ESI - Earnings call transcript Q2 2024

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Operator

My name is [ Christa ], and I will be your conference operator today. At this time I would like to welcome everyone to Element Solutions Second Quarter 2024 financial results conference call. [Operator Instructions] I will now turn the conference over to Varun Gokarn, Senior Director of Strategy and Finance.

You may begin.

Varun Gokarn

Good morning, and thank you for participating in our second quarter 2024 earnings conference call.

our accordance CEO, are with conference are CFO, Gliklich; webcasting today call. Dorman. In Carey Regulation me President Ben and and this Joining FD, we the in will Investors made replay available A section be of company's website. the

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

Benjamin Gliklich

Thank Varun, had everyone. you, quarter. Thank and Element good you Solutions joining. for morning, an exceptional second

technologies of electronic value supply growth. chain our emerging to paying and strong in Our as over reclaim several ourselves key past efforts enablers years the off position earnings are with

remains consumer and the we driven center growth impacts incremental high-value fabricators saw volume by to fast certain deserve in soft first pricing customers applications, amidst growing, electronics what and in robust commodities. capabilities stability high-performance deflation semi-conductor environment. Similar and quarter, margins data in Our computing mix industrial verticals, drove a

basis by than demand segment currency and double growth adjusted were for HPC, XX% markets. XXX segments mobile and driven our XX% EV on over year-over-year with business, and grew adjusted more primarily basis, results by AI, digits. strong a points expanded Electronic to constant Circuitry EBITDA Solutions by margin both EBITDA Our growing certain volume due

over Our well revenue mobile below Solutions despite in units. the Circuitry phone XX% average market organically, the grew long-term remaining

revenue advanced portfolio. business grew assembly a We support in Industrial and applications for also Margin strong packaging EV Europe the margins. raw increase materials moderated the metal certain on in core combination in a to continued the our Specialty material utilization. earnings the still This Solutions net almost Energy was was trend, Semiconductor wafer-level in semi growth. of the incremental lower in with and digits key electronics by by contributor demand and power demand sales business, at significantly, which first quarter segments surcharges our soft strength electronics and high fab price double strength industrial saw in automotive first lower segment the are customers. Considering ongoing impact strength for increased & half costs expansion in softer Profitability from in to relatively

volumes well at where the few For achieved past below years. margins many had these businesses, our they of were been

strength margin profitability. investments applications our take actions that cost to the underscores our So our contribute and success in ability higher-value, higher-margin permanent of to

in stronger chain concentrated the Moving we in supports positioned second and our actions, that year-over-year. sources investments quarter. confidence capitalize benefits supply of into some long-term we've the ESI the That dynamic the algorithm demand lap on propelled portfolio, new half, our margins of the our electronics growth franchise. long-term businesses our Through electronics within this emerging to but of capabilities lower materials should of remain raw should

circuit Element are center OEMs package-attached and manufacturing our Solutions examples for market scale-up align of nanocopper investing fabricators. Computing and are and breadth dye investments technologies of span of expertise to Our requires as provider that material both only our capacity for board, the of sets with chain. them, a in the chip critical and electronics partner we the unique high-volume the the development a technical increasingly technologies, solutions those India in in and across variety improvement decades the research manufacturing performance solutions, fast-growing the itself applications few just which of connect supply attachment

reinforces and differentiated applications commercial in points customer our customer opportunities ability intimacy of We in pain customer Circuitry have and a Kuprion development. wafer-level accelerated pipeline around our on and improved as has excitement from areas. copper successful active we ViaForm to Solutions And investment emerging that high-growth advantage packaging build solve our

the take consider It's more next capital to through XX the we that additional point meet strategy. exciting scaling improving XX will now you these time, the aligned deployment where same second time. Carey Carey? out has inorganic can an quarter business become to in sheet with detail. the capacity At in results manufacturing our our to apparent balance opportunity on Over months, areas. focused our is we're commercial

Carey Dorman

disk Constant in Specialty Net delivered high-margin Asia of grew Ben, circuit Solutions. and vertical lower & metallization X% expansion impacted saw to Thanks, by everyone. growth growth. surface basis high-value points. positive incremental X% in basis We organically printer margins Electronics, Strong sales Industrial adjusted however mix financial well growth an adjusted adjusted lower in in surcharges a Slide XX% over solid input expanded roughly North Circuitry expansion as treatment. currency sales gross second cloud offset in for benefit and board and mix grew by grew as growth and X% input product modest which segment Industrial, growth as overview The sales negatively U.S. advanced growth Electronics all well similar declined gross net Net on lead primarily organic more storage EBITDA X%, verticals, organically. results. good our sales X, precious Energy stable a EBITDA currency EBITDA growth quarter was from This offshore margin in strengthening American this adjusted on dollar memory chemistry standout in margins quarter. Both in by graphics. EBITDA market. and constant softness impact provides Circuitry demand X% company constant industrial substantial respectively, metal We our and cost. of year-over-year by currency than growth EBITDA XXX driven and deflation Continuing of businesses morning segments and I&S, reflect pricing. and and an mix in for as in margin XX% driven product by in from XX%, our in a off mix meaningful with adjusted total

Assembly margin would in have adjusted pass-through EBITDA metal been in the Solutions, our second quarter. Excluding the XX% impact of $XX million of sales

segments. Moving on detail growth drivers of on where organic X, Slide to we sales our additional X net in share the

improving business expected by the vertical market in automotive We as Industrially-oriented continue sales remain Assembly to continued this driven our by is Europe grew quarter Assembly, year-over-year In in from in China. recovery in but sales targeted customers for electronics areas. to Electronics, by to up. broaden This the growth first and organically a demand is net soft in volumes X% were was in and positive The see second the electronics. improving set dynamics business, Solutions consumer all especially our headwind sign half. Industrial particularly growth,

customers was mobile storage Circuitry growth market core well sales Asian specific in and Solutions demand and organically. EV cloud as led memory our Growth and XX% by strong for applications in continued China AI-related improved chemistry volume Circuitry applications. as for disk

several the growth demand has past market smartphone in driven demonstrates market of not outside outsized over that applications Circuitry emergence the performance Our the has recovered smartphone years. year-to-date. of high-value for traditional meaningfully high-end The

of unit growth coming the suggest upside smartphone from OEMs global low only Third-party estimates from quarter X% with for growth handsets. in Chinese Western significant domestic single-digit

X% and early, rest AI-enabled the utilization electronics the improved power see in for anticipate Significant by customers. our smartphone, EV applications potential expect both Electronics XXXX. of driven wafer-level multiyear increases saw packaging refresh advanced outlook tablet in are a while Power And looking of demand next in in were will sale organically. drive markets. several cycles still OSATs grew our softer years, for continuation customers over customer broadening Our that and in to base. and Electronics and support offset forecast have considered packaging We memory, new half. improved major chip semi to Semiconductor packaging improvement OSATs we made lever We an Asia server QX that by semiconductor the sales customer growth Power progress assembly fabs by from at meaningful both expecting wafer-level partially Solutions into second PCs not sequential AI have is and

Specialty. palladium majority Solutions, to Industrial decline surcharges and Moving for sales In reductions the & was X% the of Industrial commodity like metals in nickel. the

revenue drove automotive was up. Demand swings higher price metal mix value-add, Europe of high-margin, chemistry the and headline customers While sales, these recurring across impact globally sluggish. from margins

relative a with spot bright increasing both Chinese demand year-over-year Asia sequentially. export was and

mix commodity the volume volume. Solutions growth of driven with of surcharge additional We in to X% organic wins expect remained impact sales a pricing new second quarter, bright I&S and portfolio, sales driver actions. a the in and half Energy to customer the spot of negative in ease modest by pricing

levels Energy some of the at operate time. expect business continue for We to profitability similar to

from generated which as is the sequential receivable Asia, into inventory, and revenue quarter. second on particularly We single million in in $XX due capacity free well select capital, increase from projects our expansion accounts $XX $XX sequential X. largest quarter Slide development prices strategic raw to as geographies. initiatives primarily to higher of into invested Turning the in was into growth in tin flow million in also was million demand we working progressed acceleration, cash material. CapEx and as application

cash year remain full CapEx and taxes cash for Our interest, expectations unchanged.

balance sheet. to the Turning

net was X.Xx. ratio of at quarter end the Our the leverage

for the debt includes XXXX. maturities of no interest until no year Our rate capital have structure the we exposure and remainder

at turn for call We now to the barring by Ben deployment. And expect discuss outlook I capital our of second year, half. will to leverage below back further the net the end Xx the

Benjamin Gliklich

strong Thank guidance half you, first We've a in had and as introduced reflected to expect continue June. the increased Carey. we in that

improving, case seasonally view and to improvement We are pre-building the recovering third the the timing again. second quarter second of half, beginning our to conversations markets the in half. strongest, demand support nor on in broad-based constructive weaker. more be industrial do is through not not This given launches with our we Historically, markets customers expect see do likely electronics electronics. them suppliers be While is the activity uniformly in product the and a

that depend and phone on level the and However, will uplift the second in exact mobile in pace of improvement the half cadence magnitude of markets.

The healthy constant unit single-digit low our markets growth increased currency anticipate higher to XX% growth. improve EBITDA should adjusted range the expectations end of for guidance recently We of achieving mobile of our would current a translates midpoint beyond year.

Operationally, manufacturing opportunities. industrial our we have on and capacity working the sources we we focus geographies. We've and expanding of of development Our in by pipeline in to growth power an our high-leverage electronics, our seen specifiers. by of of have the as a large, optimize research are electronics future and productivity manufacturing in driving new inflection and customers with building the large in electronics, demand execution. technology for in of applications areas remains OEMs our high-probability Commercially, legacy terms such adoption high-quality, nanocopper leading-edge assets engagement and business, footprint quality and

exceptional go-forward people thank our outlook our exceeds out-performance support another for stakeholders Solutions world like the year, our who of To to Element we and I'd are our the have for wrap responsible quarter expectations engaged continued well. up, of improved and outlook. Our as and strong began for XXXX their around improved market for in where particular, highly all and

please With operator, open that, for questions. the line

Operator

Roberts Your John of comes [Operator the Mizuho. first from with line Instructions] question

John Ezekiel Roberts

second in in seems Congrats on results. half smartphones the minimal strong really results smartphones. but depend on of you're the strong recovery range to having in The spite

compared how seasonality So normal about smartphones? the the before you seasonality half to outlook pandemic? remind can just And are us second your important

Benjamin Gliklich

Circuitry outside of new Historically, smartphones regard the point of indicator the big stronger-than-expected overall there saw emerging a for our as -- is the we've you recovery end strong strong sort market in pinned typical still smartphone smartphone of what have are are propelling around on, that an to a of of the Smartphones or your but and to to we stronger-than-expected our of seasonality. guidance an for upper and in demand getting the recovery. With we'd still second without improving business demand John. the remain sources Circuitry but and right? ecosystem, in a these what part in environment quarter. midpoint range important smartphone electronics of the is quarter not business, up guidance business XX% recovery second path the strong the We're that a source to that question, is market

is strongest quarter. our quarter third historically The

got than first estimates on, somewhere particularly X% usually to research half. expected half estimates, to the X% today. uplift robust is The smartphone second be a it, is We've because not the XX% market around stronger based market call about

And sort of to tied that is so range range smartphone that's why in market. XX% the we're a X% and stronger

Operator

question comes from Josh line with next Your UBS. of Spector the

Joshua Spector

and call wanted view forecasting ask relative call? it, guess, it to tougher anything XQ strength XQ forward has I of the now. more right I making in on XQ September, that's around uncertainty on the in I Or the your view? in production plan, is uncertainty, been pulled mean, to

Benjamin Gliklich

the units some away drive smartphones as very of the emerging terms forward, don't being keep sources the XQ demand in a So dispersion, things right? business are as some from going there's business, the vehicles these driving is to the and driven are press, new know units are to how I analysts many exciting moving in electronics and industrial back or frankly electronics and forecasting of as high-performance of like of you that's demand what the decade. regard see research in And about demand compute, pull it past the we half between over pretty large optimistic about the by see don't don't for smartphone the more all drove would say, are in Things second was We electric away. quarter. We the talking which smartphones half. automation, a that substantial which see then sell they're year, substantial to in what's With quite back going uncertainty, OEMs going volume. as

single But range in that we higher back and start half going growth the to XXXX. that a QX. and accounts than the to second half, with about fall earlier about the be into in standpoint we good feel digits sometimes QX regard getting And units into -- of higher so pretty have range low range for smartphone that the end should the sometimes from

Joshua Spector

the you and assembly? talk on I guess What of And frankly, you somewhat X about that little talk maybe than side bigger management the just of you a are the think, anticipated impact of, business we to it I on seeing the front growth kind can the of to and power you surprising was improving. semi end bit about hear side, more? parts

the how just second that see you So moving as half through curious trajectory well.

Benjamin Gliklich

that Thanks to Josh. a Yes. for It's question, point good clarify.

electric certain see customers, vehicle semi-assembly in business part We we've level business pretty back where then is semi front and our the core that the which the So from packaging, soft the was a in quarter. has outstripping in power of share power to We're X our tied particularly a that's market, was components. quarter packaging There's which is revenue assembly quarter. strong second that end. been gains wafer-level portfolio where lot wafer vehicle MSI been there's softer perspective, on Tied electronics second had and growth, a there, business. The the business. packaging constructive from we've in quarter, very to second semi-assembly, of accelerating end transaction, wafer-level The the the the very business momentum business past. third growth in single-digit of in electronics standpoint OEMs and concentrated business the winning our outside long-term a within high semi

general, multiple pipeline very, so And for Power that year strong, strong over the And opportunity semi-assembly period. is effectively. the for our business growth it grew. is our very we're very a business and converting outlook Electronics confidence in there very The in

Operator

Wolfe Research. line next the question of comes Chris Parkinson Your with from

Christopher Parkinson

overall? of business. off should kind in to just ultimately mean, made question gauging to extension you the months, an X long-term. that substrates Can addition X further the you've you've be in based and I decent X Street for but X insight not intermediate next growing for just years capacity kind just to your to the for the some on how of like semi some Ben, offer said in what within vision investments specific you next of been of some that just that business terms

Benjamin Gliklich

Thanks for Yes. the Chris. question,

advanced been front-end significant with electronics a offer are in our few to from the And a semiconductor of and capabilities hardware a business opportunities, us semiconductor results we large and have enabling out good have supply of we semi strong, the in here there a community we years. the then soft strength the markets. These teaching a our And even and traction of -- first. these is packaging packaging new coming in advanced portfolio by sources we differentiated electronics electronics record industrial what gives generally customers innovation. our us the of demand Electronics next-generation with of market of demand sources lot emerging runway conviction in very a long-term deep electric wafer-level are and about customers' is solutions very this terms market the it's quarter gives our the and about. The significant sources because visibility which areas couple our storage, So and dives, been packaging portfolio. there's we we've compelling broader solutions our second make the for investor perspective, see Electronics complementarity which where very in was and observations attached. Those growth hangs lot as of which products breadth I'd broader pipeline package together and are high-performance our very us in portfolio, vehicles. The data very, AI, And their perspective, of addressable are become are and in electronics electronics is very, the business see about what new can is expanding demand assembly, excited is portfolio portfolio in well. gets from opportunities compute, our the of market creating and comment to in of chain for making the very I've demonstrated And as

Christopher Parkinson

of And just flat, investment, right say just a just CapEx us working numbers give second follow-up. 'XX cash and a little evolving the and Perhaps second in moving half bit quick half, thinking understand flow your I the color just given onwards, I about conversion cash conversion be mix flow. direction. the us capital you on for of this free the puts for the we but can takes is remind would should just free how businesses? obviously on

Carey Dorman

Chris. Sure,

our So full flow focused. And rest growth is where based from. cash most seeing intensity for noted, where of year million. that for And is our holding working company. business to investment first growth the Asia capital for the that hit higher XXXX the heavily you that on range is electronics million than the capital we're for of average expecting coming point, is the business real we're to the is The that we're Asia the slightly of driver $XXX working free of the as $XXX the

the we a So the business, the you're you're dynamic then actually the if sales some the stability, the of end sequential that's at really improvement. When percent And DII year. capital seeing trend look expect improvement for to for not to we of as see XXXX. working and -- PSO seeing you

average the it's last. overall end basis. growing year release be by lower. years investment seen in will we the be cash It to And don't the years, still growth So we've should When more beyond, see full about I year. back of the conversion. slightly on 'XX much range think and of changed think on flow a In has some should dynamics over the you an

Benjamin Gliklich

a been interest expect to we'd from hold perspective, lumpiness No and able and flat. taxes we've capital

so get leverage leverage those lines. we'll on And operating or

Operator

Lodaya Your Capital comes Bhavesh from next question the from Markets. of line BMO

Bhavesh Lodaya

of saw what on the versus just sort or in that Is wins some Maybe of We a that you business Circuitry the organic Assembly. examples new divergence in some timing and they about? spoke impact growth are? Semis

Benjamin Gliklich

Sure thing.

you've packaging business already the what has that to and growth you're tied got assembly of the I say, would business, market industrially driven topline. we the weaker been responsible to very electric the automotive circuit quarter. in generally assembly divergence, and the a business second the offset board where broader and saw strong between wafer-level we've the for circuitry industrial in the vehicles on semi-assembly circuit spoken business, So are more In performance about backdrop semi exposures board set in

emerging the Solutions strong On electronics. applications side, saw Circuitry we demand these by driven in

about -- look you high-performance talked talked markets. We at -- So certain EV about mobile compute AI.

was driver and north some in the local second business market. certain applications tablet quarter. a was mix of Chinese in high-value the applications. up as there mobile strength in these also strength applications that There was XX% in So were Volumes new are there

point chemistry of the and driving the organic the and saw. that higher, price are balance we growth our of So our that's solutions

the I markets that don't half. As and we better accelerating because industrial between second divergence -- see expect in the we half, circuitry should persist forward do assembly that, look to the the business think second to we get circuit board semi but materially

And semi the -- expect a XH. should from business so results stronger in semi of set you

Bhavesh Lodaya

at? ViaForm organic transactions more like us or Kuprion, And open as or then to is go you next you would businesses kinds your about tell In even I in second of you've a Coventya of more, which what what businesses story. growth potential are or M&A half like development Can like you going is focus the Like done something all looking year? time of investments. you existing kind past, of the be sounded say, line

Benjamin Gliklich

Sure.

from when amounts perspective. highest capital we returning more approach pursue us, Bhavesh, We and that have when that allocation. the comes just the I to available available we'll characterize I to sizing have would opportunities of capacity capital look And continue increasing channel. opportunistic an of all we'll as forward today and deploy strategy. So roll capacity out rightly a to you we opportunistic as it the And and our what think, at it's approach M&A. say it We to flexibility pointed an comes I to would

businesses. Our we are into greater are or We We for M&A that and of behind that to look straightforward. better equal pretty available invest opportunities our were make company philosophy our inside of businesses opportunity can and of is better of couple businesses past quality been able to over valuations. I several expect we'll at over years, continue attractive types an And to to do surface next have years, so. the we've would those the that

Operator

Your from next line Steve of with America. comes of Byrne question the Bank

Steve Byrne

Ben, recall that basis on volume few or underlying of on the end case? that Electronics, expected can in growth product you the X% versus production how sales more you a like out importantly, that organic And rates? is Or volume-versus-price that? out-performance past, that, your split still growth you hundred in your do points would of you Is to expanding? some I potentially markets. compare think demand key

Benjamin Gliklich

Yes. Thanks for the question, Steve.

in the semiconductor say created all fabricators. not we I into mostly were containers to, would but the our run at digits But backdrop high-value and the in to where was business. if growth Circuitry the a look actively the of volume quarter growth. And organic we're equal was price impact. mid-single operating, also you up out-performance quarter when at do volume of out digits. This business additives double I what would very see up was metal was contributor is a which our small we excess you taking have liter-sized There mix as the in Again, volumes pointed our in a the smartphone in circuitry most Electronics per of look se, positive particularly So market second wasn't were in from mix to driven. gamut we the

wasn't of magnitude. -- and order was grower packaging, to volume Our single-digit high front-end capability wafer-level in that order in a up that double-digit MSI by that

we probably are period a certainly is around to make had quarter outperforming a our of benchmarks that. one committed to, but of tough judgment as that sort we So call key excess in baseline,

Steve Byrne

Electronics. is computing couple of was computing and back, years AI sales recall driven of Where you do of maybe data combination power your I it more XX% roughly it's now? particularly and And in could And as computing power? by I think thought a more computing, this a storage go moves where

Benjamin Gliklich

hard question. single good again, on to it's assessment quarter. And a an it's a Yes, make

think well. that our demand these we to quarter, clearly, really could test a from of are I data perspective, right? and, sources contributing a disproportionately year. mix storage new full better this business So growth therefore, out growing But grew after

in large in by softer, broader boards server market. nicely, vehicles very electric was grew content a but grew Content nicely. automotive Our offset

So trough market to smartphone to the But the it vector broader clearly that us. And closer are runway smartphone still trend. electronics markets going will growth than markets in larger a they're going significant growth are as recover, for we're they long-term to to mix. because the be going growth market big significantly is contribute of we to got the to of be portion from it's to relative years a say disproportionate be I'd other several like and market.

markets vectors here are the ongoing an talked broader So from in and in electronics about. we growth growth ecosystem. the -- secular the just recovery

Operator

Your next from CJS. question the of Tanwanteng line from John comes

Jonathan Tanwanteng

do that, mix that of forward? does Electronics you in customers expand into logos expect And to business, on growth? you next year in or concentration Can the maybe X? after factor how drive mix how And legacy-versus-new going launches and that your and the Kuprion Power

Benjamin Gliklich

Thanks for an the point. question, John. It's important

So and Chinese vehicle successful of our also period expand far, in revenue, a both that's to both couple OEMs business OEMs. the and rather of of penetration in cycles, into have market, of pipeline and product Western terms opportunities. launched been historically And emerging vehicle but some of terms and thus life current into of electric longer done electric work concentrated lot more that our legacy in a importantly, we've was OEMs, Power Electronics the

global that broader diversifying to we're this very success, We've that portfolio chains. concentration so the technology traction great some gains big in decline is wins supply And and as had some going actively.

calling away ability I from think is on points vehicle to electric couple but forward. of that outperform a at an units complete complete a we're victory, a going to certainly success, what years And we're track.

but nearer-term that progress likely the grow, commercialization opportunities on copper to for business, management capabilities Kuprion traction. be the or and of we've So regard electronics. exciting technical the business, will opportunities not medium-term we EV supply expands. With from alternative we're vehicle not on that, in a a thermal They're significant impact very Kuprion's into so that can copper units opportunities as the great the They're broader actually to in of side, applications. are not got EV an active to electric perspective growing more circuitry be and going as metallization and are made the But substantial penetration offer the with power over chain near- of time, the active just circuitry die-attached set Over side market. copper. in Kuprion active We the and XX days more opportunities. past

Jonathan Tanwanteng

Thanks supply then you're strong little clarification. second expecting And demand, in like I bit deeper said to for the the smartphone drill prospects but a just among the smartphone half. bit for constrained seems Apple think It well. those stronger. comments that suppliers was they a end little that as I is you your knowing expect if concentration X higher the wondering the could square

Benjamin Gliklich

suggesting supply we the level half produce a EBITDA what high-end some growth, It's a good range comments surprise some We for talking it's smartphone is a question. single-digit not capacity how that range huge have Yes, is market year, constraint. that to in generic. lot between supply back electronics full regard versus year. or from full And the research asking unit for dispersion of of their talk OEMs the the accounts which chains the to they're about to that with dispersion there's for for low

exciting bullish is AI that's going and the In you've which very electronics capacity to in a for example. a that perspective, you're in see we capacity and the at for end But us. got constraint absorb excess leading-edge, it's smartphones, when supply so more And participate And long right, trend the volume come because it's disproportionately higher from near growth more to term, term, to an area. online, perhaps. from drive going going demand

so years. growth high-value for next And at to several it real points the

Operator

of the from comes question Duffy Sachs. next with Your Goldman line Fischer

Patrick Fischer

that best guess how back likely QX? be back midpoint split towards And the If QX that in more for we end EBITDA the half, or you the by the move gets higher in of implied half, that quarter? of $XXX would, is then range in the to if what's million

Benjamin Gliklich

question, for say, precision, guide. way for accounts right, Thanks I quarter. that phone quarter our forecast both really the million with I units consensus that October has September, balance in mobile the QX QX. split, if difficult the which third to the fourth would see about million QX the for into are think somewhere around ramping, is in $XXX the back $XXX and It's But And less that you'll consensus is Duffy. into to it the falling

Patrick Fischer

you And exclude metal price into back the year? then if you does the business, and of cost some of the do sequentially, think what contractual pricing pass-through half the

Benjamin Gliklich

Yes.

we deflation -- lapping see of -- So cost I fall away cost half to half. the don't deflation saw first the us back that through to starts starts the impact the in year-over-year

was it than the neutral cost in price so half closer to back should first in half. the be And

had of QX $X we about will savings think $X and million to lower metal and be ex in QX. QX, in number that material raw million I

Operator

from comes the question line of Mike next Leithead Your Barclays. with

Michael Leithead

some in wanted and like even seems margins pass-through. on some posted industrial, for numbers before there ask the high I you to electronics both of adjusting incremental quarter. the metal in pretty It

cost that that unpack help of mentioned? was you kind quarter? Can this deflation you mix? just So what Was just that drove the

Benjamin Gliklich

deflation, Sure cost thing. you mix It out. was rightly and as pointed

was than more cost deflation. it So mix

a business across segment, that's the X, a $X and within at the deflation vertical. favorable vertical said, offshore had and as both business other just So The from & basis. margin the Industrial So I outperformed the a in about Specialty higher right? And right? perspective, a also of we year-over-year very cost mix, million on then

we were hence, was lower So and margins higher-margin Solutions selling replaced certain that business, that -- less we of the metals certain surcharge Industrial and sell by in the chemistry. proprietary volume with commodity

and within also electronics AI. similar emerging like out-performance skewing growth high-value business mix that Circuitry from business, of a Within the saw vectors higher-margin like it's Circuitry both where these towards story verticals we

would. mostly a was, there we mix said story, of we price to some been deflation and it's And course, hold but able so as we've cost

Michael Leithead

the refresh There's AI-enabled sort phone lot Great. and to stories around a of bigger headlines do that And cycle. That's picture just helpful. can what smartphones and a of then question.

gen I think guess per about the But or expect trying smartphones improve? Element. next just of besides other you mix volume that I your you you think profitability your in I'm or to for story if any at devices, alluded to the prepared get unit content remarks. smartphone would margin to or tailwinds

Benjamin Gliklich

Yes.

coming second where the higher at the of demand value. a are I seeing new in think you're sources quarter that

to a you're you're right? get emerging should differentiated our where got margins we've refresh going from so cycle units as is to more And there. there to the point unique The proposition if value speculating pain solve margins. And a customer solutions, as applications get well higher higher you

So and that improvement you volume in mix both scenario. see should growth

Operator

Your of comes & King next David the from line with CL Silver question Associates.

David Silver

what X, that capacity applications you're you said are on up, up What focused cash Could priority strategic spend. the half guess, highest year, just and you capital. several time? CapEx of higher that capital working cited quoting highlight the My CapEx allocating this but is in for on, CapEx or here capital I income first would guess, sorry, you you're the flow discretionary I you free development question reflects spend I'm into investment CapEx directing down and but be But Ben, initiatives. is and spend progress initiatives discretionary from -- Slide cited to? the some discretionary net at expansion the is discretionary

Benjamin Gliklich

center for to its Electronics, where it capacity discretionary grow. a ballpark, prepared XX so, million it's this the a getting running capacity We're customers are the we're to Less, about our script really, which are our investing large, there, which has at any ample and we're footprint remarks. building capacity double bit or talked from high-leverage We're these one projects, customers but area for months sure can term not going investment in require I'm by there we've the in within support India, example. in and customer investing few in across only capital a is or not where is supply research because this margins and in a electronic a constrained little in the got customer capabilities very given fast-growth are and to build and $XX we is been areas Really, manage business our and across time. Yes. We're capacity huge past To dollar a proximity. pulling are we we doubling we a that that chain. used our innovation But -- building we're capacity, capabilities around there. -- we have us. were our over significant somewhat Power development support more close conclusion manufacturing that geography doesn't to

David Silver

just of And earnings. then of confidence? by and go new record for page specific couple with ahead". years like to a to to end be to you et technologies for been market release, cetera. Would overall growing call you of mean, a or would in a at have press you consumer gives give growing had What growing factors soft, going quote several surprises, that saying confidence What been if of company-specific And drivers first pick But development, your confidence I wave agree I'd you generally level. just out? the years -- you or I several it of record I capacity I'm has couple of electronics there's that you that the earnings the while that, the guess, "There's few transportation,

Benjamin Gliklich

for an overall thanks And right? And growth. subdued sort to on FX and taking at the of question, headwind. market cyclical both into Yes, before a on average million about consideration we The long-term talked the based sit is latest as closer track for year, record its here we than market industrial that's earlier best. secular ESI is today, guidance yet electronics trough question, $XX-plus it's recovery And David. on a EBITDA this

So here business very our we of place strategic recapture long-term always has benefit of the to and chain to demand are powerful are have growing conviction isn't the along supply in the see that we company the where new air between both be And put pockets high there demand say we really execution a going positioning from value sources for and But quickly. secular very and linear growth. way. and emerging growth these these pockets

the us the And just say Those electronics so conviction recovery benefit is in recovery market, the very the industrial starting in outlook also and see we're not see and to here on back the the to beginning to the starting we're And of that. of market, runway broader the which potential give counting in which we're that together half. positive. X things from the

these the the industrial getting And so calling market specific or of back demand will not we're seeing vectors. today, the of when the calling better. P&L magnitude electronics We're trend. But in get not strength to timing we're market emerging the

and those between the great, it's time. So X things, an outlook is exciting

Operator

remarks. session, concludes will Ben This back over closing conference now question-and-answer I Gliklich and for our turn the to

Benjamin Gliklich

we to day. of joining and forward the Have in morning, Thanks you very for a good many much seeing coming look and weeks. this days

Operator

call. conference today's you And Thank disconnect. this for concludes now you your participation, may and

Element Solutions (ESI) 30 Jul 242024 Q2 Earnings call transcript