Element Solutions Inc.

If you'd like to withdraw your question, please press star and number one button again. Thank you. I'd now like to hand over the call to Vernon Gokhan, Senior Director of Strategy and Finance. You may now begin, please.

Good morning, and thank you for participating in our first quarter 2024 earnings conference call. Joining me today are our President and CEO, Ben Glicklich, and CFO, Kerry Dorman. In accordance with Regulation FD, we are webcasting this conference call. A replay will be made available in the investor section of the company's website. During today's call, we will make certain forward-looking statements that reflect our current views about the company's future performance and financial results. These statements are based on assumptions and expectations of future events, which are subject to risks and uncertainties. Please refer to our earnings release supplemental slides and most recent SEC filings for a discussion of material risk factors that could cause actual results to differ from our expectations and predictions. These materials can be found on the company's website in the Investor section under News and Events. Today's materials also include financial information that has not been prepared in accordance with U.S. GAAP. Please refer to the earnings release and supplemental slides for definitions and reconciliations of these non-GAAP measures to comparable GAAP financial measures. It is now my pleasure to introduce our CEO, Ben Glicklich.

Thank you, Varun, and good morning, everyone. Thank you for joining us. Element pollution's strong results the first quarter reflect solid execution in recovering electronics markets. It was a mixed overall macro environment in which our strength and increasing capabilities in fast-growing advanced packaging and data center markets offset a mediocre market for smartphones and softness in Western automotive and general industrial supply chains. Our improving value propositions and investments in leading-edge semiconductor technologies and the impact of legacy pricing actions amidst deflation in certain commodities drove substantial profit growth. Constant currency adjusted EBITDA grew 17% year-on-year on the back of over 250 basis points of margin expansion. Our growth this quarter reflects the benefit of portfolio diversification and suggests the potential for further improvement as the electronics market recovery broadens. Our focus on deep, growing profit pools should continue to generate market outperformance and strong incremental margins. The electronics business is recovering with a surge in semiconductor solutions, including advanced and wafer-level packaging applications. Our volumes in that vertical grew in the high teens year over year, outpacing the market and our circuitry solutions business. Our more industrially-oriented circuit board assembly business declined slightly. The industrial and specialty segment saw a combination of softer automotive demand in the U.S. and Europe and lower revenue from metal price surcharges as certain commodities have deflated. Profitability in the segment increased significantly on low raw material costs, ongoing strength in our offshore business, and an improvement in our graphics business. Our markets are roughly off to the start we expected, and margins are driving our outperformance. Gross margins returned solidly north of 40% this quarter, an internal benchmark for us, and should be stable at these levels, barring metal price impacts. While many of our supply chains are normalizing after a period of heightened volatility and shortages, logistics prices remained elevated relative to 2019 levels. Notably, our margins in the first quarter have been achieved at volumes well below where they had been the past few years. While our costs of goods are mostly variable, margins have improved despite volume deleveraging. This further underscores the success of our investment in higher value, higher margin applications. and our ability to offset cost increases. The benefit of cost actions taken last year contributed to bottom-line profitability as well. This has not come at the cost of growth capital. We continue to invest in strategic capabilities, semiconductor assembly or advanced packaging technologies, a research center in fast-growing India, and high-volume manufacturing capacity for our new CoopRAM products. Throughout what has been a prolonged downturn in our electronics end market, We've maintained, and in certain instances grown, sales and technical resources needed to support customers as the market evolves and new technologies take root. Our commercial and innovation teams remain focused on delivering high-value solutions to solve customer pain points and high-growth applications. Our late-stage electronic sales pipeline and wafer-level packaging and circuitry solutions grew meaningfully in the first This is in part due to the improved customer intimacy afforded by our highly successful VIAform transaction and investment we've made in improving our circuitry technical capabilities. We paid our first product milestone earn-out payment for Kublai on this quarter, and active copper opportunities are progressing rapidly. We're pleased with the outlook from our 2023 investments, but work remains on the operational steps necessary to maximize their long-term value. At the same time, our balance sheet is improving to the point where we can consider additional capital deployment aligned with our strategy. The year is off to a solid start, and the outlook is positive.

Kari will now take you through our first quarter business results in more detail. Kari?

Thanks, Ben. Good morning, everyone. Continuing on slide three, where Ben just talked to some of the highlights, you can see a summary of our first quarter financial results. Organic sales grew 1% year over year. and constant currency adjusted EBITDA grew 17%. These strong incremental margins reflect a substantial mixed benefit from recovery in higher-margin semiconductor and circuitry business in Asia, as well as lower raw material costs in industrial surface treatment and favorable mix in the overall INS segment. In Q1 2023, the high-end smartphone supply chain and the memory disk markets experienced significantly reduced demand with inventory to stocking that continued through much of that year. As we lack this period, we have seen memory disk recovery and growth in smartphone units supporting circuitry solutions. Net sales in our industrial and specialty segments declined organically 3%, as high levels of offshore energy activity and improving North America printer demand and graphics were offset by declines in our industrial surface treatment business. This quarter, total company net sales and adjusted EBITDA were both negatively impacted by a strengthening U.S. dollar by roughly 2% and 4%, respectively. Adjusted EBITDA margin improved almost 300 basis points year-over-year in constant currency terms. The margin trend accelerated this quarter, improving sequentially 120 basis points from Q4 2023. Excluding the impact of the $79 million of pass-through metal sales in assembly solutions, our adjusted EBITDA margin would have been 26% in the first quarter. On slide 4, we share additional detail on the drivers of organic net sales growth in our two segments. In electronics, categories that saw significant destocking last year grew in the first quarter of 2024, a positive sign for more broad-based recovery as the year progresses. We saw consistent softness in our industrial-oriented businesses, particularly in the Americas and Europe, that impacted growth in both industrial solutions and our assembly business in electronics. In assembly, soft industrial demand in Western markets drove a 2% decline in organic net sales. The circuit board assembly business has more exposure to industrial applications, with certain capabilities focused on high-reliability alloys required for demanding automotive electronics use cases. While year-over-year volumes in China and Asia more broadly were positive in the quarter, volumes declined in Americas and Europe. Circuitry solution sales improved 8% organically, with growth primarily coming from a recovery in our memory disk business. Inventories of our customers' finished products declined in 2023. and this market has picked up again in 2024 on the back of resumed investment in data storage for cloud computing and enterprise servers. Our disk drives still represent the most affordable mechanism for data storage per bit, and the near-term growth outlook is favorable. The first quarter showed other signs of market stabilization, with overall smartphone units estimated to have grown at 8%. However, not all handset OEM supply chains experienced growth in the first quarter of 2024. with the bulk of the improvement occurring in China-based manufacturers. While we do skew towards the non-Chinese device makers, we have content across most smartphone models. Our customer base is broad, and our growth generally should correlate to overall industry units, rather than any particular manufacturer over time. Customers globally are expecting an improved second half. Semiconductor solutions led growth for the segment, with organic net sales up 11%. we saw significant increases in wafer-level packaging sales in Asia for both SEMIFABs and OSATs. We expect a continuation of this demand growth related to advanced packaging that supports memory, server, and AI chip markets. Power electronics products also continued to grow in the first quarter as we successfully expand our Algramax-centered silver technology to a broader customer base of electric vehicle manufacturers. Moving to industrial and specialty, Organic net sales declined 3% year over year. Roughly half of the 6% decline in the industrial solutions vertical was driven by reductions in surcharges for commodity metals like palladium. While these price swings impact headline sales, the higher mix of value add, high margin, recurring chemistry, revenue, benefits, margins. Demand from automotive customers was sluggish, in line with global auto production in the first quarter. European construction and industrial end markets remained solid. with customers continuing to operate at reduced volumes. As we move through 2024, we expect a negative impact of commodity search ad pricing to ease and new customer wins to benefit sales volume, particularly in the second half of the year. Graphics solutions sales increased organically by 5%, reflecting improved demand primarily with flexible packaging customers in North America. Encouragingly, Adjusted EBITDA margins in this business also showed meaningful expansion of almost 300 basis points year-on-year. Energy Solutions remains a bright spot in the INS portfolio, with sales growth of 14% organically in the quarter, as production and drilling activity remain strong. We expect this growth for energy business to continue this year. Slide 5 addresses cash flow and the balance sheet. We generated $39 million of free cash flow in Q1. The first quarter of the year has atypical uses of cash relative to annualized targets, including annual incentive payments and a semiannual bond payment. We invested $28 million into working capital, which primarily reflects a seasonal inventory build. Cap looks in the quarter with 19 million, which is above the 50 to 60 million annual run rate we expect for the year and reflects the late timing of certain growth projects and integration initiatives that were originally planned for the end of 2023. Now turning to the balance sheet, our net leverage ratio at the end of the quarter was 3.3 times, inside of our long-range target ceiling of 3.5, once again demonstrating our ability to quickly de-lever with cash flow generation and earnings growth. Our capital structure remains fully fixed rate for the remainder of the year. We have no debt maturity until 2028. Through cross-currency swaps, the effective interest rate on our term loan is fixed at 3.2% as of March 31st, and our liquidity position remains strong.

With that, I will turn the call back to Ben. Thank you, Gary.

We've had a strong start to 2024 and are optimistic about the trajectory from here. Our investment in leading-edge and emerging technology is driving high incremental margin sets. While our markets are not uniformly improving, our conversations with customers and suppliers support a constructive view on more broad-based electronics demand improvement in the second half. There are reasons, however, for a level of conservatism this early in the year, given geopolitical risk, sluggishness in Western industrial markets, and modestly lower full-year expectations from certain supply chain participants. For the second quarter of 2024, we expect adjusted EBITDA to be approximately $125 million, or approximately flat X currency on a sequential basis. We're also updating our full-year adjusted EBITDA guidance range to $515 to $530 million, which reflects 10 to 14% constant currency growth as the year-over-year FX headwind is now expected to be greater than $15 million. Were it not for the recent strengthening of the U.S. dollar, we would have increased the high end of the range as well. Overall, we're pleased with our execution to start 2024. Commercially, we're building a high-quality, high-probability pipeline of large, leading-edge electronics opportunities and margin-enhancing industrial projects. Operationally, we're increasing volume manufacturing capacity for future growth areas, such as nanocopper and power electronics, streamlining our legacy manufacturing footprint, and building research and applications development in high-leverage geographies. We continue to make systems improvements and better leverage our data to increase the proportion of time our employees can spend on value-added technical service and product development. Taken together, this positions us towards delivering on our commitments for the year in the current demand environment and generating above-market growth to exceed them as the environment improves from here. To wrap up, I'd like to thank all of our stakeholders for their continued support of Element Solutions. In particular, our talented and dedicated people around the world working productively and collaboratively to support our customers and objectives.

With that operator, please open the line for questions.

Opening the floor for question and answer session. If you'd like to ask a question, please press star and number one on your telephone keypad. Our first question comes from Josh Spector from UPS. Your line is now open.

Yeah. Hi, guys. Good morning. First, if you can comment on your expectations here of what you're seeing on demand versus earlier, because you talk about things kind of in line, but your first quarter came in better. obviously there's been some moving parts. So where things stand today, you know, do you have a more positive view on second half, unchanged, worse, kind of go through where things are set?

Sure. So as we get closer to the second half, we have more conviction that a recovery is coming and we're hearing that more from customers in the electronic side of the business. On balance, I think the, the, Ramp in the back half is modestly slower than was expected entering the year. The semiconductor market, you hear industry participants who were talking about greater than 10% growth now talking about about 10% growth. But net-net, the electronics recovery is roughly what we would expect it to be entering the year. On the industrial side of the business, there's pockets of strength and air pockets. As we said in our prepared remarks, our markets are roughly playing out as we thought they would this year, and our outlook is unchanged from a demand perspective.

Thanks, and that's helpful.

And I just wanted to kind of check on here where you recently talked about high single-digit percent growth in electronics over the next five years. You delivered 4% growth in the first quarter. Obviously, you expect things to improve a bit. When do you think you get to that run rate? And I don't know if there's a way to unpack how the next year, year and a half look from a cyclical improvement perspective versus how that framework impacts more of your secular growth view two to three years from now.

Sure. So in the first quarter, we had double-digit growth in semiconductor, high single-digit growth in circuitry, and the assembly business lagged. because it's more industrially oriented and the Western industrial economy was soft. By the end of this year, we should be on a year on year basis getting up towards high single digit growth, call it mid to high. And of course EBITDA growth, and we talked about getting to double digit EBITDA growth in electronics, we will be at that level in 2024. 2025, if we see a continuation of the electronics recovery, which is a reasonable expectation based on industry outlook, should once again be double digit EBITDA growth. And you'd expect that the electronics business should be in and around the same level of top line that we've been talking about. So that's a medium term outlook, I would say. But I think it's reasonable to expect that we're about there for the next couple of years.

Okay, thanks, Ben. Thank you, Josh.

Our next question comes from John Roberts from .

Thanks, and I'll just ask one here, but congrats on the progress on Couprion. When do you think we'll see first sales, and could you scope the potential additional payments for us?

Sure thing, John. Thanks for the question. So we paid our first milestone payment for Couprion this quarter. The background there is Kuberon was a technology we acquired last year with an upfront payment and a large performance-based turnout structure. The first payment was based on product performance. So that was an internal performance milestone, and we were able to get the product to perform at a certain level, which generated this payment. The subsequent payments will be based on customer success. First, customer product qualification, and subsequently customer-based revenue. We're working very closely with several customers and I would expect us to have product qualification payments this year and revenue to begin in 2024 and really ramp in 2025. The maximum we will pay for Couprion if we hit all of these targets It would be about $275 million. That would be linked to about $115 million of revenue, which would be a low single-digit multiple of EBITDA based on the margins we're expecting from this business. We have six years to get to that ramp of revenue, but our internal expectation is we'll be able to do so well within that time frame. The customer reaction and pull from the market for this capability is stronger than we could have expected.

And our progress against qualification is faster than we expected. Thank you.

Our next question comes from from BNO Capital Markets. Your line is now open.

Hi, good morning, Ben. If I look at your FY guide, it seems your outlook for the year is roughly unchanged, slightly better. I would have expected second quarter to be up sequentially, just on some demand recovery, but also given some of the drivers you highlighted that impacted the first quarter EBITDA, you are building inventory as well. So maybe if you could comment on what you are seeing in your order books in the near term, trying to get a sense of, The full year guide versus the second quarter guide.

Sure. Our expectation for the second quarter, as you heard, was for sequentially flat EBITDA constant currency. And there's about a $2 million, $3 million FX headwind, which gets you to approximately $125 million of EBITDA. There is a modest demand ramp that is offset by some OPEX ramps that we see in the second quarter. And that's how you get to that flat sequential EBITDA. It is a consistent demand environment. The industry expects the electronics market ramp to come in the second half. Typical seasonality supports an electronics ramp in the second half. I think when you look at half-on-half performance sequentially, It's a slightly greater than normal seasonal uptick in terms of the percentage of earnings in the back half versus the first half. And so we feel like it's a reasonable place for the second quarter. April is off to a good start, but we're not going to extrapolate from that. That's how we think about the phasing. And it's generally in line with what we thought entering the year as well.

Got it.

And then the autos end market is clearly an important one for you. As it relates to your exposure, it appears consultant forecasts for Western autos are gradually rising. However, at the same time, there are some concerns around softening EV adoption rates. Can you share your view on what you are seeing for your business?

So, yes, autos is an important end market for us. Our outlook for auto markets is roughly sideways from where they are today. It's not just units that's impacting our industrial business. It's type of units. So some of the higher end vehicles are struggling more than entry level vehicles, and we have more content on the higher end vehicles. The electric vehicle story is actually generally positive for us, despite a softer electric vehicle market. We've seen our really unique capabilities in power inversion. getting much broader adoption in new OEM supply chains. So we've had some pretty compelling customer wins that will contribute modestly this year, but significantly over the next several years. So by and large, we're excited about our capabilities in auto and our outlook for the businesses we have exposed to auto, albeit it's a weaker macro this year than ideal.

Thank you.

Our next question comes from Christopher Parkinson from Wolf's Ridge. Your line is now open.

Great, thanks. This is Harris Fine on for Chris. I guess from a high level, you know, top line was flat and pass-through metals were in neutral in the quarter, but margins were up a good amount year on year. So could you just maybe size the drivers of that just between mix, lower raw materials, the offset of the surcharge roll-offs? And I know you guided to some variable cost rebuild this year. I think you might have already mentioned how much of that hit the P&L in the first quarter. Thanks.

Sure thing, Harris. There's a lot of moving parts here. The simple answer is that the higher-end electronics businesses we have that are really performing well are higher margin. And the businesses that are seeing macro weakness are benefiting from lapping higher raw material prices and favorable mix from those surcharges that have rolled off. And so between the two of those things, we saw substantial margin uplift, and there was a modest impact, I would say, from the cost actions we took last year, offsetting some of that variable cost rebuild. So those are the two moving pieces. Raw material deflation year over year was a low single-digit million-dollar impact, just to help you quantify what those pieces are. And, you know, what we said in our prepared remarks is margins are stably north of 40% on the gross profit line. And, you know, we see room for improvement in margin over time driven by divergent growth rates and, you know, the higher value proposition we're bringing to support high-end electronics customers. So we're far from our margin ceiling and should see progress from here.

Got it. That's helpful. And then just as a follow-up in circuitry, a lot of the debates with investors are around smartphone, but that doesn't seem to be the primary driver of results right now. So just with demand recovering, I know you called out memory disk and server, just how How are you thinking about normalized intermediate term growth rates, what that looks like in that business?

Yeah. So within our circuitry business, there are really three moving pieces this quarter. Smartphone markets grew. Western industrial markets softened, and so our circuitry business in Europe and the Americas was soft. Those two didn't quite offset, right? The Asian business is bigger, and so the smartphone uplift. more than offset the softness in the West. And then our memory disk business grew very nicely, returned to growth. That memory disk business is for hard disk drives. As Carrie said, they're still the lowest cost per bit storage alternative. And all of this activity in AI is driving incremental hard disk drive demand. So those are the three moving pieces. The smartphone market, while it grew, is still very dislocated from trend. And so we believe there's still incremental recovery there at high margin. And the memory disk market should continue to improve as well. So, you know, the circuitry business should be a mid to high single digit grower from here for the foreseeable future.

Our next question comes from Steve Bryan from Bank of America. Your line is now open.

Hi. I'm Steve Bryan. Just given the OPEX ramp in 2Q that you just mentioned, how do you think the near-term EBITDA margin might play out for the rest of the year compared to what we saw in 1Q, and how much of a lever will mix benefits be for the rest of the year?

Thanks for the question. So EBITDA margins should be stable around where they are right now in the second quarter, maybe modestly softer because of that OpEx ramp. But in the back half, they should continue to improve. Again, as we said, we are several points away from past peak EBITDA margin ex-medal. I don't think we're going to get back there this year, but we've got room to drive that margin higher. and multiple levers right we made comments about volume uh being down and so we're still facing uh volume deleveraging um in the business and so we've got multiple levers for margin expansion from here and um are confident we can drive that you know in the medium term that's helpful um and just in semiconductors specifically uh was the strength in the business this quarter

I guess how much of that was kind of result of customer operating rates versus the mixed gains that you guys saw?

So our semiconductor business ramped because of customer operating rates, because of customer wins. And, you know, that was organic volume growth by and large with a margin contribution from our VIA form transaction last year.

Thank you.

Our next question comes from Chris Capps from Moot Capital Markets. Your line is now open.

Yeah, good morning. So my question also focused on EBITDA margins and more about the incremental margins, less about absolute margin levels. You know, the strong EBITDA growth you had relative to much more modest organic top line growth, the implication, as you referenced, like really robust incremental margins. So the question is, as the balance of this year plays out, like if you have, you know, continued growth and recovery in electronics and potentially positive mix that comes with that, and then hopefully some, you know, seasonal improvement across the broader portfolio, Is there a reason to think, other than the buildback in OpEx, that there'd be some reversion on incrementals? Or is there a case that incrementals are just simply structurally higher than you previously thought because of just both the overall mix of your portfolio and maybe some of the pricing entitlement that you've implemented? Thank you.

Thanks for that question, Chris. I think our view on incrementals are that conservatively, 30 to 40 percent, you know, through the cycle. Obviously, this quarter was a bit idiosyncratic given a flattish organic performance and substantial organic EBITDA growth. We could see quarters like that in the future depending on mix and underlying demand, but I don't think we're going to say that structurally incremental margins you know, are changed from here. There is some conservatism in that 30% to 40% because some of our new technologies carry much, much higher margin than, you know, the core of the business. And as those ramp, they will improve. But, you know, I'm not sure we would draw a line in the sand and say that our view on incrementals have permanently changed after one quarter.

Appreciate the color.

Our next question comes from David Silver from CL King. The line is not open.

Yeah. Hi. Good morning. I just have a couple of questions. I'll ask them both together, I guess. But as far as the VIAform performance goes, I think this is the second consecutive quarter it was kind of called out for you know, its strength. And just wondering, is there any way to think about, you know, how much improvement your thinking might be in 2024 over 2023? I know that the implication was when the deal was struck to repurchase the distribution rights that it was being purchased kind of at a below normal or below trend level of profitability and then just along with that is there anything or how would you say the business is being run with ESI with your company in full control as opposed to you know the previous arrangement where another company you know was in charge of marketing and distribution thanks thanks for that question so you know

We felt good about our timing for the Viaform transaction. And we have benefited from the ramp in operating rates at customers over the past couple quarters. Most of the growth we've seen has been driven by that. But the opportunity pipeline associated with it has grown. And the applications window has grown as there's, you know, it is used in applications like hybrid bonding. So there's a opportunity for us with Viaform to expand or it's an expanding addressable market and by being in full control from soup to nuts of this product we believe we're generating more commercial opportunities than we would have otherwise seen and so this year the business will grow double digits in line slightly better than MSI And the long-term outlook is for significant outperformance relative to MSI because of this growth in pipeline, share opportunities, and growth in addressable market. It's a very compelling opportunity set for us. We're thrilled by that transaction.

Okay, great. And then just one on the R&D spend. The first quarter, the number is much higher year over year, but I do believe Carrie mentioned last night that that includes the progress payment related to Couprion there. But my sense is your business is becoming structurally more R&D intensive. So is there kind of a target percentage of revenues or absolute total we should think about for you know, adjusted or clean, you know, R&D spend maybe for the balance of the year or going forward. Thank you.

Thanks, David. You're right to point out that the milestone payment for Couprion was captured in R&D this quarter, which explains the large increase year over year. Our business invests R&D dollars not just captured on the R&D line in the P&L, but also in technical service and applications developed and technical service in the P&L. We do have and we have increased investment in technology, particularly at the leading edge electronics nodes. But the breadth of our portfolio doesn't really make it apples to apples to compare our R&D spend as captured on the R&D line in the P&L to other electronic materials companies. I think that our target is to continue to invest aggressively where we have opportunities in support of our customers. And so R&D will grow, you know, roughly in line with sales, which should be growing nicely, maybe a little bit faster, but our business hasn't structurally changed in terms of its R&D needs going forward. And David, I would just add that some of the ramp we've seen in CapEx over the last couple of years has been to support, a decent portion of that has been to support lab expansion, both applications lab and our core R&D labs, as well as equipment to support that. So that's also R&D spend that we're investing, obviously just showing up in the cash flow statement.

Okay, no, I appreciate the perspective there. Thank you very much. Thank you, David.

Next question comes from John Tang from CJS Securities. Your line is now open.

Hi, good morning. Thank you for taking my questions and nice quarter. I wanted to ask you about your semi-business AI has obviously been making progress you know, headlines as well as, you know, the CHIPS Act and on-shoring initiatives in other countries. Could you update us on how those things will flow through your semi-business over the next one to three years and how big it could become as a percentage of revenue? I know you gave some details on via form, but if you could talk about the whole business, that would be great, and the percent of profits as well.

Thanks for that question, John. So, our semi-business has accelerated this year. It has a lot of runway to continue to grow and we expect it to outgrow, you know, the rest of our verticals and the rest of the electronics business. And so it will grow as a percentage of sales. You're right to point out the CHIPS Act. The CHIPS Act is bringing significant investment into fab capacity in North America. We're seeing incremental fab capacity in Europe. And, you know, with Viaform, which we just pointed out, and other investment we've been making, we feel like we're in a prime position to get more than our existing share where we play in these new fabs, which will drive above-market growth here. Also, with regard to the CHIPS Act, we have an opportunity that we're pursuing to receive some funding from the CHIPS Act for R&D, which is very exciting and should stimulate incremental growth in the business and opportunities in the business. The semiconductor business is 10-ish percent of our overall revenue, but given its divergent growth rate, it will increase as a percentage of the overall book of business and could conceivably be 20% of the business in the medium term. We're investing aggressively behind that, but only in places where it fits our operating model, where the profit pools are deep, and where we've got a right to win. So we are being circumspect about where we invest and where we choose to play. But we've got great capabilities and a lot of customer pull for them, which is compelling and exciting for us.

Great. Thank you. And then just in terms of the guidance and the underlying assumptions, what's the change in your expectations for China versus non-China handsets and also ICE versus EV automotive? How does that mix impact you as the year progresses? Just help us understand your thoughts in those two areas.

So our business in smartphones skews towards non-Chinese OEMs, right? we've got more value and share on non-Chinese device makers than local Chinese device makers, but we still have plenty of value in local Chinese smartphones. And so in a quarter like this past quarter, where units were up maybe 8%, despite non-Chinese OEMs or Apple devices being down, we still grew our smartphone business. And so that's you know, our baseline for the balance of the year. It doesn't have any big assumption associated with the OEMs providing the smartphones. It's just a smartphone growth driver. And with regard to ICE and EVs, that's a difficult thing for us to parse out because there are plenty of supply chains that we sell into that are EV or ICE powertrain agnostic. And so I can't answer that question Specifically, I would say that the general weakness relative to expectations in EEV is something of a headwind, but it hasn't changed our outlook for the full year.

Got it. Thanks, Ben. Thank you, John.

We don't have any based hands as of the moment. I'd now like to hand back over to Ben for closing remarks.

Great. Thank you very much.

Thanks to everybody for joining, and we look forward to seeing many of you soon. Have a good day.

We would like to thank everyone for attending today's conference call. We hope that you have a wonderful day. Stay safe and moving. I'll disconnect you to session.