Element Solutions (ESI) Q3 2024 earnings summary

Executive summary

• Net sales for Q3 2024 increased 8% year-over-year to $645 million, with organic growth of 6% and net income of $40.4 million, reversing a net loss in Q3 2023.

• Adjusted EBITDA rose 6% to $143 million, with gross margin improving by 110 basis points to 41.5%.

• Electronics segment led growth, offsetting softness in Industrial & Specialty, which faced macroeconomic headwinds.

• Announced sale of MacDermid Graphics Solutions for $325 million, expected to close late 2024 or early 2025, enhancing focus and growth.

• Portfolio repositioning and refinancing actions are expected to be accretive to growth, margin, and return on capital.

Financial highlights

• Q3 2024 net sales were $645 million (+8% reported, +6% organic); adjusted EBITDA was $143 million (+6% reported, +8% constant currency); free cash flow was $86 million.

• Electronics segment net sales grew 14% to $419 million, with 9% organic growth; Semiconductor sub-segment up 26%.

• Industrial & Specialty segment net sales declined 3% to $226 million, with flat organic growth; Energy sub-segment up 10%.

• Adjusted EBITDA margin was 22.1% (down 30 bps year-over-year); ex-pass-through metals, margin was 27%.

• GAAP diluted EPS was $0.17, compared to a loss of $0.13 in Q3 2023; adjusted EPS rose to $0.39.

Outlook and guidance

• Full-year 2024 adjusted EBITDA guidance narrowed to $535–$540 million, with free cash flow expected at $280–$300 million.

• Adjusted EPS guidance for FY 2024 is $1.42–$1.44.

• Management anticipates record earnings for 2024 and strong positioning for 2025, with broader-based electronics growth expected.

• FX headwind for FY24 expected to exceed $10 million; modest FX tailwind anticipated for 2025.

• Full-year capital expenditures expected to be approximately $60 million.