Element Solutions started 2026 with a record first quarter, posting 10% organic net sales growth and a 21% constant-currency increase in adjusted EBITDA, with adjusted EPS also up 21%. Electronics organic growth of 15% - its strongest since early 2021 - was broad-based across assembly, circuitry and semiconductor on accelerating AI infrastructure demand, and the recently closed Micromax and EFC acquisitions both grew double digits and integrated well. The company recovered the prior-quarter metals-hedge timing headwind, expanded ex-metals margins 170 basis points to 27.8%, and raised full-year adjusted EBITDA guidance to $665-$685 million. Offsetting positives, first-quarter free cash flow was negative on working-capital build, specialties/industrial demand stayed soft, and leverage was elevated at 3.4x; separately, CEO Ben Gliklich noted that Chairman and founder Sir Martin Franklin will not stand for re-election, with director Ian Ashken nominated as his successor.
Good morning. Thank you for participating in our first quarter 2026 earnings conference call. Joining me today are our CEO, Ben Gliklich, and CFO, Carey Dorman. In accordance with Regulation FD, we are webcasting this conference call. A replay will be made available in the investors section of the company's website. During today's call, we will make certain forward-looking statements that reflect our current views about the company's future performance and financial results. These statements are based on assumptions and expectations of future events, which are subject to risks and uncertainties. Please refer to the earnings release, supplemental slides, and most recent SEC filings on our website for a discussion of material risk factors that could cause actual results to differ from our expectations and predictions. Today's materials also include financial information that has not been prepared in accordance with U.S. GAAP. Please refer to the earnings release and supplemental slides for definitions and reconciliations of these non-GAAP measures to comparable GAAP financial measures. It is now my pleasure to introduce our CEO, Ben Gliklich.
Thank you, Varun. Good morning, everybody. Thank you for joining. Element Solutions started 2026 strong. We reported a record quarter yesterday that demonstrates ongoing success with our strategy of penetrating the highest value, fastest-growing subsegments in our addressable markets. The quarter's results are a product of work we've been doing for years in our labs, at our sites, and alongside our customers. It was enhanced by our strategic acquisitions of EFC and Micromax, both of which closed in Q1, and are off to a solid start as part of the Element family. The trends that drove accelerating performance at the end of 2025 continued to propel us forward. We delivered double-digit organic sales growth for the second quarter in a row and strong margin expansion, excluding the impact of pass-through metals, all while increasing investment in people, technology, and plants to support customer growth.
Sales in our electronics segment grew 15% organically as activity accelerated across our supply chain in support of the ongoing AI infrastructure build-out. Technical requirements in data center hardware and other high-performance electronics continue to increase, and our businesses provide critical enabling solutions across thermal management, power density, and advanced packaging applications, to name a few. We're seeing volume growth in the highest value categories across our end markets, from leading-edge semi and high-end circuit board fabs to device assemblers, and a strong pull for innovation to enable greater levels of device performance and manufacturing yield or throughput. This dynamic, combined with resilience in the higher-end mobile market, led to double-digit organic net sales growth in all of our electronics verticals. Forecasts from customers are increasing, and innovation cycles are accelerating.
This trend will continue. We're increasing investments to better serve our customers, whether in inventory to support volume growth, additional manufacturing capacity for certain high-growth product lines, or innovation to remain on the leading edge. Our investment in OpEx and CapEx is customer-led and supports durable growth trends. As a predominantly asset-light formulation business with low maintenance capital requirements, we're uniquely positioned to selectively target efficient investment ahead of industry inflection points. Our ongoing activity with Kuprion is an example of such an investment, where we are in the midst of commercializing a differentiated new material to solve several emerging customer pain points. The pipeline for this capability continues to grow despite our limiting commercial activities to ensure the supply chain can keep up with demand. We've also expanded the areas of opportunity we serve through the acquisitions of Micromax and EFC.
Their results in the quarter and forecasts for the year are tracking favorably to our expectations, with both growing revenue organically this quarter by double-digits. More importantly, we welcomed two highly capable, deeply technical teams with the same customer-centric mentality that is the hallmark of ESI. Integration is on track, and the teams are settling well into our organization and energized by the opportunities that Element Solutions can provide them to better serve customers. Carey will now take you through our first quarter business results in more detail. Carey?
Thanks, Ben. Good morning, everyone. On slide three, you can see a summary of our first quarter financial results. Organic net sales grew 10%, and constant currency adjusted EBITDA increased 21% year-over-year. Last quarter, we noted the timing of metals hedges related to tin and silver in our assembly solutions business, which negatively impacted Q4 2025 performance by several million dollars. In Q1 2026, we largely recovered that amount through sales of finished goods at higher metals values. Underlying year-on-year growth in adjusted EBITDA would have been in the mid-teens when excluding this benefit, as well as the impact of acquisitions and prior period divestitures. Our results in Q1 include a full quarter of EFC and two months of Micromax ownership.
Assuming we had owned Micromax for the full quarter, adjusted EBITDA would have been $170 million. Electronics organic net sales growth of 15% was broad-based. Each of the segment's verticals grew organically by double-digits. Our Specialties business grew 1% organically, driven by strong performance in the offshore energy vertical. Global industrial weakness continued this quarter, as our industrial solutions business was flat year-over-year on the top line. Beginning this quarter, we are updating our definition of adjusted EBITDA margin to remove the value of pass-through metals sold in the period. We believe this change allows for a better perspective on the underlying value we are providing to customers, eliminates the noise from metal prices, volatility and margins over time, and enhances period-to-period margin comparability.
Pass-through metals revenue was $256 million in the first quarter of 2026, and $101 million in the fourth quarter of 2025. On this new basis, adjusted EBITDA margins improved 170 basis points year-over-year to 27.8% this quarter. This improvement was primarily driven by mix with organic growth in higher value product lines and partially offset by continued OpEx investment to support growth initiatives. Adjusted EPS grew 21% in the first quarter, largely reflecting the underlying demand improvement in our electronics business and offset by higher interest costs associated with our recent acquisition activities. On Slide four, we share additional detail on the drivers of organic net sales growth in our two segments. In electronics, 15% organic growth was the strongest we have seen in the segment since early 2021 during the COVID recovery.
We are benefiting from rising demand for products that address new challenges around power delivery, circuit density, thermal management, and reliability in high-value applications. As a result, our assembly solutions business grew 12% organically, with sustained increases in sales of high reliability alloys and engineered solder preforms to data center suppliers. At the same time, in the consumer electronics market, pastes used for high-end smartphones continued to grow in the first quarter. Circuitry solutions net sales improved 17% organically. Its growth continuing to come from the high layer count server board market, where our differentiated solutions have great traction. We generated record quarterly sales in these product categories tied to high-performance computing and AI server builds. Beyond the data center market, sales were further supported by strong demand from suppliers of high-end smartphone components.
Finally, our business is also benefiting from continued manufacturing investments in Southeast Asia, where we have a strong and growing presence. Semiconductor solutions organic net sales grew 18%, due in part to improved order patterns for power electronics products at legacy customers and growing momentum in the thermal interface products for high power consumption applications such as AI GPU and CPUs. We also experienced strong and growing demand for advanced packaging solutions. Revenue growth for these products was magnified in the quarter by the large increases in precious metal prices that are inputs to many of these solutions. Micromax, which we owned for two months of this quarter, is not included in our organic net sales growth calculation, but contributed roughly $65 million to reported sales in the quarter.
We expect metal prices fluctuations to create volatility in headline sales for this business, as roughly two-thirds of reported revenue is related to metals. Turning to our specialties segment, industrial solutions was essentially flat in the quarter as demand for surface treatment chemistry was impacted by softer Americas automotive production activity, particularly with customers operating in Mexico. European automotive customers saw relatively stronger growth in the period against an easier 2025 comp. We remain cautious about our European industrial demand outlook. Our offshore energy solutions business grew 15% organically as a result of strong volume growth and pricing. This quarter also benefited from favorable comparisons to the prior year period, which was unusually soft due to a few specific customer delays. Finally, EFC Gases & Advanced Materials contributed $19 million of revenue in the first quarter.
This was a record first quarter for this business, which is typically the slowest of the year for EFC, primarily on the back of strong demand from electrical infrastructure customers. The EFC team is executing at a high level, growing wallet share with existing semiconductor and space customers and winning new qualifications in both. We expect a strong run for EFC this year and into the future. Slide five addresses cash flow and the balance sheet. When our business grows, we typically need to invest in working capital, and higher metals prices compounded our working capital investment in the quarter. As a result, free cash flow was negative. The first quarter is always our slowest from a cash flow standpoint, and the high level of growth in the quarter magnified this impact. We expect strong cash flow generation in subsequent quarters this year, assuming metals prices stabilize.
CapEx in the quarter was $25 million, which is trending above our previously guided annual run rate of $75 million. As you heard from Ben, there are excellent opportunities in front of us to invest in growth CapEx to support large, profitable commercial wins. We are taking the initiative to build incumbency and leadership in these areas. We are also continuing to invest in footprint consolidation and other efficiency projects where we see compelling returns. As a result, we now expect to invest between $75 million-$100 million in CapEx this year, which remains less than 3% of sales. Our expectations for other uses of cash are unchanged for interest and modestly lower for taxes.
Turning to the balance sheet, our net leverage ratio at the end of the quarter was 3.4x, and it would have been 3.1x assuming we had owned both Micromax and EFC for the full trailing 12 month period. We anticipate reducing leverage by approximately half a turn by the end of the year, assuming no further capital deployment. This strong balance sheet position should once again give us flexibility to act on opportunities if and when they arise. With that, I will turn the call back to Ben. Ben?
Thank you, Carey. We had a great start to the year. At the same time, geopolitical events have created a more complex macro environment than anticipated. We're seeing signs of inflationary pressure and expect increased variance in quarterly earnings driven by swings in metal prices. Further supply chain disruptions and the impacts to global demand resulting from higher energy prices creates risk for our suppliers, our customers, and ultimately for us. That said, our organic acceleration in the first quarter, and in particular the sources of that growth, give us confidence in a strong year. Underlying demand in the high-end electronics market remains strong, and the positions we've established in the fastest-growing, highest-value niches of these markets should serve us well. As a result, we're raising our adjusted EBITDA guidance to a range of $665 million-$685 million for the full year.
This range reflects the growth that we saw in the first quarter, combined with continued strength in electronics and softer demand in industrial solutions. It also contemplates a less favorable FX tailwind than we expected a few months ago. We expect second quarter adjusted EBITDA in the range of $155 million-$170 million, with demand conditions sequentially similar to the first quarter, and taking into consideration some risk from raw material and logistics inflation that we may not recapture immediately despite ongoing sourcing and pricing actions. We now expect 2026 adjusted EPS growth in the high-teens on a full year basis. As we've demonstrated repeatedly in recent periods of uncertainty, we're prepared to react quickly to shifts in demand and cost.
We have a variable cost structure and local teams that can rapidly respond to customer needs. We're already taking action to preserve our profitability in certain business lines. Our diversified, regionalized manufacturing footprint allows us to be nimble to accommodate dynamic trade flows. As was the case with tariffs last year, there may also be opportunities where our competition may not have the same flexibility, geographic breadth, and access to capital that we enjoy. We're actively leaning into growth in 2026. The customer signal is clear. They're asking more from us. The potential rewards from the investments we're making are apparent. High margin sales and long-term incumbency in fast-growing categories. Through our efforts to build research and applications development in high leverage geographies like Southeast Asia or our expansion of ArgoMax capacity, we've proven the value of investing ahead of inflections.
Our company is executing, and our people are eager to capitalize on our attractive long-term growth prospects. Three final topics before questions. Our portfolio has changed through acquisitions, divestitures, strategy implementation, and end market evolution over the past five years. We're holding a virtual investor day on May 18th to provide a deeper look into our businesses, introduce business unit leadership, and share some of our emerging technologies, and we're looking forward to that day. I'd like to express my deep gratitude to our Chairman, Martin Franklin, who is not standing for re-election to our board at our upcoming annual meeting. He's been and will remain a great partner and mentor to me and valuable resource for our company going forward. You'll hear from him on May 18th as well, but in short, he remains committed to our company and invested in our success.
Our nominated successor, Ian Ashken, has been on our board for 13 years and knows our company and our people exceptionally well. I'm excited to welcome him to his new role. Finally, on that same note of gratitude, I'd like to thank all of our stakeholders for their continued support of Element Solutions, and in particular, our talented, dedicated, and growing team around the world working to support our customers and drive long-term value for our shareholders. With that, operator, please open the line for questions.