Element Solutions Inc Announces 2023 Fourth Quarter and Full Year Financial Results

February 21, 2024

2023 net sales of $2.33 billion, a decrease of 8% on a reported basis or 5% on an organic basis from 2022
2023 reported net income of $118 million, compared to $188 million in 2022, a decrease of 37% on a reported basis
2023 adjusted EBITDA of $482 million, compared to $527 million in 2022, a decrease of 8% on a reported basis and 6% on a constant currency basis
2023 cash flows from operating activities of $334 million; 2023 free cash flows of $282 million
Introduces 2024 full year financial guidance:
- Adjusted EBITDA in the range of $510 million and $530 million
- 2024 expected free cash flow in the range of $280 million to $300 million

MIAMI–(BUSINESS WIRE)–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, 2023.

Executive Commentary

President and Chief Executive Officer Benjamin Gliklich commented, “Element Solutions demonstrated the resilience and quality of its businesses in a challenging 2023 for the electronics industry. We delivered on our through-the-cycle commitment to outperform our end markets, preserve profitability and generate strong cash flow. Though sales and volumes declined, through proactive cost management and prudent pricing discipline, we saw no degradation in our margins. We seized the market dislocation to enhance our value proposition in the highest end of the electronics industry with two highly strategic acquisitions. We also grew free cash flow 12%. Overall, through organic and inorganic investment, we positioned the business to benefit disproportionately from a recovery in our core markets. Fourth quarter results demonstrate that recovery is underway. Our circuitry and semiconductor businesses returned to organic growth, and overall, we delivered adjusted EBITDA growth of 11%.”

Mr. Gliklich continued, “We have solid grounding for optimism in 2024. Inventory in our supply chains has largely cleared, and customer order activity year-to-date has improved sequentially. Smartphone units are expected to grow this year, and the semiconductor market is recovering. Additionally, our gross margins have continued to expand as input pressure has eased. We expect adjusted EBITDA for this year of between $510 million and $530 million. This represents constant currency growth of between 8% and 12%, which is even more significant given the headwinds of reversing certain variable cost actions taken in 2023. This would be a new record in adjusted EBITDA for ESI, on a constant currency basis, despite the semiconductor and smartphone markets being forecast to remain below their previous peaks. We have growing evidence that the drivers of our market growth and our ability to outperform should be durable beyond 2024.”

Fourth Quarter 2023 Highlights (compared with fourth quarter 2022):

Net sales on a reported basis for the fourth quarter of 2023 were $573 million, relatively flat over the fourth quarter of 2022. Organic net sales decreased 3%.
- Electronics: Net sales increased 4% to $352 million. Organic net sales decreased 1%.
- Industrial & Specialty: Net sales decreased 6% to $221 million. Organic net sales decreased 7%.
Fourth quarter of 2023 earnings per share (EPS) performance:
- GAAP diluted EPS was $0.32, as compared to $0.05 for the same period last year.
- Adjusted EPS was $0.32, as compared to $0.29 for the same period last year.
Reported net income for the fourth quarter of 2023 was $77 million, as compared to $13 million for the fourth quarter of 2022, an increase of 498%.
- Net income margin increased by 1,120 basis points to 13.5%.
Adjusted EBITDA for the fourth quarter of 2023 was $120 million, as compared to $108 million for the fourth quarter of 2022, an increase of 11%. On a constant currency basis, adjusted EBITDA increased 11%.
- Electronics: Adjusted EBITDA was $78 million, an increase of 15%. On a constant currency basis, adjusted EBITDA increased 16%.
- Industrial & Specialty: Adjusted EBITDA was $42 million, an increase of 4%. On a constant currency basis, adjusted EBITDA increased 3%.
- Adjusted EBITDA margin increased by 210 basis points to 20.9%. On a constant currency basis, adjusted EBITDA margin increased by 220 basis points.

Full Year 2023 Highlights (compared with full year 2022):

Net sales on a reported basis for the full year 2023 were $2.33 billion, a decrease of 8% over the prior full year period. Organic net sales decreased 5%.
- Electronics: Net sales decreased 12% to $1.41 billion. Organic net sales decreased 7%.
- Industrial & Specialty: Net sales decreased 2% to $919 million. Organic net sales decreased 2%.
Full year 2023 EPS performance:
- GAAP diluted EPS was $0.48, as compared to $0.75 for 2022.
- Adjusted EPS was $1.29, as compared to $1.41 for 2022.
Reported net income for the full year 2023 was $118 million, as compared to $188 million for 2022.
- Net income margin decreased by 230 basis points to 5.1%.
Adjusted EBITDA for the full year 2023 was $482 million, as compared to $527 million for 2022. On a constant currency basis, adjusted EBITDA decreased 6%.
- Electronics: Adjusted EBITDA was $318 million, a decrease of 12%. On a constant currency basis, adjusted EBITDA decreased 9%.
- Industrial & Specialty: Adjusted EBITDA was $165 million, a decrease of 1%. On a constant currency basis, adjusted EBITDA increased 1%.
- Adjusted EBITDA margin remained relatively flat at 20.7%. On a constant currency basis, adjusted EBITDA margin increased by 20 basis points.

2024 Guidance

For the full year 2024, the Company expects adjusted EBITDA to be in the range of $510 million to $530 million and free cash flow in the range of $280 million to $300 million. In addition, the Company expects first quarter 2024 adjusted EBITDA to be in the range of $120 million to $125 million.

Recent Developments

Syndication of $1.15 Billion Term Loans and Debt Reduction – In December 2023, the Company successfully completed the syndication of $1.15 billion of new term loans B-2, which mature in December 2030. The proceeds of this transaction, together with cash on hand, were used to prepay its then existing $1.11 billion term loans B-1 and $150 million term loans A, reducing the Company’s gross debt by approximately $105 million. As a result of the swap agreements associated with the new term loans B-2, the Company’s effective interest rate was approximately 3.3% at December 31, 2023 with approximately 80% of its capital structure fixed through 2028.

Cash Dividends – On February 13, 2024, 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 15, 2024 to stockholders of record at the close of business on March 1, 2024. For the full year 2023, approximately $77.4 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 2023 fourth quarter and full year financial results at 8:30 a.m. (Eastern Time) on Wednesday, February 21, 2024. Participants on the call will include President and Chief Executive Officer Benjamin Gliklich, Chief Financial Officer Carey J. Dorman, and Executive Chairman Sir Martin E. Franklin.

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 market position to benefit disproportionately from a recovery in core markets in 2024, including in the smartphone and semiconductor markets; growth in the Company’s circuitry and semiconductor businesses; gross margin improvements; first quarter 2024 guidance for adjusted EBITDA; full year 2024 guidance for adjusted EBITDA, constant currency adjusted EBITDA growth, and free cash flow; and growing evidence in drivers of market growth and ability to outperform in 2024. 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 between Russia and 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; the continuing economic impact of the coronavirus (COVID-19) and its variants on the global economy and supply chains; price volatility and cost environment; inflation and fluctuations in foreign exchange rates; 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)	2023			2022			2023			2022
Net sales	$	573.4		$	573.8		$	2,333.2		$	2,549.4
Cost of sales		353.1			355.8			1,414.7			1,596.7
Gross profit		220.3			218.0			918.5			952.7
Operating expenses:
Selling, technical, general and administrative		151.0			147.3			596.8			578.6
Research and development		13.8			10.6			68.1			48.8
Goodwill impairment		—			—			80.0			—
Total operating expenses		164.8			157.9			744.9			627.4
Operating profit		55.5			60.1			173.6			325.3
Other (expense) income:
Interest expense, net		(12.3	)		(11.6	)		(49.3	)		(51.2	)
Foreign exchange (loss) gain		(0.7	)		(7.9	)		7.9			(5.0	)
Other (expense) income, net		(4.9	)		(2.3	)		(3.1	)		2.9
Total other expense		(17.9	)		(21.8	)		(44.5	)		(53.3	)
Income before income taxes and non-controlling interests		37.6			38.3			129.1			272.0
Income tax benefit (expense)		40.4			(25.4	)		(13.0	)		(85.8	)
Net income from continuing operations		78.0			12.9			116.1			186.2
(Loss) income from discontinued operations, net of tax		(0.8	)		—			2.1			1.8
Net income		77.2			12.9			118.2			188.0
Net income attributable to non-controlling interests		(0.1	)		(0.2	)		(0.1	)		(0.8	)
Net income attributable to common stockholders	$	77.1		$	12.7		$	118.1		$	187.2

Earnings per share
Basic from continuing operations	$	0.32		$	0.05		$	0.48		$	0.75
Basic from discontinued operations		—			—			0.01			0.01
Basic attributable to common stockholders	$	0.32		$	0.05		$	0.49		$	0.76

Diluted from continuing operations	$	0.32		$	0.05		$	0.48		$	0.75
Diluted from discontinued operations		—			—			0.01			0.01
Diluted attributable to common stockholders	$	0.32		$	0.05		$	0.49		$	0.76

Weighted average common shares outstanding
Basic		241.5			241.2			241.4			245.1
Diluted		241.9			241.6			241.8			245.8

ELEMENT SOLUTIONS INC CONSOLIDATED BALANCE SHEETS (Unaudited)

	December 31,
(dollars in millions)	2023			2022
Assets
Cash & cash equivalents	$	289.3		$	265.6
Accounts receivable, net of allowance for doubtful accounts of $12.6 and $14.4 at December 31, 2023 and 2022, respectively		461.8			455.8
Inventories		298.9			290.7
Prepaid expenses		32.5			38.5
Other current assets		115.0			138.1
Total current assets		1,197.5			1,188.7
Property, plant and equipment, net		296.9			277.2
Goodwill		2,336.7			2,412.8
Intangible assets, net		879.3			805.5
Deferred income tax assets		120.5			51.5
Other assets		143.2			168.0
Total assets	$	4,974.1		$	4,903.7
Liabilities and stockholders’ equity
Accounts payable	$	140.6		$	132.2
Current installments of long-term debt		11.5			11.5
Accrued expenses and other current liabilities		217.3			200.7
Total current liabilities		369.4			344.4
Debt		1,921.0			1,883.8
Pension and post-retirement benefits		28.1			36.7
Deferred income tax liabilities		108.9			121.2
Other liabilities		202.4			168.5
Total liabilities		2,629.8			2,554.6
Stockholders’ equity
Common stock, 400.0 shares authorized (2023:266.2 shares issued; 2022: 265.1 shares issued)		2.7			2.7
Additional paid-in capital		4,196.9			4,185.9
Treasury stock (2023: 24.6 shares; 2022: 24.3 shares)		(341.9	)		(334.2	)
Accumulated deficit		(1,183.3	)		(1,223.8	)
Accumulated other comprehensive loss		(345.9	)		(298.1	)
Total stockholders’ equity		2,328.5			2,332.5
Non-controlling interests		15.8			16.6
Total equity		2,344.3			2,349.1
Total liabilities and stockholders’ equity	$	4,974.1		$	4,903.7

ELEMENT SOLUTIONS INC CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	2023															2022
(dollars in millions)	Q1			Q2			Q3			Q4			FY			FY
Cash flows from operating activities:
Net income (loss)	$	43.0		$	29.7		$	(31.7	)	$	77.2		$	118.2		$	188.0
Net income (loss) from discontinued operations, net of tax		—			2.9			—			(0.8	)		2.1			1.8
Net income (loss) from continuing operations		43.0			26.8			(31.7	)		78.0			116.1			186.2
Reconciliation of net income (loss) to net cash flows provided by operating activities:
Depreciation and amortization		39.1			41.1			44.5			42.0			166.7			161.3
Deferred income taxes		(0.4	)		2.9			(10.6	)		(61.8	)		(69.9	)		15.1
Foreign exchange (gain) loss		(7.3	)		(8.8	)		5.6			(0.1	)		(10.6	)		3.4
Incentive stock compensation		4.4			3.3			2.9			(1.2	)		9.4			17.7
Goodwill impairment		—			—			80.0			—			80.0			—
Other, net		2.2			21.3			2.3			16.4			42.2			11.4
Changes in assets and liabilities, net of acquisitions:
Accounts receivable		(2.6	)		2.2			(6.2	)		(0.2	)		(6.8	)		6.4
Inventories		(29.1	)		(10.5	)		2.4			27.7			(9.5	)		(31.2	)
Accounts payable		18.6			(8.1	)		2.8			(13.0	)		0.3			(0.1	)
Accrued expenses		(22.3	)		10.4			3.9			17.9			9.9			(33.0	)
Prepaid expenses and other current assets		2.7			(0.7	)		1.4			(1.5	)		1.9			(26.6	)
Other assets and liabilities		5.2			1.0			(9.9	)		7.6			3.9			(14.7	)
Net cash flows provided by operating activities		53.5			80.9			87.4			111.8			333.6			295.9
Cash flows from investing activities:
Capital expenditures		(9.1	)		(13.8	)		(13.4	)		(16.4	)		(52.7	)		(47.8	)
Proceeds from disposal of property, plant and equipment		0.5			—			0.9			—			1.4			4.8
Acquisitions, net of cash acquired		—			(188.3	)		(0.3	)		(26.2	)		(214.8	)		(22.6	)
Other, net		(3.0	)		—			0.3			18.6			15.9			(9.6	)
Net cash flows used in investing activities		(11.6	)		(202.1	)		(12.5	)		(24.0	)		(250.2	)		(75.2	)
Cash flows from financing activities:
Debt proceeds, net of discount		—			150.0			—			1,147.1			1,297.1			—
Repayments of borrowings		(2.9	)		(2.9	)		(2.8	)		(1,255.5	)		(1,264.1	)		(16.4	)
Repurchases of common stock		—			—			—			—			—			(151.0	)
Dividends		(19.4	)		(19.3	)		(19.4	)		(19.3	)		(77.4	)		(78.4	)
Payment of financing fees		—			(0.7	)		(0.3	)		(5.3	)		(6.3	)		(1.9	)
Other, net		(7.2	)		(0.3	)		(0.2	)		(0.3	)		(8.0	)		(27.9	)
Net cash flows (used in) provided by financing activities		(29.5	)		126.8			(22.7	)		(133.3	)		(58.7	)		(275.6	)
Net cash flows provided by (used in) operating activities of discontinued operations		—			2.9			—			(0.7	)		2.2			1.8
Effect of exchange rate changes on cash and cash equivalents		1.0			(5.1	)		(5.0	)		5.9			(3.2	)		(11.4	)
Net increase (decrease) in cash and cash equivalents		13.4			3.4			47.2			(40.3	)		23.7			(64.5	)
Cash and cash equivalents at beginning of period		265.6			279.0			282.4			329.6			265.6			330.1
Cash and cash equivalents at end of period	$	279.0		$	282.4		$	329.6		$	289.3		$	289.3		$	265.6
Supplemental disclosure information of continuing operations:
Cash paid for interest	$	21.3		$	4.5		$	22.9		$	7.4		$	56.1		$	46.9
Cash paid for income taxes	$	12.7		$	18.8		$	17.5		$	24.7		$	73.7		$	66.5

ELEMENT SOLUTIONS INC ADDITIONAL FINANCIAL INFORMATION (Unaudited)

I. SUMMARY RESULTS ⁽¹⁾
	Three Months Ended December 31,										Twelve Months Ended December 31,
(dollars in millions)	2023		2022		Reported		Constant Currency		Organic		2023		2022		Reported		Constant Currency		Organic
Net Sales
Electronics	$	352.3	$	339.4	4	%	4	%	(1	)%	$	1,414.7	$	1,611.2	(12	)%	(10	)%	(7	)%
Industrial & Specialty		221.1		234.4	(6	)%	(7	)%	(7	)%		918.5		938.2	(2	)%	(2	)%	(2	)%
Total	$	573.4	$	573.8	0	%	(1	)%	(3	)%	$	2,333.2	$	2,549.4	(8	)%	(7	)%	(5	)%

Net Income
Total	$	77.2	$	12.9	498	%					$	118.2	$	188.0	(37	)%

Adjusted EBITDA
Electronics	$	78.3	$	67.7	15	%	16	%			$	317.7	$	360.7	(12	)%	(9	)%
Industrial & Specialty		41.5		40.2	4	%	3	%				164.6		165.9	(1	)%	1	%
Total	$	119.8	$	107.9	11	%	11	%			$	482.3	$	526.6	(8	)%	(6	)%

	Three Months Ended December 31,					Constant Currency			Twelve Months Ended December 31,					Constant Currency
	2023		2022		Change	2023		Change	2023		2022		Change	2023		Change
Net Income Margin
Total	13.5	%	2.3	%	1,120bps				5.1	%	7.4	%	(230)bps

Adjusted EBITDA Margin
Electronics	22.2	%	20.0	%	220bps	22.3	%	230bps	22.5	%	22.4	%	10bps	22.7	%	30bps
Industrial & Specialty	18.8	%	17.1	%	170bps	19.0	%	190bps	17.9	%	17.7	%	20bps	18.2	%	50bps
Total	20.9	%	18.8	%	210bps	21.0	%	220bps	20.7	%	20.7	%	0bps	20.9	%	20bps

⁽¹⁾

Reflects the transfer in the first quarter of 2023 of the operational responsibility of the Company’s Films business from its Graphics Solutions business in its Industrial & Specialty segment to its Circuitry Solutions business in its Electronics segment and the transfer of certain product lines between its Assembly Solutions business and its Semiconductor Solutions business, both of which are part of its Electronics segment. Historical information has been reclassified to reflect these changes for all periods presented.

II. CAPITAL STRUCTURE
(dollars in millions)		Maturity	Interest Rate	December 31, 2023
Instrument
Term Loans	⁽¹⁾	12/18/2030	SOFR plus 2.00%	$	1,150.0
Total First Lien Debt					1,150.0
Senior Notes due 2028		9/1/2028	3.875%		800.0
Total Debt					1,950.0
Cash Balance					289.3
Net Debt				$	1,660.7
Adjusted Shares Outstanding	⁽²⁾				243.8
Market Capitalization	⁽³⁾			$	5,641.5
Total Capitalization				$	7,302.2

⁽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, 2023, 100% of the Company’s debt was fixed.
⁽²⁾	See “Adjusted Common Shares Outstanding at December 31, 2023 and 2022″ 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 $23.14 at December 29, 2023, which was the last business day of the year.

III. SELECTED FINANCIAL DATA
	Three Months Ended December 31,					Twelve Months Ended December 31,
(dollars in millions)	2023			2022		2023		2022
Interest expense	$	15.4		$	12.7	$	58.9	$	53.8
Interest paid		7.4			3.2		56.1		46.9
Income tax (benefit) expense		(40.4	)		25.4		13.0		85.8
Income taxes paid		24.7			20.9		73.7		66.5
Capital expenditures		16.4			15.0		52.7		47.8
Proceeds from disposal of property, plant and equipment		—			1.4		1.4		4.8

IV. SUPPLEMENTAL INFORMATION
	2023									2022
(dollars in millions)	Q1		Q2		Q3			Q4		Q1		Q2		Q3		Q4
Net Sales
Electronics	$	339.6	$	355.8	$	367.0		$	352.3	$	441.6	$	440.8	$	389.4	$	339.4
Industrial & Specialty		234.8		230.3		232.3			221.1		238.6		236.1		229.1		234.4
Total	$	574.4	$	586.1	$	599.3		$	573.4	$	680.2	$	676.9	$	618.5	$	573.8

Net Income
Total	$	43.0	$	29.7	$	(31.7	)	$	77.2	$	56.4	$	65.4	$	53.3	$	12.9

Adjusted EBITDA
Electronics	$	72.7	$	76.3	$	90.4		$	78.3	$	100.9	$	101.2	$	90.9	$	67.7
Industrial & Specialty		39.6		39.8		43.7			41.5		43.9		39.2		42.6		40.2
Total	$	112.3	$	116.1	$	134.1		$	119.8	$	144.8	$	140.4	$	133.5	$	107.9

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 2024 guidance for adjusted EBITDA, and full year 2024 guidance for adjusted EBITDA, constant currency adjusted EBITDA growth, and free cash flow.

Contacts

Investor Relations Contact:

Varun Gokarn

Senior Director, 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