In the third quarter of 2025, Element Solutions delivered record results, with adjusted EBITDA of $147 million beating guidance and organic sales up 5% (adjusted EBITDA up 10% excluding the divested graphics business). Electronics led the way at 7% organic growth on strong AI and data-center demand for high-layer-count circuit boards, while the industrial segment expanded margins meaningfully despite a flat top line. The headline event was the announced acquisition of Micromax, an electronics inks and pastes business expected to be over 5% EPS-accretive and add about $40 million of adjusted EBITDA, pushing the electronics business above $2 billion. Management raised full-year 2025 adjusted EBITDA guidance to $545-$550 million, though softer EV-driven power electronics demand and higher pass-through metal prices weighed on semiconductor growth and reported margins.
Thank you.
Good morning everybody. Thank you for joining. This is an exciting morning for us. When we launched ESI, we talked about a value creation model marrying operational excellence and prudent capital allocation. Today is a solid proof point showcasing our ability to do both. In addition to reporting record results yesterday, we're also announcing the acquisition of Micromax, a highly accretive strategic transaction and a value enhancing addition to our electronics portfolio. Before we get into that though, I want to give proper due to our operating results. This was an outstanding quarter. We set multiple records despite selling our graphics business. This was our highest quarterly adjusted EBITDA since the inception of Element Solutions Inc. Our electronics segment posted its sixth consecutive quarter of high single digit organic growth and achieved a record level of revenue. Excluding the impact of graphics, adjusted EBITDA growth would have been 10%.
Despite some of our legacy end markets remaining below prior peak volume levels, a weaker EV outlook and a soft macroeconomic backdrop in Western industrial markets, our teams are executing well on their strategies. In our industrial segment, portfolio optimization, productivity initiatives and high margin wins in both verticals drove strong profit growth. Despite a flat top line, the segment saw meaningful margin improvement and excluding the impact of our graphics divestiture, adjusted EBITDA growth would have been almost 30%. On the electronic side, we've built a unified platform of technologies to solve emerging customer pain points. Just as burgeoning investment in data centers and their associated infrastructure accelerates demand for innovative material solutions, our portfolio is uniquely positioned to provide those solutions.
From metallization chemistries for high-,layer count printed circuit boards to specialized thermal management materials used in assembly to advanced packaging chip-scale chemistries, Micromax will add to those solutions its portfolio in electronics inks and pastes. With a specialization in the highest performance, most technically challenging applications such as aerospace, defense and healthcare, it is a great fit for Element Solutions Inc. The acquisition broadens our offerings to our supply chains and enhances our value propositions to OEMs and specifiers. In 2019, our electronics business was just over $1 billion and with this transaction it will exceed $2 billion. Like our business, Micromax is a leader in niche electronics markets reliant on innovation that is co-developed with customers and requires high levels of applications expertise. Its products are known for durability and performance in harsh environments and provide mission-critical solutions in highly specialized end markets.
Micromax sits at the intersection of our assembly and circuitry businesses. Its metals-based manufacturing resembles assembly solutions, but its products are used more in circuit pathway applications. Like our circuitry solutions business, these products also fit our core competencies in formulation and our high-touch, low capital intensity operating model. The business has a proven team of experienced, highly technical leaders who add depth and expertise to our electronics business. The transaction meets our robust acquisition criteria and is consistent with our strategy of disciplined investment in markets we understand and in growth businesses that we believe are better under our ownership. We expect the Micromax transaction to be more than 5% accretive to adjusted EPS and, based on its projected 2025 results, contribute approximately $40 million of adjusted EBITDA on a full-year basis. Adjusted EBITDA margins are subject to regulatory approvals and customary closing conditions.
We expect to close in the first quarter of 2026, and we're looking forward to welcoming the Micromax team into the Element Solutions family and to capitalizing on the unique value opportunities associated with this combination. Shortly you'll hear more from Carey on our results, but to me the most exciting thing about the quarter is what it means for our future. We've been able to generate great organic outcomes while ramping up investment in future internal and inorganic opportunities. While growing nicely in 2025, we're simultaneously building levers to accelerate that growth going forward. Those include several new product introductions in high-value categories in 2026, the accretive, highly strategic acquisition of Micromax underway, and substantial remaining balance sheet capacity to put to work should the right opportunities present themselves. The outlook is quite positive.
Carey,
thanks Ben. Good morning everyone. On slide 4, you can see a summary of our third quarter financial results. Organic sales grew 5%, and adjusted EBITDA would have increased 10% when adjusting the graphics business out of both the 2024 and 2025 periods to account for that divestiture. Adjusted EBITDA was a record $147 million and exceeded our initial guidance for the quarter of $140 million to $145 million. Electronics organic growth of 7% was driven by solid performance in semi and assembly and exceptional volume growth in circuitry solutions through economic and industry investment cycles. We benefit from diversification within the electronics supply chain.
This quarter our circuitry business was a.
Primary beneficiary of AI related investment as our market leading pulse plating products are used to support fabrication of high layer count server boards. This demand, along with a sequential ramp in smartphones, allowed us to deliver high single digit organic growth for the segment even as customer related volume weakness weighed on power electronics growth in our semiconductor business. The addition of Micromax should further enhance end market diversification and increased opportunities to deliver on customer led growth across a broader manufacturing landscape. Our core industrial surface treatment business has demonstrated stable or growing adjusted EBITDA for several quarters even as volume has been under pressure this quarter. Underlying volumes improved as a result of strong growth in Asia and new business wins ramping in the Americas. At the same time, margins benefited from improved fixed cost absorption, portfolio optimization and ancillary business lines, and favorable product mix.
ESI's adjusted EBITDA margin improved roughly 20 basis points year over year in constant currency terms and was negatively impacted by higher pass through metal prices. Excluding the impact of roughly $125 million of pass through metal sales in assembly solutions, our adjusted EBITDA margin would have been 28%, a 100 basis point improvement year over year. Foreign exchange provided modest favorability of about $3 million in the quarter and at current rates should provide a similar level of year on year benefit in the coming quarter as well. On Slide 5, we share additional detail on the drivers of organic net sales growth starting with electronics in assembly. The third quarter saw an increase in China volumes associated with smartphone activity as well as continued growth from customers serving the high performance computing and telecom infrastructure markets.
Advanced solder paste volumes for various computing applications continue to grow as well. Circuitry solutions sales grew 13% organically. This was driven by continued demand for data center applications, a seasonal ramp in mobile phone activity, and circuit board demand in the Asian EV market. Data center growth is also increasing demand for data storage, which drove sequential acceleration in our memory disk business that should continue through year end. Semiconductor solutions organic net sales grew 5% as continued double-digit growth in wafer-level plating was offset by lower power electronics sales from a softer evolution market. Copper plating products for foundry and tier 1 OSAT customers continue to see sustained demand. We also saw a rise in products with high precious metals content such as gold and palladium in our semi business, which drove negative mix impact to margins overall.
While we saw a year-on-year decline in power electronics from EV demand dynamics, we continue to win business with new customers and the outlook for this business remains compelling. Industrial and specialty organic net sales were flat year over year. Underlying chemistry volumes for the industrial solutions vertical were up mid-single digits as we saw strength in Asia, modest improvement in Europe, and a roughly flat end market in the Americas, which grew due to the contribution of new account wins. Reported revenue growth in this business was impacted by a large customer equipment deal in the third quarter of last year, which is tied to a high-value multi-year chemistry contract. Excluding this impact, organic sales would have been up 4% year over year. The offshore business continues to grow nicely on the back of market strength, pricing, and competitive wins. Slide 6 covers cash flow and the balance sheet.
We generated $84 million of adjusted free cash flow in Q3. This included a $22 million investment in working capital, primarily driven by accounts receivable on the back of sequential revenue growth and slightly higher inventory values driven by metal inflation. Our days of inventory continue to improve, reflecting progress we have made to drive efficiencies in inventory management. After several years of supply chain disruption, CapEx in the quarter was $17 million, primarily going towards compelling growth investments such as our first manufacturing site for Kouprion. We expect to invest roughly $65 million on a full-year basis in line with our prior forecast. Now turning to the balance sheet, our net leverage ratio at the end of the quarter was 1.9 times and our capital structure remains fully fixed at an effective interest rate of roughly 4%.
We expect to fund the Micromax transaction with a combination of cash on hand and modest incremental debt. Assuming no further capital deployment this year, pro forma net leverage at year end would be roughly 2.5 times. This is comfortably below our 3.5 times long-term target ceiling, which leaves us with plenty of further financial flexibility to continue deploying capital should the right opportunities appear. With that, I will turn the call back to Ben.
Thank you, Carey. As you've heard, our strategy and execution are driving record results at Element Solutions, and we're nicely ahead of our plan for the year. Despite real end market volatility over the.
Course of the year, we now expect.
Full year 2025 adjusted EBITDA to be between $545 and $550 million at the high end of the guidance range we provided last quarter. This translates to fourth quarter adjusted EBITDA of roughly $135-$140 million. This quarterly expectation incorporates lower EV volume, the end of the seasonal smartphone ramp, and targeted incremental OpEx investment in support of high growth initiatives by Kouprion. We expect leading edge electronics driven by high-performance computing and data centers to remain robust and have assumed stable industrial demand through year end. We're pleased to have found a solid outlet for some of the balance sheet capacity we've been building. Micromax meets our high bar for acquisitions. It's a growing business that matches our asset-light, customer-intimate, people-intensive attributes.
It'll be a great addition to our portfolio and reinforces our conviction that we can continue to find high value inorganic opportunities to accelerate per share earnings growth. We have capacity for more but will continue to be disciplined about quality and fit. I'll close, as always, by thanking all of our stakeholders for their continued support of Element Solutions. Most importantly, let me express my deep gratitude for our people around the world.
For their effort and commitment.
Our combination of strong positioning, thoughtful strategy, and solid execution is entirely a product of our team, and our exceptional people continue to deliver for us. With that, Operator, please open the line for questions.