- Net sales of $619 million, approximately flat from the third quarter last year on a reported basis; an increase of 5% on an organic basis
- GAAP diluted EPS of $0.22, compared to $0.15 in the same period last year; adjusted EPS of $0.36 as compared to $0.34 in the same period last year
- Reported net income of $53 million, as compared to $36 million in the same period last year
- Adjusted EBITDA of $134 million, an increase of 11% from the third quarter last year on a constant currency basis
- Third quarter 2022 cash from operating activities of $127 million and free cash flow of $116 million, an increase of 42% from the third quarter last year
According to the company’s website press release on October 26, 2022, Element Solutions Inc (NYSE:ESI) (“Element Solutions” or the “Company”), a global and diversified specialty chemicals company, announced its financial results for the three and nine months ended September 30, 2022.
Executive Commentary
President and Chief Executive Officer Benjamin Gliklich said, "Element Solutions delivered another strong quarter of growth, despite the accelerating macro headwinds in many of our end markets. Typical seasonal patterns did not materialize. In September, demand in Europe did not recover from August holidays. Electronics markets weakened, particularly in China, in contrast to their normal third quarter ramp. Nonetheless, we grew organically in both our operating segments as pricing actions, new business wins and a focus on high-growth electronics applications helped to offset soft volume. Our sales outpaced our markets. Inflation in raw materials and logistics together with mix were headwinds to adjusted EBITDA in the quarter as was the strengthening U.S. dollar; however cost management from synergies and actions taken in the quarter offset these impacts. Adjusted EBITDA grew year over year.”
Mr. Gliklich continued, “While we continue to execute well commercially and operationally, the combination of weak electronics markets, economic stress in Europe and record U.S. dollar strength will drive a greater than typical sequential decline in the fourth quarter. Accordingly, we are aligning our guidance with this backdrop. While we do not expect an imminent recovery in certain key end-markets, our conviction in their long-term health is unbroken. Customers remain highly engaged with our commercial and technical teams, and we have seen an acceleration in interest in several of our newer technology offerings, including products in semiconductor assembly, high-end circuit board and sustainable industrial surface treatment amongst others. The growth opportunities in markets and applications for power electronics, 5G technologies and more sustainable chemistry should be substantial over time. In the interim, we will continue to take actions designed to protect profits and generate outsized free cash flow to reinvest behind our businesses.”
Third Quarter 2022 Highlights (compared with third quarter 2021)
Net sales on a reported basis for the third quarter of 2022 were $619 million, approximately flat over the third quarter of 2021. Organic net sales, which exclude the impact of currency changes, certain pass-through metal prices and acquisitions, increased 5%.
- Electronics: Net sales decreased 6% to $388 million. Organic net sales increased 5%.
- Industrial & Specialty: Net sales increased 13% to $231 million. Organic net sales increased 6%.
Third quarter of 2022 earnings per share (EPS) performance:
- GAAP diluted EPS was $0.22 for the third quarter of 2022 as compared to $0.15 for the third quarter of 2021.
- Adjusted EPS was $0.36, as compared to $0.34 per share in prior year.
Reported net income was $53 million for the third quarter of 2022 as compared to $36 million for the third quarter of 2021.
Adjusted EBITDA for the third quarter of 2022 was $134 million, an increase of 2%. On a constant currency basis, adjusted EBITDA increased 11%.
- Electronics: Adjusted EBITDA was $91 million, a decrease of 5%. On a constant currency basis, adjusted EBITDA increased 2%.
- Industrial & Specialty: Adjusted EBITDA was $42 million, an increase of 22%. On a constant currency basis, adjusted EBITDA increased 38%.
- Adjusted EBITDA margin increased 40 basis points to 21.6% on a reported basis. On a constant currency basis, adjusted EBITDA margin increased 40 basis points.
Net debt to adjusted EBITDA ratio of 3.1x on a trailing twelve month basis.
Updated 2022 Guidance
For the full-year 2022, the Company updated its financial guidance for adjusted EBITDA in a range of $525 million to $530 million to reflect increased translational foreign exchange headwinds and lowered macro-economic growth assumptions. The Company's expectation is for Q4 2022 adjusted EBITDA to be approximately flat year-over-year on a constant currency basis. Full-year constant currency adjusted EBITDA growth implied by the Company's guidance is 8%. The Company also now expects full-year 2022 adjusted EPS of $1.40 to $1.42 and free cash flow of approximately $250 million.
Recent Developments
As part of its stock repurchase program, during the third quarter of 2022, the Company repurchased 3.0 million shares of its common stock. Through September 30, 2022, the Company has repurchased 6.0 million shares in 2022. The remaining authorization under the stock repurchase program was approximately $616 million at September 30, 2022.
Conference Call
Element Solutions will host a webcast/dial-in conference call to discuss its 2022 third quarter financial results at 8:30 a.m. (Eastern Time) on Thursday, October 27, 2022. Participants on the call will include President and Chief Executive Officer Benjamin 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 enter 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 and economic trends, including accelerating macro headwinds in many of the Company's end markets, weak electronic markets, economic stress in Europe and record U.S. dollar strength; key end-markets recovery and long-term health; customer engagement; interest in the Company's newer technology offerings; growth opportunities; actions designed to protect profits and generate outsized free cash flow; reinvestment in the Company's businesses; fourth quarter 2022 guidance for adjusted EBITDA on a constant currency basis; and full-year 2022 guidance for adjusted EBITDA, constant currency adjusted EBITDA growth, adjusted EPS and free cash flow. 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 duration and scope of the COVID-19 pandemic; the efficacy, availability and/or public acceptance of vaccines and treatments targeting COVID-19 and/or its variants; governments', businesses', and individuals' actions in response to the pandemic; the general impact of the pandemic and the invasion of Ukraine by Russia on economic activity, including financial market instability and disruption of global supply chains, and on the Company's customers, employees, suppliers, vendors and other stakeholders; inflation and fluctuations in foreign exchange rates; business and management strategies; outstanding debt and debt leverage ratio; shares repurchases; debt and/or equity issuance or retirement; 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.
