Element Solutions, Inc. Aktie

Vice President of Strategy and Integration. Please go ahead.

Good morning, and thank you for participating in our third quarter 2026 earnings conference call. Joining me today are our CEO, Ben Gliklich; and CFO, Carey Dorman. In accordance with Regulation FD, we are webcasting this conference call. A replay will be made available in the Investors section of the company's website.

During today's call, we will make certain forward-looking statements that reflect our current about the company's future performance and financial results. These statements are based on assumptions and expectations of future events, which are subject to risks and uncertainties. We -- please refer to the earnings release, supplemental slides and most recent SEC filings on our website for a discussion of material risk factors that could cause actual results to differ from our expectations and predictions. Today's materials also include financial information that has not been prepared in accordance with U.S. GAAP. Please refer to the earnings release and supplemental slides for definitions and reconciliations of these non-GAAP measures to comparable GAAP financial measures.

It is now my pleasure to introduce our CEO, Ben Gliklich.

Thank you, Varun, and good morning, everyone. Thanks for joining. Element Solutions delivered yet another record quarter as we continue to benefit from favorable positions in our end markets, strong execution against our commercial and operational initiatives and the results of thoughtful, disciplined capital allocation.

Before discussing the quarter's performance, let me recap our decision to mutually terminate the proposed transaction with Solstice at the end of August. Our North Star Element Solutions has always been serving our customers and shareholder value creation. And following the announcement of this proposed transaction, we had constructive discussions with our investors and gained valuable insights into how they'd like us to pursue that North Star. Feedback is a gift, and we were fortunate to receive it. We work for our shareholders, and we value their input.

While we stand behind the strategic and financial merits of the Solstice transaction, it became clear that our shareholders value the stand-alone trajectory that we articulated in our May Investor Day. They wanted our team to deliver on our plan. They discounted alternatives, which introduced complexity and execution risk. The feedback we received was a vote of confidence from our shareholders, confidence in management, appreciation for the unique culture we've deliberately developed and enthusiasm for the portfolio of businesses we've built. Attributes that together outweigh the benefits of enhanced scale or synergy capture.

So going forward, we're doubling down on the culture of entrepreneurship, operational excellence and prudent capital allocation that has brought us our historical success. We're committed to continue investing behind our businesses, both organically and through bolt-on M&A.

Our Electronics segment this year is on pace to deliver the same amount of adjusted EBITDA that our entire company generated last year. We are increasingly a critical enabler in the electronic ecosystem and becoming even more so as we introduce and acquire new capabilities. To keep up with the rapid pace in our markets, we must evolve and we're working to accelerate our development cycle time, deepen our technical engagements with key customers and capitalize on the many opportunities afforded by the breadth of our portfolio. Our confidence in an independent path forward is reinforced by yet another consecutive record quarter and corresponding significant increase in our full year guidance announced today.

Our third quarter results were outstanding. Organic growth remained robust in Electronics and the Specialties business navigated challenges related to materials inflation and uneven demand dynamics. Our results were again enhanced by strong contributions from recent acquisitions, which position us well in attractive new market adjacencies that are seeing robust growth. Activity accelerated across our supply chain in support of the ongoing AI infrastructure build-out. Technical requirements in data center hardware and other high-performance electronics continue to increase which has driven our offering of critical enabling solutions across thermal management, power density and advanced packaging applications to name a few.

We're seeing volume growth in the highest-value categories across our end markets. from leading-edge semi and high-end circuit board fabs to device assemblers and a strong pull for innovation to enable greater levels of device performance and manufacturing yield. This dynamic has led to four straight quarters of double-digit organic sales growth and meaningful ex-Metals margin expansion in our electronics business. Our profitable growth has allowed us to increase investment in people, technology and plants, which we expect will reinforce ESI's role in critical emerging applications.

Our customers are investing heavily to build capacity ahead of surging demand. We, in turn, have built and continue to build additional manufacturing capacity for several high-growth product lines, including incremental production capability for engineered preform and critical thermal interface products as well as local laboratory footprints for electronics in India and Southeast Asia. Where investment in Southeast Asia was intended to derisk geopolitical concerns two years ago. It's now become much needed additional capacity for our customers. Meanwhile, our business in China remained very strong, growing 30% in the quarter.

We've also made substantial investments in financial commitments to scale manufacturing of our Coperion active copper products focused on solving several emerging customer pain points around thermal management, power delivery and plating copper on challenging substrates. Our development partners are exceptionally enthusiastic about this offering, and they're progressing towards high-volume manufacturing themselves, progress evidenced by the two customer qualification milestones we achieved in the third quarter. These qualifications from two leading technology providers to the data center ecosystem support our strong conviction in the market opportunity for active copper and our ability to establish incumbency with this exciting technology.

Beyond these investments in organic growth, we continue to reap the fruits of our inorganic strategy. The integrations of Micromax and EFC are going well, and both businesses contributed meaningful adjusted EBITDA growth in the quarter. Our formula of operational excellence and prudent capital allocation drove a 22% increase in adjusted EPS this quarter. Beyond M&A, when we see compelling value in our own shares, we can act opportunistically given our substantial existing share repurchase authorization. We did so this quarter, reflecting our confidence in the business from here.

Carey will now take you through our third quarter business results in more detail. Carey?

Thanks, Ben, and good morning, everyone. On Slide 3, you can see a summary of our third quarter financial results. We delivered record quarterly revenue, adjusted EBITDA and adjusted EPS. Organic net sales grew 13% and constant currency adjusted EBITDA increased 29% year-over-year. Electronics organic net sales growth of 18% was once again broad based. Each of the segment's verticals grew organically by double digits, led by our semiconductor business, which we 24% in the quarter. Adjusted EBITDA margins, excluding pass-through metals, improved 50 basis points year-over-year to 28.2% this quarter.

The year-on-year improvement was primarily driven by product mix within the Electronics segment, where organic growth in higher-value product lines to solid underlying incremental margins in the upper end of our 30% to 40% target range as well as strong performance from Micromax. Softer margins in the Specialties segment were the result of an equipment failure that shut down a large offshore customer impacting sales in the Energy Solutions business as well as price cost timing in Industrial Solutions. We expect these dynamics to abate through year-end and into 2027. Both segments also saw margins impacted by higher allocations, primarily from above-target incentive compensation accruals.

On Slide 4, we have additional detail on organic net sales growth. In Electronics, demand remained particularly strong across semiconductor packaging, advanced PCB chemistries, engineered assembly materials supporting data centers, and power electronics. Reflecting the strength in our markets, industry forecast for PCB volume growth in 2026 have increased over the course of the year from around 6% in December to over 10% today. This an acceleration from 2025, and we continue to outperform the market.

Semiconductor Solutions organic net sales grew 24% with improved order patterns for power electronics products and growing momentum in thermal interface materials for high power consumption applications such as AI GPUs and CPUs. Demand also continues to be strong for advanced packaging solutions from Asian OSATs participating in the market. Revenue growth in this business was magnified this quarter by the year-over-year increase in precious metals prices.

Our Assembly Solutions business grew 16% organically. Demand was strong for higher liability side pace in Asia, which are benefiting from growth in AI power supply and for preformed products for data center applications. Engineered preform products such as True Height spacers that control thermal warpage on larger chip assemblies continue to gain traction in leading-edge applications, driving acceleration in our capacity expansion plans for next year.

Circuitry Solutions grew 16% organically, benefiting from continued demand for board metallization solutions tied to AI infrastructure and high-performance computing. We've supported customers as they add capacity and are seeing traction with technologies that are critical to increasingly complex, high layer count architectures.

Micromax contributed nearly $140 million to reported sales in the quarter, roughly 2/3 of which is related to metals. The business continues to perform well ahead of plan and is growing revenue and adjusted EBITDA significantly. We remain very pleased with these results as well as the response from customers and the progress of the integration.

Now turning to our Specialties segment. Industrial Solutions grew 3% organically in the quarter due primarily to price increases tied to raw material cost inflation. Global volumes were roughly flat with some modest pickup in automotive in both Asia and Europe, while other industrial end markets remain soft. This business has been restructuring aspects of the go-to-market and supply chain strategy over the last year and we remain focused on strong operational execution and high-quality offerings that meet the evolving needs of customers.

Our Offshore Solutions business declined 13% organically. Primarily impacted by certain project delays and the aforementioned equipment failure at a large customer. We expect this situation will improve in the coming months as that customer site has already come back online. Overall, market conditions and pricing dynamics remain favorable for this business.

Looking forward, we are also excited to announce that we won business on our first and the industry's first deep offshore carbon capture installation. This account is a small contributor today and a truly nascent market, but may have a bright future.

Finally, EFC gases in Advanced Materials contributed $23 million to revenue this quarter, a 45% sequential improvement from last quarter and a 19% increase year-on-year. Demand within EFC's core semi manufacturing, satellite and electrical infrastructure applications is strong, albeit lumpier than many of our other businesses. And the team executed nicely this quarter. with new business wins at healthy margins that are above segment averages. We continue to see EFC growing wallet share with existing semiconductor and space customers and winning new qualifications in both. We broke ground on a new facility for this business in Texas late in Q3, which demonstrates our expectation of future growth.

Slide 5 addresses cash flow and the balance sheet. Adjusted free cash flow for the quarter was $135 million, a material sequential and year-over-year increase. This result reflects disciplined inventory management despite increased volumes and continued metal price volatility. Our cash flow generation is typically more second half weighted, and we expect a similar seasonality this year. Q4 cash flow should also be strong but are unlikely to match Q3 as we ramp certain capital projects and build stock for several capacity expansions and footprint optimization efforts. We invested $30 million into CapEx this quarter, bringing the year-to-date investment to $83 million.

As we've discussed, we are accelerating investment in high-value product areas such as Kuprion and thermal interface materials for hyperscalers, while at the same time moving forward on existing plant consolidation projects in our industrial solutions supply chain. We now expect CapEx for the year of roughly $110 million, which still constitutes less than 3% of expected full year sales. These projects are tied to major customer technology road maps and come with attractive paybacks that should support long-term earnings growth.

Turning to the balance sheet. Our net leverage ratio at the end of the quarter was 2.7x on a pro forma basis. including full contributions for Micromax and EFC. We allocated almost $60 million of capital to shareholder returns in the quarter between our dividend and our opportunistic repurchase of roughly 1.1 million shares. As we entered 2026, we committed to leverage below 3x by year-end, and we are already there despite ramping CapEx and buybacks. We have capacity to continue to deploy capital should attractive opportunities become available.

And with that, I will turn the call back to Ben. Ben?

Thank you, Carey. Q3 was a great quarter. Our team didn't lose focus despite the noise around the terminated Solstice transaction. We maintained our high standards for execution and performance throughout. We emerged better positioned strategically and with greater clarity and conviction in our path forward. Each of our businesses has identified opportunities and built strategies to deliver substantial profit growth through investments in people and capabilities over a multiyear time frame. We pride ourselves on customer centricity.

And on this front, we're seeing the benefits of persistent investments in technical service capabilities, technology road map exchanges and a focus on customer pain points, where we can improve product performance, or customer productivity and yields. Underlying demand in the high-end electronics market remains strong and the incumbent positions we've established in the fastest-growing, highest value niches of these markets should continue to serve us well. As a result, we're raising our adjusted EBITDA guidance to approximately $720 million for the full year.

Our implied fourth quarter results assume a continuation of AI-driven electronics investment normal seasonality and continued sequential acceleration in EFC performance. Our guidance translates to 2026 adjusted EPS growth of north of 20% on a full year basis based on current exchange rates, and stable metal prices. We have a wealth of opportunities in front of us, and we want to move faster with increased focus and urgency. To accomplish this, we must keep pushing decision rights deeper into the organization to improve customer responsiveness and direct our investment to the right commercial resources.

In that context, we're evolving our organizational structure in the Electronics segment to further decentralize by forming more autonomous business units aligned with our customers, all of which will still operate under the strong McDermott Alpha brand. This morning, to support this evolution, we're announcing an organizational change. Our electronics business units, in addition to our specialties businesses, we'll now report into Matt Liebowitz, who is assuming the role of Chief Operating Officer of Element Solutions. That's been a key part of the team at Element Solutions for over a decade, and will be a terrific partner to our business unit leaders.

He has deep business knowledge and relationships, having helped build our portfolio in his role as Head of Strategy and Corporate Development over the years, and is the right person to serve in this critical role as a thought partner and coach to our general managers. Rick Frick will become an adviser to ESI and our Electronics businesses going forward. and will continue to benefit from his expertise, experience and network. Carey Dorman has also been my partner here for over a decade, will become President of Element Solutions, in addition to his role as CFO, and with oversight of all of our business functions.

Matt, Carey and I collectively will work with our business unit and functional leaders to ensure that they're working towards the right long-term objectives that they have the resources they need to win and they are held accountable to their goals. Our business units will have even greater autonomy. Our Ethos has always been to empower our people to have a maximum impact, and this is one step further in that direction. This autonomy will make us more nimble, and that's essential to keep up with the accelerating rate of change in our markets.

In Electronics, we'll continue to maintain our strong unified brand and the ability to offer the breadth of our portfolio to our largest strategic accounts. Element's success to date has been driven by repositioning our company and its resources, primarily our people regularly to get ahead of the future needs of our markets and today's organizational change is another example of this. On the topic of people, I'm particularly proud of our team this quarter who navigated a noisy 90 days to deliver our best quarter ever.

So for now, let me conclude once again by thanking all of our stakeholders for their continued support of Element Solutions and especially our team who continue to deliver exceptionally for our customers and shareholders. And with that, operator, please open the line for questions.

Thank you.

[Operator Instructions] Your first question is from the line of Mike Harrison with Seaport Research Partners. Please go ahead.

Congrats on the nice quarter. So the first question I have is on the Circuitry Solutions business. It really is looking like that business maybe showing some acceleration, was hoping you can give us a little more color on how you see the content opportunity expanding as you get into more multilayer circuit boards compared to kind of your standard PCB applications. And just wondering, are there any factors that you see in the market right now that could slow down some of the growth that you're seeing in that advanced circuit board opportunity?

Yes, sure thing. It's a good observation. Our circuitry business is performing exceptionally well. That market overall is substantially outperforming expectations on a volume basis. entering the year, as Carey said in the prepared remarks, expectations for circuit board volumes were about 6% growth in 2026, and the latest forecast has been bumping up against 10%. And so overall, that market is growing, and that's despite the fact or accelerating, and that's despite the fact that the consumer electronics market is quite soft at the moment.

So all that growth and then some is coming from the data center market. And those boards are the highest end boards that are being produced today, multilayer, very complex and we've got great capabilities to serve that market. And so our outperformance in circuitry is substantial, more than 500 basis points relative to the expected market growth on a year-to-date basis, and that's driven by our penetration of that. technology based on really solid work by the team over the past several years. We expect that to continue.

All right. And it looks like your incremental margin this quarter was pretty strong. I think if we stripped out maybe some of the higher incentive comp, just wondering if you can help us understand how sustainable the strength in incremental margin could be? And maybe talk about some of the drivers that you see still playing out from a margin standpoint?

Yes, Mike, I think it's a great call out. When you take out the incremental incentive comp accruals, which had an impact of more than 100 basis points across the business year-over-year, we saw really healthy incrementals in the mid-40s for the whole business or the 50s for the Electronics business. There are a number of things that are playing into that. And I think most importantly, it's where the growth is coming from. We're continuing to see growth, particularly in Electronics in the higher-end parts of our business as releasing specific customer needs and on fewer of our ecosystem competitors can meet those needs. That is sustainable from our perspective.

On the Specialties side of the business, we are working hard in an environment where volumes are relatively muted to make the business better. And even on that business when you take out these comp accrual and some of the onetime or sort of transitory impacts from raw material inflation, we're seeing underlying margin expansion there, too. So we guided that the Investor Day at 30% to 40% incrementals. We're seeing better than that now. But I think in that high end of that range is something that we expect to see continue into next year.

Your next question comes from the line of John McNulty with BMO Capital Markets.

Congratulations to Carrie and Matt on what looks like a nice solid step for them. And I guess my first question is to that. I guess what precipitated the change. You had an Investor Day early this year. Obviously, nothing had changed at that point. Is it the pace of the growth is just that much more robust where you feel you need to kind of make these kind of changes? Is it just a follow-up to the Solstice kind of change or a shift. Like I guess help us to think about what's driving that and the timing for it right now.

Yes. So the evolution in our Electronics business has been one of standing up best practices, which required a really strong central pillar of the business adding new capabilities. And we brought in a great set of leaders on a functional basis to help us build those capabilities and standard processes. But we're a dynamic organization. Our Electronics business has more than doubled over the past several years. We have those best practices ingrained in the business. And the autonomy that we're driving into these discrete business units will allow for them to move faster, which is what our customers are asking for from us and from the supply chain.

And so this structural change will turn the analogy of the tanker to the speedboat. So I don't think we ever were a tanker. But we're breaking into smaller, faster, more nimble speed boats on a business unit perspective, more customer aligned without sacrificing those best practices without sacrificing the strength of our brand. And so this is a logical step as the business has scaled and in response to customer feedback across the supply chain to partner with them and move faster.

Got it. Okay. No, that's helpful color. And then maybe just Speaking to the cash flow and balance sheet. So really solid 3Q results or numbers. And I understand maybe the cadence that we won't see quite as much in 4Q. But the balance sheet kind of back to even below your kind of year-end target. So when you think about cash uses going forward, I know in the past, you've kind of liked to add on bolt-ons, roughly two per year kind of seems to be the cadence. At the same time, your valuations come in under a reasonable amount of pressure over the last whatever, three to six months.

I guess how do you think about the prioritization of cash use now given the cleaner balance sheet? And should we assume it's kind of business as usual? Or do we maybe shift away a little bit temporarily from the from the M&A side and maybe a little bit more into the buyback, I guess, can you help us to think about that?

Look, we've always been opportunistic around capital allocation, whether that's buying our own shares or outbound M&A. We're in a really strong position from a portfolio perspective that there's nothing we need to own, but we've got a great footprint and brand where the things we add is they're quality enhancing. We only add quality-enhancing businesses are better inside of our business than outside. And so our framework for capital allocation is unchanged today. You saw we were on the front foot buying shares in the third quarter. Our balance sheet is healthier than we expected it to be at this point in the year given the earnings trajectory. And so we're on the offensive.

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

I wanted to ask on Kuprion. It seems like some of your incremental CapEx is targeted there. Can you talk about what you're accelerating? And just remind us kind of the milestones and time lines of some of your expansions in the next couple of years, please?

Yes, absolutely. So Kurion is a great story as evidenced by the two qualification milestones achieved in the third quarter. So those are two customers, really high-tech leading-edge customers who have qualified active copper for their high-volume manufacturing. And so that's the precursor to the revenue ramp that we expect next year. Our first site is producing in Fremont, California. Our second site is underway in Connecticut and the plans for the third site are also underway. And so the supply chain is not quite caught up to where we see demand going, but we will be in a position call it, late '27, early 2028, and we'll have multiple sites supplying multiple customers who are very eager to integrate active copper into their manufacturing processes.

It is on track with what we had committed to, maybe even ahead when you think about the medium-term horizon. This business has tremendous potential and is going to be contributing a material EBITDA when we get into 2028 for sure.

If I could just ask quickly, just on EFC. I mean, I think you noted some sequential acceleration and growth was pretty strong there in the quarter. What's driving that?

It's a lumpier business than some of our others, just given you get big orders tied to certain data light launches. The core businesses around semiconductor and electrical infrastructure are also growing really nicely. So the cadence of earnings is something we're still wrapping our hands around, but the growth in this business that we expected is delivering and the outlook is probably better, frankly, based on the pipeline we've seen. And we're adding capacity there as well. And so that's a contributor to CapEx in 2026 and into 2027 in response to really strong customer pull.

Your next question comes from the line of John Roberts with Mizuho.

Congratulations on the promotions, more work, same day. During the quarter, Well, actually, the temperatures of these latest ships are starting to warp some of the plastic circuit boards. During the quarter, Corning was discussing the last quarters potentially replacing some of the plastic. I think one of your competitors announced some product lines for plating circuitry on the last. Could you talk a little bit about that opportunity and how ESI is positioned? .

Yes, it's a good call out. again, the pace of innovation in the supply chain is accelerating and folks are working with new materials. And we're at the table providing solutions to enable those new materials. So our circuitry portfolio has very solid solutions for plating on glass through glass dies. And active copper is also one of the leading candidates to solve that problem for the supply chain. It's a big opportunity for us. We're very, very well positioned across the wafer level packaging and circuitry businesses.

Do you have a sense for when first introduction might be?

Look, the idea of glass course has been in the ether for several years. and it's been pushed out a few times. It does seem to be gaining traction based on our R&D projects and applications development projects. I'm not counting on it becoming a material volume driver in the near term, but over a medium-term horizon, call it, three to five years out, I think it could be quite substantial.

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

Great. Ben, can you just offer some insights in terms of kind of the year-end '26 and into '27 trajectories for the volume side of Microbax as well as semi. Obviously, it seems like things have generally been trending better than expected throughout the year. But I'd love to get kind of your insights on how you're thinking about the volume side of that versus the price of the product mix, especially like Micromax and just how you're delineating all those details in terms of how you think about growth for the next six to nine months?

So thanks for the question. The first comment is really no dimunition or erosion in demand. Clearly, there's some volatility in the capital markets and headlines. But from a commercial market industry perspective, we see no diminution over the past several months and Q4 is off to a solid start. By and large, with the exception of metal price volatility in all of our businesses, the growth has come from volume primarily. And with the exception also of Micromax, where we're seeing an uplift in higher value volume and a little bit of a diminution in, I'll call it, lower volume, lower value volume that skews towards automotive applications.

So it's a volume story and on the electronics side and everything about Micromax. And that's what we would continue to expect through Q4. Really nothing material changing in terms of the demand drivers for these businesses.

Got it. And just circling back just for a detail on John's question. When you think about the M&A side of it, are you primarily assessing in your comments here, you basically said your teams haven't necessarily missed a beat. When you're looking at that, are you looking at adding kind of another tendential pillar? Or is it something or all the assets that you're ongoingly assessing primarily augmenting something that is something for assembly or circuitry or anything like that? Just I would love to hear your perspective on strategy within that a little bit in further detail.

Yes. So the M&A criteria is unchanged. We want to back our businesses point of emphasis in electronics, buying businesses that are better inside of our company than outside, meaning there's some synergy and make our company better. meaning they enhance the overall quality of the portfolio, they enhance our value proposition to our customers that create opportunities for our people and they enhance shareholder value. So we're looking at electronics assets primarily those could be consolidating markets and those could be adding new capabilities that brought in our offering to our customers, only high-quality businesses that really fit within what we do today.

But there aren't an enormous number of such assets. We're a great buyer of them, and we're in a good position to prosecute those transactions, of course, those opportunities don't come around every day.

Your next question comes from the line of Matt -- do with Bank of America.

This is Fabian Humanas on for Mac. Level setting on 4Q, the $720 million EBITDA guide includes around $7 million of January Micromax contribution from before the close of the deal. So does your 4Q guide imply roughly $176 million versus the $183 million we're seeing consensus is reflecting. And also, with your customers still adding capacity, is this a step down in Micromax giving back on silver driven pricing or just conservatism?

So yes, just to be clear, that $175 million, $176 million is a reasonable number to back into in the slides as well. We typically see sequential softness seasonally from Q3 to Q4. So the last two years was around $10 million to $15 million. This guide sequentially implies that same $15 million. There's nothing that we're seeing in terms of underlying demand it's really just operating days in some of the businesses that tend to shut down as we get to the holiday season and a little bit of conservatism. But I think there's nothing structural from a demand perspective or assumptions around pricing in any of the businesses.

Your next question comes from the line of Pete Osterland with Truist Securities.

So first, I just wanted to ask about your outlook for electronics momentum to continue into 2027. I guess could you just give some more color on the visibility you have into next year? Is it supported by customer commitments or order patterns, new product ramps and Also, just how broad is the strength you're expecting outside of the AI infrastructure market?

Thanks for the question, Pete. We like to say that the world doesn't change from December 31 to January 1, right? And so the trends that we see through Q4 should continue through Q1. And as we said earlier, we really see no evidence of an erosion or a diminution in demand over the past several weeks. The business is unit driven and the demand driver for those units is more tangible or longer term today as we've seen this transition to B2B demand from B2C demand than it's been in the past. Our customer order forecasts have only accelerated over the course of the year. Outlook for the industry from market research has only accelerated over the year. And so it is more AI-driven than consumer driven. Some of the weakness in consumer is driven by the strength in AI bear in mind. But as we sit here today, the outlook, the capital plans remain robust into 2027.

Okay. Great. And then just as a follow-up, I wanted to ask on the Specialties segment. I just wanted to break down the organic growth you saw in industrial for the quarter. I guess, first, how much would pricing have had to go up to fully offset the cost inflation you saw in the quarter? And then maybe if you could comment on what volume growth was in the quarter and what you're expecting near term for demand in that business?

Sure. So First, on the price cost dynamic there. We saw we took pricing that grow about 3% -- or 3% to 4% of revenue growth. volumes across the business were overall flat. I'll talk about the mix of that in a second. That offset almost all of the price inflation we saw maybe $1 million or $2 million of wiggle between cost and price that we should continue to pick up. So you just saw the percent impact on margin there as opposed to really dollar profit dollars. When you think about volumes, is a tale of two business, sort of two end markets and a regional mix.

So automotive generally was slightly positive volumetrically and you see that in the end market as well, where our general industrial construction markets were down more materially. And then again, we saw some strength in the Asian business and some weakness in the European business. Those are trends that are sort of following the broader macros. And we expect that more of the same, frankly, into Q4.

Your next question is from the line of John Tantan with CJS Securities.

Congrats on the quarter and outlook, and it's good to be working with you guys a little longer. I was wondering if you could talk a little bit more about how you expect your performance to track against the data center end markets through the year-end and into next year? I think earlier, you mentioned you've been outperforming the volume growth in circuitry by 500 basis points or more. Does that spread remain consistent as we go forward? Or does it expand with new products and share gain? Or does it contract in your opinion for any reason?

Our guidance or rather our long-term expectation is for our business to outperform end markets by a point or two. We're outperforming that today. I'd like to think it's sustainable, but for the sake of conservatism and not knowing where the sources of growth will be over the long term, I still think that 2% outperformance is a reasonable baseline for us to shoot for to commit to rather. But insofar as the primary driver of growth in the near term is the data center market, given our position within these really high-end circuit boards. Our outperformance should continue to outpace that target.

Okay. Great. And then Cary, just if you could disclose how much your energy customer that had the outage in the quarter? How much does that impact the business? And how does it impact the guidance this year? And when do you expect the full recovery? .

Yes. So a few million dollar impact in the quarter. As we mentioned, I think in the prepared remarks, that customer is already back online and working through product that they had of ours. So we expect to resume selling to that customer again most likely in Q4. And so you should see the full recovery of that by Q1 of next year.

Got it. And that $2 million was EBITDA or revenue? .

That's a revenue impact.

Your next question is from the line of Alex Yefremov with Barclays Bank.

I apologize for long-winded question. It's a bit more big picture for you, Ben. Your growth has fairly inflective this year, but it seems like there's also a lot of investment on the part of your customers into advanced packaging and another PCB capacity, et cetera. So how should we think about where you are in that growth cycle? Are we still very early in the major inflection is still ahead are we in the middle of it? What do you think?

Yes, it's a good question. The pace of innovation is accelerating we're benefiting from a ramp in customer capacity, which we expect to continue. Leading edge technologies are still representing a rather small percentage of overall volume. And that's where the investment is going. And we should participate disproportionately in those leading-edge applications. The law of large numbers also begins to apply and so our growth rate, if it maintains at levels that we've seen this year is adding far more dollars, right, simply put.

So I think if we can sustain -- in order to sustain this level of growth, we'll need to see the capacity investments that we are seeing persist for several years. And the road maps from our customers are supporting that. If anything, they're supporting incremental investment relative to what they invested today. So we're incredibly optimistic. The outlook for this business has only gotten better since our May Investor Day.

And if I may a follow-up, I'm not sure if you already talked about your used packaging growth rate. If you could just give us some pointers there. And also how did your HDI sort of board business grow this quarter?

Yes. So advanced packaging sales sit in both our circuitry business and our semi business and sales into those applications certainly exceeded the overall growth rate for those businesses. in the quarter. And then the HDI market, that's what I was talking about these really high-end circuit boards that are serving data center applications. And again, if you think about the consumer electronics market being down year-over-year in our circuitry business being up 16%, you can extrapolate that we're seeing north of 20% growth in those applications.

Your next question is from the line of Laurence Alexander with Jefferies.

I just wanted to flesh out one of the comments you made earlier about the pipeline you're seeing in terms of investments from your customers and visibility. When you look out to 2028, do you see any factors that would make 2028 a more difficult year than 2027. It sounds like you'll actually have a net acceleration as an initial bias based on both your investments and what your customers are giving you interest on their project time lines. But can you just give your initial thoughts on that?

Yes, it's a fair observation based on the order patterns or rather the industry forecasts for capital and fab capacity, right? And so is that if that capital is invested, the business should continue to accelerate into 2028. For us, that's enhanced by Kuprion which should be a much, much bigger business by then. On the other hand, we're unit driven. And as we saw this year, order forecast change. This year, they changed for the better. there's reason to believe that can continue. But we've seen that change in the past. So I'm not prepared today to talk to 2028 demand.

I'm comfortable outlining strength exiting 2026 and well into 2027. That outlook is much more firm and very solid.

This concludes our question-and-answer period. At this time, I will now turn the call back to CEO, Ben Gliklich for closing remarks.

Excellent. Thank you, and thanks to everybody for joining.

Good morning, ladies and gentlemen, and welcome to the Element Solutions Q2 2026 Financial Results Conference Call. [Operator Instructions] I will now turn the call over to Varun Gokarn, Vice President of Strategy and Integration. Please go ahead.

Good morning, and thank you for participating in our second quarter 2026 earnings conference call. Joining me today are our CEO, Ben Gliklich; and CFO, Carey Dorman. In accordance with Regulation FD, we are webcasting this conference call. A replay will be made available in the Investors section of the company's website.

Before we begin, I want to remind everyone that our announced merger with Solstice Advanced Materials remains subject to shareholder and regulatory approvals and customary closing conditions. As such, we will be limiting our comments on the proposed transaction to what has already been made available in public filings and will not be taking questions about the transaction.

During today's call, we will make certain forward-looking statements that reflect our current views about the company's future performance and financial results. These statements are based on assumptions and expectations of future events, which are subject to risks and uncertainties. Please refer to the earnings release, supplemental slides and most recent SEC filings on our website for a discussion of material risk factors that could cause actual results to differ from our expectations and predictions.

Today's materials also include financial information that has not been prepared in accordance with U.S. GAAP. Please refer to the earnings release and supplemental slides for definitions and reconciliations of these non-GAAP measures to comparable GAAP financial measures.

It is now my pleasure to introduce our CEO, Ben Gliklich.

Thank you, Varun, and good morning, everybody. Thank you for joining. Before we review this record quarter, I'd like to reiterate our rationale for the announced agreement to merge with Solstice Advanced Materials. This proposed transaction unites our complementary competencies to better meet customer demands for scaled, broad strategic supply partners while also increasing avenues to prudently invest our cash flows for growth and unlocking compelling synergies.

Together, we stand to build an even stronger Electronics portfolio across chip and PCB fabrication, packaging and assembly while accelerating investment in the commercialization of new advanced materials and other growth priorities. We will have a broader, highly differentiated value proposition in thermal management and front-end copper interconnect formation. The combined company will be a market leader in profit growth and cash flow generation with multiple high-growth businesses.

Finally, the over $180 million in cost synergy potential is real and actionable with clear additional upside over time. Integration planning has begun, and we're assembling a joint team of leaders from both of our businesses to ensure the organizations are integrated thoughtfully, and we fully capture the strategic and financial promise of the combination. Carey will lead the effort on our side, equipped with deep knowledge of our businesses and processes as well as experience successfully leading many similar exercises over his tenure at Element.

Our North Star at Element Solutions has always been shareholder value creation, and we've had a robust dialogue with our investors since this announcement, and we'll continue to listen intently to their feedback. We work for our shareholders and value their input on important decisions such as this.

As today's results show, our organic path has tremendous momentum and combining our business with Solstice should provide an incremental lever to deliver greater value than we otherwise would have. The stock's reaction to the announcement has been disappointing, and both ESI and Solstice recognize the need to show from a cultural as well as operational perspective that we can execute against this significant opportunity. The first test of that execution will be integration. And together with other leaders from ESI and our Board, I'll be very focused on working to ensure this integration is planned and executed to our standards for excellence and delivery.

Now turning to our second quarter results. Element Solutions posted a record quarter as organic growth accelerated in our Electronics portfolio and the Specialties business continued to deliver bottom line growth despite a mixed backdrop. Our results were enhanced by strong contributions from our recent acquisitions, which are performing very well.

Overall, these results demonstrate the ongoing success of our strategy to penetrate the highest value, fastest-growing subsegments in our addressable markets and are a testament to years of work by our teams, collaborating across labs, manufacturing sites, applications facilities and alongside our customers at their locations. We're growing with our customers increasingly as a partner working together to address the most pressing technical challenges.

There are significant opportunities for our teams to improve value and use manufacturing processes, particularly as pockets of the electronic supply chain have become constrained relative to accelerating demand. In the second quarter, we delivered double-digit organic sales growth for the third quarter in a row and margin expansion when excluding the impact of pass-through metals. Importantly, our profitable growth is happening alongside increasing investment in people, technology and plants to support the future.

Sales in our Electronics segment grew 20% organically as activity accelerated across our supply chain in support of the ongoing AI infrastructure build-out. Technical requirements in data center hardware and other high-performance Electronics continue to increase, and our business provides critical enabling solutions across thermal management, power density and advanced packaging applications to name a few.

We're seeing volume growth in the highest value categories across our end markets, from leading-edge semi and high-end circuit board fabs to device assemblers and a strong pull for innovation to enable greater levels of device performance and manufacturing yield or throughput. This dynamic drove double-digit organic net sales growth in each of our Electronics verticals.

As we discussed at our May Investor Day, we're making investments to meet the increasing demands of our customers, adding additional manufacturing capacity for several high-growth product lines and increasing our laboratory footprint and innovation resources to remain on the leading edge. One of our largest focus areas has been Kuprion, where we're working to commercialize a differentiated new technology to solve several emerging customer pain points around thermal management, power delivery and plating copper on challenging substrates.

Our development partners working with this material are incredibly enthusiastic, which is evident in a growing commercial pipeline. We're actively sampling products from our first plant to qualify it through our customers, and we have high conviction in the opportunity in this market and urgency to establish incumbency with this technology. Over the past quarter, we've made plans to increase throughput at our initial plant and increase the scope of our second site, which will be located nearby in California.

Taken together, our capacity outlook for year-end 2027 is higher than it was entering the quarter. Beyond investments in organic growth, we continue to demonstrate the returns of prudent capital allocation into attractive adjacencies that bring value to our customers. The integrations of Micromax and EFC are going well. Both businesses are performing ahead of our plans for this year and contributed meaningful adjusted EBITDA growth in the quarter. It was both operational excellence and prudent capital allocation that led to the 27% increase in adjusted EPS we delivered in the second quarter.

Carey will now take you through our second quarter business results in more detail. Carey, please?

Thanks, Ben. Good morning, everyone. On Slide 3, you can see a summary of our second quarter financial results. We delivered record quarterly revenue, adjusted EBITDA and adjusted EPS. Organic net sales grew 15% and constant currency adjusted EBITDA increased 33% year-over-year. Electronics organic net sales growth of 20% was broad-based. Each of the segment's verticals grew organically by double digits, led by our semiconductor business, which grew 31% in the quarter.

Adjusted EBITDA margins, excluding pass-through metals, improved 120 basis points year-over-year to 27.8% this quarter, which was in line with the first quarter despite significant sequential non-metal raw material inflation. The year-on-year improvement was primarily driven by product mix with organic growth in higher-value product lines and partially offset by inflation in our Specialty segment as well as continued OpEx investment to support growth initiatives and fund above-target incentive compensation.

Building on that last point, if we exclude the above-target component of incentive compensation accruals in the quarter, driven by our outperformance relative to plan, OpEx in the second quarter would have been more than $10 million lower, and adjusted EBITDA margins would have been nearly 30%, which has been a long-term target for us.

On Slide 4, we share additional detail on the drivers of organic net sales growth in our 2 segments. In Electronics, 20% organic growth was driven by sustained investment in AI infrastructure and other high-performance computing applications. Demand remains particularly strong across semiconductor packaging, advanced PCB chemistries and engineered assembly materials supporting data centers and Power Electronics.

The backdrop remains softer in consumer and automotive markets, but this was more than offset by strength in AI-related applications and continued customer investment in next-generation technologies. Semiconductor Solutions organic net sales grew 31% with improved order patterns for Power Electronics products and growing momentum in thermal interface materials for high power consumption applications such as AI GPUs and CPUs. We also saw strong and growing demand for advanced packaging solutions from OSATs in Asia.

Revenue growth for the product within this business was magnified in the quarter by the substantial year-over-year increase in precious metal prices that are inputs to many of these solutions. The Assembly Solutions business grew 18% organically, supported by broad demand for high reliability solder paste in Asia and further enhanced by growth in engineered preform materials used in data center applications.

The Indian market continues to show robust growth for Assembly as Electronics manufacturing supply chain diversification continues. Circuitry Solutions net sales improved 15% organically, benefiting from continued demand for metallization solutions tied to AI infrastructure and high-performance compute. We are supporting customers as they add capacity and are seeing traction with technologies that are critical to increasingly complex PCB architectures.

Finally, this business is also benefiting from continued growth in Southeast Asia, where we have a strong and expanding presence. Micromax is not included in our organic net sales growth calculation, but contributed approximately $130 million to reported sales in the quarter, roughly 2/3 of which is related to metals. The business continues to perform well ahead of plan and is growing revenue and adjusted EBITDA significantly on an ex metals basis. We are very pleased with these results and the progress of the integration.

Turning to our Specialties segment. Industrial Solutions grew 3% organically in the quarter due to a modest return to growth in European industrial markets early in the quarter and from global surcharges and price increases tied to rising raw material inflation. This business has been restructuring its go-to-market and supply chain strategy over the last year. We are happy to see the strong execution beginning to play out. Our Offshore Energy Solutions business grew 1% organically, slower than Q1, driven by timing impacts and some disruption from the war in Iran.

Finally, EFC gases and Advanced Materials contributed $16 million of revenue in the second quarter. Demand for Electronics, satellites and electrical infrastructure applications remains strong, though this business is more lumpy than our others. Commercial activity is very healthy, and we expect EFC to have a substantially larger second half sequentially, and we have good visibility into that. The EFC team is executing at a high level, growing wallet share with existing semiconductor and space customers and winning new qualifications in both.

Slide 5 addresses cash flow and the balance sheet. Adjusted free cash flow for the quarter was $74 million, a strong increase sequentially and year-over-year. With metal prices relatively stable, we have seen the benefit of the higher earnings growth we are experiencing this year. We did continue to invest in working capital, albeit more modestly as we continue to see increased volume demand across the business. The cadence of our cash generation is typically more second half weighted, and we expect this year to follow a similar pattern, assuming metal prices stay at current levels.

On the capital expenditure side, we invested $28 million this quarter, bringing year-to-date investment to over $50 million. As we have discussed, we are accelerating investment in certain high-value product areas such as Kuprion and thermal interface materials for hyperscale customers, while at the same time moving aggressively on existing plant consolidation projects in our Industrial Solutions supply chain.

We now expect CapEx for the year to be roughly $100 million, which is on the higher end of the guidance range we provided last quarter, though it's still less than 3% of sales. These are high-returning projects with attractive paybacks that support long-term growth.

Turning to the balance sheet. Our net leverage ratio at the end of the quarter was 2.9x on a pro forma basis, including Micromax and EFC. Given earnings strength and expected cash flow, we anticipate reducing leverage to roughly 2.5x by the end of the year.

And with that, I will turn the call back to Ben.

Thank you, Carey. Our company is strong and well positioned in attractive growth markets. In each of our businesses, we've identified opportunities and built strategies to deliver substantial profit growth through investment in people and capabilities over a multiyear time frame.

We pride ourselves on customer centricity. And on this front, we're seeing the fruits of persistent investments in technical service capabilities, technology road map exchanges and a focus on customer pain points where we can improve product performance or customer productivity. Organic acceleration in the first half and in particular, the sources of that growth give us confidence in a strong year and momentum into 2027. Underlying demand in the high-end Electronics market remains and the positions we've established in the fastest-growing, highest value niches of these markets should serve us well.

As a result, we are raising our adjusted EBITDA guidance to a range of $690 million to $710 million for the full year. This range reflects the trends we saw in the first half, combined with ongoing execution of our strategic road maps in each of our businesses, while taking into account the onetime benefits of metal hedge gains realized in the first half of 2026, having recorded the associated costs in the second half of 2025.

We expect third quarter adjusted EBITDA to be approximately $180 million with demand conditions sequentially similar to the first half and taking into consideration some risk from raw material and logistics inflation that we may not recapture immediately through improved pricing and sourcing actions. We now expect 2026 adjusted EPS growth of approximately 20% on a full year basis.

Element Solutions is executing very well, and the proposed Solstice transaction is recognition of what we've done, what we're doing today and what we're capable of doing in the future. From a foundation of remarkable predecessor companies like MacDermid, Enthone, Alpha, Micromax, EFC, Coventya, Kester, H.K. Wentworth, OM Group, Polytechnic and Kuprion, we built something bigger and greater than any of them could be individually.

We don't forget the histories of those businesses, which are far longer than our own and also that those businesses were built on the shoulders of others that came before them. We're immensely proud of this chapter, but it is not the first nor clearly will it be the last for our businesses. So for now, let me conclude once again by thanking all of our stakeholders for their continued support of Element Solutions and in particular, our people who are entirely responsible for all of our success in the past and our potential in the future.

With that, operator, please open the line for questions. And as a reminder, we will not be taking questions on the recently announced proposed merger with Solstice. Thank you.

[Operator Instructions] Your first question comes from the line of Josh Spector with UBS.

Congrats on a solid quarter here. I wanted to just ask around really kind of your expectations here for the second half and kind of the phasing that's baked into your guidance. You don't have the typical 3Q uplift, but that's more smartphone driven. So what's your assumption there?

And then just within the rest of it, that's obviously having a big uplift around the data center side, do you think there's further acceleration that pulls more into it? Or are you assuming that you're kind of stable from here?

Sure thing, Josh. Thanks for the question and feedback. The way to explain sequential performance here is threefold. Continuation of the strong demand that we've seen through the second quarter across the Electronics complex. We are not expecting the typical seasonal ramp in the smartphone market, just given what's been a very weak consumer Electronics backdrop. We've outperformed that year-to-date, but we're not counting on a substantial ramp.

We're factoring a headwind from raw material and logistics inflation driven by the conflict in Iran, and we're factoring in a modest softening in Micromax, which has been the biggest source of outperformance on a year-to-date basis, and that gets you to a roughly flat sequential performance. And then for Q4, we're basically just thinking that normal seasonality and fewer operating days given the holidays, so things drop off a little bit from Q3 to Q4, and that's how we get to our full year guide.

Okay. That's helpful. I just wanted to ask at a high level generally. Just -- I mean, you're continuing to execute well on a stand-alone basis. You're investing more in Kuprion. I guess outside of the cost savings that you see from the combination with Solstice, what does ESI as a stand-alone shareholder not get in ESI stand-alone that you see them getting in the combined basis? Are there big sales opportunities you think you miss out on? Is there something kind of that's missing in terms of the Kuprion kind of build-out? Just any help kind of expanding on that a little bit, please?

Yes. Look, we really don't want to take questions relating to the merger announcement with Solstice. And we've made plenty of public disclosure and also comments in the prepared remarks. I'll limit my comments to what we just said in the prepared remarks, which is that this broader Electronics portfolio advantages our collective shareholders in terms of the breadth of what we can offer to our customers and our customers' customers at an increasingly pivotal time for innovation in the supply chain.

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

A separate question is just on ESI. In the past, we have discussed that splitting the company into Electronics and nonelectronics was possible, but there was too much efforts, too much brain damage. There are too many shared assets. Is that the same view today? And would you have like an updated number for what the dis-synergies could look like if you were to split the company today?

So look, as we've always been clear that we've got a great portfolio at Element of high-quality businesses, they're market-leading businesses with durable moats, customer intimacy and tremendous cash flows. We've also been clear that we're not emotional about any of our businesses.

And if someone is willing to offer value in excess of what we believe fair value for our business plus the, we'll call it, brain damage and separation costs associated with carving out businesses would be that we're open-minded about those types of transactions. We think our portfolio is very well positioned for long-term growth across all of its end markets and vectors and aren't currently contemplating any such transaction. It's sort of a moot point as we sit here today.

Got it. And then as we think about Electronics earnings from here, obviously, metals pricing has created a bit of volatility in the sales side of things. How would you say a deflationary metals pricing environment plays out over the next 1 year?

Yes. So obviously, we've seen the impact of higher metal prices on the top line. We try to adjust for that as best we can with our ex metals, both margins and organic growth numbers. There is a bit of metal in assorted parts of the portfolio, whether that's nickel in our industrial business or some precious metals in our wafer-level packaging businesses.

And for the most part, we don't realize margins on metals. When metal prices go up, that gives us a little bit of an opportunity to take price in some of our businesses, Micromax being one of them, but deflationary metals pricing should not have a material impact on profit dollars.

Your next question comes from the line of Mike Harrison with Seaport Research Partners.

I was hoping that you could give a little bit more detail on the Micromax business. It seems like the second quarter was again ahead of expectations, and you're kind of indicating that maybe you don't expect that strength to continue. Is that just some lumpiness inherent in the business? Maybe just give a little bit more detail on how you're thinking about the outlook there.

Yes, sure thing, Mike. So Micromax has been performing exceptionally well out of the gates. That's volume-driven and to some extent, pricing driven. We have been opportunistic around pricing given the metals volatility, and that's contributed to substantial earnings outperformance. We also started the year with a somewhat conservative assumption for what the business could be this year.

The numbers you see in our disclosure around Micromax aren't burdened by some of the, we'll call it, stand-alone costs or integration-related costs that we've had to add at the Element level to support that business. So maybe it's modestly -- it's represented as modestly greater than its underlying contribution. But given it's a relatively new business for us, and we're still getting more familiar with its earnings cadence, we thought it prudent to be somewhat conservative relative to the current run rate as we look to the back half.

All right. And then my second question is on the Power Electronics business. Just trying to understand how much of the strength that you're seeing there is related to some improvement in underlying markets? And how much might be more related to you guys finding new applications, new customers and those customers maybe starting to ramp some of those new applications?

Yes, Mike, this is Carey. So I think the answer is both. In Q2, in particular, Power Electronics are -- the EV business has performed quite well, both with our legacy customers and the expanding customers in -- particularly in Asia. That has been somewhat of a volatile set of end markets.

We expect that -- some of that volatility to continue, but really good strength there. And then we have been seeing expanding applications in data center power modules and other, let's say, emerging applications tied to AI and high-performance compute, and we expect those customer wins and those trends to continue. So a nice mix of both.

Yes. There's a lot of runway for the Power Electronics portfolio.

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

Ben, I know it's difficult to ascertain at times, but just in terms of advanced packaging trends, where you specifically fit in, which crosses both assembly and some circuitry, can you just do your best to parse out kind of what's driving those businesses, where you think you're performing relative to the market and where you -- where roughly you think you should be on a run rate basis?

Yes. Sure thing, Chris. So our advanced packaging portfolio is performing quite well. We've seen substantial growth as we've always said, advanced packaging is somewhat of a generic term. So to say this specific product is an advanced packaging product, we sell one product that goes across multiple different substrates into different types of board. So it's hard to be very precise in that regard.

But I'd say really strong traction, I would say, share gain in the IC substrate, the package substrate portion of our circuitry business. Our high-end paste business and assembly is performing very well. Our wafer-level packaging business is performing very well. But what's most exciting around advanced packaging that we're really right now in the crucible of establishing processes of record for the transition from CoWoS to CoPoS and other emerging technologies that we expect to ramp, call it, 18 months from now and become very big markets for us. And we feel confident that we're going to win those pieces of business. and the advanced packaging business will accelerate as we move into '27 and 2028.

Got it. And just switching over to semi. Could you just give us what you're willing to give on just breaking down the organic growth in semi between precious metals, volume price. It seems like you're doing very well in the -- wafer plating chemistries likely gaining share is my guess. Could you just do your best to kind of break that down for us and how we should once again interpret that for the second half and into '27?

Yes, Chris, this is Carey. I'll speak about the current performance and I think expectations for this year. So both the Power Electronics and the wafer plating businesses saw volume growth in the high teens. And then both businesses benefited from additional pricing tied to precious metals, silver and gold primarily, respectively.

So if you think about the total 30-plus percent organic growth we showed in the quarter, call it, 60% to 2/3 of it would have been volume and the rest would have been price/mix. I think we expect that volume trend to continue throughout the rest of the year. I made the comment a few minutes ago around the Power Electronics business specifically.

And again, a growing part of that business is tied to data center applications, but there's still -- the majority of that business is still tied to Power Electronics for electric vehicles, which again does have some volatility, and we're taking a little bit of a conservative view on that through the rest of the year. I think it's too early to comment on '27.

Your next question comes from the line of Pete Osterland with Truist.

I just wanted to start with an update on Kuprion. Could you size approximately the revenue you expect to see in 2027 from Kuprion? And just more broadly, as you ramp, will it all be truly incremental? Do you expect any cannibalization of existing sales?

Thanks for the question, Pete. So Kuprion is a good story. Over the course of the quarter, we identified ways to get more product, more capacity out of our initial plant in Fremont, which is now sampling and qualifying material with customers. and we were able to expand our plan for our second Fremont site and made progress towards construction of the third site, which will be in Connecticut.

So the sort of takeaway from all of that is our expectations for Kuprion or active copper capacity by year-end 2027 increased pretty materially over the course of the second quarter. From a commercialization perspective, we're making really good progress, and we have customers pulling the product very aggressively, which should translate into material revenue in 2027 and profit contribution.

It's dangerous to size these things because that second site in California may come online in the middle of the year or the latter part of the year, and that will have a pretty big impact on what revenue we can expect. But the outlook for 2028, for instance, is very robust from a revenue and profit perspective given our capacity plans.

Very helpful. And then also, I appreciate the color on Micromax. I wanted to follow up by asking about your other recent acquisition, particularly with EFC sales falling sequentially in the second quarter. How is the business performing? What drove the decline? And what do you expect in the second half?

Yes. So the EFC business is a lumpier business than our other businesses. And it's not a business that was operated on a quarter-to-quarter basis, not that ours is, but with quarterly forecasts in its prior iteration. I would say that our confidence in the full year is -- or rather our conviction in their ability to hit that $30 million for the full year of 2026 is higher today than it was a quarter ago, given the really strong commercial pull and customer engagements.

Given it is a bit lumpier, it also has pretty good visibility into large new wins, and they are winning big pieces of business. So the business is healthy. I wouldn't read anything into the seasonality, if you will, or the phasing. We're going to have a very big back half for EFC.

The only thing I'd add to that is just given that seasonality and a little bit more lumpiness, the incrementals when the revenue does pick up are much higher than we would see for the rest of our business. So we expect that to manifest in the second half as well.

Your next question comes from the line of John Roberts with Mizuho.

I appreciate it's hard to define advanced, but would you give us kind of a wide range of what you would characterize as advanced for your core sales in Electronics?

So we've had a lot of questions in the past, John, around advanced packaging, right? And we've quantified advanced packaging as several hundred million dollars of revenue. Advanced is an even more generic term than advanced packaging. And what I would say is that, by and large, what we're selling is skewing towards higher-end applications.

You see that in our growth relative to industry growth, whether that's printed circuit board volumes or semiconductor MSI, which would be the underlying market indicators for our end markets. And we've been very substantially outpacing those markets for the past several years. So we can't say that every product we have goes into leading-edge applications, but the business skews disproportionately towards advanced technologies. I would say it's a very negligible percentage of our revenue that is going to really legacy analog type applications.

Okay. I was going to -- a corollary here. Would you characterize consumer and mainstream Electronics organic as down modestly?

Yes. For the market or for our business, John. John, for the market or for our business because the market is down.

For your business is what I was asking.

No, no. If you look at Q1, I don't have the data for Q2, but in Q1, smartphone units were down overall, but our business was up mid-single digits. And I would expect something similar to that because there's been a divergence, particularly in the smartphone market between local Chinese OEMs and Western non-Chinese OEMs and our business skews towards those non-Chinese OEMs where the market has been a bit more healthy.

And then overall for the company, could I ask what are your largest raw materials that are non-metals? And actually, how much are they up as you talk about kind of inflation from the Middle East, et cetera?

Yes. So John, there's a broad swath of raw materials that are ex metal. If you think about the ones that have driven the pressure, it has been things that are derivatives of oil, so ethylene and propylene-based products. The biggest hit in the second quarter were in the industrial businesses and the offshore businesses where those products are more prevalent. But there's not any one, but it's sort of things in that oil value chain.

Ex-metal.

There's -- we have no major concentrations within any specific raw materials or molecules.

Your next question comes from the line of Jon Tanwanteng with CJS Securities.

Very nice quarter and outlook. I was wondering if you could talk a little bit more about the semiconductor business in general, just the impact of the growth on mix and margins and if you expect that to continue significantly outpacing the circuitry and assembly business growth as we move into the future quarters?

Yes. It's a good question. This is Carey. So given the metal components in the semiconductor businesses, the actual contribution margins there are not too different from the average for the Electronics business. So what we -- from a growth perspective, certainly, semi has been outperforming volume-wise, and we would expect that to continue to be our highest volume growth business through the rest of this cycle. But in terms of a margin and margin mix, I don't think we're seeing a meaningful difference in that and the rest of the Electronics business. You add into that.

Got it. That's helpful. And then just from a raw materials and market share standpoint, are you able to -- have you been seeing excessive share gain, I guess, over what you would normally see just given the impact on your competitors? Or is that something that's a more normal course? And if you are seeing share gain, do you expect that to be sticky?

Yes, it's a great question. So in general, the broader Electronics industry is short certain inputs, right, and capacity constrained as well. Those inputs tend not to be things in our value chain, right? So we are not capacity constrained. I would say that, by and large, our competition isn't capacity constrained, though there are a few areas we talked about Kuprion, for example, what we're doing in STMS and other engineered materials where I would say we are capacity constrained, and we're adding capacity as fast as we can to meet the surge in demand.

So I wouldn't say that there is a shortage of what we make as a general term. We are taking share in certain technologies where we've been first to market, established positions of incumbency or innovated ways to increase our customers' throughput because they're capacity constrained, right? And so if we can allow for them to increase their production, there's a lot of value they can capture and that justifies some switching, which is very uncommon in our industry.

And so we have been taking share in several areas across our businesses on the basis of our technology, and that has led to some level of outperformance. And we would envision that to be sticky. The switching costs are really high. The other area where we've seen some share opportunities has been given the spike in metal prices, some of our local competitors haven't had -- haven't been capitalized to float metal and handle the payment terms in the industry. And so we've seen customers turning to us because competitors aren't able to continue to operate. In those situations, we're making sure the business isn't transactional because we're not interested in that transactional type business.

We're interested in longer-term sticky business and making sure that the fact that we are a viable long-term supplier is recognized in the way we do business with our customers and by our customers. And so we have seen some share gains from that as well.

Your next question comes from the line of Frank Mitsch with Fermium Research.

Nice second quarter results. You commented that the organic outlook improved through the second quarter. I was wondering if you might be able to provide any metrics around that in terms of the underlying industry or what you're seeing specifically to make that comment that the organic outlook improved throughout the second quarter.

And then, of course, the durability of that back in mid-May when you had your Investor Day, you offered us a midterm 7% organic growth outlook. Have things materially changed in that regard? Any color there would be very helpful.

Yes, absolutely. So thanks for the question, Frank. Look, the organic outlook improved, meaning our outlook for the year and organic growth this year improved relative to the jumping off point at the end of the first quarter. And the reasons for that is we continue to see capacity expansions in the supply chain and pull from our customers, right? Their levels of activity continue to increase.

We said something similar about a year ago where we said there was concern was there pull forward and we said, this doesn't feel like inventory in the channel. Our customers are adding capacity to meet what they expect to be demand and that capacity addition continues across the supply chain. And so in that context, our customers are making long-term investment decisions, and we're partnering with them to supply them with critical materials for their production processes.

And so we don't see that abating in the near term. The medium-term targets that we -- or medium-term growth rates we articulated at our Investor Day are exactly that they're medium term, and I wouldn't say they change over a 90-day period. I would say that underlying industry health is very strong right now, and the outlook is as well.

Terrific. Very helpful. And Carey, you called out higher incentive comp in the second quarter, a $10 million headwind. How do you think about incentive comp trending for the balance of the year?

Yes. So it's a good question. Thank you. So the incentive comp accruals are based on our expectations for our full year plan, and we update those on a quarterly basis and true up the accruals.

So as of now, our -- what we're seeing in Q2 is sort of the level of expense that we would expect to see in Q3 and Q4 unless our plan changes. And as we've indicated here, our guide that we update provided is kind of consistent with where those accruals are. So I would expect a similar level throughout the rest of the year.

Your next question comes from the line of Arun Viswanathan with RBC Capital Markets.

Congrats on a very strong quarter here. So I guess I just wanted to understand the strength in the semiconductor side. Maybe you can just elaborate a little bit on what drove that and how you see that kind of evolving as you potentially go through the next few quarters? Do you think the -- you need to make any capacity additions there to meet growing demand?

Sure thing. So the semi business was very strong in the second quarter. As we said earlier, about 2/3 of that is volume and 1/3 of that is metal price inflation. We adjust for most of our metals that we pass through. But in the semi business and also in the industrial business, for instance, we don't make those adjustments.

So the volumetric strength is something we expect to continue in the metal prices, we can't predict. We are not capacity constrained by and large, in the semi business. And so we wouldn't have to make substantial investment to support ongoing growth there.

And if I could just ask a follow-up. Do you comment on your outlook as far as utilization rates at some of your customers? Do you see those continuing to ramp up? And where are we kind of in that cycle from your perspective, if you have any views there?

Yes. It's a good question, right? We've got a very broad set of customers from semi fabs to printed circuit board fabs to assemblers. And then, of course, on the specialty side of the business, it's a whole different set of customers. What I would say is that across all of our Electronics customers, we're seeing capacity additions, right?

We're seeing the device assemblers and assembly shops building out more capacity. We're seeing printed circuit boards building out capacity both in China and outside of China. We're seeing huge investments in capacity in Taiwan and Korea in those markets. And then, of course, semi fabs are expanding capacity at the leading edge. Capacity utilization varies by customer type and by what they're building, right?

So leading-edge semi versus legacy nodes. Similarly with printed circuit board fabs, there are a lot of different types of printed circuit board technologies, and those lines aren't fungible per se. It certainly at the more advanced end, we're seeing very high utilization rates, which is supporting substantial capacity additions at all of our major customers in the leading edge circuit board fabs, semi foundries and device assemblers, EMS ships.

There are no further questions at this time. I will now turn the call back to CEO, Ben Gliklich for closing remarks.

Great. Thank you, Lynn, and thanks to everybody for joining. We'll see you guys soon. Have a good day.

This concludes today's call. Thank you for attending. You may now disconnect.

Next up, I'm thrilled to introduce Element Solutions, ticker ESI. Today, we have the CEO, Ben Gliklich. I've had known the pleasure of knowing Ben for 12, 13 years now through a variety of roles. I've always had a tremendous amount of respect for him. It's our top pick. It's on Wolfe's Alpha List as it has been. So Ben, thank you for making me look a lot smarter than I actually am. I always appreciate that.

There's a lot to go through, and I imagine and the audience actually submitted a bunch of questions, too. But Ben, you've been the CEO since 2019, and there's been a huge shuffle in the portfolio and a lot of acquisitions and my associate was kind enough to list all of them. But most recently, Micromax and EFC, you divested Graphic Solutions. In terms of just the overall portfolio, how do you interpret where you stand today versus where you stood 1 year ago and where you want to be 2, 3 years ago? Are you firmly on that path? Or is there anything else you have to really do?

Thanks for having me, and thanks for starting with an easy one. We launched Element Solutions in 2019 with the vision of being the best company in our markets, in 3 clear areas. The first is the value we provide to our customers. The second is the opportunities we create for our people. The third is the value we create for our shareholders. And all of our activity has been oriented towards that goal. We quantify those goals, value to customers as gross margins, opportunities for people, internal fill rate and employee satisfaction and then value to shareholders based on TSR and compounding earnings per share.

The North Star is compounding earnings per share. And our portfolio activity has been -- has not lost sight of value to customers and opportunities for people while being focused on compounding earnings per share. By that, I mean, we have been focusing on adding capabilities that make us a better supplier and partner to our supply chains, primarily the electronic supply chain.

And so we divested the Graphics business, as you highlighted, it didn't really fit. Someone came to us that wanted to own that business. We didn't put a for sale sign on it, and offered us a value that made it worth our while to go through the brain damage and the machinations to divest of that business. We reinvested that capital in EFC and Micromax, which are two great businesses that make our company better, that are better inside of our company. So they enhance our value proposition to our supply chains, and we can get synergies from owning them and they create opportunities for our people to grow.

That work is never done. So there is still more we can add to our portfolio that enhances our value proposition to our customers that makes us a better partner, especially now given the acceleration in our end markets, the need for shorter innovation iterations and co-developed innovation with our supply chain.

And so we're not lacking anything today from a portfolio perspective. There's nothing that where we say, "Hey, we've got a big gap here." So we don't need to do anything, but we're constantly looking for ways to enhance the value we provide to our supply chain. And when we do that, we do that with a lens towards keeping leverage appropriate and paying prices that are -- that allow for long-term value accretion.

Let me get back to that in just a second. But one of the questions I asked in an earlier meeting was, do you have a similar growth rate, actually a slightly better growth rate, 15% Electronics growth in the first quarter. Obviously, there's a lot going on. There's a lot of geopolitical uncertainty. There are concerns about pull forward purchase activity amongst some of your customers, obviously, the Iranian war. How sustainable do you believe the growth rate is for the balance of the year? And how should investors be thinking about even into like '27, '28 based on the latest updates you gave us at your CMD?

So we did an Investor Day a couple of weeks ago where we tried to articulate our long-term growth algorithm. What's implicit in it is a deceleration relative to the growth that we've seen year-to-date. And that's because we're talking about many years, and we're using long-term forecast from third-party research. The business has changed dramatically in the past several years from a mix perspective, moving away from consumer electronics, which is a shorter cycle business, right, where your volumes are driven by consumer purchasing patterns towards a B2B enterprise sale driven by data center proliferation. So our business is now 20% data center driven. Our Electronics business is 30% data center and data center infrastructure associated driven. That's a longer lead time business that's a less seasonal business.

And look, the comps get harder. If you're talking about 2026, the comps get harder every quarter because last year was really strong. But our visibility is better today than it would have been at this point in the year 4 years ago because the business is more concentrated in the enterprise. A rough rule of thumb is data center turns on, turns the lights on 18 to 24 months after the capital commitment has been made. And we're selling to that data center 6-or-so months out. So what we're selling today is associated with a capital decision that was made 1 year to 1.5 years ago. And if you just follow the rate of acceleration in capital commitments over the course of 2025, you can get confidence that we're going to continue to see volume growth over the balance of the year. And we're not seeing these data centers get canceled. Some of them are getting pushed out a little bit. We're not seeing them get canceled. So there is real momentum in the business.

We also, as we went back to last year, if you refer to how we sort of got comfortable with our growth rate last year, there's capacity addition in our supply chain. So the level of investment in footprint and volume from our customers has been ratcheting and ratcheting and ratcheting. And so sitting here today, can I extrapolate 15% for the balance of the year? I'm not sure I would pound the table. But the growth, continued stable growth from here is something we're very comfortable underwriting to for the balance of 2026 and into 2027, given the dynamic around the time frame from a capital commitment to the data center lights being turned on and the fact that we haven't seen any diminution or any sort of walking back from those capital commitments.

If we just take a very quick step back in terms of -- you're now on the radar screen of a whole new investment community based on your appreciation, a larger market cap, et cetera, et cetera. Taking a step back, could you just talk a little bit about how your portfolio fits into hyperscaler, AI CapEx across the subsegments of circuitry, assembly, semiconductor. What would be the kind of the primary highlights which you'd convey to the audience today?

So Element's portfolio is the most cogent and complementary set of electronics capabilities in the market, which isn't to say that it's the biggest, or the broadest, but we sell a very cogent set of solutions that speak to everywhere an electron goes in electronics hardware. That means the interconnects through the silicon in a chip, the materials used to put that chip into a package, materials used to put that package, the black box, if you think about it, that is that chip onto a printed circuit board, and the materials that are used to create the circuit pathways in that printed circuit board. So everywhere an electron goes, is a sale opportunity for us. It's a different set of customers, but it's the same specifier OEM qualifier.

And so our solutions are enabling the breakthroughs in performance that are driving next-generation electronics. Historically, all of the innovation or most of the innovation was concentrated on the silicon, right? And innovation in terms of breakthroughs in computing performance were delivered through density in the same space on a chip. Today, because Moore's Law is breaking down, that innovation is moving into packaging and printed circuit boards. And that's where we play. We play at the interface of all of those materials.

And so our relevance, our strategic relevance to the supply chain has dramatically increased over the past several years. We're a key partner to this supply chain even if we're not selling directly to hyperscalers, they care about what our products are capable of doing. They're specifying us. They're working with us to co-develop solutions, and they're driving our technology into their supply chains.

I just want to dissect something very quickly, you just said in terms of some of the higher layer count server boards. You've spoken consistently about how this is a tailwind. Obviously, it's incredibly [indiscernible] in terms of what the investment community is addressing. In terms of your content and how those things evolve, is that content -- I know you can't give us necessarily exact numbers because everything is different. But is that content appreciation, is that linear? Is it exponential? Just how should we think about kind of the growth algo as that continuously evolves?

The innovation and value proposition of our materials has been growing more than linearly historically or in the recent past, as the number of vendors capable of solving the emerging pain points dwindles, right? So when you go from a 8-layer board to a 12-layer board, you don't really winnow the number of capable suppliers to that market. But when you get to 150-layer board, you really need cutting-edge technology. And there are only a small handful, if that, of companies that are able to solve that problem to meet that requirement.

And again, that's why your seat at the table, your ability to co-develop with the supply chain, your ability to deploy capital, right, fast behind customer opportunities is so critical to the supply chain right now. And we talk a lot about Kuprion. That's another example of new material to the world that is enabling performance that heretofore couldn't be delivered and driving share, not just a revenue opportunity from Kuprion, but of our other products into the supply chain, into the market.

So as a corollary of that question, are you noticing that some of your Circuitry, and I'll get to Assembly in a second, customers are interacting with you a bit earlier and engaging you in terms of the technicalities of the issues they want to kind of, in some cases, potentially preemptively solve. Has that activity changed materially over the last 12, 24, 36 months?

Yes. So what I would say is the value of our -- that our seat at the table is greater than it's ever been because of the acquisitions we've made and the technology we brought to bear and the criticality of what we do to breakthroughs in technology. Historically, the number of technology road map exchanges we'd have and the visibility into innovation from our supply chain was more limited than it is today. That changed when we canceled or basically bought out the distribution agreement we had for copper damascene for our ViaForm product, which enabled us to get a seat at the table with the foundries, that change when we introduced Kuprion, that's changed as server boards have become more of an enabling technology for high-performance compute and data centers.

So a similar set of questions, but the same thing for assembly. And if you could just very quickly highlight on how the Assembly business interacts in terms of the product portfolio is slightly different than the Circuitry business, perhaps that would be helpful to some of the generalists in the room.

Yes. So we've talked a lot about printed circuit boards, and our technologies are used in metallizing creating the circuit pathways in printed circuit boards. We have a large assembly materials business, and it looks larger than it is because we sell a lot of metal on a pass-through basis in that business. But it's tin and silver alloys that are used to put chips on to board. So if you ever did like a RadioShack as a kid and you had a soldering unit and you took a wire and you melted it to put a transistor, that's the most rudimentary version of what our Assembly business does.

If you think about that, you think it's low tech, and it's root was low tech, but now as these circuit boards are getting more and more complex and the feature sizes, meaning the size of the lines on the circuit boards are getting finer and finer, you can't have big globs of metal because you get signal loss, right? And they cross multiple circuits, and that doesn't work. That's a failure mode for electronics. So you need really fine powdered metal, and we make that powder and that's solder paste is what it's called, or you need new alloys as the chips are getting smaller in some instances, or the circuit pathways are smaller and the designs are more challenging. You can't use solder and glue. You just need a solder alloy that's higher reliability. And so we're innovating that as well.

So our Assembly business is a very high-value business. The margins look a little lighter because of all this pass-through metal, but it's really a direct pass-through. So if you back out the pass-through metal, the margins in that business are actually better than in our Circuitry business. It's a high-value, high-growth business. Historically, it was a bit more industrially oriented. And the observation we've made is that this uplift in the electronics market driven by AI and data centers, it's not concentrated just to server boards, because all around the data center between power and network switches and infrastructure, you're seeing volume uplift.

And so it's not simply server board metallization that's driving this business. It's the whole ecosystem that's being lifted by the demand from these data center build-outs.

There's been -- I assume you'll agree to this, but I'm not sure. But from my seat, I've seen a noticeable shift in investor perceptions in terms of PCB square meter growth relative to semi MSI. It seems as though people were in the past, at least were slightly less enthusiastic on the PCB side, more enthusiastic on the semi side. It seems that this perception is not as if everybody is not bullish on the semi side, but the PCB side seems to be getting better almost like by the week or the month in terms of that. When you think about your growth algo over the next several years, and you hit on this in your CMD, how has your own perception changed in that? Do you think it's an accurate characterization? Is it slightly different?

I can't speak to investor perception as well as you can per se. But I actually think that the most misunderstood thing about our company is that historically, for good reasons, the semiconductor market was perceived as a premium market to the circuit board market. That's where the innovation took place. There was more growth there. The margins of the semiconductor consumables companies were higher than the printed circuit board companies.

If you look at the last 3 years and you look at the forecast for the next 5, the printed circuit board market is supposed to outgrow the semi market. And there's a huge amount of innovation required to meet the needs of the industry from printed circuit board suppliers. So you've got a better growth rate. You've got margins that are accreting from the vendors in that space. You've got lower capital intensity in printed circuit board consumables than in semi consumables. So I actually think that the printed circuit board market is competing, if not better, than the semi market today. And I don't think that, that's well enough understood in the investor community.

We'll get them there. So when you think about the technological requirements, and we've hit on this several times, you just said a little on Circuitry, a little on Assembly. I apologize preemptively for being blunt, but why at your CMD, why only the 100 to 200 basis points of outperformance embedded? It seems like you could do materially better than that. Is that something you're just waiting for the thematics to kind of fall in place? You have a good reputation about kind of laying out things you know you can do versus what you think you can do? Just how should investors interpret that algo?

So our growth algorithm is based on long-term forecast from third parties. This is a multiple year growth algorithm. And so Prismark thinks that the printed circuit board market is going to grow volumetrically about 7%, and we said we'd grow 1 point or 2 faster than that. The recent past, we've done much better than that, like 3 points better, sustaining that level of outperformance is not something that we necessarily underwrite to. We'd rather outdeliver on commitments that we can feel a high level of confidence in. There are reasons to believe that the segments in which we participate will continue to outgrow the overall market substantially. And there are reasons to believe our technology is gaining incumbency in those segments, which would deliver a better outcome.

Got it. So I want to stay on track here because there are a few questions I definitely want to get to. But just what do you think is the gating factor for advanced packaging? Because once again, it seems as though the bar and table stakes, whatever characterization you want to kind of amplify it as are changing. But is it possible at this point to give a percent of your total portfolio, given the fact that you have so many different product suites which enter into it? It just seems like such a great thematic. And I'm just wondering if you could add a little color to that today.

So advanced packaging is a generic term, right? It's just new architectures for integrated chip designs, which include high performance sort of high-tech printed circuit boards and then multilayer semiconductors and the materials that go around them. And all of our businesses have solutions that solve problems and enable advanced packaging. But to be very specific on a product line, it's a little bit of a gray area. So what we say is we've got a couple of hundred million dollars of revenue in advanced packaging, it's growing very quickly. Kuprion is an enabler of advanced packaging, whether that's through-glass via filling or other interesting architectures around copper pillars and so forth. And that product hasn't even launched really yet. So it will be substantially bigger in any reasonable time line.

I asked you for kind of a deep dive on Kuprion, last September, if I'm not mistaken, and I kept on focusing on the earn-out, and you politely told me Parkinson, if we hit that number, that's a really, really, really good problem to have, and I hope we have it. It seems you have two facilities coming up. It seems like the customer demand pull is very, very strong. I understand it's in the preliminary innings of being commercialized. But what makes Kuprion so special? Why were you willing to take a chance on it several years ago? And it seems like you're just as enthusiastic now as you were back then.

I think I'm more enthusiastic now. It was a low-cost option. When we did it, right? So we paid $16 million to buy this technology. That was a new materials science, and we structured it because with a big earn-out tied to revenue. So it was risk sharing with the founders and the very small venture capitalists who are involved.

What's happened since is a lot of work to develop that material science into a product that could be used in high-volume manufacturing, get the equipment sets aligned that our customers could use for high-volume manufacturing and build our own capacity to make this material beyond the lab scale.

We have our first site commissioned for this product today in California. We have two more sites that we're working on. One is a copy exact one in California, which is somewhat new news. Historically, we said we're going to do a mid-scale site and a large-scale site. Demand is so strong that we want to have two of these mid-scale sites up and running because it will take a little longer to get the large-scale site up and running, and we don't want to miss the window where our customers really want this, but they'll find an alternative mechanism if we don't have the product. And then we're going to work on an even bigger site for 2028 than the large-scale site we're working on in Connecticut right now.

So the limiter to revenue here is simply our capacity. The motto is if you build it, they will come, and we're building it. Why is this so in demand. If you think about the issues facing the electronics industry, they are associated with power density, how do you get more power through a circuit board and thermal management. How do you keep that power from generating too much heat. And the sort of ancillary effects of all that heat on the electronics assembly.

This solves those problems. It gets copper into very fine substrates. It has interesting thermal expansion attributes, and it allows for greater power density through printed circuit boards than electroplating can deliver. So the number of applications we've developed continues to grow, even though we've only spoken to a small handset -- a small handful of customers. And those customers are using excess samples we provide to them to come up with their own applications.

So the universe of addressable market for this technology continues to expand. And the amount of customer pull continues to grow, and that's why we've got so much excitement around this, and it's really a matter of us executing on the build-out.

So sticking with the M&A side, so I think we're clearly happy about that one, enthusiastic for the future. So on the M&A side, you also acquired Micromax last year, which has historically been part of the portfolio at DuPont. It was then part of Celanese and now it's part of your portfolio. And suffice it to say, it seems like your enthusiasm has been very strong there. I have been telling people not to extrapolate the 1Q performance, which you've been articulating. So I'd like to ask you, why not and what fits in there about why are you the better owner? Why is this so cohesive with your culture? It seemed like that was a big part of the call as well. So I'd love to hear more about that as well.

So Micromax is a great business. They make electronic inks and thick film pastes that are used in manufacturing passive components. So historically, we said that we spoke to, everywhere an electron goes in electronics assembly, but we didn't have this passive piece of the business. So these are like capacitors and resistors that go around a chip to regulate the flow of energy through the assembly.

And when we first saw the business, we weren't that excited about it. The margins didn't look as good as we would have expected for a value-added materials consumables business. we had some experience with electronic inks, and we weren't particularly excited about the use cases for that. We thought it was older tech. As we dug in, we realized there's a big metal pass-through there, which is something we uniquely -- I don't want to say uniquely, but particularly understand because in our assembly business, there's a metal pass-through, and they manage that metal dynamic really well. And ex metals, the margins on the business are exceptional, right? So out of $300-or-so million of revenue, there's only about -- there's about $200 million of pass-through, right? So this is a 40-ish percent EBITDA margin business ex metals, which is accretive to our business.

And then as we dug in, it was clear they had the best technology for these passives in the market. And the innovation in data center started with the chip and then it went to the server board, and it was just getting to these passive components. So if you open your smartphone, there are about 1,000 passive components. And if you look at sort of a newer generation server board, there may be 5,000. And the next generation is 12,000, right? So the density of this material is increasing as electronics performance in the data center, right, is becoming more demanding. And so there's a lot to be excited about.

And then as we spent time with the team, it was clear that the access that they had to the supply chain was limited inside of Celanese because Celanese wasn't a big vendor into these markets. And the model is different when you're dealing with continuous flow manufacturing versus niche batch specialty materials that are customized for certain applications, which is what Micromax does. And so the carve-out has been complex. The team is incredibly energized to be part of an electronics-focused company that understands what they do, that understands how they interact with our customers that gives them access to some of these specifiers.

And I wish I could say that the performance inflection in the first part of the year was driven by anything we did, but we only owned the business for a couple of months. It's really driven by the market. And organic volumes being up 10% is an indicator of the market, and we think that the business can accelerate from here inside of Element. So the performance has been great. The team is highly energized, and we caught them at a really good time. It's been a great one for us so far.

Really quick on this one. Any quick comments? You also purchased EFC Gases. Obviously, you have some tech side of there, some industrial satellite, perhaps a quick comment on that as well.

EFC is a great business there. When you think about Gases, you think about big capital-intensive gas synthesis type companies, and this is not what they are. They buy technical-grade gases and they refine them, purify them, formulate them and work on applications know-how to support very niche applications for the customers where the majors just aren't that focused because the volumes aren't there and the sort of level of work to meet the service requirements are higher than they're used to.

And so these guys have found out really great high-value niches in semiconductor manufacturing, in satellite propulsion systems and in electrical transmission infrastructure where they can do really, really well and delight their customers. So their customers are pulling them to bring new capabilities into the market. They are benefiting from being a part of Element because of our relationships in some of these supply chains, and we're benefiting from owning them, because of the depth of their relationship with some of these semi fabricators and foundries. Company is growing really well, cultural fit is really good. There's a lot of room to grow there.

So you bought these two businesses at a time when Element's leverage was the lowest in public company history. You've gone up a little bit, not too much. And the trajectory, at least based on my numbers, and I'll speak for those. It seems like you could get back to a very low reasonable level, however you want to characterize it, fairly quickly. Just how quickly do you think you could be back on the M&A landscape? What are you interested in? It doesn't seem like you need to add anything, but what are the substrates which you'd like to add potentially?

Yes. So leverage should be back in the mid-2s by the end of the year. Our ceiling is 3.5x. We don't like to run the business at 3.5x, but there's no floor for leverage, right? I mean we're very much opportunistic around how we deploy capital. We have a very high bar from a quality perspective. We've shown discipline around value. These are scarce assets of scale, but we are a good owner of them. And for good transactions, the capital is available. So our focus is electronics businesses that are better inside of our company than outside, meaning they have some synergy content and make our business better. So their business quality as defined by customer intimacy, margins, cash flows, enhance our overall business quality. Those are the types of things we're going to look for. And there are not a lot of them, but we know them when we see them, and we're a great owner of them.

Got it. Just as a final question, I always love to ask the CEOs of my coverage universes. In terms of the buy-side community, the sell-side community, it's early in the morning, so you haven't had a full day of meetings yet. But what do you think at this point, there's been a lot going on with your thesis for a while, and obviously, your stock performance speaks for itself. But what do you think -- I don't care if you take a shot at me or anybody else. What do you think people are perhaps missing, underappreciating? Is there anything when you sit with your Board, wow, I really wish people focus on this more, wrote about this more. Is there anything that comes to mind?

The simple answer is what we spoke about earlier, which is just, I think, a misperception around the printed circuit board, the value to the electronics ecosystem of the printed circuit board market, which my predecessor up here was just talking about the structural uplift in interconnect driven by materials intensity and complexity. And that's a story that has a long way to run. And so the quality of the business, I think, is misperceived due to that.

Noted. And I'd like to thank you very much for your time today. Hopefully, you have a great day of meetings I know you have a full schedule. Thank you very much.

Thanks for having me.

Good morning, and thank you for joining us today for our 2026 Virtual Investor Day. My name is Varun Gokarn, and I'm the Vice President of Strategy and Integration here at Element Solutions. We're looking forward to sharing today's presentation with you. You will hear from several of our leaders providing a fulsome update on our business, the ways in which our portfolio has evolved and the exciting opportunities that we are working on, all driven by a deep focus on solving our customers' most critical challenges.

Before we begin, I would like to bring your attention to Slide 2 of this presentation, which notes that we will be discussing certain forward-looking statements. These statements represent management's assumptions and expectations with respect to future events, but numerous risks and uncertainties may cause actual results to differ from those predicted. Additionally, we will present certain non-GAAP financial measures. The definitions and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in the footnotes and appendix of this presentation, which will be posted on our website. We have a full agenda today, including introductory comments from our CEO, Benjamin Gliklich, presentations from several leaders within our Electronics and Specialties business segments and then some time with our CFO, Carey Dorman. We'll conclude with Ben and Carey framing our growth algorithm and then an interactive virtual Q&A session. To kick things off, I am pleased to introduce our Founder and former Chairman, sir Martin Franklin, for opening remarks.

Good morning and thank you for joining us today. It is bittersweet to be speaking at my last ESI shareholder facing event. Bitter because I truly enjoyed founding and helping build this company over the past 13 years, Sweet because I'm so proud of what it has become. Notably, it is far more sweet than better because as Ben and the team here know. I will continue to be a resource to the company and tend to remain a large shareholder. I'm committed. Simply, I'm currently Chairman of too many companies in the eyes of certain nonprincipal advisory services and this is the company where I'm most comfortable moving off the Board. My success at Ian has been my partner and confident for more than 35 years and on this board since its founding. From a Board leadership and governance perspective, we will not miss a beat. In all of the companies where I've been active regardless of their size or end markets, there have been shared attributes for success, capable people across the rents, thoughtful opportunistic capital allocation choices and cultures that put a premium on high standards of behavior and performance without bureaucracy or taking themselves too seriously. Element has those characteristics through and through. It has been a long journey to today and a very rewarding one.

Our team has matured and built new capabilities. As you will hear today, our business has enhanced its position as a leading supplier to attractive niche markets. The ESI team has built a pipeline of innovative technologies that is deeper and higher value than at any time in the company's history without losing its customer focus and commitment to best-in-class technical service. Its evolution has been remarkable and even more fun to watch from the inside.

I have a very strong conviction that the best is yet to come. Rest assured, I will be alongside this team and its investors for the long term. I'd like to take this final opportunity to thank our entire management organization and 6,000 members of the Element Solutions family for all of their contributions. I'm also grateful for the incredible -- incredibly supportive and thoughtful board members many of whom have served throughout our journey. And finally, to our shareholders who have placed their confidence in our efforts. With that, let me introduce you to our new Chairman, my friend, Ian Askin.

Thank you, Martin. I'm audited excited to be the new Chairman of Element Solutions. ESI is a uniquely positioned business have been proudly affiliated with for over a decade. The team here is top-notch. The business is focused on delivering exceptional service and products to our customers and the culture is terrific. As Chairman, I follow my long-term partner, Martin and intend to focus on similar things to those that he did: people, capital allocation and governance.

Fortunately, ESI has a well-established, high-performing leadership team and a strong track record of prudent value enhanced capital allocation. The company's future strategy, as you will hear shortly, is unchanged. You will also hear about the work our team is doing to continue repositioning our portfolio for higher growth and the exciting trends we are participating in and enabling through our technology and service. This is a business with long feedback loops, hard work and investments done today often drive growth multiple years down the road. We are reaping the benefits of the work that Ben and his team did years ago. And as an insider, I can comfortably say that there are more opportunities available to us looking forward than we have executed on in the last 5 years.

Hopefully, the content covered today will provide you an insight into why the Board and the management team continue to prioritize our technology pipeline, customer and partnership and portfolio evolution. To echo Maden, we believe the best times for Element Solutions are still to come. I'm pleased to now introduce our CEO, Ben Gliklich, to begin to take you through the presentation

Good morning, and welcome. Thank you for joining and for your support on our journey thus far. That journey is where we're going to start today's presentation. Element Solutions remains a young company. We're only 7 years old. And the work we did upfront as we were launching the company in 2019 and the work to lay a strong foundation continues to be rewarded. We thought deeply about our vision, the culture, strategy and people we would need to deliver on it, communicating and reinforcing those attributes and then beginning to build the muscle to execute. That has been the basis for our success to date. In our 7 years, we've had no shortage of tests to that foundation, from COVID to supply chain disruptions to tariffs and difficult geopolitical circumstances and the agility of our decentralized local model and our culture that encourages people to challenge themselves to make commitments to actively make choices and to focus on the customer has allowed for us not just to survive but to thrive through these conditions. .

Our end markets struggled from the COVID-related demand bullwhip in 2022 and 2023. But I think of [ 2020 ] as having been another opportunity to revisit our road map for the company and is another critical foundational year for us. It was in 2023 that we seized the disruption in our supply chain to reacquire or to buy back the distribution rights to Vifor, which is our marquee front-end semiconductor technology and also back then to acquire Puprion, one of the most promising technologies in our current pipeline. You'll hear today about how both of those are driving deeper engagement with our supply chain and better access to leading-edge customers than we've had in the past.

Since then, we've continued to pivot the business with help from the trends in our markets towards faster-growing, higher-value customers and end users. We've done that by deploying our strategy process by a divestiture in our 2 recent acquisitions. Our end markets over the past 2 years have surged from demand from high-performance computing and the AI data center buildout, and we positioned ourselves to disproportionately benefit from that. We also sold our graphics business and added high-value electronics capabilities through our Micromax acquisition and new exciting offerings in specialty gases serving the highest-growing sectors in the economy with EFC.

Overall, the company has shifted to become more than 70% electronics. And within that electronics segment, now approximately 75% serving B2B markets from about 50% a few years ago. Those B2B customers have more predictable, higher value demand. Overall, today, more than 20% of our sales are serving the fast-growing high-value data center market. The business has been repositioned. It's accelerating from a growth standpoint, and it's improving from a quality perspective. All of this activity has taken place in the context of a very challenged landscape for the chemicals and materials sector broadly.

On Slide 8, you can see adjusted EBITDA since 2022 for several relevant cohorts of companies. The aggregate earnings of these indices of chemicals businesses from 2022 to 2025 are down more than 20%. While expectations are for improvement in 2026, they're still operating well below their 2022 levels. Our proxy peer group from back in '22 is forecast for an aggregate EBITDA decline of more than 10% and off that 2022 baseline in 2026. This high-level perspective should give a sense for the backdrop we've been operating in. Over that period, based on our latest guidance, we're expecting our adjusted EBITDA to have grown nearly 30%. This is part of the reason why we're changing our proxy peer group, but it's not simply a matter of comparators.

We have a differentiated business model within the broader materials space. We may build customers for barrels and drums of products, but what they're paying us for as an outcome. It's a solution to their problems, a performance level in their factories and of their final products. We sit between chemicals manufacturers and component manufacturers, both of whom have much more asset and direct labor-intensive businesses. We have a people-intensive business where the value add comes from innovation and technical service. While our products represent a small fraction of the final product and cost or even our direct customers costs, more than 80% of what we sell is specified or qualified by our customers or by our customers' customers, meaning that while it's not a large portion of the cost, the way it performs is very important.

This combination of people and know-how based model, high performance requirements creates a very high switching costs relative to rather low switching benefits. Together, this is the recipe for a very sticky business model and robust cash flows. Additionally, nearly everything we sell is consumable. So we're not linked to the veciitudes of capital cycles. If our customers are operating, we are selling to them. And this insulates our business from investment cycle volatility. And these attributes are intrinsic to the types of businesses we operate and we've been thoughtful about making sure our ongoing investment in growth continues in businesses that match that profile.

We've also built an operating model that we believe allows for us to make the best with these types of businesses. It relies on a simple framework, balancing operational excellence, which is simply making our businesses better every day, and prudent capital allocation, deploying the strong cash flows these businesses generate wisely to compound long-term value. The basics for operational excellence are breaking down our businesses to their smallest logical cell, putting good leaders in place to run those units with the right incentives and the right tools and then making sure everyone at the company is focused all of the time on their customers.

That's effectively what we do with our strategy process, ESDI. And the foundation for all of this is our culture, our 5 Cs, which are designed for a people-oriented solutions forward company like ours. We've invested a great deal in tools and frameworks and in training to provide the skills required for our shared definition of success, and we continue to do that. The fun thing about continuous improvement is that it never ends. We still believe we are, in fact, early in our journey. The way we think about prudent capital allocation is unchanged from the early days of Element Solutions, we're opportunistic and flexible, yet very disciplined, meaning we don't have a fixed model for -- or an allocation to annual buybacks or to M&A, we seek to find the best use of our capital in any given window but we have a rigid returns criteria and we do not compromise our capital allocation over the past several years testifies to that approach.

The outcome since 2022 show how the combination of our business model and our operating model yield outperformance. We're outgrowing our peers. We're outgrowing our markets, and we're delivering for our shareholders. There are 2 areas we've been more focused on the past few years and the first of them is customer centricity. Everyone has a customer, and we aspire a good company where people spend all of their time looking outward at their customer. Why is that? Because the customer is the source of our insights, deep understanding of customer requirements and road maps leads to higher returning innovation and better customer outcomes. We're fortunate to be customer intimate. And we're in a market, especially today where the customers need innovation and technical partners more than ever.

Through our customers, we can improve our capabilities, and they want us to they communicate their needs very clearly and often well in advance. Of course, not everyone has a third-party external customer. My customers are the business unit leaders. And my job is to make sure they have what they need to be successful. What we call enterprise operations, which is the functional core of the business that carry oversees is tasked with making sure our businesses have the best tools to make decisions and execute their strategies in the world. We seek to minimize the time people are spending looking internally by cutting administrivia and deploying tools to simplify and accelerate internal reporting. That gives us more time to focus on customers, which is where value is created. The second area we'd highlight is capital allocation. Our capital allocation over the past several years has improved our business quality. It's expanded our portfolio and has created new compelling growth vectors for our company. We have, at the same time, returned approximately $500 million to our shareholders and maintained leverage below our ceiling of 3.5x. We're very excited by the opportunities we've been able to action.

We think seeds planted by this capital deployment are just only beginning to grow. There are samplings that we can once continue to nurture while also planting more seeds. We see no reason that we can't continue to find ongoing opportunities that meet our criteria going forward. For the past several years, we've talked about the evolution in our portfolio towards a heavier weighting in electronics and a heavier weighting in B2B supply chains. This change has been both intentional and market-driven. We've invested to build capabilities to support the faster-growing, higher-value issues available to us, which has been in high-performance computing and data center markets. That has worked and our portfolio is shifting. Today, our business is nearly 80% enterprise driven, and the electronics business has migrated from 50% enterprise to 75%. Importantly, we've not had to compromise on profits to gain share in this attractive market. On the contrary, we've seen our ex metals margins improved substantially since 2022.

We've offset the inflation in our supply chains and improved our customer value propositions. Nor have we had to compromise on the quality of our business model. Our highly variable cost structure may be very much the same with the ability to flex costs based on prevailing market conditions. Taken another way, as you can see on Slide 14, our margin resilience and the strength of our cash flow generation in all market environments remain very much the hallmarks of our business. We do not, however, define success simply with financial metrics. When we set up ESI back in 2019, we set a vision for our company. We aspire to be the best company in our industry in 3 specific categories: the value we provide to our customers, the opportunities we create for our people and the value we create for our shareholders. And I ask the Board to measure me against that vision, to measure me against those categories.

How much more are customers willing to pay us than we spend. That's a good metric to measure our customer value propositions. How many people are we promoting internally to fill open positions in our mid- to senior management versus hiring from the outside. That's a good way to measure the opportunities we're creating for our people. How much do they enjoy working here? And how well are we compounding per share value. That's the north star for shareholder value creation. Fundamentally, by the way, we believe if you're happy customers and happy people, you'll have happy shareholders. The inputs are the customers and the team, and we move been measuring the inputs as success there is the key to sustainable progress.

On Slide 15, you can see how we're doing, and we're making great progress on each of those vectors. Margins are up substantially. Our people are growing and happier at ESI than before, Our earnings are growing and our shareholders are being rewarded. I'm very proud of this data. But of course, there's still plenty of room for improvement, plenty more we can do in each of these domains to improve. And you'll hear about that over the course of today. We have the industry at our back as we chart our course forward. Historically, there was a perception that the printed circuit board market was slower growing and less attractive than the semiconductor market.

Over the past few years, we've seen 2 major shifts that are changing that. First, Moore's laws breaking down and packaging is becoming more important to advances in computing. Second, the AI market has developed and circuit board architectures and requirements have become radically more challenging and valuable. And so take it together, we've seen a surge in demand for high-value circuit boards and the chemistries that support them. The high and circuit board market is growing faster in volume terms than MSI. Initially, before 2023, there were already expectations for strong growth. But that was because we were coming off a trough driven by the post-code full with effective demand.

Today, forecast remained for very strong growth despite 2025 being the best year on record. This is driven by the AI data this growth is concentrated in the highest value in ports in the segment of the market where we are to treat. In sum, Element Solutions has become a higher-quality, faster-growing comp. On Slide 17, we see the CRI and Element Solutions against its new proxy peers, which include a broader range of electronics and electronics materials companies as well as a selection of higher value specialty materials businesses. You can see our business is the best in the market in terms of our returns. CRI calculates cash flow relative to tangible invested capital. how many dollars you get out for every dollar you put in. And you can see that ESI remains the highest quality company on that metric amongst our peers, all while we've increased our concentration with faster-growing, higher-value subsegments of our market and moved away from the more cyclical ones.

It's an exciting time for our company. Next, you'll hear from a range of our business leaders, who will discuss their businesses, emerging trends and technologies, how ESI is poised to participate and benefit from them. But first, let me introduce Rick, who oversees our electronics. Rick?

Hello. My name is Rick Fricke, President of Dervilpha Electronic Solutions, a business development solutions. Our electronics business spans a full spectrum, from circuitry to packaging to final assembly. We focus deliberately on the inflection point shaping next-generation electronics, where heterogeneous integration is driving new substrate materials and advanced packaging architectures and high-density data centers are driving an increasing demand for advanced packaging, thermal management and higher component density. Our integrated approach across customer needs is reflected in the scale and diversity of the business, making the strength of our platform clear. We have built a robust portfolio of solutions to reach customers earlier in their design cycles, to better serve their fast-growing and high-value applications.

Our global business generates over $2 billion in revenue with over 3,300 dedicated employees, primarily focused on formulation, research and development, technical service and commercial execution. 75% of our end market mix serves what we consider B2B or enterprise use cases. These are areas like data center infrastructure and power electronics, which typically have higher content value, higher margins and less cyclicality. Our approach and positions allow us to engage earlier, solve harder problems and create durable value delivering a higher value for our customers. What makes this particularly valuable is how it positions ESI across the electronics value chain. We solve distinct high-value customer problems. This breadth enables early engagement in customer design cycles, cross-selling across adjacent process steps to provide system-level solutions, not single material sales.

In circuit reuse, part PCB fabricators where innovation requires designs with higher layer counts and tighter geometries. In wafer level packaging, we're providing interconnect solutions for transistors and chips down to small nodes and advanced mineralization that enables new packaging architectures. In semiconductor and circuit board assembly, we deliver a range of die attach and package attached solutions. And recently, with the Micromax acquisition, we centered our portfolio into precision passive components and high reliability and high-frequency applications. That breadth becomes even more tangible when you map it to real manufacturing workflows. Our customer base spans the entire electronic supply chain, including foundries and IDNs, OSATs, PCB fabricators, assemblers and EMS providers. At the package and device assembly levels, we have an unparalleled portfolio of advanced packaging material solutions in addition to thermal and protective materials.

With printed circuit board fabrication we provide solutions for every step of circuit board fabrication. We uniquely provide system-level solutions that are important when we look at how the industry is shifting. Our recent acquisitions extend our adjacencies and increase our relevance. Micromax expands our range of offers with electronic inks pace in ceramic substrates to make passive components for the most demanding mission-critical applications. At the foundry and IDM level, we have leading presence in the chemical deposition of copper interconnects. And with the recent acquisition of EFC gases, Element Solutions now provides cleaning and etching gases to semiconductor fabs. This reinforces our role as an embedded systems partner, not a point solution vendor.

For decades, computing performance was driven primarily by shrinking node sizes, dictated by Moore's Law. Today, however, the frontier is on improving how multiple purpose-built dies connect, communicate and function together through heterogeneous integration. That shift is accelerating growth to where we have leading positions, including advanced PCB and substrate technologies, back-end-of-line metallization and assembly solutions. You see this in the disconnect between PCB square meter growth and semiconductor silicon area growth forecasts.

Medium-term PCB industry forecasts are now stronger than semiconductor forecast reflecting the rising complexity and more value created outside the front end of the wafer. That shift directly informs how we build and focus our portfolio. Our materials saw challenges in 5 critical functions: interconnect, attach, reinforcement, protection and thermal management. Our electronics business is well positioned as a mission-critical problem solver. Solving these challenges also requires us to rethink how we organize and operate. Over the past 5 years, we have repositioned the electronics business to intensify our customer entity and focus around customer pain points by integrating R&D, marketing and applications development near to the customer.

We have also focused our supply chain on continuous improvement, resulting in faster response times, improved quality and yields. Structural alone isn't enough. We are also investing ahead of industry inflection points. Recent investments made include ViaForm. We bought our marquee front-end product and strategic semiconductor franchise fully in-house. Kuprion. We acquired breakthrough Nano copper technology, precisely as AI, data centers and advanced substrates began pushing the limits of thermal and electrical performance. Argomax, we moved into silver sintering with Argomax, well ahead of EV and power electronics adoption, investing ahead of scale while customers were still designing next-generation platforms.

We look for common threads, including rising materials intensity, early technical engagement and durable specification-driven growth. Those investments follow our customers not just by technology, but geographically. We execute through disciplined deployment, placing resources where customer growth and innovation are accelerating. Examples include investments in additional Southeast Asia application labs, expansion of our Singapore manufacturing facilities, a newly opened India R&D center and physical presence where customer design decisions are made, specifications are designed and long-term relationships are for. All of this supports a broader shift in what's driving growth across the electronics industry.

Growth is being driven by a structural share price scale electronics. Enterprise applications, including AI, EV and space systems have material performance and utilization requirements that are rising faster than unit volume growth. This drives greater material intensity in value or element solutions, systems-level solutions approach. That leads to an important structural point about content per system. Let's compare a high-end smartphone in a higher high-value serve record. A premium smartphone contains low-single-digit dollar content, while server card carries content that is several multiples higher. This is driven by greater board complexity, advanced packaging metallization and thermal interface requirements. Enterprise printed circuit boards demand higher layer counts, larger plating areas and greater thermal and power management. driving higher materials intensity per unit.

While smartphones ship in hundreds of millions with modest growth, server cards are shipping at much lower volumes but are expected to scale rapidly. Even at lower volumes, enterprise applications create disproportionately larger and faster-growing value pools, positioning data center materials as a major growth driver across our portfolio. Data centers are the clearest and most immediate example of this dynamic. An AI data center, Element Solutions delivers material content from wafer to system level. At the wafer and package level, we enable advanced interconnect structures supporting high-performance GPUs, CPUs and memory.

In power delivery, our die attach and high-reliable siders are embedded across critical systems. At the printed circuit board level, our metallization technologies enable dense, high layer account designs required for server platforms. At Board assembly, we provide materials that enhance mechanical integrity and support large high-density packages. As electronic systems grow more complex, materials become increasingly critical to performance and reliability. -- value shifting from individual components to integrated performance-enabling system-level solutions. And McDermotAlpha Electronic Solutions is uniquely positioned for success at the center of these ships where complexity, specification and value converge. Thank you.

I'm Jim Witkowski, Senior Vice President of Advanced Interconnect Solutions for ESI's electronic business. Here at ESI, we are entering 1 of the most innovative periods for electronic manufacturing I have seen in my nearly 40 years in this business. As innovation shifts towards the substrates onto which chips connect and communicate with 1 another, our material science and chemical process knowledge becomes critical. Our customers rely on us to navigate new nonstandard chip and board architectures. They need a variety of full stack metalization solutions such as via and true hoofilling chemistries, copper pillars, redistribution layers and micro box. Our team sits at the convergence of chips and boards anchored by a world-class circuitry solutions business, providing leading-edge technical service and innovation to fabricators. In circuitry solutions, the key customer leaders rising board complexity driven by AI servers, IC substrates and advanced network.

This means more layers and higher aspect ratios that require more plating steps, tighter process control and higher advanced chemical formulations. Our circuit formation technology directly address those requirements by improving yield and single integrity at -- our growth opportunity comes from higher content per board and higher qualification durability because these chemistries become deeply embedded in our customers' critical manufacturing steps. Let's focus on 1 example of how ESI is supporting customers that are building out AI infrastructure. As computing workload shifts from AI training and high-performance computing, server ports are becoming dramatically more complex.

10 years ago, a typical server board might have had 10, 12, 14 layers. Today, leading hyperscale platforms are increasingly moving towards 20, 30 or even 40-plus layer boards to support higher bandwidth faster signaling and more sophisticated power delivery. When fabricators stack this many layers, they must play copper uniformly through these extremely deep and neural holes that connect the entire structure. These high aspect ratio through holes are difficult to play reliably using traditional chemistries. Our PPR or periodic pulse reverse copper plating technology allows fabricators to deposit copper much more evenly to these challenging structures. The proprietary specialty additives in our chemical bass and unique electrical waveforms applied to the bat allows for a very granular control of metal deposition.

That dynamic control enables copper to deposit uniformly along the entire whole wall. The result is a more reliable connection, electrical performance and higher manufacturing yields for our customers. as they build more complex architectures to support hyperscale computing needs. Our technical service teams operate on site with our customers as they start their manufacturing lines, helping them with a deep technical work of scale up at every step of the way. Just last year, we helped the single customer stand up an unprecedented 20 new plating lines for these complex boards. Today, we are a critical partner to many of the world's leading PCB fabricators, helping them scale production of these next-generation boards as AI server deployments accelerate over the coming years.

Now let's turn to wafer level packaging, where we participate in one of the most important structural shifts occurring in semiconductor packaging today. As features shrink and interconnect density rises, manufacturing sensitivity increases sharply and customer require void fruit copper fill, tighter bump height control and highly uniform metal deposition. Our solutions directly address these needs to improve interface reliability at very small geometries. In this business, we grow by winning share in advanced nodes, winning premium packaging content and ultimately enabling entirely new nonstandard chip designs.

Customers want material solutions that solve input output connectivity at higher density and smaller sizes. One of the most important packaging architectures today is COWOS or chip on wafer on substrate. Cowos integrates multiple high-performance logic processors and memory stacks on a silicon interposer. This architecture dramatically increases memory bandwidth and compute performance for high-performance GPUs. Building these structures, whether 2.5D interposers 3D stacked bandwidth memory or embedded silicon bridges introduces new material challenges. Each additional layer, interconnect structure or wafer-level feature introduces opportunities for specialized materials in plating chemistries. Today, we work closely with leading semiconductor manufacturers and OSAT providers around the world, helping enable the advanced packaging architecture that power modern AI compute platforms.

One specific example of where Element Solutions' suite of products can help packaging customers solve a unique pain point is a reduction of intermetallic contamination or IMC in joints with barrier layer plating technology. As packaging features shrink, controlling how metals interact in conductive joints becomes a big challenge. When copper interacts scale to very fine pitch, the formation of too much intermetallic compound creates overly brittle, unreliable joint seal crack. Our advanced barrier layer solutions address those mechanical features by inserting advanced materials that stabilize the interfaces within these connecting structures.

Leveraging the combined expertise in our portfolio, we've developed several alternative barrier chemistries that improve reliability operate at lower temperature and meet tightening regulatory standards. The result is a more durable interconnect stack that supports finer packaging connections. We are continually advancing the superiorlayer technology to help customers control interfaces and shrinkypitch. Importantly, -- this allows customers to keep their existing manufacturing flows without needing major tool changes. We help them extend the value of their existing CapEx by solving a real technical and financial constraint. As a result, we enable today's manufacturing transitions and are also well positioned to provide future critical technologies like hybrid bonding. We've shown how we're pushing today's packaging platforms further. -- but there are greater leaps that can be made with an entirely new materials. That's where Kuprion comes in. To introduce the breakthrough copper technology and the opportunities behind it, I'm pleased to hand it over to Alfred in, Co-Founder of Kuprion and the inventor of active copper.

Hi. I'm Alfred Zinn, R&D development, fellow a company founded to commercialize the unique nano copper technology, trademark active copper, which Element Solutions is now bringing to market as a commercial product. as its inventory, I'd like to tell you a little bit about what makes this product so special. Copper has been used in the electronics industry for decades and is well known for its superior electrical and thermal properties. Copper is significantly cheaper and more abundant than other central metals such as silver or gold. However, commercialization of copper sintered materials has historically faced a number of challenges. First, it is very difficult to synthesize nano copper and control its particle size and second, it is susceptible to oxidation in air before centering. At Kuprion, we developed a patented family of centering pastes, adhesives, inks and gaskets that overcome both the challenges of noncopper synthesis and prevent oxidation so that it can be handled safely in air.

Active copper has all the benefits of wild copper without the drawbacks fusing to form solid copper interconnects and strong bonds with a pressureless, low-temperature centering process. Active copper materials can be stored at room temperature and safely handled in air and still fuse readily under a nitrogen atmosphere using standard manufacturing reflow equipment and reflow profiles. And because active copper converts to balcopper, after an initial fusion step, it can be subsequently processed in unlimited reflow cycles, making it a good alternative to high-temperature sorter for reliable, high-volume manufacturing. -- active copper has the unique capability of being adjusted to a coefficient of thermal expansion values ranging from 3 to 17 ppm. This unique CTE tuning capability enabled CTE matching to many different substrates, including ceramics, silicon, silicon carbide, gallium nitride and many more.

These characteristics allow engineers to optimize heat dissipation in electronic systems while minimizing the mechanical stresses caused by CTE mismatches. These material characteristics are incredibly exciting, solving problems across a wide range of demand applications in semiconductor manufacturing and packaging, automotive, ADAS and EV power electronics. Telecommunications, satellite and aircraft systems, data centers and medical and consumer devices. From the beginning, customers have been very eager to test this material in their electronic systems and design it into their applications as well as find new application spaces.

Element Solutions has been a terrific partner, driving production scale-up accessing new application spaces and generally support the commercialization of this materials technology platform. It has been a tremendous partnership where we are working on solving many hard problems and on our way to seeing the payoff. Now I'd like to turn it over to Nick to discuss a few of the applications that have resonated with customers the most.

Thanks, Alfred. I'm Nick Antonoplas, VP of Emerging Technology for our Electronics business. Now that you've heard about the technology behind active copper, I want to share how we're using it to address our customers' most critical pain points. The 3 main pain points focus on power density, thermal reliability and manufacturability, active copper addresses all of these needs, providing extreme thermal conductivity and a tunable CT to match the expansion profile of the substrate while being virtually immune to thermal cycling fatigue that we see in sales. Importantly, active copper is versatile and compatible with current manufacturing windows, allowing customers to qualify next-gen performance without disrupting established processes. These emerging needs and Kuprion's ability to solve them provides a tremendous opportunity to become a key long-term partner for Tier 1 fabs and IDMs where speed, performance and reliability matter most.

Let me talk more about each of these use cases. Printed circuit boards generate a significant amount of heat and to address this, manufacturers use copper coins to dissipate heat from an active component. However, traditional copper coins are rigid, prefabricated metal slugs that restrict the design of the PCB. Copper coin paste like active copper allows designers to fill virtually any size shape in the PCB and center it with their standard processes. The PACE actor makes is CT tunable, which can accommodate the stresses caused by expansion mismatch in the PCB itself. It centers into a solid copper structure having the melting point of copper of over 1,000 C, allowing it to go through multiple reflow cycles. It's a leaner and faster way to manage the extreme heat loads of the next generation of power hardware without sacrificing reliability for the most mission-critical applications.

Next up, let's talk about power delivery. Modern GPUs and CPUs needed for AI servers and data centers require massive amounts of current and traditional thin-film PCB traces simply can't carry that load efficiently. Active copper changes at architecture of the Board by allowing us to move from thin traces to deep, high-capacity power trenches. By using our proprietary copper paste and centering process, we can fill trenches ranging from 0.5 millimeter to 5 millimeters wide and up to 2 millimeters deep. These bills become solid copper structures with a superior conductivity value, allowing for efficient power delivery and more freedom to design houses that can handle the extreme power demands of AI hardware.

You've heard about the opportunity in packaging and substrates as substrates move toward glass for high-performance packaging after copper is a cutting-edge solution for the thermal challenges that glass exhibits. With active copper, we've created a proprietary pace and process specifically engineered to fill glass fees with diameters as small as 25 microns and substrates as thick as 800 microns. A wide CT range allows active copper to expand and contrast at the same rate as the glass, reducing mechanical stress and improving the reliability. These are just a few of the initial applications we're excited to develop and commercialize.

I want to leave you with why Element is the ideal partner to commercialize this product and capture the potential it brings to customers. Prior to the acquisition, Kuprion was a lab scale technology. Element provides Kuprion a head start with its existing Tier 1 customer base and provides the scale and manufacturing resources to meet the active copper demands for those customers. Building out our manufacturing capability is a top priority. We opened a mid-scale site this month to serve the near-term pipeline and have plans for a larger scale plant underway.

Additionally, bringing a completely new material into electronic supply chain is incredibly difficult because customers are changed adverse and require rigorous validation. Element can leverage the deep track record it already has with OEMs, foundries and OSATs to navigate these complex multilayer qualification cycles and establish active copper as the industry standard. Finally, after Copper is highly complementary within Element's portfolio of system-level solutions from wafer plating to die-attach element can work with customers to ensure that active copper will be fully compatible with the surrounding circuit pathways in a way that a stand-alone company cannot achieve.

We are very excited about this technology and the potential it has to support the most pressing needs of our major customers globally.

Hi. I'm Tom Hunsinger, Senior Vice President of Packaging and Board Assembly. Our business helps customers build more complex and reliable electronics assemblies with critical materials and technical support that improves heat dissipation, interconnect precision, production yield and reliability, from the semiconductor package all the way to the finished circuit board. Let's start with our semiconductor assembly solutions. Our customers include EV OEMs, tier 1 power semiconductor suppliers and semiconductor package and testing companies or OSATs. For these customers, artificial intelligence and the electrification of mobility are creating new challenges around thermal management, attachment complexity and manufacturing yield.

EV manufacturers require advanced materials capable of supporting higher operating temperatures, greater power density and long-term system reliability, Our proprietary centering materials, power solder preforms, and thermal interface technologies play a critical role in connecting and managing heat within next-generation power modules. With our existing technology and applications expertise, we have a unique opportunity to build product leadership in a variety of power electronics use cases.

For high-performance computing, as devices require more complex 2.5D and 3D architectures, our high-precision die attach materials matter more than ever for the millions of AI processors being ordered by hyperscalers. As components shrink and performance source Customers want proven technology with better thermal paths, tighter bond line control that efficiently scales from development to high-volume manufacturing. In our Argomax product line, we have a core technology focused on solving the problems of power and thermal efficiency. Argomax gives customers a silver centering platform for die and package attach that improves thermal performance, electrical conductivity and long-term reliability while supporting scalable manufacturing approaches like low pressure centering.

It does this by creating a high conductivity bond line that lowers the heat transfer resistance between the die and its cooling structure. -- enabling better heat dissipation and more reliable operation of the inverters that connect a battery to the motors of an EV. We are helping the EV supply chain climb the quality and performance ladder and extend range. This has helped us win a significant new business with Tier 1 suppliers and vertically integrated OEMs globally. Today, our materials support millions of EVs worldwide, helping deliver reliable performance across billions of kilometers of operation.

Our demonstrated capabilities in electric vehicles provide an entree into other areas where high thermal loads and long service life are critical, such as charging infrastructure and electrical infrastructure for industrial and data center applications. Building on the success of Argomax, we are extending our leadership in power electronics through innovative applications development that converts existing materials into new form factors that enable different package designs. We do that through precision engineering that addresses the full stack of attachment solutions required for electric vehicle assembly. These products allow for more attach points per power module and the ability to attach on to a wider variety of substrates.

I'd like to walk you through 3 examples that deliver this full stack offering. In Bond Pat, we have leveraged our metals expertise to create an innovative assembly-ready topside interconnect. This type of copper-based interface delivers up to 20x higher reliability compared to traditional aluminum interconnects and provides better compatibility with copper wire or ribbon bonding. With Acculam, we have created precision die attach for EV modules. Here, we are able to precut a central film to provide exact bond layers to enable fast, clean manufacturing that reduces manpower and material waste by up to 85%. This improves reliability and lowers the cost of ownership in high-volume power modules, creating a highly attractive, scalable die-attach solution for automotive inverter production.

Finally, with AccuTac, we can expand centering into more complex module geometries by allowing material placement in cavities, lead frames and other difficult to reach locations. By providing precise bond line control with volume pick-and-place manufacturing processes, we enable designers to extend centric technology throughout the module stack and to unlock new designs and smaller footprints. What you see with these power electronics product offerings are examples of how Element Solutions meet customers where they are to solve manufacturing bottlenecks. We can create value through superior applications innovation.

Let's now move to circuit board assembly, where we solve problems related to component attached on to printed circuit boards. At the Board level, our customers are currently dealing with a very specific set of challenges driven by larger packages and tighter tolerances, particularly in AI accelerators, cloud networking hardware and advanced automotive electronics. As semiconductor packages get bigger and run hotter, issues like thermal warpage, coplanarity and site joint reliability become gating factors for yield and long-term performance.

Our solutions are designed to solve these problems directly in the assembly process. Our spacer blocks and engineered tree forms control standoff hype and reduce tilt on large ball grid arrays, while our advanced solder paste, edge bonds, underfills and coatings, improved first pass yield and protect assemblies and harsh operating environments. As customers push into higher performance, higher cost of failure systems, assembly materials move from being a commodity to a critical enabler. That creates a clear opportunity for higher value content broader material sets per design and durable specification-driven business for Element Solutions.

Let's focus on one timely example of how our experience and thermal management is meeting an urgent need for AI accelerator assemblies used in high-performance computing. AI accelerators, such as GPUs and TPUs, use flip chip ball grid array packages to connect chip packages to larger board substrates. These package architectures are far less tolerant of the area variation and even small inconsistencies can affect manufacturability and integration with control boards. These large area, high dense arrays can have several thousand small solder balls that need to be precisely bonded over a wider surface area than ever before. Unfortunately, during the heating process to liquefy and connect these small solar balls, large-format packages can work during heating causing short circuits and poor connections and unchecked assemblies that ultimately hurt manufacturing yields.

Our [indiscernible] blocks these stride failures in a simple but elegant way by inserting a spacer block that only melts to a precise height during the heating reflow process, thus preventing warpage on the package, protecting the integrity of the joint and significantly improving yield. As investment in AI data centers continues to ramp, we are seeing a sharp uptick in demand for engineered free forms like Tru height that reduce end-of-line defects. In recent quarters, sales from these products have grown 50% year-on-year, and we see a robust pipeline of opportunities for these products over the next several years.

I'm Bruce Molasnik, Senior Vice President for Micromax, a business which I am thrilled to be leading after several years growing our circuit board assembly business. Micromax is a recent addition to our electronics portfolio, The business has a long history as a pioneer in advancing circuitry technology, having developed the first commercial resistor pace back in the 1960s. Today, Micromax is a leader in highly specialized inks and pace specifically engineered for mission-critical electronic applications where performance and reliability are nonnegotiable. Our portfolio of services cover 4 key end markets. First, radar and communications where our low temperature co-fired ceramics or LTCC materials enable high-frequency, high-reliability communication systems. Second, our passive circuit board components where we are a leading supplier of specialized resistors, capacitors and inductors for demanding and complex applications.

Third, automotive, where our thick film pace and glass ceramic tapes, integrate automotive electronic circuitry on a variety of substrate surfaces to enable critical subsystems. Finally, Health and Safety Technologies, where our conductive inks are used in various biomedical sensor and other printed electronic solutions. Given the highly specialized nature of our products, our criticality to customer supply chains, this is a high-quality business with strong margins. The rationale for Micromax is consistent with Element's portfolio-wide effort to enhance customer intimacy and offer system-level solutions that solve our customers' most critical needs.

I'll highlight 2 focused areas. First, we are seeing a trend toward power dense, miniaturized designs and a need for advanced resistors that can deliver tight tolerances over a large temperature range. Our position resistor pace allow customers to maintain stringent and stable electrical control even as chips and boards become more complex. This has uses in a variety of applications, including increasingly advanced driving assistance and data center. Second, as high-frequency wireless communications expand, there is an urgent need for low signal loss systems that perform reliably in harsh environments.

Our solution here is low temperature co-fired ceramics or LTCC, by combining ceramic tape with conductive metal paste, our LTCC provide exceptional mechanical, electrical and thermal stability that ensures signal integrity for advanced antennas. Micromax technologies are poised to capture a growing share of demanding end uses in automotive, medical and aerospace defense and are at the forefront of RF communications for the next generation of wireless infrastructure. satellite communications and defense applications. Growing power density can present challenges when it comes to the passive components within electronics assemblies.

All electronics rely on passive components like resistors, but is the fast-growing markets with demanding applications like advanced mobility and data connectivity that drive opportunities for Micromax. Our materials ensure that resistors maintain their precise values over long periods of time and across a wide temperature range. This is critical in key markets such as data centers, aerospace systems, automotive electronics and renewable energy. We differentiate our manufacturing consistency to support our high customer yields. Our customers might print millions of features in a given period and even a tiny deviation in paste quality can lead to park failure. In modern electric vehicles with Level 2 or higher autonomy, for example, there might be tens of thousands of passive components supporting the vehicle's electronic systems.

All these components need to be able to perform with the same level of precision over a wide range of temperatures. Another exciting growth vector is advanced antenna applications. Driven by network densifications and accelerating data demands, specialty materials used in advanced antenna systems are experiencing strong growth. This expansion spans both terrestrial applications such as 5G, radar and automotive and nonterrestrial technologies, including satellite systems. The world needs more high reliability antennas and Micromax has a diverse portfolio of LTCC materials to support antenna performance for various frequencies, sizes and thermal environments. We pair proprietary ceramic and metallic materials with deep application experience to optimize product performance and manufacturing consistency.

This ultimately reduces our customers' total cost of ownership. We've owned Micromax for only a few months and already a few things are clear. The team brings exceptional technical depth with strong applications expertise and decades of development experience built through close collaboration with customers. Customer feedback to date has been very positive. Over the next several years, we believe we can accelerate growth from Micromax to outperform its end markets by refocusing on commercial execution. We see opportunities for higher penetration of Micromax's most advanced passive components in communications and high-power applications, including automotive and data center. We will expand our access to our wider network of OEMs and key specifiers, with whom we enjoy established commercial and technical relationships already.

Furthermore, we will leverage Element Solutions' global customer network to broaden reach, accelerate adoption and unlock growth opportunities worldwide. At Element Solutions, we have a track record of investing ahead of inflection points. Micromax is well positioned to solve emerging customer pain points and mission-critical applications of growing relevance. We are committed to build on this legacy of innovation.

Hello. I'm Matt Lebois, President of Element Solutions Specialties segment. Our specialty segment is a collection of high-quality niche specialty materials businesses that together represent more than $800 million of sales and over 1,900 employees around the world. Our businesses serve a broad range of end markets headlined by our decades-long relationships in the automotive sector and its industrial finishing suppliers. Notably, roughly 15% of our revenue now comes from electronics-related areas such as semiconductor manufacturing, electrical grid infrastructure and consumer electronics. We're also geographically diversified with technical teams, production sites and customer relationships across Europe, the Americas and Asia.

At first glance, these businesses may look quite different. Our Industrial Solutions business modifies the surface of metals and plastic components. Our Energy Solutions business supplies critical fluids that enable offshore drilling and production equipment to operate safely in harsh subsea environments. -- and our latest addition, EFC supplies high-purity specialty gases and advanced materials into some of the most demanding technology markets in the world. Underneath that diversity, all 3 businesses share a common operating model and ecos. First, they are all high specification, high qualification businesses. Our products are not easily swapped in our app. They are engineered into our customers' processes, validated over very long periods of time and often tied to strict performance, reliability, environmental or purity requirements.

Second, they are technical service-intensive businesses. The value we provide is not just the chemistry or the gas molecule itself. It is our formulation expertise, our application know-how, troubleshooting capability and local technical support that help customers run their critical processes reliably and efficiently. Third, our businesses generate predictable recurring revenue streams. These are consumable materials used repeatedly in ongoing production, finishing, drilling, infrastructure or high-technology applications. Once qualified, our materials tend to remain in customer production processes for many years because the cost of failure is high and the cost of switching is meaningful. This model produces strong financial characteristics, including high and stable margins, relatively asset-light operations, healthy cash flow and attractive returns on capital.

Our diverse businesses are connected by the same value creation formula. -- highly specified materials, deep technical service, recurring use and durable profitability. Today, you'll have the opportunity to hear from some of the leaders that are both accelerating growth in our newest businesses and those bringing new approaches to build on an established legacy of long-standing industry leadership. Our profit improvement strategies are tailored to each business. As you'll hear from its founder, Pavel Perla, with EFC Gases, our strategy is growth acceleration. ESC brings exposure to attractive secular growth markets like semiconductor manufacturing, space and satellite systems and electrical infrastructure.

We're building a strong qualification pipeline and enhancing capabilities in purification, metrology, recovery and recycling to support our customers. In Industrial Solutions, the opportunity is to build on our existing leadership position. we've streamlined costs, our increasing automation and growing content and margin through higher value applications. In Energy Solutions, we focus on production-oriented recurring applications. support customers with qualified environmentally advantaged fluids and expand selectively where deepwater activity, equipment complexity and reliability needs create durable value. Specialties is our home for a niche, high-margin service-intensive businesses.

We serve many end markets but have 1 consistent value creation story. differentiated materials and applications, embedded customer positions, recurring revenue, strong margins and durable cash flow.

Hello. I am Pavel Perla, Founder of EFC Gases and Advanced Materials. Now proudly part of the Element Solutions Specialty segment. EFC is a leading provider of ultra-high purity electronic gases, rare gases and advanced materials that are essential for high-value high cost of failure applications in a fast-growing niches like semiconductor manufacturing, satellite propulsion and electrical infrastructure. These key end markets make up more than 90% of our sales. and provide a tremendous opportunity for continued growth both within EFC as well as across the Element portfolio.

Before we dive into our 3 growth areas, I want to share the pillars of our value proposition and how we are positioned to win in these very specific segments of the gas market. First, -- we specialize in purification, synthesis and metrologies of gases like xenon, krypton and neon, materials that are mission-critical for our customers. This differentiates us from industrial gas majors that serve more commoditized markets. In fact, many cases, these gas majors are our customers and distribution partners.

Second, because of these specializations, our competitive advantage is rooted in our technical precision and application know-how. Our solutions and approach are highly customer-centric and that we purify and package these materials specifically for our customers' most complex use cases, which allows us to develop intimate long-term relationships in attractive high-growth verticals. Finally, we offer a differentiated closed-loop operating system that recovers, repurifies and recycle rare gases directly at the customer site. This circular model ensures security of supply for our customers while helping them win on cost and sustainability. As the semiconductor and satellite demand scales, EFC is uniquely positioned as an indispensable sustainable materials partner for the next generation of global physical infrastructure. Matt will now provide you with more detail on the exciting growth opportunities in our focused end markets.

Hello. My name is Matt Adams, Executive Vice President at EFC, responsible for our commercial organization. We're incredibly excited about the growing breadth of solutions we can provide to customers. So let's dig into how we add value in our largest end markets. One of the most high-value and fastest-growing use cases for our specialty gases is semiconductor fabrication in the United States. We offer a variety of dielectric etch gases, plasma cleaning gases and unique rare gas recovery and recycling solutions that can improve sustainability and cost effectiveness at the fab. EFC captures the opportunity by managing the molecule qualification process, allowing us to capture a greater wallet share and form deeper relationships with Tier 1 fabs, molecule qualification drives future volume and earnings growth. EFC has a track record of achieving successful molecule qualifications with new customers. .

Once an EFC high-purity etching or deposition gas, for example, is qualified into a specialty tool or process flow at a Tier 1 fab, it becomes a predictable multiyear revenue stream and positions EFC as a trusted partner for many future qualifications. In 2025 alone, we achieved double-digit material qualifications. On average, each of these qualifications can translate to a multiyear revenue opportunity of over $1 million. We are winning these qualifications through our customer centricity and responsiveness. We are nimble, focused on quality and service and our customers trust us to get it right.

We see ample white space with both existing and new customers through additional qualifications, many of which are already in process. Over the last few years, a modern day space race has intensified for satellite manufacturers and other blue-chip aerospace companies. To meet the growing space economy demand, the industry is shifting to smaller, lower-cost satellites that can be launched more efficiently and therefore, more frequently. To put this in perspective, satellite launches have increased at a CAGR of more than 35% since 2018 and are expected to nearly double over the next 5 years. As a primary provider of the high-purity Xenon and krypton necessary for satellite propulsion, this dynamic has created a significant secular tailwind for EFC to support these mission-critical projects with customized solutions that meet ultra-high purity and performance standards.

Our competitive advantage in this area is anchored in 2 places. First, the rare gas distillation column at our Hatfield facility is 1 of the few sites globally capable of the extreme purification and metrology required for aerospace grade noble gases. This custody to meet industry demand while creating shorter lead times with our customers. Second, the closed-loop operating system that I mentioned provides meaningful value to aerospace customers. We are the only provider with the capabilities to offer Xenon and krypton recycling and reloading at the customer site, which allow manufacturers to recover and reuse these expensive gases during ground testing. The combination of our technical capabilities, proprietary operating systems and application expertise creates a deeply embedded service model that lowers the total cost of ownership for our customers while securing our position as their one-stop shop partner.

As the global push for electrification and grid modernization accelerates, the demand for reliable, high-performance electrical transmission infrastructure is at an all-time high. EFC serves as a critical partner to major utilities and OEMs, providing the high-purity dielectric and insulating gases that allow high-voltage switchgear and circuit breakers to operate safely and efficiently. Another value-add we bring to this space concerns regulation around sustainability. Traditionally, transmission infrastructure relies on sulfur hexafluoride or SF6 gas, as an effective, reliable insulator. However, it is also considered 1 of the world's most potent greenhouse gases. EFC solves this issue by supplying recycled SF6 and providing comprehensive gas management services that significantly reduce the carbon footprint of our customers.

Our integrated fuel services covering SF6 delivery on-site recovery and reprocessing, position the company as a long-term operational partner for utilities, ensuring efficient life cycle management as grid infrastructure expands. To sum it up, we are excited about these 3 high-growth opportunities to continue expanding our business as part of Element Solutions. Now I will turn it back to Pavel to explain why EFC is such a great fit within the element specialties portfolio.

EFC is well positioned for growth within the Element platform and the advantages of being able to tap into element scale, customer relationships and technical expertise are already crystallizing since the sale closed in January. Element is already deeply embedded into the supply chain of OEMs across the semiconductor and aerospace. There is a real opportunity for EFC to leverage these relationships and gain greater mind share in these industries. Finally, with our deep roots in finding the niche value-added service-intense pockets of the specialty gas market, we share a lot of the same DNA as Element Solutions other businesses. We have the same solution mindset, high-touch service model and customer intimacy that defines this company, and we are thrilled to add new growth vectors in semiconductors, electrical and space infrastructure on which ESI can continue to build.

In ESI, we have a true partner for growth and expansion, and we see a very bright future ahead.

My name is Graham Dickinson. I'm the Senior Vice President of McDermott Enthone Industrial Solutions, or IS, for short. Industrial Solutions is a global surface treatment solutions platform built from targeted acquisitions. We have a broad-based technology capability and serve a diverse set of end-use markets and applications. We serve mission-critical and highly specified applications in our recurring consumables model and combine deep technical support with high customer switching costs into a durable business model with long-term customer relationships, the IS portfolio spans anti-corrosion decorative and wear-resistant surface solutions.

These core solutions are complemented by adjacent offerings in lubricants, water treatment and recycling chemical offerings. You think of our place in the value chain as a process technology provider, not on the other hand, as an individual product sale business. Some customer processes, for example, are made up of 25 to up to 40 tightly controlled processes in automotive decorative applications. At IS, we win by providing local agility versus our global peers. And conversely, we win from the breadth and value chain coverage and innovation versus our local competitors. We're invested in differentiated capabilities that support customer shifts from hexavalent to trichrome solutions that maintain performance and regulatory compliance.

We reduced customer cost of ownership with our 3S process, for example, that increases customer process efficiency and increases their backlog. We operate an OEM aligned global quality system that standardizes specifications, verification and audit processes, and the program ensures consistent performance across the customer's footprint aligned to OEM expectations. This is something our customers rely on when scaling or moving an operation, which is pertinent as our customers balance their manufacturing footprint globally.

Underlying the IS operating model is a deliberately decentralized structure, placing decision rights close to the customer. The implication is that the qualifications can oftentimes be completed in weeks rather than months. And in parallel, central product and strategy coordinates innovation priorities, portfolio expansion and entry into high-growth applications. And at the same time, the supply chain is flexible. Production is fungible, can be optimized across the region. It allows for supply continuity for our customers and enabling cost optimization internally. The result is an operating model that combines local speed, coordinated strategy and a flexible supply chain to drive share gain. Despite a challenging industrial macro, we're focused on improving the quality of the business. We have a simplified portfolio where we've exited underperforming areas and consolidated the portfolio from legacy acquisitions. We've been focused on both procurement and pricing discipline, and we've invested in site productivity and automation. And importantly, we're actively addressing legacy footprint fragmentation from the acquisitions, improving cost structure and asset utilization.

So coming out of this period, we're a more efficient business that will have higher operating leverage as volumes recover. So stepping back, with the platform built, the operating model aligned and the footprint improving, will be increasingly focused on growth. The growth levers are from market and key applications from share driven by fast regional execution and from portfolio and SAM expansion driven by innovation. That growth will be enabled by fast qualifications and focused strategy, high operating leverage and capital efficiency from an integrated footprint. Thank you very much.

Thanks for the time today. I'm Carey Dorman, President of Enterprise Operations and CFO of Element. I'm excited to share our vision for enterprise ops and then to join Ben as we talk about our growth algorithm. At ESI, central support functions exist to enable sustainable business growth. We've been intentional about consolidating our G&A functions under 1 team with a clear and focused mission. This team is responsible for the business of being a business. We provide table stakes for a nicely listed public company, plus compliance, risk management and tools to drive efficiency. Our goal is to keep customer-facing decisions as close to the customer as possible.

We're following a proven playbook of process standardization, technology-first solutions and a continuous improvement culture. With its playbook, we can enhance service while also reducing cost. We started this transformation in finance 5 or 6 years ago. We emphasize technology, process standardization and automation. These efforts drove significant efficiency and scalability. It also allowed us to successfully integrate multiple acquisitions and capture cost synergies quickly and without added risk. We drove finance costs down more than 25%, while at the same time driving internal customer satisfaction up by more than 30%. This is better quality and lower cost.

Over the last few years, we've been expanding this playbook beyond finance. And I believe we have a large runway ahead. Importantly, all of this progress was achieved before the proliferation of AI which opens a new set of value creation opportunities. Let's look at AI. We have a dedicated team of AI data scientists, engineers and business analysts. -- all pursuing use cases across our organization today.

In enterprise ops, we're looking for speed and efficiency opportunities. In supply chain, we're looking at enhancing flexibility and speed from demand planning through regulatory compliance. And commercially, we're exploring automating more of the customer experience from order management to troubleshooting to onboarding. We're taking the AI opportunity seriously. When we think about sizing the prize, the addressable spend pool is over $100 million on this slide alone. AI is an exciting thing for our business and our enterprise operations structure will make it easier to attack. And now let's pivot to growth in the future. As you heard from Ben earlier, our portfolio has changed, and our end markets have improved. This translates to an acceleration in our growth algorithm.

Here, we present our growth algorithm in 2 ways: First, by end market exposure. What is our portfolio mix? What are those end markets expected to grow? And how much can we conservatively expect to outgrow them. And then by business unit mix, what do we expect our segments to grow. These views on the analysis supporting them suggest ESI can grow at approximately 7% organically on the top line and through the cycle. The biggest changes in our end market mix should not be terribly surprising. Our portfolio has evolved from being consumer electronic centric to data center and B2B driven. Data centers are now more than 20% of sales, while mobile devices are now roughly 5% of sales. And while automotive remains a meaningful percentage of our revenue, Less than 15% of our business is truly industrial automotive, while the rest, representing more than half of our automotive exposure is driven by automotive electronics, a far faster growing market.

The weighted average through the cycle end market growth works out to be 5% to 6%. But we have a consistent track record of outgrowing our end markets through focused innovation and market share expansion. We expect its 1% to 2% outperformance to continue. Our ability to outgrow will come from different tactics in different businesses, some through technology, some through commercial excellence and some through pricing. Overall, the key that underpins it all is customer intimacy. Coming at the same growth question from a business mix perspective, we get to a similar roughly 7% expectation. We expect high single-digit growth from our Electronics segment, driven by semiconductor and circuitry solutions. We expect roughly 5% growth from our Specialty segment via industrial market share gains and strong demand from EFC gases. The upside to this whole outlook is from Kuprion, where we are only including conservative base case and from other early-stage technologies or opportunities that may contribute more meaningfully in the medium term.

This map also assumes that data center growth slows. This investment trend has driven growth in our recent quarters above what we are considering our long-term expectations. ESI has consistently translated strong revenue growth into even stronger adjusted EBITDA growth, both organically and through thoughtful strategic activity. Through 2018 to 2025, we grew sales ex metals by $370 million and adjusted EBITDA by $127 million, a 34% incremental margin. We achieved this through periods of outsized inflation and despite meaningful investment in facilities, R&D and OpEx, which have supported our trend puts higher growth. High incremental margins are structural. We generate gross profit dollar growth with minimal incremental cost to acquire or to support it. We continue to expect 30% to 40% incremental EBITDA margins over the medium term. These incrementals are supported by electronics mix shift, our innovation pipeline, AI and efficiency and continuous improvement in supply chain and across our functions. There will be, of course, intra-period swings but the trend line should hold, if not improved. It's a really compelling paradigm. Our strong earnings growth is expected to generate significant cash flow and reduce leverage organically. This creates opportunities to drive additional shareholder value.

Our balance sheet is in a healthy place, and we have consistently maintained the strength and flexibility over the last 5 years. Capital deployment has been opportunistic and has been strategic. M&A in some periods, buybacks or dividends and others and cash build in others. -- while always remaining committed to our targeted leverage ceiling of 3.5x. The takeaway here is that strong earnings growth provides upside to an already strong and flexible balance sheet. Ben, over to you.

You heard me earlier talking about our framework for deploying capital. And what you heard and what you see on this slide are no different from what we've said since the outset Element Solutions. We're opportunistic and flexible, but disciplined. Our priority is to fund internal growth capital that is customer-led tied to high-value growth. These projects together are not substantial enough to come anywhere near absorbing our total cash flow in any given year. With excess capital, we evaluate the alternatives available against our returns center -- our hurdle rate is variable based on our free cash flow yield.

In other words, we view our free cash flow yield or buying back our shares as our cost of capital. If we can't generate a premium to our free cash flow will either buy back stock, tire debt or build cash. Historically, we saw a high single-digit free cash flow yield on a 1-year forward basis for buybacks or a cash-on-cash return of 10% or more for acquisitions. Given these variables, our free cash flow yield, cost of debt and our M&A pipeline are always changing, our approach needs to be flexible and is inherently opportunistic. Capital allocation is ESI leadership's principal responsibility. That's both internal capital deployment, excess capital allocation and that of human capital. How do our people spend their time -- we encourage all of our leaders and everyone at the company to be very thoughtful about them. And we're spending our time on the things that matter and the things that will move the needle.

Human capital is our primary and most important asset. We spend multiples of our CapEx in OpEx, and that OpEx is effectively hours of our people's time. That time, it's an investment decision. We think our approach to capital allocation, discipline, flexibility and creativity are differentiators for our company. Our culture and growing reputation as a great long-term home for entrepreneurs is as well. The diversity of our recent transactions showcases those dynamics. Putting together the components of the growth algorithm Carey walked you through and our expectation of high returning capital deployment over time. Our target is to compound adjusted earnings per share in the mid-teens through the cycle.

With the top line of approximately 7% and our expected incremental margins, we believe we should grow adjusted EBITDA in the high single to low double digits. -- capital allocation should add a few points to that. I'd note that since the founding of ESI, we've compounded EPS at roughly 12%. However, we sold the business recently and reduced debt through the end of 2025. The benefit of our 2025 capital allocation is not captured in that 12% as those transactions only closed in 2026. In other words, that 12% understates the benefit of our cash flow and capital allocation over the past 2 years. So we believe our long-term growth algorithm is both compelling and achievable given our portfolio has improved and our markets are accelerating.

Before turning to your questions, let me try to summarize what you've heard today. First, our portfolio is better. It is faster growing and higher quality in terms of end markets, margins and cash flow generation than it was before. We've achieved this. We've enhanced our company deliberately by executing our strategy framework, investing thoughtfully and building a team that is translated to leadership of the best subsegments of our addressable markets. The fruits from these investments are only just getting to be harvested. Our pipeline of new technology is more robust than ever. We've established ourselves as technology leaders and in a long-cycle business like ours, this is only just beginning to accrue to our benefit.

You've heard from our leaders they're experienced, deeply technical and customer oriented. They have strong benches behind them as well. We have a great team and culture. And we've established a strong track record of capital deployment and a pragmatic approach to balance sheet management which, together with our business transformation should translate to an acceleration in earnings growth and a compelling opportunity for value creation. Thank you. And let's now take some questions.

[Operator Instructions] Your first question comes from the line of Josh Spector with UBS.

I wanted to ask first just on Kuprion. I appreciate all the details on the technical side of it. It's certainly helpful to get a better understanding I think we thought you might be at a point where you might talk a little bit more about some of the financial impacts of that with the new commercial facility coming online and just your thoughts around market sizing and TAM and how we should be thinking about how that rolls through given the forecast you just provided?

Yes, sure thing, Josh. Thanks for the question, and thanks for joining and what looks like on the road moment. Cuprion is contributing less than 1 point to our growth algorithm that we communicated today, and that's simply for conservatism. The bottleneck is capacity. We're investing heavily to expand capacity. The demand is truly off the charts for this capability. And I believe that, that 1% could be more than double that or we could deliver more than double that 1% to the growth algorithm, which would be upside to our plan as capacity comes online. I expect we'll spend $150 million over the next 3 years building that capacity. We've talked about an earn-out target of $100 million of revenue by 2030. That's the cap. And based on what we see, we think that we'll be hitting that on a run rate basis at some point in 2028, and it's really driven by capacity. .

The addressable market is multiples of that $100 million. To date, we've only gone again to a handful of customers with this technology because we don't want demand to outstrip supply any more than it already has. And as these sites ramp will be going out to more customers and well a better sense for addressable market size. So the conservatism here is really tied to supply chain. It's not tied to demand or technical capability of the product. We're on track from a demand perspective. We're probably ahead of plan from a demand perspective. and we're ramping up our investment to meet what we think could be significant demand in excess of that earnout level here over the next 4 or 5 years.

That's really helpful detail. And a really quick follow-up kind of somewhat related, I guess, is I looked at your prior investor deck, you didn't give a free cash flow conversion number. At least I didn't see it. I guess, having plenty of things to invest in is obviously a good problem to have. But a few years ago, you said 60% EBITDA conversion. Would you expect a terribly different number than that and you're going to forecast over the next few years?

So Kuprion is the primary large investment area outside of ongoing growth investment and maintenance CapEx. We will invest more in CapEx in 2026 and 2027 than we have on a percentage of sales basis in the past. We think that's a good thing. It's tied to customer-led innovation and demand. There are some opportunities on the gases side of the business as well to invest very high-returning projects tied to specific customer growth vectors. And so we've said it's about a 50% conversion from EBITDA to free cash flow in the past. I think that's a good sort of recurring level? Could it be modestly lower for the next 2 years, yes, but that would be tied to an acceleration in growth over and above what we've communicated here today as the long-term growth algorithm. .

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

Thanks for all the color and the details from the business leaders as well today. You spoke to the growth in applications around glass substrates for the next-gen packaging solutions, it looks like the industry is increasingly moving towards co-packaged optics or silicon photonics for growth. How is AS positioned over the long term to capture this shift? Are there any negative offsets to perhaps a copper portfolio -- and if I look at the presentation, it looks like Corona maybe a bit of Micromax are exposed to this. So any color around this opportunity and who you're working with, what your market share potential is as well.

Yes. Great question. Thanks, Bhavesh. So I want to separate optics and interconnect, right? So we're moving from copper cable wiring to optical wiring and our copper is not really used very much in copper cable wiring, maybe at some edges around the connectors, but not in the coax itself, if you will. And so moving that from copper to glass fiber optics doesn't erode our market. On the other side, as we move from plastic substrates to glass substrates, you can get much finer feature sizes and find and deeper aspect ratios. And our portfolio is very well positioned to deliver value in that market.

It's a market that's just emerging and current production technologies are really not the yields that our customers want, and Cubrion solves that in a meaningful way as an example. So we see this as this technology transition as an opportunity for substantial share and it's very high that is differentiated from a performance perspective, dramatically improves our customers' yields, which translates into value for them, and we'll share in that value.

And then maybe if you look at the various platforms, you gave your midterm growth outlook, certainly seems like the near-term trends are pushing for a stronger growth than that in electronics and perhaps an inverse in the specialties group. Could you maybe have like a second half '26 or '27 outlook in terms of how you think about organic growth for the 2 platforms?

Yes, the specialties business has several strong growth vectors in it. The offshore business grew 15% in the first quarter, and between pricing and an increase in drilling activities, we expect that business to grow healthily in the mid-single digits this year. And EFC has a tremendous tailwind behind it and very strong team and strong commercial execution. And so that business should also be able to grow nicely. The industrial surface treatment business, we've thought that it's been at trough for an extended period of time, and there are some geopolitical headwinds, particularly in Europe right now, but we haven't seen them actually manifest in the P&L year-to-date.

So it's been a tough environment for the IS business. We've outperformed and we expect to continue to outperform, and we haven't seen the recent trends impact the business as yet. On the electronics side, it's been really strong, right? And we've gone from strength to strength coming off a peak year, yet delivering 15% organic growth in the first quarter and our expectations of continuing strong levels of growth in 2 -- the -- it's not our order book, but the supply chain backlog, if you will, or the supply chain order book associated with data center build-out seems durable well into 2027. If you're asking sort of upside, downside to our long-term plan, we have conservatism built in simply because the current operating rates, the current growth rates are well in excess of our long-term growth algorithm. So we're assuming that trees don't grow to the clouds and that there'll be a deceleration, but we have no obvious indication of that deceleration is imminent.

And we've also put quite a bit of conservatism into the Kuprion opportunity given our visibility on getting that supply chain up and running.

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

Thank you for the great and detailed presentation. That's actually a good segue into the question that I had which was the slowing in data center you conservatively assume that that's going to happen in your long-term growth outlook. I was wondering if you could walk through what your assumption is for when that actually starts to happen, if that's a fuzzy number, and what your growth looks like before and after that transition becomes apparent.

Yes. We don't have a crystal ball around that, John. We built our growth algorithm off of industry forecast data, right? And so the industry forecast from previous Mark says that the PCB market from a volume perspective is going to grow 7-ish percent through 2029. And so that clearly has a deceleration at some point in the next 4 years, but we don't have a pin in that number. And so we're just baselining our forecasts of -- or our growth algorithm off of industry forecasts. As I said just now, there's nothing indicating a slowdown is imminent if anything, we're seeing an acceleration in certain pockets of the market. And we see opportunities to outperform given our concentration in the higher growth, higher value segments and new innovation we're bringing to market.

Got it. And Carey, I had a question on the $100 million savings target. I was wondering if you could talk about what the cash cost of those savings are as well as the pace, number one? And then kind of how that impact press you go through those.

Yes. Thanks, John. So just to clarify, I think we called it an opportunity, which I would say is a little bit different than a savings target. It's -- think about it as the pool of spend that we're playing in as we look at where we can deploy AI most effectively. So I would expect meaningful contributions over the next handful of years as we're seeing this technology evolve, and we're learning how to use it well in our business. we are not setting aggressive internal targets, and I would expect the onetime costs associated with that with those achievement of those savings will be relatively modest. But more to come on that in the coming quarters as we are ready to disclose. .

Yes. Look, I think that we've done a good job. Carey has done a great job of implementing technology to add efficiency to our processes with the goal of having more efficient processes, not simply cost savings and the cost savings fall out on the back of that. And there are more tools available to us today than there were 5 years ago and there are more domains that we can pursue with those tools. So Carey is talking about $100 million of G&A that we can go fishing in for opportunities and we're already in the process of that. I wouldn't consider those cost savings factored into our incremental margin evaluation, right? We didn't have this size opportunity to Hunt in when we started 4, 5 years ago, yet we've delivered good incrementals in line with our long-term targets, while ramping up investment in OpEx for growth. And so I view the AI opportunity or, I'll call it, process efficiency through technology opportunity as all additive to incremental margin.

I would just add also that none of that $100 million addresses the procurement opportunity and some of the potential, say, revenue opportunities associated with it. So it's still early as Ben said.

[Operator Instructions] Our next question will come from the line of Pete Osterland with Truist Securities. .

Thanks for all the information this morning. Just first, I wanted to start by asking another 1 on the growth algorithm. You gave us a lot on how your targeted performance relates to the underlying market growth across your end markets and your businesses. I was wondering if you could expand on that and maybe talk through where you see the highest risk of variability. I guess if you were to outperform or alternatively miss these targets over the next few years, particularly in terms of where you expect to outperform underlying markets where within your portfolio of businesses, do you see more risk of this happening? And what are the most relevant drivers you're focused on that would impact meeting your outlook?

Sure. So thanks for the question, Peter. So you're just trying to understand sources of variability versus the market arrow. So execution, if you will, where do we have the most execution risk, market share risk and so forth. And -- it's a good question. As I see upside here, it's Coperion in some of the other emerging technologies you heard about True height space or some of our TIM we've done a really good job with circuit board metal server board metallization technologies, and we've got a strong market position there. .

The short answer is we've developed incumbency in these markets. And these are markets where there is a very high bar to change, especially in the fastest-growing ones where our customers are just solving for capacity addition, right? It's not about driving out the incremental penny or nickel. It's meeting surging demand. And so as I see it, that incumbency is very powerful and gives us more upside than downside as we roll into the next several years. And -- based on our expectation that the current growth rates aren't abating any time soon.

Okay. Great. Very helpful. And then just as a follow-up on a related note to growth. on capital allocation. In the current valuation environment, do you expect to be doing more bolt-on M&A in the near to medium term? And where within your portfolio, are you seeing the most opportunities in the pipeline for complementary business that could be a good bit .

So we never know when some been great to come across our desk and valuation for these types of businesses tends to be less driven by the market multiple. They're really high-quality businesses and they're scarce. And for the most part, they're private companies held by families. And so we don't see too much volatility around valuation. The pipeline is fine, I would say, right now. We're not actively working on anything, but we feel as though but we're regularly maintaining dialogue with the principles of the businesses that we're interested in. And it's just a matter of when, and we can't catalyze those transactions. It's sort of takes 2. And the other side of the table has a large bearing on that. And we're very happy to build cash.

Should there not be attractive things to do with our capital -- we're still in the process of delevering a bit from our acquisitions last year, so there's no urgency. But I would expect Element to continue to be on the offensive in terms of building its portfolio we're building confidence from Micromax and EFC around integration and around steps into logical adjacencies to our portfolio based on the receptivity and the success we've had to date.

Your next question comes from the line of John Roberts with Mizuho,

Have you been able to gain some share from 1 of your major competitors been for sale for the past 6 months. So maybe talk a little bit about win rates in that business?

You're asking about the Industrial Solutions business. The Industrial Solutions business has done well over the past several years. We have consolidated that market, right, first with the Endo acquisition and the Covent acquisition. We have a very strong position, a very strong team, a globally capable technical services organization. You heard from Graham earlier today talking about both sort of the vectors of growth and innovation, how we're spending our time and our outperformance relative to peers. So we do believe we're taking share in that broader industry and not simply improving the business through commercial excellence, but also through productivity, and you can see that in the margin expansion we delivered through a period of inflation. .

And then secondly, Silver has become a bigger cost component, and maybe Micromax brings in a being handled differently from the historical instead.

John, we missed a portion of that question. You said silver has become more important. Micromax brings in.

Yes. And you've historically had an automatic pass-through on Tensor, but I think those other metals are handled differently.

No. So tin and Silver and our assembly business are passed through with a very similar mechanism. Micromax also has a metals pass-through mechanism. And so we view those as surpass through sales, where customers want fixed prices, we will commit to a fixed price but hedge that exposure. -- that creates a little bit of noise in the P&L and in some periods, but over time, we don't lose any value associated with that middle.

Just I think to clarify that point, the profit dollar margin protection embedded in our pricing model for our legacy tenant silver business holds with Micromax. So there shouldn't be a risk to profit dollars as metals function. .

Your next question comes from the line of Harris Fein with Wolfe Research.

Just 1 for me. You took the effort to differentiate today between automotive electronics, which are growing a lot faster versus automotive surface. Just -- maybe any sort of framework as to how we should be thinking about electronics intensity or content per unit opportunities on the automotive electronics side?

Sure. So if we go back several years, we thought that our auto business would be growing low to mid-single digits because auto units would be growing low-single digits and content per unit would grow 1 to 2 points faster than that. What we found over the past several years is that our auto business on the surface treatment side hasn't seen that growth vector because units have been challenged, particularly in the West. But our automotive electronics business has vastly outpaced that as there's more sensor technology, more autonomous systems, more power electronics and so forth. And so we're conservatively saying our automotive electronics business is going to grow in the mid-single digits. -- and our industrial auto surfaces business will grow more with SAAR. Recent evidence would suggest the auto electronics business can grow much faster than that.

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

I just wanted to ask on the breakdown of the business where you're talking about the AI data center, telco, high-end compute, the 20% of sales you guys laid out an industry CAGR or at least your view of what you can grow there about 11%. I think you've clearly been growing higher than that near term. So I'm curious if you can kind of define what you think that growth might look like for that part of the business over the next 1 to 2 years versus what you're framing as the market, just given kind of where the industry is at today versus your longer-term view?

Yes, absolutely. Yes. That was something we struggled with because there's a lot of dispersion in that portion of the business. You've got the TruLite spacer is growing more than 50% a year. You've got the PPR technology growing at a similar CAGR -- and then you've got your memory disk business, which is growing okay, but basically, the supply chain is at full capacity right. So you're not going to get the same growth arrow there. And so we put it all together to get to -- it's a double-digit number. In the near term, it's growing faster than that, right? Like our expectation is that this year and next year, it's going to be growing well ahead of that.

But again, we've taken this view based on industry research that there will be some deceleration at some point. And so that's how we landed at is that overall piece of business or that overall slice of the business growing at 20-ish percent right now, something in the high teens to 20% is a good rough figure. I don't have it directly.

Your next question comes from the line of Frank Mitsch with Fermium Research.

Thank you for the color and the detail of the various segments. It sounds like the overarching commentary is on EFC and Micromax were positive. I'm curious here you are several months into owning both of those businesses. how -- what may have surprised you positively or negatively on those 2 acquisitions?

Yes. So Micromax came out of the gates incredibly strong and continues to be performing really, really well. They've got great capability, the customer overlap and the sort of collaboration between our organizations is going very, very well. And these capacitors are becoming increasingly important to the electronic supply chain. And we expected that might be the case, but you read reports recently where you go from 1 generation of NVIDIA server board to the next and the number of capacitors goes from 6,500 to 12,000 and on a smartphone, it's 1,000 of them, right?

And so just the intensity of the increasing unit intensity of how of what Micromax is selling into it -- into the leading edge has been -- I don't want to call it a positive surprise, but a helpful dynamic, right? And so Micromax --it's just a good transaction, good value, good team, great fit. EFC is doing really, really well as well. We are thrilled to be owners of that business. The markets are moving in its direction. When you look at the incremental investment in satellite capacity. We're winning big contracts with the OEMs and electrical transmission infrastructure, all of that on the come to support data center build-out -- and it feels like a highly strategic asset, right?

We're in this period where the reliance on foreign gas is an important concern to the domestic semiconductor market, and we own a potential solution to that. And over time, that's going to accrue to our benefit. And so great business, great fit, great team, very optimistic about what that business can be done.

As you talk about your -- as you thought about the capital needs to grow both of those businesses, has that changed at all? Have you uncovered other growth opportunities that you're going to be investing in maybe a little bit faster than you originally thought? Or how do you think about that?

So Micromax, no, Micromax has ample capacity. They've got a great site in Puerto Rico. We're thinking about adding more there. again, domestic supply, lower cost, really strong jurisdiction. EFC has a great site in Pennsylvania. EFC does require a bit more capital per dollar of revenue growth because you're adding columns, you're adding new capabilities for formulation. And there are some bigger opportunities there where we could scale that business and add meaningful capacity in partnership with our customers and other supply chain participants. That is something that we expect to evaluate over the next couple of years. and we'd only do it tied to very meaningful high-value growth opportunities.

The next question will be a written submission. I'd like to turn it over to Varun Gokarn.

Yes. There's just 1 written submission here. Can you share sources of upside and downside to the long-term growth in that you laid out today? .

Yes, absolutely. And thank you for that question. Look, the downside, it's linked to units or weaker macro, whether that's data centers or otherwise. We don't see the data center market is slowing imminently. We see units as coming off of a -- when you think about smartphones, which is less important than historical, but consumer electronics or auto, reasonably weak baseline. Auto units have been high, but most of that growth has come from low-value units in Asia where we are not significant suppliers. But the downside is really macro and unit-driven and we don't see any of that imminently.

We see more upside than downside to the long-term growth algorithm, simply driven by the fact that the current conditions are there they're materially better in this market than the forecast shows, right? And so there's this implicit deceleration, which we're not saying we wouldn't dismiss, but we don't see it imminently at all. on the near-term horizon. The other sources of conservatism in the plant are Kuprion, where again it's contributing less than 1% to the annual growth algorithm, and it could easily be double that in the near term and at substantial incremental margins. And then just going back to the AI observation, we really haven't baked in the way process efficiency and technology can translate into better than historical incremental margins, but I expect that over time, it will.

And so the conservatism is, to some extent, on top line with a more conservative macro and more conservative Kuprion and to some extent, on margins tied to what our organization can do to be more efficient as we scale.

There are no more questions at this time. I'd now like to turn the call over to management for closing remarks.

Great. Well, thanks everybody for joining my deep gratitude to the team. We showed a deeper bench of leaders and folks normally see, and they put real effort into putting a good foot forward and showcasing the incredible technology that we've been developing around the world. Thank you for joining. Thanks for your time, and we look forward to seeing many of you soon. Take care. Have a good day.

Good morning, ladies and gentlemen, and welcome to the Element Solutions Q1 2026 Financial Results Conference Call. [Operator Instructions]

I will now turn the call over to Varun Gokarn, Vice President of Strategy and Integration. Please go ahead.

Good morning, and thank you for participating in our first quarter 2026 earnings conference call. Joining me today are our CEO, Ben Gliklich; and CFO, Carey Dorman.

In accordance with Regulation FD, we are webcasting this conference call. A replay will be made available in the Investors section of the company's website. During today's call, we will make certain forward-looking statements that reflect our current views about the company's future performance and financial results. These statements are based on assumptions and expectations of future events, which are subject to risks and uncertainties.

Please refer to the earnings release, supplemental slides and most recent SEC filings on our website for a discussion of material risk factors that could cause actual results to differ from our expectations and predictions. Today's materials also include financial information that has not been prepared in accordance with U.S. GAAP. Please refer to the earnings release and supplemental slides for definitions and reconciliations of these non-GAAP measures to comparable GAAP financial measures.

It is now my pleasure to introduce our CEO, Ben Gliklich.

Thank you, Varun, and good morning, everybody. Thank you for joining. Element Solutions started 2026 strong. We reported a record quarter yesterday that demonstrates ongoing success with our strategy of penetrating the highest value, fastest-growing subsegments in our addressable markets. The quarter's results are a product of work we've been doing for years in our labs at our sites and alongside our customers. It was enhanced by our strategic acquisitions of EFC and Micromax, both of which closed in Q1 and are off to a solid start as part of the Element family.

The trends that drove accelerating performance at the end of 2025 continue to propel us forward. We delivered double-digit organic sales growth for the second quarter in a row and strong margin expansion, excluding the impact of pass-through metals, all while increasing investment in people, technology and plants to support customer growth.

Sales in our Electronics segment grew 15% organically as activity accelerated across our supply chain in support of the ongoing AI infrastructure build-out. Technical requirements in data center hardware and other high-performance electronics continue to increase, and our businesses provide critical enabling solutions across thermal management, power density and advanced packaging applications to name a few.

We're seeing volume growth in the highest-value categories across our end markets from leading-edge semi and high-end circuit board fabs to device assemblers and a strong pull for innovation to enable greater levels of device performance and manufacturing yield or throughput. This dynamic, combined with resilience in the higher-end mobile market, led to double-digit organic net sales growth in all of our Electronics verticals.

Forecasts from customers are increasing and innovation cycles are accelerating. This trend will continue, and we're increasing investments to better serve our customers, whether in inventory to support volume growth, additional manufacturing capacity for certain high-growth product lines or innovation to remain on the leading edge. Our investment in OpEx and CapEx is customer-led and supports durable growth trends.

As a predominantly asset-light formulation business with low maintenance capital requirements, we're uniquely positioned to selectively target efficient investment ahead of industry inflection points.

Our ongoing activity with Kuprion is an example of such an investment where we are in the midst of commercializing a differentiated new material to solve several emerging customer pain points. The pipeline for this capability continues to grow despite our limiting commercial activities to ensure the supply chain can keep up with demand.

We've also expanded the areas of opportunity we serve through the acquisitions of Micromax and EFC. Their results in the quarter and forecasts for the year are tracking favorably to our expectations with both growing revenue organically this quarter by double digits.

More importantly, we welcomed 2 highly capable, deeply technical teams with the same customer-centric mentality that is the hallmark of ESI. Integration is on track, and the teams are settling well into our organization and energized by the opportunities that Element Solutions can provide them to better serve customers.

Carey will now take you through our first quarter business results in more detail. Carey?

Thanks, Ben. Good morning, everyone. On Slide 3, you can see a summary of our first quarter financial results. Organic net sales grew 10%, and constant currency adjusted EBITDA increased 21% year-over-year. Last quarter, we noted the timing of metal hedges related to tin and silver in our Assembly Solutions business, which negatively impacted Q4 2025 performance by several million dollars. In Q1 2026, we largely recovered that amount through sales of finished goods and higher metals values. Underlying year-on-year growth in adjusted EBITDA would have been in the mid-teens when excluding this benefit as well as the impact of acquisitions and prior period divestitures.

Our results in Q1 include a full quarter of EFC and 2 months of Micromax ownership. Assuming we had owned Micromax for the full quarter, adjusted EBITDA would have been $170 million.

Electronics organic net sales growth of 15% was broad based. Each of the segment's verticals grew organically by double digits. Our Specialties business grew 1% organically, driven by strong performance in the offshore energy vertical.

Global industrial weakness continued this quarter as our Industrial Solutions business was flat year-over-year on the top line. Beginning this quarter, we are updating our definition of adjusted EBITDA margin to remove the value of pass-through metals sold in the period. We believe this change allows for a better perspective on the underlying value we're providing to customers, eliminates the noise from metal prices volatility and margins over time and enhances period-to-period margin comparability.

Pass-through metals revenue was $256 million in the first quarter of 2026 and $101 million in the fourth quarter of 2025. On this new basis, adjusted EBITDA margin improved 170 bps year-over-year to 27.8% this quarter. This improvement was primarily driven by mix with organic growth in higher-value product lines and partially offset by continued OpEx investment to support growth initiatives.

Adjusted EPS grew 21% in the first quarter, largely reflecting the underlying demand improvement in our Electronics business and offset by higher interest costs associated with our recent acquisition activities.

On Slide 4, we share additional detail on the drivers of organic net sales growth in our 2 segments. In Electronics, 15% organic growth was the strongest we have seen in this segment since early 2021 during the COVID recovery. We are benefiting from rising demand for products that address new challenges around power delivery, circuit density, thermal management and reliability in high-value applications. As a result, our Assembly Solutions business grew 12% organically with a sustained increase in the sales of high reliability alloys and engineered solder preforms to data center suppliers. At the same time, in the consumer electronics market, pastes used for higher-end smartphones continued to grow in the first quarter.

Circuitry Solutions net sales improved 17% organically, with growth continuing to come from the high layer count server board market, where our differentiated solutions have great traction. We generated record quarterly sales in these product categories tied to high-performance computing and AI server builds. Beyond the data center market, sales were further supported by strong demand from suppliers of high-end smartphone components.

Finally, our business is also benefiting from continued manufacturing investments in Southeast Asia, where we have a strong and growing presence.

Semiconductor Solutions organic net sales grew 18% due in part to improved order patterns for power electronics products at legacy customers and growing momentum in the thermal interface products for high power consumption applications such as AI GPU and CPUs. We also experienced strong and growing demand for advanced packaging solutions. Revenue growth for these products was magnified in the quarter by the large increases in precious metal prices that are inputs to many of these solutions.

Micromax, which we own for 2 months of this quarter, is not included in our organic net sales growth calculation, but contributed roughly $65 million to reported sales in the quarter. We expect metal prices fluctuations to create volatility in headline sales for this business as roughly 2/3 of reported revenue is related to metals.

Turning to our Specialty segment. Industrial Solutions was essentially flat in the quarter as demand for surface treatment chemistry was impacted by softer Americas automotive production activity, particularly with customers operating in Mexico. European automotive customers saw relatively stronger growth in the period against an easier 2025 comp. We remain cautious about our European industrial demand outlook.

Our Offshore Energy Solutions business grew 15% organically as a result of strong volume growth and pricing. This quarter also benefited from favorable comparisons to the prior year period, which was unusually soft due to a few specific customer delays.

Finally, EFC Gases and Advanced Materials contributed $19 million of revenue in the first quarter. This was a record first quarter for this business, which is typically the slowest of the year for EFC, primarily on the back of strong demand from electrical infrastructure customers. The EFC team is executing at a high level, growing wallet share with existing semiconductor and space customers and winning new qualifications in both. We expect a strong run for EFC this year and into the future.

Slide 5 addresses cash flow and the balance sheet. When our business grows, we typically need to invest in working capital and higher metals prices compounded our working capital investment in the quarter. As a result, free cash flow was negative. The first quarter is always our slowest from a cash flow standpoint and the high level of growth in the quarter magnified this impact. We expect strong cash flow generation in subsequent quarters this year, assuming metals prices stabilize.

CapEx in the quarter was $25 million, which is trending above our previously guided annual run rate of $75 million. As you heard from Ben, there are excellent opportunities in front of us to invest in growth CapEx to support large, profitable commercial wins. We are taking the initiative to build incumbency and leadership in these areas. We are also continuing to invest in footprint consolidation and other efficiency projects where we see compelling returns. As a result, we now expect to invest between $75 million and $100 million in CapEx this year, which remains less than 3% of sales. Our expectations for other uses of cash are unchanged for interest and modestly lower for taxes.

Turning to the balance sheet. Our net leverage ratio at the end of the quarter was 3.4x and it would have been 3.1x assuming we had owned both Micromax and EFC for the full trailing 12-month period. We anticipate reducing leverage by approximately half a turn by the end of the year, assuming no further capital deployment. This strong balance sheet position should once again give us flexibility to act on opportunities if and when they arise.

With that, I will turn the call back to Ben. Ben?

Thank you, Carey. We had a great start to the year. At the same time, geopolitical events have created a more complex macro environment than anticipated. We're seeing signs of inflationary pressure and expect increased variance in quarterly earnings driven by swings in metal prices. Further supply chain disruptions and the impacts to global demand resulting from higher energy prices creates risk for our suppliers, our customers and ultimately for us. That said, our organic acceleration in the first quarter and, in particular, the sources of that growth give us confidence in a strong year.

Underlying demand in the high-end electronics market remains strong and the positions we've established in the fastest-growing, highest-value niches of these markets should serve us well. As a result, we're raising our adjusted EBITDA guidance to a range of $665 million to $685 million for the full year. This range reflects the growth that we saw in the first quarter, combined with continued strength in Electronics and softer demand in Industrial Solutions. It also contemplates a less favorable FX tailwind than we expected a few months ago.

We expect second quarter adjusted EBITDA in the range of $155 million to $170 million, with demand conditions sequentially similar to the first quarter and taking into consideration some risk from raw material and logistics inflation that we may not recapture immediately despite ongoing sourcing and pricing actions. We now expect 2026 adjusted EPS growth in the high teens on a full year basis.

As we've demonstrated repeatedly in recent periods of uncertainty, we're prepared to react quickly to shifts in demand and cost. We have a variable cost structure and local teams that can rapidly respond to customer needs, and we're already taking action to preserve our profitability in certain business lines. Our diversified regionalized manufacturing footprint allows us to be nimble to accommodate dynamic trade flows.

As was the case with tariffs last year, there may also be opportunities where our competition may not have the same flexibility, geographic breadth and access to capital that we enjoy. We're actively leaning into growth in 2026. The customer signal is clear. They're asking more from us and the potential rewards from the investments we're making are apparent, high-margin sales and long-term incumbency in fast-growing categories. Through our efforts to build research and applications development in high-leverage geographies like Southeast Asia or our expansion of Argomax capacity, we've proven the value of investing ahead of inflections. Our company is executing and our people are eager to capitalize on our attractive long-term growth prospects.

Three final topics before questions. First, our portfolio has changed through acquisitions, divestitures, strategy implementation and end market evolution over the past 5 years. So we're holding a virtual Investor Day on May 18 to provide a deeper look into our businesses, introduce business unit leadership and share some of our emerging technologies, and we're looking forward to that day.

Second, I'd like to express my deep gratitude to our Chairman, Martin Franklin, who is not standing for reelection to our Board at our upcoming annual meeting. He's been and will remain a great partner and mentor to me and valuable resource for our company going forward. You'll hear from him on May 18 as well. But in short, he remains committed to our company and invested in our success. Our nominated successor, Ian Ashken, has been on our Board for 13 years and knows our company and our people exceptionally well. I'm excited to welcome him to his new role.

Finally, on that same note of gratitude, I'd like to thank all of our stakeholders for their continued support of Element Solutions and in particular, our talented, dedicated and growing team around the world working to support our customers and drive long-term value for our shareholders.

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

[Operator Instructions] And your first question comes from the line of Bhavesh Lodaya with BMO Capital Markets.

Ben, congrats on the quarter. Within Electronics, one, can we dig a bit deeper into your 15% organic growth that you saw in Electronics? How much of that is volume driven versus pricing or mix? And then it seems like you are seeing an improvement in your order books as well. How should we think about a continuation of this organic growth trending in the second quarter and the full year?

Yes. Great question, Bhavesh. Historically, the framework for organic growth in our business is volume versus price, meaning that most of the growth comes from volume as opposed to pricing actions. The exception to that is our offshore business. And other than metal price, which we've adjusted out when we look at organic growth, most of our growth in the first quarter has been volume driven.

On the margin, there's been a mix benefit in our semi business and to a small extent in our circuitry business. But roughly, I would say this is a volume-driven quarter. As we look forward, what we've projected is for a continuation of these trends. And so our outlook is for a continued robust volume environment. We will have to take some pricing actions in parts of the business to offset some of the inflation that we've seen. But really, it's a volume story when we think about 2026.

Got it. And then you're stepping up CapEx a bit to support growth that you're seeing with your customers. Can you talk about which product lines or regions these are in? And then looking at your deck, it also looks like you're looking at certain plant consolidation opportunities. It would be great to hear your thoughts on both of these aspects.

Yes, absolutely. So capital is going to both of those initiatives. On the Electronics side of the portfolio, we're seeing customer forecasts increase rapidly. So especially our B2B customers who have longer-term visibility, they give us a forecast for what they expect to require over a 6- to 12-month period. And those are never particularly accurate. But in the past, it's been inaccurate in both directions. At the moment, they've been inaccurate in one direction. And so we're seeing a rapid increase in certain categories of demand and increase in forecasts that has us reconsidering our capacity equations.

So obviously, Kuprion is something that we're investing heavily in, and we're accelerating some of that investment. There are a few other product categories in the semi-assembly market, in particular, where we need to add some capacity. This is for global customers, but in specific sites where we make those products. And by and large, most of our manufacturing is fungible, and we don't have significant capital requirements to expand capacity for blending. But in some of our engineered products, we do have some bottlenecks and we need to debottleneck and add.

With regard to site consolidation, in our Industrial business, we've been reducing our footprint over the past several years, and that's really long-term integration-related activity and that continues at pace. And so we're in the midst of a large site consolidation project in one site in Europe that is requiring significant investment, but driving productivity across the business.

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

Congrats on a strong Q1. I just wanted to ask with the guidance here. I mean, obviously, you're flowing through the raise from Q1, but you're flowing through almost an additional $10 million that appears more back-half-weighted. So I mean, clearly, you have higher confidence. I was wondering if you can comment on where you're seeing that? And if you feel like you're getting a little bit of a longer lead time view around customer demand, which maybe helps you forecast a bit more or not.

Yes. Thanks for the question, Josh. As we said in our prepared remarks, we're seeing an acceleration. We saw an acceleration in the first quarter in the Electronics segment. Over the past 2 years, we've talked about how our business has migrated from consumer, which is more short cycle towards enterprise applications, which is longer cycle. And so we've got confidence in the durability of this acceleration in demand through 2026 from data center and associated investment. And so that's where that comes from.

With regard to phasing, the back half is typically stronger than the first half, and we expect that seasonality to continue. We benefited in the first quarter from a metal price recapture from a stronger-than-expected Micromax result, and we're still getting comfortable with the seasonality and lumpiness of that business, which speaks to why you've got this dynamic sequentially from the first quarter to the second quarter. But for the full year, our outlook is stronger from the Electronics side of the business than it was when we gave our original guide.

That's really helpful. And maybe just to follow up there on the points around some of the lumpiness and specifically Micromax, I mean, I think when you call out the impact in January, you extrapolate that, you're north of $80 million in that business. Obviously, that's much higher than what you indicated when you acquired it. Is that primarily the lumpiness in first quarter? Or maybe another way, if you could characterize kind of what you think the earnings contribution is at Micromax now versus what you thought a few months ago for the full year?

Yes. Good question, Josh. So it's dangerous to do that extrapolation math. The same thing that happened in our assembly business with metal prices where we got -- there was a lagging impact in Q1 from metal price fluctuation is the way to think about that January number. So that was a recapture of value from 2025. That said, it's a stronger result from an organic perspective, right? The Micromax business grew in the double digits in Q1, which is higher than the long-term growth algorithm we would have expected from that business. And it speaks to this point that the entire Electronics ecosystem is benefiting from the AI and data center build-out. It's not simply the semiconductor market or the circuitry market. And so we are expecting better contribution from Micromax on a full year basis. And -- but we are still working our -- wrapping our arms around the seasonality to -- associated with it.

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

Ben, obviously, there have been a few changes in terms of the '26 outlook and the nice 1Q beat even without January Micromax, the FX adjustments and so on and so forth. And obviously, it seems like you're integrating some of the global uncertainty for the remainder of the year. But given the -- what appears to be, by all intents and purposes, the building momentum in several of your businesses that are benefiting kind of all the substrates of Electronics, have you kind of increased your expectations for anything on whether it's MSI, PCB, any other kind of like facets to the Electronics market as we progress the second half of the year? Are those metrics or kind of market dynamics similar to how you're thinking about this market just a few months ago? I'd love to hear your updated thoughts there.

So at this point, we're looking more at the subsegments of the market. We do believe that PCB growth will outstrip what was originally forecast entering the year, and you just see it in the results, right? Our circuitry business growing in the mid-teens this quarter is an indication of the continued robustness of that market. On balance, if there's one indicator that's better for us than forecast, it's the smartphone market, which we were assuming would be flattish this year. And our smartphone-oriented business grew in the mid-single digits this quarter. We did see weakness at the low end, but the high end was quite strong. And so the risk associated with memory dynamics and pricing, it is flowing through the smartphone market, but it hasn't been impacting us to a proportionate extent. And so that's a tailwind. PCB overall is a tailwind. And then there are the unknown unknowns associated with inflation and geopolitics, and we try to factor that into our guide as well.

Got it. And just as a quick follow-up, I feel like it's a mandatory Kuprion and thermal interface update. I think everybody is aware that it's not a material contributor at all in 2026. But in terms of the customer receptiveness, how your conversations are going in terms of the commercialization process and trajectory for '27, '28? Perhaps you can just give us an update on how you're thinking about that and where you've been pleasantly surprised on what you still perhaps need to work on?

Yes. So Kuprion is different than the thermal interface materials that we call out in the CapEx slide. That's -- the thermal interface materials are another product that we offer. We're seeing huge demand from hyperscalers. But Kuprion is a very good story from a commercialization perspective. We have a small handful of customers who are working with the material and they're developing new applications and use cases regularly, so that's the good side. The note of caution I'd strike is just supply chain and our ability to meet demand. And so we are ramping up our investment to add capacity in order to satisfy the few customers who we are engaging with at this point in 2027 and into 2028. Commercialization is good. Supply chain is coming along, but we have work to do there.

Your next question comes from the line of Mike Harrison with Seaport Research Partners.

You talked a little bit about the impact that you're seeing from metal price volatility. I'm just curious if higher metal costs have led to any demand disruption? Is it leading customers to look for substitutes for more expensive metals? How are customers responding to this unusual volatility? And what could it mean? Do you view it as a threat or an opportunity?

Yes. So higher metal prices have not had an impact on demand as yet. Customers don't like that their bill of materials has gone up. The volumes that we're selling relative to the overall bill of materials for these high-end electronics are still small from a value perspective. And at the moment, they're operating with such a high level of activity and capacity that they're not really looking for substitution. Kuprion, to some extent, is a substitution by the way, copper instead of silver. And so we are working in a few areas, not just with Kuprion but with other thermal materials and attached materials to reduce the amount of silver to solve that customer pain point. But we have not seen that.

On the other hand, we have smaller competitors who are running into cash flow issues because the value of their inventories with long payment terms are making it such that they're running out of capital and they're withdrawing from certain markets. And so that's a competitive benefit that we've seen from higher metal prices.

Right. And then just to follow up. Obviously, we've seen this metal price hedging impact that hurt you in Q4. It helped you this quarter. Are you considering any changes just from an accounting standpoint to how you approach the metal pass-through, either internally or with your customers so that maybe you don't have to bear the hedging costs or maybe we can dampen further these earnings swings related to metal prices?

So in the fullness of time, we recapture the value, and it's the right commercial practice to allow for our customers to lock in metal prices in some cases and for us not to wear the risk associated with those metal prices. So it's the right commercial decision. And periods of volatility like this are pretty infrequent. And so we're comfortable with the practice and don't expect anything to change. That said, we have changed our EBITDA margin definition this quarter to reduce the noise in our reported financials associated with metal prices.

Your next question comes from the line of John Roberts with Mizuho.

What would you estimate organic industry growth was this past quarter in Electronics?

That's a really challenging question to answer at this point, John. The data isn't out yet. I'm confident that our organic results are outstripping the overall industry because we are participating disproportionately in the fastest-growing vectors of the market.

Okay. And do you have any updated thoughts on how the shortage of memory is going to impact your mix as things progress here? You talked about a little weakness in low-end mobile devices, more strength in high end. Where else might you see the impacts across your portfolio?

I think, if anything, it accelerates the transition of our business away from consumer electronics and towards enterprise applications. That's where the highest value electronics are going with the highest ability to pay. And that's a transition we were already on before this dynamic.

Do you have a rough split, consumer versus enterprise? Is that's the way you think of it?

We'll talk about that at our Investor Day in mid-May.

Your next question comes from the line of Rock Hoffman with Bank of America.

I've seen some data points, which seem to imply that smartphone shipments year-over-year growth may get a bit more challenged as we get through the rest of the year. Just curious if this drop is kind of baked into your guidance? Or do you expect to continue to skew more positive given your alignment to more premium smartphones?

Yes. Over the course of the quarter, the forecast did get worse from third parties around the smartphone market. What we saw in the quarter was that there's a real bifurcation between low-end and high-end device manufacturers and our business skews towards the high end. And so our business grew in the quarter despite the low end actually seeing a decline.

So our going-in assumption for the year was smartphone units would be flattish. At the moment, the AI and data center dynamics are stronger than we expected, and that gives us room for the smartphone market to be a little bit weaker. But we believe we're insulated from that, given where we play.

Understood. And just as a follow-up, can you speak to the potential scale and timing of some of the ongoing pricing actions that you're implementing to offset some of these nonmetal raws?

Yes. So it's actually less nonmetal raws and more logistics and packaging. Those are our primary petrochemically linked inputs, if you will. And it looks different in different businesses and in different regions. Historically, when we've had these spikes, we've put in place surcharges. They aren't always immediate, so there's a bit of a lag, but we're able to recapture the value -- the potential value leakage. It's a dynamic environment and unmitigated. It's tens of millions of dollars of risk, but we expect to be able to mitigate most of it over the course of the year.

Your next question comes from the line of Pete Osterland with Truist Securities.

I just wanted to start by following up on the topic of inflationary pressures and supply chain disruptions. Are you seeing any signs of potential demand destruction in the Industrials business? How, if at all, has your growth outlook for '26 in that business changed versus what it was 3 months ago?

So entering the year, we didn't have particularly high hopes from a market perspective in the Industrial surface treatment business. We were off to a better start than we expected across most of that business. But obviously, geopolitics has put a dampen on some of that -- on some of those green shoots. So on balance, our expectation is for weaker demand growth in the Industrial Solutions business. We're in an advantaged position given our scale and ability to continue to support customers and remain on the offensive from a market share perspective. But overall, that business' growth outlook is worse today than it was entering the year.

Got it. And then just sticking with that segment, the Offshore Energy business. I understand it's a small piece, but high margin. Just given some of the dynamics impacting the global oil market right now, are you seeing any increased interest or demand for this business at this stage? And following that 15% organic growth, what is sustainable going forward? And then what are you currently assuming for the year?

Yes. So in fairness, Q1 of 2025 was quite weak for the Offshore business. So that 15% is benefiting from an easier comp. But this business is in really good shape at the moment. There's a bit of disruption from a demand perspective, given what's happening in the strait. But drilling activity is increasing. Drilling rates for vessels are going up, and the contracts are getting longer. Those are leading indicators for the business. So we see acceleration from a volume perspective. And this is a business where we have a pricing lever. And so we will get a price benefit as well. So it should be a good year for our Offshore business, another year of high single-digit organic top line.

Your next question comes from the line of Jon Tanwanteng with CJS Securities.

Really nice Q1. I was wondering if you were seeing any current constraints in the upstream or downstream electronic supply chain? And are you including any potential headwinds in your outlook, whether they're related to the helium for the foundries or PCB availability or any other derivative impacts that may pop up? Any color on that would be helpful.

Yes. Thanks for the question, Jon. It is something that we're keeping an eye on for sure. There is risk there. Unknown bottlenecks that can emerge driven by disruption in the supply chain and raw material availability. By and large, similar to what we're seeing in the memory market, it's the low-end PCBs that would be first impacted because the marginal supplier there is going to be more impacted than the high-end suppliers. And so we skew disproportionately towards the higher end. So while I'm not dismissive of that risk, I think that our customer mix will be insulated from that exposure.

Got it. That's helpful. And then what are your EV versus total auto expectations for this year? It looks like EVs are picking up in several markets just related to the high gas prices. But maybe just help us understand your views between the subset and the total and how that's included in your guidance as well?

Yes. I don't know that we have a fine point on EV units versus auto units. Our EV-exposed business has been outgrowing even EV units because we're taking share with power electronics. Interestingly, in the first quarter, the source of growth last year, which was Asian EV manufacturers were a bit weaker as some subsidies rolled off, and there was a bit of an EV glut over there. But our domestic customers saw really strong performance in the first quarter. And so overall, our EV business grew nicely in Q1, and we expect it to continue to grow healthily even if the mix there is a bit different than we expected entering the year.

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

Great. Thank you, Angela, and thanks, everybody, for joining this morning. We're looking forward to speaking with many of you on May 18 at our Investor Day. Have a good day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Ben Gliklich here with me, CEO of Element Solutions.

Ben, great to have you. We've had you here before, but maybe just for people in the room that aren't as familiar with Element Solutions, can you kind of give us a rundown of the company and its product offering?

Sure. Absolutely. Good to be here. Thanks for having me, Rock. Good to be back.

Element Solutions is a global specialty chemicals technology business. So we provide critical materials and solutions to enable high-value end markets, customers in the electronic supply chain and the industrial supply chain. About 70% of the business is electronics oriented. And we are selling a suite of technologies that really enable high performance in high-performance applications, from data centers through smartphones at the very leading-edge.

Business has been around as Element Solutions for 7 years, I'm the founding CEO of the company, delivering on a strategy of what we call operational excellence and prudent capital allocation. Running the high-quality businesses. We have better more days than not. And harvesting their exceptionally strong cash flows to reinvest behind them in high-returning ventures, that has looked like buybacks at times, debt paydown at times and, more recently, some very interesting M&A.

2025 was a record year for the business. Our end markets inflected positively. We're capturing more than our fair share of that. As I mentioned, a couple of very exciting transactions to add capabilities to the business. And 2026 is off to a great start.

Great. Appreciate the background. Maybe just to jump straight into some of those transactions: EFC Gases and Micromax. So if you can kind of speak a bit about how these fit into the company's kind of longer-term strategy profile. And in what ways does ESI perhaps make these businesses better? Or do they primarily enhance ESI's broader offering?

Yes, absolutely. So the vision for our company is simply to be the best in our markets in 3 distinct areas: the value we provide to our customers, the opportunities we create for our people and the value we create for our shareholders. And that guides our capital allocation framework.

The filter we run businesses through is: Does this business enhance our customer value proposition? Does this business enhance the quality of our company? Can this business be better inside than outside? Do we deeply understand it? Those qualitative criteria are then married with financial criteria, which is simply looking at the cash-on-cash return from the investment in year 1 relative to our free cash flow yield, and we want to get a premium on M&A.

EFC and Micromax both meet all of those criteria, and more. They're outstanding opportunities to deploy capital and improve our business.

EFC is a provider of high-purity gases and advanced materials to fast-growing industrial end markets, namely semiconductor fabrication, satellite systems, electrical infrastructure and transmission equipment. It's a business you would have thought, "Well, how are gases relevant to most of what we do which is aqueous or solid state?" But they really do what we do. They don't synthesize molecules. They formulate products -- they purify products. And they support customers with really great applications know-how.

So they're buying technical-grade gases, they're purifying them, they're mixing them, they're packaging them in interesting ways. And in some cases, they're actually charging them for a customer -- not charging. Loading, this is charging in loading sense of the word. Into customer use cases.

So very customer-intimate, customer-centric solutions oriented company just like Element. Gives us exposure to fast-growing, or enhances our exposure, to certain fast-growing end markets, with great, great capabilities. And inside of Element, we can leverage our depth of footprint into some of these supply chains to accelerate growth, to improve the customer network and drive that business faster.

Micromax is a bit of a different story, where Micromax is a long-tenured company in the electronic supply chain, selling electronic inks and pastes. This was a business that was a part of DuPont, that became a part of Celanese, and we acquired it from Celanese thereon. The best technology for thick-film pastes and inks in the market, really well-established brands.

Been a bit orphaned in its prior iterations. Celanese isn't in the electronics materials space, and that's a market we know really well. We sell materials that form circuit pathways for our customers and their use cases. And these thick-film inks and pastes are a part of that value chain or ecosystem. So it really does fill what was a gap in our portfolio with a very high-value set of technologies that we believe we can make better as a part of Element Solutions.

Great. So with those transactions kind of altering some of the end markets which you're kind of selling into here, I would just love kind of maybe a broad update on your -- what you view as your end market exposure, particularly in consumer electronics, is one that's been spoken about a bit more. So maybe as we hone into the Electronics segment, how have you seen kind of your growth in both the high-value niches, call it, AI data centers versus kind of more legacy consumer electronics?

Yes. So I'd say that EFC doesn't really change our end market exposures too much, nor does Micromax for that matter. They're both broadly defined in the electronics space. And they're not that significant from a revenue contribution perspective to move the needle materially. I think they deepen us and maybe broaden us a little bit.

But overall -- and we owe our investors an Investor Day to sort of be a bit more precise on our end-market exposures, because the last time we did that was in 2022. The theme that runs through what's happened in all of our businesses, particularly on the Electronics side, is that the concentration in consumer electronics has declined as our participation in the growth from what I'd call B2B electronics markets, high-performance computing, data center applications, satellite applications, has accelerated.

And so if you go back to 2022, we would have said about 25% of the business was in smartphones. That number has come down. And that's been replaced by what we call data storage and computing, which at the time was around 15%, and that's clearly gone up. So the trend of electronics intensity and higher-value, higher -- more technically challenging electronics content in these B2B applications is a real one, and it's accelerated.

I see. And just kind of as we understand your outlook in kind of both of those end markets within Electronics, I think last quarter you saw still some strength in the consumer electronics side of things, with assembly particularly seeing some benefits from that. About the same time, we do have this trend of memory prices potentially impacting consumer electronics. So how do you view that playing out in 2026?

Yes. So the business accelerated in Q4, and our circuitry business certainly outperformed our expectations. Some of that is driven by the better-than-expected smartphone unit environment, right? So smartphone units grew a bit more than I think was the baseline. And then data center investment accelerated as well, and we're an active participant and enabler of that market.

And as we look to 2026, what we said is we think that 2026 is a continuation of what we saw in the back half of 2025. I think a tweak to that is that our expectation for the smartphone market is going to be a bit softer, down a little bit in 2026 year-over-year. But the PCB market, right, we're expecting to grow 6% on a volume basis. It was 9% in 2025. Our circuitry business should outgrow that because we're participating more in the faster-growing vectors of that market, and that side of the market has not slowed down at all.

So that 6%, why would it be slower than 2025? I think that takes into consideration some of the concern around the memory price dynamic, where memory prices have increased and the expectation is that consumer electronics will get more expensive and that will have an impact on demand. Haven't seen that yet, but I think that there's a bit of consensus around that happening.

But you can't look at that in isolation, right? Where are the chips going? Where are the memory chips going? They're going into high-performance computing applications and data centers. And how our value proposition to that supply chain is greater, our volume -- or our value per unit is greater. And so as we look out to 2026, we see real growth in our circuitry business driven by the data center market, offset slightly, but not entirely, only partially, by risk in consumer electronics.

Interesting. And maybe just kind of drilling down to the product level within Electronics. Kuprion is an area which we've grown more excited about, as I think you have as well. I think we saw, I guess, the manufacturing ramp-up, I believe, your first manufacturing site is set to be complete soon. Could you kind of just walk through the opportunity associated with this Kuprion business line?

And I think previously you've noted kind of demand exceeding production capacity on the last call. I'm just wondering how that may influence your commercialization plan in terms of the timing and scale of a potential second site.

So Kuprion is a really compelling materials science, materials technology platform we acquired 2 years ago, 2.5 years ago. And it came to us as materials technology. It was a really interesting material that had a broad range of uses. And we bought the business for a modest upfront payment with the goal of commercializing it.

And that's a long journey. When you're bringing new material science to market, you're standing up your own internal manufacturing process, you're helping customers build the capability to use it, and then, not just use it, but use it in high volume, that's a complex effort that's taken us several years.

We crossed an important chasm in Q1 of this year where we made our first external product qualification milestone payment. So the structure of the acquisition was an upfront payment with a series of deferred payments tied to revenue and certain other milestones. And one of the most important milestones was: Has a customer qualified this product to use in its manufacturing? And we crossed that chasm in the first instance in Q1, and we expect to pay another milestone payment here at some point either in Q1 or Q2. So that's 2 commercialized product use cases for Kuprion. Those are the first 2.

At the same time, we've been standing up our supply chain. And as you mentioned, we have a mid-scale site that is beginning to ramp production. And that production ramp will happen over the next couple of quarters. And the comment I made was not that demand exceeds production capacity, but the pipeline. The pipeline is the commercial opportunities that are being developed, which is different than sales, right? Sales are demand.

Now at the moment, we have control of the number of potential customers, because we don't want demand to outstrip supply. But as we're ramping the site, we have excess product, we're going to start doing more sampling, and that will convert more of these qualifications. And so as you'd expect, we're developing plans for the second site, and expect that to come through, become a reality over the next couple of years.

Our expectations for this business were always high, but our confidence interval around it was wider as we were building -- as we were proving it out, I would say, over the past couple of years. And as we sit here today, we've got line of sight to real revenue and an expectation of EBITDA contribution next year. And the confidence interval around that is closed, it's tighter.

The potential for the business is very profound, but the timing of that remains subject to a bunch of variables. We're very excited about it and we're proving it out hereon now every day.

Yes. And just as you ramp up production capacity over the near and medium term, how do you think about, I guess, the need for, I guess, customer diversification, either in regards to end markets or just kind of being contracted with a specific customer?

I don't -- I'm not worried about customer concentration here. Basically all of the customers who we've been willing to sample have expressed interest in the product, and it's more than a handful at this point. And they are the leaders, I would say, from a technology perspective. And so if they're adopting the technology, I'm confident that the rest of the supply chain will be interested when we make it available to them.

Makes sense. And I think previously on the call, you had called out kind of the potential goal of reaching $100 million or hundreds of millions of sales for Kuprion kind of in the medium term. Just curious what the capital requirements may be to hit that goal.

Yes. So to be very clear, it's not a goal. The earn-out associated with the acquisition is capped at $100 million of revenue by 2030. So that has to be -- certainly, that's the target of the selling shareholders, some of whom are my colleagues today. And so we are racing to accomplish that, because it's a win for them and for us. It's a high-margin product, and if we can reach that level, it will be a really meaningful contributor to profits.

The capital requirements are not insignificant. We are -- the first plant we built cost north of $20 million. The next plant, we're still sketching out, it will cost more because it will have greater capacity. But in the scheme of large chemical manufacturing plants, this is not a particularly expensive one. And so there will be a capital requirement associated with scaling the business, but it should fit within the framework of 2% to 2.5% of sales in CapEx on a recurring basis. We can support a couple of large projects. For us, this is a large project per year within that context.

Sure. Maybe just shifting over to Argomax. Can you kind of just explain that technology and the size of that offering in the medium to long term? I understand there's been a recent shift to kind of shift away from EVs, and potentially western EVs and, in the longer term, over to infrastructure and data center systems. Can you kind of speak to that and the trajectory for that as well?

So Argomax, taking a step back, Element is not a blockbuster product type company. Our model is to work closely with our customers to solve their problems. And our customers have a plethora of problems. And so we've got a lot of different SKUs. And part of the beauty of the business is managing that complexity, being able to come up with niche solutions that creates some level of moat around what we're doing.

That having been said, we just talked about ActiveCopper or Kuprion and the potential associated with that, and Argomax is another one of these, I won't call it blockbuster, but product brands of scale in the portfolio. Argomax is a silver-based material that's used for high-thermal applications around semiconductors.

So the first big use case we had was power electronics for electric vehicles. And this is for the power module and the power inverter, that inverts the energy from the battery to the motor. And using this material allows for less thermal loss, which is to say, less heat escapes the system, which is more energy that can go towards the motor. It gets better range. You can also take higher power densities, so it doesn't melt like alternative materials might, so you can use fewer of these power semis and get better throughput.

So really great technology and product capability. It was early-adopted by a certain large EV manufacturer. And the second set of adopters were also very nimble. They were Chinese leading EV OEMs with high-performance offerings. And so we went from being customer concentrated there to being more and more diversified. Now we're starting to see some of the western OEMs adopt the technology as well. So the business has been growing nicely, despite the EV market not having had such a great trajectory in the past 12 months, a bit of a step back especially from one of our customers.

So the next market where there's a high-thermal, high-power application is data centers. And we are starting to see adoption of this technology, or an ancillary product based on this technology, in that market. Today it's concentrated in electric vehicles, but there's a lot of room to run and interest in this from the data center market.

I guess how is the R&D or just the process of kind of spec-ing in with this new type of customer been for that product, the ancillary product?

It's been interesting because we thought of the product as really having a great value proposition to the electric vehicle market, and most of our energy and research and resources were dedicated to broadening our penetration of the EV market, and only recently have we pivoted towards other potential applications. And we're finding them, is what I would say.

The work is more around applications know-how in certain incremental product development at the moment. And we have very interested counterparties that are engaging with us in our applications labs to experiment with the material here and now.

Understood. I think one of the other products brought up in the electronics sphere would be Shadow Plus. I think the latest was you guys were trying to kind of spec that in with certain OEMs. Just curious how this progress has been going for that direct metallization technology and what you see as potentially the near and medium-term revenue opportunities there.

So direct metallization is a circuit board metallization technology that, rather than using copper, uses carbon. And so this is a way of forming circuit pathways actually more environmentally friendly, less water intensive, less energy intensive than conventional copper.

But you're in a supply chain that is change resistant, right? And so driving adoption of something, even if it's got a really strong value proposition, takes some time, and highly qualified. So we've been fighting an uphill battle, I would say, to get this new technology qualified. We've got receptive customers and supply chains, but it just takes some time to get that done.

And our new product for this is a really nifty new capability that the supply chain is pretty excited about. But again, these things take a bit of time.

Fair enough. So I think you had previously mentioned the expectation of PCB is growing, I believe you said 6%, in 2026. Obviously, we all have our autos forecast as well. Just kind of based on both historical levels as well as some of these newer products, maybe Kuprion being one, how do you expect your premium to be over kind of these baseline growth of the end markets?

Yes. So if you go back to 2024, we started doing what we called our Electronics Roadshow, where we tried to reintroduce our Electronics portfolio. It's really changed a lot from the businesses we originally acquired in 2013 and 2014, 2015. And we looked at a few indicators as the underlying growth drivers, and then explained why we thought we could grow faster and how much we could grow faster.

So for the assembly business, we said electronic systems value growth was the best driver, and that was somewhere around 4%. We said we could grow 1 point or 2 faster than that. And last year we grew 3 points faster. The circuit board business is driven by PCB square meters, which we thought would be a mid-single-digit grower, 5% to 7%. And we thought we could grow 2 or 3 points faster. Last year, PCB square meters grew 9% and our circuit board business grew in the low teens. So we're outpacing that as well by more than we thought we could.

In the semi business, the front-end business, we said we'd be a high single-digit grower, that we could grow about 5 points faster than. And MSI last year was up 6% and our circuit board business was up -- or our semiconductor business was up 13%. And that also includes our semi assembly business, which we thought we were 5 to 10 points faster than. So 2025, growth year, where our growth exceeded even our outgrowth expectations, I would say.

The industrial business, on the other side, was flattish on the top line, but grew earnings in the mid-single digits. And that's operational excellence. That's better sourcing, productivity in the plants, pricing discipline. And that flattish number is outgrowth relative to the market indicators as well as we see it.

So as we roll to 2026, our expectation is the PCB market is up 6%. And that's not our internal expectation; that's the sort of most trusted data vendor on the space's expectation. And we think we'll grow faster than that again this year. MSI is supposed to be up roughly the same, and again, we think we can outgrow by 5-plus points. And then our assembly business, same sort of dynamic, where electronics systems value is growing because of data center applications, and we've got some really great capabilities supporting that.

So that all translates to high single-digit overall organic growth for the business, which is what's contemplated in our guidance. And then we layer in the acquisitions we made.

Sure. And you touched on Specialties, just curious if you could speak a bit to the strength that we saw in Specialties, specifically in Q4. And just more broadly with the recent kind of shifts around the business, the divestiture of graphics and now bringing in EFC, on a go-forward basis, how should we think about the long-term growth and margin of this new Specialties business?

Specialties business is a collection of outstanding, outstanding businesses. It's 3 businesses. The biggest one is our industrial solutions business. They provide surface treatment technologies into industrial applications: automotive, heavy machinery and equipment, building products. And these are markets that have been really beat-up over the past several years. We saw some nice growth in Asia last year and a decline in the West.

And we're not assuming things get better in 2026, but through the cycle, these are growth businesses. Maybe not like our Electronics businesses, but they should be growing in the low to mid-single digits. And we should outgrow that between share opportunities, pricing opportunities and strong execution. You've seen us deliver earnings growth in each of the past 3 years in this sector despite a pretty tough macro. And that's offsetting lower utilization in our sites because volumes have been down.

So there's a lot to be excited about in the medium term on the Specialties side, before adding in EFC. So divesting the graphics business, which was a slower-growing, more capital-intensive business, lower margin, and replacing that with EFC, which is a much faster-growing, high-margin business with tremendous opportunities, getting some help at some point -- again, we're not counting on it in 2026 -- from the macros in the industrial surface treatment business. And then more of the same from our offshore business, which has been growing really nicely over the past several years at attractive incremental margins. It's a growth vector for the company.

Understood. Perhaps just across the whole enterprise, I know you probably won't get into specific end-market breakdowns, but just in regards to the auto exposure, which I think maybe in 2022 was around 25% in either segment, I'm just curious kind of how should we think about that within both regional as well as single OEM diversification and how that might compare on the EV side versus ICE vehicles.

Sure. So our industrial surface treatment business is about 50% automotive. Our Electronics business is less. It's been a tough auto environment. Our industrial surface treatment business is flattish last year from a revenue perspective.

But our Electronics business in auto was growing. It was growing because our circuit board chemistries for final finish are performing very well in the Chinese EV supply chain. It's growing because our power electronics business, we talked about Argomax, was gaining share within newly-launched platforms in the EV space. And you're seeing a proliferation of content in even ICE vehicles of Electronics content, be it sensors, screens and compute.

So we view the automotive market as a growth market for Element overall. It's shrinking as a percentage of the overall Electronics portfolio given the pace of growth in our data center oriented business. But it's still very good, high-margin growth business for us in Electronics.

And on the industrial side, it's a coiled spring. So we've been able to eke out earnings growth, again through making the business better, productivity enhancements, offsetting a lack of absorption in the plants. And at some point, those volumes come back, and particularly in the West where our industrial business skews, and that will translate into pretty compelling incrementals.

Sure. And perhaps just looking at trends in autos, I think, obviously, previously, we've seen kind of a shift to some more EV sales in China, in the U.S., although decelerated somewhat at this moment. I'm curious maybe the next big shift within autos would just be the shift towards autonomous driving. Does this have the ability to be as big of a needle mover as kind of the prior shift to EVs for ESI specifically?

Yes. I think as a general rule of thumb, the more technically challenging and higher reliability the electronics have to be, the more value there is for us, because there's less competition and there's higher risk assigned by the supply chain. And so when you're talking about autonomous systems, the cost of failure is tremendous and the circuit density has to be really high, because there's a lot of computations that go into autonomy. And so that would be a higher-value opportunity than a conventional circuit board and an infotainment system in a car.

And so this is the -- last year when we started talking about AI as a theme, maybe 2 years ago, it wasn't simply the software and the AI sort of user experience of that moment. It was this shift in what people were willing to delegate to machines, and what that meant in terms of the proliferation of high-density, high-technical challenge, high-reliability electronics to the edge of networks. So that's autonomous cars, that's robotics. Those are massive addressable market expansion opportunities for Element over the medium term.

Understood. Perhaps just shifting gears to more of ESI's cost structure. I think something which maybe there was a bit more of a spotlight on this past quarter were ESI's raw materials. I think typically, you have the metals and the nonmetals portion. Could you kind of speak through how these flow through ESI's P&L and walk through some of the hedging impacts that we saw in 4Q?

Yes. So we're an asset-light business. We very rarely are synthesizing molecules in asset-intensive manufacturing processes. Most of what we do is formulation. So we're buying compounds from molecule synthesizers and mixing them in interesting ways. And then developing applications know-how around that product or that set of products. And so our cost of goods are not fixed assets, primarily the raw materials. So 80% of our cost of goods is variable, it's raws, 20% is fixed.

Most of that 80% today, given what's happened in metal prices, has -- is associated with metals. And most of the metals we're buying are passed through. So they have an impact on our margin percentage, but not on our margin dollars. The price of silver goes up, our sales go up commensurately, right, because it's captured in selling price. So we're able to offset inflation in many commodities with pass-through mechanisms, other commodities with surcharge mechanisms. And then the rest of our buy is niche raws, really specialty molecules. And when those costs go up, we negotiate price increases with our customers.

So the margins are quite stable. They're not simply driven by volume. Occasionally, there's a bit of a lag where we're catching up with our customers when we've seen inflation.

Our business is more OpEx-intensive than a conventional chemicals company because our workforce is primarily not on the factory floor running the equipment. They're out with customers, selling, providing technical services or innovating to solve their problems. And so OpEx is a bit higher than your benchmark chemicals business. But it's much more variable, because most of these people have high incentive compensation percentage of their earnings. And so in tough years, our OpEx flex is down.

So if you look at the business' trajectory over the past several years and diversity of end markets, gross margins have been stable. They're back close to prior peak. And OpEx has flexed in line with demand, so the EBITDA margin is very stable. And the cash flows are even more stable because when the business is in an end market -- in a challenged end market environment, it releases a lot of working capital. So cash flow conversion is better in lower-demand environments. The hallmarks of the business are the stable margins and the strong cash flows.

On the capital allocation side of things, I mean, we've spoken to this a bit in regards to the 2 acquisitions. But just coming out of those acquisitions, leverage is in what I would say is a relatively still favorable position. How should we think about M&A priorities and cadence over the medium term, say, next 3 to 5 years or so?

We talked about M&A earlier and what our criteria are. Our leverage ceiling is 3.5x. And so we sit here today with 3 turns of leverage, and that gives us some capacity. We don't like to run the business bumping up against that leverage ceiling. It reduces our flexibility and optionality.

Our filter, our hurdle for M&A is high, right? We've got outstanding businesses. And there's a scarcity of businesses of this quality in these end markets. So we have to be opportunistic positioning ourselves to act when these opportunities become available. We don't get to choose when these opportunities become available.

So as we sit here today with 3 turns of leverage, the door isn't closed on incremental M&A. The bar is a little higher because of our bandwidth and, I would say, a little bit less capacity than we had a year ago at this time. But by the end of this year, leverage is trending down back towards 2.5x, and so we'll be positioned to continue.

I wouldn't say the pipeline is particularly robust at the moment, but we're not also actively trying to catalyze transactions. And sometimes we're surprised by when great assets become available. And we believe we can be the home of choice for the types of businesses that fit our model.

Sure. And on the other side of things just following the divestiture of the graphics business, when you look at your remaining, your current businesses, are there any that you would view as either noncore or less core that you'd be willing to sell at the right price, of course?

So we've always characterized -- or we historically characterized the graphics business and the offshore business as less core, which is to say there's less overlap from a facility perspective, technology perspective and so forth. The graphics business, we sold, but we didn't actively sell it. We didn't seek a sell there. We were approached.

We're not emotional about any of our businesses. And so if someone is excited about paying us more than what we believe to be fair value for one of our businesses, we'll entertain that. But we will not seek to sell any of our businesses. They're great businesses. They're contributing nicely. There are opportunities to make each of them bigger and better over time. And that's where we're spending our time.

Yes. Happy to open for questions from the audience.

Maybe just one more on my side. Just given the recent spin of an electronics materials pure-play in the space, can you just provide an updated view of ESI's competitive peer set maybe across both the major end markets as well as the 2 segments you guys serve?

It's a good question. The great -- one of the differentiating things about Element's Electronics business is the complementarity of the businesses we're in. So there are bigger electronics materials players out there that have broader portfolios. But everything we do fits together nicely. We form the circuit pathways in electronics, whether that's in a printed circuit board, that's the assembly materials or in the package in semiconductor. And so we can sell and provide transparency to key OEMs and end markets on systems-level performance. If you use this suite of products, you get this systems-level performance, which is really different than selling product performance.

And by virtue of this breadth, and this -- we're not competing with any one company in all of our markets. So in our circuit board business, we see Qnity, we see a business that was called Atotech that's part of MKS. In our semiconductor business, we see a completely different set of competitors. In our die attach business, it's a completely different set of competitors. In our assembly business, a different set of competitors.

So there's no one in the market who can do all of the things that we can do and build the data and collateral to show systems performance the way that we can. And that's highly, highly differentiating and increasingly important as innovation in electronics is moving from scaling down transistor size on node size on semiconductors into packaging applications and into the back end, which is where we thrive.

Can definitely see the value of kind of being a system solutions provider. I'm just curious that as you kind of go down this path, what level of kind of additional synergies can you see just from kind of bundling in these offerings to the customers you're already with?

So bundling is a bad word because we're value-selling each component, and it's to a different customer specifically. What we're trying to do is show how the products work together to the OEM who will then specify these products to their suppliers. And then we're interacting with each of their suppliers who are our direct customers on a product-by-product basis.

So the opportunity here is to capture value by providing value to the OEM on the systems level and driving preference through their supply chain for our offerings. And that translates into better pricing, more market share and more at-bats. Because the bigger our seat at the table is, the more exposure we have to emerging customer pain points, which then drives our innovation, right? So there's a flywheel here. By being a preferred supplier, you're not just capturing value today, but you're a partner discovering and co-developing solutions to future pain points, right, which drives growth for the business over time.

Understood. Appreciate that. With that, it looks like we're pretty low on time. So please join me in thanking Ben.

Good morning, ladies and gentlemen, and welcome to the Element Solutions Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions]

I will now turn the call over to Varun Gokarn, Vice President, Strategy and Interrogation. Please go ahead.

Good morning, and thank you for participating in our fourth quarter and full year 2025 earnings conference call. Joining me today are our CEO, Ben Gliklich; and our CFO, Carey Dorman.

In accordance with Regulation FD, we are webcasting this conference call. A replay will be made available in the Investors section of the company's website. During today's call, we will make certain forward-looking statements that reflect our current views about the company's future performance and financial results. These statements are based on assumptions and expectations of future events, which are subject to risks and uncertainties.

Please refer to the Investors section of our website for a discussion of material risk factors that could cause actual results to differ from our expectations. Today's materials include financial information that has not been prepared in accordance with U.S. GAAP. Please refer to the earnings release and supplemental slides for definitions and reconciliations of these non-GAAP measures to comparable GAAP financial measures.

It is now my pleasure to introduce our CEO, Ben Gliklich.

Thank you, Varun, and good morning, everyone. Thank you for joining. Element Solutions had another record year in 2025. We executed our model, marrying operational excellence and prudent capital allocation to deliver record results while accelerating investment in future growth. The company is benefiting from its position as a solutions partner across the electronics manufacturing supply chain and also strengthening it. Our portfolio breadth, strategic positioning in high-value growth niches and deep technical expertise have accelerated opportunities for our businesses. We see that in the results we are reporting today and the activity levels at our customers as we enter 2026.

In the past year, demand from data center and high-performance computing markets drove 10% organic revenue growth in our Electronics business, a trend that accelerated in the fourth quarter. Our Electronic Solutions and our people enable the increasing performance that our markets demand as well as faster product iterations and significant advances in reliability and complexity. Customer engagement is as strong as ever, partially driven by our pipeline of new exciting products.

Overall, our company achieved record adjusted EBITDA and record adjusted EPS in 2025 despite continued industrial weakness and the divestiture of the Graphics business in the first quarter. Our focus on operational excellence means we strongly believe that each of our businesses can improve every year regardless of the macro environment. We demonstrated that over the past 12 months in our newly renamed Specialty segment, where margins expanded 250 basis points, driven by higher value selling, supply chain initiatives, cost efficiencies and portfolio optimization.

The businesses that comprise the Specialty segment focus on attractive niche markets with demanding customer qualification requirements and an emphasis on value-added technical service. This creates high-margin recurring revenue streams, and we've demonstrated the ability to grow our profits in these businesses even when volumes are soft. We believe we can continue to drive profit growth through share gains and productivity improvements until industrial end markets inevitably recover. We enhanced our portfolio in 2025 through prudent capital allocation.

In the first quarter of last year, we divested our slower growth, relatively lower-value flexographic printing business and redeployed that capital into 2 value-enhancing transactions that expand our presence in attractive electronics-focused growth adjacencies. We announced the acquisitions of both Micromax and EFC Gases & Advanced Materials in the fourth quarter and closed them both in early 2026. We believe that within the ESI family, these businesses will have the opportunity to flourish and grow faster and more efficiently.

Micromax is a global leader in advanced electronics inks and pastes as well as low-temperature ceramic materials essential for the most demanding electronics applications. The acquisition enhances our leadership position and technical bonafides in the electronic supply chain. Micromax's innovation and go-to-market capabilities align with our customer-centric approach, enabling us to deliver next-generation materials for high-growth applications such as satellites, electric vehicles and data centers.

Our initial weeks together have reinforced our excitement for the product portfolio and the untapped commercial opportunities that can be unlocked in the years ahead as part of a larger electronics materials company. EFC provides high-purity specialty gases and advanced materials that are essential for certain high-value, high cost of failure applications requiring stringent purity and performance standards. The business is concentrated in fast-growing markets such as semiconductor fabrication, electrical infrastructure and satellite propulsion. It has grown at a revenue CAGR in excess of 15% since 2009, with growth accelerating recently, primarily in semiconductor applications.

EFC's focus on niche, high-value products and people centricity has yielded commercial momentum and a pipeline of customer qualifications that we anticipate will translate into robust earnings growth in the coming years. And their team is a great cultural fit with ours. The business is off to a very strong start in 2026. Taken together, we had an outstanding year with demand improving sequentially throughout. That sets us up well for 2026.

Carey will now take you through the fourth quarter and full year financials in more detail. Carey?

Thanks, Ben, and good morning. On Slide 4, you can see a summary of our fourth quarter results. Net sales increased 10% organically, led by high-end electronics growth, primarily from AI and data center investments. Electronics segment organic growth was 13% with all 3 business verticals growing in the double digits. The Circuitry business has been a large beneficiary of AI-related investment as our market-leading pulse plating chemistry is used to support fabrication of high layer count server boards.

Assembly Solutions saw similar benefits from both consumer electronics and high-performance computing applications that drove 12% organic growth in the quarter. Finally, our Semiconductor Solutions business grew 13% organically as advanced packaging applications drove demand for wafer-level plating chemistries and power electronics sales returned to growth on the back of new customer wins. Specialties organic growth was 4% with modest volume improvement in core Industrial and 9% year-over-year growth in Energy Solutions.

Adjusted EBITDA for the quarter was $136 million, up 8% year-over-year on a constant currency basis when excluding the impact of divestitures. Higher pass-through metals in our Assembly business created an optical margin headwind of roughly 1% in the fourth quarter. Excluding net sales from these pass-through metals, adjusted EBITDA margin would have been 25.5%, representing a 40 basis point improvement year-on-year.

The rapid increase in metal prices in the fourth quarter, particularly silver and tin also had a negative impact on adjusted EBITDA of several million dollars. This is simply a timing impact, and those earnings should be recaptured in 2026 as inventory sells through and metal prices stabilize. We would have seen stronger incremental margins without this impact.

On Slide 5, we discuss full year financial results. Net sales for 2025 were $2.6 billion, growing 6% organically. Electronics net sales increased 10% organically, driven by strength in AI and data center markets, demand for advanced packaging metallization solutions and growth with new EV customers. Specialties grew 1% organically as offshore hydraulic production fluid growth remained robust. In Industrial surface treatment, strong automotive growth in Asia and new customer wins later in the year offsets overall sluggish Western industrial markets.

Adjusted EBITDA for the year was $548 million, which represents 7% constant currency growth when excluding the impact of the Graphics divestiture. Excluding net sales from assembly pass-through metals, adjusted EBITDA margin would have been 26.5%, a 60 basis point increase year-over-year. Once again, this margin would have been higher if not for the earnings timing impact associated with the steep increase in metal prices during 2025 and particularly in Q4. Finally, we delivered record adjusted EPS for the year of $1.49 despite the Graphics divestiture.

Next, on Slide 6, we share additional details on full year organic growth by business. Our Assembly Solutions business has a relatively diversified set of end markets with larger exposure to industrial, consumer electronics and automotive applications than our other electronics verticals. In 2025, this business grew organically at 8%, with the outperformance driven by strong consumer electronics and automotive demand in Asia, particularly in the first half of the year and increased demand for our engineered preform materials used in high-performance computing applications.

Circuitry Solutions delivered robust organic growth of 10% for the year, supported by investments in high-performance computing and data center infrastructure. We have industry-leading metallization solutions for the fabrication of dense high aspect ratio circuit boards that are uniquely suited for the extreme requirements of data centers. In addition, our solutions for data storage, EV electronics and low-earth-orbit satellites provided additional growth vectors. This year, we also focused on investments intended to meaningfully strengthen our presence in Southeast Asia, a region that should see continued momentum in the years ahead as the electronics supply chain seeks to diversify its manufacturing footprint.

Semiconductor Solutions grew 13% organically year-over-year, reflecting strong demand from advanced packaging metallization solutions and power electronics growth with new EV customers. This is the second consecutive year of mid-teens organic growth for this business. Demand remains robust across all our product lines and the opportunity pipeline continues to expand.

Our customers are performing well with our technologies. For example, our top ViaForm copper damascene customers grew 20% on average for the year, and we expect this trend to continue in 2026. We've introduced multiple new product families that are gaining customer traction and see opportunities to grow in areas that intersect with printed circuit board metallization such as IC substrate and large format panels.

Turning to the Specialty segment. Organic growth of 1% reflects softness in industrial-oriented end markets. Energy Solutions remained a bright spot, growing 7% organically as we saw continued production fluid revenue growth due to competitive wins and pricing activities. Our core Industrial surface treatment business was flat organically for the year on the top line. Underlying volume growth in Asia, automotive end markets was offset by lower European industrial activity. Net sales growth comparisons were impacted by a large customer equipment deal in the third quarter of last year, which is tied to a high-value multiyear chemistry contract.

Moving to cash flow and the balance sheet on Slide 7. We generated $256 million of adjusted free cash flow in the year with $83 million of cash generated in the fourth quarter. Working capital investment in the fourth quarter was higher than we expected due to the rapid increase in tin and precious metal prices and the timing of our hedge settlements. Higher metal prices, even though they are passed through, tie up more capital, all else being equal. However, all else is not equal. Over the past several years, we have worked on optimizing our inventory on a volume basis. Consequently, we have seen solid improvement in both inventory days and overall cash conversion.

When the metal prices eventually normalize, we expect to see a benefit to cash flow. We invested $61 million in net CapEx in 2025, advancing key strategic projects such as Kuprion and new advanced packaging product manufacturing, as well as our global R&D and production footprint. These investments support high-value growth opportunities and technology leadership in our Electronics segment. For 2026, we expect capital expenditures of approximately $75 million, reflecting our continued commitment to innovation, capacity expansion where necessary and new product introductions in fast-growing AI and data center markets primarily. This figure includes the expected capital requirements of our newly acquired businesses.

We ended 2025 with a strong balance sheet, including $627 million in cash and a net debt to adjusted EBITDA ratio of 1.8x. When we closed our 2 acquisitions earlier in Q1 this year, we paid approximately $870 million, which was funded in part by a new $450 million term loan add-on. Overall, our debt is currently 95% fixed and our cost of debt remains roughly 4%. Today, pro forma leverage is slightly above 3x, which we expect to approach 2.5x by year-end 2026, assuming no further capital allocation. Our liquidity and financial flexibility position us well to fund organic growth, strategic M&A and capital return to shareholders as appropriate.

With that, I will turn the call back to Ben to discuss our outlook. Ben?

With that, I will turn the call back to Ben to discuss our outlook. Ben?

Thank you, Carey. Looking ahead to 2026, we expect market conditions to largely resemble late 2025 with continued strength in high-performance computing and leading-edge electronics and slower industrial markets. There will be noise on the top line driven by metals price volatility, which may also have a bearing on our adjusted EBITDA seasonality and short-term cash flow. But in the fullness of time, these are only timing differences with no impact on overall profit dollars.

Our 2026 adjusted EBITDA guidance range is $650 million to $670 million, inclusive of the expected contributions from the EFC and Micromax acquisitions and assuming current FX rates and metal prices. This range includes a modest year-over-year FX tailwind and an expected $5 million headwind as we lap the 2025 stub period contribution from our Graphics business, together implying high single-digit organic adjusted EBITDA growth. This also translates to adjusted EPS growth in the mid- to high teens.

Our focus in 2026 will be similar to prior years with the only adjustment relating to our recent acquisitions. The emphasis will be on operational excellence, integrating EFC and Micromax and scaling capacity for new products. We made product qualification milestone payments in the first quarter of this year for Kuprion and are in the final innings before ramping capacity at our first site in California. We have other compelling product launches underway in thermal materials, die attach and circuit board fabrication. We also retain and will build capacity for further accretive capital deployment should attractive opportunities become available.

We have strong customer partnerships, a clear strategy and a growing high-performing team that is enthusiastic and incentivized to continue to execute on the momentum we have. We're a people-powered company, and I'm grateful for the extraordinary talent that is responsible for a great 2025 and focused on another record year in 2026.

Operator, please open the line for questions.Operator, please open the line for questions.

[Operator Instructions] Your first question comes from the line of Mike Harrison with Seaport Research Partners. Please go ahead.

Congrats on a nice finish to the year.

Thanks, Mike. Good morning.

I wanted to start with the Electronics business and just the margin performance there. If we adjust for that metal price pass-through, it was still relatively weak. It sounds like maybe the metal price spike or kind of the significant rise that you saw in metal prices were also a drag on margins. So I was hoping you could talk about that.

But maybe also just if we kind of excluded that metal price impact completely, what were you seeing in terms of underlying margin performance as it related to operational efficiency, mix, your cost structure, any other factors that we would think about kind of the underlying sustainability of margin performance into next year or into '26, I should say?

Thanks for the question, Mike. There are a few things impacting margin in the quarter and in the year. We talked about a corporate allocation shift as subsequent to the sale of our Graphics business that had a bearing. We talked about ramping up investment primarily in Kuprion, which is just OpEx as we prepare to ramp that. And then the third variable, which was a new variable here in Q4 and really in December was this metal pricing dynamic where the spike in metal prices and the associated hedge losses that occurred in Q4 and were more acutely in December had a several million dollar hit to the P&L.

Absent that, we would have been above the high end of our guidance range, and we'll recapture that value sitting here in 2026. So the incrementals would have been better than reported in Q4 and in the full year absent that. And as we roll into 2026, we expect the incremental margins to be more normal in the Electronics business and across all of Element. We've talked about a 30% to 40% incremental in normal times, and there's no reason that, that has changed.

All right. And then just a second question here. There are some concerns about rising memory prices and potential shortages and the impact that could have on logic demand in areas like consumer electronics or automotive or industrial applications within Semicon. How do you see higher memory prices affecting ESI's Electronics business as we move forward in '26?

Yes. So we don't want to be dismissive of that risk. That's a real risk that memory prices will rise and correspondingly, consumer electronics prices will rise and that will have an impact on demand. But that's really looking at a single variable. And it's a multivariable equation, which is to say the reason that memory prices are rising is because capacity is constrained by the surge in demand from data center applications. And we're beneficiaries of that surge in demand. You see it in the P&L, and you saw the acceleration in all of our Electronics businesses here in Q4.

We have more value on a high-end server board for a data center than in a PC or a smartphone. And so insofar as memory prices are rising and that's having a negative impact on consumer electronics, it should be associated with a correspondingly positive impact in the data center market, which will benefit Element. So I don't want to dismiss that as a risk. It's something we're keeping an eye on. Our underlying forecast for 2026 doesn't have strong growth assumptions for the smartphone market or consumer electronics more broadly, but it does have quite strong growth assumptions associated with the data center market, which we're seeing on the ground here today.

Your next question comes from the line of Aleksey Yefremov with KeyBanc Capital Markets.

Ben, can you just talk about the new product adoption in '26? Do you expect that process to be accelerating in '26 versus '25? And as a result, your outgrowth versus the market, would it increase in '26 versus '25?

Is that a question about our new products or our supply chain new products, Aleksey?

Your new products, Ben.

Yes. So historically, Element hasn't really been a blockbuster product type company, right? We have a lot of product proliferation because our solutions are very much customized to customer-specific requirements. That having been said, over the past several years, we've had real traction in a couple of areas in power electronics. We've talked about Kuprion as a compelling value proposition and a product we're ramping. And then a few other areas around die attach solutions and some new introductions around circuit board fabrication and some thermal materials.

Those are responsible for some of our outgrowth relative to the market. The other thing to think about is just that our technology skews towards higher-end applications, and those are outgrowing relative to the market. And both of those things will be true in 2026 as they were in 2025. Our Circuitry business skews towards the highest end, highest value circuit boards, which are growing well in excess of the market. Our power Electronics business is gaining share in excess of the automotive market as an example, and growing much faster than your semi assembly market.

We have seen real traction with Argomax in proliferating our customer base, and that's a business where outside of our original core customer, we're seeing 20-plus percent growth in the back half of 2025. We expect that to continue, and on and on. Kuprion also contributes to that where we should see a ramp in sales over the course of 2026, which would be idiosyncratic to the overall market. So I'd say there are multiple factors that support the -- our ability to outgrow end market indicators in the medium and long term. And we've got high confidence, I would say, growing confidence in our ability to continue that coming out of 2025.

And a bit of a crystal ball question. You grew organically 13% in Electronics in Q4. You're guiding to high single digit in 2026. Is something in the low teens in terms of growth for this segment within reach, within the range of outcomes in your view if we were thinking about bull case scenarios?

Ultimately, we're in a units-driven business that's short cycle. And so what we target is to outperform our end markets by 2 or 3 points through the cycle. And so the cycle is going to be the driver -- underlying unit demand is going to be the driver. And if we see a continuation of what we're seeing in the data center market, if we see a modestly better smartphone market than expected, yes, you could see a continuation of double-digit organic growth on the top line for our Electronics business. But as you know us, we tend to -- given the visibility in this business, not guide towards the bull case, guide towards sort of shared down the fairway market expectations -- end market expectations.

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

Ben, you hit on this as it related to the Circuitry a couple of questions ago. But can you just hit on Assembly and Semi, just given your portfolio has been constantly evolving in many ways away from just baseline consumer electronics as well as handsets. But across the Electronics segment, how should we think about the relative growth rates embedded in your guidance, for instance, like HPC, data center and advanced packaging versus some of the more legacy end markets? And do you feel the buy side fully appreciates that evolution?

Yes. Thanks for the question, Chris. Historically, the Semi business and the semi market was assumed to grow faster than the printed circuit board market and the Printed Circuit Board business. But for the past 3 years, we've seen PCB square meters exceed -- or growth exceed MSI growth. And so our Printed Circuit Board business has seen a real acceleration. And looking ahead into 2026, the market or industry experts expect the PCB market to outgrow MSI once again, which is a good arbinger for our Circuitry business. And we've been outgrowing MSI by a greater delta than we have PCB square meters, right?

So PCB square meters were high single-digit growers, and we were 10% in Circuitry this year and MSI was mid-single digit and our Semi business grew in the low teens. So as we look to 2026, we would expect similar degrees of outperformance relative to underlying growth. The industry is expecting 6-ish percent PCB growth in 2026, which would be a bit of a deceleration. And so we see potential room for upside there, but our guide doesn't contemplate that. The semi market is expecting similar year-on-year growth, and we believe we can outperform by a similar delta in 2026, driven by what we see in power electronics and some of the other new product introductions we have.

The more surprising growth vector has been our Assembly business, which we historically would have thought would grow roughly in line with or the market driver would be electronic systems growth, which was a low to mid-single-digit grower and has really accelerated here in 2025. And our business has substantially outperformed that, growing in the high single digits. And that's because we've introduced some new products, higher reliability solders, finer solder pastes, preforms, which are used in high-end server boards to keep the chips flat on -- because the chips have gotten so big. So we've got some really interesting engineered materials that keep chips flat on the highest-end server boards going into data centers. So our overall electronics business is benefiting from advances in technology and accelerating. And so yes, we do believe the portfolio has improved from a quality perspective and will continue to.

Got it. And just shifting back to Kuprion. I understand '26 is still very, very early, and there's still some growth investments. But can you just comment based on what you're hearing from customers and the potential demand pull from both of your facilities, can you just remind us on kind of where you stand in that process as well as what you perceive to be the current customer receptiveness to that product portfolio?

Yes. Thanks for the question, Chris. So Kuprion is really exciting, and we're in the crucible here as we're beginning to ramp production at our first significant site in California. And at the moment, the pipeline of demand exceeds our production capacity based on this first site. Now we need to ramp that. We need to convert that pipeline into high-volume manufacturing at the customer level. But we're progressing on planning the second site already on the back of the robustness of the demand for this capability. So we are in the crucible customer receptivity, customer pull remains exceptionally strong, and we're still deep in getting the supply chain set up to meet that demand.

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

I wanted to ask just on your 1Q guidance. Your range is wider than what you typically give. Can you talk about why that is and what drives the upper versus lower end?

Yes. Thanks for the question, Josh. The range is wider than typical because of metal price impacts. So we saw a significant increase in metal prices, tin and silver in January. And so that same impact we talked about in Q4 may recur in Q1, but it may also unwind in Q1 if metal prices stabilize. And so that creates a little bit of variability, as I said in the prepared remarks, around seasonality of the business. That's the biggest needle mover. The second is acquisitions and how they feather in from a seasonal perspective, right? This is our first quarter owning Micromax and EFC. And so we gave ourselves a little bit of a wider birth around the seasonality in those businesses.

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

Could you share some thoughts on why the Specialty segment was the right place for EFC? And then do you expect the overall segment to grow at your mid-single digits guidance for this year?

Yes. EFC is a great niche business with highly technical, highly qualified products in a wide range of industries. And it could have fit within both segments. The way we're running it as an autonomous unit and the breadth of end markets it's supplying is why it landed in our Specialty segment. It accelerates the growth of the Specialty segment. It also improves the margins of the Specialty segment. So as we look out to 2026, it's value enhancing to the Specialty segment and quality enhancing. So you'll see that feather in as well.

When we look into 2026 for that segment, we talked about end market conditions being similar to 2025, which is uninspiring end market growth in the industrial vertical, but an opportunity to make that business better and grow profits. The offshore business continues to be robust and the EFC business is growing very, very nicely. And so from an EBITDA growth perspective, we could repeat the mid-single-digit growth we delivered in 2025.

Got it. And then maybe on your acquisitions, Micromax, EFC, how did they perform in '25? Does your guide include them as still at $70 million EBITDA? And maybe also, I think in your prepared remarks, you mentioned some untapped commercial opportunities, is that something we see in '26?

Yes. So when we announced Micromax, we said it was roughly $40 million of EBITDA in '25 and EFC, we said it was roughly $30 million. We expected roughly $30 million in '26, right? And so that's the roughly $70 million of contribution in '26 is adding those 2 with some modest growth and a little bit of conservatism as we navigate integrations. The Micromax business outgrew our expectations in 2025, organic revenue growth was north of 10% for Micromax. So there were some questions about its ability to grow and I think it just proved them in their early days in 2025, and we're seeing a really robust start to the year for that business here in 2026.

Also for EFC, a month doesn't make a trend, but both of them are outperforming our initial expectations. And the integrations are going really well. The folks at Micromax are incredibly excited to be a part of an electronics-oriented company. And we have, just in the first days of integration, identified several areas where collaboration and relationships -- discrete relationships their organization has and our organization has will yield, what we believe, will be better commercial outcomes for both businesses. So that's what we're referring to the untapped commercial opportunities. We see our ability to make these businesses better as part of Element as quite compelling over and above the high-quality businesses they were independently.

Your next question comes from the line of Matthew DeYoe with Bank of America.

Ben, so I think you had shared this with me, right? So the Taiwan Printed Circuit Board Association, right, calling for the PCB market to be up 14% in 2026. I mean, is it reasonable to assume this is like a base case for your associated volumes? Obviously, you can make maybe your own assumptions on the end markets. But like presumably, you would also expect to outgrow this? And how do you factor in an outlook like that into how you perceive your own business performance?

So we use Prismark data as our baseline, and Prismark is talking about a 6% year in 2026, a 9% CAGR from '24 to '29. And so that's what we benchmark ourselves against. It's important to look at meter squared versus dollar value. So a lot of the PCBs that are being produced today, a lot of where the growth is coming from is really high-value complex boards. Now that's good for us because that's higher-margin sales, but we're not driven by the dollar value of the circuit board. We're driven by the volume of circuit boards being produced. And so that might be the reconciling figure.

There's a bull case in the circuit board market right now given the acceleration of investment in data center capacity. And we were in Asia in early January and the level of activity was unbelievable and super exciting. But as we look to 2026, we're looking at that 6% number, that's what we're building off of.

All right. I appreciate that. And I think in the call, I heard 7% organic growth in Energy Solutions. So I made the comment, seemed maybe to be a decent amount price driven. Can you break down price volume in here? And should we kind of assume this price annualizes in '26? Is this -- I know this is a pretty solid business for you. Is this kind of price in excess of raws? Or is there some obscure raw material that I don't know of that's up materially? Just trying to chart the course for next year.

Yes. The Offshore business is a wonderful business. And I would say of the 7%, it's about half and half price volume growth. And this is one of those businesses where there is a bit more of a pricing lever available to us and it's one where we're building that muscle as appropriate. Entering 2026, we were a little cautious, I would say, about volumes there. Energy price had been a little low. We saw some projects potentially shifting out to the right. But it should be a mid-single-digit grower between price and volume next year again.

Your next question comes from the line of John Roberts with Mizuho.

Nice results. Is Kuprion used in copackage optics where they're using glass as a substrate?

So today, Kuprion isn't used in high-volume manufacturing anywhere. It has applications in Through-Glass Vias which are the core layers for some of the highest-end printed circuit boards, and it solves a major customer pain point there. That's just one of many potential markets for it.

Okay. And how do we think about wafer level packaging, like what are your key products that would be used in that application?

So we have wafer plating products that are -- that go on to the backside of wafers for packaging applications. We have advanced interconnect products that are used for copper pillars and barrier layers. We have printed circuit board chemistries for the highest-end printed circuit boards that are used in packages. So wafer-level packaging, advanced packaging, that is right at the sort of center of the Venn diagram of our capabilities and our solution sets for foundries and OSATs and the associated...

Is there a way to scope the size of that opportunity?

So we have a specific business we call wafer-level packaging, which is about $150 million of revenue, actually bumping up against $200 million now that we've seen some precious metal price increases, and there are some precious metals in there that are not reported as pass-through. And then we've got ancillary products that go into advanced packaging applications in the -- which would bring our advanced packaging revenue to the multiple hundreds of millions. But again, these are generic terms. And so it's hard to be too precise.

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

Just wanted to follow up. I think Carey in the prepared remarks talked about a large customer contract. And I wasn't clear, it seemed like there was some distortion from that either currently or in the future. But could you just walk through what that is, the size and kind of how that impacts the P&L?

Yes. So in Q3 of 2024, we sold a large equipment line to a customer that was building manufacturing capacity in the industrial business in Mexico. And so that was large revenue, it was lower margin on the equipment. And we didn't make the equipment, by the way. We purchased it on their behalf in exchange for a multiyear high-margin contract. It's a big market share win for us and a short payback period. So when you look at the year-over-year in Q3 and on a full year basis, there was a revenue contribution at lower margin in '24, which was replaced by higher-margin chemistry sales in '25.

Okay. Great. And then can you remind us on Kuprion, if the plant runs as you expect, how long will it take, do you think to sell the first plant out? And then roughly, what's the contribution from the first plant when it's at full operating rates?

There are a lot of assumptions embedded in that. And so we don't want to be too precise. What I would say is we have a pipeline today for volumes in excess of that plant. The ramp of that plant, we should be ramped to full production in the second half of this year. And it will come at pretty compelling incremental margins. What we've guided to is multiple millions of dollars of revenue in '26 and a material contribution to EBITDA from this in '27.

Your next question comes from the line of Pete Osterland with Truist Securities.

I just wanted to follow up on some of your comments around Specialties. What are your expectations around segment margins in 2026, excluding the impact of the EFC acquisition? I guess, it's stable to slightly higher a reasonable expectation given what sounds like continued growth in offshore? Are there any other major puts and takes to call out for margin performance in that business this year?

No, I think that we would expect that business to be expanding margins if we're going to deliver mid-single-digit growth given the end market outlook for the segment overall ex EFC.

Okay. And then just given some of the dynamics you've called out with working capital and the higher CapEx you're guiding for 2026, what are you targeting for free cash flow generation in 2026? Do you have a target in terms of EBITDA conversion you can share?

Yes. I think consistent with prior years, we target roughly a 50% conversion of EBITDA to free cash flow. To your point, the dynamics around metal pricing put some seasonality questions in that. But ultimately, on a full year basis, I would expect right around 50%, maybe just a tick lower.

And your final question comes from the line of Frank Mitsch with Fermium Research.

Obviously, a very busy start to the year with the acquisitions, and you offered some very constructive comments on how they're trending so far. I was wondering if you could expand upon your thoughts on top line synergies for both as we progress through this year and into next year. How should we think about the longer-term implications for the top line synergies between Micromax, EFC and Element?

Yes. Thanks for the question, Frank. It's really hard to underwrite to revenue synergies because they're sort of hard to prove out. And we're in businesses that have long sales cycles, especially when you think about EFC and Micromax, it's highly qualified products. And so it's hard to say in 2026, we're going to see material revenue synergies. But what we've said repeatedly is that these businesses are better inside of Element than outside. And so in both cases, there's not a huge amount of cost synergy we're driving from this. It's being a part of a larger electronics organization and the resources and relationships that we can bring to bear to support those businesses.

And we're already starting to see that in the collaboration and joint customer visits is just beginning. And so we believe that the Micromax business will grow faster than it would have independently. EFC doesn't need any help growing faster, but we do believe that the relationships we have and frankly, some of the relationships they have will help accelerate growth in both businesses. And so we do expect to see an acceleration overall from what you might call revenue synergies, but it's hard to quantify that and put time bounds on it.

Okay. Got you. So at this point, the trend is positive, customer -- joint customer visits, et cetera, but you're too early to try and throw some numbers to it. And then just lastly, I mean, I believe you said before that the capital intensity of Micromax was similar to Element Solutions. I assume that, that's similar for EFC as well?

I wish. Just going back to that question, I wish I could say that 1 or 2 months into 2026 post closing, we're responsible for the strength in the businesses we're seeing, but that's just the quality of the businesses and the end markets they're participating in. With regard to capital intensity, Micromax is similar to ESI overall. EFC is modestly more capital intensive, but it's a smaller business. And again, we're guiding to $75 million of CapEx this year, which should comfortably cover it.

Yes. And I would just add that the returns on capital in that business, EFC in particular, are as high, if not higher, just given the profitability.

I will now turn the call back over to Ben Gliklich for closing remarks.

Well, thank you, Rebecca, and thank you, everybody, for joining. Have a great day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Terrific. Okay. So we'll go ahead and get started. We're very thankful to have Element Solutions, Ben Gliklich, the CEO for the company here to chat with us today, fascinating story of the company. Again, we've been around this a long time. Started off with something called Platform Holdings years ago, had a trouble here, and Ben and his predecessor fixed it up and turned it into something that's really one of the kind of shining stars within our space. As far as one of the few guys is actually growing the business, have great market positions and just done a phenomenal job managing the business, deploying capital. So again, congratulations, Ben, because we haven't seen that much in the space where you've just been smart with capital.

So maybe, Ben, let's start as I've kind of done with a lot of the companies, if you just went back to January 1 this year, you obviously had some expectations for what was going to happen this year. What ended up being better, what ended up being worse this year when you kind of do an after-action review of 2025?

Thanks for the question, Duffy, and thanks for having us here. Gosh, going back in the time machine to January of this year, it's been a good year for us. We were on track for a record year since we founded Element Solutions. We're growing really organically nicely. We're proud to have found an avenue for some interesting capital allocation as well.

Entering the year, we had conviction that the high end in electronics was going to remain strong. The biggest area of uncertainty on the electronic side has been smartphones, and that goes back several years. And we weren't quite sure what to expect. I think our base case was modest growth in the smartphone market. The EV market has been a volatile one as well. If you had to point to something that didn't go as we would have expected it to go is the EV market where we saw some weakness with some concentrated customers.

And then the biggest question entering the year was capital allocation. The balance sheet had been delevered nicely. We announced the sale of our Graphic Solutions business in the third quarter of 2024 that closed the end of February. And so we had a lot of capacity and it was a question of where would we deploy that capacity. And so we spent a reasonable amount of time looking for attractive areas to deploy that capital, and we were fortunate to have found 2 great acquisitions more recently here.

So what's been better? High-end electronics continues to surprise to the upside, smartphones modestly better than we would have expected. What's been a bit worse? EV. What's been -- on the industrial side, we expected the offshore business to continue to be strong, it has been. On the Industrial Solutions side, volumes continue to be difficult there. But we continue to find avenues to improve margins through procurement and productivity. So that's been a good story as well. And then, of course, capital allocation is a really exciting area for us as we exit 2025.

Fair enough. And so using that as a baseline then, how does that set you up to springboard into 2026? Again, kind of the same thing, what do you think gets better? What do you think maybe is going to be challenge next year?

Yes. I think the right baseline is a continuation of what we saw here in 2025, which is to say the high end on electronics continues to be robust. Expectations for smartphones are for similar like years just because there's so much volatility around that from a units perspective, not a growth perspective. We'd like to -- we will hope that the industrial side of the business recovers. It feels as though the market has been saying things are going to get better in the back half of the year for 3 years rolling and they haven't. And so we're not going to go in with a very bullish assumption there. We don't have any data points to support that. But we do believe we can continue to drive productivity in that business.

And then, of course, we've got an FX tailwind for the first time in a while, and M&A contributing. So together, it's something around $70 million of EBITDA that we'll add next year. And those are high-quality, fast-growing businesses that will be adding to our growth algorithm in the out years.

Okay. And let's dive in on both -- the two acquisitions, if we could. Walk through kind of like what they were doing individually before you got them? And then is there a chance for you to do something differently to accelerate their growth? Or are there true kind of sales synergies that you think kind of combined 2 plus 2 is bigger than 4?

Yes. So the two acquisitions are very different in terms of our approach to them and the strategy go-forward. With EFC Gases, this is a market leader in niche, rare high-purity gases, servicing the fastest-growing niches of the industrial economy, semiconductor fabrication here in the United States, satellite propulsion systems and other aerospace applications and electrical transmission. So those 3 areas together are about 75% of sales.

They've been growing 15% annualized back to 2019 at very robust margins. Our plan for them is to run that as a stand-alone business inside of Element, leverage the relationships and capabilities that we have, invest behind them and accelerate the growth that was naturally coming their way. And that's just an outstanding team, outstanding business with a lot of runway to grow and the market at its back.

On Micromax, it's a bit of a different story where this is a very high-quality business, market-leading technology in an attractive high-value niche market, but it's a carve-out. And it's been inside of a good company, but a company that wasn't focused on electronics. And even before that, when it was inside of DuPont, it was off to the side. And so we think that inside of Element with a really deep focus on electronics, with great access to specifiers, qualifiers inside of our electronics business, MacDermid Alpha Electronics Solutions, we can do a lot to grow their mind share and help them gain real traction in the leading edge.

Right now, their applications are in what were historically the most technically challenging areas of the market, satellites, aerospace and defense applications. They're not yet into high-performance compute server boards. And we're just at the inflection where a lot of the innovation is moving from the chip to the board and onto the passives, which is where they serve. So we see a big opportunity for us to help them climb that and accelerate growth in that business. and then integrate them into our overall portfolio, where there will be some cost synergies as well.

And were they already moving into those areas and you're just going to help them? Or that's an opportunity you saw to take them from an area and move it into kind of a white space areas that they weren't in?

Look, their technology is leading in the market. They have a right to participate in that market. They're already in the passive space, but commercially, I think that there's an opportunity to invest to help them gain share in those applications.

Okay. And then with those kind of already in the bag, right, I guess, what does that do for your strategic vision and for Element, again, '26 and maybe going out 3 or 4 years? Is it possible that we see 2 or 3 or 4 of those types of deals every year, and we can kind of increase your -- the real growth rate inorganically? Or is this just kind of a one-off that happened to come together and that's lumpy and won't repeat?

There are sort of two mantras for Element Solutions. The first is operational excellence and prudent capital allocation. So we've got great businesses, make them better more days than not. And the way that they manifest as great businesses in addition to above-market growth is really strong cash flows. And so our job, the leadership team of Element is to deploy those cash flows in prudent ways with a lot of flexibility around that. So it's been M&A, always in markets we deeply understand behind our businesses, there have been buybacks. We have a modest dividend. We've delevered the balance sheet over time. And so capital allocation is part and parcel of what we do.

And the other sort of hallmark is that we want to be the best company in our industry in terms of the value we provide our customers, the opportunities we create for our people and the value we create for our shareholders as measured by intrinsic value per share. And so as we look out over the next couple of years, there isn't some fixed algorithm for capital allocation, right? There's a fixed growth algorithm organically. There are fixed frameworks around how we deploy our strategy, but we're going to retain flexibility to deploy capital.

We would love to continue to invest, particularly behind our electronics business, but in general, behind our businesses to compound earnings per share, to improve our value proposition to our customers. There's nothing that we must own, and we've been disciplined around our leverage ceiling. And so we'll exit the year with 3 turns of leverage. The ceiling in the past is -- the ceiling has been 3.5, very comfortable at 3. It was as low as 1.9 recently. But keeping the balance sheet conservative and then investing behind our businesses is something you should expect us to do over any 3-, 5-year period.

Fair. And maybe walk us through on the electronics side, you've, I think, pretty deftly kind of gotten yourself into some of the higher-growth areas. But how is the change in the focus for electronic end markets married up, I guess, with your portfolio and why you've kind of been able to accelerate growth a little bit behind that?

Look, the acceleration in our electronics business is a product of deliberate strategy and a bit of luck. The portfolio that we had when we launched Element Solutions was a great portfolio of market leaders in niche markets, serving primarily printed circuit board applications with a foothold in the semiconductor market. So from a deliberate perspective, we improved our access to the semiconductor market. If you look at what we did with the ViaForm or the Entegris distribution agreement that we canceled as an example of that.

And then we saw this convergence coming where printed circuit boards were seeing more innovation and prioritized resources towards solving those emerging customer pain points. And that has given us better mind share with the key specifiers and qualifiers and OEMs in our supply chains.

And so we put our businesses together, this collection of market-leading niche electronics assets into one company and really made a push on marketing and applications development and strategic account management to bring the breadth of what we do to bear to these important supply chain partners. And that has driven market share and mind share as I said, and allowed for us to really outperform our end markets and gain great traction in the fastest growing niches of our available market.

Definitely going to come back to electronics because it just drives so much. But let's touch on the industrial business for a second because it's still over 1/4 of the company. One, I guess, strategically, should that remain part of the company -- I mean, again, is there a way to create value with those separate? Or do you think that they work well together and it's not an issue? And then two, just again, the same kind of question, how do you see the strategy for that business over the next 2 or 3 years? What should we expect to see there?

So our Industrial & Specialty space segment smaller than it was 2 years ago because we sold the Graphic Solutions business. So it's also two really high-quality market-leading businesses that are growing earnings in what has been a very difficult backdrop for industrial companies over the past several years. We have an offshore solutions business, which is less than $100 million of revenue, growing really nicely, very strong pricing power, really strong market position in what has been a growth market, deep offshore exploration and production. So that's been a great story for the company, really good business.

The Industrial Solutions business is also a great business that has been demonstrating the quality of the business because it's been facing a significant volume headwind over the past 3 years. Volumes are down 15-plus percent, earnings are up. That's pricing, that's procurement, that's productivity despite facility utilization being meaningfully down.

So it's primed for really strong incrementals when that market gets better, but we're not calling for that market to get better imminently. Both of these businesses are like our other businesses, they're asset-light, people-intensive, really strong cash flow businesses. We are not emotional about the portfolio as it is currently constructed. We see a pretty meaningful value creation opportunity from our industrial assets. We don't believe that the right catalyst is self-generated here. And we want to back the great horses that we have in terms of the people and the assets in the portfolio.

Okay. And the Industrial Solutions business, what's the best metric to track macro-wise? Is it just global manufacturing? Like what is it that really drives the volume in that business over time?

So about half of it is auto with a skew towards the West. The other half is construction building products, industrial equipment and machinery, so it's ISM and PMIs.

Fair enough. And in that down period, have you guys taken market share in that business? Have you done better than the market, would you guess?

Yes, we absolutely have. And I think that, that can be supported empirically. So our volume decline is less than the market. And that's because of a real strong commercial emphasis. And also we've been supporting customers. We've seen a pretty dramatic realignment from a supply chain perspective, a lot of our European customers are moving into new geographies. We're helping them do that, we're equipment financing for them. And so we've won some really big pieces of business. We've also had -- several of our large competitors have been in the midst of transactions, and that has created a white space for us, and that has allowed for us to outperform.

Maybe looking at the company as a whole, again, we've gone -- it's been a long road with this one. Valuation is better today, but I think a lot of people would argue that something you've got peers like Qnity and Entegris. When you're sitting down with it, what is the right way to think about valuing this company? I mean what is the right peer set in your mind?

I think you've done better than people would have suspected 2 or 3 years ago. But you've gotten rewarded for the EBITDA that you've generated, but not so much for a multiple improvement, like the company is a higher-quality company than people would have thought. So just in general, what are your views on valuation?

It's not our job to assign a multiple for the business. Our job is to grow what gets multiplied, and we're very focused on that. And on a relative basis, we've absolutely outperformed the broader indices in which we -- the broader peer group and even the electronics peers. This company is now more than 70% electronics. When you look at our heads-up comparison against some of our peers, we've been outgrowing them. And so we think that the portfolio has demonstrated resilience through downturns because there was a recent downturn in electronics and then upside on the way up. And we're proud of that execution.

The thing that I think is sometimes missed when you evaluate Element in the context of electronics businesses is the cash flows, right? And so ex metals, our margins are comparable to those peers. We sell $300-or-so million of metal on a pass-through basis. It doesn't impact margin dollars. It just impacts margin percent. So you could look at it ex metals the way we do. And so margins are expanding. They're close to historical records, and they're in line with peers. But our capital expenditures are dramatically less than peers, right? It's an asset-light business.

And so when you look at our cash flow conversion, or even more simply, you look at our earnings per share, but the multiple is meaningfully lower. What do we do about that? Well, when it becomes dislocated, we buy back stock. Again, we generate a lot of cash. And so in our first 7 years as Element Solutions, we repurchased 20% of shares outstanding, maybe a little bit more. We generate cash consistently every quarter and buybacks are certainly part of our arsenal to help us compound earnings per share, which is the North Star for the company.

Okay. And sometimes we get pushback from investors kind of flipping that up, the capital costs are lower, the R&D percent is lower. So therefore, it's not as good a quality company. You want to have high R&D, you want to be growing and needing capital to do that. So when you comp yourself again to an Entegris, to a Qnity, there's a lot of pieces in that. But what would you expect the growth algorithm relative to those types of companies would be going forward?

A simple pushback is, if you can get the growth and the margin without the capital intensity, it's probably a good thing.

It's a wonderful thing. But I think their point is at some point, you still run out of road or what have you.

Look, the growth algorithm that we believe is right for our electronics business is high-single digits through the cycle, and we've delivered high single-digit organic revenue growth out of our electronics business the past 6 quarters. And it hasn't been a uniformly strong electronics environment. Sure the headlines are really strong about capital into data centers. That's a small, albeit growing slice of the electronics ecosystem. A lot of electronics that go into cars, that go into smartphones, that go into industrial equipment, and those are markets that haven't been particularly robust.

And so across the broader electronics ecosystem, it's a good time, but it's certainly not a great time. And we've been delivering high single-digit organic growth. We've been outpacing some of the peers you mentioned earlier on a like-for-like basis with our semiconductor business and our circuit board business. And that's all with a less R&D-intensive and capital-intensive model. And that's just the nature of the business.

Now where we sell into semiconductor, we're spending the appropriate percentage of sales more in line with some of those peers in R&D. But our assembly business, where there's $300 million of pass-through metals, it's less R&D-intensive. And it's still growing quite nicely. The right growth algorithm for the overall business is mid- to high single-digit top line, 1.5x that on EBITDA because we're getting an incremental margin of between 30% and 40%.

And then with prudent capital allocation from the strong cash flows this business generates, 2-ish percent of sales in CapEx, we should be compounding EPS in the teens. And over the past 3 years, we've done things that work against our ability to grow EPS in the short term, selling our graphics business, delevering the balance sheet. But that unlock an acceleration or the right thing for the long-term growth algorithm of the business.

Right. Fair enough. No, that's clear. Now when you look at the electronic materials industry kind of writ large, right, given the, U.S., Qnity, MKSI, do you think there will be meaningful structural inorganic changes to that industry? Or all this stuff goes through cycles. And now people are pretty excited, multiples are pretty high. Sometimes that makes it difficult for things to happen. But we've seen a decent amount of consolidation, probably your closet peer got acquired several years ago. Would you suspect that we will see continued consolidation in this industry?

Yes. So this is a market that has been consolidating for several decades. We are the market leaders in the markets in which we participate. And so we're always eager to bring new capabilities to bear to support our customers and supply chains. Not all electronics materials businesses are made the same. You just went through the capital intensity, the R&D intensity and the natural return of a lot of those businesses. So we're not looking from our perspective, simply for electronic materials business. They need to meet a quality threshold that is very high because our business quality is quite high.

The other dynamic is that because we're in a strong position in our markets, and there has been reasonable amount of consolidation, there's nothing that will happen from a strategic perspective that will put us on a definitive posture where we have to go consolidate. So our view is we're eager to consolidate high-quality businesses. We are a great long-term home for these assets. I think we've proven through our operating system and strategy that we can run these businesses as well when they meet the model that we're looking for and the quality criteria we're looking for.

But we're not going to be forced buyers by other consolidations. So I can't read the tea leaves. I can only speculate around incremental consolidation. But our posture on this is we're happy to add high-quality business, but we don't feel like anything will force us to do so.

Okay. Kind of post COVID, again, you guys less so than a lot of my other companies have to talk about like raw material costs and stuff like that, but kind of underneath what has been the trend for raw materials for you guys kind of last year, this year, looking into next year? And have you been able to offset that with pricing generally?

So our business, a few observations around raws, right? When you look at our cost of goods, 80% is variable. And so we don't have a big fixed asset footprint. And so when raws go up, that has an impact very quickly. But we are able to pass through either contractually, through negotiations, price increases pretty consistently. That's always been the model, and that was the model coming out of COVID when there was a lot of inflation. We're able to pass that price on. And we're able to hold that price by and large. And so it took a little while. So our margins were under a bit of pressure coming out of COVID. We've recaptured that and more. And we've been able to hold price in what's been a deflationary environment for our raws over the past several years.

Our outlook for 2026 is for roughly flat input costs, just a conservative assumption. But we're driving better procurement, and so we see room for margin expansion from better procurement and then mix. We're bringing new technology to market. And we value price. So if we're coming to market with something that improves our customers' operations, we share in that game. And so there's a margin expansion opportunity because the segments of the market that are growing fastest are the highest tech, so the mix is better. And then we have innovative products that we bring to market alongside that.

Okay. And then maybe one kind of around politics. Obviously, there's been a lot of trade noise around electronics in the last year or so. When you look at that, one, has that directly impacted your business at all? Again, are you getting calls from the administration kind of saying, "Hey, don't sell this or don't sell that type thing.

And then two, if countries turn out to be winners from this and again, maybe it's more stuff in the U.S., more stuff in Korea, maybe China, kind of going on their own chips, where do you win, where do you lose geographically, if one side of the other kind of comes out on top?

So the business is very local. So we're buying manufacturing and selling locally with local teams on the ground, providing technical support. And so when there was a lot of noise around tariffs, the threat was not that we were going to have to pay tariffs with the cross-border flows, it was, everything is going to get expensive, it's going to destroy demand, which didn't happen in 2025. So we've got a resilient model from tariffs. The benefit of our business is it's local, and we're global. We're global leaders. So when business moves from, let's say, China to Thailand or India, we're there on the ground to support our customers who have much more complex manufacturing processes than we do. And so we're helping them stand up their sites.

So we've won share in the electronics business as circuit board fabrication, for example, moved from China to Vietnam and Thailand this year. We've helped large smartphone OEMs stand up assembly in places like India, where they've started to move device box building. So the realignment of supply chain thus far has been a positive for us. And I would expect it to remain so.

Okay. And just when you get big growth areas like that and movements, sometimes you get inventory build, people always kind of double, triple order stuff just to make sure. Do you see any of that in your chains? Do you worry that we might have an inventory issue if things slow down a little bit.

Our customers don't really stock our product. The exception is in the semiconductor business where they want to have 6 months on hand. But if you go to a printed circuit board fabrication -- fabricator, they don't want to have big jugs of chemistry sitting on the floor. There are lots of people, right? And we're local. So they expect -- they place an order, they're going to get something within a week, if not a few days. So there's not a lot of inventory of our product. In the past, where we've seen inventory build is a finished good. So the most recent example of that was the printed circuit board market for domestic Chinese smartphone. There was an overbuild of the actual finished product in preparation for the reopening post COVID. I don't see that here.

And the way I could support that sort of from an anecdotal or empirical standpoint is that our growth is coming from new lines to support advanced server boards for the data center market, right? A lot of the growth we're seeing, and there was this question about was there a pull forward around COVID. A lot of the growth we're seeing is new investment, new kit to support server boards for these large data center build-outs.

Okay. Fair enough. Maybe just a quick update Kuprion, where you kind of do an after-action review on that. What has that done to the portfolio? How is that delivered for you guys?

It's not an after-action review at this point. We're in the middle of the action with Kuprion. So Kuprion was a technology that we acquired in the middle of 2023. And it was really a material science company that had a very innovative material for copper that solved a lot of very pressing pain points in the high-end electronic supply chain. And we have spent the past 2 years doing 3 really hard things, scaling up manufacturing for a brand-new sort of material market, commercializing a brand-new material to the market and helping our customers figure out how they were going to get the equipment sets to use this in their high-volume manufacturing.

And so as we sit here 2.5 years in, the commercial pull is stronger than we could have imagined. So customers really want to use this, and it is because it's enabling them to do things they couldn't do without it. There's some drop in applications. There's some new applications, but there's a huge amount of pull to the extent that we have stopped new engagements. We've limited the number of customers that we will sort of talk to about this because we can't make enough for them to do samples. So we don't want customers to say to start working with this, order it from us and not be able to satisfy that.

The first piece is where most of our energy is right now, which is standing up the manufacturing capability. And so we were originally going to build one large plant, and that was going to take too long. So we are simultaneously building a -- what we're calling a mid-scale site, which should be operational at the end of this year, which will make enough quantity. So we'll solve this issue of being able to sample the material for the market and also get some sales from the material in 2026 and then a large-scale plant, which will most likely be operational in 2027.

And then there's a lot of innovation right now with customers on applications technology, how they're going to use it. But it is an example of how our electronics business has changed, things we're doing from a strategic deliberate perspective to bring new technology to market to climb the technical ladder in terms of access to CTOs and leading engineers in our supply chains and improve our traction in those markets, and it's bearing fruit. There are many, many anecdotes I could provide of customers we didn't have good relationships with or access to who are now becoming customers across all of our electronics portfolio because of dialogue that started around active copper.

And if that -- if you had the large plant on stream today, could you sell everything? Or you still need to go out and create the demand for it. So it needs to have...

There's a qualification cycle with us. So our customers need to qualify the material and then they need to qualify their product. And in some cases, where we're enabling something new, they need to sell that product. And so they want it because it's going to drive their revenue, but they can't sell that product until they're making it. So there is a cycle time. But the mid-scale cycle is going to be very busy once it's ramped.

And this is displacing what material today, generally?

So it is providing an alternative for circuit board metallization, microplating, certain die attach semiconductor packaging applications, certain thermal interface material. It's got a really broad application set. This is the way to think about it.

Okay. And then last one, I always get a lot of questions on the metal pass-through stuff. Have you guys ever thought of a creative way, I don't put it in the corporate segment or something like that, where you could kind of look at the way you guys do the margin and that stuff? Or you just don't think it's that big of an issue that, that doesn't hold you back really to try to do something with it?

So it's a fair observation and it's becoming -- it will become a bigger line because Micromax sells $200 million of metal. And so you should expect us to address that into our financial reporting after the Micromax transaction closes. We think that the quality of the business is understated because of the metal sales.

No, I think that's fair. I just didn't -- yes, somehow so people can do an apples-to-apples versus peers, I think, would be helpful. Okay. Awesome. Well, Ben, thank you so much for coming and spending some time with us today. Again, this has been one of the true bright spots in our space over the last couple of years. So congratulations on that.

Thanks, Duffy. Appreciate your time and interest. Thanks, everybody.

Thanks, everyone, for joining. My name is Josh Spector, UBS North American chemicals and packaging analyst. Welcome to the tech conference at UBS. Happy to have Element Solution, Ben Gliklich on the stage with us to talk about Element Solutions today.

Before we get started, just as a research analyst, need to disclose the relationship with myself and at UBS and with the company we express a view. Those disclosures available at ubs.com/disclosures or you can reach out to me. For those in the room at the event, there is a QR code you could scan to ask questions, that will pop up to me. Feel free to use that if you want to ask any questions yourself. Otherwise, I'll drive this call.

So thanks, Ben. Appreciate you having you back at this conference.

Thanks for having us.

I think the first place where I wanted to start was really just talk about some near-term trends in electronics, particularly. And within your guidance for the year, you had some expectations around some end markets around smartphones, automotive, various other demand drivers. Just where are we sitting today versus where your expectations were a month or so ago?

Yes. So there's been real momentum in the fast-growing niches within the electronics market. If you look at AI, data center and so forth, and that's propelled the business very well. The third quarter was a record quarter for the company. As we rolled into the fourth quarter, we've seen that electronics momentum continuing in those pockets. We've seen a slightly better-than-expected smartphone market. We've seen a bit of continued weakness in certain areas within electric vehicles, but our guidance, as we articulated it contemplates roughly what we're seeing right now.

Okay. Fair enough. And maybe early to talk about 2026, but I'll try. I think if you go back a year plus ago, you guys are pretty confident in highlighting that you thought that the electronics part of your business would be growing high single-digit percentage for the next 5 years. Obviously, we've had strong growth in high-end compute, pretty good growth in other parts of the market and a strong PCB market this year. I guess when you look into next year, are there any things getting better or worse from a trend perspective? And would there be any reason why you would deviate from that high single-digit growth that you saw earlier?

Yes. We articulated early last year an expectation of a through-the-cycle growth for our electronics business in the high single digits. And we've had, at this point, 6 consecutive quarters of high single-digit organic growth in our electronics business. And that's been in a mediocre overall electronics market, which is to say that the high end has been exceptionally strong, but the low end or the legacy nodes, I would say, have had varying levels of strength and weakness. Smartphone units are still well below trend and way off of prior peak. Industrial electronics are only okay just in a weak industrial economic environment. So we're delivering on that algorithm in a mixed environment.

As we roll to 2026, our expectation is more of the same, right? We don't currently see the industrial economy getting materially better. There are reasons to be a little bit more optimistic in the beginning of the year from the smartphone market, but the high end remains really robust. And so sitting here today, that algorithm still holds, whether that's the right number to put in -- the model for 2026, it's early to say, but we're delivering on that framework. And if anything, given M&A and new product introduction, we see that number could be better.

Okay. That makes sense. I wanted to ask on -- I personally have been getting a lot of questions around ESI's exposure to consumer products and mainly in the framework around memory costs have gone up, cost of devices may go up next year. Is there risk to demand? Obviously, a tighter memory market has some benefits on the other end of ESI. So how does that come together to impact your view around demand for your products near and medium term?

Yes. So importantly, our business is driven by units, not pricing. So the price of memory doesn't have a bearing directly on our revenue. And of course, as devices get more expensive, it could have an impact on units. Our business is more concentrated in logic applications, in printed circuit boards than in solid-state memory. And we've had some really good wins in high bandwidth memory in the past couple of years. But for the most part, our semi exposure skews towards logic applications. But of course, high priced units, if that impacts demand could be a headwind. I think we're going a few steps too far into the -- there are a bunch of embedded assumptions and ifs in that question. And I think it's early for us to have a view on that sitting here -- on that in 2026, sitting here at this point in 2025.

Is there a way to think about the content side of things? So if HBM demand is stronger and that pulls more content for ESI? Does that lead to more growth if you have more constrained markets on the other side of things? Or is that too niche or a way to think about it?

Within the memory market for semiconductors, right, HBM is a higher value and a faster-growing niche, but I think that it's a -- it's sort of taking 2 variables that aren't -- it's hard to be too prescriptive around that.

Okay. We talked a lot about -- or you guys have talked a lot about high-end compute and obviously, that's been a high source of growth for many in the market. I don't know how you would describe your mix of your business today, in that, what percentage is high-end compute and driving more of the growth? And has that mix shifted in terms of some of the disclosures that you've had versus 2 to 3 years ago?

Yes, for sure, it has. So if you go back a couple of years, where we said about 30% of the business was automotive. And this is not just electronics, this is all of Element, 30% was automotive, about 25% was smartphones. We talked about compute. Internet infrastructure as being sub-20%. And the smartphone market from a units perspective, has been down continuously since then. Automotive units have been -- relevant automotive units, so that's excluding some of the lower-end vehicles made in China have been down since then. And the market for server boards has been growing really robustly. So I would have thought that our sort of Internet infrastructure and computing revenue share has grown to at least 20% of the business. And that's not all AI, data center applications, but it certainly has been growing and is a more meaningful percentage of the overall portfolio today.

Yes. And maybe kind of building off the portfolio comments here. You guys have done some divestments. You've done a number of acquisitions recently. Let me just leave it open and to you to talk about the 2 acquisitions that you've announced more recently. Why are those acquisitions at ESI needed to do?

Yes. The framework for M&A at Element has always been to back our existing businesses, right? And so to expand our penetration of markets, we deeply understand with acquisitions that make our company better and other businesses that are better inside of our company. So we're staying in our core markets. We're bringing things in that enhance our customer value proposition and businesses that are better inside of Element because of our know-how, our customer relationships, our capabilities today, and then that come at attractive year 1 cash-on-cash return relative to our free cash flow yield. That's the rough framework that we've always had.

We don't get to choose when assets like that become available. There's a scarcity of assets in the electronic space that meet our very high hurdle from a quality perspective and valuation criteria. Just so happened that 2 of these assets became actionable in the second part of 2025. Both of them are great additions to our portfolio. Micromax, is a market leader in a niche electronics market. This is thick film pastes and electronics inks. And it really fits nicely within what we do in the electronics ecosystem. And it's a business we deeply understand. They're creating thick films or electronic inks using powdered metal, precious metals, which is what we do in our assembly business, we make solder pastes. But they're being applied to form circuit pathways, right? So that's print inks or for used in resistors or other electronic passives.

So they're part of the circuit pathway, which is something that we have deep know-how and knowledge around. It was -- it is the market leader. It's got really strong technologies, but there's been a bit of orphaned over the past several years, right? It was part of the business that DuPont divested to Celanese and Celanese doesn't play in these markets the way that we do. We think we've got an opportunity to really deepen the penetration of this business into the faster-growing niches within the electronic supply chain, areas that they have not been as present in because of the more recent ownership structure, and a lot of know-how on supply chain.

There will be synergies from a cost perspective and opportunities to accelerate revenue growth. It's a high-value business. The margins don't look as great on the face of them because they're selling a lot of precious metals. But if you exclude the precious metals, it's a 40-plus percent EBITDA margin business, which gives you a sense for the value proposition this product offers to its supply chain.

EFC gases is a completely different story, but a really, really compelling opportunity for us. So they're selling specialty rare gases, into the fastest growing niches of the industrial economy. So they're selling cylinder gas to semi fabricators, satellite propulsion systems, electrical transmission infrastructure. So these are the areas that are growing in the industrial economy. Unlike a typical gas company, there's a lot of applications know-how and on-site service that these guys provide.

So Element thinks about itself as a people-based customer-intimate service-oriented company. And EFC is doing that in the gases space. It's no different than what we do with aqueous or solid metal in our other existing electronics business just happens to be gases. So whether that's purification services, recycling services, loading services, they're not just selling the material they've got a value add on top of it. And it's focused on these niches where the large players have not been as present in the past. So just like our business, where we're a market leader in niche they're a market leader in the niche.

We think that inside of Element, because of our breadth of touch points, we can accelerate some of their penetration of some of these supply chains, particularly semiconductor and satellites. And by having a broader offering, it will give us a bigger seat at the table with some of these critical qualifiers and specifiers in the supply chain. It's a business that's growing -- has grown at a 15% top line CAGR for the past 15 years, 30% EBITDA margin. It's accretive to our margins, accretive to our growth, and adds a new arrow to our quiver for our customers. So they're both really exciting different opportunities, very compelled to add them to the portfolio and to have found opportunities to scale while enhancing the overall quality of Element Solutions.

So how do you plan to integrate some of these? So there's maybe a little bit of tension between local autonomy and separate businesses from -- I think some of the messaging from the portfolio is you go all the way from semi and follow the electron through down to the printed circuit board. So there's maybe some integration benefits that maybe get you some scale. So on that order of magnitude, where things can fit in, how do these fit in? And how do you -- how do you make sure you leverage them to the extent that you can?

So these will be 2 very different types of integrations in terms of complexity and timeline. EFC is a stand-alone business. And we intend for it to remain a stand-alone business inside of Element Solutions. There's certain integration we need to do from a functional perspective taking effectively a family-owned business and making sure it has the appropriate compliance and cybersecurity and so forth from a functional perspective. But its go-to-market is completely unchanged.

And the way will leverage its capabilities to help us with relationships and leverage our capabilities to help their relationships is really through strategic account management, where we'll do a tech day, we'll go to a customer site and set up a room full of stalls or booths with our different product propositions and capabilities, engineers will come. And learn about what we can do for them, and they'll just be a booth that is EFC, for example, right? So it's part of the portfolio, but it's not integrated from a commercial perspective or a supply chain perspective. It will be a standalone business.

Micromax is more complex, because it's a corporate carve-out. We have to stand up certain capabilities, and it will become more part of what we call McDermott Alpha Electronic Solutions given where it sits as we talked about in that electron, everywhere the electron goes in a circuit pathway. It will still be a discrete business, right? We don't have [Technical Difficulty] that shared between semi-assembly, for example, power electronics and printed circuit board fabrication, it will have its own technical team, innovation team, commercial team, supply chain, but it will be a -- and it will be a stand-alone unit within McDermott Alpha Electronics Solutions.

But again, when we go do tech days, they'll have a presence there and a capability there. Some of our know-how and best practices from a manufacturing standpoint around how to make paste, we'll share and vice versa. So there will be a bit more supply chain synergy and data generation, use this passive with this solder paste with this printed circuit board chemistry, you'll get this level of performance, which speaks to the performance of an integrated electronics assembly as opposed to just a product, which is part of the enhanced value proposition we offer to the supply chain. So it will be more of that collaborative data generation with Micromax and with EFC.

Importantly, EFC should close this year and Micromax won't close until Q1. And so we have time to digest all of this. It's a lot of work to integrate an acquisition and to do 2 at the same time, may raise some antenna. But from a phasing perspective and a complexity perspective, we have more than enough time to manage them both and do a good job of both.

Yes. I think that was going to be my next question, which you answered to some degree, but I'll ask it anyway. Just around you're doing these 2 deals. You just did a divestment, you have good organic growth, like -- how are you making sure you achieve all those goals, organic growth doesn't lag, new wins don't lag and the integration of these goes flawlessly?

Yes, it's a matter of the way we run our business and our operating system and the quality of the people that we have, right? So we have names and boxes who are responsible for these integrations, and they're different than the people who are responsible for the breakthrough strategic objectives that we're driving towards organically. It's a decentralized model, where we drive autonomy and ownership as close to the customer as we possibly can. And so the folks who are working in the businesses on immediate customer pain points are different than the folks who are driving these integrations and appropriately so.

Do either of these acquisitions then create more white space? I guess, Micromax talked about already a leader in the space. The gases side maybe more uncertain is that does that unlock something that maybe we're not seeing from the outside that we should think about being an interesting avenue longer term?

Yes. From an M&A perspective, Micromax and EFC both get us into adjacencies that we're not currently in, and so there is -- could there be further consolidation opportunities in the electronics inks and thick film pace market? There could be, right? In gases, we're going to be very choosy because again, we're not interested in bulk gas, technical gas businesses. We're interested in high purity, rare and specialty gases with a real people-intensive bent to them, and those are reasonably scarce, but not nonexistent. So it does give us white space from a capital allocation perspective, for sure.

Whether we want to talk about these acquisitions or just the portfolio evolution? I mean, how is your at the design table change. So again, the tension between a local selling sales force with heavy technical service versus big product road maps at bigger companies. Are you gaining more mind share on the larger scale and product road map side, which should benefit ESI with this broader portfolio? Or is there a different way you think about it?

So we say that roughly 80% of what we sell is either specified or qualified and that percentage is going up. And as I was talking about before, being able to do a systems solution sale, as opposed to a product sale is highly differentiated. And there is no company in the market that has the breadth of -- that has the cogent broad portfolio that we have in our -- in the electronic supply chain. And so we are seeing much greater levels of engagement, higher up in the technical organizations of the major OEMs and specifiers than we've ever had before.

And that's a product of bringing the portfolio together, right, and being able to talk about the way that pastes and circuit board and semi assembly products work. It's a product of the innovation we're bringing to market, things like Kuprion, for example, are really growing our mind share and relevance in the supply chain ViaForm Omega or the ViaForm transaction we did with Entegris. A couple of years ago, also changed the perception of our electronics business with the key customers or some of the key customers. So collectively, it's not the stated strategy but an outcome of the strategy is greater relevance and mind share and access in a few key -- in the technical rooms, and the technical leadership of our supply chain.

Do you think you'd be talking about more system sales and be able to talk about that as a percentage of your mix over time? Is that big enough to start to matter? Or is that more just, I guess, maybe you get more pieces of the pie over time, and that shows up as higher growth?

Well, the way it manifests you can't just spend time in the -- with the OEMs and specifiers, because the direct customers, right, spend rely on us to support their production. And so it's really -- it's a 2-sided sale. It's getting that qualification, and then once you're on that approved vendor list, making sure you're selling to every person who is an approved supplier into that supply chain. And so the way a systems sale will look is more market share with the circuit board fabricator and the EMS provider to that systems builder. So you can't even quantify, hey, this is a system sell revenue dollar per se, it just looks like above market growth and market share.

How do you think competition has maybe changed in the space? I mean you have your own portfolio change that's going on. You now have another electronics competitor, which is now separate from the larger parent. Everyone's chasing some higher growth parts of the market. Like where does ESI win out versus some of those competitors? And how has this changed over time?

So if you go back to the founding of ESI, right, we were the -- I don't want to say least stable, but the most dynamic company in the market. We were the only one who had been through all of the sort of corporate strategic activity that happened at Platform Specialty Products, our predecessor company. And you fast forward 6.5 years. And we are the most stable company in the market that has gone through the least amount of corporate activity with some of our competitors being divested, spun out and at the same time, we've been adding to our portfolio more than our direct competitors have.

And so our value proposition, our focus on our end markets has -- and our capability set has been growing. And so we feel as though we've been winning, and I think the data bears out market outperformance. Some of the strategic activity around [Technical Difficulty] and the like, it doesn't really change the competitive dynamics because the portfolios of the market -- in the market are mostly unchanged over the past several years. And the customers are looking at product as opposed to corporate identity. And our product portfolio is growing. Our capabilities are enhanced. We're bringing new technology to market, and that's leading to real progress from a market share perspective and mind share perspective within the supply chain.

When you think about high-end compute and I guess, specifically data centers and maybe energy at some point being a limiting factor on growth, how does ESI's portfolio help alleviate that? Is that something that's maybe more of a benefit for your portfolio? Or does that not change the opportunity set for you?

There's not a silver bullet around this. But if you look at the innovation we've been -- some of the innovation we've been driving towards, it's been around thermal management and power density, right? So how do you get more power efficiently through electronics assemblies. That's what we do with Argomax, that's one of the things that Kuprion is helping solve it also as a thermal management attribute to it. And then we have some solder TIMs that we've introduced that are solving some problems around heat management in high-performance chips. So a significant portion of our business is being driven by that dynamic by introducing higher reliability alloys, and alloys that can support greater power density in assembly or in the circuitry business.

I want to ask one on the industrial side of the business. I think it's actually been a bright spot within the portfolio. You've done a divestment of graphics, but the EBITDA within that part of the segment has been growing. I guess I made the comment before, we're not going to rely on much industrial growth next year. But so then what's driving the success in that business? Can that business grow next year if we're in a flat industrial environment?

Yes. So the calling card for Element is operational excellence and prudent capital allocation. Operational excellence doesn't rely on organic volume growth. When you look at our Industrial business, we've made it better the Industrial Solutions or the Industrial & Specialty segment, it's 2 pieces. It's got an offshore business that's doing quite well and attractive margins through pricing discipline -- through pricing action and market share growth in a healthy market.

In the Industrial Solutions business, which is the bigger piece, which has been growing earnings through productivity, improvements, procurement activity and market share gains. We are the leader in that market. We have been flexing that muscle and taking advantage of our market position and our ability to meet customer needs better to grow market share despite a declining volume arrow and to make our sites and footprint more efficient, which has really been where the margin expansion has come from. And so the margins in the Industrial business today are at record levels despite volumes being down more than 10% over the past several years. So how do we get better? We drive margin, we win share, and you don't need a market -- you don't need market growth in order to deliver that, and there's still plenty of share for us to go after.

Do you see any more need to divest or prune the portfolio back. Obviously, the growth has been higher in electronics. More of the acquisitions have been driven by electronics such gets larger and larger. Does that drive you to think about anything else differently?

Not at all. Our portfolio holds together, high quality, stable, strong cash flowing businesses with market-leading positions in attractive markets. We're not emotional about any of our businesses, but we're certainly not going to proactively seek to separate them. They're all great businesses with plenty of growth opportunities in front of them.

And maybe I'll give you the last question here to broadly talk about how investors should think about ESI's algorithm today? I mean I mentioned with acquisitions, the electronics have gotten larger? You've been very free cash flow focused over the entirety of ESI's existence. I think when I look at it, the growth potential has gotten higher, the stock has seen some pressure as of late. So one, what should investors expect in terms of growth and kind of what the company should be delivering? And then two, what's the market missing today that you think is the opportunity?

Yes. Look, the North Star for the business is to compound intrinsic value per share to compound earnings per share in the teens. The growth algorithm is mid-single-digit topline, 1.5x that of EBITDA and very strong cash flow generation to deploy in pursuit of that North Star. If you look back over the past 5 years, we delevered the balance sheet before these recent acquisitions to below 2x from 3.5x. We sold a business that took $0.14 of EPS out of our pockets because it was the right thing to do for the long term. And notwithstanding that, we're still compounding growing EPS. So there's a significant amount of pent-up earnings per share growth entering 2025.

We flex that muscle through capital allocation, but we're still only levered at 3x exiting this year after 2 reasonably accretive acquisitions. So what investors should expect is for this business to compound earnings per share in the teens over the long term, and we're prime to continue to do that with an acceleration in earnings growth next year from some really interesting capital allocation that's going to be -- that's going to prove out not just in 1 year, but over the next several.

Anything you'd want to say in terms of what isn't asked or what's the most misunderstood part of Element Solutions?

It's hard to know what people understand or don't understand. We sit at this funny intersection between materials and electronics. We come to conferences like these and have really great discussions around trends in the electronics market. And there's a lot of enthusiasm about that. And I think that there is an opportunity for Element to get the appropriate attention and respect from the market for the innovation it's bringing to enable its customers to deliver value to their supply chains. I think that, that is something that we could do a better job of clarifying going forward, because that's something that we are doing, and we're just beginning to see the fruits of it today. When you think about where our capital has gone both internally towards Kuprion expansion, this esteem product I was talking about -- and then from -- with Micromax and EFC, there'll be more and more of that going forward.

Great. I think we'll leave it there. Thanks for taking time with us.

Thank you, Josh. Thanks, everybody, for joining.

Good morning, ladies and gentlemen, and welcome to Element Solutions Third Quarter 2025 Financial Results Conference Call. I will now turn the call over to Varun Gokarn, Vice President of Strategy and Integration.

Good morning, and thank you for participating in our third quarter 2025 results conference call. Joining me today are CFO, Carey Dorman. In accordance with Regulation G, web conference call. A replay will be available in the Investors section of company's website. During today's call, we will make forward-looking statements that current views of the company's pro forma financial results.

These statements are based on assumptions and expectations of future events, which are subject to risks and uncertainties. Please refer to the earnings release, supplemental most recent on our website for a discussion of the material risk factors that could cause our actual results to differ from our expectations and predictions. Today's materials also include financial information that has not been prepared in accordance with U.S. GAAP. Please refer to the earnings release and supplemental slides for definitions and reconciliations of these non-GAAP measures to comparable GAAP financial measures. It is now my pleasure to introduce our CEO, Ben Gliklich.

Thank you, Varun, and good morning, everybody. Thank you for joining. This is an exciting morning for us. When we launched ESI, we talked about a value creation model, marrying operational excellence and prudent capital allocation. Today is a solid proof point showcasing our ability to do both.

In addition to reporting record results yesterday, we're also announcing the acquisition of Micromax, a highly accretive strategic transaction and a value-enhancing addition to our electronics portfolio. Before we get into that, though, I want to give proper view to our operating results. This was an outstanding quarter. We set multiple records.

Despite selling our graphics business, this was our highest quarterly adjusted EBITDA since the inception of Element Solutions. Our Electronics segment posted its sixth consecutive quarter of high single-digit organic growth and achieved a record level of revenue. Excluding the impact of graphics, adjusted EBITDA growth would have been 10% despite some of our legacy end markets remaining below prior peak volume levels, a weaker EV outlook and a soft macroeconomic backdrop in Western industrial markets.

Our teams are executing well on their strategies. In our industrial segment, portfolio optimization, productivity initiatives and high-margin wins in both verticals drove strong profit growth despite a flat top line. The segment saw meaningful margin improvement. And excluding the impact of our graphics divestiture, adjusted EBITDA growth would have been almost 30%.

On the electronics side, we've built a unified platform of technologies to solve emerging customer pain points just as burgeoning investment in data centers and their associated infrastructure accelerates demand for innovative material solutions. Our portfolio is uniquely positioned to provide those solutions from metallization chemistries for high layer count printed circuit boards to specialized thermal management materials used in assembly to advanced packaging chip scale chemistries.

Micromax will add to those solutions, its portfolio in electronics inks and paste with a specialization in the highest performance, most technically challenging applications such as aerospace, defense and health care is a great fit for Element Solutions. The acquisition broadens our offerings to our supply chain and enhances our value proposition to OEMs and specifiers.

In 2019, our electronics business was just over $1 billion. And with this transaction, it will exceed $2 billion. Like our business, Micromax is a leader in niche electronics markets reliant on innovation that is co-developed with customers and requires high levels of applications expertise. Its products are known for durability and performance in harsh environments and provide mission-critical solutions in highly specialized end markets.

Micromax sits at the intersection of our assembly and circuitry businesses. Its metals-based manufacturing resembles assembly solutions, but its products are used more in circuit pathway applications like our Circuitry Solutions business. These products also fit our core competencies in formulation and our high-touch low capital intensity operating model.

The business has a proven team of experienced, highly technical leaders who add depth and expertise to our electronics business, McDermott Alpha Electronics Solutions. The transaction meets our robust acquisition criteria and is consistent with our strategy of disciplined investment in markets we understand and in growth businesses that we believe are better under our ownership.

We expect the Micromax transaction to be more than 5% accretive to adjusted earnings per share. And based on its projected 2025 results, contribute approximately $40 million of adjusted EBITDA on a full year basis at accretive metals adjusted EBITDA margins. Subject to regulatory approvals and customary closing conditions, we expect to close in the first quarter of 2026, and we're looking forward to welcoming the Micromax team into the Element Solutions family and to capitalizing on the unique value opportunities associated with this combination. Shortly, you'll hear more from Carey on our results.

But to me, the most exciting thing about the quarter is what it means for our future. We've been able to generate great organic outcomes while ramping up investment in future internal and inorganic opportunities. While growing nicely in 2025, we're simultaneously building levers to accelerate that growth going forward. Those include several new product introductions in high-value categories in 2026, the accretive, highly strategic acquisition of Micromax underway and substantial remaining balance sheet capacity to put to work should the right opportunities present themselves. The outlook is quite positive. Carey?

Thanks, Ben. Good morning, everyone. On Slide 4, you can see a summary of our third quarter financial results. Organic sales grew 5%, and adjusted EBITDA would have increased 10% when adjusting the graphics business out of both the 2024 and 2025 periods to account for that divestiture.

Adjusted EBITDA was a record $147 million and exceeded our initial guidance for the quarter of $140 million to $145 million. Electronics organic growth of 7% was driven by solid performance in semi and assembly and exceptional volume growth in Circuitry Solutions. Through economic and industry investment cycles, we benefit from diversification within the electronics supply chain.

This quarter, our circuitry business was a primary beneficiary of AI-related investment as our market-leading pulse plating products are used to support fabrication of high layer count server boards. This demand, along with the sequential ramp in smartphones, allowed us to deliver high single-digit organic growth for the segment even as customer-related volume weakness weighed on power electronics growth in our semiconductor business.

The addition of Micromax should further enhance end market diversification and increased opportunities to deliver on customer-led growth across the broader manufacturing landscape. Our core industrial surface treatment business has demonstrated stable or growing adjusted EBITDA for several quarters, even as volume has been under pressure.

This quarter, underlying volumes improved as a result of strong growth in Asia and new business wins ramping in the Americas. At the same time, margins benefited from improved fixed cost absorption, portfolio optimization and ancillary business lines and favorable product mix. ESI's adjusted EBITDA margin improved roughly 20 basis points year-over-year in constant currency terms and was negatively impacted by higher pass-through metal prices.

Excluding the impact of roughly $125 million of pass-through metal sales in Assembly Solutions, our adjusted EBITDA margin would have been 28%, a 100 basis point improvement year-over-year. Foreign exchange provided modest favorability of about $3 million in the quarter, and at current rates should provide a similar level of year-on-year benefit in the coming quarter as well.

On Slide 5, we share additional detail on the drivers of organic net sales growth. Starting with electronics. In assembly, the third quarter saw an increase in China volumes associated with smartphone activity as well as continued growth from customers serving the high-performance computing and telecom infrastructure markets.

Advanced solder paste volumes for various computing applications continue to grow as well. Circuitry Solutions sales grew 13% organically. This was driven by continued demand for data center applications, a seasonal ramp in mobile phone activity, and circuit board demand in the Asian EV market. Data center growth is also increasing demand for data storage, which drove sequential acceleration in our memory disk business that should continue through year-end.

Semiconductor Solutions organic net sales grew 5% as continued double-digit growth in wafer-level plating was offset by lower power electronics sales from a softer EV market. Copper plating products for foundry and Tier 1 OSAT customers continue to see sustained demand. We also saw a rise in products with high precious metals content such as gold and palladium in our semi business, which drove a negative mix impact to margins overall.

While we saw a year-on-year decline in power electronics from EV demand dynamics, we continue to win business with new customers, and the outlook for this business remains compelling. Industrial and Specialty organic net sales were flat year-over-year. Underlying chemistry volumes for the Industrial Solutions vertical were up mid-single digits as we saw strength in Asia, modest improvement in Europe, and a roughly flat end market in the Americas, which grew due to the contribution of new account wins.

Reported revenue growth in this business was impacted by a large customer equipment deal in the third quarter of last year, which is tied to a high-value multiyear chemistry contract. Excluding this impact, organic sales would have been up 4% year-over-year. And finally, the offshore business continues to grow nicely on the back of market strength pricing and competitive with.

Slide 6 covers cash flow and the balance sheet. We generated $84 million of adjusted free cash flow in Q3. This included a $22 million investment in working capital, primarily driven by accounts receivable on the back of sequential revenue growth and slightly higher inventory values driven by metal inflation. Our days of inventory continued to improve, reflecting progress we have made to drive efficiencies in inventory management after several years of supply chain disruption.

CapEx in the quarter was $17 million, primarily going towards compelling growth investments such as our first manufacturing site for Kuprion. We expect to invest roughly $65 million on a full year basis, in line with our prior forecast.

Now turning to the balance sheet. Our net leverage ratio at the end of the quarter was 1.9x, and our capital structure remains fully fixed at an effective interest rate of roughly 4%. We expect to fund the Micromax transaction with a combination of cash on hand and modest incremental debt.

Assuming no further capital deployment this year, pro forma net leverage at year-end would be roughly 2.5x. This is comfortably below our 3.5x long-term target ceiling and leaves us with plenty of further financial flexibility to continue deploying capital should the right opportunities appear. And with that, I will turn the call back to Ben.

Thank you, Carey. As you've heard, our strategy and execution are driving record results at Element Solutions, and we're nicely ahead of our plan for the year despite real end market volatility over the course of the year. We now expect full year 2025 adjusted EBITDA to be between $545 million and $550 million, at the high end of the guidance range we provided last quarter.

This translates to fourth quarter adjusted EBITDA of roughly $135 million to $140 million. This quarterly expectation incorporates lower EV volume, the end of the seasonal smartphone ramp and targeted incremental OpEx investment in support of high-growth initiatives like Kuprion.

We expect leading-edge electronics driven by high-performance computing and data center to remain robust and have assumed stable industrial demand through year-end. We're pleased to have found a solid outlet for some of the balance sheet capacity we've been building.

Micromax meets our high bar for acquisitions. It's a growing business that matches our asset-light customer intimate people-intensive attributes. It will be a great addition to our portfolio and reinforces our conviction that we can continue to find high-value inorganic opportunities to accelerate per share earnings growth. We have capacity for more, but we'll continue to be disciplined about quality and fit.

I'll close, as always, by thanking all of our stakeholders for their continued support of Element Solutions. Most importantly, let me express my deep gratitude for our people around the world for their effort and commitment. Our combination of strong positioning, thoughtful strategy and solid execution is entirely a product of our team and our exceptional people continue to deliver for us. With that, operator, please open the line for questions.

[Operator Instructions] Our first question comes from Bhavesh Lodaya from BMO Capital Markets.

Congrats on multiple fronts. On Micromax, could you share some thoughts on how you expect this platform to perform under the ESI umbrella just compared to your prior ownership, maybe opportunities with your existing customers? And how should we expect the growth and synergies starting from that $40 million EBITDA mark?

Yes. Thanks for the question, Bhavesh. We're really excited by the opportunity to bring Micromax into the ESI family of businesses and make it a part of our Electronics segment, McDermott Alpha Electronics Solutions. This is a business with a market growth algorithm in the mid-single digits.

And just like with all of our other electronics businesses, we think we can outperform the market. The benefit of having this business inside of Element as opposed to where it's been most recently, is the depth of our connectivity in the supply chain, in particular, in the circuit board supply chain.

This is a product category that really fits right in between our assembly and circuitry capabilities. There's a modest amount of customer overlap and there's a great deal of OEM and specifier overlap, and our relationships can help accelerate that growth. From a cost synergy perspective, we would expect those to be modest because we're going to run it from a functional perspective and a supply chain perspective separately.

But we do believe we can accelerate the growth here and the value proposition to our supply chains, which should translate into value creation from a margin perspective and profit perspective for the company.

And then maybe stepping to Kuprion, can you give us an update around the commercialization activities there? Are we on track for -- I believe the start-up was planned for this quarter. And any initial thoughts around earnings or EBITDA contribution next year from that?

Yes. So Kuprion, there are 2 major thrusts, I would say, commercialization and supply chain. Our mid-scale site, where we ramped up investment meaningfully in the third quarter is on track to be operational at the end of the year, which will provide more product to both qualify and sell. And so we should have some meaningful sales and profits into next year.

Commercialization is really qualifying this product with our customers and the specifiers. And that also continues at pace. I would say that there's a handful of very compelling commercial opportunities that are working their way through the different layers of approval required to sell something into this high-value, high-performance supply chain. And so we should be getting some qualification milestones here in the fourth quarter.

Our next question comes from Josh Spector from UBS.

Congrats on the Micromax deal. I just wanted to ask on that one first. Just I don't know if you could provide any more color around the growth of that business from a top and bottom line perspective over the last couple of years, I guess, would that have been accretive to ESI's growth over that time?

And then also, as you think about the stability of that growth. Does it provide -- I mean, basically, does it improve the stability of overall ESI growth in your view? Or is it slightly more volatile? Just any characterization there would be helpful.

Yes. So the way to think about top line here is ex metals. So of the roughly $300 million of revenue here, about 2/3 of that is metal value. And so there's been quite a bit of metal volatility, and that's been impacting the, we'll call it, SEC or GAAP revenue here, but the profits have been very stable.

I would say that there was a pretty significant drawdown in the electronic ecosystem in 2022 and into 2023. This business fared better than our electronics business did through that period. It's a very sticky product portfolio. And so it didn't have the same drawdown. And they have a price lever as well that has been flex reasonably well, and we see opportunity associated with.

On the way back from that drawdown, I would say the growth has been roughly in line with our assembly business, maybe a little bit faster over the past couple of years. So this business enhances stability for sure, certainly, ex metal and on the profit line. And we see an opportunity to accelerate growth going forward. There's -- the products that this company sells are really specialized for the most demanding applications. So they've got a concentration in aerospace and defense, low earth orbit satellites health care applications, and we're just starting to see the pull into the data center complex.

So that as a market vector and also as a virtue of -- as a product of being inside of Element and our access to that market should lead to an acceleration in earnings growth here.

That's helpful. And just as a quick follow-up. I mean, you made comments in the release about still having capital flexibility. So I mean I think your 2.5x is pro forma for the deal closing. I guess, at first blush when that closes without those numbers, that leverage will go higher.

So can you just talk about your ability, I guess, over the next 6 to 9 months to deploy cash to the extent that there's maybe a bigger opportunity in your stock and a drawdown or otherwise, how high would you be willing to bring leverage in that scenario?

Yes. So we think about things on a pro forma basis. And so the 2.5 we have is pro forma for the contribution of the expected contribution of Micromax and taking into consideration the full purchase price of Micromax. So 2.5 would be the number at year-end.

Given the cash flow characteristics of our business and the growth opportunity we see into 2026, that number will be closer to 2 again by the end of 2026, barring any further capital deployment. We've always said that our long-term target ceiling for leverage is about 3.5x. So we see plenty of capacity even in the near term should something interesting become available to deploy incremental capital.

Our next question comes from Chris Parkinson from Wolfe Research.

Great. Ben, given Micromax's history as part of DuPont, what would you say to somebody who perhaps would cortege the business and say, well, why did they get rid of it in the first place? And essentially, what would make -- what's evolved over the last 5 to 10 years? And what ultimately makes Element Solutions the best owner or best home for the platform as it stands today?

Yes. Thanks for the question, Chris. Look, we can't speak to DuPont's decision-making as we really weren't a party to it. But if I had to speculate, I'd probably say 2 things. The first is the SEC or the GAAP margins of this business on the face of them are lower than some of our other businesses and some of DuPont's other businesses.

And DuPont doesn't have other metals-related businesses where they would make an ex metals adjustment like we do. right? To that point, on an ex metals basis, the margins of this business are in excess of 40%, which really speaks to how highly valued these materials are to their supply chain. This is a business that is highly specified by its customer base with substantial switching costs, very long qualification cycles. It's a very sticky business. It's a very high-value business even if the margins on the face of them, again, on a GAAP basis, appear lower.

The other reason may be that when DuPont chose to divest this business, this -- the recent surge in innovation in the printed circuit board market, which has been away from the chip, right? Innovation in the integrated circuit has moved back into packaging and onto the circuit board that hadn't really started at that point.

And so as we sit here today, there's a huge amount of innovation and technology moving back from the chip to the circuit board, and these materials are an important part of that. Finally, I think it's worth noting that in the, whatever, 12, 16 hours since we announced this transaction, I've had many messages from DuPont and ex-DuPont people congratulating us on the acquisition and lamenting frankly, that they no longer own it.

So this is a really good business as a market leader in a high-value market with strong technology, solid growth outlook, great cash flows. And we've got several avenues to make it better as part of Element Solutions, it fits within this really cogent portfolio of technologies that we have to support high-value electronics.

That's great color. And just as a quick follow-up, Ben, as we start thinking about on a preliminary basis about '26, how should we think about the semiconductor growth side of it and the comments in the PowerPoint about softer power electronics, was that a singular customer that caused an issue? I mean, how should we think about the momentum into year-end and ultimately over the next 12 to 18 months?

Yes, absolutely. So within the semi business, there's really 2 prongs, their semi assembly and our wafer-level packaging business. The semi assembly business has a strong capability in power electronics, and we've all seen what's happened in the EV market and certainly, with some of the larger participants in that market, and that's what weighed on the Semi business in the third quarter. The wafer-level packaging business continued to grow in the teens and has a pretty compelling growth runway ahead from here.

And in the power electronics business, even with a weaker EV market, we see substantial customer wins as we gain share with our material over competitive, more legacy technology materials for power semis and power modules.

And so there's a growth vector there as well. The semi business will continue to grow certainly above market and healthily as we get into 2026.

Our next question comes from Frank Mitsch from Fermium Research.

Congrats on Micromax. I'm assuming that given the quick time to complete the deal, looking at the first quarter of '26 that you're not anticipating any antitrust issues in terms of government approvals?

Yes. So as we've said, this is a complementary capability. While there's some customer overlap, there really isn't a technology or market share overlap. And so we don't anticipate substantial regulatory hurdles going forward.

And nice job on the third quarter upside. What most positively surprised you relative to the guidance? And how is that trending so far here in the fourth quarter?

Yes. So the Industrial Solutions business had a really strong third quarter even if you don't necessarily see it in the organic sales. But we were lapping a period where we sold a big piece of equipment in Q3 of 2024. And so when you adjust that out, which was a low-margin sale, when you adjust that out, we actually had volume growth and organic growth in that business which was mix favorable and positive.

I think entering the third quarter, our expectations for Industrial were probably weaker than what we ultimately delivered. So if I had to call out one surprise, it would be that. And as we sit here in the fourth quarter, right, we're almost through October, the momentum in the electronics side of the business has been a positive surprise thus far.

And so we're seeing real strong continued momentum in electronics. And that's a positive indicator as we move into 2026.

Our next question comes from Aleksey Yefremov from KeyBanc Capital Markets.

Ben, I realize you already talked a lot about Micromax, but I was hoping to give you an opportunity to talk about growth synergies here, either on the commercial side or technology or anything else?

Yes. No, I appreciate it. Look, our -- 70% of our business and correspondingly 70% of our people wake up every day thinking about the electronic supply chain and how they can add value to their customers and the specifiers, right? And so now we've got a new capability that's highly strategic. It's a market leader in a high-value market that we can add to the quiver of capabilities that we bring to bear to those suppliers.

We're doing tech days with the largest OEMs with the largest participants in the supply chain, bringing all of our capabilities to bear. And Micromax will be one of those capabilities. That's not something that they had in their prior ownership. And so I believe that we will drive greater commercial traction through that.

At the same time, the technologies they have are becoming increasingly important as the demands that are being placed on the printed circuit board versus the semiconductor versus the chip are changing and growing. And so that is a market growth vector that will support this technology leader and we'll be able to get them into the right rooms and provide them with greater access than they would have had previously.

And so this is -- that allows for -- that should allow for this business to grow faster than its market has already got a solid growth outlook.

Thanks, Ben. And then hopefully, I was hoping to look a little bit into '26. On your electronics side, how do you feel about just volumes in general, given there's been some destocking that occurred this year across sort of several key products. Do you see generally volume growth accelerating next year about the same or slower?

Yes. So we think about units and we have conviction that the growth we're seeing in high-end electronics will continue into 2026. And the growth that we've delivered in high-end electronics year-to-date has been really strong. And, I would say, clearly above market, so we should continue to deliver that.

The outlook for automotive units, in particular, EVs is really hard -- is hard to predict at this point, we'd simply be speculating. But we've got, especially on the Power Electronics side, plenty of market share to go after that should allow for us to outgrow that market. And so the question mark as we entered the third quarter was smartphones.

We're seeing a healthy smartphone environment as we sit here today, probably better than we would have expected. We'll see what the pull-through on that is into 2026. It's hard to call that right now. All told, next year has promised to be another solid year of organic growth, and we've just added a strong impact from inorganic opportunities. So we're very optimistic about 2026 and beyond.

Our next question comes from Pete Osterland from Truist.

First, just following up on Micromax. Do you view these assets as historically underinvested in? I mean do you see the need for any elevated capital spending initially in order for the business to reach the full potential you're looking for? And could you share what you're expecting in terms of onetime costs to stand up and integrate the business?

Sure, Pete. So this business is just like our businesses. It's a people-intensive technical applications-oriented employee base, customer-facing type of business and correspondingly, it's asset-light formulation. And so I would think this is about a 2% of sales capital business just like ours, and it's got the capacity it needs to support substantial incremental growth.

So we don't see this driving an uptick in CapEx across Element and nor requiring significant investment in physical assets. There is a stand-alone cost dynamic, which is burdened, which is in the approximately $40 million that we've communicated as the full year contribution for this business of a few million dollars. We'll see synergies could come from that over a 12- to 18-month period, driving the earnings here higher.

Very helpful. And then switching gears. On the IMS business, the margin performance in the third quarter was very strong despite kind of continued challenges in the overall industrial operating environment. So my question is, where can margins go in this business?

I mean in a more normalized demand environment, is there room to move margins meaningfully higher from the almost 24% that you put up in the third quarter?

Yes is the short answer, Pete. The industrial business, while it had modest volume growth is still very far dislocated from its prior peak volumes. And so the productivity and procurement we're driving to drive those margins higher will contribute, I would say, a very strong incremental as and when volume growth recovers, we get better absorption through our sites. The offshore business also continues to be strong, and that's mix positive.

So there's room for further margin expansion. And I'd note that when you look across the ESI complex, our ex metal margins were 28% in the quarter. That's only 100 basis points off of our prior peak. And we're continuing to invest in OpEx in anticipation of and in support of pretty significant margin accretive future growth. So across all of Element, we see material opportunity for incremental margin expansion from here.

Our next question comes from John Tanwanteng from CJS Securities.

Congrats on a nice quarter on the Micromax deal. I was wondering if we could drill down to the offshore business a little bit. How sustainable is the strength there? I think you mentioned that there are some good tailwinds, but I'm wondering were there any first fill programs there that might tail off and kind of what the demand outlook is as we go off into next year?

Yes. The offshore business is a longer cycle business. And so what drives that is a solid, stable energy price which drives drilling activity, which subsequently translates into new producing wells and we get a large sale when you see a fill. And so when a drill is completed and then ongoing more annuity recurring like monthly orders for each well on which our fluids are being used. Drilling rates are pretty good right now. I think that there is an expected lull to some extent in drilling activity into 2026. I wouldn't count on -- you wouldn't have expected in a 70% electronics business, we're the fastest-growing vertical to be offshore drilling. But -- and I wouldn't expect that to continue into 2026.

But it's a healthy market. It's a healthy business. We've got a pricing lever there as well that's pretty compelling. And so we see sustained growth into 2026. We're probably not at these rates.

Got it. And then maybe a similar question, but focused on just the margins in the electronics side and the EV specifically. Do you expect that headwind from, I guess, the larger customer there to continue for the foreseeable future? Or is that something you expect to reverse out at some point? And kind of how do you think about that market overall?

Look, I think it's safe to say EV volumes are likely to be down again year-over-year in Q4 globally. I think that the worst of it is passed and I see opportunity for, again, this power electronics business to continue to grow.

We see a compelling growth opportunity in power electronics going forward into 2026. And it's not just actually for EV applications. We're starting to see pull for these materials, these high thermal materials into other applications, network infrastructure and data center applications as well. We see a very strong pipeline for Argomax into 2026 and beyond.

Our next question comes from John Roberts from Mizuho.

MKS has decided to exit the Atotech industrial metal plating business as the main competitor, was part of your volume pickup share gain opportunities as they go through that process?

Really can't speak to that, John. I would say that our industrial business has been growing really nicely, executing very well. And we've outgrown our market for sure. So there has been some share gain, but I don't think it's appropriate to speak about any specific competitors we've got great capability there and a really good value proposition of the supply chain, and the team has been executing really, really well.

Okay. And then maybe I missed this, but you described Micromax as fitting between assembly and circuitry. Will it be reported in either of those 2 subsegments? Or will it be reported standalone?

I don't expect it to be reported in either of the segments. I think it will be standalone. And I would note that we will report this business ex metals to give a better picture on organic volume and appropriate margin.

That concludes the question-and-answer session. I would like to turn the call over back to Ben Gliklich for further remarks.

All right. Great. Thank you very much. Thanks to everybody again for joining, and we're looking forward to seeing many of you in the days and weeks to come on the road. Have a great day.

This concludes today's conference call. Thank you for joining. You may now disconnect.