Element Solutions Inc.

Good morning, ladies and gentlemen, and welcome to the Element Solutions Q2 2025 Financial Results Conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, press star followed by the number one on your telephone keypad. If you would like to remove yourself from the queue, press star followed by the number one. As a reminder, today's call is being recorded. I will now turn the conference over to Varun Gokhan, Vice President of Strategy and Integration. Please go ahead.

Good morning and thank you for participating in our second quarter 2025 earnings conference call. Joining me today are our President and CEO Ben Glicklich and CFO Kerry Dornan. 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 the earnings release, supplemental slides, and most recent SEC filings on our website for a discussion of material risk factors that could cause actual results to differ from our expectations and predictions. Today's materials also include financial information that has not been prepared in accordance with the U.S. Gap. Please refer to the earnings release and supplemental slides for definitions and reconciliations of these non-GAP measures to comparable GAP financial measures. It is now my pleasure to introduce our CEO Ben Glicklich.

Thanks, Varun. Good morning, everybody. Thank you for joining. Element Solutions had an outstanding second quarter. We continue to execute on our strategy of penetrating the fastest growing areas within our addressable markets while driving productivity through our continuous improvement culture. Our electronics business delivered a fifth consecutive quarter of high single-digit organic growth consistent with the targets for the segment that we set early last year. Ongoing hyperscaler investment in data centers and their associated infrastructure continues to drive demand for a wide range of material solutions that our portfolio is uniquely positioned to provide. From metalization chemistries for high-layer count printed circuit boards to specialized thermal management materials used in assembly to advance packaging chip scale chemistries. Sales from our wafer-level packaging products grew more than 20 percent in the second quarter as programs on leading edge nodes continue to ramp. Order patterns from these customers remain strong throughout the first half of the year. Our power electronics business also grew at a double-digit rate in the quarter with demand strength from legacy EV customers and new wins that have broadened our customer base over the last 12 months. We've demonstrated our value proposition in leading edge semiconductor and power electronics technologies and are continuing to establish our business as a leading innovation partner to the largest companies in electronics manufacturing. Over the past five years we've driven a deliberate transformation from a high quality but disparate portfolio of businesses in select niches into a unified organization that is leading in important emerging categories. Our commercial, technical service and R&D teams are collaborating across a breadth of product areas to provide system-level solutions to OEMs while building a pipeline of breakthrough innovation that should support further growth. Included in that pipeline are applications that improve thermal management on the top side of advanced high-performance computing chips and enable greater power density to reach these chips. Other applications in development allow for fast and low-cost deposition of copper interconnect on the finest layers of silicon wafers and next generation active copper or cuprion products designed to solve a range of unique thermal and power related customer pain points. Our initial mid-scale active copper manufacturing site is under construction and expected to be commissioned at the end of this year. In industrial and specialty we saw meaningful margin improvement and excluding the impact our graphics investiture, the segment adjusted EBITDA growth would have been 10%. Our core industrial surface treatment business has demonstrated stable or growing adjusted EBITDA for several quarters even as volumes have been under pressure. Across our business we've been investing in technology, people and strategy deployment tools to help us improve performance regardless of the macro environment. This is most evident in our industrial results. Global trade dynamics remain volatile and there's still a lack of clarity around tariff policy and its resulting impact on demand. However, as we've noted previously, we're fortunate to have a geographically broad yet localized sourcing, manufacturing and technical footprint that has proven to be responsive to customers. We continue to execute on mitigation efforts to minimize the impact of tariffs on our cost structure. Given the breadth of our operations, our global presence in a hyper local people-based business, we also believe we're well positioned to support customers as they navigate broader changes to and realignment of supply chains in coming years. This quarter we opened a new world-class research center in Bangalore, India to support basic formulation research globally and also applications development in electronics manufacturing locally. We're also building applications in customer support labs in Thailand and Vietnam designed to help customers scale operations in those countries. In short, while the near-term macroeconomic environment remains uncertain, we retain and continue to build structural advantages that should serve us well over the longer term. Carrie will now take you through our second quarter business results in more detail. Carrie?

Thanks, Ben. Good morning, everyone. On slide three, you can see a summary of our second quarter financial results. Organic sales grew 6% and adjusted EBITDA would have increased 7% when adjusting the graphics business out of both the 2024 and 2025 periods to account for our recent divestiture. Adjusted EBITDA of 136 million exceeded our initial guidance for the quarter of 120 to 125 million. Electronics organic growth of 9% was broad-based across all three verticals. ESI's adjusted EBITDA margin declined roughly 40 basis points year over year in constant currency terms, largely impacted by higher pass-through metal prices relative to the same quarter last year. Excluding the impact of roughly $113 million pass-through metal sales and assembly solutions, our adjusted EBITDA margin would have been just under 27%, a 30 basis point improvement year over year. We have seen significant FX volatility in the past few months, but currency only had a modest impact to results this quarter. However, based on end of June rates, the impact in the second half should be more meaningful. The expected year over year tailwind of over $5 million in the back half. On slide four, we share additional detail on the driver's organic net sales growth. Starting with electronics. In assembly, the second quarter was driven by B2B customers serving the high-performance computing and telecommunications end markets. Advanced solder paste volumes for various computing applications grew meaningfully, and we saw strong customer pull on technically challenging engineered assembly solutions used in server and data center applications. Circuitry solution sales grew 5% organically driven by data center applications and specialty finishes for circuit boards in the Asian EV market. You will recall in 2024, we had a very strong second quarter driven by consumer electronic seasonality. This year, we did not see the same increase in Q2, but posted healthy growth nonetheless. Our business mix continues to shift towards B2B end markets as applications for servers, data centers, and high-performance computing are driving demand while the smartphone market has been mediocre on the back of extended replacement cycles. We are also benefiting from promising nascent sources of demand such as low-Earth orbit satellites. This transition away from traditional consumer electronics should continue to dampen quarterly seasonality. Semiconductor Solutions organic net sales grew 20% from continued robust demand in wafer level packaging for SemiFab and OSAT customers in Asia. Sales from our Viaform product line again grew above 20% this quarter, continuing the upward trend in this product line since we took the business direct to end customers in the middle of 2023. We have exciting new product introductions in our pipeline that should deepen our reach into more advanced nodes with leading edge solutions for advanced packaging applications. Our power electronics product showed robust growth in the second quarter despite relatively weak initial forecasts from certain large customers. In the first half of 2025, we benefited from broadening our ArgoMax power electronics customer base to additional electric vehicle manufacturers in both Asia and Europe. This strategy has been effective, but we are cautious about the second half in this market, giving headwinds in certain pockets of the EV ecosystem. Industrial and specialty organic net sales were up 1% year over year. Volumes for the core industrial business were down slightly with macro weakness in Europe and the Americas partially offset by automotive growth in Asia. We have not yet seen a recovery in Europe, but consider recent policy changes in the region towards infrastructure and defense investment as a potential catalyst for an increase in industrial activity, which should in turn benefit our business. This is not factored into our full year outlook. We do however have new business wins that should drive out performance relative to our end markets in the second half. Offshore's year over year organic sales growth of 15% was the result of several large project completions that had been delayed from earlier in the year, as we call that in Q1. We continue to expect healthy growth for the business overall this year on the back of pricing and new wins. Slide 5 discusses cash flow and the balance sheet. We generated $59 million of adjusted free cash flow in Q2. We invested $35 million into working capital. Which primarily reflects increased accounts receivable on the back of sequential revenue growth in the business. We remain pleased with the progress we are making on inventory management, which we continue to optimize after several years of supply chain disruption. Capital in the quarter was $18 million, spending which is predominantly skewed towards the compelling growth investments that Ben mentioned earlier. We still plan to invest roughly $65 million over the course of the year to support strategic initiatives such as Cuprion, Manufacturing, Scale Up. Turning to the balance sheet, our net leverage ratio at the end of the quarter was 2.1 times. Our capital structure remains fully fixed at an effective rate of roughly 4%. And we have no debt maturities until 2028. We repurchased approximately 1 million shares at an average price of $20.45. Early in the quarter. Our balance sheet provides significant capacity for further capital allocation within our targeted leverage framework. And with that, I will turn the call back to

Ben. Thank you, Kerry. It was a great first task. With leading edge electronics growth and solid execution across our supply chain and yet another period of volatility, we're ahead of our original plan for the year. With the expected added benefit of favorable foreign exchange rates, we're comfortable increasing our adjusted EBITDA outlook for the full year to a new range of between $530 million and $550 million. For the third quarter of 2025, we expect adjusted EBITDA to be in the range of $140 to $145 million, which represents a 5% sequential improvement over the second quarter. We expect leading edge electronics driven by high-performance computing and data center to remain robust and industrial demand to remain similar to the first half. Consumer electronics and electric vehicle volumes have been harder to forecast and account for the risk and upside to the outlook. Our full year adjusted EBITDA guidance range remains wider than typical at this point in the year, allowing for a prudent degree of potential demand variability in the second half. We're still uncertain about how tariffs may impact economic activity in our end markets. We've not seen any signal of demand weakness to date, but remain cautious. We're well capitalized to seize on opportunities that may materialize in such periods of volatility. And beyond the daily drive to maintain solid execution and operational excellence across the company, capital allocation remains front of mind. While our balance sheet capacity continues to grow, the principles that govern our capital allocation strategy remain unchanged. We deploy capital to accelerate shareholder value by investing behind our markets and businesses into high-quality businesses that enhance our customer value proposition. In the second quarter, the best opportunity that met this criterion was our own shares. We have capacity to continue to repurchase while also pursuing attractive acquisitions should they appear. Let me close by thanking all of our stakeholders for their continued support of Element Solutions and in particular, our talented team around the world for their steadfast customer orientation and commitment to delivering for our company. Our combination of strong positioning, thoughtful strategy, and exceptional people continues to work. With that, operator, please open the line for questions.

At this time, if you would like to ask a question, press star followed by the number one on your telephone keypad. If your question has been answered and you would like to remove yourself from the queue, press star followed by the number one. Your first question is from the line of Mike Harrison with Seaport Research Partners.

Hi. Good morning. Congrats on a nice quarter. Thanks, Mike. Ben, I was hoping you could talk a little bit about what you're hearing from customers and in particular, are you getting any sense that some of the Q2 strengths might have been related to pull forward of demand? And if so, is there any way to be able to quantify that?

Yeah, sure. Good question, Mike. So the short answer is that we don't see any pull forward in the second quarter. The pace of investment in data center capacity remains robust. Last year in the second quarter, we did see some pull forward in the smartphone market and in certain other consumer electronics. That activity did not recur in the second quarter of 2025. And we've got reasonably good visibility to that. So we don't see any pull forward in the second quarter from the smartphone cycle. We expect to see some ramp in smartphone production here in Q3, which accounts for some of the sequential improvement. I would say we're starting to see that here in July, but it's still early. And the other vectors of demand strength in the second quarter don't have the same seasonal impacts and have long, durable, secular trends propelling them.

All right, thanks for that. And then my other question is about power electronics. It sounds like that was, again, a bright spot this quarter. But I think you may have indicated that despite kind of broadening your customer base for you're seeing maybe some headwinds in the EV ecosystem. Can you elaborate on what your expectations are for power electronics in the second half?

Sure thing. So power electronics had a very strong second quarter on a year over year basis. We were lapping a period where one of our major customers there in the second quarter of 2024 was doing some product changeovers, so demand was weaker. And so that accounted for some of that growth. As we look out to the back half, we see some customers with production volume declines expected offset by new customers ramping. So it should continue to be a growth vector for the business, but the rate of growth may slow a bit because of some customer-specific issues. Our penetration of that supply chain more broadly continues at pace. The pipeline is great. And so the longer-term outlook for that product and that capability remains very strong.

Your next question is from a line of Babish Lodhoya with BMO Capitals Markets.

Hi. Good morning, Ben. Your electronics sales are back to prior peak levels seen in early 2022. Can you look back and compare and contrast where business stands versus stands? Are your volumes back to those earlier levels? And if there are any notable differences across the subsegments? Yeah, it's a good question,

Babish. Thank you. So electronics revenue is at a new peak in the quarter. Volumes are not at prior peak. As we look across the business, the semiconductor business is at peak levels. The circuitry and assembly businesses are not. That is, to some extent, driven by where we are from a smartphone cycle perspective, with the circuitry business historically being more concentrated in the smartphone market. And we've talked at length about how that business is transitioning more towards B2B sales and a recovery in the smartphone market would drive significant outperformance. We're not seeing that imminently. The assembly business is more industrially oriented. And of course, we're seeing some, I call it, malaise in industrial markets. And so it's not a surprise that that business isn't back to peak. There is a metal price impact in there as well. All of that is to say that there's significant opportunity for this business to continue to grow. The things that are delivering record value will continue to grow in terms of B2B markets and what we're seeing from high-performance computing. And then the more cyclical aspects that are soft, it's reasonable to expect we'll recover, though we're not counting on that in our back half. That's upside for years to come.

Got it. And then as we look at your power electronics platform or even your advanced packaging via phone, have you seen any increased competition or perhaps new entrants coming in? There were some talks about investments in China, Chinese domestic players, any color or any visibility there?

Yeah, so two different markets and capabilities and two different sets of dynamics. For what we're doing with our wafer-level packaging products, our via phone products and copper damascene, that's a well-established market with well-established competition. And we have been winning at the leading edge there and growing our share. We've not seen new entrants at all. In power electronics, where we're dealing with new materials, that's a fast-growing market. And we're starting to see competitors come to market. We've got an outstanding capability that's highly differentiated in terms of performance. We have IP around how that product is made and how that product is used and a position of incumbency with the leading participants in the market. And so we are growing faster than the EV market there, which I think demonstrates the quality of our offering and our customer value proposition. Furthermore, we're continuing to innovate in that product area, where it's not just about materials, but we're innovating around applications. And that's widening the moat as we solve specific customer applications problems, which has been attributable for some of that outgrowth that we've seen recently.

Your next question is from the line of Oleski, your Fremont with KeyBank Capital Markets.

Thanks, and good morning, guys. You got Ryan on for Oleski. The first question I just wanted to ask is going around ArgoMax. So I just think some recent policy changes in China, talking about the end of the price-cutting wars, I was wondering if that might be an even greater opportunity for you guys, maybe as kind of the shift to quality is greater here.

Yeah, it's a good observation. And this capability skews towards high-performance vehicles. And so not all electric vehicles are created equally. And this is a capability that is really designed for and intended for the best of the best electric vehicles. And insofar as there is a shift towards higher quality, higher reliability, higher performance vehicles in the electric vehicle sector, that should help us. All that having been said, this isn't such an expensive portion of the cost of an EV. It's a tiny, tiny fraction. And so we don't see price pressure, for instance, when there are price cuts in that market. And I wouldn't view this as an opportunity for us to raise our prices should the value of EVs increase.

Understood. Okay, that's helpful. Thank you, Ben. And then, Kerry, just for you, in electronics, it looks like EV.margins, excluding kind of the pastor of metal costs, it looks like they were down about 200 basis points year on year. So can you almost get a better understanding of what kind of drove that and maybe what the expectation for that would be kind of in the back half?

Thanks. Sure. Yeah, it's a good observation. I think the first point to make there is really that when we look at the product lines and the verticals inside the electronics business, we're seeing pretty healthy, stable to growing margins, particularly when you exclude the impact of both the pass-through metals on the assembly business and some of the precious metals that we sell in the semiconductor business. So I think that's the key, the first key point. When you actually bridge the sort of decrementals that you're seeing, the biggest driver other than the pastor metals, which we talked about in the repair remarks, is an impact of OPEX. So there's two things going on there. One is a shift in the corporate allocation between the two segments now that we've sold the graphics business and the way that's allocated disproportionately now hits electronics versus the prior split. And then some incremental OPEX that we're spending partly to fund coupon research and development and then just some other growth and expansion we're doing. When you take out those two impacts, you kind of get back to a normal margin story. I think when we go to the back half of the year, that should normalize sequentially. The corporate dynamic will continue to play out on a year over year basis.

Your next question is from Chris Parkinson with Wolf Research.

All right. Thank you so much. Ben, you clearly have the portfolio pretty well positioned for an eventual upturn and you're already doing pretty solid. But in terms of the core growth drivers that you're the most excited about in 26 onwards, I'm thinking Cooper and everything else, what's kind of the next leg of the stool in terms of how we should be thinking about your trajectory in the context of your electronics and markets?

Yeah, it's a good question, Chris. So, you know, we're outperforming the broader electronics market as we see it today. We've talked about this bifurcation between the leading edge, which is growing really fast and lagging applications, legacy applications, which are not growing as quickly. You know, we don't expect that to persist into perpetuity and we'll get some benefit when some of those legacy applications get some wind in their sails. So that's a cyclical dynamic. The leading edge isn't going to slow in that situation. The things that are driving this business have very long legs and there's a cyclical upturn from those lagging applications. At the same time, we're continuing to innovate, bring new capabilities to market, right? And this isn't a company that is really driven by blockbuster products, but we do talk about active copper and cuprion as a very compelling opportunity. We called it out in our prepared remarks. We're investing and should be opening our first mid-scale production site for that by the end of this year. And so that should be contributing to profit next year. And there are some new applications that we're developing for some of our technologies that have really good value propositions for hyperscalers and data centers that we also expect to pick up into 2026. So there's a cyclical tailwind as and when that market recovers. There's some new product introductions that we're very excited about at high margins and there's secular growth propelling the leading edge where we've been disproportionately participating and benefiting.

And then in your prepared remarks, you mentioned your willingness to do buybacks. The term opportunistic was used and you said also you're thinking about M&A just given where the balance sheet leverage is. When you think about tuck-in bolt-on M&A opportunities, Ben, are there pieces of the portfolio you feel the need to fill in in terms of the total well-rounded portfolio or would it be more ancillary opportunistic things that you've been assessing over the last several years? Thank you.

Yeah, thanks for the question, Chris. We've said in the past and stand by the fact that there's nothing we need to own to fill a gap in portfolio. What we have holds together very well in terms of our ability to sell a system level solution to OEMs and specifiers in our supply chain and there's nothing we're missing. There are capabilities that could improve our customer value proposition and there are businesses that we believe could be better inside of our portfolio by leveraging collaborative research and materials compatibility and those are the types of things we're looking for. We're looking for things that are better inside of our business and make our business better that we deeply understand that are available at attractive returns to our shareholders and so that's where we're spending our time around M&A and as we said in the past quarter the best opportunity was our own shares and we acted on that.

Your next question is from the line of John Roberts, Womazooho.

Thank you. Industrial EBITDA organic growth was 10 percentage points higher than organic sales this quarter. Last quarter it was 8 percent higher. How long can you maintain that EBITDA growth much higher than the organic sales? Is there a regional mix issue that's helping here or application mix is something that might reverse in the future?

Sure thing. So, Carrie was talking about the corporate allocation shift on a -over-year basis and that attributes that you can attribute some of that outperformance to that and then the offshore business you know which grew 15 percent -over-year in the quarter and is a high margin business so there's a mixed effect there as well and you could expect that to continue as the offshore business has been outgrowing the industrial business and we expect that to continue in the second half so we should be able to outpace the top line on the bottom line in industrial for the balance of the year.

Okay, how are you thinking about leverage? CUNY just announced that I think they're going to be at 3.7 times net debt EBITDA. Integris is still running up I think just above 4. I think you used to target 3 as kind of your target which you're well below.

Yeah, so we've articulated in the past that our target ceiling is three and a half times, right? We didn't want to exceed three and a half times. The business can support more than that but from across the capital perspective it was prudent to stay you know at or below that level. We did exceed it by about a tenth of a turn in the middle of 2023 when we had the opportunity to buy Ubrion and terminate the distribution agreement we had with Integris. That was just really great timing and great opportunities and we had confidence that we were at the bottom of the cycle there. So three and a half is the ceiling. We like running the business with capacity. Our framework around capital allocation does not change depending on our leverage ratio and so that's how we think about it and it's nice for a change to be the lowest one on the page that you just went through John.

Your next question is from the line of Matthew Dale with Bank of America.

Good morning, Hakeem Stamford here from ADO. I have a quick two questions. The first one being you mentioned there's some room for deteriorating macro in your guidance range. So can you clarify the assumptions for the top and low end range and the primary risk achieving your upper half of new guidance?

Yeah sure thing. There's a bit of an echo on the line. Our guidance range gives us a bit of a wider berth than we normally would have at this juncture in the year that's driven by uncertainty around tariff impacts. That's not to say we've seen any impact. July remains strong. We see no signal of demand destruction but we see volatility as a risk. The way we get to the high end is stronger EV, stronger smartphone activity and continued benign macro environment. The way we get to the middle or low end is with macro deterioration, a weaker than expected smartphone environment, weaker than expected FX, tailwind. Those are the types of things I would be looking at that would determine where we land.

Thank you so much. Do you guys have any updates regarding production related bottlenecks for beyond? I know you mentioned plans for it to come on later this year so just any updates regarding that. Thank you.

Yeah it's a good question. So in the past we've talked about the focus of our energy being around our own supply chain and our customer supply chains for active copper which is scaling up our own manufacturing and helping our customers develop applications technology for how they'll use it in their high volume manufacturing. And that remains our focus area. We are in the process of commissioning our first production line which we expect to be operating at the end of the year which should relieve that first bottleneck. Based on the demand forecast we see we will need another site within the next 18 months subsequent to that and so we're working on that plan as well.

Your next question is from a line of Josh Spector with UBS.

Hi good morning guys. I'd just be curious if you could talk a little bit about kind of the texture of your electronics portfolio today. I mean you've continued to talk about growth in P2B and high end compute and that reducing some of the cyclicality that you expect going forward. So if you look at the 90 percent organic you delivered in 2Q and what you've been delivering year to year to date how would you describe the growth from the various parts of the businesses? Is roughly half the business growing 20 percent and kind of some of the more legacy exposure industrial auto smartphones flat or would you describe it pretty differently? And just thinking about how we can apply that on a go forward if we do have help from maybe the more cyclicalish parts of the portfolio versus more of the secular growth areas. Thanks.

Thanks for the question Josh. It's not so simple to point to a specific end market for a specific product line. If you think about leading edge boundaries those chips are going into multiple different end markets but it's the highest value chips in those end markets. If you look at our circuitry business for example which you know historically was concentrated in the smartphone market the growth there is coming from high performance computing going into data centers. The growth there is coming from the Chinese EV market where there are certain final finishes that lend themselves to those types of power applications. Our semi assembly growth is also coming from the EV market. Some of our circuitry growth is coming from the low earth orbit satellite market. So there are these emerging demand vectors that are you know responsible for the outgrowth and when we say outgrowth we're talking about you know high teens 20 30 growth in some areas off of low bases. The sort of the base of the business is growing more modestly in the smartphone markets and those more industrial markets. And so what you end up with is an increase in concentration in fast growing b2b markets like the ones I articulated and the growth rates for those markets should continue to be higher which blends the overall business growth rate higher. Similarly the advanced boundaries are an increasing percentage of overall MSI and you know our share in those markets is strong and the capacity additions are coming in those markets. So as we sort of to answer your question as we look forward you know what should the growth rate be from here for our electronics business there's certainly be some volatility but it's accelerating over the next several years as we articulated it would last year.

Thanks that's helpful if I could just follow up on the the margin questions earlier. So understanding some of the moving parts in this year I guess as we look forward do you have any different view on how we think about incremental margins? I guess mainly thinking about if you need to make more incremental investments in cuprion or other areas as you see you know more emerging signs of growth there. Thanks.

Yeah so you know referring to Carrie's answer there's the gross margin point where there's precious metal pass-throughs and mix was a bit of a headwind to margin and then there's the OPEX point where the corporate allocation aspect it's really a one-year effect and the cuprion investment is into a product line that's not generating substantial revenue today and so that's also a one-year effect. So we view the incremental or decrementals rather the incrementals quarter as transient and our you know historical expectation around incrementals for this business being you know 30 to 40 percent frankly is conservative as we as we you know roll this forward with the expected growth rates that we've just articulated.

Your next question is from the line of Pete Osterland with TruList.

Hey good morning guys thanks for taking the questions. I just wanted to ask another one on margins so in industrial and specialty you called out price discipline and productivity helping margins there. I was just wondering if you could elaborate on the pricing dynamics you're seeing in industrial particularly given the low growth environment you know and going forward as macro conditions recover and you know you start to see some more positive organic growth there is there meaningful margin upside in this business?

Yeah so in the industrial solutions business we've been driving productivity and maintaining price. It's been a tough market we have we took quite a bit of price over the past several years so the observation here is we're not giving price in a more benign raw materials environment and we're making our business more efficient across our site footprint particularly in Europe and so you know we're driving earnings growth in that business in a flattish volume environment. The flattish is slightly down. The second part of your question is around you know where could the market in this business go and over the past three years we've seen volumes down you know in the high teens across our industrial solutions footprint and this is not a business with significant fixed assets and so as a percentage of our cost of goods fixed costs are not high but absorption has been a headwind over the past several years in our sites and so with any volume tailwind the incremental should be above average in industrial solutions.

Very helpful thanks and then I just also wanted to follow up on the comments on the offshore business you know even with the strong growth in second quarter it looks like on a -to-date basis sales are still down -over-year so I was just wondering are there still any project delays that you're expecting to catch up on during the second half and could you see a similar growth rate -over-year for sales in the second half as you saw in the second quarter?

Yeah

so

you know what we called out in the first quarter was project delays and we are still seeing things shift to the right. I wouldn't expect the second half growth rate in this business to be in the high teens you know this is a business that should be growing in the mid single digits on the back of price and some volume over the course of the year so we do have some more catching up to do but it won't be to the order of magnitude that we saw in the second quarter.

Your next question is from a line of John Kelantan with CJ S Securities.

Hi this is Willem for John can you talk about how the TAM for Coupariana Scoron since you acquired it and over the past year?

Yeah so we've been working on we'll call it commercializing qualifying uh active copper projects now for two years and we have had to limit the number of customer engagements we have by virtue of our ability to make the product right. We're making it in on lab scale batches and there's only so many samples and trials qualifications we can do. The demand pull the customer pull for this product and the number of applications that customers would like to try this for you know has been growing very very rapidly so it's it's hard to quantify a TAM here because there's so much exploration we're bringing a new material to market but you know put simply the the earn out we have here is is tied to achieving a hundred some million of revenue by 2030 and we certainly see that as a very likely path a very very likely path to achieve that goal in front of us if not if not do better.

Thank you and then just to follow up can you talk about how much capacity the SuperNOT facility can serve from a revenue perspective and you know the margins in that business relative to the electronics segment in general? Thank you.

Sure thing so it's early to talk about capacity and revenue attached to this I would say that it's an above average margin product because we're bringing new material to market that's solving you know substantial significant customer pain points and as I as I said you know we're going to need to bring more capacity online to support this you know in the next two years so there there this one site isn't going to get us to our target that's for sure.

This concludes the Q&A session of today's call I will now hand the call back over to Bing Glick Glick for closing remarks.

Wonderful thank you Tamika thank you everybody for joining we're looking forward to speaking with many of you in the days and weeks to come have a good day.

This concludes today's call thank you for joining you may now disconnect your lines.