Element Solutions Inc (ESI) Earnings Call Transcript & Summary

Good morning, everyone. My name is Varun Gokarn. I'm the Senior Director for Strategy and Finance here at Element Solutions and it's my pleasure to welcome you to the 2022 Element Solutions Investor Day. Thank you to those of you who could join us here in person in Miami and to the many of you listening on the webcast. We're incredibly excited to be with you today and share the work we're doing to create value for our customers, opportunities for our employees and in particular, for this audience, drive value for shareholders. Over the next couple of hours, you're going to hear from our Executive Chairman, Sir Martin Franklin; our CEO, Ben Gliklich; CFO, Carey Dorman; and several other key business leaders. They will cover our progress over the last 3 years, the key attributes of our business and our compelling path forward, followed by Q&A, which we expect around noon. As a reminder, before we begin, I encourage you to review the safe harbor on Page 2. And it is now my pleasure to introduce Sir Martin Franklin, our Executive Chairman, for opening remarks. Martin?

Thanks, Varun. Good morning, everybody. As you can see, I have the most complex slide of the day. I think before we begin, this is unusual times. So hopefully, everybody can stay focused the European thing, Europe back at war is a terrible thing. So I don't know, our prayers go out to all the people in Ukraine. So let's talk about the business. People. As any of you who have known me for long enough know that my view is all businesses are simply where people meet activity and people are the key to every business. And I think that the team has done a remarkable job since we last presented at an Investor Day to bring the company together where people are motivated, aligned and are generally proud of their work. I think that attracting top talent is the most important really goal that any leadership organization can have. And I think if you looked at this company today, it's really not recognizable from the individual businesses that made up what is today Element Solutions and certainly a night and day from where I started this journey about 8 years ago. And the performance of the business speaks for itself. This is about the best return on invested capital company you'll ever find in the specialty chemicals space. Certainly, that trades at the multiples that we trade at. It's one of the highest free cash generators that you will find, and it grows faster than the markets in which it competes without having to spend a lot of money on capital expenditures. But still at a 15 P/E and maybe today, 13 or 14, I haven't looked at the market, I don't feel that this company's been yet getting the recognition that it deserves in the marketplace and that's opportunity as far as I'm concerned. I've been an investor in this company, as I said, for 8 years, haven't sold a share, and I see tremendous upside from where we are. We doubled earnings per share in 3 years and set a new incentive to double earnings per share again in the next 5 years. So there's a lot of upside. The markets -- the end markets will be there for us to be able to execute on that opportunity as long as we can be good capital allocators. And I hope that if you look back on the last 3 years with the benefit of hindsight, we have been good capital allocators. And I think that if you look at any business that creates superior returns than the markets in the indices in which it operates, it's capital allocation that really makes a difference. And I can say that it's been a pleasure working with the team. It is a real team, a team like never before. And I think some of the challenges that this company has gone through from a macro perspective, only make it a stronger organization. There's enormous amount of potential here. And as one of the largest shareholders in the company, I'm very excited with the prospects that are in front of us. So with setting that format, I'll hand it over to Ben and hope you enjoy the next couple of hours.

Thank you, Martin. Thank you, everybody, for joining. Thanks to everyone on the line. It's great to be here with you today. It's been a great 3 years. The future is bright, and I'm looking forward to taking you through what we've accomplished and what we're setting out to accomplish in the near term here. Before launching into Element Solutions since launch, let me recognize some of the people in the room. Up on the dais with me, our CFO, Carey Dorman; Joe D'Ambrisi, the Head of our Electronics business, you're going to hear from both of them; Rich Lynch, who runs our Industrial Solutions business; and Rick Frick, who runs the Semiconductor business. Also with us today are other members of management, Judy Foldes, who's responsible for our sustainability across all of Element; Vic Michels and Caroline Lind from the legal team; John Capps, General Counsel; Denis Bräuer, our Treasurer; Matt Liebowitz who overseas strategy; Robbie Matthews is somewhere in here, who's on the corporate development team. You'll have an opportunity to speak with them during lunch and ask questions. Elyse Filon from our Board is also in the room. Thanks to you for joining. As I said, we're going to start today with what we've accomplished over the past 3 years as Element Solutions. And it's really hard to believe that it's only been 3 years since we launched ESI and how much we've accomplished in that period of time. It's been an intensely productive 3 years. And each year has really been very different. You start with 2019, we took the work of not only defining but also clearly articulating who we are and who we wanted to be very seriously. What did Element Solutions stand for? What are the behaviors that we would encourage? What's our culture? And then ensuring that the organizational design and incentives all aligned with that vision, which meant restructuring the organization and eliminating layers, resetting our compensation programs and then communicating that thoroughly internally and externally. And then we really viewed that as laying the foundation for Element Solutions' future, which was very quickly tested in 2020. Could we be nimble in the face of COVID? Could we manage our costs aggressively without sacrificing the long term and still being a reliable high-quality supplier to our customers? This was the first real economic dislocation since 2008 and 2009. And these businesses didn't exist in their current construct at that point. So we wanted to prove out the things that we had counted as the hallmarks of this business, margin resilience and cash flow generation. We took out more than $20 million of cost in 2020 without a significant personnel restructuring. And you'll hear more about how we really preserve margins in the face of huge volume volatility. The silver lining of 2020 was that there was an acceleration in certain trends prompted by COVID. And that's been propelling our business since then, and will continue to do so. And in 2021, we were focused on ensuring that we could capitalize on those trends in the near term, capture that value while also still maintaining an ability to keep that acceleration and accelerate our growth in the future. So that was -- that looked like a ramp-up of investment, right? We spent more in CapEx in 2021 than in prior years. It meant process improvement. And you'll hear a lot about all the things we did in 2021 to position ourselves for growth over the course of the day to day. And coming back to 2019 and the foundation we laid, we created a very simple vision, which was to be the very best in our industry around 3 specific areas: the value we provided to customers; the opportunities we created for our people; and the value that we would create for our shareholders. And rather than just throwing those out as words or ideas, we set out to measure them with simple metrics. We measure value to customers through gross margins. How much more are customers willing to pay than what we pay for the solutions that we provide to them? And through Net Promoter Scores, you could juice your margins by raising prices, but you'd have unhappy customers and that would be bad for the long term. So how happy are our customers, which we get to through voice of the customer surveys. Measure opportunities for employees 2 ways. First, internal fill rate. How good are we at growing our people and preparing them for promotions and then promoting them? And employee satisfaction also done through surveys of our people. And finally, we're a long-term oriented company. We believe the best way to measure the value we're creating for shareholders is through EPS growth, but we also look at TSR. And by all accounts, we've done very well on all 3 of those areas over our first 3 years. Excluding the impact of metal, we've grown our gross margins by 100 basis points in that 3-year period. We did a survey in the second half of 2020. The next one will be in 2022, and 40 questions that we had asked in 2018, but the most important takeaway was that 92% of our people felt that Element was as good or better of a place to work in 2020 than it was in 2018. Now remember what's happening in the second half of 2020. We had COVID, which was creating a huge amount of stress from a personal perspective as well as a professional perspective. People were working from home. They were dealing with the personal side from a sickness standpoint, but also wage cuts and a huge amount of stress and yet still 92% of our people were happier than they were 2 years prior. And finally, from a value for shareholders' perspective, we've doubled EPS, and we've doubled our share price. Element Solutions' operating system is where we translate the ideas from our vision into day-to-day tactical execution. So we talk a lot about the excellent businesses we have and running them better. And this is how we do so. This is how we build the long-term plans for breakthrough growth and then turn them into short-term goals. Creating this linkage between big picture vision and culture through to long-term business specific goals, down to specific local execution and marrying that to incentives is very challenging. But when done right, that alignment is incredibly powerful. And so the way we solve that is through what we call esdi, which is element, strategy, development and implementation. And this is a standard framework that we use in every one of our businesses. It relies on empirical data, customer insights and a set of specific tools that we've either developed internally or borrowed from companies that we admire. And at its core, what we're doing is developing a deep understanding of our markets at their most nuanced slices. And then we develop frameworks to understand customer behaviors and customer requirements. And when we use those understandings to build long-term ambitious breakthrough goals, call them breakthrough strategic objectives. These are 3- to 5-year ambitious targets that are really out there. And then we break those targets down with annual and then even monthly milestones that aren't just accomplishments, but they're also married to the investment we have to make to deliver on them, and we tie those to incentives. It's a process that's developed centrally and governed centrally, just like capital allocation is governed centrally, but the goal setting and the execution is managed on a decentralized basis. It's managed by each of the businesses and locations. And this is driving that level of prioritization and discipline to ensure that long-term projects can be successful. And so when we talk about strategic execution as one of the ways we're outperforming our markets, we're talking about this. So we've delivered on our commitments since we launched Element Solutions. And with that has come a track record of strong performance. We've outgrown our markets from a top line perspective, in good times and more challenging times. We've converted that sales growth into earnings at a higher rate, delivering operating leverage. We've converted that profit growth into cash flow growth, over $750 million of free cash flow in our first 3 years, growing every year. We've deployed that cash flow in really prudent ways. And so we've compounded EPS at a 27% CAGR for our first 3 years. That's 3x as fast as EBITDA. So how are we doing that? We talked about esdi conceptually. Let's talk about investment and execution that's making each of our businesses better. What are we doing to make our businesses better? Well, it looks different in different businesses. You can see 3 case studies here on Slide 11. First, in our Assembly Solutions business, what we've done there is driven mix towards higher technology applications. Historically, a large portion of this business was bar, solder and wire. These are heavy metal content products that have a lower value added. What we've done is we've done a thorough portfolio analysis, understood what in this portfolio are going to be the value drivers, invested in higher technology applications, whether that's high-end pastes, our power electronics portfolio, our preform products, and we've driven nearly 1/2 of the sales in that business into higher technology, therefore, much higher margin products. This is a true transformation in our Assembly Solutions business. The lower tech, more metal-based products are an increasingly small percentage of sales, but even less of profits, and they've been replaced by faster growing, higher tech inputs that are going into high-end devices and semiconductor markets. The convergence across our electronics portfolio, which you're going to hear about more, is really pulling this through. So our presence in semiconductor, our presence in circuitry is giving us intelligence and traction with these higher-end capabilities, it's really helping drive that transformation to the benefit of our broader electronics portfolio. You can see it here in the Assembly Solutions business. Some of these products are low-melting point paces. So they have a lower melting point to the metal, which means that the heat required to assemble the electronics is less. And as you've got flexible circuit boards, there's less damage to the board or high reliability alloys. These are higher reliability products that have applications in high-demand end markets like automotive. There's the power electronics portfolio you're going to hear about. We've even entered into the adhesives market away from the metal side through acquisitions, which is a hugely important and big growth driver within the overall electronics space. We've got a foothold, and we expect that to grow nicely. What that's translated to is 500 basis points of margin expansion in this business and a 10% improvement in CRI. You're going to hear a bit more about CRI over the course of the day. CRI is cash return on investment. It's a metric we've been using more and more at ESI, which simply measures the amount of cash you get out of a business relative to the amount of cash we have in the business. And we borrowed that from Roper Technologies, and it's an easy way to evaluate business quality. In the Semiconductor business, it's less about portfolio transformation and more about investment. So we've increased capital investment and production capability. We've added applications labs, and then we've increased personnel investment in commercial team and in our technical team. And altogether, that investment has driven very strong growth, and it's been high returning. So despite increasing OpEx, our margins are expanding. The top line is up over 50%, margins are up over 100 basis points and CRI is up nearly 30%. So it's a different strategy for a different type of business, but both are driving growth in profits and business quality improvement. And finally, in the Industrial Solutions business, we've been investing to expand our footprint to expand our team and expand our capabilities, and we've done so very accretively. We become a clear leader in our categories. And we've built the best team in the market with the best product portfolio. It's been a real transformation. And these acquisitions haven't just added new capabilities in our core markets, but we've also entered new markets like water treatment, which is increasingly important for our existing customers or the light metal space, which is a really nice growth adjacency where there's a lot of complementarity between the things we're doing here and there. Importantly, these investments have been at very attractive entry points. So below 10x, which includes substantial synergies and those synergies are going to drive margins higher over the next several years. And with that, CRI. So what you can see is different strategies for different businesses that are all working towards similar objectives, compounding earnings and improving our already very good business quality. In our first 3 years, we've also improved transparency into ESG. Now ESG is a value driver for our company. And it really aligns with our vision. We'll talk more about that a little later. It's been a long part of our company historically, but it was not well enough articulated. And we changed that over the past 3 years, and we've ramped up our investment. So we launched ESI Sustainability, which is an initiative that unites both internal and external supply chain sustainability activity. We formed the ESI Foundation with a $5 million investment that's focused on investing behind our communities. And we launched ESI Cares, which is a community service effort at our sites all over the world. And the employee engagement in that has been terrific. The response has been outstanding. We also published our first sustainability report in 2021, which, with its added transparency and reporting, really drove substantial improvement in our ESG scores and recognition for all the good work that we're doing from a sustainability and ESG perspective. We're very proud of that. And we're invested in and investing behind a more sustainable future, and there'll be more on this later. All of this has translated to real value creation at Element Solutions. We've more than doubled EPS in 3 years through earnings growth, through capital allocation and through prudent balance sheet management. Our share price has more than doubled on the back of that. And in that period, the capital markets have been supportive not just of us, but many of our peers, and our peers have also seen share price appreciation, albeit not to the same extent as ESI. But what's interesting to note is the sources of share price appreciation across our peer group. So on the bottom-left here, you can see share price performance of our peers split between EPS growth and price earnings multiple expansion. And at the median within our peers, about 60% of share price appreciation is attributable to the multiple expansion. But for us, on the other hand, 90% of our share price appreciation is attributable to earnings growth. So while our shares have appreciated our P/E multiple has roughly been flat despite the improvements I just took you through in our business and the growth outlook that I'll be taking you through today. Our free cash flow yield remains well above the peer average despite substantial growth we've delivered and the bright future we have in front of us, which is all a way of saying that we believe the path forward for ESI has multiple levers for value creation, including but not limited to, earnings growth. Before we dive into the compelling future for Element Solutions, our compelling path forward, I'm going to spend a few minutes reviewing several key attributes of our business for those of you who are newer to our company and to our story, and I'll start with Slide 16 (sic) [ 15 ] here. First and foremost, Element Solutions is a growth business. We are a growth company, and we'll talk more about all the different pathways to growth and each of the powerful trends propelling our business forward in more detail, but this is the right place to start when we talk about Element Solutions. The growth trajectory of our company has sustainably inflected positively in the last 3 years. Our business has real significant exposure to some of the most exciting trends, not just in specialty chemicals, but in the overall economy. So whether that's the rate of electric vehicle penetration, which has accelerated in the past 3 years beyond what we would have expected when we were together in 2019 to the traction around 5G investment, both in phones and base stations and the surge that we're seeing in that market really picked up in 2020. And this increased mobility and computing power is driving a huge increase in demand for semiconductors and microelectronics. And we're a key participant and supplier in that market as well. At the same time, the necessity for sustainability, both in our products and in our broader lives, has never been greater and Element Solutions is providing the materials that are enabling these dramatic shifts. So while technology shifts are driving growth and with that a great deal of change, at its very core, our business is sticky and durable. Our products are deeply embedded in our customers' supply chains. And the moats around our technology are deep and wide. The barriers to entry in this business are very, very high. Our end customers qualify and specify the preponderance of our products. And we're built into our customers' manufacturing processes and our people are on site with our customers all over the world. Compounding that is the fact that our products represent a tiny share, a tiny percent of the overall cost to our customers. So the switching costs are very high, and the switching benefits are very low. It's a defensible business, and it's also a repeatable business because 99% of what we sell is consumable. Further enhancing our defensibility is our diversification. So the business is diversified across end markets, across geographies. It has very little customer concentration. So while we're increasingly concentrated in specific secular trends and technologies that are driving our business forward, we're not concentrated in any specific technology, in any specific geography or in any specific customer. The growing global focus on ESG is a tailwind for Element Solutions. Sustainability is a value driver for our company. Sustainability sits at the intersection of the 3 vectors of our vision that I took you through in the beginning, which is to say that our customers want more sustainable manufacturing. Our people benefit from the investments we're making in their communities and our shareholders want to support more sustainably oriented companies. And all across our business, sustainability is driving customer preference and commercial execution because we bring to bear an incredibly sustainable portfolio. So whether it's our ability to provide recycled tin, to eliminate hazardous chemicals from manufacturing processes, to help with water recycling, to support electric -- vehicle electrification, to reduce water and energy intensity in our processes or in our customers' processes, we have a selection of products in every one of our businesses that supports sustainable goals. So if customers want sustainable solutions, we are their vendor of choice. And we're differentiating ourselves through that. It's a major theme, both on a macro level, but also on a micro level in our business that we've been capitalizing on. Historically, the hallmark of these businesses have been strong and stable margins and strong and stable cash flow. And so while we've been investing more in growth and we've delivered more growth, those dynamics really have remained unchanged. Despite significant raw material inflation over the past several years, our margins have been stable. And even in periods of significant volume volatility, our margins have been stable. Our cost structure remains variable both in COGS and in OpEx. And if you think back to the most recent test, we proved that out. In the second quarter of 2020, our sales were down 15%. Our EBITDA margin was down 10 basis points. We have the ability to preserve profits in down markets and to deliver operating leverage as we grow. We've proven that. And finally, with regard to cash flow, we've grown cash flow every year, and that trend should continue. Over the next 5 years, we expect to generate in excess of $2 billion of free cash flow compared to $750 million over the past 3. As you heard earlier, we've been increasingly using this metric, CRI. We love it. It's a simple metric to measure business quality. We like it because it's simple. We like it because it's really easy to understand, right? How much cash to get out of the business, EBITDA less maintenance CapEx divided by how much cash you have in the business, which is net PP -- gross PPE plus working capital. It's good because it's comparable across all businesses, right, an easy thing to calculate. And it can be improved in any year regardless of the macro. So in a down market, you can reduce the capital intensity in your businesses and still drive CRI. So you can have success in markets where the top line may not grow. Unsurprisingly, as we regularly talk about, the cash returns on our business being superior in our space, the data bears that out from a CRI perspective. So if I could conclude this section on our business attributes with one sentence, it would be that Element Solutions is a growth business with wide moats, sticky customers, stable margins and best-in-class returns. So our compelling path forward. Thus far this morning, we spent our time talking about history and about the long-term fundamentals of this business. But the most exciting thing we're going to talk about today is the current environment, the here and now, the opportunities right in front of us. The path forward for Element Solutions is incredibly compelling. The confluence of macro and company-specific factors present an opportunity that will allow for us to compound earnings for many years to come. And I'll take you through each of them quickly and then turn to my colleagues to go through them in more detail. The secular growth drivers, I think, are well understood. Vehicle electrification. As I said before, the pace of penetration of the automotive fleet by electric vehicles has accelerated and will continue to do so. There is huge runway there, and we are providing critical enabling capability to electric vehicles. Next-generation wireless technology is here with us, but is in its early stages, both from a handset perspective, and from an infrastructure perspective. And once there is pervasive 5G capability, it will open new markets. So this isn't a run-up that will be followed by a rundown. The technology requirements of those new markets will be similar, if not more demanding to what we're selling today. So the runway here is very long. We talked about rising semiconductor intensity. We're seeing that all over the world. It's become a geopolitical issue, and we are a critical supplier with gaining importance in the semiconductor supply chain. And finally, sustainability, as I talked about, is propelling our business forward. That is a secular trend in each of our businesses that we are well poised to benefit from. Strong execution. This isn't just a macro story. We're running these businesses better. We're running them better through commercial excellence and the investment we've made in standardizing processes around that through technical excellence, having the best people on site with our customers, having the best products. We're driving market outperformance through that and through other investments, and we're converting that growth very efficiently and accretively into profit growth. And compounding all of that is capital allocation. And as Martin said, we're building a track record of thoughtful, accretive capital allocation, whether that's investing behind our market-leading businesses, having significant capacity to continue to do so. We're entering new interesting adjacencies with low basis and low risk and we're investing behind sustainability, which creates a real positive feedback loop from 0.4 to 0.11 as you'll hear about. So with that, let me introduce Joe D'Ambrisi, who oversees our Electronics segment, and he's going to take you through with more specificity, several of these really exciting trends. Joe?

Thank you, Ben, and good morning, everyone. My name is Joe D'Ambrisi. I'm an Executive Vice President and Head of Electronics for Element Solutions. I am a 38-year employee of Element Solutions and its legacy organizations. I began my career as a research chemist and an engineer and over the years, have held a variety of different roles of increasing responsibility in product management, marketing management, innovation management and now commercial management for Element Solutions. I have spent my entire 38-year career in the electronics industry. And I am thrilled to be here today to talk to you a little bit about the market opportunities that are in front of us and how our Electronics business creates value for both our customers and for ESI shareholders. It's clear that one of the primary beneficiaries of the secular growth trends that Ben just mentioned will be the automotive industry. And we believe that Element Solutions is well positioned to take advantage of the dramatic electronics content growth that we'll see in the automotive supply chain. If you look at the chart on the left, at the top of the slide, we see rapid growth rates in electric vehicle production over the next 10 years. This transition to electric vehicles presents significant challenges to the automotive industry, but those challenges are what we view at Element Solutions as opportunities for innovation in our businesses. We've categorized these system-level opportunities at the bottom of the slide. And in the case of power electronics, specifically electric vehicles, the industry required the development of an entirely new drivetrain. And just like the evolution of the internal combustion engine, there will be incremental innovations along the way that will improve the efficiency of power transfer and the capacity in which batteries can store power. Element Solutions has developed entirely new and unique enabling technologies for inverters in this application, such as our Argomax technology that Ben mentioned and alloy metal plating technologies to improve battery efficiency. The remaining 4 system-level opportunities that you identified at the bottom of the chart, pertain not just to electric vehicles, but for all vehicles regardless of the drivetrain that they use. And these opportunities extend across the entire Electronics Solutions portfolio as well. An exciting new area of opportunity on the left of the slide that we have identified and one where we believe that Element Solutions is uniquely positioned in the industry, is in-mold electronics and displays. As the name implies, we use our existing film in-mold technology that today produces decorative 3-dimensional structures in a car interior and combine it with our portfolio of flexible and formable printed inks to produce formable, structurally rigid, 3-dimensional elements with circuitry embedded inside. These designs and structures can reduce weight by eliminating wiring harnesses. They can reduce manufacturing complexity and manufacturing steps. And they can replace traditional mechanical buttons and switches with touch-sensitive functionality throughout the entire vehicle. As the industry strives towards fully autonomous driving, Element Solutions has programs to solve some of the most difficult challenges that touch almost every part of our portfolio. Our semiconductor plating technologies enable the rapid response speeds needed for LiDAR and radar systems, while our Alpha HiTech adhesives are a key component in camera and sensor modules. As we can see in the chart in the upper right, both of these technologies will benefit from the rapid growth we'll see in vision and sensor technology that's needed to enable completely autonomous driving or what's known in the industry as Level 5 autonomy. Given the breadth of capabilities that Element Solutions can offer in automotive electronics, it's not surprising that OEMs are more frequently engaging us to help them solve new, unfamiliar challenges across each of these applications. Working with these OEMs drives them to push their suppliers in our direction with qualifications and specifications that eventually lead to sticky, high-margin business opportunities for us. When we add all of this together, we believe this group of system-level opportunities presents around $100 of content opportunity per electric vehicle for Element Solutions. Building the propulsion system for an electric vehicle falls into a very broad category known as power electronics. In simple terms, an electric vehicle takes energy stored in a battery and transfers that energy to electric motors at the wheels of a vehicle. At the center of that power transfer is a semiconductor chip and that semiconductor chip manages and regulates that power transfer. The industry's traditional method for attaching semiconductors to their package substrate, or what's known in the industry as die attach, today relies heavily on lead-based solder alloys that simply don't provide the power density or the long-term reliability that's necessary for an electric vehicle. We've developed and commercialized an enabling silver centering die-attach technology with the brand name Argomax that greatly increases power density and provides orders of magnitude improvement in the long-term reliability of an electric vehicle drivetrain and this solution is the clear industry-leading technology in the EV market today. What that means for an electric vehicle owner is better performance in the way of acceleration and longer range in between charges. And the need for power electronics is not just limited to inverters in an electric vehicle, but extends to the entire EV battery management and charging systems to electric locomotion, to industrial power management systems and to any other application where high power needs to be managed and regulated. As shown in the chart on the right of the slide, the end result of all of these applications is just incredible growth for many years to come. In the last year alone, our Argomax revenue has doubled, which just confirms for us the importance of this rapidly growing technology sector. And to make sure that we maintain that leadership position, we are investing heavily to keep up with this rapid growth. The silver centering technology, which Argomax is based on, is completely new to the automotive industry. So we use our application centers located around the world to demonstrate this capability that this technology can provide. This allows our customers to bring their specific designs to our application centers where we can demonstrate the benefit that they can expect to receive by adopting this innovative solution. We're investing in additional manufacturing capacity to accommodate the incredible growth that we've seen over the last 3 years. And just like so many other Element Solutions businesses, it's our people that differentiate our products and the value that they can provide to our customers. So we continue to invest heavily in our team here as well. This is a market that we expect to grow to over $300 million in the coming years and one in which we are the incumbent leading supplier. Of all the secular growth drivers that Ben mentioned earlier, the one common denominator is that all of these trends result in increasing device complexity in the electronics equipment that we use every day. And I think one that most clearly represents the opportunities available to Element Solutions, is next-generation 5G wireless technology. There really isn't a single component that's used to build a next-generation 5G compatible device that doesn't require increasing circuit density, whether it's the main printed circuit board of a flagship 5G smartphone, or the semiconductors used to power that phone, or the package substrate that those semiconductors are mounted to. All of these components have significantly more circuit density than their predecessor 4G models. As an example, a 5G main circuit board can contain 10% to 20% more layers than a 4G model, and every additional layer means an additional pass through our chemistries. When it comes to semiconductors, a 5G handset simply needs more of them, to the tune of about 30% more semiconductor area when compared with a 4G model. And although we use roughly the same amount of solder paste per unit area in a 5G phone, we continue to build more phones every year. And the higher reliability alloys and finer pitch solder pastes that are used to build those phones are sold at a significantly higher margin than earlier generations. And one of the unintended consequences of increasing device complexity when we're trying to generate more processing power in roughly the same amount of space is increasing amounts of heat. Managing that heat is a constant struggle for designers and fabricators alike. And this was one of the principal factors behind 2 of our most recent acquisitions of our HiTech and Electrolube brands. Thermal management will continue to be a challenge for the industry as long as device complexity continues to increase. And this provides us with the opportunity to innovate with both conductive and nonconductive adhesives that are part of our HiTech portfolio and in thermal management materials that are part of our recently acquired Electrolube portfolio. So when we put all of this together, increasing device complexity in this example, simply means that an equivalent flagship 5G model phone requires significantly more Element Solutions content than its predecessor models. And I think this picture in the center is a simple illustration of how Element Solutions is uniquely positioned in the industry to take advantage of these trends. This picture shows a single interconnect on a semiconductor chip mounted in a semiconductor package, which will eventually be connected to a bare printed circuit board. This interconnect is one of billions of interconnections on every single electronics device, all manufactured with Element Solutions' technology from all 3 of our Electronic Solutions divisions. At our core, we are the only company in the industry capable of creating circuit pathways on everything from a semiconductor chip to an advanced wafer level package, to an IC substrate, to a bare printed circuit board and then interconnecting all of those circuit pathways together to build a complete electronics assembly. Our competitors certainly have parts of this process, but no 1 company has the complete portfolio of capabilities that Element Solutions has. But so what? Why is this important? Well, if a designer of a next-generation device wants to know about the compatibility of all of those circuit pathways and the reliability of all of the assembly technologies used to interconnect all of those circuit pathways together, the only company that can ensure that compatibility and can help them predict the reliability of that next-generation device is Element Solutions. And with all the news and the fanfare that we hear about 5G technology, you would think that it's a technology that's approaching maturity. But to be clear, as Ben mentioned, we are really just at the beginning of 5G evolution. The most prominent early adopter of 5G technology has been next-generation wireless communications. And there are 2 principal pieces of a 5G ecosystem that are seeing significant investment today. The first is handsets, where you can see in the chart at the top of the slide that only 1/3 of all smartphones built today are 5G-enabled. This will grow to more than 2/3 of all smartphones by 2025 and will continue to grow until 3G and 4G technology is eventually phased out. The important point here is that Element Solutions captures roughly 15% more value for every 5G-capable handset that's produced, and that will continue well beyond 2025. And the benefits of faster data rates and lower latency from 5G can only be realized with an infrastructure network that supports it. In the chart at the bottom of the page, you can see that here, too, we are in the early stages of infrastructure build-out to support 5G networks. This build-out has started with base stations that are designed to span large distances, but this will evolve and continue to grow with an even greater number of what's known as small cell or millimeter wave base stations. This millimeter wave subsegment of 5G technology promises even faster data rates, but it only works over shorter distances. So it's ideally suited to handle urban areas, stadiums, airports, other densely populated or crowded spaces. And as this last iteration of 5G technology becomes more mainstream, it will require a whole new generation of handsets specifically designed to take advantage of these faster data transfer rates. And so another replacement cycle will start at that time. So we have 2 waves of technology requirements in 5G that will demand a continuous stream of innovation from Element Solutions. And Element Solutions' content in 5G, just like in every other electronics end-use segment, extends from semiconductor packaging -- semiconductor fabrication rather, through wafer level and IC substrate packaging through printed circuit board fabrication and on to final bare board assembly. And although faster mobile and broadband communications is the most obvious and current benefit of 5G technology, there are a myriad of other applications that will evolve and grow as a result of a fully functioning 5G network. We've shown many examples here on this slide and our customers and their customers rely on ESI to provide innovative solutions to make these applications a reality. There are markets and applications very early in their life cycles that will continue to grow and reach their full potential as 5G networks continue to expand around the world. We've already talked about autonomous mobility and what the evolution of 5G technology will mean to the automotive industry, but there are many other future market opportunities that are enabled by 5G, whether it's high-end wearables or factory automation and autonomous distribution networks, or the broad proliferation of IoT devices or advancements in augmented reality and virtual reality, all of these devices and applications rely just as heavily on ESI's entire portfolio of current products and future innovations. And we need to realize that mature 5G infrastructure isn't the end of a long growth curve for Element Solutions. 6G is on the horizon and is expected to be commercially released sometime around 2030, with 3 orders of magnitude or 1,000x greater speed than 5G. So the years leading up to 2030 will begin the next cycle of increasing device complexity, of renewed infrastructure spending, of a whole new generation of market opportunities and applications, many of which we have yet to imagine. In my 38 years of doing this, there's been no more exciting time to be in the electronics industry than there is today. And now I'd like to introduce you to Rick Fricke. Rick is the Vice President and General Manager of our Semiconductor Solutions division, and he's going to tell you a bit about the trends driving our Semiconductor business and our participation in that important market segment. Rick?

Thank you, Joe. Good morning. My name is Rick Frick. I lead the Semiconductor Solutions business for here at Element. I joined the company 2 years ago from Honeywell, where in my last role, I led their Electronic Materials business. Prior to that, I held leadership roles at ATMI, now Entegris, and Danaher. It's no secret the semiconductor market is growing fast. The number of semiconductors used in auto, smartphones, data centers are increasing. The applications where electronics are used is also increasing, driven by 5G. More semiconductors needed means more wafers are produced and more packages are assembled. We sell the enabling chemistry that is required to produce the wafers and assemble these chip packages. Our products are specified into leading-edge phone, automotive components and advanced sensors. We are positioned well for this tailwind. Advances in packaging design creates 2 significant issues for chipmakers. First, the assembly materials you use on an existing package today are too large. Second, the higher density of the packaging creates thermal challenges. These challenges require new materials that can handle the change in power loads and thermal properties. Our business is uniquely positioned having both wafer level and semiconductor assembly materials. We can work broadly with our customers to solve all of their advanced packaging challenges. Here are some recent examples of wins that required close collaboration with our customers. In our interconnect metallization business, we provide plating solutions for wafer packaging. We recently won a multimillion dollar per year award from a Taiwanese customer, where we provide nano-twinned copper, which is plated on the wafer. This patterned wafer then creates a copper pillar at the submicron level and allows the customer to create their first interconnect to the package on the wafer verse on the package, which creates a huge size advantage for these customers. These logic chips will be used in automotive and 5G applications. In our wirebond and clip business, we recently -- where we do die-attach, Joe explained die-attach, we recently won an opportunity for an advanced automotive application. The customer needed a material that could provide a durable bond at high heat, so the chip would remain attached to the substrate in a rugged automotive application. Our ATROX products provided a solution to this unique problem. We're investing in new technologies and executing on the commercial side. As a result, we are expecting to see double-digit growth in this business over the next 4 years. You may have heard of More than Moore. So what is it? Essentially, when customers are able to scale semiconductor, say, from 28-nanometer, 24-nanometer, they got a performance and a cost advantage. Today, if you go from 10-nanometer to 5-nanometer, it costs more. You get the performance but at an increased cost. So several applications, this is no longer economically feasible to use the most advanced chips. So customers are looking at advanced packaging technologies to solve their performance challenges at a lower cost. That's what More than Moore is. So packaging technology that uses a range of chipsets on a package, there's an example on the right, called heterogeneous packaging, basically solves the performance problem at the system level at a lower cost. And this is advanced packaging design. So the next big breakthroughs in performance will come from advancements in packaging design. Element Solutions is a recognized leader and a partner with these customers at the forefront of where they're developing new standards for assembly technologies. New packaging materials developed across the electronics business to meet these new requirements can significantly reduce -- provide significantly higher margin for us as they are truly new and patentable designs and materials. Also, the semiconductor and circuit board markets are converging. There is enormous opportunity for us across the entire electronics segment. We are uniquely positioned with circuit board, semiconductor plating and assembly technologies. At a recent technology road map review with one of our largest outsourced semiconductor packaging customers, they said, "You're the only company we work with that could talk to us about packaging from the wafer level all the way up to the board level. We are positioned well for this technology trend and our customer is recognized and appreciated. Thank you." While strong execution and growth in electronics is an exciting part of Element Solutions, but not the only part. There are compelling trends driving each of our businesses, and I'm pleased to announce Rich Lynch to talk about Industrial Solutions.

Thank you, Rick. My name is Rich Lynch, and I'm responsible for the Industrial Solutions business. MacDermid Enthone Industrial Solutions. I've been in this industry for more than 30 years and never has there been a greater opportunity for our business and our markets than what's in front of us today. Our acquisitions have allowed us to build the largest and best, most capable teams and to wrap the leading product portfolio around that capability. Oh. Thank you very much. Our acquisitions have allowed the capability to enable those key people and make them more capable to deliver on our opportunities. Our acquisitions are -- combined with trends around sustainability, we have a market growth and market share opportunity that is unprecedented. I'm really pleased to be here and share our excitement for how we're driving growth, how we're driving growth through specific trends related to sustainability. These trends have accelerated. Environmental sustainability has gone from being a buzzword to being an economic reality for our customers. And I'd like to share with you just a few of the trends that are leading that. Regulatory compliance. Regulatory bodies all over the world in every jurisdiction are increasing the demand and the requirements around regulatory compliance. This tightening requirement is really key for a couple of key reasons. I think of our customers in 2 buckets. One, we have existing customers needing to operate in a tightening regulatory environment today and in the future; and then we have growing and expanding customers that are building new plants, expanding to new geographies and need to know that they can meet today's regulatory requirements and tomorrow's regulatory requirements to protect their investment. Demand for energy efficiency. This lowers and mitigates the rising cost of energy and it's important for operational costs, but it's particularly important in geographies with acute energy acceleration and rising inflation. It also lowers the organization's environmental footprint. Vehicle lightweighting, vehicle lightweighting is driven by the need for increasing fuel efficiency in vehicles, but also improved range of electric vehicles. We see nice growth in this sector, and this is where our Coventya acquisition really supports this market opportunity with improved technology and increased know-how in this space. We've assembled a really nice team in this area to meet this market trend. Clean manufacturing preferences. I think everybody would like to operate with the smallest environmental footprint possible. We are uniquely positioned to show our customers how to do this profitably through the marriage of our bio-enabling equipment and our process chemistry. Business continuity and supply chain risk management. Historically, this is table stakes taken for granted. This is not the case today. As the leading supplier in our market, we're able to leverage our ability to secure critical raw materials. We're also able to bring together, to bring to bear the largest R&D and innovation team for qualifying new raw materials. We also have a large global footprint. This allows us to effectively acquire raw materials in those geographies where they're available and also to move materials around as is most efficient, be them finished goods or raw materials. As you see on the right, this new technology has a real trend, has real traction at the OEM level, and we are leading the market. This traction manifests itself through the level of OEM approvals for our newest environmentally friendly technologies. We have the longest operating hexavalent chrome-free production facility in the world. This is particularly important for OEMs. I mean, the OEM community tends to be conservative and risk adverse, and validation of technology in a production environment is very, very important to them. Our engagement is extremely high. And you can see this in the level of projects. We literally have projects with every significant global automotive OEM in the world and the market influencer customers that they rely on to deliver components. Large market-leading customers need a profitable path to sustainability. They know this. And traditional product solutions are just part of the solution, part of the answer. Our ability to connect these solutions, these technical solutions through our Envio ancillary equipment, wastewater treatment systems and the ability to reclaim and recycle materials is completely unique to us. By bringing solutions which reduce water usage, for example, or allow to reclaim high-value metals, this is where we're solving new and real problems where we're adding more value than any other market participant. So we provide a leading-edge technology. We have a complete solution unique to us in Envio. We've been active in consolidating our markets to achieve industry-leading scale. Yet again, this is not enough on its own. Connecting these solutions to executive decision-making levels through strategic account management is where we win. It's where ESI wins and quite frankly, it's where the customer wins. We've worked extensively at ESI to become quite good at this, and it's a key area of focus for our businesses. Every business has key accounts prioritized. We train a specific team of people to be successful at this level of engagement. We have a large universe of customers. We have a large universe of opportunities, and we know that the biggest of these drive the most value to the bottom line. Strategic account management is where we develop specific strategies for targeted customers to raise the level of engagement from a regional to a global perspective. We bring a solution for a fundamental business issue and solve it at the executive level that could be implemented, replicated at multiple sites around the globe or across the region in a consistent manner. This is very powerful and very valuable. Here are a few examples. So the customer on the left is a large automotive supplier. They interface with that supply chain in a variety of ways. We had a really strong regional relationship. They're a very large customer in that region, but only when we engaged through global strategic account management were we're able to raise the level of engagement and open opportunities in other geographies as they continue to expand. We worked with that same company to implement our hexavalent chrome-free technologies and to help them validate that technology with the OEMs that they serve. So this level of credibility also opens the doors again for us to leverage our Coventya acquisition as this company also sees the same trend toward light metal. So light metal usage and incorporation in vehicles is rising. This company is investing and expanding its footprint across the globe to invest in these applications. And now, with our Coventya acquisition, we're able to leverage our enhanced technology portfolio and our wider scope of people to bring to bear. The company in the middle is a large company, multiple divisions, again, strong regional relationship and business. They had a stated corporate goal to eliminate hexavalent chrome from their facilities all over the world. We have the technology. We have the applications expertise. In this case, the way they need to apply that technology is very unique. And so we worked with our R&D and our innovation teams, our global applications experts and regional experts to apply those technologies to their specific need and use. And what is the output of this? The output is they have a strategic advantage in the marketplace versus their competitors. They solved their internal sustainability goal to eliminate hexavalent chrome, and we're able to multiply our revenue across the globe to multiple facilities. The company on the right is a company that sought to vertically integrate by bringing plating metal finishing in-house, really to control the quality of their high-value, highly engineered components that they make. So in that situation, we were able to consult and help them to design a plating layout. We were able to train all of their people through our plating Academy program and we are able to provide a turnkey wastewater treatment solution, completely unique and apply it to their facility. This turnkey consultative approach allowed us to contractually secure this business for years to come. So in closing, I'd like to say we're leading our customers, our industry and the markets we serve to a profitable, sustainable future. A complete value proposition delivered by trained, global strategic account managers has been well received and valued by our customers. With that, I'd like to turn it over to Ben to talk through our commercial execution, a product of the success in our sales excellence initiatives.

Thanks, Rich. So as you heard from me earlier, we've been standardizing and improving processes all across Element Solutions and sales excellence is one of those processes. We have a very disciplined selling process, and we actively track our commercial execution. You also just heard from Rich that we've been putting extra focus across all of our businesses on what we call strategic accounts. We understand that in any market, the biggest opportunities represent a disproportionate amount of the profit pool. And so we've been focusing on those large accounts in all of our businesses. And what that translates to is what you see on this slide, which is all data directly from our CRM. What it shows is that we're winning more business on the top, right? The annual value of what we're winning is going up. The number of wins are going up, and we're winning bigger business. So the per opportunity value is going up. So we're focusing on larger accounts, and we're converting larger accounts. At the same time, what you see on the bottom of this chart is that we're replenishing our pipeline. We talk about winning now, winning later. Winning now is the top, winning later is the bottom. So we're converting more big business opportunities, and we're backfilling those opportunities as our pipeline is growing very rapidly. And that pipeline growth gives us conviction in the sustainability of longer-term growth because that pipeline is what turns into the top of this slide in the years to come. And that's a great segue actually for Carey, who's going to take you through our growth algorithm in a bit more detail. Carey?

Thanks, Ben. Good morning. So in 2019, we presented a blended average growth rate for ESI by mapping our businesses to the key end markets that they participate in. Today, we're updating that analysis and increasing our outlook. The mix of our business has changed modestly, but the growth rates of our end markets have accelerated in a large part due to the secular mega trends that Rich, Rick and Joe talked to you about before. Our leaders spoke about growth, not just in volume, but also in content per unit or complexity per device. Our businesses should grow faster than the end markets that they sell into because of this per unit complexity. This point is often underappreciated about ESI. ESI is not just exposed to these exciting secular mega trends. It's a levered exposure. It provides upside when units are growing, and it insulates declines in weaker end markets. This reduced volatility in market outperformance has been clear in our multiyear results. So what does this translate to? A blended medium-term growth rate of 4% to 5%, plus the content per unit growth that I just talked about, plus strategic execution, and you get an expected medium-term annual growth rate for ESI of 5% to 6%. Our growth rate is accelerating because of the markets that we sell into and the [indiscernible] is the key part of the equation. Ben took us through earlier the variable operating cost structure that we have in the business, which allows us to protect profits during downturns. However, we've also shown that over a multiyear period, ESI can generate strong and expanding EBITDA margins through improved business mix, operating leverage and executing on specific cost reduction initiatives. Over the last 3 years, ESI has generated 36% incremental EBITDA margins on 14% sales growth. Quarter-over-quarter fluctuations in our different verticals and which one grows in a specific period can make that hard to see in any one quarter, but the multiyear trend is clear. To getting to 30% to 40% incremental margins means growing adjusted EBITDA about 1.5x net sales. Now I'm going to dig a little deeper into the 3 ways we expect to do this. The first is product mix. For us, product mix simply means that the products we're going to sell in the future have an average margin that's higher than the products we sell today. As you've heard from the other leaders, as a reliable partner, such as ESI -- excuse me, as you heard from the other leaders in our end markets, technological change happens fast. And a reliable partner like ESI is required to move quickly at scale to develop new products in a flexible supply chain to serve these changing needs. In return for this value, we're able to capture strong and stable margins. The more growth markets that we sell into, the higher our margins will be. In addition, our ESDI prioritization initiatives that Ben showed you at the top at the meeting specifically target markets where we have proven technology advantages and higher-margin opportunities. On average, we expect those ESDI initiatives to contribute margins at least 10% higher than the company's average today. Simply put, our higher-margin businesses are growing faster, and we are investing to further accelerate that flywheel. So next is operating leverage. On manufacturing costs, we benefit just like other industrial production companies putting in a second or third production shift. It's the same equipment in the same facilities. We see very small incremental costs. It's really just the labor. When it comes to other functions with an ambitious annual productivity target like a target for flat organic G&A cost or certain percent of efficiencies in our supply chain and purchasing organizations every year. And importantly, we incentivize our team against these targets. And finally, targeted cost reduction initiatives where we have a track record of success. We reduced $25 million of corporate costs after the Arista divestiture. We've executed above plan on numerous synergy programs from the acquisitions we've completed, and the large opportunity in front of us here is from Coventya. That integration is going exceptionally well. We're selling and innovating one suite of products with one commercial and R&D team already. And we've also begun the integration of our supply chain and our G&A organizations. We are confident that we're going to overachieve the $15 million of synergies that we announced when we closed the deal back in September. So while most of these savings drop through to the bottom line, they also provide us capacity to invest in growth. As I said, our businesses are asset-light and require minimal capital to grow in existing product lines. However, one of the ways that we deploy the significant excess capital that we generate is in product extensions into new markets where our customers have undermet needs. Investing in these new capacities has become an increased focused area for us, and it's a high-returning opportunity. Importantly, our maintenance and incremental growth CapEx needs to remain modest. You heard a little bit about these before, and I might go through them quickly again. The 4 exciting examples on this slide that we highlight all share certain common attributes. They're all in large and growing addressable markets. There's a clear line of sight to high returns on our investments. There's relatively low execution risk. And these are all markets that we know well and are well positioned within. The first 3 examples relate to some of the strategic growth areas that our other leaders just spoke about. The first is power electronics, where as Joe mentioned, we're adding a new applications lab in China to cement our leadership presence in that market. And we're building a new production facility in the U.S. to meet the more globalized needs of EV manufacturers and other power electronics customers, as their footprints are expanding as well. In semiconductor, we're building a new applications lab in Taiwan. That's a highly concentrated semiconductor production market. We want to make sure that we have a strong presence there. And lastly, customer equipment financing. Here we're leveraging our strong balance sheet to lock in long-term contractual and highly profitable business across the electronics market. We're also investing in our other businesses, like graphics, which has numerous exciting growth trajectory ahead of it. We're expanding production capacity to support production for a big new customer win that we secured last year. And we're also establishing a customer experience center. This is similar to the electronics application labs that we have around the world. It's going to allow customers to come in, test and train with new technologies, expanding our customer reach. Each of these investments has a dedicated project team that has full ownership of the outcomes. We have a high bar for investments like these, but have many exciting opportunities. So over the last several years, we've built a strong balance sheet that provides us flexibility to pursue attractive capital allocation. Our cost of debt capital is low, and our interest rate risk is fixed and hedged through 2024. We believe we've demonstrated our ability to deploy significant amounts of capital, while keeping leverage well below our committed 3.5x net debt ceiling. In total, we've deployed over $1.3 billion in the last 3 years, driving significant shareholder returns, while also delevering to less than 3x. So as we look forward through EBITDA growth and free cash flow generation, we think this business should organically delever about 0.75x per year, subject to significant capital allocation. This puts us in a strong position. So speaking of capital allocation, we wanted to revisit this slide that we showed back in 2019 to remind you how we think about deploying excess capital. To date, we believe we've maintained a measured approach, acting opportunistically to deploy capital to the highest available risk-adjusted returns that we've seen. When we consider an acquisition, for example, we don't just look at the absolute price we're paying for that deal. We look at the risks inherent in buying someone else's company and compare that to the return available to us buying our own shares. So as our stock gets cheaper, our hurdle rate for M&A goes up. When we don't see M&A that meets our absolute hurdle rate, and we think our stock starts to approach fair value, that's when we would build our cash chest or consider increasing our dividend. We've been fortunate in the last several years. We've had enough capital to deploy, where all of the choices have made sense at different times. This framework will not change. But of course, the relative value of opportunities will, and we will be ready to take advantage of them. So how is our capital allocation framework materialized over the last 3 years? As I said, we've deployed nearly $1.3 billion of capital into a variety of high-returning investments. These include 5 high-returning acquisitions that all met our acquisition criteria, a bond refinancing that saves us more than $16 million a year in annual interest and nearly $600 million of share repurchases that equates to almost 20% of the initial float shares when we launched ESI in 2019. We look at the acquisitions. Each of them was consistent with our M&A framework, good businesses in markets we know well; one that we believe are better under our ownership, which means we see a clear path to synergies; and available at reasonable prices above our hurdle rate. While all of these businesses were directly complementary to existing product offerings today, some also brought exciting new adjacencies. These adjacencies offer growth in the white spaces around our business. Many of these have already begun to harvest, and Ben will get into more detail on this now.

Great. Thank you, Carey. So our acquisition activity to date has been focused primarily on growing our participation in our core markets, but we've also been able to gain footholds in adjacent markets where we can support our existing customers, where there's some pull from our existing customers, and that's what you see on this page. What you see on this page is how we enter new markets. As we've articulated in our businesses, the barriers to entry organically are very high. And so the way we enter is through small acquisitions, where we're taking a foothold at a low basis. So the 3 acquisitions that are represented on this page are single-digit multiple acquisitions. Electrolube and what we call MacDermid Envio Solutions were more pure plays in these markets. Coventya brought us into the light metals business. It wasn't the reason we made that acquisition, but it was a nice additional value driver. The Electrolube business in H.K. Wentworth has really good technologies, but it was a niche regional player. We've talked about thermal management being critical in next-generation electronics. That's what Electrolube's products do. They're for thermal management, and there are polymers that improve the durability of electronics assemblies. We're seeing big pull from our customers who are interested in these products from us. And so a small business with a tremendous growth capability. They had the product, and we had the customers. The combination is very powerful. DMP and our push into sustainability is another example of this, where, historically, our businesses would deal with all of the manufacturing processes and then end right before water treatment. The water treatment is a critical value driver. It's an increasingly important source of concern and area where our solutions can be value added for our customers in most of our businesses. We understand the water that's being treated. And so we see a huge growth opportunity in a gigantic market from MacDermid Envio Solutions. And finally, the light metals business inside of Coventya, there's a lot of overlap in the technologies in general metal treatment. We just didn't have a presence in light metal treatment. We tried to enter that market organically for many years, but we didn't have proven technologies. Now we do. And so the opportunities from combining these businesses and with the, again, existing products that Coventya had and the customers that we have are very compelling. Once we've proven our ability to execute organically in these markets, it opens very big opportunities for further capital deployment. So we're not going to invest heavily behind these businesses until we've proven to ourselves we can win. But I believe we will prove to ourselves we can win, and that opens the door for significant capital deployment in these new markets that are very attractive. We're increasing our investment in sustainability for all of the reasons that have been outlined today. You've heard about it in every one of the presentations from each of the presenters. And today, we're proud to announce our 4 ESG commitments. So in our ESG report last year, we committed to making commitments, and now we're making them. The targets are focused on a cross-section of topics that are material to the breadth of our stakeholders. The first is our commitment to reducing emissions. So we accept that climate change is a threat to the planet, and we intend at Element Solutions to do our part to protect the environment. So our commitment here is to achieving a 25% reduction in total Scope 1 and Scope 2 emissions intensity by 2030. The next is in sustainable chemistry. So environmental sustainability for us is more than just good corporate stewardship. It's good business, as you've heard today, and we have significant sales that are tied to environmentally sustainable solutions. And our commitment here is to double those sales to $1 billion by 2030. With regard to diversity, equity and inclusion, we're a global multinational company, and we believe strongly that we benefit from different perspectives, and that those different perspectives will lead to better outcomes. And so our commitments here are to recruiting, training and community initiatives over just the next 2 years to progress us further down our path from a diversity, equity and inclusion standpoint. And finally, with regard to health and safety, particularly employee health and safety, you've heard from Martin and you've heard from me, our people are our most important asset. This is a people-based business, and our success more than anything else is directly attributable to the effort of our people. We believe that to the tips of our toes. And so providing a safe working environment is nonnegotiable. And so our commitment here is to strive towards 0 reportable incidents, while setting annual measurable TRIR milestones to ensure that we're making progress towards that goal. In the next couple of days, a more comprehensive report with more detail on each of these targets will be published. We're looking forward to publishing that, and we're looking forward to discussing it with you further. So we've gone through the 11 points that underpin this compelling path forward. And as you know, we're metric-driven. We want to measure it. So how does that translate to targets? And how do those targets translate to shareholder value? What you've heard from leaders today are the points, whether they're trends or proven track record, that underpin our belief that our business can grow its top line 1 point or 2 faster than our markets, and that our markets have indeed accelerated by 1 point or so over the past 3 years, so that gets us to our top line goal that Carey articulated of 5% to 6%. And we've shown that we can deliver incremental margins that drive conversion of that sales growth into faster underlying EBITDA growth. So our target is for high single-digit EBITDA growth on the back of that mid-single-digit top line. We have the opportunity just as we've proven to continue to deploy our strong and stable cash flow, combined with the additional balance sheet capacity that our growth will provide, and that should easily add several points to our EPS. Importantly, to deliver these goals we will need to deliver operational excellence and prudent capital allocation. One of those alone will not get us there, but we believe we can do that just as we have over the past 3 years. So there are 3 key takeaways that I hope you have from our time together today. The first is that at Element Solutions, we've built connectivity from our vision, which is focused on driving long-term outperformance by delivering value to customers, to our people and to our shareholders connectivity from that through to the day-to-day behaviors and activities in our business around the world. And that alignment that runs through our culture, through our planning process and into our incentives is very powerful and will bode well for our future. That's the first takeaway. The second is that there's a confluence of macro and company-specific factors that are really exciting, and they represent a substantial opportunity for value creation in the near- to medium-term future. And together, those 2 things create our compelling path forward. And the third, if you look at our culture, there are 5 Cs. The first is challenge. We like to challenge ourselves. We accept challenges. And the second is commit. We make commitments, and we deliver on our commitments. And the third takeaway is that we are committed to delivering another strong stretch of outperformance with an ambitious but achievable target that is once again inside of the incentives for senior management. We look forward to sharing our progress against these objectives in the months and years to come, and we're grateful for your time and attention this morning. We have once again under promised and over delivered, and that we said questions would be at noon, and we're sitting here at 11:30, so let's take 5 minutes to freshen up and then we'll turn to Q&A. Thanks very much, guys.

And if you've got a question, raise your hand and -- that's great. I'm glad to see it. After questions by the way, there's lunch with a lot of food, so stick around. First question, Josh Spector, over there.

Thanks for all the detail today. It's definitely really helpful. I wanted to follow up on the advanced packaging comments there. My understanding is it's still a smaller part of the semis business overall. To be frank, I think some of your competitors have maybe talked about a bigger position in that market versus you guys. So I'm curious if anything's changed or if that's perhaps a wrong perception on my part. And if you guys kind of have the tools needed to organically really compete at the same scale that you do in your circuitry markets in that advanced packaging markets or if you need other inorganic investments to perhaps help boost that business and make that a more meaningful part of the ESI overall.

Yes. So I'll start that, and then I'll pass it to Rick. But we're winning business in that part of the market. It's a fast growth dynamic market. And as you heard from Rick and Joe, our participation across the breadth of electronics assembly and circuitry is giving us an angle that has been very beneficial with customers. We've had real good traction there, and it's been organic thus far. Rick?

Yes, little bit to that. So I think what our competitors talk about, they talk a lot about tin and silver. That was kind of the first trend in packaging, and I would probably say that we kind of missed that trend. But now with nickel, we have a sustainable run-free nickel product. [indiscernible] copper things that are actually advancing on the wafer for packaging. We have probably technology, and we have a partnership with one of the leading edge tool manufacturers that we signed last year first quarter, which has allowed to gain process of record on their tools for all of these advanced packaging, wafer-level packaging programs. Win in Taiwan, win with a big customer with nickel in the U.S., they're going to roll us out on 4 of their fabs. We just started getting orders for that this quarter. So it's a positive momentum. And again, with that partnership with OEMs -- both OEMs, frankly, we have a lot of good growth opportunities that I think our competition won't have because of our process of record position.

All right. Next question, Steve, please.

I've got a question for Joe, and you opened up your remarks with that technology that you guys are developing, where you create these multiple parts that have the electronics built in. You don't have the harness. You don't have the buttons. Just curious as to whether this is -- is this something that's far away in terms of being commercialized? Or do you have some of the OEMs that are interested in going down this path soon?

This is a technology that is really in an evolutionary stage right now, where it plays off the existing benefits and applications that we already have in in-mold technologies where, to this date, it's simply been decorative coatings that have been formable and made into 3D rigid structures. We're just beginning now our work with applicators and specific automotive OEMs in the industry to demonstrate the capability of technology and to qualify these applications for next-generation models that will be coming out. And we're likely to see the first generations of this in 2 to 3 years it will take. That qualification process is not unusual for an automotive application. And so you'll see very simple applications of it in probably 2 years' time in those models, possibly earlier. And then more sophisticated applications in the years to come after that.

Early stages of ramp, but huge amount of potential.

Senior Associate of Corporate Development & IR Kieran?

When you did the 2019 Investor Day, I think you outlined a $75 per automobile opportunity. That's growing to $100 now. Maybe you can speak to what's changed or what's -- what new opportunities you've seen over the last couple of years. And when we're sitting here 2 years from now, any opportunities that may kind of evolve and make that content grow over time?

Inflationary environment. That's definitely some of it, but power electronics and our increasing content there, more circuitry content per vehicle are driving that, right? Cars are becoming computers. There's more electronics. There are more demanding applications. Our power electronics business penetration has accelerated the pace of auto -- of electrification of the fleet has accelerated, and that's all translating into that value. With regard to what could help inflect that, well, the things that are happening today are driving that higher. And what Joe just talked about isn't really taken into consideration in that. So insofar as our displayed and in-mold electronics effort is successful, there's a huge amount of value from the film, from the assembly materials, from the circuitry capability that would all go into these next-generation vehicles. As Joe pointed out, these are long-cycle activities, right? So the next platforms are still being worked through today for 2 years from now. And we wouldn't expect a huge amount of this in 2 years. But in 10 years, in 6 years, it could be much more substantial as the capabilities are more proven. David?

Yes. Thank you. Enjoyed the presentation. I have a question maybe about ESG and, in particular, your company's opportunity, not just to keep up, but to profit from it. So a number of my companies the investors ask me, is ESG going to be a plus or minus for this particular company? You mentioned right upfront about your multiple maybe being a little low. And in my humble opinion, my hypothesis is the jury's still out on whether across your businesses, ESG is an area where you're going to be competitively advantaged. So I just would like you to focus on the plating side of what you do, electroplating, which has some sensitivities with regards to the materials and the processes and the particular emissions issues. And I don't know if you want to do it like a SWAT, strengths, weaknesses, threats, et cetera. But how do you think you're going to evolve your plating technologies and your strategies to go to market to not just keep up with regulatory changes, but actually use this as a lever to grow share or to deepen your customer relationships?

It's a great question. Thank you, David. It's a great question. I'm really happy to have that question actually because it's a plus for us. And you heard today that sustainability is a secular trend that's driving our business forward and it's an area of investment for us. And in plating both in the circuitry business and in the Industrial business, we're taking advantage of that trend. So let's talk about the circuitry business. We can talk about direct metallization. So direct metallization is the metallization technology that replaces electrolytic copper with a carbon-based solution electrolytic copper more metal and electrolytic, it's an electroplating process more energy, more water. Direct metalization, fewer steps, less energy, less water, less waste. And direct mineralization, our market share in the electrolytic copper area is similar to our market share in the overall circuitry business. In direct mineralization, it's more significant because we're the pioneers of that technology. And we are driving supply chain towards direct metalization as opposed to electrolytic copper for those reasons, and we're getting traction for those reasons. And even where customers may not want to change, OEMs are going to want to change because the OEMs are selling in B2C and care a lot about their environmental footprint. So they want to be able to make claims that their technology is more sustainable every year. And so we're building reliability case studies, evaluating these use tools to demonstrate that direct metallization is equal to or better from a performance perspective, electrolytic copper processes, the legacy technologies and much better for the environment, which is very well proven. In the industrial solutions plating business, you made a comment about how will we evolve. I don't think it was a pun, but it was great because our product is evolved, which is our chrome-free etch project that eliminates [indiscernible] on chrome. We're gaining real traction with trivalent chrome, which is another type of chrome plating. I'll let Rich talk a little bit more, and I think Rich did address with a full slide how sustainability is one of the key trends propelling our Industrial Solutions business. But between eliminating hazardous chemicals from these processes and what we're doing in water to help our customers improve their environmental footprint, both with water treatment, but also metals reclaim. So we have ancillary equipment that we provide to customers that allows for them to pull the depleted -- to pull nickel from depleted bath that don't have enough nickel, for example, to be effective for the plating process, but there's still some in there. They pull that nickel out. It allows for them to recycle that. That nickel doesn't get discharged. It doesn't have to be treated, and they get value from that. And that's one of the key prongs of the equipment business we have in MES. Rich, is there anything more you want to say?

Yes. I would say, in general, regulatory environment change is good for our business. I mean, it requires new technologies, higher-margin technologies. It often replaces, we'll say, generic steps in a process where they don't require proprietary chemistry with less stringent environmental requirements. When they need higher level of environmental responsibility, they need proprietary solutions. And so we're able to capture profit and revenue in areas that, traditionally, we do not participate in. So it's actually -- it's quite good for our business.

Angel? Thanks for that question, David. Angel is over here.

Yes. So I just wanted to follow up on that actually. There's been a lot of great discussion about the underlying growth and being well positioned in terms of just the right end markets that will allow you to outgrow kind of underlying broader end markets that you're in. I wanted to kind of take that into the market share and maybe dive in a little bit deeper there. So as you think about now versus 2026 and what's kind of embedded in that growth, it's not -- it doesn't seem to be necessarily embedded in there that you're going to be taking incremental share, which could be an incremental opportunity because it seems like you have a lot of great products that you could continue to evolve. There was conversation about winning bigger and more kind of acceleration around kind of market wins. So if you could just kind of give us more color on that market share? How much? Is it just the acceleration of being in the right places in terms of growth, in terms of our end markets versus winning share versus other kind of bigger players, et cetera?

Yes. One of the great things about our business is how sticky it is, right? We go back to those key attributes. Attribute one was growth. Attribute two was defensibility, right? These are sticky processes that we're providing, and that works both ways. Market share doesn't move significantly from an intra-period perspective. That having been said, we're having success leveraging the investments that we've made to improve our position. Some of that is going higher tech. Some of that is going cleaner tech. And we do see a point or 2 of market outperformance. Some of that is coming from improving our share. Some of that is also coming from these new markets we're entering, and we're coming from -- and that is also improving our share where it's very low, right? So in our core businesses, we have a solid market position. In these new adjacencies, we talked about $1 billion market opportunities where we have $20 million of sales. So clearly, if we expect to accelerate growth there, we're going to be taking share. And we have confidence we'll be able to do that in these new adjacencies. And together, that gets us to those point or 2 of market outperformance. Chris?

Chris Kapsch with Loop Capital Markets. So you make the case that your overall markets that you address are seeing accelerating growth, and it's partly or maybe largely on just the increased complexity of the integrated circuits and the electronics and just the proliferation of IC devices more generally. And put another way, I love the tagline that was in your presentation that ESI is really kind of a play on More than Moore's Law, which is true to the convergence of the semiconductor, and PCB ecosystem are really translating to better growth opportunity and growth rate for your company. So -- but you also touched upon -- and I think Carey did on Page 37, just about the evolving investment requirements to address these growth opportunities. So I'm curious about just the -- in terms of capitalized on the growth opportunities, what do you see in terms of just the capital intensity of the business and then that key objective that you highlighted, the return on -- the cash return on investment?

Yes. So CRI is something we look at when we evaluate our business performance. We look at what investment it's going to take in order to drive the next level of growth. And the CRI progression in these businesses has been very good, despite incremental investments. The capital intensity of our businesses is unchanged. So despite the fact that we invested more in CapEx in 2021, and we plan to invest more in 2022, these are growth investments. These are not maintenance capital investments, and their growth investments in some of these new markets that I was just talking about, where we don't have an installed base of capability, but we're doubling capacity in some of these businesses for $10 million or $15 million. That's a lot of CapEx for our business historically, but in the greater scheme of the chemicals industry, it's still very modest. And the payback periods on these are 2 years. So you get a sense that the underlying maintenance CapEx is really unchanged, but we've got some great growth opportunities we want to capitalize on. And so we're making those investments. We're doing them prudently. The returns are really solid, and there's customer pull for this investment as well. So we fully expect, when you're making investments with 2-year paybacks, the CRI is going to get better. And CRI is going to become a part of our LTI program. So our incentives are going to be tied to ensuring we're improving the amount of cash we get out of the business relative to the amount of cash we put in the business. So be sure we're going to be very thoughtful about sizable investment, as we have been historically. But the returns are too good right now for us not to do this. In fact, we're excited about the fact that we have these opportunities to deploy capital at these rates of return organically.

And just a follow-up to the one you've kind of highlighted , investment and customers improved financing. Wondering how profound that is, how important it is strategically to engage in that. And does that change the capital intensity plan?

Yes. Yes, it's a great comment. And for those on the line who didn't hear the first part of the question, it was about customer equipment. This is not equipment that we manufacture, right? So other than our water treatment business, we are a consumables business, and we don't think that having the equipment is a competitive advantage, to be clear. But we've got a great balance sheet, and we've got customers that want to put in new lines, and we want to lock in those lines for 5 years. We're happy to provide equipment financing, which is, in a sense, capital in order to win that share and accelerate our growth. And so we're doing that. These pieces of equipment are in the hundreds of thousands of dollars area, and we've got a lot of opportunity to do that. Customers are excited to do that from us. They don't have the balance sheets that we have. And so it's helping us drive growth. It's helping us drive share at very high returns again sub 2-year payback period. It's the right investment, especially as we break into some of the new even higher technology markets, where, historically, we haven't had as much of a presence. This is helping us do that.

Yes, I think that's an important point. This is targeted, so this is not the entire electronics equipment portfolio. This is specifically in higher tech markets where we're using it as a way to break into the [ share ] to get you.

Do we have anyone on the line? Any questions that have come in over the portal?

Yes. There's one from Jon Tanwanteng. So you said, what have you been seeing in the last 3 years in terms of competitive intensity, maybe bifurcated between larger and smaller opportunities? And how do you expect your market share against your competition to evolve in the next 3 to 5 years?

We participate in competitive markets, but they're really bifurcated between higher technology and lower technology. And our competitors are big good companies with great technology, and they are very viable alternatives in many instances. But we have been a stable ship. So for the past 3 years, we have been the most solid from transformational perspective. We haven't been undergoing big transactions and transformations. We've continued to invest heavily, and that has helped us. And I do believe our competitive position on the back of the changes we've made around our culture, the strategic process that we've been implementing, the willingness to invest is helping. And it has driven above-market growth. The results are empirical in the presentation we've given and what you've seen over the past 3 years. So I believe that we're in a solid competitive position with great growth opportunities and stable, if not growing market share. Please?

This is Josh Silverstein from Wolfe Research. In the 5-year outlook, how are you using the balance sheet to grow EPS a couple of hundred basis points over EBITDA growth? I ask because you mentioned the balance sheet can organically delever almost a turn annually, but you also have free cash flow that could be 30 -- that could buy back 30% of the market cap over that period as well. So are you assuming that you are deleveraging? Are you buying back your stock aggressively? And kind of along the same line with the multiples, too, like are you going to take advantage of a multiple that's been -- that hasn't been moving higher?

There's no specific embedded assumption around capital allocation in that period of time, but we know we will have opportunities to deploy a substantial amount of capital, and we have confidence we'll do it in a very accretive way. So we're flexible and opportunistic with regard to how we deploy capital, whether it's in our own shares, whether it's small bolt-on acquisitions, whether it's larger strategic acquisitions, there's no specific path, but the opportunity is very material and it's there. And so that's why we have confidence that we'll be able to drive EPS through capital allocation. I don't know, Martin, if there's anything you want to add.

No. Look, these are things that are windows in time. So over a 5-year period, our assumption is you're going to have some period of recession. You're going to have periods where markets are higher, lower. We've experienced this in other companies that I've been involved in. As long as you have financial flexibility to exercise your capital allocation when it's on your time on your choosing, that's when you can maximize returns. So what you'll see us keep doing is keep delevering, keep flexibility in our balance sheet. So when those windows open, we take advantage of it.

Kurt, please?

Kurt Martinson from Locust Wood Capital. Great presentation. To piggyback a little bit on Josh's question regarding the balance sheet, have any of the learnings over the past 3 years and your outlook going forward driven you to reassess what an optimal leverage range is for you guys? Typically, it's been sitting in the 3 to 3.5 turn range.

So when we came out as Element Solutions, we set a leverage ceiling of 3.5x. That wasn't based on what the business can bear, right? This is a business that can support significantly more leverage. And all of the businesses inside of our portfolio at some time had significantly more leverage and didn't have to sacrifice any level of growth investment, despite that and despite having that level of leverage through challenging economic periods. That having been said, we set a ceiling of 3.5x because that optimizes our cost of capital, which is to say we don't want to have a penalized equity value because we're running with more leverage, even if it's not damaging the business. And you've seen us with a willingness to keep leverage well under that ceiling. And frankly, we have been able to deploy a substantial amount of capital, while decreasing that leverage ratio. The 3.5x is not something that we are litigating. It feels like the right ceiling. The operating level of leverage in the business is going to be depending on circumstances. If there's something worth pursuing to the extent that it takes leverage to 3.5x, we are not uncomfortable doing that, and we can run the...

Are you actively involved in any regulatory efforts to drive accelerated ESG adoption in areas where you have a better solution versus the status quo?

And when there are regulatory shifts, we make sure that we're on the front end of them. One great example of this is in our offshore business, where offshore hydraulic fluids are leaked in the process of offshore drilling and production. And the most critical criteria for the products in this business are their environmentally -- are their environmental attributes. And early last year, we acquired the best-in-class, best-performing environmental product in that space. It was new technology. It hadn't actually been sold yet. It was still in its proving phase. We're ahead of regulation in that regard. So it's got the best rating, but the supply chain hasn't done all of its testing to qualify it. But as that regulatory -- or as regulatory bodies in that industry tighten, we are going to be gaining share and a leader. And so that's the type of thing we're doing, where we were eliminating solvent from platemaking and moving more towards thermal, solvent being a waste stream in that process, thermal being heat. And you've heard case studies about the field driver of our business and one that we're capitalizing on. Josh? Josh, over here.

Just a quick follow-up on the algorithm overall. And I understand 5-year focus, it's a good target you guys have. Wondering if I could bring it more to the medium term, thinking more about 2023, I guess, specifically, a lot of the call yesterday focused on cost this year. The Coventya synergies are pretty chunky and flowing over the next 2 years. Should we expect the incrementals significantly above your range in 2023? If that is the case, do you still expect that 30% to 40% incremental then off of that into '24, '25. And I'll caveat this, I know 2023 is pretty uncertain, but if things kind of go more normal and don't devolve into chaos, is that the right framework to think about?

Yes. So there's one thing we know for sure is that things don't happen in a straight line. Secular growth isn't linear. There will be air pockets along the way. As Martin said, when we think about a 5-year period, we can't think about consistent growth all throughout, and we're coming off a year where we had tremendous growth, right, which is something we factored into our algorithm from here. The incrementals in the business are fundamental in a normal environment, which is to say that operating leverage, it doesn't require the first 2 pieces of Carey's 3-piece triangle or trajectory. The first 2 pieces are inherent to the business, right? We don't need significant cost in order to produce more, right? And we don't need significant or pro rata people in order to sell more. And so those -- and the businesses that are growing faster are higher-margin businesses. And so mix is driving that. And so in a normal raw materials environment, right, which is hard to say given what we've lived through for the past year, those incrementals are there. But we've demonstrated positive incrementals, despite that raw material inflation, right? If you take out the price of metal, our incrementals have been positive. So I have a good level of confidence, should the inflationary environment subside that those incrementals come through. But there's a big assumption in there, which is about the inflationary environment in 2023, and we don't speculate in that regard. So we're comfortable with the 5-year. We're comfortable with our '22 guidance, but how we get there over the 4 years between 2022 and 2026, can't put a pin in that.

I think David had another question.

Dave Silver, CL King. So I had a question broadly about talent acquisition. So you've touched on it at a number of spots in this presentation, but I'm thinking, with a lot of the trends you cited, the secular trends, the rising electronics intensity and complexity, I think my guess is that the center of gravity for your business is moving more towards other regions of the world, right? So just a 2-part question, but could you maybe discuss your ability to get the talent that you need for the 40% of your workforce that's R&D or tech service or tech sales? Can you maybe discuss, number one, how you're doing in the U.S. and how you view that challenge, I guess, as part of your 5-year goals? But then more to the point, if you're going to be maybe growing more or serving more Asian customers or non-U.S. customers, how do you compete for talent? In other words, your customers, the OEMs or the mobile device makers are big, strong companies, great reputations, maybe national champions. How do you get your share of the talent required to service those customers adequately and meet your growth targets?

Yes, it's a great question. It's interesting. We did a global town hall for the whole workforce this morning following our fourth quarter earnings to review 2021, and I had a question about what I'm worried about. And frankly, the biggest existential issue as a long term -- thinking long term about our business is people, right, how do we ensure we've got the best people because there aren't enough people for the breadth of this industry given trends in the workforce and what people are interested in doing, particularly in the West. So if we don't get the best people, we won't have enough people. And so we spend a huge amount of time on culture, on building a company that people really want to work for, that they're motivated by, that they feel cares about them, not just in the workplace, but in their communities. That's what the ESI Foundation is about. It's all about matching donations that our people make all over the world because we believe that people in thriving communities thrive in the workplace, improving our HR processes and digitizing those. We've made huge steps in that regard, having a high-potential program, having other types of recognition programs because it's not just about dollars and cents. It's about the fulfillment you derive from what you do every day. And indeed, this is a business that's participating in really exciting trends and opportunities, right, and making sure that people from the front manufacturing line to the top of the organization understand how they're contributing is something we spend a lot of time on and is very, very important. I believe we are doing that. We're not going to be a software or technology -- leading software company or an Internet company. But within our markets, we are building that reputation. We are building that capability. And we're building -- that's why we care about -- number two in our vision is opportunities for our people. We're building a track record where people are happy and people are being promoted, and they're seeing opportunities and they're participating in our success And that's how we do that. And we spend a huge amount of energy ensuring that, that is the case. Is there any more on the line?

Yes, we can take one from the line. Can you talk more about your specific growth plans for your wastewater treatment business?

Yes. Customer pull, primarily. So there are 3 aspects, maybe 4 aspects to what we're doing in wastewater treatment. The first is big wastewater treatment plants, which is equipment at the end of the line in big manufacturing facilities where we help treat wastewater. The second is that ancillary equipment we were talking about where you pull metal out of plating baths for recycling. The third is water treatment chemistry, which is a reasonably high margin business. And we have little pieces of it that have come through acquisitions on a more local basis. And the fourth is service, so having people helping run our customers' wastewater plants that we've installed with our equipment. Thus far, most of the thrust of what we've been doing has been on the ancillary equipment side and on the wastewater treatment side with new plants. The ancillary equipment side is a really big, high-returning investment for our customers. That's an easy sale. It's not huge dollars. Wastewater plants are equipment sales that happen every 10 to 20 years. It's not the repeatable type of business that we're most excited about. So we're trying to understand how we can sell more chemistry and see if there's a service model that works for us. But our customers are bringing us in. There's a great case study here where we went to a customer that needed a new piece -- an existing customer needed a new wastewater plant. And the legacy MacDermid Enthone team went to try to sell this piece of equipment with the same sales guy from our MacDermid Envio business. And they didn't want to buy from us. Coventya salesperson brought the same sales guy from the MacDermid Envio Solutions business and they bought it from us. So it's a case study in both the pull that we're getting from customers for our waste treatment and also the benefit of the businesses we're bringing together and the commercial relationships that we have. And there's a lot of growth opportunity associated with that, and it's very compelling. And the traction is a little bit longer lead time, but we're seeing it in things like our pipeline of new plant or of new equipment to sell. You've got a question, Angel?

Just wanted to follow up on M&A and just broadly, I think, one of the things that you've discussed is you want to be very disciplined in your approach and prove to yourselves that you can grow this business, that you're integrating, growing. So could you just tell us a little bit more about kind of what internal targets, as you think about the incentives that you have and the kind of internal checkpoints that you have to, one, proven this out to yourself? And how should we think about deployment of capital potentially being able to get more aggressive as you do prove to yourself that you are able to, as you noted, see the opportunities of kind of integrating these businesses over time? Could this be a 2023 point? And how should we think about that?

Different businesses are in different phases of that proving out phase, if you will. But it's delivering on organic growth at -- profitable organic growth and executing against targets and milestones. That's how we get that level of confidence. We build conviction in the leadership team supporting those businesses, and that will give us comfort that acquisitions will meet our acquisition criteria, right? So it's businesses we understand. So if we're delivering organically, it means we're understanding. We're executing well. Businesses we can make better. So if we've made our internal business better, that gives us a level of confidence that we can make acquisitions better and businesses that are available at reasonable prices. right? The opportunity set in these markets is huge, right? The addressable market in thermal interface materials and electronics adhesives in some of these water treatment technologies, in light metal surface treatment, those are huge addressable markets relative to our position. So there will be opportunities. Just a matter of are those opportunities right for us and is the timing right. Any more on the line?

Yes. How do you benefit from the increase in semiconductor fabrication investment that is expected over the next several years?

Rick?

Well, there's kind of -- obviously, we win, right? It's just a huge tailwind for us because the more investments we made in semiconductor applications, these are our existing customers. So we'll have wins. The opportunities though are in the newer technologies, right? So that's why we're focused on things like advanced packaging. There's a lot of decision-making on the front of the line. You have [indiscernible] decisions made versus decision being made. So our technologies, our newer products, the process of record, the tool providers, advancing the technology, that's where we start to win and those are higher-margin products for us. And a lot of the fabs they'll go in with the older technologies, and we'll win those because we're already in place with those customers. But a lot of them are advancing technologies, and a lot of the investments going into advanced packaging facilities as well as just expanding the wafer starts around [indiscernible].

Volume growth and margin growth.

There's no more questions on the line.

Any more questions in the room? All right. Great, guys. Well, thank you again for coming. Thanks for your attention. Thanks for those on the line for listening. Really looking forward to delivering on our commitments and having lunch.

I'm told lunch is ready right now, by the way.

Great. Thank you.