Element Solutions Inc (NYSE:ESI) Q1 2024 Earnings Call Transcript

Element Solutions Inc (NYSE:ESI) Q1 2024 Earnings Call Transcript April 30, 2024

Element Solutions Inc isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, everyone. My name is Shelly, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Element Solutions 2024 Quarter Finance — First Quarter Financial Results Call. [Operator Instructions]. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions]. I’d now like to hand over the call to Varun Gokarn, Senior Director of Strategy and Finance. You may now begin, please.

Varun Gokarn: Good morning, and thank you for participating in our first quarter 2024 earnings conference call. Joining me today are our President and CEO, Ben Gliklich; and CFO, Carey Dorman. In accordance with Regulation FD, we are webcasting this conference call. A replay will be made available in the Investors 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 Investors section under News and Events. Today’s materials also include financial information that has not been prepared in accordance with US. 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 Gliklich.

Benjamin Gliklich: Thank you, Varun, and good morning, everyone. Thank you for joining. Element Solutions’ strong results for the first quarter reflect solid execution in recovering electronics markets. With a mixed overall macro environment in which our strength and increasing capabilities in fast-growing events packaging and data center markets, offset a mediocre market for smartphones and softness in Western automotive and general industrial supply chains. Our improving value proposition through 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 suggest the potential for further improvement as the electronics market recovery broad. 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 US. and Europe and lower revenue from metal price surcharges as certain commodities have deflated.

Profitability in the segment increased significantly on lower 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 borrowing 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 volumes well below where they had been in the past few years. While our cost 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 EMEA and high-volume manufacturing capacity for our new Kuprion products. Throughout what has been a prolonged downturn in our electronics end markets, 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 in wafer level packaging and circuitry solutions grew meaningfully in the first quarter. This is in part due to the improved customer intimacy afforded by our highly successful ViaForm transaction, an investment we’ve made in improving our circuitry technical capabilities. We paid our first product milestone earnout payment for Kuprion this quarter and ActiveCopper 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.

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

Carey Dorman: 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 mix 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 I&S segment. In Q1 2023, the high-end smartphone supply chain and the memory disk markets experienced significantly reduced demand with inventory destocking that continued through much of that year. As we lap this period, we have seen memory disk recovery and growth in smartphone supporting circuitry solutions.

Net sales in our Industrial and Specialty segment declined organically 3% at high levels of offshore energy activity and improving North America printer demand in 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 strengthening US. 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 and 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 from 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 were broadly were positive in the quarter, volumes declined in Americas and Europe. Circuitry Solutions 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 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 chain 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 semi fabs and [ph]OSAT. 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 Argomax centered silver technology to a broader customer base of electric vehicle manufacturers.

Moving to Industrial & 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 remain soft, with customers continuing to operate at reduced volumes. As we move through 2024, we expect a negative impact of commodity surcharge pricing to ease and new customer wins to benefit sales volume, particularly in the second half of the year.

Graphic Solutions sales increased organically by 5%, reflecting improved demand primarily with flexible packaging customers in North America. Encouragingly, adjusted EBITDA margin in this business also showed a meaningful expansion of almost 300 basis points year-on-year. Energy Solutions remains a bright spot in the I&S portfolio with sales growth of 14% organically in the quarter as production and drilling activity remained strong. We expect this growth for energy business to continue this year. Slide five addresses cash flow and the balance sheet. We generated $39 million of free cash flow in Q1. The first quarter of the year has a typical uses of cash relative to annualized targets, including annual incentive payments and a semi-annual bond payment.

We invested $28 million in our working capital, which primarily reflects the seasonal inventory build. CapEx in the quarter was $19 million, which is above the $50 million 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 times and 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 maturities until 2028. Through cross currency loss, the effective interest rate on our term loan is fixed at 3.2% as of March 31, and our liquidity position remains strong.

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

Benjamin Gliklich: Thank you, Carey. We’ve had a strong start to 2024 and are optimistic about the trajectory through 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 electronic 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 ex currency on a sequential basis.

We’re also updating our full year adjusted EBITDA guidance range to $515 million 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 US. 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 nano copper 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, a talented and dedicated people around the world working productively and collaboratively to support our customers and objectives. With that, operator, please open the lines for questions.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from Josh Spector from UBS. Your line is now open.

Joshua Spector: Hi, guys. Good morning. If you could comment on your expectations here on what you’re seeing on demand versus earlier because you talked 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? Do you have a more positive view on second half unchanged, worse, kind of go through where things are set?

Benjamin Gliklich: 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 electronics side of the business. On balance, I think the rent in the back half is modestly slower than it was expected during the year, right? 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 in 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.

Joshua Spector: Thanks. 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, 1.5 years look from a cyclical improvement perspective versus how that framework impacts more of your secular growth view two to three years from now?

Benjamin Gliklich: Sure. So in the first quarter, right, 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.

Joshua Spector: Okay, thanks Ben.

Operator: Our next question comes from John Roberts from Mizuho. Your line is now open.

John Ezekiel Roberts: Thanks, and I’ll just ask one here, but congrats on the progress on Kuprion. When do you think we’ll see first sales? And could you scope the potential additional payments for us?

Benjamin Gliklich: So we paid our first milestone payment for Kuprion this quarter. The background there is Kuprion was a technology we acquired last year with an upfront payment and a large performance-based earn-out 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 base 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 Kuprion, 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 6 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.

Operator: Our next question comes from Bhavesh Lodaya from BMO Capital Markets. Your line is now open.

Bhavesh Lodaya: Hi, good morning, Ben. If I look at 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?

Benjamin Gliklich: 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. There is a modest demand ramp that is offset by some OpEx ramp that we see in the second quarter. And that’s how you get to that flat sequential EBITDA. It is consistent demand environment. The industry expects the electronics market ramp to come in the second half. Typical seasonality supports 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.

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.

Bhavesh Lodaya: Got it. And then the auto end market is clearly an important one for you. As it relates to your exposure, it appears consultant forecast 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?

Benjamin Gliklich: So yes, auto 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 store 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.

Operator: Our next question comes from Christopher Parkinson from Wolfe Research. Your line is now open.

Harris Fein: Great. Thanks. This is Harris Fein on for Chris. I guess from a high level, top line was flat and pass-through metals were 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.

Benjamin Gliklich: Good 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 lower raw material prices — higher raw material prices and favorable mix from those surcharges that have rolled off. And so between the two of those things, right, 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 what we said in our prepared remarks is margins are stably north of 40% on the gross profit line. And we see room for improvement in margin over time driven by divergent growth rates and 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.

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

Benjamin Gliklich: Yes. 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 Carey said, they’re still the lowest cost per bit storage alternative. And all of this activity in AI is driving incremental or 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 the Circuitry business should be a mid- to high single-digit grower from here for the foreseeable future.

Operator: Our next question comes from Steve Byrne from Bank of America. Your line is now open.

Rock Hoffman Blasko: Hi it’s Rock Hoffman on for Steve Byrne. 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 kind of compared to what we saw in 1Q? And how much of a lever will mix benefits for the rest of the year?

Benjamin Gliklich: Thanks for the question. So EBITDA margin 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 metal. 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 being down. And so we’re still facing volume deleveraging in the business. And so we’ve got multiple levers for margin expansion from here and are confident we can drive that in the medium term.

Rock Hoffman Blasko: That’s helpful. And just in semiconductor, specifically, was the strength in the business this quarter. I guess how much of that was kind of a result of a customer operating rates versus the mix gains that you guys saw?

Benjamin Gliklich: Our semiconductor business rent because of customer operating rates because of customer wins. And that was organic volume growth, by and large, with a margin contribution from our ViaForm transaction last year.

Rock Hoffman Blasko: Helpful. Thank you

Operator: Our next question comes from Chris Kapsch from Loop Capital Markets. Your line is now open.

Christopher Kapsch: Good morning. So my question also on — focused on EBITDA margins and more about the incremental margin is not about — less about absolute margin levels. The strong EBITDA growth you had relative to a much more modest organic top line growth, the implication, as you referenced, like really robust incremental margin. So the question is, as the balance of this year plays out, like if you have continued growth in recovery in Electronics and potentially positive mix that comes with that and then hopefully some seasonal improvement across the broader portfolio. Is there a reason to think, other than the build back in OpEx? Is it 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 entitlements that you’ve implemented?

Carey Dorman: Thanks for that question, Chris. I think our view on incrementals are the conservatively 30% to 40% 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 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 the core of the business. And as those ramp, they will improve. But 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.

Operator: Our next question comes from David Silver from CL King. Your line is now open.

David Silver: 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 was kind of called out for its strength. And just wondering, is there any way to think about how much improvement you’re 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 the previous arrangement where another company was in charge of marketing and distribution?

Benjamin Gliklich: Thanks for that question. 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 of 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 — it is used in applications like hybrid bonding. So there’s an 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.

David Silver: Okay. Great. And then just one on the R&D spend. So the first quarter, the number is much higher year-over-year, but I do believe Carey mentioned last night that, that includes the progress payment related to Kuprion 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 adjusted or clean R&D spend, maybe for the balance of the year or going forward?

Benjamin Gliklich: You’re right to point out that the milestone payment for Kuprion was captured in R&D this quarter, which explains the large increase year-over-year. Our business invest R&D dollars not just captured on the R&D line in the P&L, but also in technical service and application development, which is captured under selling 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 and the P&L to other electronics 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 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.

Carey Dorman: 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.

David Silver: Okay. No, that’s the, I appreciate the perspective there. Thank you very much.

Operator: Next question comes from John Tanwanteng from CJS Securities. Your line is now open.

Jonathan Tanwanteng: Hi, good morning. Thank you for taking my questions and nice quarter. Just wanted to ask you about your semi business, AI has obviously been making headlines as well as the chips act and onshoring 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 ViaForm, but if you could talk about the whole business, that would be great as a percent of profit as well.

Benjamin Gliklich: Sure. 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 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 with ViaForm, which we just pointed out and other investments 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 grow — 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.