Glossary of Defined Terms This section provides definitions for key terms and abbreviations used throughout the report | Terms | Definitions | | :--- | :--- | | Element Solutions; We; Us; Our; the Company | Element Solutions Inc, a Delaware corporation, and where the context requires, its subsidiaries or operating businesses. | | Credit Agreement | Credit Agreement, dated as of January 31, 2019, as amended from time to time, among, inter alia, Element Solutions and MacDermid, Incorporated, as borrowers, certain subsidiaries of Element Solutions and the lenders from time to time parties thereto. | | EBITDA | Earnings before interest, taxes, depreciation and amortization. | | Exchange Act | Securities Exchange Act of 1934, as amended. | | FDII | Foreign-derived intangible income. | | GAAP | U.S. Generally Accepted Accounting Principles. | | GILTI | Global intangible low-taxed income. | | Kuprion Acquisition | Element Solutions' acquisition of Kuprion, Inc. on May 19, 2023. | | MGS Transaction | Element Solutions' sale of its flexographic printing plate business, MacDermid Graphics Solutions on February 28, 2025. | | Quarterly Report | This quarterly report on Form 10-Q for the three and six months ended June 30, 2025. | | RSUs | Restricted stock units issued by Element Solutions from time to time under its Amended and Restated 2013 Incentive Compensation Plan. | | SEC | Securities and Exchange Commission. | | 2024 Annual Report | Element Solutions' annual report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 19, 2025. | | 3.875% USD Notes due 2028 | Element Solutions' $800 million aggregate principal amount of 3.875% senior notes due 2028, denominated in U.S. dollars, issued on August 18, 2020. | Forward-Looking Statements This section outlines the nature of forward-looking statements and associated risks, emphasizing that actual results may differ materially - This Quarterly Report contains forward-looking statements identified by specific words and expressions, covering expectations regarding benefits from acquisitions and divestitures (ViaForm Distribution Rights, Kuprion Acquisition, MGS Transaction), tax implications, deferred payments, geopolitical conflicts (Ukraine, Israel-Hamas), tariffs, economic factors, capital requirements, financing availability, RSU performance targets, government regulations, accounting standards, dividend policy, hedging activities, environmental and legal matters, tax strategies, impairments, market volatility, inflation, foreign exchange rates, liquidity, cash flows, capital allocation, funding sources, capital expenditures, debt, share repurchases, debt/equity issuance/retirement, pension contributions, contractual obligations, operating results, sustainability goals, and future prospects11 - The company cautions that actual results may differ materially from forward-looking statements due to various factors, including those discussed in the 'Risk Factors' section of its 2024 Annual Report. The company undertakes no obligation to update or revise any forward-looking statement12 Non-GAAP Financial Measures (Introductory Statement) This section introduces non-GAAP financial measures, clarifying their definitions, limitations, and reconciliation to GAAP measures - This Quarterly Report includes non-GAAP financial measures such as Adjusted EBITDA and operating results on a constant currency and organic basis. These measures should not be considered in isolation from, or as a substitute for, GAAP performance measures13 - Further information, including definitions, limitations, and reconciliations to comparable GAAP measures, is provided in 'Non-GAAP Financial Measures' within Part I, Item 2, and Note 13, Segment Information, of the unaudited Condensed Consolidated Financial Statements13 Part I. Financial Information This part presents the company's unaudited condensed consolidated financial statements and related management discussion and analysis Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the company's unaudited condensed consolidated financial statements and notes, detailing key financial changes Condensed Consolidated Statements of Operations This section presents the company's unaudited condensed consolidated statements of operations, detailing revenues, expenses, and net income for the reported periods Key Financial Highlights (Q2 and YTD June 30) | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :--- | :--- | :--- | :--- | :--- | | 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 | | Interest expense, net | $(12.9) | $(14.3) | $(27.2) | $(28.2) | | Foreign exchange (losses) gains | $(17.1) | $5.0 | $(23.4) | $12.9 | | (Loss) gain on divestitures | $(5.5) | — | $66.6 | — | | Income before income taxes and non-controlling interests | $63.3 | $74.2 | $179.1 | $143.7 | | Income tax (expense) benefit | $(15.8) | $17.5 | $(33.6) | $4.0 | | Net income from continuing operations | $47.5 | $91.7 | $145.5 | $147.7 | | Net income attributable to common stockholders | $47.4 | $93.2 | $145.4 | $149.2 | | Basic EPS attributable to common stockholders | $0.20 | $0.39 | $0.60 | $0.62 | | Diluted EPS attributable to common stockholders | $0.20 | $0.39 | $0.60 | $0.62 | - Net income attributable to common stockholders decreased by 49% for the three months ended June 30, 2025, and by 3% for the six months ended June 30, 2025, compared to the prior year periods15 - The company recorded an income tax expense of $15.8 million in Q2 2025, a significant shift from a $17.5 million benefit in Q2 2024, and an expense of $33.6 million YTD 2025 compared to a $4.0 million benefit YTD 202415 Condensed Consolidated Statements of Comprehensive Income This section presents the company's unaudited condensed consolidated statements of comprehensive income, including net income and other comprehensive income items Comprehensive Income Highlights (Q2 and YTD June 30) | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Net income | $47.5 | $93.3 | $145.5 | $149.3 | | Total foreign currency translation adjustments | $96.5 | $(28.4) | $164.6 | $(74.7) | | Total unrealized (loss) income on qualified hedging derivatives | $(5.0) | $(0.9) | $(15.6) | $7.1 | | Other comprehensive income (loss) | $91.5 | $(29.1) | $149.0 | $(67.4) | | Comprehensive income attributable to common stockholders | $138.9 | $64.2 | $294.5 | $81.9 | - Comprehensive income attributable to common stockholders increased significantly by 116% for the three months ended June 30, 2025, and by 260% for the six months ended June 30, 2025, primarily driven by positive foreign currency translation adjustments16 Condensed Consolidated Balance Sheets This section presents the company's unaudited condensed consolidated balance sheets, detailing assets, liabilities, and equity at specific dates Balance Sheet Highlights (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | 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 stockholders' equity | $2,626.2 | $2,383.0 | | Total equity | $2,641.3 | $2,398.4 | - Cash and cash equivalents increased by 47.4% to $529.9 million at June 30, 2025, from $359.4 million at December 31, 202418 - Total debt decreased by 10.4% to $1,624.5 million at June 30, 2025, from $1,813.6 million at December 31, 202418 Condensed Consolidated Statements of Cash Flows This section presents the company's unaudited condensed consolidated statements of cash flows, categorizing cash movements from operating, investing, and financing activities Cash Flow Highlights (Six Months Ended June 30) | Metric | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :--- | :--- | :--- | | Net cash flows provided by operating activities | $98.6 | $124.8 | | Net cash flows provided by (used in) 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 | - Net cash flows from investing activities significantly increased to $323.1 million in YTD 2025, compared to a $43.8 million outflow in YTD 2024, primarily due to proceeds from divestitures20 - Net cash flows used in financing activities increased substantially to $266.0 million in YTD 2025, mainly due to repayments of borrowings ($202.6 million) and repurchases of common stock ($19.4 million)20 Condensed Consolidated Statements of Changes in Stockholders' Equity This section presents the company's unaudited condensed consolidated statements of changes in stockholders' equity, detailing movements in capital accounts Stockholders' Equity Changes (Q2 and YTD June 30, 2025) | Metric | Q2 2025 (in millions) | YTD 2025 (in millions) | | :--- | :--- | :--- | | Balance at March 31, 2025 / December 31, 2024 | $2,519.8 | $2,383.0 | | Net income | $47.4 | $145.4 | | Other comprehensive income (loss), net of taxes | $91.5 | $149.1 | | Repurchases of common stock | $(19.5) | $(19.5) | | Dividends | $(19.7) | $(39.2) | | Balance at June 30, 2025 | $2,626.2 | $2,626.2 | - Total stockholders' equity increased to $2,626.2 million at June 30, 2025, from $2,383.0 million at December 31, 2024, driven by net income and other comprehensive income25 - The company repurchased $19.5 million of common stock and paid $19.7 million in dividends during the three months ended June 30, 202522 Notes to the Condensed Consolidated Financial Statements This section provides detailed explanatory notes to the unaudited condensed consolidated financial statements, offering additional context and disclosures Note 1. Background and Basis of Presentation This note describes the company's business, organizational structure, and the basis for preparing the condensed consolidated financial statements - Element Solutions Inc is a leading global specialty chemicals company, providing solutions that enhance product performance in industries such as consumer electronics, automotive, and offshore energy28 - The company's operations are organized into two reportable segments: Electronics and Industrial & Specialty29 - The Industrial & Specialty segment completed the sale of its flexographic printing plate business, MacDermid Graphics Solutions on February 28, 202531 Note 2. Divestitures This note details significant divestiture activities, including the sale of the MacDermid Graphics Solutions business and its financial impact - On February 28, 2025, the company completed the sale of its MacDermid Graphics Solutions business for $323 million, net of cash, resulting in a gain of $70.9 million recognized as 'Other income'37 - The disposed business was classified as held for sale but did not meet the criteria for discontinued operations38 - In Q2 2025, the company recognized a loss on sale of $4.3 million for other immaterial divestiture activity40 Note 3. Inventories This note provides a breakdown of the company's inventory composition, including finished goods, work in process, and raw materials Inventory Composition (in millions) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Finished goods | $155.9 | $137.4 | | Work in process | $48.4 | $35.6 | | Raw materials and supplies | $79.5 | $73.2 | | Total inventories | $283.8 | $246.2 | - Total inventories increased by $37.6 million from December 31, 2024, to June 30, 202542 Note 4. Property, Plant and Equipment, Net This note details the composition of property, plant, and equipment, net of accumulated depreciation, and related depreciation expense Property, Plant and Equipment, Net (in millions) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Land and leasehold improvements | $50.3 | $48.0 | | Buildings and improvements | $195.8 | $180.0 | | Machinery, equipment, fixtures and software | $353.8 | $313.1 | | Construction in process | $54.0 | $55.5 | | Total property, plant and equipment | $653.9 | $596.6 | | Accumulated depreciation | $(357.3) | $(319.8) | | Property, plant and equipment, net | $296.6 | $276.8 | Depreciation Expense (in millions) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended June 30, | $9.7 | $10.3 | | Six Months Ended June 30, | $19.7 | $20.4 | Note 5. Goodwill and Intangible Assets, Net This note provides information on the company's goodwill by segment and the net book value of various intangible assets Goodwill by Segment (in millions) | Segment | December 31, 2024 | June 30, 2025 | | :--- | :--- | :--- | | Electronics | $1,258.1 | $1,311.7 | | Industrial & Specialty | $873.9 | $929.9 | | Total | $2,132.0 | $2,241.6 | - Goodwill increased by $109.6 million from December 31, 2024, to June 30, 2025, primarily due to foreign currency translation and other adjustments ($110.9 million), partially offset by a divestiture ($1.3 million)44 Intangible Assets, Net (in millions) | Category | June 30, 2025 Net Book Value | December 31, 2024 Net Book Value | | :--- | :--- | :--- | | Customer relationships | $375.0 | $382.7 | | Developed technology | $48.0 | $58.1 | | Trade names | $122.2 | $55.9 | | Reacquired distribution rights | $161.0 | $167.3 | | Indefinite-lived trade name | — | $68.0 | | Total | $706.2 | $732.0 | - In Q1 2025, the company began amortizing a previously indefinite-lived trade name over 20 years48 Note 6. Debt This note details the company's debt obligations, including term loans and senior notes, and compliance with debt covenants Debt Obligations (in millions) | Debt Type | Maturity Date | Interest Rate | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Term Loans | 2030 | SOFR plus 1.75% | $829.7 | $1,030.0 | | Senior Notes - $800 million | 2028 | 3.875% | $794.8 | $794.0 | | Total debt | | | $1,624.5 | $1,824.0 | - On March 31, 2025, the company prepaid $200 million of its term loans B-3 using proceeds from the MGS Transaction, reducing the principal outstanding and ceasing required quarterly principal payments53 - At June 30, 2025, the company was in compliance with all debt covenants and had $368 million of unused borrowing capacity under its revolving credit facility57 Note 7. Financial Instruments This note describes the company's use of derivative financial instruments to manage exposure to interest rate, foreign currency, and commodity price risks - The company uses derivative financial instruments (interest rate swaps, net investment hedges, foreign currency forward contracts, commodity derivative contracts) to manage exposure to interest rate, foreign currency, and commodity price risks61 - In January 2025, upon maturity of $286 million in notional value of cross-currency swaps, the company received $25.5 million in cash proceeds and subsequently entered into new swaps for $135 million notional value65 Notional Value of Derivatives (in millions) | Derivative Type | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Interest rate swaps and cross-currency swaps | $834 | $1,040 | | Foreign currency exchange forward contracts | $161 | $104 | | Commodity derivative contracts | $65.6 | $55.3 | Note 8. Stockholders' Equity This note provides details on changes in stockholders' equity, including common stock repurchases and dividend payments - During the three months ended June 30, 2025, the company repurchased approximately 0.9 million shares of its common stock for $19.5 million78 - The remaining authorization under the company's stock repurchase program was approximately $562 million at June 30, 202578 Note 9. Earnings Per Share This note presents the calculation of basic and diluted earnings per share attributable to common stockholders Earnings Per Share Attributable to Common Stockholders | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Basic EPS | $0.20 | $0.38 | $0.60 | $0.61 | | Diluted EPS | $0.20 | $0.38 | $0.60 | $0.61 | - Basic and diluted EPS decreased significantly in Q2 2025 compared to Q2 2024, reflecting the lower net income80 Note 10. Contingencies, Environmental and Legal Matters This note discusses the company's environmental liabilities and involvement in various legal proceedings - The company's environmental liabilities totaled $11.0 million at June 30, 2025, primarily for remediation, clean-up costs, and site monitoring82 - The company does not currently anticipate any material losses in excess of the recorded environmental liabilities82 - The company is involved in various legal proceedings but believes their resolutions will not have a material adverse effect on its consolidated financial position, results of operations, or cash flows86 Note 11. Income Taxes This note details the company's income tax expense or benefit, including factors influencing the effective tax rate Income Tax (Expense) Benefit (in millions) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended June 30, | $(15.8) | $17.5 | | Six Months Ended June 30, | $(33.6) | $4.0 | - The income tax expense in 2025 includes a continued U.S. benefit from foreign tax credits and FDII deduction, partially offset by a $7.7 million multi-year tax settlement (YTD)8889 - The 2024 income tax benefit included a significant release of valuation allowances ($35.9 million in Q2, $37.1 million YTD) related to U.K. tax attribute carryforwards due to improved profitability92 Note 12. Related Party Transactions This note describes transactions and agreements with related parties, including advisory services fees - The company has an Advisory Services Agreement with Mariposa Capital, LLC, an affiliate of one of its founder directors, entitling Mariposa Capital to an annual fee of $2.0 million and expense reimbursements95 Note 13. Segment Information This note provides financial information by reportable segment, including net sales and Adjusted EBITDA, for performance evaluation - The company's operations are organized into two reportable segments: Electronics and Industrial & Specialty, with the CEO utilizing net sales and Adjusted EBITDA for resource allocation and performance evaluation9697 Net Sales by Segment (in millions) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Electronics | $439.4 | $391.7 | $833.7 | $740.9 | | Industrial & Specialty | $185.8 | $221.0 | $385.2 | $446.8 | | Total net sales | $625.2 | $612.7 | $1,218.9 | $1,187.7 | Adjusted EBITDA by Segment (in millions) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Electronics | $96.5 | $92.2 | $185.4 | $176.1 | | Industrial & Specialty | $39.5 | $42.9 | $79.0 | $86.0 | | Total Adjusted EBITDA | $136.0 | $135.1 | $264.4 | $262.1 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's financial condition, results of operations, and liquidity Overview This section provides a high-level description of Element Solutions' business model, segments, and recent strategic developments - Element Solutions is a global specialty chemicals company focused on product innovation and customer-centric solutions across its Electronics and Industrial & Specialty segments106110 - The Electronics segment provides specialty chemicals for electronics hardware, including Assembly Solutions, Circuitry Solutions, and Semiconductor Solutions, with growth driven by increasing use of electronics, AI, and data center investments110111 - The Industrial & Specialty segment offers chemicals for surface enhancement and industrial processes, including Industrial Solutions and Energy Solutions. The MacDermid Graphics Solutions business was sold on February 28, 2025111112113 - During Q2 2025, the company repurchased 0.9 million shares of common stock for approximately $19.5 million, with $562 million remaining under the stock repurchase program authorization114 Non-GAAP Financial Measures This section defines and explains the company's non-GAAP financial measures, such as constant currency, organic net sales growth, and Adjusted EBITDA - The company uses non-GAAP financial measures such as constant currency, organic net sales growth, and Adjusted EBITDA to provide additional insights into performance and facilitate period-to-period comparisons117 - Constant currency adjusts results to exclude the impact of foreign currency translation, while organic net sales growth further excludes pass-through metals pricing and acquisitions/divestitures119121 - Adjusted EBITDA is defined as EBITDA, excluding items not representative of ongoing business or associated with the company's capital structure123 Results of Operations This section analyzes the company's consolidated and segment-level financial performance, including net sales, gross profit, and operating expenses Net Sales This section analyzes the company's net sales performance, including reported, constant currency, and organic growth rates by segment Consolidated Net Sales Growth (Q2 and YTD June 30) | Period | Reported Growth | Constant Currency Growth | Organic Growth | | :--- | :--- | :--- | :--- | | Three Months Ended June 30, 2025 | 2% | 1% | 6% | | Six Months Ended June 30, 2025 | 3% | 4% | 6% | - Electronics' net sales increased 12% reported (9% organic) in Q2 2025, driven by volume growth in high-performance computing, telecommunications, AI, data center investments, wafer plating, advanced packaging, and new EV customers128130 - Industrial & Specialty's net sales decreased 16% reported (increased 1% organic) in Q2 2025, with divestitures negatively impacting reported sales by $38.4 million127129 Gross Profit This section analyzes the company's gross profit and gross margin performance by segment, highlighting factors influencing changes Gross Profit and Margin by Segment (Q2 June 30) | Segment | Gross Profit 2025 (in millions) | Gross Profit 2024 (in millions) | Gross Margin 2025 | Gross Margin 2024 | | :--- | :--- | :--- | :--- | :--- | | Electronics | $179.4 | $172.5 | 40.8% | 44.0% | | Industrial & Specialty | $87.0 | $94.7 | 46.9% | 42.9% | | Total | $266.4 | $267.2 | 42.6% | 43.6% | - Electronics' gross profit increased by 4% reported (3% constant currency) in Q2 2025, driven by organic volume growth, but gross margin decreased due to higher prices of pass-through tin and silver138 - Industrial & Specialty's gross profit decreased by 8% reported (8% constant currency) in Q2 2025, primarily due to a $13.1 million negative impact from the MGS Transaction. However, gross margin increased due to the sale of the lower-margin Graphics Solutions business and growth in higher-margin Energy Solutions139 Operating Expenses This section details the company's operating expenses, including selling, technical, general, administrative, and research and development costs Operating Expenses (Q2 and YTD June 30, in millions) | Expense Type | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Selling, technical, general and administrative | $155.9 | $155.4 | $313.1 | $304.5 | | Research and development | $16.2 | $15.6 | $32.1 | $33.7 | | Total Operating Expenses | $172.1 | $171.0 | $345.2 | $338.2 | - Operating expenses increased 1% reported (0% constant currency) in Q2 2025, reflecting higher incentive compensation costs partially offset by $6.7 million lower operating expenses due to the MGS sale144 - Year-to-date operating expenses increased 2% reported (3% constant currency), driven by higher incentive compensation and $3.6 million non-recurring MGS transaction costs, partially offset by $9.0 million lower expenses from the MGS sale and $3.9 million lower R&D costs from the Kuprion Acquisition (due to a prior year charge)145 Other (Expense) Income This section details other financial items, including interest expense, foreign exchange gains/losses, and gains/losses on divestitures Other (Expense) Income, Net (Q2 and YTD June 30, in millions) | Category | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Interest expense, net | $(12.9) | $(14.3) | $(27.2) | $(28.2) | | Foreign exchange (losses) gains | $(17.1) | $5.0 | $(23.4) | $12.9 | | Other income (expense), net | $4.5 | $(12.7) | $(8.6) | $(15.0) | | (Loss) gain on divestitures | $(5.5) | — | $66.6 | — | | Total | $(31.0) | $(22.0) | $7.4 | $(30.3) | - Interest expense, net, decreased due to higher interest income, partially offset by a higher effective interest rate on a lower outstanding term loan principal balance147 - Foreign exchange losses increased significantly in Q2 and YTD 2025, primarily driven by the remeasurement of intercompany loans148 - The company recognized a $70.9 million gain from the MGS Transaction in Q1 2025, contributing to a $66.6 million gain on divestitures year-to-date152 Income Tax This section analyzes the company's income tax expense or benefit, discussing key drivers and significant adjustments Income Tax (Expense) Benefit (Q2 and YTD June 30, in millions) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended June 30, | $(15.8) | $17.5 | | Six Months Ended June 30, | $(33.6) | $4.0 | - The 2025 income tax expense includes U.S. benefits from foreign tax credits and FDII, partially offset by a $7.7 million multi-year tax settlement (YTD)153154 - The 2024 income tax benefit included a significant release of valuation allowances ($35.9 million in Q2, $37.1 million YTD) related to U.K. tax attribute carryforwards157 - The MGS Transaction resulted in a nominal tax impact, reducing the effective tax rate due to deferred tax asset realization and valuation allowance release155 Segment Adjusted EBITDA Performance This section analyzes the Adjusted EBITDA performance for each reportable segment, highlighting key drivers of change Adjusted EBITDA by Segment (Q2 and YTD June 30, in millions) | Segment | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Electronics | $96.5 | $92.2 | $185.4 | $176.1 | | Industrial & Specialty | $39.5 | $42.9 | $79.0 | $86.0 | | Total | $136.0 | $135.1 | $264.4 | $262.1 | - Electronics' Adjusted EBITDA increased 5% reported (3% constant currency) in Q2 2025, driven by broad-based sales growth across the segment163 - Industrial & Specialty's Adjusted EBITDA decreased 8% reported (7% constant currency) in Q2 2025, primarily due to a $7.5 million negative impact from the MGS Transaction, partially offset by growth in the higher-margin Energy Solutions business163 Liquidity and Capital Resources This section discusses the company's cash flows from operating, investing, and financing activities, as well as its debt and capital structure Operating Activities This section analyzes net cash flows provided by operating activities, detailing changes in working capital and other operational factors - Net cash flows provided by operating activities decreased by $26.2 million to $98.6 million for the six months ended June 30, 2025, primarily due to higher incentive compensation payments, partially offset by lower working capital investment169170 Investing Activities This section analyzes net cash flows from investing activities, including capital expenditures and proceeds from divestitures - Net cash flows provided by investing activities significantly increased to $323.1 million for the six months ended June 30, 2025, primarily driven by $326 million in proceeds from divestitures (mainly the MGS Transaction) and approximately $4.8 million lower capital expenditures169171 Financing Activities This section analyzes net cash flows used in financing activities, including debt repayments, stock repurchases, and dividend payments - Net cash flows used in financing activities increased substantially to $266.0 million for the six months ended June 30, 2025, primarily due to the prepayment of $200 million of term loans B-3 and $19.4 million in common stock repurchases169172 - The company paid $39.1 million in cash dividends on common stock during the six months ended June 30, 2025172 Financial Borrowings This section details the company's total indebtedness, including term debt and senior notes, and available credit facilities - At June 30, 2025, total indebtedness was $1.62 billion, comprising $836 million in term debt and $800 million in 3.875% USD Notes due 2028173178 - Availability under revolving credit facilities and various lines of credit totaled $390 million at June 30, 2025173 Covenants This section confirms the company's compliance with debt covenants under its Credit Agreement and senior notes indenture - At June 30, 2025, the company was in compliance with the debt covenants contained in the Credit Agreement and the indenture governing its 3.875% USD Notes due 2028174 Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes in the company's market risk disclosures from its prior annual report - The quantitative and qualitative disclosures about market risk have not changed materially from those disclosed in the company's 2024 Annual Report175 Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes to internal control over financial reporting - Based on management's evaluation, the company's disclosure controls and procedures were effective as of June 30, 2025176 - There have been no material changes in the company's internal control over financial reporting during the quarter ended June 30, 2025177 Part II. Other Information This part provides other required disclosures, including legal proceedings, risk factors, equity security sales, and exhibits Item 1. Legal Proceedings This section details the company's involvement in various legal proceedings, including environmental matters, and refers to related financial statement notes - The company is involved in various legal proceedings, investigations, and claims, including environmental matters at current and former plant sites and waste management sites179 - More information and updates on these matters can be found in Note 10, Contingencies, Environmental and Legal Matters, to the unaudited Condensed Consolidated Financial Statements179 Item 1A. Risk Factors This section states that there have been no material changes in the company's risk factors from those disclosed in its prior annual report - There have been no material changes in the risk factors from those set forth in Part I, Item 1A, Risk Factors of the company's 2024 Annual Report180 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's repurchases of common stock under its publicly announced program during the reporting period Purchases of Equity Securities (Three Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of a Publicly Announced Repurchase Program | Approximate Dollar Value of Shares that May Yet be Purchased Under the Repurchase Program (in millions) | | :--- | :--- | :--- | :--- | :--- | | April 1 - April 30 | 589,600 | $20.22 | 589,600 | $569 | | May 1 - May 31 | 360,198 | $20.81 | 360,198 | $562 | | June 1 - June 30 | — | — | — | $562 | | Total | 949,798 | $20.45 | 949,798 | | - The company repurchased 949,798 shares of common stock for approximately $19.5 million during the three months ended June 30, 2025181 - The remaining authorization under the company's stock repurchase program was approximately $562 million at June 30, 2025181 Item 3. Defaults Upon Senior Securities This section confirms that no defaults upon senior securities were reported during the period - No defaults upon senior securities were reported182 Item 4. Mine Safety Disclosures This section confirms that no mine safety disclosures were reported for the period - No mine safety disclosures were reported182 Item 5. Other Information This section confirms that no Director and Officer 10b5-1 Trading Arrangements were reported - No Director and Officer 10b5-1 Trading Arrangements were reported182 Item 6. Exhibits This section lists the exhibits filed or furnished as part of the Quarterly Report, including corporate documents and certifications Key Exhibits Filed/Furnished | Exhibit Number | Description | | :--- | :--- | | 3.1(a), (b), (c) | Certificates of Incorporation and Amendments | | 3.2 | Amended and Restated By-laws | | 31.1* | Principal Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 31.2* | Principal Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 32.1** | Principal Executive Officer and Principal Financial Officer Certifications pursuant to 18 U.S.C. Section 1350 | | 101.SCH**, 101.CAL**, 101.DEF**, 101.LAB**, 101.PRE**, 101.INS** | Inline XBRL Taxonomy Extension Documents | | 104** | Cover Page Interactive Data File | Signatures This section provides the official signatures confirming the submission of the report - The report was signed on behalf of Element Solutions Inc by Michael Russnok, Chief Accounting Officer, on July 31, 2025186187
Element Solutions (ESI) - 2025 Q2 - Quarterly Report