ESI - Earnings call transcript Q4 2021

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Operator

Good morning, ladies and gentlemen, and welcome to the Element Solutions Q4 and Full Year 2021 Financial Results Conference Call. Later, you will have an opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note, this call maybe recorded. I’d now like to turn the call over to Varun Gokarn, Senior Director of Strategy and Finance. Please go ahead.

Varun Gokarn

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

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

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

Sir Martin Franklin

this chain and culture. three In adjusted supply through our three COVID-related managed forged out. company results in have in both joining. hitting from capital proven a reported faced is for is These terms leadership journey Thank Element our a results stride reporting experiences team’s company that very initial commitment as And EPS allocation and another are on them of disruptions short-term Solutions. have through of just the Thank we of good to for focus with you, myriad Varun, Element its outgrown everybody. leadership we This issues. and you been morning, outstanding from Solutions, breakthroughs this headwinds execution, delivers years its and year Today, on eye Today, capabilities commitments. good. our five-year meeting is shareholders for delivering execution. without years. We’ve a taking off markets long-term The strong its strategic team the

has solid this outperformance. leverage a has approach Underpinning a prudent financial operating over created that driven have on for and and a is – is cost investment. strategic We capital through compounded to allocation delivering fostered That execution all on per balancing commitments growth culture stakeholders. three earnings goal for share This team thoughtful highly so leadership that years. at CAGR that culture a the ambitious setting, which caring motivated and and continued performance foundation XX%

by the in that returns capital Our addressable is growth and of a been markets exciting some relatively the have properly business we low chemicals market. enormous is made relatively in This Its industry-leading arena. most believe not in of appreciated investment time. period that generates company has specialty positioned on short strides positioned uniquely the assets yet requires a it

year With to in to tomorrow’s turn over call me you detail. forward the looking at to quarter We’re I’m and that. growth very Day. for of more take that you Investor seeing much providing through let many more introduction, Ben? of outline forward a opportunities the granular Ben looking the

Ben Gliklich

you, Solutions Thank exceptional year. an Element had Martin.

these and in material our free adjusted sales severe delivered XXXX. end adjusted of and executing both records EBITDA, strong disruptions in were unusual We’re since growth, a Solutions of an raw and in we company Each became labor. at Element annual high backdrop level logistics EPS demand supply, through The cash markets flow. record

operating challenges industrial to has longer-term chain as on tested energy entered been more embracing our on for and of focus commercial we to accounts. unprecedented and to should we XXXX execution also focused winning that through strategic strength winning electronics the allow mantra leverage end, our pricing the management across scale capabilities commitments and implementation, better many planning, start results. opportunities our of culture with of now with on and last our our our on in respond over feel We our the we changes in to strategy three key later, markets supply our and environment of markets. We proud win operational capitalize Our increasing the in success. delivering years, and the and the development processes To while portfolios on to both larger that enhanced investment effectively

solutions and and board We manufacturing circuit advanced leading-edge both printed as also growth in accelerated such technology. investment capabilities capacity technical power electronics, in internal in packaging areas semiconductor focused

growth, we delivered our commitments in future in invested also we As on XXXX. financial

supply over year after closed two dividend. and capital to business organically acquisitions increased cash constant by year, million our in adjusted ensure working currency of in a XX% increase flow, strategic quarterly net to the XX% last and reliability Our even for XX% split We We both terms. CapEx across grew investments grew EBITDA free exciting segments. customers. larger sales $XXX making in our of evenly We delivered

in in the flow Finally, the just initial industrial to customers. position excellence believe finishing significant were operational significant the the know we higher in prudent and strategy, and Solutions for deploy XXXX, breadth businesses our running into a expansion we opportunities our in global we excited capital they to better markets core with strong with we achieved in capital to Wentworth ability growth our metal year, adjusted high-quality Element cash position We ways. our we February that have double Coventya, and we and When allocation, five-year EPS, With deploying Last balancing generate launched target value-enhancing business support long-term scale year amount adjacencies. every three adjusted years. of high expected enhanced returns espoused in of very acquisitions in $X.XX providing EPS our well. Coventya strategic to while HK markets attractive exceeding product

of business ever products, thermal adhesive critical materials. We’ve in as conformal and critical coatings, resin talent and high-end years. path portfolio electronics surface Element driving particular, on enhanced serve which entered outcomes of and Solutions In provide solutions. advantage strong DE&I ESG, focused offering. track of and results in of interest friendly own. million see Solutions a double exceed its achieve continue competitive This These launched that next encapsulation inaugural the high-end we talent and expect safety, days, electronics opportunities our assembly program ratio more and be Carey? ESG way including customer we acquisitions years the same this as improving strong will year, in customers sustainable the is career of our research with $XX emissions, the with as that funded environmentally seen communicated, with publishing run polymer-based initiatives and of transparency from in and the will also attributes. commitment durability coming over business XXXX, We We’ve grew for sustainable report, great on with in the charitable Carey ESG expanded previously new a and these and to our our synergies supply to the the for ESG. brand, on the four a sales complementary several company a of to XXXX. increasingly significantly strides in existing and rate publishing to Overall, it. believe the a several employee made ESG which by without now through year we to to business people. become we’ll across our Industrial goals end more highly to front. the you more another Wentworth interface company chain leverage very of products management also which, we these an in regionally HK and, treatment more semiconductor by additional culture expanded we financial in our provided volunteers expand equity taken In performance commit our we bit forward the that’s to in HSO started we’re is detail. We’re values Electrolube manufacturing step further development more key our We pillars pleased acquisition with January these take We come. thermal for as us our and giving products, year rigid finished are and the

Carey Dorman

Good you, morning, Ben. Thank everyone.

first the our quarter net results the summarized on full million timing record We quarter X. an Coventya. fourth our we since $XXX surge with are a and quarter the and of to segment. XXXX, fourth of launches Electronics sales Net drove launch our initial despite X% reflects a growth Our by in sales smartphone and were a quarter of organically grew difficult recovery in post-COVID Slide in comparison manufacturing saw

X% QX of business fourth to Electronics sales XXXX. grew net compared Our the in organically quarter,

logistics margin through which EBITDA believe percent, Approximately in logistics into However, points in early XXXX, early return a and continue in end margins impact inflation and in given XX% tough to from is million were XXXX, and further inflation been QX in margin prices mix, above-target two sales materials, period. years which in Approximately by by offset chain positively raw remain business XXXX XX basis our when a markets decline impact fourth since supply grew of quarter. planned Specialty metals by which business pricing annual by of experienced High-single This Electronics of XXXX, growth to with comparable and these explained QX construction the down We in striving the growth in a has Demand the and growth end persistent was growth in same a XX% to digit began inflection the our general X%. accelerated The the over when We driven quarter. materials, continued in sales metals. dollars. only in the is quarters $XX should adjusted is is XXX markets. organic compared trends end then. the strong inflected associated Overall, driven strong Net we growth bps and over raw margin this was acquisitions. business to in more metal growth. it our and not in incentive unusual European to energy The compared with stages. of not the automotive QX. markets rest graphics see that is secular carry in OpEx XXXX, our in industrial The pass-through XXXX. Industrial points pass-through in adjusted basis our than net EBITDA XXX and segment organic is it and these explained compensation, OpEx change

pass-through margin Excluding metals quarter. EBITDA XX% impact been assembly the would have in the adjusted of revenue,

organically, net prices. strong to constant vertical. four per sales into growth organic months our top adjusted when the in XX% year Slide grew segment. with now vertical capital line, strategic year-over-year on year. financial performance organically Turning after growth or contribution earnings metal improvement and $XX each Full of X. our that of XX% full we in XX% Electronics by excluding full as the XX% grew of We converted X, year top The deployment on impact grew additional we details year large the delivered line XXXX Coventya assembly million growth operating share in adjusting Slide provide results. last out our results EBITDA compounded adjusted the the strong even On XX% XX% currency the sales

XXXX, these power our of silver due in customers, where and on including XXXX. penetration we benefited by was the market Assembly as increased delivered growth vehicles in to a margin year. business beginning a impacted assembly, and automotive protects impact of million pass-through electric dollar of pass We percent. on XX% prices, from XXXX as which primarily contractually in to impact well sales of automotive increase $XXX business large XX%. and strong the product in has increases The The modestly it’s in an the profitability position terms, and down exposure. The prices, organic the Sales net recovery but semiconductor its reported tin nature portfolio. in increased electronics, metal sales

next-generation business XX% XX% XXXX. semiconductor devices, This the mobile markets, driven is see versus electronics the advanced from computing, in in grow grew to mobile, vehicle growth demand nicely. electrification. XXXX. in increased circuitry benefited continue opportunity a organic This XXXX and market by by growth high-end We in The business like followed and infrastructure net to demand XXXX which organically in sales packaging higher driven continue telecom

strong by points margins of Electronics markets points demand impacted data computing had We in and down basis negatively for year, another also sell network in XX EBITDA Overall, basis which storage constant were the pass-through currency, into about by pricing. XXX metals adjusted year-over-year infrastructure. driven almost segment

impact, the logistics are in second positive mix actions Organic other costs These our for year. we XX% and has which from of on XXXX, more of manufacturing the net in weak acute XX%. business capitalized half, industry. against mainly by shutdowns. macroeconomic down and recovery the increase full strong Industrial materials XX% acquisition industrial and in in raw than grew year-over-year, of this these The in organically to & driven actively working Excluding the around increased backdrop headwinds offset pricing been XXXX. any most The offset the Specialty excludes more sales benefits also markets We COVID-related impact in end are pressures further most line Coventya. with our vertical the in

the eased manufacturing we XXXX, impact As into saw our recover. on growth sales COVID

double in Our despite underlying production. the lower-than-anticipated digits automotive business grew unit

Coventya X% strong but management delivering. grew picked for largely by X% business margins organically organically the segment quarter strategic the year fourth was we well decline and Demand In were new Europe. Graphics go-to-market the declined impacts, our in materials, in in down up lower-than-average and across account portfolio, wins our the basis inflation X% as mix sales before year versus cost and offshore, online. sales making execution points in the and new I&S Adjusted began the come EBITDA later This of XXXX. to expanding rigs XXXX. XXXX, and bodes Americas logistics in synergies. margins driven year-over-year. sales all product strategy and XXX contribution drilling with are This Our QX The raw net are for grew at segment in organically net investments

year-end We all million by expect at add adjusted contribute least XXXX, $XX EBITDA Coventya points the to and synergies margin basis segment, XXX therefore, else to annualized equal. of of approximately

Slide XXXX, stock. despite cash inventory an year million year-over-year of in to of generated $XXX we working stronger free full flow increase investment X, to significant support safety sales capital Turning in and XX% growth

support elevated the still stock of are began back we most half likely to capital $XX to increased invest are value year and in inventory continue growth work semiconductor power safety will and through While high XXXX. new we We XXXX, through the as we we the to In this our of year, support million operating in invested with expenditures in projects continuing graphics. to areas. growth strategic capacity electronics, in to

these $XX CapEx capital the remain not to million, expect levels. total find higher opportunity including and at In high to around make annual million, are types investments and to business unchanged adjacent of growth in growth investments at We have we integration initiatives. these and these new we CapEx returning markets. XXXX, our several expect ongoing maintenance are of approximately Coventya needs happy $XX capital largely The do of

than interest we slightly to in came Finally, and roughly in both for in grow XXXX. our last expect cash And taxes cash taxes line forecast with XXXX. earnings better

capital talk of full ratio Our in We XXXX million year-end Coventya. year-end should repurchasing us with drive to expect to Nonetheless, exiting approximately our times our net deployed XXXX. our back constant we stock. deployment, a including million two year of significant of adjusted I $XX from year, XXXX, ratio Without in mid-Xs capital was capacity invest EBITDA, to turn to a including testament over when XXXX. contribution and about the And of prudently held common organically X to returns. leave continue amount acquisitions of in leverage delever shares to nature leverage X.X it dividends plenty the into This shareholder business. to the we’d cash-generative further will that, more Ben

Ben Gliklich

Thank Carey. you,

year experienced dynamics first XXXX into the half financial we XXXX. of a in XXXX the Our reflects continuation full of guidance

We dynamic the healthy current supply expected remains significant execution and this well remain improvements growth continued and are opportunities for what year macro constraints in year. second of half environment. executing markets end a supply tailwinds, towards believe the Our from teams our in presents

adjusted year at between $XXX growth currency representing is million, constant XX% for Our range $XXX full XX%. guidance to of and EBITDA a million of

their both the in and We expect $X.XX, to deliver above Net chain. of should supply end XX% be and representing buoyed long-term growth growth cyclical adjusted earnings markets rates, recovery per in XXXX share segments auto between and in XX% ongoing by $X.XX in strength electronic the industrial expected to year-over-year. sales our

expect opportunities increased adoption and the the of We the to vehicles of wider by industry. automobile XG, of electric increasing production electrification content from benefit driven broader

end to adjusted headwind a approximately X% XXXX weighted which throughout million full material be the half Given XXXX, the half of supply roughly January the in FX that EBITDA automotive we constraints growth anticipate year. representing be fact given likely the increased an to and will sales first rates, $XX will and chain earnings prices raw headwind. Year-over-year continued second exchange to year-over-year headwind for of

We raw take inflation. to offset continue to material action

strong expect quarter For the will is adjusted approximately XXXX, our be of no currency three to expect a years and to we business variety we of prior demonstrated our markets, year year. Element that flat Solutions be cash in compared first end the this flow able constant EBITDA to exception. We’ve in generate first

line first free years. allocation new leadership and our five free and In Element earnings this years to our in I’d and our the levers certain our achieve to multiple despite for goal grateful up. thank million a wrap early In This goal our plan term compound of superior earnings to implemented on $XX to people XXXX, activity. flow end see share generate record by Operator, for of than from opportunities cash ability of been team our driving customers, creating million of the Day to funding return to for their in announced like expenditure to company more as to established at XXXX, over delivered to double XXXX earnings. Element We for adding double-adjusted capital compound a strong per again all flows vision share in $XXX and all Solutions. employees our journey. look generation and supplier for us excellent this investors. on Investor to to creates and and detailing more a open achieved years. four excited of have years help our better forward to three to the our prior integration-related their cash our next cash We continued the to per to that for incentives earnings ever we businesses further and better of become incentive onetime capital this commitments Solutions, for running board commitment per $X.XX I’m their three questions. To stakeholders in is XXXX. tomorrow. expect $XXX We’ve We share prudent targets target please our deploying happy our the leg significantly for support target longer flexibility

Operator

[Operator first Instructions] take question Koort will We Bob with from our Goldman.

now is open. line Your

Mike Harris

scenarios look When count the in determine This in this at to Harris, we share whether not of end is or I or morning. of what maybe or at that speak in? came EPS that range morning. high reductions baked and XXXX for sitting low actually Mike would assumptions macro or the guess guide you Good range, the the throughout Bob

Ben Gliklich

Yes, for absolutely. question, the Thanks Mike.

variables There’s to big exactly of are guidance to capital EPS amount EBITDA required our business assuming we’re we capital course specifically get how think other weighted, allocation, year. as of The cash the correspond range. our magnitude right. guidance we modest range. that drivers, that So In timing to deploy about generates that that EPS range a and allocation range the doesn’t And of the the guidance, are critical half substantial our this flow it’s auto recovery. the the back over

believe And of constraints ease strength variable could is start production then persisting the year. half. that’s drive accelerate conviction to that be And us end. chain that second the that’s been have so there of And in the obviously volatile. weighing a on will the we supply through automotive in that the would but been going obviously a FX we have lot And towards it electronics continue, to higher course even further. increasingly

Mike Harris

looking on change follow-up, M&A may Okay. your And landscape, consolidation, industry then how business a competitive appetite? if can perhaps speak just or in that’s in you or strategy as change at to that a quick the going

Ben Gliklich

Yes, absolutely.

materials So strategic a we’ve always call markets doesn’t our said us. impact in let’s in, that electronics and it, consolidation from perspective,

We’re Surely, our portfolios. position which leaders been in consolidated, hasn’t fortunate the to vendors seen. by that we’ve not the to be customers product that diminished shared participate. in consolidation have market in but other markets we And

been if consolidation through We’ve organic has capital enter the new allocation. so in our leadership unchanged, market our and consolidating allocation we’ll which moats driving all. we’ve anything, execution, position And inorganic through that share our and been change at to continue markets does strategic in not our decisions capital of been drive that’s our and be capital through some business, able outperformance positions allocation gain we’re and leadership in around to got framework unchanged any great

Mike Harris

Thanks for question. our taking

Operator

Chris next We Loop will take with from question Capital our Markets. Kapsch

Your line open. is now

Chris Kapsch

good Thanks. Hey, morning.

is, when end So XXXX. mentioned market about for one you talking question Ben, tailwinds growth

out, build broader how you here, more But generally. base if of electrification strength there’s into the opportunity around XG in What’s investors a hear for XG way get highlighted I – probably the to does ESI could you just just calibration more of for parameters smartphone feed stations and including of quantify ecosystem was EVs and XG-enabled – that? content reasonable hopeful ahead builds think first smartphone. a can I on You autos.

Ben Gliklich

and great a a a phone percentage on is legacy We’ve Yes, observation. a a technology phone. versus of XX% mobile are are content also and phone got enabled uplift those that great XG growing question it’s growing. Units market XG in units the

enable to and the times So in the The are we growth opportunity base right? support of number see opportunity stations the units the that required magnitude are underlying over rollout service of technology huge in five that’s that able see But infrastructure, there’s XG to of also XG the and years capability a next unit an big are phones to mobile being and all of that such be XG stations for size opportunity we built a content. the And business. a order going support from perspective in XXXX the X the in it’s content to base that sold. of Element Solutions’ Electronics

Chris Kapsch

industry Appreciate That’s your of maybe the helpful. the over it. the that. picture follow-up And about bigger board a into then time feeding and question role printed is circuit evolution just and

in of when industry it manufacturing – the driving growth about terms overall and you’re now electrification nature than became more as So concentrated that it’s period the was industry global the higher of talking of when shifting the that just to a in pendulum time there matured drivers end. China. was in economy, more But back

I the valid and the strength of this today? question guess Is So the for that electronics like the feeding yourself into sort suppliers notion higher-end only supposition still in that elite that is evolution the electronic. industry are

Ben Gliklich

IC of substrates. tier in are needs good the that observation, only Chris. highest a capable a it’s meet Yes, vendors the our boards to level and technology are of few next generation delivering circuit There

which more we’re growing higher margins of right, over technical share and wider us. become investment have value, driver higher-end moats. current more and that which market applications accelerating market and is higher to the the for for market the of more ensure are a requirement end that to electronics above share folks participate we And faster, challenging as so like And drives us, in our those

some and And trends the of the are that explain going to some our next relative does this really so of to for outperformance years. many exciting our business propel that markets

Chris Kapsch

the it. I appreciate color. for Thanks

Operator

from We with will Bank next Byrne take of our question Steve America.

now is line open. Your

Steve Byrne

you would double can would to this that do three conviction to drill Is versus EPS, to on these do in it five-year How potential on in end drivers? into gives strength target can internal side rank like bolting you those? like acquisitions your the for And Ben, into? what the view your more your But or wanted markets to you you expectation cost it as that I new that you you rank Is that? markets the more would perhaps sell and importantly, initiatives, maybe to new really these cross-selling years. hear either into geographies?

Ben Gliklich

Steve, thanks question. the for

We’re spend at hours on that two tomorrow Day. going to Investor our

want bit internal target And things. of thunder, external few to too our a set but of much so its I don’t We a outside little steal our target.

And And going about so talk that. comprised deliver we’re the of external to to of it’s we’re forward things and have to going communicate on tomorrow, target path our all compelling we the you said.

three secularly than believe that’s what we and rates at they years ago, We’re markets sustainable. faster growing were growing are that participating growth in

every from flow to of sales and to compound cash We’re execution to generate rates year running the higher we’re from per the billions better going sales growth earnings of profit, secular every that the at free businesses and growth that get share. our convert dollars into to we’re deploy going day,

espouse that to allocation. we we capital how We’ve next and delivering Solutions it do goals, them. model it the target. ambitious like done at first so excellence and Element And years, on certainly the prudent we operational stretched get We and setting three that’s five for is intend we years, like our for and to

Steve Byrne

we’ve about manufacturing your generally impression the close logistical the about costs, made your customers. higher ask And that you to to also I comments is base had wanted

delivery logistical is customer So Is primarily you’re is is that Or to cost? the issue can getting trying you it provide the mode any a what source little better? it it more and causing explanation what as is to raw materials? your to end and higher

Ben Gliklich

Yes.

transport that’s costs logistics And actively something were haven’t A many had get on of to price. driven to And So from a fact We’ve we trucking. or lot where are percent, become and logistics the of debating. to multiples rate are It’s modes the or considering year all basically airfreighting perspective they see passed of don’t historically all We customers do ago. modes. if availability. we cost not just higher and on expensive use by year time, that over so. than some a products costs logistics significantly logistics past more given so we’re

have, a to logistics actively That’s in offset headwind obviously, try our base the $XX to guidance, taken in costs. So action we And to do to from we into raw taking broader look about materials consideration. EBITDA inflation cost we’re margin. as both and to million preserve

Steve Byrne

Thank you.

Operator

from Morgan our take with will Stanley. question Castillo Angel next We

line now is open. Your

Angel Castillo

Hi, my question. good morning. Thanks for taking

a assembly you maybe if is be Just was XQ analysis unpack think the growth if I just digit. could the and guess maybe we it for both circuitry. the like in low and right, you about was may embedded in guidance I the quarter single could if seems was little talk bit my And seem would as saw that – of of In It terms to in what’s circuitry and XXXX. assembly a particular, little maybe quarter. bit I during wondering suggest you wondering from that about kind fourth organic negative more

in and bit just us but a kind more you assume So well probably those you color give could those if fit how a – into guidance? autos, lot that how of on I little of is the as

Ben Gliklich

second And COVID-related still strength of Industrial that first mix in of the our a saw XXXX we XXXX. pockets, quarter business. same that also our a was electronics and engineering fourth third also industrial QX in into of and some see smaller pushed the had XXXX. in case XXXX, driven an fourth the the industrial – the of fourth The automotive electronics. electronics in the rather comping assembly our our into other and of an against year business, and of lot was it products. but of the pockets should should volume into anomalous lapping We quarter heavy persisting our graphics quarter businesses some there’s shutdowns grow Rolling our strength construction the the a in business grow. quarter of very first our There’s strength buoyant from like the quarters QX odd of – strong The business, and Yes, should manufacturing quarter in really weakness, we those was in industrial environment strengthen offshore It’s overall, XXXX in growth business And in grew that despite remains XXXX, equipment perspective. by and business which other persisting in biggest, building the organically. in driven semiconductor by is strength business. is quarter

of will continue excuse raw we’re and we And lapping stable XXXX, pressure, where a by consistent the saw quarter material – see back across we portfolio in some a logistics expect inflation half the growth didn’t first because the which the XXXX we same inflation so period in pretty offset margin me. and that

Angel Castillo

kind And for underneath kind the that of we brackets, of assumptions think the about what organic that that? full – year within kind what’s growth, XXXX, as of the growth the

Ben Gliklich

XXXX. We’re expecting average above for growth our most of – businesses the long-term above average in rates

that’s aspect back through And we be the bit, the consistent line. as to a think see half in expect right? auto supply about the ease industrial broad-based, pickup pretty a electronics instance, for the it, pretty So mid-single-digit business year. top but phasing there’s should should business, chain a we’ll you to the So whereas

Angel Castillo

it. just kind the an capital much. sneak EPS? this last with assumption embedded allocation If could one I quickly so Got one. Thanks count of what And share

Carey Dorman

Sure. This is Carey.

baseline, as allocation. good the for think we’re million I XXXX assumption is EPS So for using adjusted XXXX a a ex-capital $XXX for

you see EPS, you’ll do get EBITDA $X.XX at to If capital same or range you from EPS. about equivalent the the to allocation EBITDA of from need to $X.XX walk that

shares earnings. either it’s or So buying

Angel Castillo

you. Thank helpful. Very

Operator

We’ll our Jon with next Securities. question take Tanwanteng CJS from

Your open. now line is

Jon Tanwanteng

me. think that’s I guys, Hi

after the well years. on of couple really targets last long-term over ride your of congrats all, a First hitting

Ben Gliklich

Thanks, Jon.

Jon Tanwanteng

than about five I years? tomorrow, place any to reason this know faster than any talk in are markets years? earnings again double you’ll there more in four you end but there you incentive expected? to growing And faster given is can’t your Just three achieve why that are structures

Ben Gliklich

the and sheet of job arrow would and sooner very base We’ve perspective, see good thanks some are for absolutely at the question. this sheet The We our is lot disposal good modest, driven debt to quiver. got it We’ve a Jon, an our earnings growth the optimization. achieve than of more bigger right? by five was from love balance balance levers years. So not really a our cost a to was some well, place avenues a for improving in of improvement that rate and hard done tax optimization. as of that’s from in target

have The We is double to The levers magnitude, need $X.XX. that greater. right, we our again. fewer. at have add are magnitude need the we disposal So to don’t

be so if do it in years, exceptional five able to we outcome. think And this a really will we’re

sooner, reasonably be Of to can and love will do feels as target. this it course, it if but we’d it exceptional that, more five-year set a we ambitious

Jon Tanwanteng

Thanks. it. Got

Ben Gliklich

fact, markets we have growth, than great in our expected at faster frankly and backs here the we are in in and participating and XXXX. XXXX Understanding great growth

Operator

UBS. our question And we Spector with will take next Josh from

now Your line open. is

Josh Spector

question. Yes. my Hi, thanks for taking

you you’re your a could be maybe now Or when this in was side you XXXX, what late recovers XXXX cost is sized Just to to ago? the even of recovered occur of of of that that’s kind I through is it you’re higher Does in can go of logistics the wondering back. things, XXXX? the terms cadence impact. total pass-through to or for quantify than of you inflation of you that or walk cost excluding; that serve could back inflation if kind if it cost something years something it kind items was thinking in recapture And expecting couple

Ben Gliklich

to year chasing It’s do inflation been Josh. question, analysis, of the so year all for multi-variable and all continue and a continue Thanks so. to We’ve last right? for do

in aren’t QX our are basis. to the that but And within good out the on so margin control, really there impacts it’s equation a opportunity a year-over-year break things

control and explain that what So doing we what can within we’re things are happened. the and our has else

XXX So dollar an right? is if for high, is for margin all-time instance, Metal our you are XXX basis or pass-through, progression, prices metal over QX at just XXXX margin there that points decline so some of XX, at look over dollar. That’s of XXXX QX have doubled.

optical to me, sales a attributable excuse will synergies, is Coventya its and The which That’s $XXX million increase to eroding sales XX get dollar roughly XXXX impact made dollars, the average on a business realize XXX in we’ll any to be $X just increase an contributor. margins. another, prior it’s of in synergies average So – we acquisition impact we’ll as not an profit, it in margin profit and and point increasing beginning of margin. is basis that our above once realize below we margin a lot

have levels well. and points, XXX Carey incentive a compensation. go in was is talked in – as it talked we quarter you and XXXX because basis we – those between point fourth will target So That above target, about about about headwind comp, which OpEx about basis away expect was the of XXX

So XXX basis headwind about is offset basis points. price. what And is left you’re with in material points XXX of what’s improvements logistics mix and and by inflation, that raw

about And price so point from behind to is X perspective. the that way about that we’re there’s think that a

to shouldn’t But that this. we’ve we price make there’s us to over able we’ve and what We’re need nothing will and with to environment that been pursue quarter, we second Mix hopeful the persist could in to. help the doesn’t suggest to that needed point have be inflation to existing history well price but do increase getting point first we to don’t no actions we’re pursuing continue higher have and I and expect material do. inflationary when so. to recover of And continue such that time. a as we quarter that raw

Carey Dorman

And material Josh, raw on add I just front. the would

year. seen some the excluding of stabilization mentioned on have We Ben over prices the that raws, course of the metals

a to our XXXX few only raws saw percentage We So increase – fourth a sequential points. that while on like versus XX% quarter, starting by the something moderate. ex-metals we saw versus increase XXXX of XXXX, we are

that increases raw in But is to continue there’s further not assumption to going or take to prices offset obviously, try ex-metals. our that price, material we’re So logistics.

Josh Spector

that was in up at? Thanks. arena? context in what a And on And what increasing changed I of That’s some equipment. deck wondering investment if the in that also had just all the you increase financing on projects then helpful. is guess comment your that could ramping I businesses targeted customer CapEx, provide you’re

Ben Gliklich

Yes.

we’re returning organic opportunity excited to So new the attractive opportunities. us by that customers more are and are into. invest We behind execution and that pulling some frankly adjacencies our and existing our really very about markets high talked businesses

mousetrap very, differentiated tomorrow. more about that We’ve high-value it’s expansion and growing for power really capacity technology a there quickly. our in investing electric critical electronics talk We’ll enabling We’re is business, great for a very which vehicles. got

So we’re doubling capacity there.

highly We’ve business, to wins applications accelerate an in Taiwan, and adding great semiconductor semiconductor business for a We’re which going support and semiconductor lab really is market. is in the our had concentrated that. this

support we’re we’re are a And which have excited acceleration making growth, customers With customer technology with with equipment, permanently. our circuitry equipment, very investment the a support and opportunities good in interested this cash capacity with in supporting We’re about we sticky, that really another balance for investments. rerated will sheet, we’re our very high-margin flow of technical growth. Notwithstanding need sub free growth. our our capital help business, are there for These type that to and for which some where are also year and and to an year, very order service with is customer that free the had as applications believe is cash technology, growing graphics also this some still in and business. record investment, accelerate XXXX. supporting year-over-year we’ve business in incremental our or we’re big returning regard capacity high flow guidance doubling wins business, this We the really two-year But don’t to in that increased entrees payback them. requirements into higher

Carey Dorman

sales. an in for exchange, customer not equipment that that we’re financing, just third-party contractual just we’re financing one, important point on the manufacturing, is That the for And right? customer equipment that typically, equipment is

Josh Spector

guys. Thanks, Okay.

Operator

Kieran our from take next Mizuho. will de with question Brun We

Your line is open.

Kieran de Brun

Hi, good morning.

is think that about that talking But of the growth while well we would it profile in think these in of I’m helpful. you the were opportunities environmentally product forward talk Investor products, in profile how think the color terms environmentally your group as sustainable That can business kind more about as mix be mentioned should acquisition HSO going any sustainable Day. of we area? seems you shifting your that it about sure that during the and you direction. really and you opportunities the industry in I give

Ben Gliklich

Sustainability category. single is Yes. not product a

businesses. every And of initiatives it it investment We It it a of is our growth in single of itself. of itself. have an in area in secular driver one sustainability is

us well. capabilities the bring bring to – eliminates entrepreneurial excited a good have the We customer chemistry that plating as to niche some team. what industrial for business, they is and have family-owned, HSO, regard good really great They market. product some with hazardous on relationships them to is technology really HSO wonderful

these In in margins. to chemistries. similar And which that our product we’re way at technology, our investing been we’ve technology position concentrating, leadership high drive in addition hazardous technologies, really will to eliminate solidifying share

to be to simply We’re our technologies in where portfolio. acquired, rebranded treatment it in is our capability the interested existing Envirosolutions also and water solutions which business, we more that plating and provide of customers our the the continues the investing side, grow was to called in MacDermid business, product particularly ability treatment, and industrial also water continue DMP but in side pipeline to circuitry BioSolutions we’ve business the value-added

with our to the targets standpoint provided we’re ESG we ESG We’re to week come. to recognition be publishing glad and going our from initiatives the from commitments year, we’ve in report see transparency made a last sustainability and the

that recognized most way and the proud traction perspective. it’s is great were perspective a we which XX company, differentiate the supply Sustainability commercially sustainable for and we the really and which a rank be and market, to something initiatives both was these we were ourselves XXXX, was of Newsweek out of in transparency seeing from chain that that. internal from something

Kieran de Brun

if you Coventya of then bridge initiatives growth help we Coventya acquisition, us, any whether that gets I But if pieces, be follow-up. the kind a organic additional and in we it’s quick range. and of would synergies of could of these can And to different the just that maybe million EBITDA million throughout the components into $XXX all $XXX mean way the us of helpful. the the you how you’ve the $XXX different the call. That and you help kind answered different just that ended of Great. at, take million a year course

Ben Gliklich

Absolutely.

So that Coventya right contribution about FX $XXX to a place million. you so million which gets from before is start. is the $XX to to $XXX $XX year adds a million. headwind million get We million synergies, full There $XX

gets million you that million $X this $XX to from million. to So year. the $XXX of hit P&L should synergies Coventya

will confidence rest a where the come range see guidance of sit multiple get high have to and margin you half. with into by we of first in mid-single gets digits said the business We The $XXXs pressure paths some organic level And this that line. auto so is that back today. organic the So the just our driven That’s cycle. on nature phasing we growth X% from million. the half, But growth to of there. percent as the or we top lapped the

Kieran de Brun

Great. you. Thank

Operator

on program no have back line I the time. closing this remarks. questions to further Ben over at will the for We turn any

Ben Gliklich

everybody, much, for joining. very Thanks

and many weeks to again. months forward of tomorrow in looking those and We’re attend the stay safe can’t Investor who And ahead, at our Day. you seeing thanks

Operator

Thank This your program. participation. you today’s does conclude for

You may disconnect a wonderful at any time, day. have and

Element Solutions (ESI) 23 Feb 222021 Q4 Earnings call transcript