ESI - Earnings call transcript Q4 2020

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Operator

Good morning, ladies and gentlemen, and welcome to the Element Solutions Q4 and Year-End 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note this call may be recorded. [Operator Instructions] I will now turn the call over to Varun Gokarn, Senior Director of Strategy and Finance. ahead. go Please

Varun Gokarn

thank and and participating our on Good XXXX you earnings quarter full-year conference fourth morning, for call.

FD, In Joining written Solutions me Gliklich; with are Dorman. Ben of conference or express call. call Franklin; Martin Disclosure, Any strictly Regulation webcasting is accordance redistribution, this are Executive the and in Element Chairman, CFO, any consent Sir without or of we Fair prohibited. rebroadcast retransmission CEO, this Carey form

reflect financial www.elementsolutionsinc.com Web be can also information my these CEO release refer material make These materials will and These been It uncertainties. most could Events. cause that future of risk supplemental Please views and Today's certain on with GAAP. Please has we from our News to prepared our call, that slides performance actual include results. current are slides the at statements found results Investors financial materials financial U.S. risks comparable not assumptions the today's to recent company's statements section earnings expectations future for Solutions. under non-GAAP Element accordance company's measures. subject & of pleasure now and filings in site GAAP in differ on and for measures earnings supplemental During events predictions. that release, is of factors to of to reconciliations SEC about forward-looking based our and and introduce that refer to Gliklich, expectations definitions discussion to and the the a are Ben

Ben Gliklich

customers, long-term resilience drove people. lost our high-quality the feel our grew in cash of those face EBITDA operational XXXX, running top XX% team, launched not sales, Solutions team on long-term February We every the since in and In navigating ramifications. success adjusted persistence us. for in and to balancing suffering, has its This we On XXXX. was EBITDA, better culture share, growth and dramatic adjusted generate and our and for the line allocation, who businesses to early in backdrop. the culmination of on at We who was an X% for the and year-over-year, earnings and they by basis, all launched strategy our are record investing our dedication organically created colleagues. our intense come as a and flows three, lived dislocation, our people a EPS relative XXXX, adjusted of page deploying of as cash and not When Element or and had stark context, free economic consider we our morning X%. while this expense growth are XX%. especially day, mourning. in adjusted every a who EBITDA objectives. macroeconomic for trajectory this the Element espoused we good showed and people The sales the The only adjusted a XXXX, the against proved Thank in entirely grateful value-enhancing earnings turbulence in particularly we capital and by our capstone. and you, tragic We're between a our EBITDA we Varun, you prudent excellence Thank year, COVID It the Solutions adjusted quarter us, flow. ongoing deeply grew socioeconomic outstanding. and absolute is Pandemic outstanding joining. that an company, on in year outstanding those fourth We testament XXXX basis quarter and We our our our light outstanding sick, XXXX of touched by was per and strong by grew net are net good health the did This year we in ways. year and contrast and crisis performance everyone.

we $X.XX the throughout price delivering notably, the in on both CapEx, despite resilience cost in million, year, prior Free cash year dividend $XX a accretive believe the throughout share balanced quarter. maintaining with year approximately quarter, deployed repurchase for model stable initiation robust growth up and levels in XXXX. small to variable well debt a profile, as the X% employee continued and We repurchases. was nearly the generating shutdowns. R&D a share cash flow year, creates We preserving flow bolt-on throughout $XX our that with We opportunity demonstrated spending high-returning acquisition capital allocation share. like-for-like our operating us, flow an $XXX average of below every a our cash of long-term prudently margins shares a our to flow fourth as great preserve of investing cash of the over course and per demonstrated and at COVID-XX-related the we refinancing, per the cash million and the commitment base And commitment that

year in [technical Even we entered -- year to we a exited that be proud difficulty] invested growth fell continued ratio will to X.X -- difficulty] as leverage [technical net It's and stronger of. and improve, we our we a than

mix XXXX. basis in $X.XX XXX in in Adjusted of business, efficiencies. slide They what November grew year-end. Solutions, on exceeded better. results we year-over-year high-end launched We mid-December continued businesses. was in a represented continued the same currency grew the driven improved quarter and even which the $XXX in we points of of EBITDA in XX% electronics four. EPS Element a both December, in best particularly $XXX as quarter million the the versus Adjusted month by constant period industrially-oriented since operating saw our benefits adjusted period growth since strong a record typically also and was summarized of sales EBITDA is strength XX% quarter the expectations were XX% quarterly Net until record as in launch. at Our to remained are fourth recovery by Electronics, margins million. slow quarter through They

We capital results, share other more as adjusted you prior results in from general, on currency manufacturing sales per Turning sales on EBITDA constant full-year year will in of we backdrop, DMP slide versus heavily marked adjusted adjusted our in bit and and macroeconomic demand a on saw data our our the quality a on infrastructure earnings Organic EBITDA business compounded a a automotive throughout X% markets Full-year our second impacted before high-end for this our work telecommunications in in movements adjusted several and X% and the markets. currency markets the quarter underlying center repurchases in year. XG our COVID-XX-driven Strong most Carey? year. business and second-half net Including markets, of next-generation earnings sales, and share net earnings supported up XXXX shine weakness despite and the to financials industrial declines. end in delivered the smartphones, in adjusted the expanded Electronics EBITDA of modestly the of we take the detail. X%. Kester, performance. grew full-year were basis benefit saw for margins year now net X% full-year growth our grew Carey the recovering slowdowns when light acquisitions production structure our through per five, These our share declined financial end the full-year team. as

Carey Dorman

the driven recovery demonstrated and this end was Thanks, XX% we growth X%, pushed mobile Ben. each quarter later which our segments. beginning benefit semi, two double-digit XXXX, six, everyone. their year; in applications, in from in in and in advanced similar year. general growth markets up drivers infrastructure trends data organic sequentially Electronics believe QX. morning, net were assembly as by Good Circuitry significantly to slide mobile demand. in saw organic high-end sales market growth net detail on over sharp the On up QX QX, QX, semiconductor continue circuitry timing chip growth sales by firming of driven phone with particularly in launches a Full-year of to business XG additional packaging but share our and strong in and Electronics We outgrew in in growth strong

expectations our While see the In electronics-driven continue XXXX make assembly, Asia. strong the trends, X% into is weakness which relatively in not slightly automotive up particularly growth business, for and should similar will we QX, long-term recovery do in did we QX believe market growth early QX to rates. above support saw the for these

mobile high-end production both auto year-over-year in growth increasing trend sequential launches QX. and the in supported However, double-digit

EBITDA helped occurred margins market COVID-related relative support in Our the and basis the net nicely cost along outperformance. the EV second, quarter. three increase adjusted point in activity third Electronics growing second a to that Electronics growth of sales primarily business XX is the management as businesses The our well Power contributing very with in for and

at net in Specialty it XXXX. in persisted strong, of full-year, our globally in the albeit mid-QX market, levels. sales the global through the sales in returned, believe XXXX. hit the organic industrial of continue which muted production About mid-teens was & XX% a slowdowns Asia as backdrop. West as QX declined industrial weak and The For production business early macroeconomic result when declined Industrial first have serve half and The to back-half in in the declined recovery estimated into is should the auto we XX%

COVID-driven to the demand. by both year, had wins business start Our graphics customer and a driven strong

prices However, solutions throughout our and rest drove limited typically in production consumer business. of marketing the to consumers demand which reduced campaigns, for sales declines and launch new low the packaging sales. energy energy on restrictions the uncertainty products investments, new dampened year impacted led the rates of net offshore capex Similarly, and which macroeconomics and drive

and highest after efficiency with X% in reflects of $XX pressure million the declined our the generated the activities expect figure XXXX the seven globe. flow in mix, tax prior energy of in were additional flow EBITDA $XX I&S capital impact balance cash against year, refinancing. a year, Constant expectations a result being primarily the cash basis margins reduction free longer and $XX successes the note reflecting the activities sheet business, highlights XXXX we of million Cash XXXX. around Slide Cash XXXX. reduction XX of into We was some a segment. the senior $XXX in XXXX, taxes as impact structure. in our our over million, year-over-year the business of in of early million adjusting the which positive do XXXX, segment numerous this million sales adjusted interest currency for margin points a versus XXXX, cycle the $X Given increase in

CapEx QX. business. the Working net in across As in saw spending capital Ben million almost $XX entirely continued in of capital driven basis net an demand we a Working of sharp net million, the in sales year, we COVID sales $XX the planned the was as declined despite approximately year released impacts, COVID-XX our by midst mentioned, earlier investment on growth the shutdowns.

by However, business, has our sales working capital is determined near-term been performance, strong. in which

expect line cash flow. growth we top year, working to we believe business. more approximately modest growth the rate levels would XXXX, the capital keep generate investment strong $XXX current our we million in While our sales given In we expect free than next can imply, of

our are tax tax beneficial structure we rate in cash to to the profile cash the by we expectations, of tax code. EPS To we dollars reflect XX% improvement this new is Element our earnings the XXXX, This in down be change tax changes will over While tax increasing, million. $XX Solutions calculation for reflect use a to down to expect XX%. consequence significant to approximately to reducing at adjusted go and changes

fact deployed was are or Xs And ratio declining year is ratio the leverage in million times. more $XXX we environment. XXXX than throughout refinancing-related X.X from flat proud of net we particularly a of This to light acquisitions, the and high Our reduction the expenses. impressive showing buybacks, volatile leverage dividends mid-Xs in XXXX throughout exiting that

XXXX, As turn conservative sheet. to it we capital I'll balance to Ben. continue preserving while we back looked expect that, opportunistically a With at to deploy

Ben Gliklich

strength The carried On into Carey. our quarter. introduced end quarter guidance. has XXXX you, the eight, our Thank saw fourth full-year markets in we first in the we slide financial

markets healthy, well. executing our Our remain and are teams

per share Our is earnings for and adjusted $X.XX full-year EBITDA guidance growth to $X.XX, representing approximately XX% adjusted of growth between year-over-year. XX% X%, and

broader In in to margins average the in recovery EBITDA to their should end markets in When We expect buoyed sales electronics. to a the and we content adjusted XXXX particular, environment adoption QX driven industry. from return by both normal be an rates, modestly increasing growth reversing from above industrial ongoing cyclical net increased the segments opportunities the of we offset standpoint. be expense margin operating net Overall, by XG, long-term was auto electric production and automobile expense we growth and electrification mix strong strength by of operating wider expenses, the to high-end excluding vehicles of expect in quarter saw sales normal roughly relatively expect XXXX. and gross flat both as travel trend be benefit a

However, cost of taken government in salary and basis, actions on including which travel, are significantly full-year reductions, lapping most we not a subsidies do expect XXXX. in temporary we reduced XXXX,

Given current anticipate disruptions sales first-half growth X% operating and the given approximately XXXX exchange EBITDA. of magnitude should be the the FX in net weighted year, of be rates, XXXX. will to timing for we an adjusted full-year tailwind the and

our same in XXXX. our business Element in year of the period a exception. this For two generate quarter years XXXX, that strong to be the over we is to first in markets, flow growth adjusted EBITDA cash in demonstrated XX% and all X% will first as expect able we We've Solutions range of expect no

over free we The Carey Earnings to some allow As create believe the tuck-in remain cash cash a combination dividends. ESI, leverage evaluate should mentioned, meaningful be part we additional with generate XX% ESI, talent generation share opportunistic flexibility growth we free should accelerate increased rate. of us that have good XXXX. together growth and for and flow and prudent create for and bring represent a cash to value deployment of million repurchases our capacity record growth-oriented target. to additional potentially flow, acquisitions, growth as of $XXX acquisitions better for cash representing potential generate to under company, capabilities, of capital companies our we We bolt-on continue new a would expect

Finally, an and stakeholder been a engagement. on recent to Element long highlight has and slide important topic that become internal ESG, for developments has source some regarding topic of commercial nine, I'd success increasingly our a in like

is yesterday report published report to of support our outcomes our report, between we profitability this The inaugural and showcases. in business. First, our well-established across and intersection what for this the sustainability highlights proud environmental more importantly, our ESG customers improve afternoon. supply And objectives and I'm efforts it sustainability chain.

business traction customers our outcomes wastewater sustainable that to Envio launch had has but only ambitions. metal we XXXX better power in economy. expected the MacDermid Our with contributions and to increased circular one solutions business, a Solutions, early the modest-sized of treatment than with innovative great support recycling This with

the giving communities a Florida-based our ecosystems as As step that positive company, in making serve operate. big a XXXX a where to deeply we're not-for-profit, the a as healthy ESI establishing us. this forward charitable we committed took believe is by commitment Foundation, only lasting impact We the which in as entity. business the will company's We in around

live The communities. grants to from As focus our of causes to with communities and social organizations important up, organization provide I'd million to intends a qualified intends work. and environmental XXX(c)(X) foundation all of the well-being where funding the initial employees the the the year, these To in talent charitable of is a wrap on thank our Solutions. like their $X our a do to foundation to and stakeholders again on short This in record to built to a our building and in around continued Element poised for commitments long Through world. testament for We're of we've of the XXXX. of term. support so people delivering dedication the track our challenging term company,

especially for the for that, continued line effort. please questions. year thankful We are Operator, With their this open

Operator

take a of Sachs. We'll Goldman from Rob Koort [Operator question Instructions]

Your line is open.

Rob Koort

morning. Thanks Good very much.

Ben Gliklich

Rob. morning, Good

Rob Koort

and both the are about for And auto prospect and the seeing, the shortage in going on for challenges are right electronics on a your the What have then industry I hearing well. business talk bit of challenges? ground, those alleviation exposure you for you semiconductor as wondering if was you now, could what you what's the

Ben Gliklich

Yes.

seeing that. It's silver we in automotive, and associated the know, of in really the So, production some we in two shortages seeing with but that. automotive of you're we're the this I seeing would point is of are linings from pockets near-term, you units spotty, pretty the that and business. what industrial to But automobiles that headwind think reduced are long-term chip referring to impact have down huge a been slowing associated Not West, and positives. the that with

The first is the demand for units there. those is automotive

And we so, of and proliferation It good to move opportunity. in chips and for the strength we will fourth lose saw demand business, business, And the on many, content chip in for the chip made, and our right will so, we in that And our we're business saw bit. and just these draw may many won't that's driving long-term that's from shortage, those operations. quarter market little and what's in a right? fullness in line is is of that The bullish our our markets be trend you is a time, electronics cars. in which the cars, those day-to-day a and the is strength revenue in what's the electronics and huge with seeing for electronics, quarter bigger this can cars positive happening our the now be fourth

Rob Koort

unit improvement. XXXX bit costs that. the ambitious don't little expression the cadence a COVID on think about see more some the growth bit guidance, returning and I this little but as in it come some for why more back? margin-wise you've then Is of those or leverage you rather year? there revenue that If strong higher margin the to about being is cost growth? we costs. understand talked I EBITDA first-half fixed your why growth talk But cost revenue curate growth Thanks of of of no Or peak your fairly maybe cost-outs I Or the return. follow-up robust, material could in margin of a

Ben Gliklich

Yes. I appreciate that question, Bob.

tailwinds talk headwinds a from the about growth margin standpoint. Let's and and

have to the the EBITDA base I that If for year, there's the year, and through isn't able to be should other there and of line top better case softness is top of that the it's it's the that flat we we're if X% a X% of on guidance first-half that our For the the reason line in get EBITDA. if starters, carries year-over-year. think into year, we margin whatever second-half seeing the of growth, than X%, ways X% do back-half to momentum the a in

of took, most tailwind pointed to the of in business base and pointed -- are, we there's that of OpEx OpEx of normalization, you we in $XX-some that EBITDA salary of volumes and that travel our we were year. our some out we to, as also good So, you back, a subsidies of of as The get we able first-half growth to margin greater comes would case the The cuts the take the headwinds to as the operating come leverage. is, to that like and some million and last expect year. government toward of normalization expect things portion year, back-half

we logistics customers, we'll we've increases two to disruptions seen year. point into been to able The freight We every bit a cost of similarly, this get lot things but to coming that to not material seeing. would able and And sure through other dollar of pass are of just of that. most inflation raw be there's that -- we've a were

able into can a persist And get that when will And but should we're so itself strength is the that margin seeing to guidance. balance unclear if into guidance we the persist, the give our second-half, It's multiple if of will do to number we taking again, the resolve we we're or into that account better. we've year be that carrying first-half over the ways. got --

Operator

[Operator of our next question Instructions] from We'll UBS. Spector Josh take

Josh Spector

congrats Yes. solid and Hey, Thanks and for the guys. here. taking on year end XXXX my question, a to

volumes take a dynamics persist this guess year years? dynamics perhaps you been are What different now expect pricing the within volume and Last where I and the Electronics advantage quarter. anything think being I some guys here. couple part are of the Industrial. the on quarter, a first tightness focus organic next where over in Is like? can of this the of lot has that of past to pricing bigger of story you we're point strong at have the over

Ben Gliklich

Josh. price price our Yes. and Thanks impacted a inflation really position has to that us. we've good where take taking to It's raw for question, Where continue is one. material been

metals we're any that So passed business aggressive to basis through direct from we be and don't a plan have in in pricing markets, aren't positions the the dynamics our on take we've large. can and a hikes nice it's for. nice in assembly that perspective. by have We surcharging some you pass-through market a of not those and markets. We're price without annual where of market got from type But fallout

counting with And pricing may we're It's not on go-forward from from here. volume be a aren't a really so here. But that. story there associated And we some that. significant perspective, opportunities on counting

Josh Spector

the term? a impressive up book Okay. does Is and just get down Thanks longer and step step both we rate it tax be considering side, Can basis? the one flow should that that sustainable? that Is a in better? basis. Or cash cash forward something quick on on back on free year-over-year, pretty

Ben Gliklich

Yes.

tax second. I working on turn But team in one structural a done So to has the would changes good that a say from this Carey job I'll really perspective.

should bit reducing the permanent we're as believe adjusted you mentioned, using XX% I upside. to you little tax there's to the or XX% Carey a year, talk calculation EPS interpret rate in change being. XX%, more a that? our which Carey, that And for some from As about time this want we're XX% do

Carey Dorman

Yes.

back On of Solutions, that were profits the we're team more some with to changes align with the due business. big in I we from XX% is chunk a good position And of and assets -- than the Element the along historically. you with sort much think to better risks tax pleased launch reallocating reform, a favorable spent in we're time believe tax the do of We rate this of sustainable. hit points.

this there's couple of a but this the of years, of think range for rate should from be rate, little I upside next tax bit cash sustainable still least. So at

Josh Spector

thanks. Okay,

Operator

Chris And Loop Kapsch we'll Capital of next from our Markets. question take

Chris Kapsch

Yes. Good morning. Thanks.

in the in business, applications what that you're I and guess, per increasing platforms, I auto guess markets. anyway? addressing smartphone end expect seems But seems peers and content your the both referenced So also outperforming outperforming the item like you'd are advanced -- relevant you Electronics it that end given it you're same markets. for

I'm agree and that's just commercial right you So traction customers curious any Or been color the right with share? case, there's gained helpful. or platforms, Do explanation. if more if if if caught you feel on you've be like just the there the you've would any

Ben Gliklich

Yes.

standpoint, that far business high-end for from market superior that electronics thanks the for business in down and our far, mid-single is in XXXX, and forecast Chris. unit XXXX. the smartphone question, to digits So, circuitry a results be to clearly The

for for of is Some the forecast s in that that' business significant going units units. in performance XXXX circuitry And XXXX into with pretty product in our XXXX growth.

benefit And saw so, in fourth the quarter. of that we some

so, think I our I'm in of our many an also going I to on We've seeing it's in that attribute nice relative market healthy many, some back growth. people, think basis sure been And investing a technology outperformance competitors, ongoing to competitors that are years. you can

at forth five this integration haven't or had for years point. We disruption from so any

bringing to good we're we're speak performance, products And our share dynamics, are well. very the the feel And I so commercially, very can't we specific to about but market teams to in you're our market performing seeing customers. our bringing I very, and service the results. that think

Chris Kapsch

mix on that. I'm positives expectations for if full-year, margins, especially -- would negatives against the the and wondering curious then guess the follow question second you you a on would that see there there, be sort for you impact in headwinds imply the upside a there're adverse -- of persists up But COVID the Do and flat or that you driver playing second-half. about of then if, in felt strength what you industrial positive I quarter margin just Thanks the Bob's bridge, see Okay. mix the first-half, Mix to I'm out. the being that demand might mix overall is guess through how as margin second-half? if And initial some question recovering, referenced that I some businesses see the fact, strength you potential with just will. clearly, and response as in of the some in

Ben Gliklich

first-half quarter, It's Chris. at you in it's a modest those the and more And good industrial business. because to a the the Yes. look in particularly they're most Those businesses surface negative, treatment going two impacted assembly growth, industrially oriented lower-margin the the were show the is sizable Mix question, are businesses. by two second that and if average. COVID, business relative the most are businesses to

Then which we'll bit margin we've a impact relative And positive a mix have guidance. a baked-in the we'll our in so, guidance, of If negative to into given. into second-half, have the is seeing the not effect. strength we're circuitry persist

Chris Kapsch

you much. Thank helpful. very That's

Ben Gliklich

Thanks, Chris.

Operator

is question Duffy next Barclays. from Our Fischer of

Duffy Fischer

fellas. morning, Good Hey.

Ben Gliklich

Good morning, Duff.

Duffy Fischer

question around is just inventory. First

do do the customers' inventories low So, of you? where inventory, still kind your Or strength and of inventory, quarter people-building you last in we've very your seen your to the feel inventory? any products is think

Ben Gliklich

The as a Thanks and about business. by by large, Yes. in question, is But as the Duffy. inventory the that don't answer business QX, I for sales different see circuitry earlier, we had little that built. in we in this talked The West. electronics so that well Asia, are the built going we expect and being all in is sold are and performing in in those produced And, see sold. how the business, units we economy those high-end be into XXXX. to And units

to And, have shortages that auto that business, as pockets sales to with of shutdowns. there. I So, units is mentioned side issue so on see market the the big demand into we inventory that may we earlier. of chip be some for production in missing don't recapture the a the we The associated expect led

So, in don't a issue stock the now see all. big right we at inventory business

Duffy Fischer

is Okay. very to the lot that And have in. companies bit up obviously strong of traded a multiples the then would like the a across little just second one, lot publicly M&A could you businesses in business last moved for you acquire a about year, environment, talk

what want just is over a does we've of does sell mindset? seller's maybe years? couple people the to through, for to incent a that to year? this push multiples top last high So a look think at it business acquisitions multiple? do wise condition what they you? that better too Does for go least or how that And opportunity Did Just set maybe seen

Ben Gliklich

And market generating on to I cash reduced Duffy. that offensive. now. flow. we're very We've leverage. the So, a position M&A is question, significant be active right appreciate the Obviously, in great We're

And for of driven our And is so value. our looking fit we're criteria. that out acquisitions by criteria one

that And from at that -- going opportunities things like And, of modest we any for be that Martin, things now allocation, done past. tuck-ins capital all make look for at of there's be are not in plenty right in The so types there overpay that a now. looking constructive. that can pushed our available regard will because we've you the value to And the We're business landscape do pay to and we better, of want right that meet in we're the looked more at to markets recent things we're about to do is talk criteria. our reasonable broadly? There that standpoint. things disciplined are multiples, prices going so the we've fair believe

Martin Franklin

things. I I would mean, few say Yes. a

our own that got were or acquisitions. value. that got considerably we the three they we we've had when anything buy which We've below thought still we outlook. the tuck-in at particularly glad benefit aren't we our very I aggressively where look shares posture First had was back close, our fully But I'm in with of hindsight, the levers. to of all, shares think past, priced that

As dividend. our shares increase to the buyback also Ben potential to said, and we've got

look So, But I think all three. we're during are on going there to all I this at year. holistically think frankly, course of fronts even the opportunities,

Duffy Fischer

All right, thank you, guys.

Martin Franklin

Thanks.

Operator

is CJS Our Jon next from question of Securities. Tanwanteng

Jon Tanwanteng

you taking energy the a do revenue. that guidance. XXXX. relatively it have guys, stack. or your have for did than in of coming as year? more morning small back was and thank impact business last in the it's is percentage really the EBITDA questions much nice in for is much how I $XX quarter was your I year how Good Ben, wondering higher-margin know businesses guidance of my it just in 'XX, crude And whole higher one you in now

Ben Gliklich

and offshore a Jon. driven decline lag to a The year in it tough volatility by has prices. small and the a business for prices. last Thanks year, business, is had Yes. that question, a steep business energy Typically, energy

up. We're So after decline forecasting decline quarters growth that quarters there and is business that that. is is few significant -- from significant If few the that prices in way after in XXXX. the with energy not business there's in on upside similarly softness back a a the associated growth,

energy it to been price to higher stable, energy it's So, for CapEx back for a has that. a price, but tough on. higher customers drilling not energy And turn price The volatile. us to underwrite takes activity just our and

So, a to big growth that's in contributor outlook. not our

Jon Tanwanteng

was headwinds things, logistics? the above line, continuation the of prices there and wondering are businesses Are seeing into similar it, -- as just in your strengthening of you some from headwinds number demand Got the business, Any QX. Are automotive. the clients electronics speak or thank of with could above it's and be forecast? two, number line you I the one helpful. about mentioned and quarter? provide on the the on if the bottom where second increasing you And you're the on assembly color rest commentary on industrial you the top whether you. would And on or slowdowns input seeing

Ben Gliklich

Sure, Jon.

two businesses. by from comment would was the We in those XXXX we was which are a more the margin we year-over-year COVID, those it because very, of and end those QX. so QX, XXXX. healthy. recovered markets, And, biggest on that assembly they But QX on was of impact growth growth about in and had strength count two mix in in general, it negative outlook can't industrial business, in the we trends a we're of And businesses, QX right, and today in quarter. given and comment nicely QX, the continued very And than happen, because a driven But back-half, of sequential continuation bit in saw comment, -- continue strength QX So won't the can't little to is cautiousness. into in that continuation just underwrite but a and to second visibility quarter. cautious. for say as That's a touch in that's the that more we feel, them the not and why such expect to bit our we're strength commit this there's we our second that into of in seeing the and

Jon Tanwanteng

Understood. Thank guys. you,

Operator

Neel of Morgan from is Stanley. question Kumar next Our

Neel Kumar

on in your reasonable around guidance, flow to your of for think flow free there forward? suggests my conversion are any that in And about question. to assume what then free share Great. cash also of and Thank cash taking in improve opportunities free cash Is terms XXXX? in terms XXXX. further? EBITDA level does Based buybacks it flow just going even guidance, XX% you EPS And a other that conversion

Ben Gliklich

Neel. for Thanks the question,

expect work creep earnings. sheet, done the on we those up work, taxes. on I So, we've tax And grow lot to significantly of them a balance wouldn't as good numbers, and interest

cash improve flow earnings And so our would conversion expect here. from I to grow as

I ceiling With little. so a is regard that means. At end, there's XX% bit low there's of guidance, And our end, allocation. little a at the capital very EPS think by any the high to don't

capital but And an necessarily I more Carey? so we've buybacks, in some it add, don't doesn't it there's accretive means if mean way. know anything that deployed you'd

Carey Dorman

No.

on of specifically I right. fixed that rate point we out would on that's all have think interest debt. I just that the

be So, through so not of that the certainly up. XXXX, should going end

Neel Kumar

are the then electronics you thinking Okay, the your business. contribution growth how for great. That's about expectations of helpful. XG And longer-term to

past, being talked the GDP-plus you electronics primarily markets. about I think in

over of move years will of that upwards acceleration think next the You the XG? because two

Ben Gliklich

absolutely. Yes,

that. in many can shortage bandwidth, distributed. beginning, is just we're massive investment semiconductor are That's from seeing and open foreclosed, performance chip that's and will do business, what not in has the ramifications infrastructure will of legacy capacity. industrial smartphones all computing us something near-term content you're the disseminated so, a a market versus X-year And business in connectivity, for our That's of ramps not medium-term have infrastructure gonna years. just that each technology and XG be what going that the meaningful but multiple demand will content economy. we power medium-term starters, the beyond get more for going in That's requirements and go phone. smartphone, many, trend. in that's It's industry, a faster the And in of allow that investment the of technology XG saying for technology not a way tailwind have this it's driving sort more is folks long phone to areas today greater but that that for quite And that's XG those cycle infrastructure just last of our three-five a Once in the hear drive for a you accelerated to in -- XG here high-end that smartphone-driven drive longer-term while. horizon, smartphone technical So or significant where to given for phones we've our going cycle, electronics near-term, our and replacement an for to years. will multi-year -- match the you the got anticipation, connectivity, will trend. replacement greater plus The to investment

Operator

Bank DeYoe We'll of America. move to of Matthew next

Matthew DeYoe

my taking for Thanks question.

make offering? So, scale things or should Or expect we there business, what's the filtration grow just you increase next organically? for moves are to product to water need to

Ben Gliklich

Yes.

to This increase gained traction to, the We've are remarks, U.S. expected that to manufacturing capability scale our our a and faster quite we we we business, in capability gain said So is traction it and and as we to expected it investments our outside than has fast. moves commercial made offering making grow prepared product organically. of

be and about Asia. manufacturing in equipment currently we're in so And -- manufacturing to equipment Europe, in

business those both is can sales million, for three we teams are year. We building This in become million commercial that four we doing million all a $XX that or expectations believe And, $XX our And of have $XXX was to do of it business regions. in last years. organically.

our very and other areas address for Our water treatment and customer have to us eager that customers -- technology come are they know in expect to service concerns. from the their

it. And a well so executing we're for against it's and us, exciting very opportunity

Matthew DeYoe

report through it you. I ESG out. Thank part as saw it that was And have haven't much would the But to. I time liked to came I of dig as had just are the for about use. lot and regard. the economy ESI value of I'm what of ahead there's there kind a to wondering talking metals in you circular obviously opportunities that

Ben Gliklich

for help It's one their sales not good. by the see There's quite something report of report, many, environmental but you of the proud We And if published yesterday. just a solutions something the every offers our businesses of way. it's bit theme huge quite by to under where will our very that doing improve and for waves of providing captures that ESG about document also tops many already doing and for well sustainability that continue across chains growth our technology through supply inaugural brought businesses report align example and that externally services that one have be ESG of you And businesses, and that with published. between of another our our company of products we've website is And great many, company one something our something in impacts. question. intersection it's did the we're existential the our And, an our well as customers, bit sort a and to is forward. I customers. driver area many our Yes. years, a There's going we can very, go to together and we It's that a this a report. in trafficked been with that we from that profitability of. has place sort communicated appreciate this opportunity

Operator

[Operator Instructions] follow Josh have We a up of UBS. from Spector

Josh Spector

here. guys. for second taking one Thanks Hey,

as to content build there's any the over pay give type leverage would or higher region here guys if or if some context there. that mean vehicles, years. battery on you I content. next few continue should opportunity of double more we EVs you been the ramp strongly And more highlight cases, exposure that clear perhaps attention in that to Just amount in could have highlighting you you I wondering just give your was electric some pretty potentially

Ben Gliklich

Yes.

business. So, market And the EV or well-established a market market, in that the us, that's names, is thing, are that's without And getting opportunity high our and are working us. because but It's a our tiers without that we I incredibly XXXX fast. into are would power are that that a strong for into inverters. at that enabling to -- And OEMs electronics of above-market power with customer an it a is to it's specific end and explode providing new growth in market our the incredible Can't And say business talking growing XXXX question. thanks for getting materials if for growth. to in XXXX, contributor all XXXX, materials. for are how that say participate with the investigating poised and we that

nice moves tailwind penetration it technology will as but pointed the of enabler, We not vehicles. drive will out. of a the see electric it's enabling fleet true And that EVs. so more rightly be more growth, just you of automotive, EVs content, a And key we're should as a to of

Josh Spector

Okay, thank you.

Operator

for any to remarks. concluding session. the our call happy concludes return question-and-answer be to that I'd And management

Ben Gliklich

much for the the near-term. participating in to forward seeing your Thank you questions, Stay you look in for We safe. call. very

Operator

This Solutions' does Element full-year earnings conference XXXX call. conclude

You may lines, a now disconnect have your good and everyone day.

Element Solutions (ESI) 26 Feb 212020 Q4 Earnings call transcript