Earnings call transcript Q4 2022

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Operator

Good morning, ladies and gentlemen, and welcome to the Element Solutions Fourth Quarter and Full Year 2022 Financial Results Conference Call. [Operator Instructions] And I will now turn the call over to Varun Gokarn, Senior Director of Strategy and Finance. Please go ahead.

Varun Gokarn

Good morning, and thank you for participating in our fourth quarter and full year 2022 earnings conference call.

Joining me are our CEO, Ben Gliklich; our CFO, Carey Dorman; and our Executive Chairman, Sir Martin Franklin. FD, webcasting Regulation conference with accordance we this are call. In in will after section call. be replay the completion made the shortly A website available Investors company's of of the

reflect make performance future financial results. forward-looking will the and we call, views about today's statements During that our current company's certain

These cause based most a earnings our release, could on and actual slides to discussion in of and on that material expectations that for materials future and events to statements found factors subject Please to our refer from be SEC the News These are the results recent expectations. under risk filings are differ risks assumptions of website and Events. uncertainties. Investors supplemental can section company's

not GAAP. supplemental these with now been prepared Chairman, Today's to financial also reconciliations definitions comparable materials in Martin GAAP introduce Please Franklin. our release It and to measures. has U.S. the slides earnings for measures to of and is include financial non-GAAP that Sir pleasure refer accordance my Executive information

Martin Franklin

Varun, good everyone. and morning, you, Thank

have working before. all as and sales has ever environment. The exactly bolt-on year a evolved The has accretive has hoped. that culture along another Element we a to evolved of record growth completed year team than and management now that led better into earnings had of organic business cadence strategy as our share, The face acquisitions in Solutions. created has organization per is with the challenging of macro a growth-oriented We driving fourth

pick steam its believed from edge of to to long-term significant that in demand always There and characteristics cash markets perfectly have continues is shareholders, create headwinds, growing that defensible there company's outperforming and was general with flow customer I've adjacent to There in to Element at core be its strong secular benefit consensus up but will much demand Solutions are markets. cutting and at end share. is the about on personifies in business growth point, to focusing development cycle some growth years that these and and returning excited macro future. free for that a be Element the positioned markets balance the Solutions that best-in-class criteria while cash many programs all a margins. continues the earn With come. is delever to sheet moats

None of are you say I'd were this And and Element it entire fortunate for we to base recognize like true that, achievable would be to the not for people the employ With enough thank Ben. employee the of hand to excellence and at the of dedication over company. I'll Solutions.

Ben Gliklich

grew Thank we and morning, EBITDA Thank Martin, backdrop, everyone. adjusted XXXX. record Solutions Despite earnings. delivered in you a and you, challenging revenue, earnings joining. Element good share per adjusted for

drive been Our on to day commitments that has and growth, above-market profitable we again. did X once

in dollar. nearly continued In markets organic from of X% EPS adjusted Nonetheless, automotive an suffer consumer year a grew We costs, $X.XX and material segments. absolute U.S. X% operating in to strong logistics inflation or and currency. grew in the from raw despite elevated face constant FX X% adjusted terms a headwind the EBITDA supply X% both Asian following patterns. disjointed The global net and to we and malaise of for the suffered sector from overstock order our grew by economic sales full COVID-related chain electronics

cash has across environments. flow of operating variety hallmarks million. free of cash our of we this year, of been One flow $XXX steady a the business And generated

million repurchases, returned dividends of operational and drive is the combination a returns most creation and for Coventya in the to HSO our our above-market than in of and over-delivered formula XXXX, profitable original of for share savings acquisitions value synergy excellence plan. We prior capital also growth we incremental on to flow $XX prudent M&A. XXXX. Our of but to In continue cash targets improve generating shareholders year more

leader as in finishing customers built deliver a enhanced and with we to position both industrial our The capabilities scale metal shareholders. for our global should and continue technical

half for XXXX half recovery automotive. partially first quickly demand half. momentum out softened by electronics and persisted. and second different. volumes were was the X in inflation very but and first in of XXXX from while the sharply year, steam Overall, The of of The This the offset ran months continued a second

back last. Either We inflation is dynamic a believe this come subside. will or demand cannot that will

saw better believe fact, are inflect are the happen business 'XX. the may In pass strong underpins our year would we than markets year and second will outside simultaneously, we of in half shortly. there to of our China. to which industrial [ has cover guidance, outcomes to both reasons Electronics This ] translate full started either along expected

take Carey Carey? more First, will you financials the in through detail.

Carey Dorman

a pricing offset see actions QX wins Thanks, deteriorated most our business primarily and QX. across environment summary new grew ecosystem can results. volume Ben. On that sales verticals. a of you Slide organically, X% from X, softer in further of to fourth our Net electronics by Demand driven the quarter

flat believe we outperformed sales. meaningfully our So we organic end markets with

where was and over Global even sales growth assembly QX to customers. decline reduction. XX% semiconductor EBITDA automotive adjusted and business, Electronics with in 'XX, vertical with demand smartphone strong constant In margins from primarily year-over-year the by XX% year-on-year mid-teen roughly XX% we segment industrial benefit that by the electronics that organic backdrop, assembly Against OEMs products seeing our and offset quarter. for the power market circuit currency, in flat. in in our serve XX% declined resilience saw continue board shipments larger This declined Western circuitry organic

our segment, from channel saw as and Industrial growth continue automotive to with normalize. our customers pricing Solutions benefit modest IMS began proactive actions inventories to In we in

of the organically growth. should X% experienced cost back business, quarter, in XX% unit fourth Across organically. grew into grew vertical continue a inflation industrial increase estimates drilling moderation Our and that a quarter XXXX. organically offshore material the graphics automotive and grew we logistics broadly X% production in line Energy on with of in in

EBITDA of in quarter from the across in versus higher XXXX. adjusted roughly the a improvement segment declined terms, a EBITDA X% grew inflation electronics currency XX%, point in of high-end margin, mix Constant the constant cost nonmetal function business. and I&S negative Adjusted basis first with in XXX currency margins QX

This We demand weighed line the our offset a X, U.S. but was reflect On $XX from margin we on overall gross X% our impact headwind top Once dollar. translation by Reported million discipline. in demonstrated of preserve stronger challenged grew Slide full results. financial the OpEx a results to ability year we a summarize again, profitability environment. organically.

results drove negotiated mix by first the base year. X% basis, organic instituted and inflation material constant a growth of in both of reflect our million electronics as currency which fluctuations, surcharge adjusted margins price driven as and year-over-year increases A significant roughly portion high-end Constant year-on-year. that points of half adjusted headwind. well EBITDA the raw grew currency a declined XXX was logistics EBITDA FX Reported headwinds $XX the face in portfolio. basis within On

EPS Excluding FX. on despite XX% business, year. pass-through margin in for metal a the million X% reported of $XXX been Solutions of impact impact negative Adjusted basis the sales our from have EBITDA our X% grew would a adjusted Assembly

which, our results on for [X of story X, organic as detail said, Next, halves]. electronics Slide for full share of we a was Organic Ben year growth businesses. in each additional X% was on XXXX, year-over-year

saw in in first for by disk and driven of actions. circuitry semiconductor Our surcharge pricing raw memory semiconductor the data growth plating, and half vertical demand 'XX, double-digit centers material strength

overbuilt all leading declined, decline. net These an due X% center unit in This decline but same Smartphone destocking. downstream memory metal trends and the to precious to or organic and COVID-related electronics translated impacts volumes are this first investment growth data prices Asia annual memory XX% in the fourth slowed, a second diff disk softened for channel half. in as includes quarter circuitry market high-end sales solutions, figure organic stabilized

for organically in Semiconductor XX% Solutions a with similar QX. year decline grew full the X%

Assembly has year. the saw course with the business, more Our significant positive end trends acceleration more to of and exposure through industrial markets Solutions automotive which

electronics fourth electronics also the the also board remained for expanding X% driven for remain year production XX% net Organic This increased technologies Specialty business into organically sales our strong non-consumer throughout the strong products grew Industrial X% and electric in year-end. segment Demand circuit year, for demand full our in in the quarter. year-over-year. while applications power assembly and vehicle by

driven Industrial but quarter. grew business, Solutions, X% pricing actions which which organically surcharges. constitutes digits by the and the year, grew fourth is Sales in into auto, almost for XX% segment of the grew double of revenue, XX% mid-single roughly digits

Europe and to Europe supply end in new automotive sales actions, business Solutions Graphic in first for contributed in uncertainty despite chains industry year. construction appear Europe have are quarter XXXX. additional Geopolitical markets softening more impact the the industrial that muted for in drove planning pricing drove of that of still in packaging sales many designs the to resilient been America sequential flat of half volumes. be in slowdown stabilizing, XXXX in OEMs first a While growth the North in and decline growth in and we were new organically a

the initiatives making with grew acceleration sales Energy this XX% fourth line Solutions accelerate margin to are organically top We in multiple progress designed improved in an business on XXXX. and quarter. in

business, We increase to side in lead related well. have momentum which revenues of should the as the drilling time production over

business continue high-margin to its growth XXXX. this expect in We

cadence $XX was a year, cash Moving deflation cost. release a This and reflects a million to which in of $XX of of Slide decline, raw sales safety quarterly free X, we by modest million million in the generated working driven was in half. The second $XXX the flow capital reduction sequential QX. material in approximately of

the CapEx uses expectations. better quarter, came fourth our in of other interest, taxes, including in than all Our cash cash and

expansions approximately deployment of projects CapEx Graphic. electronics, in This which our $XX projects drove forecast. due CapEx into investment expected over lower then We have equipment and will these XXXX been for power key on XXXX. additional of Several delayed dedicated manufacturing to R&D original roll million, several key lab availability, in than capacity

and efforts We in also equipment circuitry integration relationships, beyond invested primarily industrial. enhance to customer and capital long-term

near-term cash a despite was to investments or capital $XX We shares expect XX% should modest an interest high-returning X.Xx, of at of returned million. opportunistic These this million cash for adjusted price tax and approximately rate We taxes XXX this strategic flat roughly year. purposes about year-end return roughly average and at are year-over-year supporting leverage to EPS repurchases In over $XXX profitable share investments. XXXX, $XX including X growth. we model Net $XX.XX. are continue that million million at this year, over roughly shareholders

[ for swap our All remains euro rate ] obligation debt the floating fifth XXXX. early

balance and will that, to the with position liquidity discuss to I And XXXX. financial guidance our Ben call turn sheet for are strong. Our back

Ben Gliklich

end overall macroeconomic for the unlike cloudy, our you, entering The Thank Carey. outlook. year not markets is outlook this

to impact impact industrial receded, certain while input As in Europe hard warmer again. have derivative rise medium-term of China risks be and will certain influence others reopening emerging. on metal the activity to effect consumer logistics results. The and raw begun inflation The is winter and pricing its worst-case on second industrial potential costs to drivers material have XXXX are mitigated prices energy of important demand and predict

adjusted constant to XXXX rates, guiding to $XXX we're that a million. million At $XXX context, basis. on this roughly of In today's currency flat EBITDA range a in implies

free We And flow $X.XX. expect adjusted EPS million. approximately of of $XXX between and $X.XX cash

of first The of enter from a the carried first electronic the we year will an challenge half to on half the be XXXX momentum downturn to XXXX. XXXX that compared as

levels reduced activity production is have and [indiscernible] XXXX. prior we circuit determined significantly no and reopening exception only adjusted modestly versus fabs activity, in impact in around we current semiconductor utilization see the EBITDA electronics to expect have first QX electronics in uncertainty the by declined, XXXX. half board and and industrial XXXX Customers the at to high-end softness QX reflecting increase China Typically,

half. adjusted that EBITDA typically expect second more in half first will we the be is the exaggerated. dynamic This in year, While than higher

the as towards XXXX We electronics in our half, particularly second reasons in optimism business. have for we look

We General in many inventory will half. destocking the of to by positively anticipate electronics the impact industry demand ease end second inflect markets expectations years. in for are

growth decline, implying expect first will smartphone certainly estimates return show the for the to a flattish Given half. second in a third-party year-over-year almost the year, sales that half

chain. relative and electronics applications and supply automotive a presence. for pockets already in are will there have the These strength resilience infrastructure strong seeing manufacturing we expect broader be of where are relative We telecom electronics

not not have will long-term and secular business. in we've our that growth current conviction As growth, volatility the positive is linear driving past, the we electronics trends impact the noted

electronics, weigh In China power computing will activity in networks, results. The growth quarter and and high-performance we and opportunities weak chemistry electric see vehicles, XG-enabled first on sustainable the & substantial remains in Specialty over devices Industrial segment, autonomous industrial time.

global hampered have that constraints supply the year. production the automotive expect will we overall, However, through ease

fall, surveyed customers treatment have winter. to to Anecdotally, expected forecast we none customers Our off [ our gas European industrial due short European warmer and the half inflation their a in when construction the over work and are largest outperforming winter go it surface ]. coming to ration, nearly cost

has Together during momentum have in with segment our in XXXX. some we and IMS wind the business, its the sales offshore

the macro of our volatility, our immune. structure While from help variable products businesses consumable not highly our insulate nature and we are cost

and We this And plan operating opportunities accounts of market the there year efforts long-term have that capitalize prudent business ]. for the inevitable environment level uncertainty are profitable of operating position [ the to to heightened growth. sacrificing us this proud a without recovery. protect profits We're macroeconomic in on for our end significant

weather stability the Our scale, strategic and these and capitalize liquidity us on allow markets. should horizon to

and engaged opportunities. technology the new reflection to with customers' our provide iterative are actively technical is our in commercial persistent teams high-impact a innovation are customers longer-term This of we markets platforms and focused our the our on and Our momentum growth products.

Let people their of deep conclude our continued of dedicated responsible world, appreciation another and the my support all growth. around particular, of for stakeholders Solutions in for to gratitude Element and my me year our with talented to

future will Our in I'm grateful for the their success and tenacity that of a be it. product commitment

the for please questions. Operator, line open

Operator

will take first Josh We Instructions] Spector [Operator with you. question Thank from our UBS.

Josh Spector

a guide. EBITDA first, couple the Just on

assuming the drivers that? XQ, versus then through high thinking in terms second and you in main are second, through range is that unknown most the there much? about the I in up So we half, the And on first, should guess, XQ wondering particularly of What your be what if step drives your watching low to the year, expectations could cadence of walk does end?

Ben Gliklich

question. for Sure thing, Josh. Thanks the

like XXXX, we'll have had So year it first look we the So to for reverse in and XXXX. and in second a are right? our strong a reverse weaker the half of for expectations XXXX, the half,

look The of first will 'XX half half XXXX. the second like of

step-up the around the expect a accounts in the the first of New XQ. have So the for full you And on bigger half, second from of Year half, half. $XXX-or-so XQ, in million for second And is about electronics as XQ impact that. the in that then which have obviously. some The won't to EBITDA recovery think range range Chinese which does We predicated is clearly year. guidance an variable market

And in implies is other fall and the the in recovery, that the a half reason -- call recovery end to be it, and ramp the low electronics are to of end that how confidence of indicators half results the high units XX% are but variable Smartphone increase right? XX% about that real the see half in slope significantly XX% the increase to There that that the strength implies EBITDA versus a our typical in the There's second roughly largest of first range half, is within half. will So they'll that half. the in the range, right? half, of in second implies that the then X forecast recovery there us give first the believe flat down second first we'll seasonality second ramp. which the be suggest in in this business, year versus

cost extent the half, that comes And at to the preserve second well levers we momentum recovery later for recovery into disposal that the to XXXX. If see don't it profits. bodes in very our we have

think of that's about So the range. sort how we

Josh Spector

you mean or not all at earlier, so? I the returns And would I'm post-demand things, look fit absorbed made much that No, a mean look have past recovered raws, I logistics, how you into mean scenario over like how and mean, potential you comment that's inflation just year do I this? and I wondering, if helpful. cost those abates, what like?

Ben Gliklich

them Overall haven't QX, in takes of right, scenario, in year-over-year $XXX Yes. material Logistics in $XX costs. XXXX. best about our starting stabilize is seen down other and yet. inflation That's see raw total to in costs our the but to million. goods see recovery headwind you in inflation a moderation electronics input we you million a input where come cost We've seen demand

lot And we gotten all we've a price, of but haven't taken it. of

is margin deflation end of the our higher opportunity a get also potential range. that towards help from So would there us guidance

continued opportunistic to We have be around price.

be may with opportunity there well that associated so an XXXX. as And in

Operator

We will take Suisse. question with next our from Credit John Roberts

John Roberts

need get Board more see Since we have adjacency be call, of because how do your does the maybe industrial electronics to Or in think you ask you competitors have the you point, Franklin continuing faster? between portfolio? relative just you a portfolio? think more lot the Martin semiconductor do more in at Do do I on electronics, breadth And get industrial to a to some the the grows balance larger Martin, thought question. broader it or I'd exposure? to about some an

Martin Franklin

I've Interesting bolt-on tell question. will in done is acquisitions. believed far I What scale. so mean successfully we've I always you,

acquirers. As to a have characteristics the Obviously, not you we're better be parts growth of semiconductors know, afraid come higher price. at and market

very we're page we the think of very looked players I that very number that some larger out compete the I, where seen to on with ably Ben And exist. of as much because do public our there the things both we're same finding we I made But I the a lot this things cash. We picked company to and think return have where made. public want of But good areas we've grow pockets think been that on very that the generates can the for spots we where we've haven't a opportunities at disciplined. we've We've continue investments and that think seen, has a there.

positioned than has end frankly, forward take takes think markets. I share. grow and the its time to been move to well company But very It faster

very is I I'm is expand adjacencies, where always better. into with happy scale we today. think if But yes, we can And obviously, will. the portfolio it So

John Roberts

And in quarter. a then SG&A a fourth the down short-term was question. lot

been over that so compensation accruing earlier part of how there re-budgeted? in would but from variabilize your ended in you quarter the a much reversal probably given a have of currency, structure, than was big year the weaker cost Some is also year the fourth

Ben Gliklich

Yes.

a year, but We're growth culture our have deliver proud coming this year. didn't we level of the a strong had would the we pay-for-performance expected it's of results, we So and into year.

that half. reversals some And accrual second the so there were compensation impacted

Operator

next our Mizuho. take will we Brun And from with De question Kieran

Kieran De Brun

you more. Good out just could bit was a morning. wondering I little parse if

-- semis you you recovery be XXXX. circuit think weaker strengthened is the the of with cadence, be I or mentioned It we about little you kind year [indiscernible] the and relatively to Assembly assembly year. bit the poised think strong the of and circuitry seem I throughout seems still like a throughout a ending in little guess, course When to semi.

how any color helpful. you're the progress be on there that there you would give Is or seeing us to can you that throughout year, how that

Ben Gliklich

significant exposure electronics electronics the Kieran. the into strong for QX that broader and -- the power seen that and the goes circuitry business vehicles, business We've more versus of big business Thanks and semiconductor question, a explanation Yes. we've end assembly assembly that got for businesses. a production call certainly is ramps that piece for electric strong a Yes, has there. it, The relatively a industrial markets. into had

the the should carry to dynamics be into first XXXX. assembly the that -- from half not business Again, And in the over exempt we persist second should expect be over that. over resilience should half -- and so the

Kieran De Brun

cost end throughout on environment I already profits a to a course bit, mentioned we little challenging touched 'XX. levers in preserve but of if the think and this And up just then quickly, you Great. you more

be can on would just touch more little bit you helpful. that, that if a So

Ben Gliklich

didn't disposal at all We Yes. levers the in our throw XXXX.

is we've the look Travel feel compensation XXXX our as to opportunity level in disposal the environment significantly will increased a at need if our the Incentive or still that from has spend so there. we plan. demand got not XXXX. into significant somewhat we be justify -- And cost XXXX, have accruals of we does

so on very these quickly that's spend there's And environment deliver expect our groups discretionary there. these isn't it's spend. -- the after in innovation sacrificing growth, we the things people we the but opportunity these call businesses, when people large moderate then about will a other, long-term still that we'll go rely are long-term from think not can we customers without right? It's and substantial how cost it, growth cost, demand we of not And when

Operator

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

Chris Kapsch

in bit function relative management times dynamics little of more about the the couple to lines. your end market, disproportionate sort granular more likely is you've of getting of a there? a number in months, XX of contributing curious there if would to wondering markets it electronics a the I'm the to mentioned into little least space. about more the on getting and you or your a at just explanation a wins a of inventory some PCB remarks over that's over-indexed formal So Was new this specked of be last outperformance I'm Just XX kind relative or bit helpful. others? function had versus

then the end or inflect diminished? become this outperformance see year, is color you And as to persist, that market dynamics? Any on pronounced expected those more later will electronics

Ben Gliklich

look down show in in there. market XX% slide look And XXXX. deck the smartphone us at where call our market Chris. the units They Smartphone biggest XX% were for thing, in markets were the tried is at and we our end that QX. to end Sure and performance. We biggest we out down electronics relative

have to We then on nearly units line we grew electronics. QX, biggest circuitry in It's end semiconductor but to in in extent intra-period, electronics market in not smartphone down. And and hard portfolio that but we've outperformed clearly share exposure the the business that end down to our the organically the calculate market XXXX. in markets was higher electronics was top our

QX our confidence about clearing, we're doing contributing really for quarter, in did we're and And industrial and share. which Electronics, it big similarly, see portfolio in of and wins us there. in a level that our was market share the position, we're production gives in high there that leading but lag the relative Power reaccelerated when XXXX And by broader growth then we electronics third because industrial, driven a to we outperforming what automotive channel in were we in new in the significant by, we in clearly inventory think example, of where concerned

overall, So we as significant this markets. we about see very do business end performance. see opportunities share our do and We our outperforming coming way, relative feel its good

Chris Kapsch

on follow-up that. to just So

So the and it's primarily landing effectively over course success of business function really a you've the had in new the production proactively year? PCB of lines last getting new

Ben Gliklich

new I mix. So think it's wins in

end to growing share the exposure Our of those end overall is faster-growing markets in pie. concentration faster-growing and markets our

Chris Kapsch

And just CapEx flow the Got Okay. the reconcile EBITDA guidance given and to assumption. it. and on cash follow-up expense, interest you've one your your try free taxes, then cash to --

the So capital. is there plug working

and wondering going anything recovering, your of just -- should a cash that's assumption Just we of? there if capital be function it else working of on like sales source aware the looks

Ben Gliklich

Yes.

different there's the business flow the We're outcomes EBITDA get capital towards to of capital smaller the will see that a comparable is it we comfortable as trend, that because an in cash will The the working plug second multiple end ways free number. investment If flow to cash cash. we in working EBITDA. of in half. don't grows And a in but sort capital come we get be capital require to use if be we of be feel working higher So does working number. going investing accelerating to business and our us for

Chris Kapsch

the relative that in or in how working out play metals, does just And number. the inflation deflation capital

Carey Dorman

all the today see is have reported things for But also prices the we [indiscernible] commensurately. So equal, metal there not on lower but going I based impact it's dollars our will No, are if need reduce don't certainly, inventory. Carey. the below price. down, XXXX significant you're the inventory, investment come should come will far we down, of require that average a in XXXX, dollars that sales versus like to reality else which think come that those actually average the down our invest of prices to current

this not And look perspective, at days impact. an inventory so as it's we an from really

Operator

our will next Securities. CJS [Operator And from we take question Instructions] Tanwanteng Jon with

Jon Tanwanteng

ramping are it just get top-down confident of in And electronics has that markets was flat troughed that to half just business? within pickup up range your specifically customers the ready other the to industry programs you the projects then implication and get a how Are I there wondering being smartphone for forecast? Or guidance specific new and second better you're simply are to out telling are there. you is where have more over the to back inventories and electronics pick demand?

Ben Gliklich

The is general around the by second recovery electronics supported the indicating units are in industry for broader of third-party it's the research half year-over-year. an participants And that consensus year. around recovery -- flat smartphone

which than times. ramp what's a you second are lead an see year, after greater in there not would a half suggest our where guidance. in is But seen implied X-month one even bad good industry is an we've what historically, smartphone Now this the

is so plausible And that, it is doesn't it occur. -- that very recovery

to we there multiple win. guidance ways about the And our way are is that think

that have our We disposal. lever at cost

As ways. the this that to ramp. a profits That's guidance when and prepared business, the But in get can we've doesn't have materialize. preserve of business multiple Industrial the more ability operating cost range we hallmark the it mentioned variable level nature, of got demand in to wind sales again, is our our remarks, doesn't because in I and we and have in it same Specialty we conviction the around see

Jon Tanwanteng

just shares you're whether or year. EPS Understood. underlying a on And guidance the repurchasing not? that, the Is then for amount of question there specific a

Carey Dorman

little So low to allocation range end no bit need the capital there's you the a compared take like capital And in EPS, if EPS down some all of end, tax, get of high to on low of you way. end levers to really EBITDA. that cetera, other allocation EBITDA other the then from of assumed to the et

So on not low the I end capital significant. some but think about would allocation

Jon Tanwanteng

Understood.

could. more, Just one I if

between mix basis? wondering electronics I expectations you and if industrial head subsegments seeing on the electronics unusual just was just kind QX, a you're maybe sequential As the about anything within into for the sequential of and

Ben Gliklich

balance Sequentially, I'd because Lunar is characterize means by being Specialty about electronics New is between to electronics EBITDA covered softer X Year as the in being production And get things, and which days what sequential talked fewer Asia, those impact just business Industrial little you the of couple and a bulk a growth. the of that the that we where of percentage business.

Operator

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

Rock Hoffman

This is Rock Hoffman on for Steve Byrne.

wondering telecom you're in was growth, infrastructure, And for for that this guys green tech shoots market, autos the does automotive any I confidence numerically You particularly the particularly mentioned seeing recovery? and market in XXXX? guidance handsets strong a assume other if in market high-end what end and TH already give in electronics

Ben Gliklich

So end. shoots high it's about right electronics and now speak at to green hard the

And generally now QX, in electronics are I trough that here expecting today. is by think QX that market what weak across industry, the what particularly and folks a is guidance. that and is our are implied We're seeing we seeing.

units in roughly smartphones, right? implies guidance Our flat

about that. there's phasing that. talked But a We to

to going be is half down. first The

inflection. of be then the electronics. in XXXX, in the XXXX, first Remember, will which strong the that necessarily And half stronger than second underpins second much half was half very

units, We're business. in automotive line a to automotive, estimates. With flat modeling roughly about the which pickup, roughly talking third-party electronics we're modest regard with is

Rock Hoffman

into material general volumes? with former, or those of inflation you opportunity accelerate question, lower current Just should margin second volumes are broadly. If or through My just prohibiting flow the are raw more outlook results. Or -- deflation any should weaker for XXXX costs? Understood. seeing your we realization what's the

Ben Gliklich

deflation in So our we don't significant have guide.

the stabilizing. we in fourth we said quarter, saw input prices As

And for XXXX. that so we've extrapolated

a deflation. from there XXXX develops opportunity the economy on of course is of post reopening. the also how inflation over the risk an There's in depending China So COVID

Of course, that's if that, opportunity that on of demand improves for us top offset an potential inflation. likely because any the line

Operator

And our Seal question from next take David with we Silver will King.

David Silver

a I and markets. to detail added I ask some comments on if about Ben electronics you, little maybe was you on global to smartphones. add going end automotive you your color, think, could

But comment clearing. slowly extend mean other becoming I remarks, little you is normalizing mean, prepared or was your bit. just the semiconductor in about maybe a could supply if comments your available? wondering a in availability in you press So chain I this release, about those parts talked I market the

to more well in transition -- the it pace auto related the your benefit directed the transition builds this from trend. Is Or improving? where of is consider EVs global or that general, company I to very your to towards more positioned

just in end automotive the little what seeing color So a you're about markets.

Ben Gliklich

Yes, absolutely. the for Thanks question.

the share think XXXX, channel, automotive inventory first the lagged had, of the the saw QX channel and units. clear wins see products the in gains we of business. back the then QX we specialty in that some industrial that where as And we in about from accelerated our and we outperformed production through the saw half but our inventory of And growth the and big Industrial we've that was lapping we've lagged in some XXXX inventory half, Solutions customers' had products. So acceleration not then normalize that there and because of in in expectations we we that

about auto side. Industrial primarily roughly the and our on being to really that's more that So that, Solutions constructive supply relate and chain comments flat

earlier very and vehicles. proliferation the story electronics from still XXXX driven being power within by position growth that's the a anticipate And electronics we're do continued we side in the the of our business. assembly in a of and where And strong of business really story. question That's just proliferation is year innings. the where EVs electric relative had about profitable and outperformance not have electric impact early However, electronics, a vehicle we that's of the the

David Silver

ask in working to just capital. general question trends now like a about I'd

release results of year, back if greater So it a I million. over capital. in the look couple years. the guess, seems of working million cited the been of sourcing, or I your half capital past you the But $XX working buildup $XX I in has second than mean

working general, in XXXX? what are release or your Just for use during capital expectations

And into how much factors estimate? cash $XXX of your that flow million free

Carey Dorman

Carey. It's

the the to question start of XXXX-point couple go over with I'll last So then years. back the and

and the to So earlier, working use -- case of of for to XXXX cash that a we we use said really as are capital. of it's the Again, in get sort assuming base work plug terms growth, year the second half in depending investment in of that growth there's make. of particularly and significantly vary of on the and the the pretty can X.XX we'll magnitude of the number phasing

do same down to we that $XXX if from think million, you roughly made were the EBITDA just the the it's size walk I XXXX. to investment in

goes in would similar the again, would the that in of [indiscernible] you'll dollars expect, see I see on. most years you And see as invested see would where phasing year that growth we those a that where, sorry, pickup you that

there's grow in input we inflation X selling that go If has stock think disruptions chain the seen that I working we've XXXX, throughout we've to as XXXX, in And little because supply you of up ticked other a as that but back had that mentioned. safety One price, period. trended fully over down than seen. And the to we that build XXXX. is sales haven't is sales really faster the we've reasons percent capital all a the prices that offset the of back

XXXX I think be over release, opportunity up So stockholder the term. an opportunity safety it's the all setting longer year but to I over think that is time. there's where don't

Operator

[Operator our Instructions] question Stanley. Castillo with will we take Morgan And from next Angel

Angel Castillo

seeing North what give a you color maybe and more regional on you're America. I what but things, hoping was could in just on OEMs, electronics with bit on, some and seeing. little Europe that of a a of side lot industrial particular, basis, in color Obviously, the you're overlaps us

those as what And in about as industrial of kind the of kind basis? Asia, you markets markets well you're a in from seeing or improvements regional think

Ben Gliklich

Yes.

and cautious rationing inflation of best the fall the So We start survey early I story. with impact part gas our that price prepared and the the which risk Europe customers, pretty the right? about were Europe, in We of the remarks. of did winter I'll on with in gas is mentioned

and of expected One go work to of them the in to winter, of our short and half them customers did. over largest none Europe

workforce than of slope guidance. a or it's you the partially lockdowns considered our been can but sense of impact. is year, for read the slow, a right? That's the holiday in in COVID weeks, the week more recovery It's slow in though have that before a dynamics COVID variable good March on and great then channel big us. holiday the COVID the proliferation China. some Lunar because a loading it, to of the call constructive that for impact before, Year Asia New because expected get have the there's don't from much Where X on and the entering we so the Europe be And from we recovering are and In Asia, because been hard today saw, we it's

business. a And and America, several things quarters, industrial then side in market on the going us North that's have pretty the for reasonably back been healthy steady been of

But All to of surprise other year. a I this relate say, industrial. than those point the surprises, in would comments big at positive from no Europe

Angel Castillo

maybe Got it. customers just helpful. get Are after more of back think curious get your on here. PCB about you from first electronics quarter? months. restarting That's maybe similar to beyond utilization hearing very one some another And starting around of a kind to and -- semi-fabs comments we And few that Asia, to potentially normal as destocking anything cadence next pick your up suggest the seems then also talked company I plans rates in

I reinforces anything hearing more that you're just that kind well? of maybe recognize visibility as But month there's than a up.

Ben Gliklich

say. not what We're anything hearing Yes. is would inconsistent I with that

will from aligned in believes that that we're slow a that half, first the half that I the overall, see a I industry regard. all think and material recovery think second

Operator

at are there for the I additional call will turn and no time. this Gliklich further any remarks. closing back And to questions Ben

Ben Gliklich

And for in look We seeing coming joining. Abby. to Have thanks day. good Thank you, forward the you everybody weeks. a

Operator

for thank we this participation. today's concludes and gentlemen, ladies And your conference call, you and

now may disconnect. You

Element Solutions (ESI) 22 Feb 232022 Q4 Earnings call transcript