- 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
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. 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 2024 and full year 2024
guidance for adjusted EBITDA and constant currency adjusted EBITDA
growth 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 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,
2023:
Three Months Ended December
31, 2023
Reported Net Sales
Growth
Impact of Currency
Constant Currency
Change in Pass-Through Metals
Pricing
Acquisitions
Organic Net Sales
Growth
Electronics
4%
0%
4%
(4)%
(1)%
(1)%
Industrial & Specialty
(6)%
(1)%
(7)%
—%
0%
(7)%
Total
0%
(1)%
(1)%
(2)%
(1)%
(3)%
NOTE: Totals may not sum due to rounding.
Twelve Months Ended December
31, 2023
Reported Net Sales
Growth
Impact of Currency
Constant Currency
Change in Pass-Through Metals
Pricing
Acquisitions
Organic Net Sales
Growth
Electronics
(12)%
2%
(10)%
4%
(1)%
(7)%
Industrial & Specialty
(2)%
1%
(2)%
—%
0%
(2)%
Total
(8)%
1%
(7)%
2%
(1)%
(5)%
NOTE: Totals may not sum due to
rounding.
For the three months ended December 31, 2023, Electronics'
consolidated results were positively impacted by $12.0 million of
pass-through metals pricing and $3.2 million of acquisitions and
Industrial & Specialty's consolidated results were positively
impacted by $0.1 million of acquisitions.
For the twelve months ended December 31, 2023, Electronics'
consolidated results were negatively impacted by $61.5 million of
pass-through metals pricing and positively impacted by $9.8 million
of acquisitions and Industrial & Specialty's consolidated
results were positively impacted by $3.9 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 (10) 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)
2023
2022
2023
2022
Net income
$
77.2
$
12.9
$
118.2
$
188.0
Loss (income) from discontinued
operations, net of tax
0.8
—
(2.1
)
(1.8
)
Net income attributable to the
non-controlling interests
(0.1
)
(0.2
)
(0.1
)
(0.8
)
Reversal of amortization expense
(1)
30.8
29.2
124.1
119.7
Adjustment to reverse incremental
depreciation expense from acquisitions
(1)
0.3
0.5
1.5
2.2
Inventory step-up
(1)
3.3
—
3.3
0.5
Restructuring expense
(2)
5.1
3.4
11.4
9.5
Acquisition and integration expense
(3)
3.5
4.4
16.8
10.6
Foreign exchange (gain) loss on
intercompany loans
(4)
(2.1
)
4.6
(9.7
)
7.8
Debt refinancing costs
(5)
7.8
—
7.8
—
Goodwill impairment
(6)
—
—
80.0
—
Kuprion Acquisition research and
development charge
(7)
—
—
15.7
—
Adjustment of stock compensation
previously not probable
(8)
—
—
—
1.3
Other, net
(9)
10.3
6.3
11.9
12.4
Tax effect of pre-tax non-GAAP
adjustments
(10)
(11.8
)
(9.7
)
(52.6
)
(32.8
)
Adjustment to estimated effective tax
rate
(10)
(47.9
)
17.8
(12.8
)
31.4
Adjusted net income
$
77.2
$
69.2
$
313.4
$
348.0
Adjusted earnings per share
(11)
$
0.32
$
0.29
$
1.29
$
1.41
Adjusted common shares
outstanding
(11)
243.8
243.1
243.9
246.7
(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 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 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 adjusts for costs relating to
certain stretch target performance-based restricted stock units
granted to certain key executives as the achievement of the
performance target for these awards was not deemed probable prior
to the second quarter of 2021 and, therefore, compensation expense
for these awards did not begin to be recognized until the second
quarter of 2021 when achievement of the performance target became
probable. The Company adjusts these costs as it believes it
provides a more meaningful comparison of its performance between
periods.
(9)
The Company's adjustments consist
primarily of highly inflationary accounting losses for its
operations in Turkey of $9.9 million and $4.9 million, certain
professional consulting fees and unrealized gains/losses on metals
derivative contracts for the years ended December 31, 2023 and
2022, respectively. 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. The Company adjusts for certain professional consulting
fees because it believes they are not reflective of ongoing
operations.
(10)
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, 2023.
(11)
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, 2023 and
2022
The following table shows the Company's adjusted common shares
outstanding at each period presented:
2023
2022
(amounts in millions)
Q4
FY Average
Q4
FY Average
Basic common shares outstanding
241.5
241.5
240.8
244.3
Number of shares issuable upon vesting of
granted Equity Awards
2.3
2.4
2.3
2.4
Adjusted common shares
outstanding
243.8
243.9
243.1
246.7
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 (loss)" to
"Adjusted EBITDA" for each of the periods presented:
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 and integration expense
(3)
3.9
4.4
5.0
3.5
16.8
Foreign exchange (gain) loss 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
(9)
1.0
1.5
(0.9
)
10.3
11.9
Adjusted EBITDA
$
112.3
$
116.1
$
134.1
$
119.8
$
482.3
NOTE: For the footnote descriptions,
please refer to the footnotes located under the "Adjusted Earnings
Per Share (EPS)" reconciliation table above.
2022
(dollars in millions)
Q1
Q2
Q3
Q4
FY
Net income
$
56.4
$
65.4
$
53.3
$
12.9
$
188.0
Add (subtract):
Income from discontinued operations, net
of tax
—
(1.8
)
—
—
(1.8
)
Income tax expense
20.0
23.9
16.5
25.4
85.8
Interest expense, net
14.1
13.2
12.3
11.6
51.2
Depreciation expense
10.6
10.3
10.6
10.1
41.6
Amortization expense
31.0
30.3
29.2
29.2
119.7
EBITDA
132.1
141.3
121.9
89.2
484.5
Adjustments to reconcile to Adjusted
EBITDA:
Inventory step-up
(1)
0.5
—
—
—
0.5
Restructuring expense
(2)
1.9
1.3
2.9
3.4
9.5
Acquisition and integration expense
(3)
2.9
1.1
2.2
4.4
10.6
Foreign exchange loss (gain) on
intercompany loans
(4)
1.6
(0.9
)
2.5
4.6
7.8
Adjustment of stock compensation
previously not probable
(8)
1.3
—
—
—
1.3
Other, net
(9)
4.5
(2.4
)
4.0
6.3
12.4
Adjusted EBITDA
$
144.8
$
140.4
$
133.5
$
107.9
$
526.6
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. 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 should be
considered as an additional measure of liquidity to, rather than as
a substitute for, net cash provided by operating activities.
The following table reconciles "Cash flows from operating
activities" to "Free cash flows" for the periods presented and the
Company's free cash flow outlook for the full year 2024:
Three Months Ended December
31,
Twelve Months Ended December
31,
Outlook
(dollars in millions)
2023
2022
2023
2022
2024
Cash flows from operating
activities
$
111.8
$
100.5
$
333.6
$
295.9
~$330-$360
Capital expenditures
(16.4
)
(15.0
)
(52.7
)
(47.8
)
~(50)-(60)
Proceeds from disposal of property, plant
and equipment
—
1.4
1.4
4.8
~0
Free cash flow
$
95.4
$
86.9
$
282.3
$
252.9
~$280-$300
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240220705873/en/
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
Grafico Azioni Element Solutions (NYSE:ESI)
Storico
Da Dic 2024 a Gen 2025
Grafico Azioni Element Solutions (NYSE:ESI)
Storico
Da Gen 2024 a Gen 2025
