Element Solutions Q1 Earnings Call Highlights

Key Points

• Element Solutions delivered a “record quarter” driven by strong electronics demand and acquisitions (EFC, Micromax), reporting **10% organic net sales growth** and electronics up ~15% with double‑digit adjusted EBITDA gains.
• The company revised its adjusted EBITDA margin to exclude pass‑through metals, reporting a 170‑bp expansion to 27.8%, and raised full‑year adjusted EBITDA guidance to $665M–$685M while forecasting **high‑teens** adjusted EPS growth for 2026.
• Free cash flow was negative due to working capital and metals‑price effects, CapEx was increased to $75M–$100M, net leverage ended at 3.4x (3.1x pro forma) with a plan to cut ~0.5x by year‑end, and Chairman Martin Franklin will not stand for re‑election.

Element Solutions NYSE: ESI opened 2026 with what management described as a “record quarter,” driven by continued momentum in electronics end markets and contributions from acquisitions completed during the period. On the company’s first-quarter 2026 earnings call, CEO Ben Gliklich said the results reflected long-running efforts to move deeper into “the highest value, fastest-growing subsegments” of the company’s markets, alongside improving demand tied to the ongoing AI infrastructure build-out.

Gliklich said the company delivered “double-digit organic sales growth for the second quarter in a row and strong margin expansion,” while also increasing investment in personnel, technology, and manufacturing to support customer growth. He added that recently closed acquisitions EFC and Micromax “are off to a solid start” inside the company.

First-quarter results and updated margin presentation

CFO Carey Dorman reported that organic net sales grew 10% in the first quarter and constant-currency adjusted EBITDA increased 21% year over year. The quarter included “a full quarter of EFC and two months of Micromax ownership,” and Dorman noted that if Micromax had been owned for the full quarter, adjusted EBITDA would have been $170 million.

Dorman also pointed to a timing impact related to metals hedges in the company’s assembly solutions business. He said metals hedge timing had negatively impacted fourth-quarter 2025 performance “by several million dollars,” and in the first quarter the company “largely recovered that amount through sales of finished goods at higher metals values.” Excluding that benefit as well as acquisitions and prior divestitures, Dorman said underlying year-over-year adjusted EBITDA growth “would have been in the mid-teens.”

The company also updated its definition of adjusted EBITDA margin starting this quarter to remove the value of pass-through metals sold in the period. Dorman said the change is intended to improve comparability by “eliminat[ing] the noise from metal prices.” Pass-through metals revenue totaled $256 million in the first quarter of 2026, compared with $101 million in the fourth quarter of 2025. On the revised basis, adjusted EBITDA margins increased 170 basis points year over year to 27.8%, driven primarily by favorable mix and partially offset by higher operating expense to support growth initiatives.

Adjusted EPS rose 21% in the quarter, which Dorman attributed largely to improved demand in electronics, offset by higher interest costs associated with acquisition activity.

Electronics demand strengthened across verticals

Management emphasized broad-based strength in the electronics segment, with 15% organic net sales growth. Dorman called it the strongest growth the segment has seen “since early 2021 during the COVID recovery.” Gliklich tied the strength to increasing technical requirements in data center hardware and other high-performance electronics, saying the company’s solutions support areas including “thermal management, power density, and advanced packaging.”

Dorman broke down performance across the electronics verticals:

• Assembly solutions grew 12% organically, supported by sustained increases in sales of high-reliability alloys and engineered solder preforms to data center suppliers. Dorman also said pastes used for high-end smartphones continued to grow.
• Circuitry solutions improved 17% organically, driven by the high layer-count server board market. Dorman said the company generated “record quarterly sales” tied to high-performance computing and AI server builds, with added support from strong demand for high-end smartphone components.
• Semiconductor solutions grew 18% organically, due in part to improved order patterns for power electronics products at legacy customers and growing momentum in thermal interface products for high power consumption applications such as AI GPUs and CPUs. Dorman added that the company saw “strong and growing demand” for advanced packaging solutions, and noted that higher precious metal prices magnified reported revenue for products that use those inputs.

Micromax, which was owned for two months of the quarter, contributed roughly $65 million to reported sales, but was not included in organic growth calculations. Dorman said metal price fluctuations can create volatility in headline sales for that business, noting that “roughly two-thirds of reported revenue is related to metals.”

In response to questions about what drove the 15% organic electronics growth, management said it was primarily volume-driven. Gliklich told analysts that, excluding metal price effects, “most of our growth in the first quarter has been volume driven,” with some mix benefit in semiconductor solutions and “to a small extent” in circuitry. He said the company expects “a continued robust volume environment” through 2026, while also taking pricing actions in parts of the business to offset inflation.

Specialties results mixed as offshore offset industrial softness

In the Specialties segment, Dorman reported 1% organic growth, led by offshore energy. Industrial solutions were “essentially flat” as demand for surface treatment chemistry was impacted by softer automotive production in the Americas, “particularly with customers operating in Mexico.” He said European automotive customers posted relatively stronger growth against an easier comparison, but added the company remains cautious about the European industrial demand outlook.

Offshore energy solutions grew 15% organically on strong volume growth and pricing, though Dorman noted the comparison to the prior-year period was favorable because the year-ago quarter was “unusually soft due to a few specific customer delays.” Gliklich later said the offshore business should have “another year of…high single-digit organic top line,” citing indicators such as increasing drilling activity, higher vessel drilling rates, and longer contracts.

EFC Gases & Advanced Materials contributed $19 million in revenue in the quarter. Dorman said it was “a record first quarter” for EFC—typically its slowest seasonal period—driven by strong demand from electrical infrastructure customers. He also said EFC is growing wallet share with existing semiconductor and space customers while winning new qualifications.

Cash flow, investment plans, and raised guidance

Dorman said free cash flow was negative in the quarter due to working capital investment associated with growth, which was compounded by higher metals prices. He reiterated that the first quarter is typically the company’s weakest for cash flow and said the company expects stronger cash flow generation in subsequent quarters, “assuming metals prices stabilize.”

Capital spending was $25 million in the quarter, trending above prior guidance, as the company increased growth investments and continued footprint consolidation and efficiency projects. Dorman raised expected full-year CapEx to $75 million to $100 million, still “less than 3% of sales.” Gliklich said investments include accelerated spending on Kuprion commercialization and adding capacity in select engineered product lines where bottlenecks exist, while also continuing industrial site consolidation efforts including “a large site consolidation project” in Europe.

Net leverage ended the quarter at 3.4x, and Dorman said it would have been 3.1x assuming Micromax and EFC were owned for the full trailing 12 months. He said the company anticipates reducing leverage by approximately half a turn by year-end, assuming no further capital deployment.

While noting that geopolitical events and inflationary pressures have created a more complex macro environment and that metal prices could add volatility, Gliklich said first-quarter acceleration—particularly in high-end electronics—supports confidence in the outlook. The company raised full-year adjusted EBITDA guidance to $665 million to $685 million. Management said the updated outlook reflects continued strength in electronics, softer demand in industrial solutions, and “a less favorable FX tailwind” than previously expected.

For the second quarter, the company forecast adjusted EBITDA of $155 million to $170 million, with demand conditions expected to be “sequentially similar” to the first quarter, while factoring in risk from raw material and logistics inflation that may not be recaptured immediately despite sourcing and pricing actions. Gliklich said the company now expects 2026 adjusted EPS growth in the “high-teens” for the full year.

Management also announced it will host a virtual investor day on May 18 to provide a deeper look into the portfolio and emerging technologies. Gliklich said Chairman Martin Franklin will not stand for re-election at the upcoming annual meeting, and that board member Ian Ashken has been nominated as successor.

About Element Solutions NYSE: ESI

Element Solutions Inc is a global specialty chemicals company that develops and supplies highly engineered chemistries to performance-driven end markets. The company's solutions serve customers across the electronics, energy, transportation, consumer and industrial sectors, with a particular emphasis on electronics chemicals, metal plating, and industrial coatings additives.

In the electronics market, Element Solutions provides a range of plating and surface-treatment chemistries used in the manufacture of printed circuit boards, semiconductor devices, and advanced display technologies.

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