Element Solutions Inc (ESI) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Element Solutions Inc. group conference call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Bob Koort. Sir, the floor is yours.

Thank you very much, and good morning, everybody. I appreciate you participating today in our call with Element Solutions. I need to read a few disclosures here, and then we'll get to the heart of the matter. This -- sorry, we are required to make certain disclosures and public appearances about Goldman's relationships with companies we discuss, disclosures relate to investment banking, compensation received or 1% or more ownership. We're prepared to read aloud disclosures for any issuer upon request. However, these disclosures are available in our most recent reports available to U.S. clients of the firm on our web portal. Also this conversation is not intended for the media, and in that regard, should be considered off the record. We are going to have a Q&A session at the end after Ben and team go through some prepared slides. If you'd like to ask a question, we ask you to send that via e-mail to myself, [email protected], or maybe easier to spell [email protected]. Also all the views stated by non-Goldman personnel do not necessarily reflect those views of Goldman Sachs. So today from Element, we've got Ben Gliklich, the CEO. We've also got on the line to help answer questions and participate, Martin Franklin, who is the Executive Chairman; Carey Dorman, who's the CFO; and Scot Benson, who's the President and COO, and thanks also to Yash for helping organize that. So if everybody could turn to the webcast and the slides, let me turn it over to Ben Gliklich.

Thanks, Bob. Thanks, everybody, for joining. Thank you to Bob and the team at Goldman for hosting us. We've spent quite a bit of time with Bob and his team recently, and we've been really pleased with how they've dug in to understand ESI and to appreciate our business model and our objectives. And we're very happy to have the opportunity to update the investment community on our recent performance and the impact of the coronavirus on both our business and our outlook. I'm going to take you guys through just a few slides and then with Martin, Scot and Carey, take some questions from Bob, who solicited his clients for questions over the past week or so. The place to start is this has been a very challenging time. But as you'll see, our team has been managing it aggressively, proactively and thoughtfully with a priority, first, always people and ensuring their health and safety, followed by continuing to service our customers. And we've been doing both quite well. The flexibility of our business, not just our cost structure, but also our supply chain and our people has been on full display over the first quarter of this year. And I'm extremely proud of what our team has been able to and continues to accomplish. On Slide 3 here, you can see some comments about the impact of coronavirus to date. And it's really been a story of regions. And in the first quarter, the impact has been concentrated in Asia primarily from a demand perspective in our electronics assembly customers. They've had the largest supply chain disruptions to date given where they sit in the supply chain further along. So bottlenecks in other parts of the supply chain have impacted their ability to produce. On a positive note, our circuitry business has been quite strong and resilient, driven by demand for 5G infrastructure. So that business has outperformed, especially in light of the disruptions we've seen. The automotive market has been slow in Asia. That's a continuation of what we saw in 2019, but obviously, weaker given some of the supply chain disruptions driven by coronavirus. Our supply chain has been very resilient in Asia especially. Our facilities were closed for about 2 weeks coming -- including Chinese New Year. And in February, they were all open by the middle of the month. And they've remained open, by and large, through March. And most of our customers as well have continued to be open and manufacturing. We incurred about $1 million of incremental expense, just $1 million of incremental expense through the gymnastics required to continue to supply into China through spending a little bit extra to procure raw materials such that we could continue to supply. But by and large, outside of that, we are back to normal, and it was a very resilient performance. Net sales in Asia in the first quarter were off about 10%. That's primarily in China and by -- and mostly in our assembly business. But we had continued OpEx savings driven by what we put in place in 2019 and continue to execute against in the first quarter to offset some -- to partially offset some of that sales mix. In the West, in Europe and the Americas, the impact has been quite modest thus far. We have started to see OEMs shutting down manufacturing in Europe and the Americas, but it will not have a big impact on the quarter. Importantly, all of our facilities have remained open, even our facility in Northern Italy, albeit with a skeleton crew throughout the coronavirus and its impact in the first quarter. We have built up some safety stocks in an abundance of caution, shipping them to warehouses across Europe to ensure continuity of supply should we have to shut a facility. And we have incurred -- we have had some difficulty with shipping across borders, again, driven by coronavirus, but we have continued to supply our customers on a regular and ongoing basis. And the sales impact has been modest, as I noted earlier, in the West. And the OpEx savings that we've been able to generate through continued cost discipline and continuation of the activities we put in place in 2019 has offset all of the sales impact from coronavirus in the first quarter. Element -- I'm on Slide 4 now. Element has done a lot in response to coronavirus. And I think the place to start is with people. And as I said earlier, the priority is always, first and foremost, protecting our people and their families, promoting a healthy and safety environment. And so what have we done? We've done everything that the regulators have required and more in many instances. We have nonessential personnel working from home, who are on staggered shifts. We've put in place all of the necessary temperature checks, hygiene controls at our manufacturing facilities, kept folks adequately distanced from one another. We've reduced travel almost to 0, with the exception of customer requirements where customers are asking for us to come, and we're only doing so in places where it's safe. This isn't just to protect our people. It's also to be good corporate citizens and to prevent the further spread of coronavirus, which is something we take seriously and is part of our culture. We're a leadership -- and the flexibility of Element Solutions have really shown through has been in supply chain thus far. The way that our supply chain has reacted to almost hourly changing regulatory requirements has just been remarkable. And there are many anecdotes to suggest that -- one that comes to mind is, when Malaysia was shutting its borders and shutting facilities, we had about 6 hours to react. Our facility in Malaysia was intended to be closed down, but it turned out that we were able to qualify as producing essential material or in an essential supply chain, so we're able to keep that open. And then we have about 2 dozen folks who commute from Malaysia to Singapore in -- to support our manufacturing presence there. We were able to get those folks hotel rooms in Singapore, and they were willing to live apart from their families for several weeks to support our production. And so we didn't miss a beat in Singapore. All managed within hours and executed against within hours. And there are other anecdotes of our leadership team staying close, being -- collaborating across geographies and across functions to ensure continuity of supply to our customers, which is critical and part of our value proposition. The other thing that we're doing is monitoring order books, making sure that the orders that we see coming through are real, that old orders are still good and doing that on a daily basis. So collaboration across supply chain and on the business units to ensure that we're managing working capital appropriately and delivering our orders on time where needed. We've got manufacturing redundancy across geographies and regions, which has been a huge value as we've been navigating some of the disruptions through our supply chain created by coronavirus. Another anecdote of that is that we can manufacture in North America a product and ship it to Europe in case we see factory disruptions, which is something that we've put in place or we've begun to do when we saw some issues in Northern Italy and continue to supply across geographies. Again, all of our facilities remain open, given the essential status of certain of our end markets, particularly in the circuitry space and the electronic space, we do provide into medical and defense end markets. And we haven't seen any disruption from a raw material perspective. And so we jumped on that early, ensuring dual sourcing where we could and that we were getting our allocation of raw materials. And so we haven't had any issues in that regard. From a balance sheet perspective, this week, we drew $320 million of our corporate revolver in an abundance of caution. We have over -- or about $200 million of cash on our balance sheet before we had done that. So this wasn't driven by a need for liquidity. It was really driven by a desire to ensure we had that cash on our balance sheet should there be disruptions, further disruptions in the capital markets. So now we have over $500 million of cash on the balance sheet, which is more than 12 months of projected liquidity. We also in the first quarter, continued with our share buyback purchase, and we funded that through cash flow we generated over the course of the quarter. We repurchased about $30 million worth of shares, about 3.5 million shares at an average price in the 8. On Slide 5, you can see our first quarter expectations. And we expect a strong performance, especially in light of the environment, nicely in excess of expectations from The Street, and the top line, down about 5% organically. And that's almost exclusively driven by Asia and the impact of coronavirus in China specifically. And on the EBITDA line, we expect more than $95 million. There's an FX headwind year-over-year of about $3 million. And so we should show year-over-year EBITDA growth despite that impact on the top line, driven by margins from mix as you know, the assembly business is a lower-margin business and the cost savings that we've talked through. Again, exemplary of our ability to preserve profitability in the -- on the context of a weaker or pressure on the top line. Free cash flow should be north of $35 million. That's a little lighter than you would expect, but that's driven by the safety stocks that we've been building. We've been building some inventory to ensure continuity of supply and our ability to continue to serve our customers. But we expect north of $35 million of free cash flow in the quarter, again, a strong performance in light of the disruption that we've seen. I'll spend just a minute on Slide 6 on the balance sheet. I talked to this just before, but we've got $500 million of cash on the balance sheet after the revolver draw. We have a single maintenance covenant, right? So we're not worried about liquidity or our balance sheet at the moment. We have a single maintenance covenant, which is 5x first lien net debt. Today, we're levered 1.3x on that metric and the real economic value of our first lien net debt, because we've swapped it to euros last year, is about $655 million. So we're inside of that 1x or less than a turn -- a little bit more than a turn levered on that basis. Our first maturity is in 2024. And so from a liquidity and covenant perspective, we've got significant flexibility, both short term and medium term. And so the last slide, before turning to questions, is on our near-term outlook. And so we're monitoring our end markets closely. We're speaking to our customers daily. But our visibility is limited, especially given the regulatory impact at our customers' facilities and ours -- and at ours as well. The place to start, I think, is on our Electronics business, which is primarily Asia-driven. And Asia has come back. As you've heard from some of our peers as well, we're seeing the Asian market recover and come close to sort of normal productivity levels. The stimulus and investment in 5G infrastructure is real and it's coming through in the P&L. The critical medium-term variable is high-end smartphones and demand for them. The Electronics business, while it is generally an Asian business, is supplying the West. And so pull-through demand from the West will be a driver of the health of that market over the medium term, which is unclear at the moment. We do see some new phone launches likely to be delayed. But that market is relatively healthy as we enter the second quarter. The story is a bit different in our automotive and industrial end markets, where, as you've seen, automotive OEMs have been shutting down production, and we are much more cautious about that end market as we look into the second quarter. On the bright side, the Graphics business, which supplies flexible packaging into consumer packaged goods is performing quite well. You guys have all seen the activity in supermarkets around the world, and there's been strong demand there, and that end market is quite healthy. And then our energy business is also performing relatively well. And our expectations are for a strong second quarter, given the long lead times associated with those projects. When you look into the second half, it's a little bit less clear. The production side of that business should continue on as it had been. But with oil in the 20s, some of that drilling activity could slow down in the back half. A few other considerations to note. The dollar has strengthened quite a bit in the past few weeks, which does create an FX headwind on a year-over-year basis. That is material, but it's been very volatile. And so we've seen it bouncing around quite a bit. And we have quite a bit of additional cost we can pursue. Obviously, in 2019, you all saw our ability to execute against cost initiatives, and there's more where that came from. And we have been planning how to drive cost out of this business in a way that doesn't damage the long-term growth trajectory of the business, but is reflective of the demand environment. And we've got our hands on the levers. We've identified those opportunities. And as the next weeks and months play out, we will be throwing those levers to ensure we preserve profit regardless of the demand environment and outlook. Given the uncertainty around the duration of the supply chain disruptions associated with coronavirus, we are rescinding our 2020 financial guidance. What I'd say is that our goal is always to outperform our markets. And we believe we can, through this disruption, in particular, given the flexibility of our global supply chain, the nimbleness we've demonstrated in the first quarter and in years -- and last year, to continue to serve our customers and demonstrate resilience from a supply chain and customer service perspective, despite the disruptions that we've been living through. Importantly, our long-term growth trajectory, our long-term growth algorithm is unchanged. We participate in markets that are growing secularly and this virus and its economic implication don't change those growth drivers through the long term. And we're very excited about the long-term growth trajectory and our ability for this business to continue to drive profitable growth over the medium term. And again, our view on growth and those growth drivers is unchanged and our ability to deliver on our financial objectives over the medium-term as well. So with those summary comments, why don't we take some questions from Bob?

Thanks very much, Ben. A reminder, folks on the line, if you'd like to ask a question, if you could e-mail those to me, [email protected] or [email protected], we can file those. As we're doing that, let me turn it over to Anthony, who covers the ESI with me here at Goldman. I think he's got a few questions to start.

Thanks, Bob, and thanks to the ESI team for hosting this. Ben, maybe just to start, can you walk us through the decision to draw on the revolver at this point? We were doing some back of the envelope math. And I think you would need EBITDA to drop to below $150 million to trip your maintenance covenant. The free cash flow profile of the business is strong. And so just talk us through your rationale, what you might be seeing in the markets that resulted in the decision to draw on the revolver at this point.

Yes. So thanks for that question, Anthony, and your comment. And I can walk you through the covenant math in a second. But there are folks who are drawing on their revolvers because they need the liquidity and there are folks are drawing on their revolvers because they're worried about bank and systemic risk. And I would put us in the latter camp. As I noted, we had $200 million of cash on the balance sheet when we drew the revolver, now we have $500 million. It's really in an abundance of caution, we want to have that cash. It doesn't cost us much. Net, it's less than 2% per annum interest to have that cash on the balance sheet. So we'd rather have it now. Just given some of the volatility we've seen in the capital markets, we don't have a liquidity problem, as you noted, or -- what I'd note is that our annual OpEx and our -- our annual running cost, let's say, before any cost savings, are less than $500 million. So we've got a year of liquidity. That's before cost savings. That's before the working capital free up that we'll see if the top line declines, that's assuming very little in sales. So we've got plenty of liquidity. From a covenant perspective, as noted, our first lien -- we have a single maintenance covenant, 5x first lien net debt. We have $550 million of first lien net debt right now. EBITDA would have to fall to $110 million, right? We're going to print north of $95 million in the first quarter, so we don't have a covenant risk either. It was really just out of an abundance of caution in light of the volatility in the capital markets.

That's great. And you highlighted the $500 million of cash in the balance sheet post the revolver draw. How should we think about your approach to that cash balance going forward? Will that continue to be preserved in safety? Or do you anticipate strategic opportunities or share repurchase opportunities?

Do you want me to comment on that?

So I'll pass the capital allocation question to Martin. Martin, do you want to take that?

Sure. Yes. I mean I think I'd say a few things. First of all, the drawdown on the revolver will not be used for capital allocation. So in other words, we're not using it for buybacks or acquisitions. That's not what the -- that's not why we drew the revolver. As Ben said, this -- the option cost of the safety is extremely low. And as a result, we just thought it was prudent protecting the company under any scenario to make sure that we have that cash available to us should we need it. Outside of that, maintaining our cash balances. And also geographically, making sure that we have not just the amount -- the strong cash balances, but regionally strong cash balances where we want them is something we'll be focused on. But you should expect until things calm down that we would simply maintain a very large cash balance and continue to do that. In terms of buybacks, we're now in a close period. We'll be in a close period for over 50 days. So we'll have a much better view on the world and the cycle and what outcomes should look like 50 days from now. And obviously, to the extent we decide to either put the revolver back in place and pay it down or maintain, it will really depend on how we see the world in 50 days' time from the buyback perspective.

And then understanding the limited forward visibility in the business and the uncertainty of the marketplace, can you maybe provide us with a view on trends in China that might inform how quickly the U.S. and Europe might recover once we get through this period of lockdown? I think you noted that utilization rates for your plants were back to 80%, 90%. So just help us with the cadence of that and how things will grow?

Yes. So what we saw in China was a disruption in February. Things got -- similar to what we commented on our Q4 earnings call, right? About a $15 million impact in February, driven mostly by the assembly business; a meaningfully less, call that, a $5 million impact in March. That was largely supported by robust demand in the circuitry business. And at the moment, we're not seeing much disruption in China. There are other pockets of Asia where you're seeing some new hotspots that are impacting the supply chain. But things got back to normal pretty quickly in the Chinese market, driven by the actions that the government took and our supply chain being able to meet the regulatory requirements to continue to manufacture and our customers really asking us and also meeting those requirements and having quite a bit of demand to meet. So we saw a pretty strong ramp and a steady ramp through March coming out of February. And that has persisted, and we expect that to persist with the big variable being the pull-through from the West. Hopefully, that's a case study for what we see in Western markets. But we just don't have -- it's too early to call that. The Electronics business remains strong also in the West, driven by circuitry demand. The assembly business is still a little bit weaker in China and in other parts of the world. I don't know, Scot, if there's anything you'd comment around the ramp in Asia and if we could draw any conclusions about what will happen in the West?

No, I think you categorize it very well -- or characterized it very well, Ben. We have seen kind of domestic demand and domestic consumption return in Asia. And the future is predicated on what happens on the demand front from the West. There was a lot going on in terms of data storage, data movement, things of that nature that I think are driving some of the demand. But the West will kind of predicate what happens in the short term just from a demand standpoint. But the Asia domestic demand has recovered nicely.

Ben, it's Bob Koort. Couple of things. One, it's interesting, we've seen the volatility in your stock, and I suspect some of that might be relative to metrics looking at coverage and debt lows sort of thing. But I also saw something on Bloomberg this morning that showed that within specialty chemicals, at least, you guys have the highest safety margin in terms of cash flow, even better than some of the paint companies. So I thought that was kind of interesting. We've got a question here from an investor that clearly knows your company pretty specific. Asking, with the graphics and energy business holding up relatively better than assembly, should they expect a positive gross margin benefit? And what about any opportunity from lower raw material prices?

Yes, it's a good question, Bob. Thanks for that. And yes, we did see gross margin expansion in the -- or we expect to see gross margin expansion in the quarter, driven partially by the assembly business being a little bit weaker relative to the other businesses. And that is something that you should continue to expect to see, given where we're seeing strength and where we expect some supply chain disruptions. The industrial business is on the lower margin end of the spectrum for us, which is where we anticipate the greatest weakness as we look forward. From a raw material perspective, we haven't seen that come through as yet. But obviously, we've seen some big moves in input prices. And so that is something else that we're looking to harvest. And we will be aggressively pursuing. So there is some margin opportunity in light of the dislocation here for sure.

Ben, I think we thought that during 2019, your cost performance was pretty impressive in light of the weak macro. I think sales were down 6% and EBITDA was down 1%. Can you just walk us through the variable cost structure versus fixed cost structure of the business? And how we should think about your ability to flex the cost structure further in this current environment and what specific leverage you might be able to pull?

Yes. Thanks for the question. So in 2019, the top line was down 4% organically, EBITDA was up 3% organically, we took out about $50 million of cost in OpEx. We called about half of that permanent cost out and about half of that cost avoidance. Those are costs that come back in a growth environment. This business has a remarkably variable operating cost structure. So when we look at our cost of goods, around 90% is variable. So if we're not manufacturing, we're not buying, and so we don't have a big fixed cost burden there. We have reasonably high SG&A because this is a people-based business. Our customers rely on our innovation. They rely on our sales force. They rely on our technical service teams who are on-site with them all the time. But -- and we don't view those people, the baseline cost there, as very variable, but there are many variable aspects to it: Variable compensation, T&E expense, trade shows. We -- when we look at our costs, we look at the things we can drive down without damaging the long-term growth trajectory of the business, right? And because there's so much know-how and technical expertise in our people, right? That's -- we don't view head count as variable, but the fringe and the activity that that head count is pursuing becomes variable. In a market like this, our customers, by and large, don't want us to travel. So that cost goes away. In a declining market, variable compensation falls away. The way we're thinking about cost activity in 2020 is how can we flex down cost without making permanent changes to our team? Because our team -- this market will come back, as you heard me say, we believe in the growth drivers here. We've seen these businesses snap back when we recover. And we want to be, and we believe we are best positioned in our industry to weather this storm without making cuts that will impact the long-term growth trajectory. We want to be there at our customer sites when they welcome us back. So we can recapture a disproportionate share here. All that's to say, we have, let's call it, about a $50 million additional cost pool on an annualized basis around -- that we're pursuing right now and that we've identified to go get should the demand environment necessitate that, all through temporary actions that aren't material reductions to our workforce and that allow us to continue to be positioned to be the leader in this space and to continue to grow in excess of our markets, which is our goal.

Ben, we've got a couple of questions all around the same topic. But basically, if we can go back maybe to the old MacDermid days and the last time we had a real abrupt economic climate, maybe '08, '09. Can you talk a little bit about how these businesses behave then?

Yes. Yes, absolutely. So for many years, we had questions, what does this business do in the economic downturn, and we pointed to '08, '09. Now we can point to '08, '09 and 2019, right? Last year was a tough year for our end markets. Our end markets were down mid- to high single digits. As we talked about, we grew organically 4% and preserved margin grew, EBITDA margin grew -- excuse me, we declined organically 4%, we grew EBITDA 3% through margin preservation and cost actions. In 2008, 2009, these businesses weren't together in their current configuration. So you have to do a little bit of math. But most of the information is publicly available. MacDermid had public debt, Alent was part of a public company, as were the OM assets that we have. And rough orders of magnitude, the top line was down 20%, EBITDA was off 10% or 12%. So that's what we saw through the financial crisis. As we think about our performance last year and the cost we took out, we think that that resembles that. And if you extrapolate a weak demand environment through 2020, if you looked at '19 and '20 combined, we think we can replicate that performance or do better if that's what the top line looks like. Again, it's demand predicated, but the cost opportunities remain there. And we've got the ability to execute against them, and we're confident we can preserve margin through a prolonged period of weakness should that be what we see.

Maybe to that point, you talked about how COVID-19 has impacted the various supply chains. Can you just give us a little bit of color on your major end markets where you're seeing the most disruption? What your typical lead times for production are? And then also any concerns around liquidity on behalf of your customers or suppliers?

Sure, sure. So given how fast-changing the situation has been, visibility hasn't been great. And this is a unique situation because regulators have the ability to impact visibility or to impact our order book and shut down customers, which is something we haven't seen before. And in some cases, have -- regulators have implications on how we operate. When OEMs decide to shut down production, it takes a week or 2 to flow through and impact our P&L. So we've seen OEM shutting down in the West. We're still seeing orders into their supply chains today, but presumably, those dry up after a prolonged shutdown. What we're doing to compensate for some of that loss of visibility is we're reconfirming orders daily, running daily meetings between supply chain and commercial to make sure that we're tracking customer activity, we're tracking facility status. So that allows us to both manage working capital and to deliver where the customer need is. There are exceptions, though, to where we have longer visibility. For instance, the offshore business. Given the long lead times associated with those projects, we've got better visibility, and we feel -- as I said earlier, we feel good about the second quarter there, get in the Graphics business with things flying off the shelves in supermarkets. We've got good visibility and confidence there. As we think about the other end markets, obviously, the industrial end market is the one that's seen the greatest disruption. And the Electronics, we put a half circle there because we're seeing strength in Asia, but some of that ultimately is predicated on Western demand, which is unknowable at the moment. I don't know, Scot, if there's anything you'd add to that?

No, not really, Ben. I think you summarized it well.

Guys, there's a question here that's sort of related to maybe that last answer, but asking in terms of your expectations into this year, how much of that was dependent on some of the new products, whether it's auto launches, 5G or next-gen phones, that sort of thing? And maybe we saw some Apple news about some delay. I think you mentioned it a little bit in your remarks, but can you talk about how critical that was in terms of the original guidance you gave, Ben?

Yes, look, our results are tied to end market units. And so if you see new launches being pushed out, that's generally going to translate to fewer units in a period. So that's not great from a demand perspective. But it's more driven by -- but that's just one anecdote, I think, is the way I'd characterize it. When we go into a year, we're not building from a phone by phone, OEM by OEM basis. We're looking at underlying demand growth from multiple different vectors and that's how we think about it. At the moment, as you noted, we rescinded our guidance for -- or as we noted, we rescinded guidance for 2020 because of the opacity of the outlook. And I think that we're learning more day-to-day, week-to-week about the demand environment. I wouldn't say that we were counting on a specific smartphone platform launch, but we were looking to 5G infrastructure investments, and that is still coming through. And so we are cautiously optimistic about that circuitry business, and we're seeing the fruits of that 5G infrastructure investment in our P&L in the first quarter, right? Where you saw that our circuitry business was robust despite several weeks of lost production in that supply chain. I don't know, Scot, if you'd add anything around that question.

No, I think the only thing I would add is that we did kind of enter into 2020 trying to be very realistic about what was going to happen from a new product standpoint and not overoptimistic. So I think that enables us, I think, to have a little bit clearer picture on what we expect going forward or what the impact might be, not having been overoptimistic about what was going to happen from new product launches, in particular. So -- and that's maybe all I would add, Ben.

Yes. And there's no OEM that's material to us across the company, right? So there's not one specific OEM where a delayed launch is going to be -- have a material impact as we look at our customer concentration.

There's a number of questions that circle around capital allocation, so maybe I'll try and combine these. But I know, Martin, you had said that drawing the revolver was going to be used for share repurchase. But can you talk about the appetite here with the stock at $8 to maybe use some of the leverage to buy more stock and/or how do you think about opportunistic M&A? Because obviously you guys have a public equity that's under some pressure. I would imagine some of the private targets you might look at aren't feeling so comfortable either. Is this a chance to deploy that capital? Or do you sort of sit tight on everything?

Well, I'd say 2 things. First of all, until we can have freedom of movement and have the resources that can do due diligence to actually buy something, obviously, M&A is -- it's not -- it's in prep stage, not active. I mean there's no way on good conscience one can buy business without visiting all the facilities and things like that aren't so easy to do right now. So I would tell you that this is where we're actually ferreting and making sure that we've got our eye on things that could become opportunities. There are one of two things that I think people have rather lost the expectations for. And I think after this experience, unless they want to have a very long hold time, will be a lot more sanguine about valuation when things do normalize. And then I think we're just positioning ourselves to be ready to act. When you buy back stock, you don't have to travel, you don't have to do due diligence, you don't have to take new risk. You kind of know what you're getting. And if the value was compelling and we've always shown that we haven't been afraid to act even in sometimes in a contrarian way to buy back our equity at a time that we thought was below intrinsic value of the company, we would do so. That window is closed for us today. And we bought -- as you know, we bought back some stock. We were happy to do it, but the -- it will be another 50 days before we are even thinking about that again. And the world will look different, whether it be better or worse, will look different in 50 days' time. We'll evaluate it then. But I don't think you'll see us doing buybacks while we're drawing on our revolvers. That's a contradictory position. We want to feel comfortable that everything is stable before we turn back on -- in terms of the macros before we turn back on buyback programs, we may guess.

Ben, you -- short-term issues aside, I think you've articulated a view that the company is set up within the fairway of longer-term growth and secular trends. Can you just talk a little bit about what gives you the confidence in the medium to long term? And then also at the outset, you started out by saying, you're taking actions to make sure that you position the company well for the long term. Can you maybe just articulate what those actions might be and how you're thinking about coming out of this period as a stronger team, stronger company?

Yes. So I think the place to start is that this crisis has brought our team together in a remarkable way. The way we're collaborating across functions, across regions, the pace of activity, the nimbleness and flexibility has just been incredible. And so we're coming together as Element Solutions. This has brought us even faster together as Element Solutions, never waste a crisis in that regard. Our ability to continue to support our customers throughout this disruption is differentiating. The things we've done in terms of ensuring continuity of supply across continents, being open quickly in China was very differentiating. And this is not a business where market share changes in large quantities. It's slow. Because if we -- to get a customer to change a competitor out requires a change in equipment and stopping production and a whole bunch of activity that doesn't happen overnight. But this nudges customers, potential customers, towards us because our ability to leverage our global supply chain, to leverage our global team, to ensure through a crisis we're a partner that's reliable is differentiating. And we're seeing that day in and day out over the past several weeks. We have the financial wherewithal to retain our team. We have the balance sheet flexibility to retain our team, to retain our talented folks such that when things come back, we'll all be there. And the familiar faces will be there to call on customers. And with certainty, many of our competitors are not in that position. And so we see emerging from this crisis ourselves in an advantaged position relative to the competition for that reason as well, right? When we talk about our cost actions, we don't talk about big rounds of layoffs. We talk about temporary changes such that we can retain that talent, such that we can continue to service customers when this market comes back because it will come back. And that gets to the first part of your question. These are secular growing markets. If anything, this crisis has demonstrated why we all rely on high bandwidth connections and increased mobility. 5G infrastructure is coming regardless of economic conditions in the near term. Electric vehicles and the thesis behind growth in electric vehicles, the driver behind growth in electric vehicles, is unchanged despite this crisis. So those types of drivers, which are the key drivers for the long-term growth of this business will persist. And innovation isn't grinding to a halt even as the economy is slowing down, right? The need that we feel for new products, new technologies, new enabling technologies doesn't go away. And so there will be investment to catch up for that. And we're in a pole position to support that innovation and to support the customers that are manufacturing those new products. And so we are steadfast in our belief that the growth in these markets will return. There will be a snapback to some extent. And we're going to be continuing in our leadership position and growing our leadership position in these markets when that happens.

That's terrific. Ben, I think inspirational there, a great way to end the call. We're up against our 45 minutes. So I want to thank you and the rest of the ESI team for joining us. And any clients who had additional questions, you can send those through, we'll try to get those answered. But really appreciate everybody's time and take care. Thanks.

Thank you. Thanks, guys.

Thanks, [ Emil ].

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.