Earnings Call: Q1 2020

Apr 30, 2020

Good morning, ladies and gentlemen, and welcome to the Element Solutions First Quarter 2020 Financial Results Conference Call. All participants are now in a listen only mode. Later, you will have an opportunity to ask a question during the question and answer session. Please note this call may be recorded. I will now turn the call over to Yash Nahedi, Senior Associate, Corporate Development and Investor Relations. Please go ahead. Good morning, and thank you for participating on our Q1 2020 earnings conference call. Joining me this morning are Sir Martin Franklin, our Executive Chairman CEO, Ben Glicklitsch President and CEO, Scott Benson and CFO, Cary Goelman. Please note that in accordance with Regulation FD or fair disclosure, we are webcasting this conference call. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Element Solutions is strictly prohibited. During today's call, we will make certain forward looking statements that reflect our current views about the company's future performance and financial results. These statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Please refer to our most recent SEC filings for a discussion of the most significant risk factors that could cause actual results to differ from expectations and predictions. Please note in the earnings release and supplemental slides issued and posted today, Element Solutions has provided financial information that has not been prepared in accordance with U. S. GAAP. For definitions or reconciliations of these non GAAP measures to comparable GAAP financial measures, please refer to the release and slides, which can be found in the company's website at www.elementsolutionsinc.com in the Investors section under News and Events. It is now my pleasure to introduce Martin Franklin. Thank you, Yash, and good morning, everyone. To get started, we want to join the chorus thanking healthcare workers, first responders, hospital staffs and all the individuals working in essential jobs that are helping our employees, our families, our customers and the world at large through this unprecedented time. Your efforts are immensely appreciated. And on behalf of Element Solutions, we thank you. Before turning the call to Ben and the team to take you through the quarter and our outlook, I'd like to make a few introductory comments. First, I could not be prouder of how the team at Element Solutions has navigated the year thus far. They have moved quickly and demonstrated great flexibility to have not lost sight of the long term opportunity for this business. Have not lost sight of the long term opportunity for this business. We have a resilient business with strong and stable cash flows, something that we have demonstrated in abundance over the last 15 months. But this does not happen automatically, and our team has proven capable of successfully operating this business in both good and more challenging times. The team is deeper than the people you hear from on these calls and even than the broader group you met at our Investor Day last year. We have strength and depth. It is in this bittersweet context that we are announcing Scott Benson's upcoming retirement today. Scott has been a key leader at Element Solutions and its predecessor companies for 2 decades and his contributions to our company's success are remarkable. The team he helped build and has grown allows us to allows him to step back with the utmost confidence that the business will continue without a hitch. That is a testament to his leadership. His valuable experience will remain with the company, not only in the leaders he has mentored, but also on our Board, where he will continue to serve. Thank you from all of us, Scott. You will hear more from Scott shortly, but first let me turn the call over to Ben. Ben? Thank you for those comments, Martin, and good morning, everyone. I'd echo Martin's remarks about our immense gratitude to those on the front lines fighting the coronavirus and helping support those who have been impacted. At the same time, I would add my enthusiastic thanks to the large constituency within the ESI team that continues to work in support of Essential Industries. Throughout this pandemic, we have proudly been providing critical inputs for life saving electronics applications and packaging for the food and consumer packaged goods industries. Those customers are relying on us today more than ever. This has been a very challenging period for all of us as individuals and as a business and Element Solutions has met the challenge on both fronts. We've taken strong actions to protect our people through increased health and safety protocols, health checks at our facilities, staggered shifts and moving a large portion of our office based organization to working from home. The team has responded equally strongly to enable continued supply of products to our customers, navigating rapid changes impacting facility availability, labor availability, freight and shipping logistics and supplier capacity. Today, all of our facilities are open. And remarkably, perfect order performance, a key quality metric we track in our supply chain improved in the Q1 despite all of this, strong testaments to the performance of our supply chain group. The coronavirus remains with us today and for the foreseeable future and its impact will persist. From a business perspective, the impact of the coronavirus in the Q1 was concentrated in Asia. And although Asia is our single biggest region, our overall results for the quarter were quite strong. Factory closures impacted sales in China starting in February, but improved over the course of March. Our ability to withstand what was a sizable disruption in China was a testament to the breadth and diversity of our business and its supply chains, the quality of our team, which reacted quickly and decisively to ensure continuity of supply and the strength in the underlying electronics market, which has been resilient year to date. The sales impact in Asia was largely offset by increased demand in other regions, which in some cases we believe came from customers preparing for the factory closures and supply chain disruptions we are now seeing in April and into May. Our Circuitry business was quite solid in the quarter despite being an Asia centric business as demand associated with 5 gs and data center applications remained robust. Our semiconductor business also benefited from similar trends. Our assembly business, which is further down the electronic supply chains and exposed to a wider universe of electronics applications was the laggard in the group. This benefited margins as Assembly has a lower margin profile given the metal pass throughs captured in its sales. We also had a strong quarter in our graphics business, which saw double digit organic net sales growth on increased volumes from CPG customers given increased demand for packaged goods. Our Q1 results are a product of our strategy of owning diversified high quality businesses with stable margins and cash flows and running them well. And those results were particularly noteworthy in the context of the headlines we've been seeing over the past several months. Overall, net sales fell 3% organically, but constant currency adjusted EBITDA grew 14% with margin expansion of more than 300 basis points. This was a product of improved mix, which contributed approximately 180 basis points as the business is more impacted by coronavirus, our industrial and assembly units are lower margin and of cost savings. Our focus on managing costs, which yielded $50,000,000 of savings in 2019 translated to over $8,000,000 in OpEx savings in the 1st quarter, which contributed 120 basis points to that margin expansion. Cost savings in the quarter reflect both the carryover savings from actions we took in the second half of last year and additional savings associated with the current business environment. We've taken further cost action in anticipation of a period of continued demand weakness, including a 15% salary reduction for meat, a 10% salary reduction for many other top leaders around the company and others in the more impacted businesses and other personnel actions in parts of the business where demand has been most impacted by the coronavirus. Importantly, we consider all of these actions temporary. When our markets recover, we expect to be well positioned with our workforce to capitalize on that recovery. Adjusted earnings per share this quarter increased 25% year over year as EBITDA performance was compounded by our buyback activity over the course of 2019. This result demonstrates the power of prudent capital allocation aligned with operational excellence. Our balance sheet is stable with no significant near term maturities and our strong liquidity position bolstered by the business' historically stable cash flow generation gave us the confidence to repay a revolver earlier this month. We generated more than $50,000,000 of free cash flow this quarter, which is burdened by more than $10,000,000 of safety inventory builds as well as the impact of last year's incentive compensation, which was largely paid in March. We're pleased with our results in the Q1, while fully aware that the path forward will continue to be challenging. We will discuss our outlook and guidance later in the call. I will, as usual, turn the call shortly to Scott. Before doing so, a quick word about Scott. Element Solutions and its predecessor companies have been fortunate to have Scott as a leader for the past 20 years. He's made meaningful contributions across all aspects of the business and helped position us for continued success. I've been fortunate to work closely with Scott for many of those years and to have had him as my partner. His impact on this business will carry on for a very long time in the team he has built and developed around the world. He will continue to be a friend and advisor on the Board. Scott? Thank you, Ben and Martin for the kind words. I stepped back from Element Solutions at the end of June with a great deal of pride and fulfillment based on the high quality organization it has become. I know it is not only great businesses, but also great people and great values. While my ideal scenario would have been to retire with record earnings and bluer skies, I came to this decision after seeing how well the team has managed through this challenging period, how well we have come together as a company under the new Element Solutions structure and how this business has reached a point where it can truly shine even through very difficult moments. Our portfolio of businesses is built to withstand moments like these with stable and diversified businesses and management teams who know how to run them in growth markets and down markets. The Q1 was a case study with the Americas and Europe, along with our graphics and semiconductor businesses, mostly offsetting the weakness in Asia associated with COVID-nineteen. This quarter also demonstrated the underlying strength of the secular trends supporting our business, with the electronics business bouncing back quickly in China to support new applications like 5 gs, which are demanding investment even in periods of broader economic weakness. I am thankful for the opportunities Element Solutions and its predecessor companies have created for me over the past 20 years and for the great relationships I have built with incredible colleagues. I will be enthusiastically supporting Ben and the team for a very bright future and look forward to continuing to contribute actively on the Board of Directors. Let me turn the call to Cary to take you through some of the financial highlights from the quarter. Cary? Thank you, Scott. I am now on Slide 6. As Ben mentioned earlier, our Q1 was relatively strong from an earnings and cash flow perspective and our balance sheet remains solid. We are managing through the current demand disruption with a focus on preserving profitability and cash flow. Therefore, our attention is not just on cost, but also on working capital and of course on supply chain continuity. That is ensuring that we continue to supply high quality products and services to our customers. This quarter, we intentionally built excess inventory in both raw materials and finished goods. Supply chains are vulnerable to shutdowns and we aim to be prepared to continue to serve our customers should our suppliers close or our own facility operations get disrupted. This inventory build was about $10,000,000 to $15,000,000 in the quarter. Our continued emphasis on driving free cash flow as the hallmark of these businesses translated again to a strong result. Absent the inventory build, our free cash flow would have been even stronger than the $51,000,000 we generated. We deployed $33,000,000 of cash in the quarter to repurchase 3,700,000 shares at an average price per share of $8.82 and invested $6,000,000 to acquire a new offshore fluid technology that will help support our customers with next generation sustainable capabilities. We also paid $14,000,000 in legacy taxes associated with the sale of Marissa to UPL. And we do not expect to have any further significant net tax liability owed to UPL going forward. Ben will take you through our financial outlook shortly. I would note, however, that the cash flow characteristics of this business are such that when the top line declines, our conversion of net sales to free cash flow should improve. As working capital is released and other demands on our capital decline as well. Cash flow this year is also expected to be aided by one time benefits from the CARES Act and similar government actions around the world. We are reducing our cash tax forecast to $75,000,000 and maintaining our cash interest expense outlook at $70,000,000 for the year based on what we know to date. This helps contribute to cash flow conversion, which we expect to be as strong in 2020 as it was in 2019. From a balance sheet perspective, we ended the quarter with net leverage of 3.2 times adjusted EBITDA, unchanged from the prior quarter. We drew our revolver in March out of an abundance of caution as we started to see credit market instability. This left us with nearly $500,000,000 of cash on the balance sheet at quarter end. We were worried that the economic impact of coronavirus could translate to a liquidity shortage in our bank partners. With Central Bank successfully stepping in to stabilize the financial system, we repaid our revolver in full on April 20. Our liquidity position remains unchanged. Similarly, our capital structure provides significant runway and flexibility as we have no significant maturities until 2024. We intend to remain prudent and disciplined with our cash to ensure that disposition of strength holds. I will now turn the call to Ben for an update on our guidance. Ben? Thank you, Carrie. In March, we rescinded our 2020 financial guidance. Any projection at that time was immediately stale, given the rate of change in our markets as a result of the spread of coronavirus and the regulatory reactions to it. We believe giving annual guidance in an environment like today would not be helpful given there are as many economic forecasts as there are forecasters and the ranges are remarkably wide. But given Element Solutions is new in its current configuration, we want to set a baseline for performance in this environment. We expect adjusted EBITDA in the 2nd quarter to be between $70,000,000 $75,000,000 Assuming economic conditions continue at current levels through the Q3, we expect our Q2 adjusted EBITDA guidance range to be the floor for the Q3 as well. These numbers include an FX headwind for full year 2020 that has grown to about $15,000,000 year over year. We believe there is room for us to materially exceed this baseline outlook if our end market should improve above current levels in the second half of the year. April has been a difficult month with so much of our industrial supply chain closed in the West. Our industrial business represents about 30% of net sales and about 75% of that is in Europe and the Americas. Demand for that business is down more than 50% this month. We expect demand in the Industrial business to improve when automotive OEMs reopen and believe many of them likely will in the coming month. Our Electronics business, which represents 60% of net sales, is under pressure but has been more resilient. Most of that business is in Asia, which has improved significantly in the past 2 months. Our graphics business is benefiting from strong demand for consumer packaged goods and our offshore business has not yet seen the impact of low oil prices because of the long lead times for offshore energy activity. Nonetheless, we've pulled incremental levers to preserve profitability. As mentioned, the senior leadership team and the teams in our impacted businesses have taken salary cuts and we have shortened work weeks and put in place short term furloughs in the facilities and businesses where demand or travel restrictions have called for it. We reduced OpEx by $50,000,000 in 2019 and we have a similar sized pool to target this year if our markets were to continue to deteriorate. Importantly, we consider none of these actions to be permanent. We expect the actions we are taking to be temporary and reflect the COVID-nineteen material decline in demand and hence volume in our business. We are not damaging the long term growth potential of our business through these actions, and we are preserving employment. With the decline in year over year sales, we expect working capital to release this year and free cash flow should exceed $175,000,000 for the full year of 2020. As we have said, we believe our business should grow faster than our end markets in all environments, and we intend to preserve profitability through aggressive management of our variable cost structure in difficult times. We historically have generated strong cash flows in all markets and should do so again this year. Our balance sheet position and diversification allow for us to continue to invest in growth and maintain focus on the important drivers of our business long term. At the same time, our global capabilities are demonstrating the real time value of our supply chain continuity to our customers. This is winning us new business opportunities already. Element Solutions has the mindset and the balance sheet to be on the offensive through this difficult period. As Carrie mentioned, we made a small technology acquisition in our offshore business in Q1. This is a product still in development that we expect will have best in class environmental characteristics, which is increasingly important to our offshore customers. And this technology should give us a further advantage in this market in the future. We also repurchased 3,700,000 shares in the quarter at attractive levels. Despite deploying $50,000,000 in capital, we held our leverage ratio flat at 3.2 times. This quarter, we will continue to look for opportunities to deploy capital in a prudent and measured way to drive long term value while maintaining discipline on our net leverage levels relative to our targeted ceiling of 3.5 times. We believe our response to the current crisis will help make Element Solutions a better company for its customers and for its employees. It has brought our team together in a remarkable way. The way we're nimbly collaborating across functions and regions has resulted in permanent organizational improvements. At the same time, we've shown our workforce, which is the very foundation of the company that we are committed to retaining them even in difficult times. We've shown our customers that we can supply them from many locations around the world in the midst of a once in a century supply chain disruption. At the same time, we've seen evidence that the markets we are participating in are here for the long term and if anything increasingly important. This crisis has demonstrated how much we rely on connectivity. 5 gs infrastructure is coming regardless of economic conditions in the near term. High bandwidth mobility is essential to business continuity. Those drivers, which are the key drivers for the long term growth of this business, will persist. And we will continue to lead by providing enabling technology in the future. With that, operator, please open the line for questions. We'll go first to Bob Koort with Goldman Sachs. Please go ahead. Hey, guys. This is Anthony Walker on for Bob. Good morning, Anthony. Good morning. Ben, how much in EBITDA do you think was pulled forward into the Q1 from 2Q? And then as you think about the balance of the year, what are your expectations on the rollout of new smartphones by your customers? Do forward. We did see just as we built excess stock or safety stocks this quarter, we did see some of our customers doing that towards the tail end of March, but it's not a huge, huge number. The outperformance relative to what we said at the end of March was really increasing strength in electronics out of Asia and additional cost savings that we were able to generate relative to our expectations over the beginning of the quarter. With regard to your second question around smartphone rollouts, obviously, we're seeing some smartphone rollouts being delayed into the latter part of the year. That may impact phasing rather than absolute dollars of sales. And we're seeing in general real resilience in our electronics business. As you know, that's an Asia centric business and Asian supply chains have recovered really nicely from COVID-nineteen where we saw a big impact in February and less in March. And this isn't just an electronics, this isn't just the smartphone end market we're talking about. This is also Internet infrastructure and data center demand that has recovered really nicely and been stronger than we expected coming into the year. Great. And then maybe just one on the cost out opportunity. So I think you highlighted $50,000,000 in additional potential, which you've taken measures against half. What are the factors that could cause you to go after that additional $25,000,000 opportunity? And what would then be the timing of the realization of the P and L? Thanks. Yes. So what we highlighted was about a $50,000,000 cost opportunity, which is similar to what we were able to generate throw levers to attack that cost on short notice, discretionary spend, incentive compensation, those types of buckets that are really decisions that we take and the actions follow pretty quickly thereafter. And so our spend is going to be based on our outlook for revenue. And if we see a persisting weak market in line with what we're seeing what we expect to see in Q2, we'll certainly throw more of those levers, and we expect to see that through the P and L very quickly thereafter. Next question please, operator. We'll go next to Jon Tanwanteng with CJS Securities. Please go ahead. Good morning. Good morning, gentlemen. Thank you for taking my question. Nice quarter. Thank you. Will you be buying back more shares now that you paid back the revolver or do you see more value elsewhere in terms of cash? This is Martin. Hi. I would say not right now. The reason very simply is we just don't think it's in good taste to use company's cash to buy back stock at a time when you're having employees taking reductions in pay. It's just not what we do. And but when things normalize, and I think at some point, they're obviously going to, we will resume our our repurchase in the absence of higher and better uses of our cash. Fair point, Martin. Also just wondering what are the prospects exactly for the oilfield business? You made an acquisition there. How much might profitability impacted this year and into 2021 if the oil prices persist as they are right now? Sure. So our offshore business is an offshore business. We don't do business onshore. And so there are really long lead times associated with that activity, both production and drilling. And the production really hasn't and doesn't dry up. That's a very stable source of revenue. And that's more than the majority. That's the preponderance of that business. The drilling activity will slow down. We expect to see that. But given the lead times, we expect to see that towards the back half of this year and into 2021. So as we look at our Q2 and Q3 outlook, our offshore business should be stable despite the low energy prices. With regard to the acquisition we made, it was a technology acquisition, a very interesting technology that we expect to have best in class environmental characteristics and environmental sustainability and impact is really the number offshore energy producers because some of this material does end up in the ocean. And it doesn't sacrifice this product, doesn't sacrifice any efficacy. We're a market leader in the offshore business and this technology will protect that leadership position for the long future. So we're very excited about introducing that product, which we expect to take place in towards the tail end of this year into next year. And we'll go next to Josh Spector with UBS. Please go ahead. Yes. Hey, guys. Glad to hear that everyone sounds like they're doing well. Just a question on industrial margins. You guys had a really good performance there in the quarter. Just curious how much of that was mix versus kind of other things that would have drove margins up year over year? And related with that, how do you think about margins when demand ultimately normalizes or returns in that business on the back end of all this? Yes. So in the Industrial and Specialty business, about 70% is tied to the Industrial Surface Treatment vertical, which had a weak quarter unsurprisingly. And the industrial surface treatment vertical has lower gross margins than the other two businesses. So mix certainly was a big contributor to the gross margin expansion in the Industrial and Specialty segment. I'd also note that we've been driving efficiencies through our supply chain and we're seeing that impact every quarter through the cost actions we've taken from a supply chain perspective and a procurement perspective. So we feel very good about our ability to execute on that and it's showing up in the numbers. As we think about more normal demand environment, the industrial business is running at a low level, right? That's the industrial vertical within that segment, and it should recover off of that level and become a bigger contributor. So I wouldn't suggest that the current levels of gross margin in Industrial and Specialty should be extrapolated, but we are driving gross margin expansion across the business through our supply chain initiatives. And so we do expect our overall gross margin to continue to expand from the normal levels you would have expected from them in the past several years. Thanks. That's helpful. And I guess somewhat related, if you think about raw materials for everything except for metals, is that a factor we should be thinking about in the second half or into 2021 if kind of the current environment holds in terms of like oil prices, for example? And like how are your contracts structured around movements in those prices? Do those tend to get back in time? Or is there some type of benefit we should be considering? Yes. That's a good question. So the place to start is that our raw material footprint is very, very diversified and no single bra really represents a significant percentage of our total spend. And the environment has had several the raw material price environment and the commodity pricing environment has had several different and diverging impacts on our cost structure. 1st, oil based raws have clearly declined. That's not a big percentage of our overall raw spend except for perhaps in the offshore business, and we will see some benefit from that. We've seen some precious metal prices increase, but those shouldn't have an impact on our gross margins because most of the metal, the precious metals we're buying have some pass through mechanism, whether it's in the assembly business, whether directly pass through or we have the ability to pass through some of the price increase to customers with a short lag. And then non precious metals, tin, nickel and others, those prices have declined and we've seen that actually in the sales line because as you know, we pass through a lot of that metal price and it's reported as sales. And so we try to break that out in our disclosure what the impact of metal is on our sales growth rate. And so we may see some sales decline associated with metals prices, but it won't have any impact on margin dollars. Okay, thanks. We'll go next to Steve Byrne with Bank of America. Go ahead. Hi. Good morning. This is Luke Washer on for Steve. Good morning. I wanted to touch on your forward guidance. You mentioned that April 2020 sales were looking were running at about 130,000,000 dollars What is that seasonally, what is April during the Q2 typically? And then as you look forward to May, are you seeing any kind of green shoots with regards to maybe a stabilization and declines in demand? Thanks for the question, Luke. So the second quarter doesn't have big peaks and troughs from a seasonality perspective. Is a normal month relative to May June. This year, we expect April to be a low month just given the fact that many of the OEMs who are our customers' customers have been shut down. And so we do expect demand to recover as OEMs reopen in May. What we're seeing is a transition from a supply chain driven demand environment or supply chain disruption to a weakened demand environment. And that transition should translate to more demand because when the supply chain is shut, in some cases, orders go to 0 in the automotive space, for example. When the factories reopen, even if demand is weaker, they'll improve. And so we expect April really to be a low point as we look out. Okay. Makes sense. And then just on capital allocation, I know, Martin, you mentioned that you wouldn't be doing any share buybacks in the meantime. But otherwise, has your approach to capital allocation changed? Are you seeing you mentioned opportunities and acquisitions. Do you expect that to continue on pace or potentially grow? Yes. I mean, the reality is we are very well positioned today to go on offense. And so we are looking. And I think that, obviously, given what's going on, on the macros, there will be some opportunities. And to the extent they become available, we'll be ready. I mean, we're very focused on keeping our leverage ratio below the benchmark that we set for it even in this environment. Mark that we set for it even in this environment. But we do have capacity beyond that, and we're going to be still generate a lot of free cash flow this year. So yes, we're going to continue looking. Okay. Thank you. And we'll go next to Neil Toomey with Morgan Stanley. Please go ahead. Hi. Thanks for taking my question. In terms of the 50% decline in the industrial business in the month, can you just give us a sense of what you're assuming in terms of how that rate declined perhaps less throughout the quarter in terms of your $70,000,000 to $75,000,000 guidance with just more auto OEMs opening? Yes. So as I just said on the prior question, we're seeing a transition in from this being a supply chain driven environment to a demand driven environment. And so we will see some recovery in the auto space. It's hard. It's an uncertain environment. It's difficult to forecast. And so we're setting a conservative baseline with regard to that EBITDA target given the uncertainty. Surely, we'll see a decline in demand in our automotive business, but it will be an increase from what we saw in April, where in the automotive business in the West, demand was close to 0. And so we should see a ramp, but not the depth of that ramp or the slope of that ramp, we're forecasting it conservatively in the absence of more data points, which we should accumulate over the next several weeks as we enter May and these facilities begin to reopen. That's helpful. And then during the last downturn, I believe you had mentioned in the past the business declining organically in the mid single digit range while EBITDA still grew. Can you just give us a sense of how that business composition has changed since then? What will allow you to replicate that performance or even do better from a market positioning or perhaps cost structure perspective? Yes. So I think you're referring to our comments on the call we had at the end of March where we had gotten questions in the past. How does this business perform in an economic downturn? Because it hadn't been configured as this through 2,008. So we always had to point to the financial crisis when the top line was off 20%, if you put all the pieces together and EBITDA was off 10 ish. Now we have last year as a data point when we saw real demand weakness in the industrial economy, we saw disruption in Asia. And last year, our top line was off in the low to mid single digits and EBITDA grew. As we think about this year, we have the resilience as we have in the past, strong gross margin performance, execute against the variable operating cost structure we have and most importantly, cash flow. The hallmark of this business is our free cash flow and the stability of our free cash flow. And we think it's what's most differentiating relative to our peers. This is an asset light business that does not require significant capital to grow or to sustain its margins. And in down years, we generate more cash than in up years. So you look at last year, we generated 20% more free cash flow in 2019 versus 2018 even though earnings were down. And we made a comment earlier today about $5,000,000 of free cash flow is a number we expect to exceed this year. And so that's the type of performance that we would expect in a year like this and in an environment like this. And cash flow is really the key thing that we're measuring ourselves against and we're focused on delivering. And we'll go next to Jim Sheehan with SunTrust. Please go ahead. Good morning. Thanks for taking my question. Did you take any market share in the Q1? I'm just looking at your organic growth. Did you exceed the underlying markets again in the Q1? And if so, can you just explain what's been driving your market share gain both recently and over the longer term? It's a great question, Jim. Appreciate that. The data is still coming out around market performance. So we can't point to anything empirical that says this was our market share gain in the Q1. But I think that our performance and our business continuity, if it didn't translate to market share growth in the Q1, will translate to market share gains in the future. This is an industry and our markets, these niche markets have big moats around them. And it's the switching costs are really high. That's why the margins are so high and so sustainably high. So converting from a competitor to our products doesn't happen overnight by and large. That said, the nimbleness that we demonstrated from a supply chain perspective, our ability to provide continuous product across continents when many of our peers and competitors' supply chains were shut down, that is highly distinguishing. And having that global supply chain and that flexibility and responsiveness is highly differentiating. At the same time, having a balance sheet that allows us to continue to focus on our customers and focus on our long term objectives and not be distracted by short term issues is highly differentiating. And so we feel very good about what we were able to do in the Q1 and what we were able to prove to our customers in the first quarter. We're already seeing some new business opportunities associated with this. They're more modest, but we're highly confident that over the medium term, this disruption and what we were able to deliver through it will win us more market share than we had going into it and we will emerge stronger. Terrific. And you talked about 5 gs being relatively strong in the quarter. Can you talk about what you're seeing in China and anywhere else in Asia from government stimulus? Is that type of growth sustainable? When would you expect organic growth in 5 gs to start to accelerate? Yes. So we've been we came into the year cautiously optimistic about the electronics business. It had had a weak year last year. We've been sort of expecting 5 gs to come. The resilience we saw in our electronics business, specifically the higher end, the circuitry and the semiconductor business through the beginning of this year was positively surprising. So when things closed down in Asia, there were still some continued demand and the recovery back was faster than we would have expected. And so you see that in our results in our Electronics segment, where the Circuitry business and the Semiconductor business has performed well in the Q1. And we expect that we tie that to both 5 gs and data center demand. And so we see some real investment, particularly in Asia behind 5 gs infrastructure. And obviously, with what's happening in the world, there's been a huge, huge surge in spending for data center infrastructure. So that's a trend that's not going away anytime soon. We see several years of investment associated with getting 5 gs infrastructure in place, and we will be beneficiaries of that on the top line and from a margin perspective because that's a higher margin product category or higher margin product requirement technical requirements than the average in the business. And we will take a follow-up from Jon Tanwanteng with CJS Securities. Hi, thanks for taking the follow-up. I was just wondering what kind of plans your clients are making for the second half in electronics launches specifically? How many programs have been pushed out to your knowledge either by a month or 2 or into the next quarter? It's a moving target, John. It's a moving target, right? I think that the disruption has certainly set some things back. A lot of the OEMs have ambitious plans to get back on track, but the level of disruption in the reopening is unknowable at this point or the pace of the reopening is unknowable at this point. We're not materially tied to one specific OEM or one specific product launch. So we have some diversification around that, that insulates us. But clearly, new launches will be delayed by a number of months, but we're not in a position today to say if that's 2 months or 4 months. Got it. And then just as a follow-up to that, we saw Apple launching a pretty successful mid tier phone just recently. I'm wondering if that kind of phone looks like it's going to become more popular in this economic environment. And how much difference that your profitability if people are switching from higher end to more mid tier or lower end devices? That's still a relatively high end phone compared to some of the local Chinese sort of average phones you see. And so we've got quite a bit of content across the, call it, the Western and Korean OEMs. And so that's a folks are switching from local Chinese to mid end Apple phones, it's probably a good trend for us. I don't know, Scott, if there's anything you'd add to that. No, I think that's right, Ben. I think Apple still has a very high standard for their components and we benefit from any growth in that area. Got it. Thank you very much. Thanks, John. And we'll take a follow-up from Josh Spector with UBS. There are no further questions at this time. I'll turn it back to Ben Glicklich for any closing remarks. Thanks very much, And thanks to everybody for joining the call this morning. We look forward to speaking with you in the coming weeks months. Thanks again. Stay safe. This does conclude today's program. We appreciate your participation and you may now disconnect.