Okay, good morning, everyone, and welcome to the 21st Best Ideas Conference here at C.L. King. I'm David Silver, Senior Managing Director, Director of Research, and analyst covering chemicals, materials, and electronics. We're very happy to have Element Solutions participate, and we even happier we have the CEO, Mr. Ben Gliklich, here for a fireside chat. I'm just going to ask Ben to maybe give a brief introduction to Element Solutions, maybe touch on the key operating segments, the operating segments, and the key end markets. So with that, I'm gonna turn the floor over to Ben. Thanks, David, and good morning, everybody. Thank you for joining. Happy to spend some time with you here this morning, and grateful for the opportunity. Element Solutions, for those who are new to us, is a global chemical technology company. We provide critical enabling solutions to high-performance applications across electronics and industrials end markets. The business has about 5,500 people all over the world, $2.5 billion of revenue. That's split 60% between our electronic segment, about 40% in our industrial segment. Geographically, 40% in Asia, 30% in Europe, 30% in the Americas. The electronic segment provides process chemistry that converts laminate into printed circuit boards. So basically, the process of manufacturing a printed circuit board is a series of chemical processes, and we're a market leader in that market. We provide materials that are used to put components onto printed circuit boards. At its most basic, think about a small amount of metal. It's gotten far more high tech as sizes have condensed and capabilities, reliability requirements have become more challenging. We're a market leader in that assembly materials space. And then we do the same things that we do for circuit boards for semiconductors. So that's copper deposition onto silicon, and then back end of line advanced packaging and solutions for basically putting die into chips and chips together. That's our electronic segment. Again, roughly 60% of the business. The remaining 40% in our industrial segment is primarily surface treatment technologies, so that's making surfaces more durable or decorating them. Think about functional surface treatment, corrosion resistance, hardening and decorative surface treatment, so plating on plastic, primarily in the automotive industry, but also in construction and industrial industries. The two hallmarks of the business are strong and stable margins and strong and stable cash flows. It's an asset-light business, CapEx less than 2% of sales per year, and a variable cost model. So when the business isn't growing, cost comes out, and we're able to preserve profits. It is a growth business, though. We're fortunate to operate at the intersection of very compelling secular trends in increasing computing power, the proliferation of computing power to the edge of networks, next-generation wireless technology, data storage applications, vehicle electrification, sustainability, and AI are all large drivers for our business, and we're very well positioned to benefit disproportionately as those markets expand. So with that, introduction, maybe I'll open for questions. Thanks, Ben. And, I'm gonna start maybe with a question, following up on your comments during the second quarter, earnings conference call. But, you know, your company reported weaker, somewhat below trend line, first half results. We think that reflects a likely trough in electronics demand, as well as unusual weakness in, Chinese economic activity. And in our opinion, you know, and yours, I guess, the, your company remains on track for a stronger second half. That said, when discussing your second half financial guidance, you did cite factors including, you know, semiconductor production levels that remain below long-term, averages and, you know, partly offset by sequential strength in auto or electric vehicle production, when updating your overall outlook. Could you just kind of update us on that and tell us if there's any significant shift, either in magnitude or direction, in how you're viewing the second half outlook? Yeah, so our end markets have seen, you know, some big volatility over the past several years, driven by COVID, supply chain issues, and some of the second derivative impacts associated with COVID and lockdowns. The second half of 2022 was quite soft in the electronics end market, really driven by a bullwhip effect associated with our supply chains, and we expected the first half of 2023 to be a continuation of those trends. Typically, in the electronics market, what we see in the second half of a calendar year is a predictor for the first half of the following calendar year, and that certainly played out. When you look at smartphone units, for example, they were down substantially starting in the back half of last year, and that continued into the first half. You know, these are significant dislocations from long-term averages. Smartphone units were down below 2013 levels. We saw, you know, +10% declines in smartphone sales in the second half of 2022, and that persisted into the first half of 2023. It was a challenging market environment in the first half, as expected. Entering the year, we expected the second half of 2023 to begin a rebound, and that's what we've seen thus far. On our second quarter call, we talked about, you know, a 10% month-over-month growth in our electronics portfolio, June to July. And that underpinned our belief that we were starting to see a recovery and that we'd hit the trough, and that dynamic has absolutely continued. We feel as though we're in the midst of a rebound. The depth of that trough is deeper than folks would have expected, than anyone in the industry expected entering the year. And on a year-over-year basis, demand is still or the market is still down, right? So that comment, David, that you're reflecting is correct. We're seeing things get better sequentially, but year over year, we're still in negative comps. All of that having been said, we have a lot of conviction that this recovery is gonna continue, right? We're seeing it in the numbers, we're seeing it through our P&L, we're hearing it in the customer supply chains. Maybe a bit delayed, maybe the slope of that recovery isn't as steep as precedent might have suggested or folks might have expected, but we're certainly in the midst of it, and it has legs. Okay, great. I'm gonna ask you now about, I guess, technological convergence, that you see affecting your markets across semiconductors, and printed circuit boards. But I'm wondering if, you know, you could comment on the theoretical narrowing of the gap between the front end of line and the back end of the line in wafer production and the printed circuit board, on, you know, in the other hand, and maybe using the rise of advanced packaging, you know, as an example of the intersection, of those areas and the increasing, I don't know, narrowing, I guess, of the technological gap. But, you know, I guess the, you know, chip makers are looking further downstream and integrating their designs and production to kind of mesh with what needs to be done for a couple steps down the production chain in order to hit their production quality and performance targets. And when I look at the industry, at least amongst publicly traded companies, I would say Element Solutions, to me, looks like it's almost uniquely positioned to kind of benefit or participate in that increasing, I guess, convergence- Mm-hmm ... from the chip maker down to the finished component on a printed circuit board. Could you maybe comment on how you view that development, and maybe what parts of your overall business do you think will be the primary beneficiary? Yeah, I appreciate that observation, David, and we agree. You know, Element Solutions is uniquely positioned and uniquely capable to speak to the breadth of touch points where there's breakthrough innovation in next-generation electronics technology. Let me provide a little bit of background here and then explain the impact on our business. You know, historically, breakthroughs or increases in computing power came from shrinking of transistor sizes on silicon, right? So talk about, you know, 28 nm down to where we are today, where we're pushing 3 nm. But the capital requirement and the time associated with getting to smaller node sizes has increased dramatically. And so, semiconductor fabricators and the industry broadly has had to turn to alternative means to increase computing power. It's not just on the silicon. The new emerging technology is to make multiple pieces of silicon and put them on a hybrid, very advanced printed circuit board. So it's something in between a semiconductor and a circuit board, and it's called an IC substrate, and that is effectively manufactured using printed circuit board technology. It's considered a printed circuit board. So where the breakthroughs in investment used to be at the front end of line in the semiconductor fabricators, it's trickled downstream into the circuit board market. We are a market leader in circuit board fabrication, printed circuit board fabrication, and so we are providing technology to enable these breakthroughs to help the circuit board industry climb the technology curve to meet the standards and capabilities that not just semiconductor companies, but electronics OEMs are increasingly required to deliver. So semiconductors. Circuit boards are becoming semiconductors at some level, to make it very simple. What Element does, right, within its diverse businesses, is put the circuitry, deposit the copper onto silicon and deposit the copper onto printed circuit boards. So we can speak to the requirements at the semiconductor level and at the circuit board level. We also put chips onto boards, and we put die, which is basically sliced small pieces of silicon, into packages. So we've got a material set that is compatible across, up and down, from semiconductor down to printed circuit board capabilities. As the OSATs, right, the emerging growth semiconductor players that are enabling this market, think about your AMDs and your Amkors and your NVIDIAs and your STMicroelectronics, are navigating these new technologies. We have a one-stop solution set, where we can speak to materials compatibility and the requirements and technologies associated with enabling these breakthroughs. And so, you know, Element is incredibly well-positioned from a technical perspective, from a relationship perspective, to solve these emerging problems. And, we are—we're seeing that in our pipelines, we're seeing that in our commercial engagements. It's very, very exciting, and it's early innings for this. It really is. There's a long way to run, and we are very excited about our position to support our customers and supply chains navigating these technical breakthroughs. Well, I know a good line when I steal it, and I think I'm gonna be using circuit boards are becoming semiconductors, going forward. So there you go. Anyway, I'd like to ask you kind of a overly complex question about maybe the shifting in production and manufacturing and investment in electronics, you know, as a result of maybe trade restrictions on China and just an overall trend towards onshoring. But, you know, reshoring and onshoring, particularly in electronics, you know, has become a much bigger topic in recent months. I mean, how is ESI impacted by these trends? And, you know, what are the opportunities and risks you see as manufacturing capability kind of relocates, maybe away from China and certainly towards North America and some other regions? And maybe if you could just dovetail that with your thoughts on the wave of new large-scale, you know, wafer fab capacity that's under development, primarily, you know, in the United States. But, you know, does that require you to shift your supply chains or shift your footprint, you know, significantly? How do you think you're positioned, I guess, for that secular change and where the assets are and where production takes place? So Element is a global company that operates very locally, meaning we've got a local presence where our customers are. We've got manufacturing close to customers, we've got technical service close to customer, we've got applications development centers close to customers, and a commercial force close to customers. Wherever our customers are going, we will be there before they can. Because, you know, for us to add capacity or capability is mostly people, and our manufacturing is asset light, whereas our customers are operating, you know, manufacturing capital-intensive plants, whether that's a circuit board plant or a device assembly plant or a fab. So we're not worried about onshoring or a geographic shift in production in our supply chains. If anything, it plays to our strength because, you know, we'll be there with local capability very quickly. There are certain markets in which there's a higher level of competition than others, China being one of them. So insofar as capacity moves out of China, that probably helps. The increase in capacity also helps. You know, we are a unit-driven company. We should grow, you know, units plus content per unit is the way to think about our growth algorithm. So, you know, as more cars are made, you know, we're gonna grow more than the unit growth because there's more electronic content per vehicle. Or as more smartphones are made, we'll grow more than the unit growth because there's more value in, you know, a next generation smartphone. We don't go down the tech curve. So, you know, that is a general outline for how we think about nearshoring. It's a tailwind for us, and a share opportunity for us. You know, we are working closely with our supply chains to support them as they shift geographies. That isn't just a moving out of China dynamic, by the way. For instance, in our industrial business, we're seeing customers move out of Western Europe, sometimes to Mexico, and we're supporting those transitions as well. You know, it plays to our strength as a globally capable, high-quality supplier with a strong balance sheet and the ability to invest. And that's something we've been harnessing over the past several years as supply chains have been disrupted. Okay, thanks. You know, the next, next question would be about your strategy to service the automotive industry, including, you know, the legacy ICE model vehicles, as well as the emerging EVs. So your solution portfolio for automotive and electric vehicles, you know, spans numerous attractive niches, including circuit board chemistry, assembly materials, thermal interface materials, flexible, formable printed electronics chemistries and films, as well as decorative and functional coatings, among others. Can you discuss the various forces driving, you know, the above-market organic growth across your automotive-focused portfolio? And how do you see your solutions portfolio evolving over the next several years as EVs come to represent a much greater share of the overall automotive market? Also, maybe just a separate comment about growth in your Argomax sintered silver technology, in particular. So if you go back, you know, over a decade, our exposure to automotive was, you know, functional and decorative coatings, right? So, surface treatment that helped brake calipers resist the temperature and, you know, moisture conditions in which they operate. And, you know, the grill of a high-end car that looks like it's made of chrome, but is really plastic with a thin layer of chrome or nickel on it, that was our technology enabling, you know, those capabilities. As electronics were added to cars, you know, we had more content in a car, right? Whether that's, you know, automatic cruise control or lane departure warnings, right? Those are very, you know, those are not quite life safety systems, but drivers have come to rely on them, and so the technical requirements associated with that are high, and that falls under our electronics portfolio, but it is part of our automotive exposure. We've all seen how over the past several years, cars, even internal combustion cars, are increasingly automated. Their features, their electronic features, from sensors to infotainment to dash displays, are increasingly electronic, and that all accrues to the value opportunity in a car for us. And so, you know, as I was saying before, the business grows units plus content, and content is growing a couple of points a year. Because once they've got automatic, you know, whatever it is, cruise control, the OEMs don't remove that. What's even more exciting for us in the automotive supply chain is electric vehicle electrification, where, you know, there's even more mission-critical electronics. And we've got really differentiated, powerful technology in power electronics in particular. These are materials that are used in the power semiconductor that regulates the flow of energy from the battery to the motor. And Argomax, which David mentioned, is the highlight product there for power semis. And it's a sintered silver material that has better reliability, meaning it can withstand more cycles of high voltage, and also better thermal attributes, meaning it generates less heat. And that heat that is generated speaks to range on the vehicle, right? So power coming from the battery that doesn't make it to the motor because it's, it's, it's released as heat, is power lost from the system. And so Argomax is really differentiated. It is enabling high-end performance, or the performance of high-end electric vehicles. And so, you know, we say our portfolio across our business, we get about 1.5x-2 x the content value on an electric vehicle versus an ICE vehicle. Therefore, you know, we're gonna grow significantly above units as electric vehicles penetrate the automotive fleet. But it's not just in electronics. This has actually been a revelation for us. You know, we've done a lot of work understanding and considering what we might lose in this transition as there are less moving pieces, mechanical pieces in the, in the engine, that require corrosion resistance, for example. Are we gonna lose some of our industrial business in the conversion from combustion engines to electric vehicles? And what we found is that electric vehicles actually have more fasteners than combustion engine cars, and those fasteners all require corrosion resistance plating and functional surface treatment. So we actually think the pie is growing for both sides of our business in this conversion from ICE to electric vehicles, and again, it represents a very big opportunity for us, you know, over the next decade. Can't write that enough. Thanks. I'd like to ask you maybe about, you know, industry M&A involving maybe some of your competitors and, you know, how you think that has changed the competitive landscape or not. But over the past couple of years, you know, the electronic materials and electroplating, electronic component space has been impacted by a few transformational deals. In particular, I'm referring to Entegris acquiring CMC Materials and MKS Instruments acquiring Atotech. And in particular, your electroplating peer, Atotech, you know, has been acquired by MKS. And MKS indicated that by adding Atotech, they have expanded their solutions toolkit for their customers. And publicly, they've stated they've begun to see some benefits from a more integrated approach to... and higher customer engagement. So from your perspective, Ben, has that acquisition of Atotech with MKS Instruments, has that, you know, led to changes in the competitive landscape? Does your company plan to refine their competitive strategies in coming years to compete with... maybe some larger and more integrated, you know, competition? Yeah. So there's been consolidation around us. There hasn't been any overlapping consolidation, which is to say there hasn't been, you know, significant market share consolidation. It's been companies that have complementary capabilities coming together in the electronics material space. That's the first observation. The second observation I'd make is, you know, Atotech and MKS came together, and Atotech is a very fine company with great market position, great technology, and as is MKS. Atotech has always had an equipment offering. Element Solutions and its predecessor companies historically had some equipment offerings. We got out of that business. And MKS is a, it was fundamentally an equipment business. So there's a lot of overlap, you know, in the equipment side between MKS and Atotech. MKS primarily provided laser drilling equipment in the circuit board industry, which is not something that Atotech did. Atotech is plating equipment. We believe we can compete with Atotech on equal footing despite not manufacturing our own equipment, because we can work with third parties and present a soup-to-nuts solution, including our chemistry and third-party equipment. And we don't have to wear the capital intensity and the cyclicality associated with those equipment businesses. And we don't believe that not having that equipment has impaired our ability to grow, and our track record shows that, you know, we have been able to grow very nicely in these end markets and outperform our markets. So, you know, not having equipment hasn't hurt our business, and Atotech and MKS coming together, it just furthers their equipment strategy, which, you know, we would say doesn't undermine our capabilities. And MKS has spoken about success from bringing these businesses together. But, you know, what I've observed from the outside in is that the success has been leveraging the Atotech chemical relationships to sell through more equipment, which doesn't come at our expense at all. And, you know, further, frankly, supports our point that not having equipment isn't damaging chemical sales. Maybe if we wanted to have an equipment business, we would have more success with that business because of our chemical sales, but we don't want to have that business. So the competitive landscape, I would say, is stable and healthy. The consolidation around us is a reflection of the conviction that industry participants have in the attractiveness of our end markets, and you know, we have that conviction as well. So we feel like we've got a really high quality and increasingly scarce asset at the moment. Very, very good. I'd like to switch from maybe industry M&A to your company's specific M&A. And, you know, you've been a steady acquirer, you know, over many years, but I'd like to focus maybe on just the most recent past, where you picked up some front end of line assets, which is typically they're harder to locate and complete on reasonable terms. But over the past few months, you know, your company has strengthened its long-term growth potential and exposure to front end of line activities. And that includes your $200 million deal to buy in a long-term distribution agreement for your ViaForm deposition products from Entegris. And then you also purchased Kuprion, a developer of next generation nano -copper technology for semiconductor, circuit board, and electronic assemblies markets. Can you just discuss the strategic rationale and the expected financial benefits from these two transactions? Yeah. Two very different transactions, but very, very exciting, opportunities in front of us. You know, the ViaForm transaction has its roots 20 years ago when one of our predecessor companies sold the distribution rights to ViaForm to a predecessor company to Entegris. It was an evergreen contract. We continued to do the R&D for the product and manufacture the product. And Entegris, through an acquisition, owned the front end, the distribution, right? So the sales and last mile logistics. And, you know, it was just a suboptimal setup for both of us, and for the customers, right? Entegris was making a nice margin, but a below average margin for them, and we didn't own the customer interface, and you know... The customer didn't have a straight line of sight through, you know, their commercial person to supply chain. So for many years, there was a back and forth about how do we rectify that, and we were able, you know, Element and Entegris, to find a reasonable way to integrate, if you will. You know, we paid a healthy multiple on what we believe were trough earnings for the business, and now we own that product line, soup to nuts, and we're thrilled about that. We're very excited about the potential recovery in the semiconductor market, which we're seeing, frankly, and our ability to drive that business harder now that we own it all. Whether that's, you know, gaining share of new fabs that are coming online or gaining share from some existing fabs competitors. And it's a high-margin business, it's a fast growth business, it's a super high quality business, Front End of Line, you know, highly qualified products. And so, you know, it accelerates our growth trajectory, improves our margin, our margin performance, and builds a bigger and more important relationship with, you know, the largest semiconductor fabricators in the world, through you know, going direct. And that has already translated into technology roadmap exchanges and, you know, more discovery from them of our capabilities, again, coming back to this great convergence, and the value and technology we can provide to them. So that was a great one for us, and we're very excited about it. ViaForm is a different type of transaction. This was a technology acquisition. It was a really great materials technology that was spun out of Lockheed Martin, with excellent scientists and technicians in the business. And, you know, copper is the material of the future. It and what this group has developed was really unique. And it solves a lot of issues as, you know, holes in circuit boards get smaller and denser, and thermal management becomes a bigger issue. And, you know, this is a material solution that, you know, our customers are clamoring to get their hands on. And, you know, we bring quality and credibility to a start-up, and durability and applications expertise. So, you know, we've got pilot line to try all this material and and prove out its capability to customers. And the engagement thus far has exceeded our already high expectations. We have, you know, more than 30 applications, projects ongoing with the biggest circuit board and semiconductor companies in the world. You know, we expect the ViaForm transaction to, you know, we bought it off of roughly, let's call it $15 million of EBITDA. We think that can be north of $20 million in the next couple of years. And the Kuprion transaction, we structured it with a small upfront payment and then milestone payments based on revenue, and we end up paying... You know, our payment is capped when Kuprion gets to about $115 million of revenue, which would be about 4x EBITDA, and which would translate to paying about $275 million, which would be about 4x EBITDA. So you can do that math. You know, this is a $60+ million EBITDA contribution over the next five years if it hits its paces, and from our perspective, it's ahead of schedule. Just to clarify, is that cumulative EBITDA? That's what I want to know. No, that's annual. Annual. Oh, my gosh. I'm going to have to rework the numbers. I'm going to ask you a carry question, but just to finish up, and you know, we could just, you know, two minutes or less, I guess, just to keep on track. But I'll skip the preamble. But you know, you generate a lot of free cash flow, highly opportunistic with M&A, opportunistic with your buybacks, et cetera. You've initiated a dividend and increased it. Just looking ahead, any change in your priorities regarding the deployment of your free cash flow? And just to be more specific, we're in a higher interest rate environment. Of course, a certain fraction of your debt is variable rate. You know, I'm not privy to your banking group's discussions with your banking group, but has anything changed maybe, you know, in how you might execute your capital deployment strategy? In particular, maybe has debt pay down taken on a little bit greater priority or greater importance in the current environment? You know, we set a leverage ceiling of 3.5x when we launched the company, where we stretched a tick above that at trough earnings, given these really attractive capital deployment opportunities we had in the second quarter. But, you know, 3.5x was a through the cycle ceiling, and we started at a low interest rate environment as interest rates have come up. It's still through the cycle. We're in the cycle. We may pay down a little bit of debt. We may build a little bit of cash to be able to be more opportunistic. We don't like running the business at 3.5x. We like giving ourselves some room, call it around 3x. But, you know, overall, our North Star is compounding the intrinsic value per share of the business. We set long-term goals to compound EPS. Our latest goal is to get to $2.50 by 2026, and that is what will dictate our capital allocation choices. Keeping leverage below 3.5 x and driving EPS, you know... The way to do that looks different at different times. So, you know, we bought back a lot of shares early on. We made strategic acquisitions at a point. We've made some, you know, small technology bets. We will play the hand we're dealt, but there will be no shortage of opportunities to deploy capital, and there will be no shortage of capital because the business generates so much cash flow over the next several years to compound earnings per share. Okay, great. I think we went just a couple minutes over, but I want to thank Ben Gliklich for sharing his perspectives and insights on his company and the overall markets that Element Solutions operates in. I want to thank the audience for participating, and have a good rest of the day. Thank you, David. Thanks, everybody. Thanks, Ben.