- Net sales of $2.46 billion, an increase of 5% on a reported
basis or 4% on an organic basis from 2023
- Reported net income of $245 million, compared to $118 million
in 2023, an increase of 107% on a reported basis
- Record Adjusted EBITDA of $535 million, compared to $482
million in 2023, an increase of 11% on a reported basis and 13% on
a constant currency basis
- Cash flows from operating activities of $362 million; record
free cash flow of $294 million
- Introduces 2025 full year financial guidance for Adjusted
EBITDA in the range of $520 million to $540 million
Element Solutions Inc (NYSE:ESI) (“Element Solutions” or the
“Company”), a global and diversified specialty chemicals company,
today announced its financial results for the three and twelve
months ended December 31, 2024.
Executive Commentary
President and Chief Executive Officer Benjamin Gliklich
commented, “Element Solutions had an outstanding year in 2024. We
produced record results, improved our portfolio and positioned the
Company for longer-term outperformance. Against an inconsistent
macro backdrop, we delivered 13% constant currency adjusted EBITDA
growth, significantly outpacing our end-markets. We have been
successful penetrating some of the fastest growing, highest value
niches in the electronics consumables market, which should continue
to deliver profit growth well in excess of the broader ecosystem in
2025. We have also driven margins back towards prior record levels
for Element Solutions, while total volumes remained materially
below their previous peaks. This supports our expectation that we
can continue to deliver both solid growth from a cyclical recovery
over time – in addition to the secular demand growth in electronics
– and margin expansion. The anticipated closing of the Graphics
business sale this quarter will improve the overall portfolio and
its longer-term growth rate, while providing significant
flexibility on the balance sheet for long-term, value accretive
capital allocation. More than just a good year behind us, our
results in 2024 provide conviction in future value creation.”
Mr. Gliklich continued, “Expectations for 2025 suggest a demand
environment similar to 2024. The industrial markets are not seen to
be recovering, and an acceleration in the overall electronics
industry is uncertain. However, the growth niches within our
markets and the execution that delivered our performance in 2024
should remain on track. Demand continues to grow in
high-performance computing and data storage applications. We
continue to extend our penetration of the EV market with our
differentiated power electronics solutions, and we expect market
growth and our share gains in high-value semiconductor markets to
continue. The two major non-operational impacts we expect on
year-over-year adjusted EBITDA in 2025 are a reduction of
approximately $30 million from the sale of the Graphics business
and an anticipated translational foreign exchange impact from a
stronger US dollar of $15 million based on rates at the end of
January. At the midpoint, our full year 2025 adjusted EBITDA
guidance range would translate to 8% growth without those two
impacts. This would be strong growth in light of expected market
conditions. We also expect opportunities this year to deploy our
balance sheet capacity and deliver growth in per share earnings
beyond what is reflected in our full year outlook. We have
momentum, opportunity and, most importantly, a high-performing team
enthusiastic about delivering on our compelling multi-year growth
potential. I am grateful for each of these, but our people chief
among them.”
Fourth Quarter 2024 Highlights
(compared with fourth quarter 2023):
- Net sales on a reported basis for the fourth quarter of 2024
were $624 million, an increase of 9% over the fourth quarter of
2023. Organic net sales increased 6%.
- Electronics: Net sales increased 14% to $401 million. Organic
net sales increased 7%.
- Industrial & Specialty: Net sales increased 1% to $223
million. Organic net sales increased 3%.
- Fourth quarter of 2024 earnings per share (EPS) performance:
- GAAP diluted EPS was $0.23, as compared to $0.32 for the same
period last year.
- Adjusted EPS was $0.35, as compared to $0.32 for the same
period last year.
- Reported net income for the fourth quarter of 2024 was $55
million, as compared to $77 million for the fourth quarter of 2023,
a decrease of 29%.
- Net income margin decreased by 470 basis points to 8.8%.
- Adjusted EBITDA for the fourth quarter of 2024 was $130
million, as compared to $120 million for the fourth quarter of
2023, an increase of 8%. On a constant currency basis, adjusted
EBITDA increased 9%.
- Electronics: Adjusted EBITDA was $87 million, an increase of
11%. On a constant currency basis, adjusted EBITDA increased
11%.
- Industrial & Specialty: Adjusted EBITDA was $43 million, an
increase of 4%. On a constant currency basis, adjusted EBITDA
increased 7%.
- Adjusted EBITDA margin decreased by 10 basis points to 20.8%.
On a constant currency basis, adjusted EBITDA margin decreased by
10 basis points.
Full Year 2024 Highlights (compared
with full year 2023):
- Net sales on a reported basis for the full year 2024 were $2.46
billion, an increase of 5% over the prior full year period. Organic
net sales increased 4%.
- Electronics: Net sales increased 10% to $1.56 billion. Organic
net sales increased 7%.
- Industrial & Specialty: Net sales decreased 3% to $896
million. Organic net sales decreased 1%.
- Full year 2024 EPS performance:
- GAAP diluted EPS was $1.00, as compared to $0.48 for 2023.
- Adjusted EPS was $1.44, as compared to $1.29 for 2023.
- Reported net income for the full year 2024 was $245 million, as
compared to $118 million for 2023.
- Net income margin increased by 490 basis points to 10.0%.
- Adjusted EBITDA for the full year 2024 was $535 million, as
compared to $482 million for 2023. On a constant currency basis,
adjusted EBITDA increased 13%.
- Electronics: Adjusted EBITDA was $362 million, an increase of
14%. On a constant currency basis, adjusted EBITDA increased
16%.
- Industrial & Specialty: Adjusted EBITDA was $173 million,
an increase of 5%. On a constant currency basis, adjusted EBITDA
increased 8%.
- Adjusted EBITDA margin increased by 110 basis points to 21.8%.
On a constant currency basis, adjusted EBITDA margin increased by
120 basis points.
2025 Guidance
For the full year 2025, the Company expects adjusted EBITDA to
be in the range of $520 million to $540 million and free cash flow
conversion to be comparable year over year. In addition, the
Company expects first quarter 2025 adjusted EBITDA to be
approximately $125 million.
Recent Developments
Portfolio Optimization - On September 1, 2024, the Company
entered into an agreement to sell its flexographic printing plate
business, MacDermid Graphics Solutions, for approximately $325
million. MacDermid Graphics Solutions constitutes substantially all
of the Company's Graphics Solutions business. The transaction is
expected to close in the first quarter of 2025, subject to
customary closing conditions and adjustments.
Improved Balance Sheet through Debt and Interest Rate Reduction
- In October 2024, the Company completed the syndication of $1.04
billion of new term loans B-3 which resulted in an interest rate
reduction of 25 basis points to SOFR plus a spread of 1.75% per
annum. In connection with this repricing, the Company fully paid
down its $1.14 billion term loans B-2, therefore reducing its
borrowing under its credit agreement by $100 million. The net
proceeds of the new term loans and cash on hand were used to prepay
in full the Company's term loans B-2.
Cash Dividends - On February 12, 2025, the Board of Directors of
the Company declared a cash dividend of $0.08 per outstanding share
of its common stock. The dividend is expected to be paid on March
17, 2025 to stockholders of record at the close of business on
March 3, 2025. For the full year 2024, approximately $78.2 million
was returned to the Company's stockholders in the form of cash
dividends.
Conference Call
Element Solutions will host a webcast/dial-in conference call to
discuss its 2024 fourth quarter and full year financial results at
8:30 a.m. (Eastern Time) on Wednesday, February 19, 2025.
Participants on the call will include President and Chief Executive
Officer Benjamin H. Gliklich and Chief Financial Officer Carey J.
Dorman.
To listen to the call by telephone, please dial 888-510-2346
(domestic) or 646-960-0111 (international) and provide the
Conference ID: 3799230. The call will be simultaneously webcast at
www.elementsolutionsinc.com. A replay of the call will be available
after completion of the live call at
www.elementsolutionsinc.com.
About Element Solutions
Element Solutions Inc is a leading global specialty chemicals
company whose businesses supply a broad range of solutions that
enhance the performance of products people use every day. Developed
in multi-step technological processes, these innovative solutions
enable customers' manufacturing processes in several key
industries, including consumer electronics, power electronics,
semiconductor fabrication, communications and data storage
infrastructure, automotive systems, industrial surface finishing,
consumer packaging and offshore energy.
More information about the Company is available at
www.elementsolutionsinc.com.
Forward-Looking
Statements
This release is intended to qualify for the safe harbor from
liability established by the Private Securities Litigation Reform
Act of 1995 as it contains "forward-looking statements" within the
meaning of the federal securities laws. These statements will often
contain words such as "expect," "anticipate," "project," "will,"
"should," "believe," "intend," "plan," "assume," "estimate,"
"predict," "seek," "continue," "outlook," "may," "might," "aim,"
"can have," "likely," "potential," "target," "hope," "goal,"
"priority," "guidance" or "confident" and variations of such words
and similar expressions. Examples of forward-looking statements
include, but are not limited to, statements, beliefs, projections
and expectations regarding the Company's position for longer-term
outperformance; profit growth and margin expansion; the expected
benefits of the Graphics business sale; future value creation;
market trends, growth, execution and demand expectations in 2025;
growth strategy in the EV and semiconductor markets;
non-operational adjusted EBITDA impacts in 2025; first quarter 2025
guidance for adjusted EBITDA; full year 2025 guidance for adjusted
EBITDA and adjusted EBITDA growth, and free cash flow conversion;
opportunities to deploy balance sheet capacity; and growth in
adjusted earnings per share beyond full year guidance. These
projections and statements are based on management's estimates,
assumptions or expectations with respect to future events and
financial performance, and are believed to be reasonable, though
are inherently uncertain and difficult to predict. Such projections
and statements are based on the assessment of information available
as of the current date, and the Company does not undertake any
obligations to provide any further updates. Actual results could
differ materially from those expressed or implied in the
forward-looking statements if one or more of the underlying
estimates, assumptions or expectations prove to be inaccurate or
are unrealized. Important factors that could cause actual results
to differ materially from those suggested by the forward-looking
statements include, but are not limited to, the war in Ukraine and
the Israel-Hamas conflict and other hostilities in the Middle-East
as well as actions in response thereto and their impact on market
conditions and the global economy; tariffs and other changes in
trade policy in the U.S. and other countries; capital requirements
and need for and availability of financing; the impact of
government regulations on our ability to conduct operations; the
impact of changes to privacy, cybersecurity, environmental, global
trade, tax and other governmental regulations; impairments,
including those on goodwill and other intangible assets; price
volatility and cost environment; inflation and fluctuations in
foreign exchange rates; our liquidity, cash flows and capital
allocation; funding sources and capital expenditures; outstanding
debt and debt leverage ratio; shares repurchases; debt and/or
equity issuance or retirement; expected returns to stockholders;
and the impact of acquisitions, divestitures, restructurings,
refinancings, impairments and other unusual items, including the
Company's ability to integrate and obtain the anticipated benefits,
results and synergies from these items or other related strategic
initiatives. Additional information concerning these and other
factors that could cause actual results to vary is, or will be,
included in the Company's periodic and other reports filed with the
Securities and Exchange Commission. The Company undertakes no
obligation to update any forward-looking statements, whether as a
result of new information, future events or otherwise.
ELEMENT SOLUTIONS INC
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
(dollars in millions, except per share
amounts)
2024
2023
2024
2023
Net sales
$
624.2
$
573.4
$
2,456.9
$
2,333.2
Cost of sales
368.2
353.1
1,421.2
1,414.7
Gross profit
256.0
220.3
1,035.7
918.5
Operating expenses:
Selling, technical, general and
administrative
166.7
151.0
628.8
596.8
Research and development
14.4
13.8
63.0
68.1
Goodwill impairment
—
—
—
80.0
Total operating expenses
181.1
164.8
691.8
744.9
Operating profit
74.9
55.5
343.9
173.6
Other (expense) income:
Interest expense, net
(13.9
)
(12.3
)
(56.3
)
(49.3
)
Foreign exchange gains (losses)
1.1
(0.7
)
25.1
7.9
Other income (expense), net
4.7
(4.9
)
(25.0
)
(3.1
)
Total other expense
(8.1
)
(17.9
)
(56.2
)
(44.5
)
Income before income taxes and
non-controlling interests
66.8
37.6
287.7
129.1
Income tax (expense) benefit
(12.0
)
40.4
(44.8
)
(13.0
)
Net income from continuing
operations
54.8
78.0
242.9
116.1
(Loss) income from discontinued
operations, net of tax
—
(0.8
)
1.6
2.1
Net income
54.8
77.2
244.5
118.2
Net income attributable to non-controlling
interests
(0.1
)
(0.1
)
(0.3
)
(0.1
)
Net income attributable to common
stockholders
$
54.7
$
77.1
$
244.2
$
118.1
Earnings per
share
Basic from continuing operations
$
0.23
$
0.32
$
1.00
$
0.48
Basic from discontinued operations
—
—
0.01
0.01
Basic attributable to common
stockholders
$
0.23
$
0.32
$
1.01
$
0.49
Diluted from continuing operations
$
0.23
$
0.32
$
1.00
$
0.48
Diluted from discontinued operations
—
—
0.01
0.01
Diluted attributable to common
stockholders
$
0.23
$
0.32
$
1.01
$
0.49
Weighted average
common shares outstanding
Basic
242.2
241.5
242.1
241.4
Diluted
242.7
241.9
242.6
241.8
ELEMENT SOLUTIONS INC
CONSOLIDATED BALANCE
SHEETS
(Unaudited)
December 31,
(dollars in millions)
2024
2023
Assets
Cash and cash equivalents
$
359.4
$
289.3
Accounts receivable, net of allowance for
doubtful accounts of $10.3 and $12.6 at December 31, 2024 and 2023,
respectively
439.6
461.8
Inventories
246.2
298.9
Prepaid expenses
22.7
32.5
Other current assets
136.9
115.0
Current assets held for sale
65.2
—
Total current assets
1,270.0
1,197.5
Property, plant and equipment, net
276.8
296.9
Goodwill
2,132.0
2,336.7
Intangible assets, net
732.0
879.3
Deferred income tax assets
133.3
120.5
Other assets
140.9
143.2
Non-current assets held for sale
188.9
—
Total assets
$
4,873.9
$
4,974.1
Liabilities and stockholders'
equity
Accounts payable
$
121.3
$
140.6
Current installments of long-term debt
10.4
11.5
Accrued expenses and other current
liabilities
229.3
217.3
Current liabilities held for sale
18.7
—
Total current liabilities
379.7
369.4
Debt
1,813.6
1,921.0
Pension and post-retirement benefits
22.2
28.1
Deferred income tax liabilities
93.9
108.9
Other liabilities
152.6
202.4
Non-current liabilities held for sale
13.5
—
Total liabilities
2,475.5
2,629.8
Stockholders' equity
Common stock, 400.0 shares authorized
(2024: 267.2 shares issued; 2023: 266.2 shares issued)
2.7
2.7
Additional paid-in capital
4,214.1
4,196.9
Treasury stock (2024: 25.0 shares; 2023:
24.6 shares)
(349.5
)
(341.9
)
Accumulated deficit
(1,017.1
)
(1,183.3
)
Accumulated other comprehensive loss
(467.2
)
(345.9
)
Total stockholders' equity
2,383.0
2,328.5
Non-controlling interests
15.4
15.8
Total equity
2,398.4
2,344.3
Total liabilities and stockholders'
equity
$
4,873.9
$
4,974.1
ELEMENT SOLUTIONS INC
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
2024
2023
(dollars in millions)
Q1
Q2
Q3
Q4
FY
FY
Cash flows from operating
activities:
Net income
$
56.0
$
93.3
$
40.4
$
54.8
$
244.5
$
118.2
Net income from discontinued operations,
net of tax
—
1.6
—
—
1.6
2.1
Net income from continuing operations
56.0
91.7
40.4
54.8
242.9
116.1
Reconciliation of net income to net cash
flows provided by operating activities:
Depreciation and amortization
40.3
40.1
39.4
37.8
157.6
166.7
Deferred income taxes
(5.4
)
(37.4
)
9.2
(5.6
)
(39.2
)
(69.9
)
Foreign exchange (gains) losses
(7.8
)
(4.7
)
(12.4
)
0.5
(24.4
)
(10.6
)
Incentive stock compensation
4.1
3.6
3.8
3.3
14.8
9.4
Goodwill impairment
—
—
—
—
—
80.0
Other, net
3.7
1.3
13.6
4.3
22.9
42.2
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable
(4.8
)
(27.4
)
(12.2
)
14.5
(29.9
)
(6.8
)
Inventories
(23.9
)
(20.1
)
22.6
29.2
7.8
(9.5
)
Accounts payable
0.7
14.3
(15.1
)
(0.9
)
(1.0
)
0.3
Accrued expenses
(14.5
)
13.5
18.9
15.1
33.0
9.9
Prepaid expenses and other current
assets
6.7
(9.3
)
(0.9
)
(0.7
)
(4.2
)
1.9
Other assets and liabilities
3.1
1.0
(8.8
)
(13.6
)
(18.3
)
3.9
Net cash flows provided by operating
activities
58.2
66.6
98.5
138.7
362.0
333.6
Cash flows from investing
activities:
Capital expenditures
(19.0
)
(14.5
)
(12.6
)
(22.3
)
(68.4
)
(52.7
)
Proceeds from disposal of property, plant
and equipment
—
—
—
—
—
1.4
Acquisitions, net of cash acquired
(3.9
)
—
—
—
(3.9
)
(214.8
)
Other, net
—
(6.4
)
—
4.9
(1.5
)
15.9
Net cash flows used in investing
activities
(22.9
)
(20.9
)
(12.6
)
(17.4
)
(73.8
)
(250.2
)
Cash flows from financing
activities:
Debt proceeds, net of discount
—
—
—
1,040.1
1,040.1
1,297.1
Repayments of borrowings
(2.9
)
(2.9
)
(2.8
)
(1,144.0
)
(1,152.6
)
(1,264.1
)
Dividends
(20.0
)
(19.4
)
(19.4
)
(19.4
)
(78.2
)
(77.4
)
Payment of financing fees
(2.1
)
—
—
(1.1
)
(3.2
)
(6.3
)
Other, net
(7.7
)
0.9
(6.0
)
0.1
(12.7
)
(8.0
)
Net cash flows used in financing
activities
(32.7
)
(21.4
)
(28.2
)
(124.3
)
(206.6
)
(58.7
)
Net cash flows provided by operating
activities of discontinued operations
—
1.6
—
—
1.6
2.2
Effect of exchange rate changes on cash
and cash equivalents
(5.6
)
(2.9
)
9.0
(13.6
)
(13.1
)
(3.2
)
Net (decrease) increase in cash and
cash equivalents
(3.0
)
23.0
66.7
(16.6
)
70.1
23.7
Cash and cash equivalents at beginning of
period
289.3
286.3
309.3
376.0
289.3
265.6
Cash and cash equivalents at end of
period
$
286.3
$
309.3
$
376.0
$
359.4
$
359.4
$
289.3
Supplemental
disclosure information of continuing operations:
Cash paid for interest
$
24.2
$
8.4
$
24.3
$
7.9
$
64.8
$
56.1
Cash paid for income taxes
$
14.2
$
25.3
$
21.3
$
26.4
$
87.2
$
73.7
ELEMENT SOLUTIONS INC
ADDITIONAL FINANCIAL
INFORMATION
(Unaudited)
I. SUMMARY RESULTS
Three Months Ended December
31,
Twelve Months Ended December
31,
(dollars in millions)
2024
2023
Reported
Constant Currency
Organic
2024
2023
Reported
Constant Currency
Organic
Net Sales
Electronics
$
401.4
$
352.3
14
%
14
%
7
%
$
1,561.4
$
1,414.7
10
%
12
%
7
%
Industrial & Specialty
222.8
221.1
1
%
3
%
3
%
895.5
918.5
(3
)%
(1
)%
(1
)%
Total
$
624.2
$
573.4
9
%
10
%
6
%
$
2,456.9
$
2,333.2
5
%
7
%
4
%
Net Income
Total
$
54.8
$
77.2
(29
)%
$
244.5
$
118.2
107
%
Adjusted EBITDA
Electronics
$
86.8
$
78.3
11
%
11
%
$
361.5
$
317.7
14
%
16
%
Industrial & Specialty
43.1
41.5
4
%
7
%
173.2
164.6
5
%
8
%
Total
$
129.9
$
119.8
8
%
9
%
$
534.7
$
482.3
11
%
13
%
Three Months Ended
December 31,
Constant Currency
Twelve Months Ended
December 31,
Constant Currency
2024
2023
Change
2024
Change
2024
2023
Change
2024
Change
Net Income Margin
Total
8.8%
13.5%
(470)bps
10.0%
5.1%
490bps
Adjusted EBITDA Margin
Electronics
21.6%
22.2%
(60)bps
21.6%
(60)bps
23.1%
22.5%
60bps
23.3%
80bps
Industrial & Specialty
19.4%
18.8%
60bps
19.5%
70bps
19.3%
17.9%
140bps
19.5%
160bps
Total
20.8%
20.9%
(10)bps
20.8%
(10)bps
21.8%
20.7%
110bps
21.9%
120bps
II. CAPITAL STRUCTURE
(dollars in millions)
Maturity
Interest Rate
December 31, 2024
Instrument
Term Loans
(1
)
12/18/2030
SOFR plus 1.75%
$
1,038.8
Total First Lien Debt
1,038.8
Senior Notes due 2028
9/1/2028
3.875%
800.0
Total Debt
1,838.8
Cash Balance
359.4
Net Debt
$
1,479.4
Adjusted Shares Outstanding
(2
)
244.5
Market Capitalization
(3
)
$
6,217.6
Total Capitalization
$
7,697.0
(1)
Element Solutions swapped its floating
term loan rate to a fixed rate for all of its outstanding term
loans through the use of interest rate swaps and cross-currency
swaps which mature in January 2025 or December 2028, as applicable.
At December 31, 2024, 100% of the Company's debt was fixed.
(2)
See "Adjusted Common Shares Outstanding at
December 31, 2024 and 2023" following the footnotes under the
"Adjusted Earnings Per Share (EPS)" reconciliation table below.
(3)
Based on the closing price of the shares
of Element Solutions of $25.43 at December 31, 2024.
III. SELECTED FINANCIAL DATA
Three Months Ended December
31,
Twelve Months Ended December
31,
(dollars in millions)
2024
2023
2024
2023
Interest expense
$
16.6
$
15.4
$
67.5
$
58.9
Interest paid
7.9
7.4
64.8
56.1
Income tax expense (benefit)
12.0
(40.4
)
44.8
13.0
Income taxes paid
26.4
24.7
87.2
73.7
Capital expenditures
22.3
16.4
68.4
52.7
Proceeds from disposal of property, plant
and equipment
—
—
—
1.4
IV. SUPPLEMENTAL INFORMATION
2024
2023
(dollars in millions)
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Net Sales
Electronics
$
349.2
$
391.7
$
419.1
$
401.4
$
339.6
$
355.8
$
367.0
$
352.3
Industrial & Specialty
225.8
221.0
225.9
222.8
234.8
230.3
232.3
221.1
Total
$
575.0
$
612.7
$
645.0
$
624.2
$
574.4
$
586.1
$
599.3
$
573.4
Net Income (Loss)
Total
$
56.0
$
93.3
$
40.4
$
54.8
$
43.0
$
29.7
$
(31.7
)
$
77.2
Adjusted EBITDA
Electronics
$
83.9
$
92.2
$
98.6
$
86.8
$
72.7
$
76.3
$
90.4
$
78.3
Industrial & Specialty
43.1
42.9
44.1
43.1
39.6
39.8
43.7
41.5
Total
$
127.0
$
135.1
$
142.7
$
129.9
$
112.3
$
116.1
$
134.1
$
119.8
Non-GAAP Measures
To supplement its financial measures prepared in accordance with
GAAP, Element Solutions presents in this release the following
non-GAAP financial measures: EBITDA, adjusted EBITDA, adjusted
EBITDA margin, adjusted EPS, adjusted common shares outstanding,
free cash flow, organic net sales growth, first quarter 2025
guidance for adjusted EBITDA, and full year 2025 guidance for
adjusted EBITDA and adjusted EBITDA growth, and free cash flow
conversion expectations. The Company also evaluates and presents
its results of operations on a constant currency basis.
Management internally reviews these non-GAAP measures to
evaluate performance and liquidity on a comparative
period-to-period basis in terms of absolute performance, trends and
expected future performance with respect to the Company’s business,
and believes that these non-GAAP measures provide investors with an
additional perspective on trends and underlying operating results
on a period-to-period comparable basis. The Company also believes
that investors find this information helpful in understanding the
ongoing performance of its operations as well as their ability to
generate cash separate from items that may have a disproportionate
positive or negative impact on its financial results in any
particular period or that are considered to be associated with its
capital structure. These non-GAAP financial measures, however, have
limitations as analytical tools, and should not be considered in
isolation from, a substitute for, or superior to, the related
financial information that Element Solutions reports in accordance
with GAAP. The principal limitation of these non-GAAP financial
measures is that they exclude significant expenses and income that
are required by GAAP to be recorded in the Company’s financial
statements, and may not be completely comparable to similarly
titled measures of other companies due to potential differences in
calculation methods. In addition, these measures are subject to
inherent limitations as they reflect the exercise of judgment by
management about which items are excluded or included in
determining these non-GAAP financial measures. Investors are
encouraged to review the definitions and reconciliations of these
non-GAAP financial measures to their most comparable GAAP financial
measures included in this press release, and not to rely on any
single financial measure to evaluate the Company's businesses.
The Company provides first quarter 2025 guidance for adjusted
EBITDA and full year 2025 guidance for adjusted EBITDA, adjusted
EBITDA growth and free cash flow conversion only on a non-GAAP
basis. Reconciliations of such forward-looking non-GAAP measures to
GAAP are excluded in reliance upon the exception provided by Item
10(e)(1)(i)(B) of Regulation S-K due to the inherent difficulty in
forecasting and quantifying, without unreasonable efforts, certain
amounts that are necessary for such reconciliations, including
adjustments that could be made for restructurings, refinancings,
impairments, divestitures, integration and acquisition-related
expenses, share-based compensation amounts, non-recurring, unusual
or unanticipated charges, expenses or gains, adjustments to
inventory and other charges reflected in its reconciliations of
historic numbers, the amount of which, based on historical
experience, could be significant.
Constant Currency:
The Company discloses net sales and adjusted EBITDA on a
constant currency basis by adjusting results to exclude the impact
of changes due to the translation of foreign currencies of its
international locations into U.S. dollar. Management believes this
non-GAAP financial information facilitates period-to-period
comparison in the analysis of trends in business performance,
thereby providing valuable supplemental information regarding its
results of operations, consistent with how the Company internally
evaluates its financial results.
The impact of foreign currency translation is calculated by
converting the Company's current-period local currency financial
results into U.S. dollar using the prior period's exchange rates
and comparing these adjusted amounts to its prior period reported
results. The difference between actual growth rates and constant
currency growth rates represents the estimated impact of foreign
currency translation.
Organic Net Sales Growth:
Organic net sales growth is defined as net sales excluding the
impact of foreign currency translation, changes due to the
pass-through pricing of certain metals, and acquisitions and/or
divestitures, as applicable. Management believes this non-GAAP
financial measure provides investors with a more complete
understanding of the underlying net sales trends by providing
comparable net sales over differing periods on a consistent
basis.
The following table reconciles GAAP net sales growth to organic
net sales growth for the three and twelve months ended December 31,
2024:
Three Months Ended December
31, 2024
Reported Net Sales
Growth
Impact of Currency
Constant Currency
Change in Pass-Through Metals
Pricing
Acquisitions
Organic Net Sales
Growth
Electronics
14%
0%
14%
(7)%
—%
7%
Industrial & Specialty
1%
2%
3%
—%
—%
3%
Total
9%
1%
10%
(4)%
—%
6%
NOTE: Totals may not sum due to
rounding.
Twelve Months Ended December
31, 2024
Reported Net Sales
Growth
Impact of Currency
Constant Currency
Change in Pass-Through Metals
Pricing
Acquisitions
Organic Net Sales
Growth
Electronics
10%
1%
12%
(4)%
(1)%
7%
Industrial & Specialty
(3)%
2%
(1)%
—%
0%
(1)%
Total
5%
2%
7%
(3)%
0%
4%
NOTE: Totals may not sum due to
rounding.
For the three months ended December 31, 2024, Electronics'
consolidated results were positively impacted by $23.6 million of
pass-through metals pricing.
For the twelve months ended December 31, 2024, Electronics'
consolidated results were positively impacted by $59.7 million of
pass-through metals pricing and $8.1 million of acquisitions and
Industrial & Specialty's consolidated results were positively
impacted by $0.5 million of acquisitions.
Adjusted Earnings Per Share (EPS):
Adjusted EPS is a key metric used by management to measure
operating performance and trends as management believes the
exclusion of certain expenses in calculating adjusted EPS
facilitates operating performance comparisons on a period-to-period
basis. Adjusted EPS is defined as net income adjusted to reflect
adjustments consistent with the Company's definition of adjusted
EBITDA. Additionally, the Company eliminates amortization expense
associated with intangible assets, incremental depreciation
associated with the step-up of fixed assets and incremental cost of
sales associated with the step-up of inventories recognized in
purchase accounting for acquisitions.
Further, the Company adjusts its effective tax rate to 20%, as
described in footnote (9) under the reconciliation table below.
This effective tax rate, which reflects the Company’s estimated
long-term expectations for taxes to be paid on its adjusted
non-GAAP earnings, is consistent with how management evaluates the
Company’s financial performance. The Company also believes that
providing a fixed rate facilitates comparisons of business
performance from period to period. This non-GAAP effective tax rate
is lower than the average of the statutory tax rates applicable to
the Company’s jurisdictional mix of earnings, primarily because it
reflects tax benefits derived from U.S. tax attribute
carryforwards, which consist of operating losses and tax
credits.
The resulting adjusted net income is then divided by the
Company's adjusted common shares outstanding. Adjusted common
shares outstanding represent the shares outstanding as of the
balance sheet date for the quarter-to-date period and an average of
each quarter for the year-to-date period, plus shares issuable upon
exercise or vesting of all outstanding equity awards (assuming a
performance achievement target level for equity awards with targets
considered probable).
The following table reconciles GAAP "Net income" to "Adjusted
net income" and presents the number of adjusted common shares
outstanding used in calculating adjusted EPS for each period
presented below:
Three Months Ended December
31,
Twelve Months Ended December
31,
(dollars in millions, except per share
amounts)
2024
2023
2024
2023
Net income
$
54.8
$
77.2
$
244.5
$
118.2
Loss (income) from discontinued
operations, net of tax
—
0.8
(1.6
)
(2.1
)
Net income attributable to the
non-controlling interests
(0.1
)
(0.1
)
(0.3
)
(0.1
)
Reversal of amortization expense
(1
)
28.2
30.8
117.6
124.1
Adjustment to reverse incremental
depreciation expense from acquisitions
(1
)
0.3
0.3
1.3
1.5
Inventory step-up
(1
)
—
3.3
—
3.3
Restructuring expense
(2
)
2.1
5.1
7.8
11.4
Acquisition, divestiture and integration
expense
(3
)
10.4
3.5
21.7
16.8
Foreign exchange losses (gains) on
intercompany loans
(4
)
0.3
(2.1
)
(23.9
)
(9.7
)
Debt refinancing costs
(5
)
0.4
7.8
0.8
7.8
Goodwill impairment
(6
)
—
—
—
80.0
Kuprion Acquisition research and
development charge
(7
)
—
—
3.9
15.7
Other, net
(8
)
(1.8
)
10.3
22.8
11.9
Tax effect of pre-tax non-GAAP
adjustments
(9
)
(8.0
)
(11.8
)
(30.4
)
(52.6
)
Adjustment to estimated effective tax
rate
(9
)
(1.3
)
(47.9
)
(12.7
)
(12.8
)
Adjusted net income
$
85.3
$
77.2
$
351.5
$
313.4
Adjusted earnings per share
(10
)
$
0.35
$
0.32
$
1.44
$
1.29
Adjusted common shares
outstanding
(10
)
244.5
243.8
244.5
243.9
(1)
The Company eliminates the amortization
expense associated with intangible assets, incremental depreciation
associated with the step-up of fixed assets and incremental cost of
sales associated with the step-up of inventories recognized in
purchase accounting for acquisitions. The Company believes these
adjustments provide insight with respect to the cash flows
necessary to maintain and enhance its product portfolio.
(2)
The Company adjusts for costs of
restructuring its operations, including those related to its
acquired businesses. The Company adjusts these costs because it
believes they are not reflective of ongoing operations.
(3)
The Company adjusts for costs associated
with acquisition, divestiture and integration activity, including
costs of obtaining related financing, legal and accounting fees and
transfer taxes. The Company adjusts these costs because it believes
they are not reflective of ongoing operations.
(4)
The Company adjusts for foreign exchange
gains and losses on intercompany loans because it expects the
period-to-period movement of the applicable currencies to offset on
a long-term basis and because these gains and losses are not fully
realized due to their long-term nature. The Company does not
exclude foreign exchange gains and losses on short-term
intercompany and third-party payables and receivables.
(5)
The Company adjusts for costs related to
the prepayment of its prior term loans because it believes these
costs are not reflective of ongoing operations.
(6)
The Company recorded a non-cash impairment
charge of $80.0 million related to its Graphics Solutions reporting
unit in its Industrial & Specialty segment in the third quarter
of 2023. The Company adjusts this cost because it believes it is
not reflective of ongoing operations.
(7)
The Company adjusts for research and
development costs associated with contingent consideration and the
purchase accounting related to the acquisition of Kuprion, Inc. The
Company adjusts these costs because it believes they are not
reflective of ongoing operations.
(8)
The Company's adjustments include a
non-cash available-for-sale debt security impairment charge of
$11.4 million in the third quarter of 2024 and highly inflationary
accounting losses for its operations in Turkey of $3.8 million and
$9.9 million for the years ended December 31, 2024 and 2023,
respectively. In addition, the Company adjusts for certain
professional consulting fees and unrealized gains/losses on metals
derivative contracts. The Company adjusts for the
available-for-sale debt security impairment and certain
professional consulting fees because it believes they are not
reflective of ongoing operations. The Company adjusts for highly
inflationary accounting impacts for its operations in Turkey and
unrealized gains/losses on metals derivative contracts as it
believes it provides a more meaningful comparison of its
performance between periods.
(9)
The Company uses a non-GAAP effective tax
rate of 20%. This rate, which reflects the Company's estimated
long-term expectations for taxes to be paid on its adjusted
non-GAAP earnings, is consistent with how management evaluates the
Company's financial performance. The Company also believes that
providing a fixed rate facilitates comparisons of business
performance from period to period. This non-GAAP effective tax rate
is lower than the average of the statutory tax rates applicable to
the Company's jurisdictional mix of earnings, primarily because it
reflects tax benefits derived from U.S. tax attribute
carryforwards, which consist of operating losses and tax credits.
These economic benefits are expected to recur through 2028. Without
taking into account these benefits derived from its U.S. tax
attribute carryforwards and other similar adjustments, the
Company's non-GAAP effective tax rate would have been 23.9% which
would have resulted in a $0.07 reduction in Adjusted EPS for the
year ended December 31, 2024.
(10)
The Company defines "Adjusted common
shares outstanding" as the number of shares of its common stock
outstanding as of the balance sheet date for the quarter-to-date
period and an average of each quarter for the year-to-date period,
plus the shares issuable upon exercise or vesting of all
outstanding equity awards (assuming a performance achievement
target level for equity awards with targets considered probable).
The Company adjusts the number of its outstanding common shares for
this calculation as it believes it provides a better understanding
of its results of operations on a per share basis. See the table
below for further information.
Adjusted Common Shares Outstanding at December 31, 2024 and
2023
The following table shows the Company's adjusted common shares
outstanding at each period presented:
2024
2023
(amounts in millions)
Q4
FY Average
Q4
FY Average
Basic common shares outstanding
242.2
242.1
241.5
241.5
Number of shares issuable upon vesting of
granted Equity Awards
2.3
2.4
2.3
2.4
Adjusted common shares
outstanding
244.5
244.5
243.8
243.9
EBITDA and Adjusted EBITDA:
EBITDA represents earnings before interest, provision for income
taxes, depreciation and amortization. Adjusted EBITDA is defined as
EBITDA, excluding the impact of additional items included in GAAP
earnings which the Company believes are not representative or
indicative of its ongoing business or are considered to be
associated with its capital structure, as described in the
footnotes located under the "Adjusted Earnings Per Share (EPS)"
reconciliation table above. Adjusted EBITDA for each segment also
includes an allocation of corporate costs, such as compensation
expense and professional fees. Management believes adjusted EBITDA
and adjusted EBITDA margin provide investors with a more complete
understanding of the long-term profitability trends of the
Company's business and facilitate comparisons of its profitability
to prior and future periods.
The following table reconciles GAAP "Net income" to "Adjusted
EBITDA" for each of the periods presented:
2024
(dollars in millions)
Q1
Q2
Q3
Q4
FY
Net income
$
56.0
$
93.3
$
40.4
$
54.8
$
244.5
Add (subtract):
Income from discontinued operations, net
of tax
—
(1.6
)
—
—
(1.6
)
Income tax expense (benefit)
13.5
(17.5
)
36.8
12.0
44.8
Interest expense, net
13.9
14.3
14.2
13.9
56.3
Depreciation expense
10.1
10.3
10.0
9.6
40.0
Amortization expense
30.2
29.8
29.4
28.2
117.6
EBITDA
123.7
128.6
130.8
118.5
501.6
Adjustments to reconcile to Adjusted
EBITDA:
Restructuring expense (income)
(2
)
2.3
3.5
(0.1
)
2.1
7.8
Acquisition, divestiture and integration
expense
(3
)
1.7
3.3
6.3
10.4
21.7
Foreign exchange (gains) losses on
intercompany loans
(4
)
(6.8
)
(3.9
)
(13.5
)
0.3
(23.9
)
Debt refinancing costs
(5
)
—
—
0.4
0.4
0.8
Kuprion Acquisition research and
development charge
(7
)
3.9
—
—
—
3.9
Other, net
(8
)
2.2
3.6
18.8
(1.8
)
22.8
Adjusted EBITDA
$
127.0
$
135.1
$
142.7
$
129.9
$
534.7
NOTE: For the footnote descriptions,
please refer to the footnotes located under the "Adjusted Earnings
Per Share (EPS)" reconciliation table above.
2023
(dollars in millions)
Q1
Q2
Q3
Q4
FY
Net income (loss)
$
43.0
$
29.7
$
(31.7
)
$
77.2
$
118.2
Add (subtract):
(Income) loss from discontinued
operations, net of tax
—
(2.9
)
—
0.8
(2.1
)
Income tax expense (benefit)
16.9
21.2
15.3
(40.4
)
13.0
Interest expense, net
11.7
12.0
13.3
12.3
49.3
Depreciation expense
9.5
10.1
11.8
11.2
42.6
Amortization expense
29.6
31.0
32.7
30.8
124.1
EBITDA
110.7
101.1
41.4
91.9
345.1
Adjustments to reconcile to Adjusted
EBITDA:
Inventory step-up
(1
)
—
—
—
3.3
3.3
Restructuring expense
(2
)
2.3
1.9
2.1
5.1
11.4
Acquisition, divestiture and integration
expense
(3
)
3.9
4.4
5.0
3.5
16.8
Foreign exchange (gains) losses on
intercompany loans
(4
)
(5.6
)
(8.5
)
6.5
(2.1
)
(9.7
)
Debt refinancing costs
(5
)
—
—
—
7.8
7.8
Goodwill impairment
(6
)
—
—
80.0
—
80.0
Kuprion Acquisition research and
development charge
(7
)
—
15.7
—
—
15.7
Other, net
(8
)
1.0
1.5
(0.9
)
10.3
11.9
Adjusted EBITDA
$
112.3
$
116.1
$
134.1
$
119.8
$
482.3
Free Cash Flow:
Free cash flow is defined as net cash flows from operating
activities less net capital expenditures. Net capital expenditures
include capital expenditures less proceeds from the disposal of
property, plant and equipment. Free cash flow conversion from
adjusted EBITDA is a liquidity ratio defined as cash flows from
operations minus gross capital expenditures, divided by adjusted
EBITDA. Management believes that free cash flow, which measures the
Company’s ability to generate cash from its business operations, is
an important financial measure for evaluating the Company's
liquidity. Free cash flow and free cash flow conversion should be
considered as additional measures of liquidity to, rather than as
substitutes for, net cash provided by operating activities.
The following table reconciles "Cash flows from operating
activities" to "Free cash flow" for the periods presented:
Three Months Ended December
31,
Twelve Months Ended December
31,
(dollars in millions)
2024
2023
2024
2023
Cash flows from operating
activities
$
138.7
$
111.8
$
362.0
$
333.6
Capital expenditures
(22.3
)
(16.4
)
(68.4
)
(52.7
)
Proceeds from disposal of property, plant
and equipment
—
—
—
1.4
Free cash flow
$
116.4
$
95.4
$
293.6
$
282.3
View source
version on businesswire.com: https://www.businesswire.com/news/home/20250218115486/en/
Investor Relations Contact: Varun Gokarn Vice President,
Strategy and Finance Element Solutions Inc 1-203-952-0369
IR@elementsolutionsinc.com
Media Contact: Scott Bisang / Ed Hammond / Tali Epstein
Collected Strategies 1-212-379-2072 esi@collectedstrategies.com
Element Solutions (NYSE:ESI)
Historical Stock Chart
From Jan 2025 to Feb 2025
Element Solutions (NYSE:ESI)
Historical Stock Chart
From Feb 2024 to Feb 2025
