consumer smartphone market.
• Net leverage ratio is projected to decline to approximately 2.5x by the end of 2026, down from the current 2.9x pro forma (including Micromax and EFC).
• Adjusted free cash flow generation remains on track to follow the company's typical second half weighted cadence, assuming stable current metal prices.
• EFC is expected to deliver substantially higher sequential revenue in the second half of 2026, with full year 2026 revenue of $300 million still projected and management confidence in this target has increased.

Element Solutions has two core operating segments: Electronics and Specialty.

1. Electronics Segment: Reported 20% organic net sales growth year-over-year, with double-digit organic growth across all three vertical sub-segments:

   • Semiconductor Solutions: 31% organic net sales growth, driven by strong demand for power electronics, thermal interface materials for AI GPUs/CPUs, and advanced packaging solutions from Asian OSATs. Precious metal price increases amplified top-line revenue growth this quarter. The recently acquired Micromax contributed $130 million to reported segment revenue (two-thirds from metals) and is performing ahead of plan, delivering significant ex-metals revenue and adjusted EBITDA growth.
   • Assembly Solutions: 18% organic net sales growth, supported by broad demand for high-reliability solder pastes in Asia, growth in engineered preform materials for data center applications, and robust growth from India amid global electronics supply chain diversification.
   • Circuitry Solutions: 15% organic net sales growth, driven by demand for metallization solutions tied to AI infrastructure and high-performance computing, traction with technologies for complex PCB architectures, and continued expansion in Southeast Asia. The Electronics segment contributes approximately 70-75% of the company's total organic growth, with all growth concentrated in high-value, AI and high-performance computing end markets.

2. Specialty Segment: Delivered low single-digit organic net growth overall:

   • Industrial Solutions: 3% organic growth, supported by a modest early-quarter return to growth in European industrial markets and price increases to offset rising raw material inflation. Ongoing restructuring of go-to-market and supply chain strategies is beginning to deliver results.
   • Offshore Energy Solutions: 1% organic growth (slower than Q1 2026), impacted by project timing and operational disruption from the conflict in Iran.
   • Recently acquired EFC Gases and Advanced Materials contributed $16 million in Q2 2026 revenue. Demand for EFC's products for electronics, satellite, and electrical infrastructure applications remains strong, though the business has inherently lumpy quarterly revenue.

• Raw material and logistics inflation driven by the ongoing conflict in Iran may not be fully recaptured in the near term through pricing adjustments or sourcing changes, creating near-term margin pressure. Inflation has been most pronounced for oil-derived raw materials (ethylene, propylene-based products), which primarily impact the Specialty segment's industrial and offshore businesses.
• Consumer and automotive end markets remain soft, and no material seasonal ramp in consumer smartphone demand is expected for the second half of 2026, acting as a modest headwind to overall growth.
• The proposed merger with Solstice Advanced Materials remains subject to unresolved shareholder and regulatory approvals and customary closing conditions, creating uncertainty around the transaction's completion.
• Power electronics end markets (primarily tied to electric vehicles) have historically been volatile, and management has taken a conservative outlook for this segment through the end of 2026.
• The EFC business has inherently lumpy quarterly revenue, creating variability in quarterly results relative to expectations.
• Metals pricing volatility creates top-line revenue volatility, though management notes it should not have a material impact on core profit dollars for the business.

Q: What demand assumptions drive Q3 2026 guidance, and could data center growth accelerate further into the back half of 2026? / A: Management expects strong demand for electronics (particularly AI tied products) to continue from Q2 levels, with no typical seasonal smartphone ramp due to the ongoing weak consumer backdrop. Guidance incorporates headwinds from Iran-related raw material/logistics inflation and a modest pullback from the exceptionally strong year-to-date performance of Micromax. Q4 is projected to see a modest decline from Q3 due to normal holiday seasonality and fewer operating days, aligning with full year guidance. (293 characters)

Q: How would a deflationary metals pricing environment impact Element's profits over the next year? / A: Higher metal prices increase top-line revenue for the business, but Element generally does not earn material margins on pass-through metal costs. Only a small portion of the portfolio (precious metals in semiconductor packaging, nickel in industrial products) includes metal content, so deflation in metals prices is not expected to have a material impact on overall profit dollars for the company. (256 characters)

Q: What is the current corporate view on splitting the company into separate electronics and non-electronics businesses, and what would separation costs look like today? / A: Management confirms it is not emotional about its portfolio, and is open to transactions that deliver shareholder value in excess of the fair value of a business plus separation costs. However, the company currently views its portfolio as well positioned for long-term growth across all end markets, and is not contemplating any separation transaction at this time. (271 characters)

Q: Can you provide an update on Couprion commercialization, expected 2027 revenue, and potential cannibalization of existing sales? / A: Couprion capacity projections for year-end 2027 have increased materially this quarter, with the technology progressing well through customer sampling and qualification, with strong customer pull for the product. Management declined to give a specific 2027 revenue figure due to uncertainty around the timing of the second California site's launch, but noted 2028 revenue and profit will be very robust under current capacity plans, and the technology is entirely incremental to existing sales. (357 characters)