Executive Summary Element Solutions reported strong Q2 2025 results with organic growth, increased adjusted EBITDA guidance, and solid cash flow CEO Commentary CEO highlighted outstanding Q2 2025 performance, driven by strong Electronics segment growth and increased adjusted EBITDA guidance - Element Solutions had an outstanding second quarter, executing well against its strategy of penetrating fast-growing niches and driving continuous improvement3 - The Electronics segment achieved its fifth consecutive quarter of high-single digit organic growth3 - The recently increased 2025 adjusted EBITDA guidance range demonstrates the company's ability to navigate the current tariff environment without sacrificing growth3 Second Quarter 2025 Highlights Element Solutions reported Q2 2025 net sales of $625 million (6% organic growth) and adjusted EBITDA of $136 million Q2 2025 Financial Highlights | Metric | Q2 2025 | Q2 2024 | Change (Reported) | Organic Growth | | :-------------------------------- | :------ | :------ | :---------------- | :------------- | | Net Sales | $625M | $612.7M | +2% | +6% | | Reported Net Income | $48M | $93M | -49% | N/A | | Adjusted EBITDA | $136M | $135M | +1% | N/A | | Adjusted EBITDA (excl. divested MGS) | $136M | $127.6M | +7% | N/A | | Cash flows from operating activities | $73M | N/A | N/A | N/A | | Adjusted free cash flow | $59M | N/A | N/A | N/A | | GAAP diluted EPS | $0.20 | $0.38 | -47.4% | N/A | | Adjusted EPS | $0.37 | $0.36 | +2.8% | N/A | - Electronics segment net sales increased 12% to $439 million, with organic net sales up 9%5 - Industrial & Specialty net sales decreased 16% to $186 million (17% from divestitures), with organic net sales up 1%5 2025 Guidance Element Solutions updated its full-year 2025 adjusted EBITDA guidance to $530-$550 million, with Q3 adjusted EBITDA projected at $140-$145 million 2025 Financial Guidance | Metric | Guidance | | :-------------------------- | :-------------------- | | Full Year 2025 Adjusted EBITDA | $530M - $550M | | Full Year 2025 Free Cash Flow Conversion | Comparable to prior year | | Q3 2025 Adjusted EBITDA | $140M - $145M | Company Overview Element Solutions is a global specialty chemicals technology company providing innovative solutions across diverse industries About Element Solutions Element Solutions Inc is a global specialty chemicals technology company providing innovative solutions that enhance product performance across various key industries - Element Solutions Inc is a leading global specialty chemicals technology company providing solutions that enhance product performance11 - The company's innovative solutions enable manufacturing processes in key industries such as consumer electronics, power electronics, semiconductor fabrication, communications and data storage infrastructure, automotive systems, industrial surface finishing, and offshore energy11 Consolidated Financial Results Consolidated financial results for Q2 2025 show increased net sales, stable gross profit, and a decrease in net income Condensed Consolidated Statements of Operations Q2 2025 net sales increased to $625.2 million, but net income decreased significantly to $47.4 million due to foreign exchange losses and divestitures Condensed Consolidated Statements of Operations (dollars in millions) | Metric (dollars in millions) | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--------------------------------- | :------ | :------ | :------------ | :------------ | | Net sales | $625.2 | $612.7 | $1,218.9 | $1,187.7 | | Gross profit | $266.4 | $267.2 | $516.9 | $512.2 | | Operating profit | $94.3 | $96.2 | $171.7 | $174.0 | | Income before income taxes | $63.3 | $74.2 | $179.1 | $143.7 | | Income tax (expense) benefit | $(15.8) | $17.5 | $(33.6) | $4.0 | | Net income attributable to common stockholders | $47.4 | $93.2 | $145.4 | $149.2 | | Diluted EPS | $0.20 | $0.38 | $0.60 | $0.61 | - Foreign exchange losses were $(17.1) million in Q2 2025, compared to gains of $5.0 million in Q2 202416 - A loss on divestitures of $(5.5) million was recorded in Q2 2025, compared to zero in Q2 202416 Condensed Consolidated Balance Sheets Total assets increased to $5,002.6 million, total liabilities decreased to $2,361.3 million, and total equity rose to $2,641.3 million Condensed Consolidated Balance Sheets (dollars in millions) | Metric (dollars in millions) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $529.9 | $359.4 | | Total current assets | $1,454.2 | $1,270.0 | | Total assets | $5,002.6 | $4,873.9 | | Total current liabilities | $354.9 | $379.7 | | Debt | $1,624.5 | $1,813.6 | | Total liabilities | $2,361.3 | $2,475.5 | | Total equity | $2,641.3 | $2,398.4 | - Goodwill increased to $2,241.6 million from $2,132.0 million18 Condensed Consolidated Statements of Cash Flows Operating cash flows decreased to $98.6 million, while investing activities generated $323.1 million, primarily from divestitures Condensed Consolidated Statements of Cash Flows (dollars in millions) | Metric (dollars in millions) | 6 Months 2025 | 6 Months 2024 | | :--------------------------------- | :------------ | :------------ | | Net cash flows provided by operating activities | $98.6 | $124.8 | | Net cash flows (used in) provided by investing activities | $323.1 | $(43.8) | | Net cash flows used in financing activities | $(266.0) | $(54.1) | | Net increase in cash and cash equivalents | $170.5 | $20.0 | | Cash and cash equivalents at end of period | $529.9 | $309.3 | - Proceeds from divestitures (net of cash) amounted to $325.5 million for the six months ended June 30, 202520 - Repayments of borrowings totaled $202.6 million for the six months ended June 30, 202520 Segment Performance and Key Metrics This section details net sales, net income, adjusted EBITDA, and EPS performance across the Electronics and Industrial & Specialty segments Net Sales by Segment Total net sales increased 2% reported (6% organic) to $625.2 million, driven by strong 9% organic growth in the Electronics segment Net Sales by Segment (dollars in millions) | Segment (dollars in millions) | Q2 2025 Net Sales | Q2 2024 Net Sales | Reported Change | Organic Change | | :---------------------------- | :---------------- | :---------------- | :-------------- | :------------- | | Electronics | $439.4 | $391.7 | +12% | +9% | | Industrial & Specialty | $185.8 | $221.0 | -16% | +1% | | Total | $625.2 | $612.7 | +2% | +6% | - For the six months ended June 30, 2025, Electronics organic net sales grew 9%, and Industrial & Specialty organic net sales were flat at 0%22 Net Income and Adjusted EBITDA Reported net income decreased 49% to $47.5 million, while total adjusted EBITDA increased 1% to $136.0 million Net Income and Adjusted EBITDA by Segment (dollars in millions) | Metric (dollars in millions) | Q2 2025 | Q2 2024 | Reported Change | Constant Currency Change | | :--------------------------------- | :------ | :------ | :-------------- | :----------------------- | | Net Income | $47.5 | $93.3 | -49% | N/A | | Adjusted EBITDA (Total) | $136.0 | $135.1 | +1% | 0% | | Adjusted EBITDA (Electronics) | $96.5 | $92.2 | +5% | +3% | | Adjusted EBITDA (Industrial & Specialty) | $39.5 | $42.9 | -8% | -7% | - Excluding the divested MacDermid Graphics Solutions business, Adjusted EBITDA for Industrial & Specialty would have grown 10%13 Earnings Per Share (EPS) GAAP diluted EPS decreased to $0.20, while Adjusted EPS slightly increased to $0.37 in Q2 2025 Earnings Per Share (EPS) Summary | Metric | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :---------------------- | :------ | :------ | :------------ | :------------ | | GAAP Diluted EPS | $0.20 | $0.38 | $0.60 | $0.61 | | Adjusted EPS | $0.37 | $0.36 | $0.71 | $0.70 | - Adjusted net income for Q2 2025 was $90.8 million, up from $88.7 million in Q2 202435 Margins (Net Income & Adjusted EBITDA) Net income margin decreased by 760 basis points to 7.6%, while total Adjusted EBITDA margin decreased by 40 basis points to 21.7% Profit Margins (Net Income & Adjusted EBITDA) | Metric | Q2 2025 | Q2 2024 | Change (bps) | | :-------------------------- | :------ | :------ | :----------- | | Net Income Margin | 7.6% | 15.2% | (760) bps | | Adjusted EBITDA Margin (Total) | 21.7% | 22.1% | (40) bps | | Adjusted EBITDA Margin (Electronics) | 22.0% | 23.6% | (160) bps | | Adjusted EBITDA Margin (Industrial & Specialty) | 21.2% | 19.4% | +180 bps | Capital Structure and Liquidity This section details the company's debt, cash position, net debt, market capitalization, and free cash flow Capital Structure Details Total debt was $1,636.2 million, with net debt at $1,106.3 million, and 100% of debt fixed through interest rate swaps Capital Structure as of June 30, 2025 (dollars in millions) | Metric (dollars in millions) | June 30, 2025 | | :--------------------------- | :------------ | | Term Loans | $836.2 | | Senior Notes due 2028 | $800.0 | | Total Debt | $1,636.2 | | Cash Balance | $529.9 | | Net Debt | $1,106.3 | | Market Capitalization | $5,526.6 | | Total Capitalization | $6,632.9 | - As of June 30, 2025, 100% of the Company's debt was fixed through interest rate swaps23 Free Cash Flow Q2 2025 free cash flow increased to $58.8 million, while six-month free cash flow decreased slightly to $88.9 million Free Cash Flow Summary (dollars in millions) | Metric (dollars in millions) | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--------------------------------- | :------ | :------ | :------------ | :------------ | | Cash flows from operating activities | $72.6 | $66.6 | $98.6 | $124.8 | | Capital expenditures | $(17.7) | $(14.5) | $(28.7) | $(33.5) | | Proceeds from disposal of property, plant and equipment | $0.6 | $0.0 | $0.7 | $0.0 | | Free cash flow | $58.8 | $52.1 | $88.9 | $91.3 | Recent Corporate Developments This section covers recent stock repurchase activities and the filing of a universal shelf registration statement Stock Repurchase Program Element Solutions repurchased 0.9 million shares for $19.5 million in Q2 2025, with $562 million remaining authorization - During Q2 2025, the Company repurchased 0.9 million shares of common stock for approximately $19.5 million at an average price of $20.457 - The remaining authorization under its stock repurchase program was approximately $562 million at June 30, 20257 Shelf Registration Statement Element Solutions filed a routine universal shelf registration statement on Form S-3, effective upon filing, for future securities offerings - On July 30, 2025, the Company filed a universal shelf registration statement on Form S-3 with the SEC to replace an expired statement8 - This registration statement was a routine filing and became effective upon filing8 Non-GAAP Financial Measures Definitions and Reconciliations This section defines and reconciles various non-GAAP financial measures used by management to evaluate performance and liquidity Overview of Non-GAAP Measures Management uses non-GAAP measures like adjusted EBITDA and free cash flow to evaluate performance and liquidity, excluding disproportionate items - Management internally reviews non-GAAP measures to evaluate performance and liquidity on a comparative period-to-period basis25 - Non-GAAP measures include EBITDA, adjusted EBITDA, adjusted EPS, free cash flow, and organic net sales growth, among others24 - Reconciliations for forward-looking non-GAAP measures are excluded due to the inherent difficulty in forecasting and quantifying certain necessary adjustments26 Constant Currency Constant currency results adjust financial performance to exclude foreign currency translation impacts, aiding consistent period-to-period comparisons - Constant currency basis adjusts results to exclude the impact of changes due to the translation of foreign currencies into U.S. dollar27 - The impact of foreign currency translation is calculated by converting current-period local currency financial results into U.S. dollar using prior period's exchange rates28 Organic Net Sales Growth Organic net sales growth excludes foreign currency, pass-through metals pricing, and acquisitions/divestitures to show underlying sales trends Organic Net Sales Growth Reconciliation | Metric | Reported Net Sales Growth | Impact of Currency | Constant Currency | Change in Pass Through Metals Pricing | Divestitures | Organic Net Sales Growth | | :--------------------- | :------------------------ | :----------------- | :---------------- | :------------------------------------ | :----------- | :----------------------- | | Q2 2025 Total | 2% | (1)% | 1% | (2)% | 6% | 6% | | Q2 2025 Electronics | 12% | (1)% | 11% | (3)% | —% | 9% | | Q2 2025 Industrial & Specialty | (16)% | 0% | (16)% | —% | 17% | 1% | - For Q2 2025, Electronics' results were positively impacted by $9.9 million of pass-through metals pricing, while Industrial & Specialty's results were negatively impacted by $38.4 million of divestitures31 Adjusted Earnings Per Share (EPS) Adjusted EPS is calculated by modifying net income for specific non-recurring items and applying a fixed non-GAAP effective tax rate of 20% - Adjusted EPS is a key metric used by management to measure operating performance and trends by excluding certain expenses32 - A non-GAAP effective tax rate of 20% is used, reflecting estimated long-term expectations for taxes and tax benefits from U.S. tax attribute carryforwards3336 Adjusted Earnings Per Share Reconciliation (dollars in millions, except per share) | Metric (dollars in millions, except per share) | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--------------------------------------------- | :------ | :------ | :------------ | :------------ | | Net income | $47.5 | $93.3 | $145.5 | $149.3 | | Reversal of amortization expense | $28.5 | $29.8 | $55.7 | $60.0 | | Restructuring expense | $2.1 | $3.5 | $3.2 | $5.8 | | Acquisition, integration and transaction expenses | $3.3 | $3.3 | $11.6 | $5.0 | | Foreign exchange losses (gains) on intercompany loans | $10.6 | $(3.9) | $16.6 | $(10.7) | | Loss (gain) on divestitures | $5.5 | — | $(66.6) | — | | Adjusted net income | $90.8 | $88.7 | $174.3 | $171.3 | | Adjusted earnings per share | $0.37 | $0.36 | $0.71 | $0.70 | | Adjusted common shares outstanding | 244.0 | 244.5 | 244.5 | 244.5 | EBITDA and Adjusted EBITDA EBITDA is earnings before interest, taxes, depreciation, and amortization, with Adjusted EBITDA further excluding non-recurring or capital structure-related items - EBITDA represents earnings before interest, provision for income taxes, depreciation and amortization38 - Adjusted EBITDA excludes items not representative of ongoing business or associated with capital structure, such as restructuring and acquisition expenses38 EBITDA and Adjusted EBITDA Reconciliation (dollars in millions) | Metric (dollars in millions) | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--------------------------------- | :------ | :------ | :------------ | :------------ | | Net income | $47.5 | $93.3 | $145.5 | $149.3 | | Income tax expense (benefit) | $15.8 | $(17.5) | $33.6 | $(4.0) | | Interest expense, net | $12.9 | $14.3 | $27.2 | $28.2 | | Depreciation expense | $9.7 | $10.3 | $19.7 | $20.4 | | Amortization expense | $28.5 | $29.8 | $55.7 | $60.0 | | EBITDA | $114.4 | $128.6 | $281.7 | $252.3 | | Adjustments to reconcile to Adjusted EBITDA | $21.6 | $6.5 | $(17.3) | $4.8 | | Adjusted EBITDA | $136.0 | $135.1 | $264.4 | $262.1 | Free Cash Flow and Adjusted Free Cash Flow Free cash flow is operating cash less capital expenditures, with adjusted free cash flow further excluding non-recurring tax and divestiture payments - Free cash flow is defined as net cash flows from operating activities less net capital expenditures40 - Adjusted free cash flow excludes non-recurring payments for tax settlements and professional fees/taxes associated with divestitures40 Free Cash Flow Reconciliation (dollars in millions) | Metric (dollars in millions) | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--------------------------------- | :------ | :------ | :------------ | :------------ | | Cash flows from operating activities | $72.6 | $66.6 | $98.6 | $124.8 | | Capital expenditures | $(17.7) | $(14.5) | $(28.7) | $(33.5) | | Proceeds from disposal of property, plant and equipment | $0.6 | — | $0.7 | — | | Adjustments | $3.3 | — | $18.3 | — | | Free cash flow | $58.8 | $52.1 | $88.9 | $91.3 | Additional Information This section includes important disclosures regarding forward-looking statements, conference call details, and investor contacts Forward-Looking Statements The release contains forward-looking statements, subject to various risks like global conflicts and economic factors, and are not updated - The release contains 'forward-looking statements' intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 199514 - Examples include statements regarding strategy execution, market trends, demand, profits, global trade dynamics, tariff mitigation, demand variability, foreign exchange rates, and 2025 guidance14 - Actual results could differ materially due to factors such as global conflicts (Ukraine, Israel-Hamas), tariffs, economic factors, capital requirements, government regulations, and the impact of acquisitions/divestitures14 Conference Call Information Element Solutions will host a webcast/dial-in conference call on July 31, 2025, at 8:30 a.m. ET to discuss Q2 2025 results - Element Solutions will host a webcast/dial-in conference call on Thursday, July 31, 2025, at 8:30 a.m. (Eastern Time) to discuss Q2 2025 financial results9 - Participants will include President and CEO Benjamin H. Gliklich and CFO Carey J. Dorman9 - The call will be simultaneously webcast at www.elementsolutionsinc.com, where a replay will also be available10 Investor Relations Contact For investor relations, contact Varun Gokarn at 1-203-952-0369 or IR@elementsolutionsinc.com; media inquiries go to Collected Strategies - Investor Relations Contact: Varun Gokarn, Vice President, Strategy and Integration, Element Solutions Inc, 1-203-952-0369, IR@elementsolutionsinc.com42 - Media Contact: Scott Bisang / Ed Hammond / Tali Epstein, Collected Strategies, 1-212-379-2072, esi@collectedstrategies.com42
Element Solutions (ESI) - 2025 Q2 - Quarterly Results