Good morning, ladies and gentlemen, and welcome to the Element Solutions Q3 2021 Financial Results Conference Call. Later there will be an opportunity to ask questions during the question and answer session. I will now turn the call over to Varun Gokarn, Senior Director of Strategy and Finance. Please go ahead.

Good morning, and thank you for participating in our third quarter 2021 earnings conference call. Joining me are Executive Chairman Sir Martin Franklin; CEO Ben Gliklich; and CFO Carey Dorman. 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 expressed 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 and dividend policy. These statements are based on assumptions and expectations of future events that are subject to risks and uncertainties. Please refer to our earnings release, supplemental slides and most recent SEC filings for a discussion of material risk factors that could cause actual results to differ from our expectations and predictions. These materials can be found on the company’s website in the Investors section under News & Events. 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 Ben Gliklich, CEO of Element Solutions.

Thank you, Varun, and good morning, everyone. Thank you for joining. Despite a problematic supply chain environment and turbulence in the automotive market, our business is thriving. We delivered net sales that were a record for Element Solutions with solid incremental margins and strong free cash flow this quarter, while faced with both logistics and supply chain disorder that drove increased costs and impacted demand. Our people are embodying our culture. They're stepping up to challenges and showing commitment to our company and our customers. This is helping to ensure reliability of service and to mitigate raw material sourcing shortages in our own supply chain. At the same time, our organization continues to focus on and deliver against strategic growth priorities, such as power electronics for electric vehicles, new customer wins from our core electronic and industrial markets, and sustainability solutions. Underlying demand in our markets remains healthy and while supply chain dynamics will continue to create volatility over the next several months we are more excited than we have ever been about the long-term prospects for this company. We closed our acquisition of Coventya on September 1st and are off to a running start with our integration work streams. The benefits of this combination in terms of growth opportunities and cost savings are becoming increasingly tangible just two months after closing. While we still have significant work to do to realize the value from this combination and carry forward our current momentum through year end, we're energized by the way these teams are working together. Our increased product breadth and expanded set of commercial relationships are already unlocking incremental opportunities for us. The electronics industry continued to grow in the third quarter, bolstered by expansion and communications infrastructure, consumer electronics, and automotive electronics. Our electronics segment posted monthly sales records this quarter reflecting robust underlying demand and more importantly, strong commercial execution by our strategic sales and technical service teams. Customer engagement remains strong and customer investment in new capacity continues. Our industrial business was impacted by automotive supply chain constraints, but grew year-over-year as we lapped a quarter that still bore significant impact from facility closures due to COVID. We also benefited from strong demand in construction and other industrial end markets. The surge in economic activity year-to-date continues to challenge a capacity constrained global supply chain and logistics network. Demand for logistics is far outweighing supply across nearly all transportation modes and regions exacerbated by port delays, labor bottlenecks, and COVID-related worker shortages. Although our team has navigated the effects of these factors well when combined with negative mix impacts they weighed on gross profit margins relative to the first half of the year. Inclusive of metals we saw a raw material cost basket increased about 4% sequentially, while freight costs have continued to increase by several million dollars a quarter from their run rate exiting 2020. We've actioned price increases these past several quarters to reflect rising costs, but we have not yet fully offset raw material inflation through price action. Nonetheless, while costs are putting margins under pressure, our adjusted EBITDA margins this quarter were flat year-over-year and improved nearly a point on a metals adjusted basis. This period of inflation may persist, but we continue to take actions to retain our strong margins profile. Given raw material scarcity and logistics difficulty, we have built and retained safety stocks in inventory to help us meet customer demand given ongoing supply chain shortages. While this is impacting our cash flow conversion, we believe that impact is transitory. The fundamental requirements for working capital in this business are unchanged and we expect this buildup to release in the future when supply chains stabilize. On slide three, you can see a summary of our third quarter financial results. We grew the top line 13% organically year-over-year and grew adjusted EBITDA by 29% on a reported basis. In constant currency terms, third quarter adjusted EBITDA grew 25% and adjusted EBITDA margins were roughly flat to the same quarter in 2020. While the first few weeks of the quarter benefited from lapping the global manufacturing shutdowns that accompanied COVID-19 in 2020, underlying growth also continued to compare favorably against pre-pandemic levels. Notably, relative to comparable third quarter 2019 figures we grew net sales 11% organically and adjusted EBITDA 14%. Operating leverage on higher volumes offset the headwinds from increased metal prices, higher logistics costs and a return to more normalized OpEx levels as we continue to exit from crisis period cost containment measures of 2020 and early 2021. Adjusted EBITDA margins were roughly flat year-over-year and our OpEx as a percent of net sales was lower versus the third quarter of 2020. We expect a modest sequential increase in OpEx in the fourth quarter as countries continue to reopen. Our adjusted EBITDA margin was 26% when excluding the impact of the $111 million of pass-through metal sales in our assembly solutions business. While pass-through metals create volatility in our reported margins, year-to-date incremental margins excluding this impact have been steadily in line with our long-term targets. Our third quarter is a testament to the power of persistence and productive collaboration. Our customers are happy to have us back visiting in person, technology roadmap conversations have accelerated, many of our offices have reopened unleashing significant collaborative energy. We remain deeply grateful to our colleagues who have remained focused on supporting our company and our customers. Carey will now take you through our third quarter performance in more detail.

Thanks, Ben. Good morning everyone. Starting on slide four, we review the key drivers of organic sales growth in Q3 across our verticals. The electronics segment grew net sales by 11% organically in the quarter with all three verticals again growing in the double digits. Circuitry solutions grew 14% organically, driven by persisting strength in high-end electronics and memory disk markets. The more typical 3Q seasonal uplift in demand returned due in part to new higher-end mobile launches. We did see some softness in a few high-end margin product areas linked to delays in production schedules. This is delayed, not lost business. Our semiconductor solutions business grew 12% organically driven by strong volume increases across communication and automotive end markets. Sales value for wafer plating and advanced packaging solutions were also driven by inflation and precious metal prices, which would generally pass on to our customers. Assembly grew 10% organically. Demand here came from continued strength in the broader electronic markets and growth in our power electronics products, which mainly serve the electric vehicle supply chain. Our Asian business, where most of our sales are generated in this vertical, was stronger than Europe and the Americas. While we continued to improve the margin mix within our assembly portfolio, the impact of increased pass-through tin prices muted the otherwise strong margin uplift we would have seen during the quarter. Constant currency adjusted EBITDA margins in the electronics segment decreased only 60 basis points despite the impact of these metal prices. This result was driven by volume-based operating leverage and positive product mix, which helped largely offset raw material price inflation, net of the pricing actions we've taken and the return towards more normal operating expense levels. The industrial and specialty segment had an even stronger quarter, growing net sales by 15% organically driven by a strong macroeconomic environment and the lapping in the beginning of the quarter of widespread production shutdowns in 2020. Graphics solutions grew organic sales by 19% due to improving conditions in CPG markets as companies are investing in new package designs, products, and promotions. We saw volume increases from existing customers and strong commercial execution driving new wins across several geographies. Industrial solutions grew Q3 net sales 17% organically seeing year-over-year strength and construction in general industrial end markets, but sequential softness in automotive demand. In the first half of 2021, this business remained relatively insulated from the demand impacts of supply chain disruptions. However, we now believe the magnitude of the recent production rate decline due to material shortages has our customers preparing for a more protracted slowdown. We continue to expect that automotive demand will largely be deferred versus being lost altogether. Exceptionally low inventories and strong consumer demand suggest a potentially strong pipeline of industrial business next year and beyond. Offshore solutions net sales declined 9% organically in the quarter, down $1 million both sequentially and year-over-year. Our energy prices have trended higher and commentary from E&P companies stopped domestic. Investment in drilling and production activity has yet to materially pick up. Constant currency adjusted EBITDA margins in the I&S segment increased approximately 30 basis points in the quarter, as operating leverage and higher volumes and pricing action offset negative mix impacts from lower automotive demand and raw material inflation. We saw a modest increase in SG&A driven by mid-year merit increases, a pickup in customer-related travel and the inclusion of one month of Coventya results in the quarter as well. Turning to slide five. We generated $81 million of free cash flow in the quarter and over $175 million in a year-to-date period. Uses of cash this quarter included our semi-annual bond payment, several strategic growth CapEx projects and additional working capital driven by strong net sales growth and our investment in safety inventory. We now expect our inventory safety stocks to remain elevated into 2022, but believe these levels should normalize over time. On a full year 2021 basis, we expect free cash flow of at least $265 million with the reduction from prior expectations driven primarily by working capital. We increased our cash interest expectation modestly to reflect the add-on to our term loans, which funded a portion of the Coventya acquisition. And we also increased our CapEx expectations to reflect the exciting investments we are making behind capacity to support power electronics and other business growth. Our markets are expanding and we are excited to have organic capital allocation opportunities that meet our hurdle rates and position the business for continued success. Our balance sheet remained healthy in Q3. Net leverage at quarter end was 3.1 times on a trailing 12-month basis reflecting the add-on term loan for the financing of the Coventya acquisition. However, this reflects the contribution of only one month of Coventya earnings. On a trailing 12-month basis including a full-year contribution of Coventya, our net debt ratio would have been 2.9 times at quarter end. We expect to be under three times on a reported basis by the end of the year. Our consistent cash flow generation and leverage well inside our 3.5 times targeted ceiling provide us with meaningful capacity to continue to prudently deploy capital. And with that, I'll turn things back over to Ben.

Thank you, Carey. Turning to our outlook for the balance of 2021, our updated guidance is on slide six. Our markets remain generally healthy and our teams are executing well against our strategies to capture value beyond market growth. Inclusive of a full quarter of Coventya results we expect fourth quarter 2021 adjusted EBITDA to be approximately $118 million with a contribution from Coventya of approximately $8 million. Electronics demand remains strong. The weak auto market will have a negative impact on our industrial segment relative to previous expectations, while typical seasonality is responsible for the balance of the sequential decline. As you know, our fourth quarter last year benefited from the robust recovery from COVID shutdowns and later than typical new handset platform launches, so the year-over-year comparison is more challenging. We're updating our full-year 2021 adjusted EBITDA expectation to a range of $515 million to $525 million inclusive of four months of Coventya results. This equates to roughly $505 million to $515 million excluding Coventya. Notably, we expect to deliver results within our previously stated guidance range for the full year of 2021 despite an incrementally worse automotive backdrop and less favorable FX environment. We continue to expect full year adjusted earnings per share to exceed $1.35, which is approximately 40% growth year-over-year. In the context of our strong earnings growth and our expectation for continued growth from here, we expect to increase our dividend again this quarter. The second time we'll have done so in calendar year 2021. We believe 2022 is shaping up to be a year of robust growth. Given the dynamic environment it's early to provide guidance, but the overall outlook is positive. If we'd owned Coventya for the full year in 2021, we would have expected 2021 adjusted EBITDA, taking into account the synergies we expect to realize during this first year, to be closer to $560 million, and we expect organic growth off of this base next year given the secular trends in our electronics business, an expected cyclical recovery in our industrial business, and our proven ability to outgrow both markets through strong execution. We continue to have high conviction around the mega trends powering our end markets and a demonstrated ability to invest prudently behind them. To wrap up, I'd like to thank all of our stakeholders for their continued support of Element Solutions and in particular our talented and dedicated people, who help make this outstanding quarter possible. With that operator, please open the line for questions.

And we will take our first question today from Steve Byrne with Bank of America. Your line is open.

Yes. Thank you. Ben, your comments about Coventya sound more constructive after having a couple months with them now. My question for you is your outlook on that acquisition improving more because you see opportunities for productivity? Or is this really more about cross-selling or pricing power outlook from here?

Thanks for the question, Steve. I think the answer is both. The Coventya business outperformed the forecast we bought the business off of, it has strong momentum despite a weaker automotive backdrop and obviously automotive is a part of that business. The teams are coming together really, really well from a commercial perspective, identifying great opportunities. The relationship strength is very complementary. So certain accounts where Coventya had great relationships, we had weaker relationships and vice versa. So we see a really compelling growth opportunity from the business. And then, from a synergy standpoint as well, the savings opportunities are becoming more tangible and we've got line of sight to delivering in excess of what we've committed to in terms of cost savings in a reasonable period of time. So both growth and savings are making us more encouraged there.

And any acceleration in any of that or seasonality to take into consideration to help us estimate what the 2022 EBITDA contribution might be? Is it simply four times your EBITDA estimate for Q4?

There's a little bit of variability associated with that driven by automotive, right? Automotive is a key variable that will determine the level of growth in that business. But it's not a bad estimate to take a little bit more than four times eight, because eight is the slow quarter. Q4 is this lower quarter and then add some synergies on top of that. We've tried to do that math for you guys and given that baseline of about 560 before organic growth into next year.

Okay. Thank you for that, Ben. And just one risk I wanted to drill into is whether you see any potential that some of your elect sales in the auto and markets might have been driven by inventory build by your customer? Is that a potential headwind going forward?

It's hard to quantify what's gone into units versus what's waiting to go into units. But the latent demand from the automotive space in the West gives us confidence that there's significant growth potential when the supply chain stabilizes that will overcome any potential inventory build.

Thank you. We will move next to Bob Koort with Goldman Sachs. Your line is open.

Thank you. Ben, you mentioned that for most of the year, your sales to the auto chain did not match production levels. Should we expect a delay as production ramps up? I saw that GM has added overtime shifts and mentioned improvements in supply. Do you think there will be a slight delay before these changes are reflected in your business?

I don't believe there will be a significant delay when the auto market rebounds from this period of weakness. Our customers have noticeably slowed down over the past month and a half, and we anticipate this trend to continue into the fourth quarter. However, we are aware that they are all prepared for the market to recover. Some of the strong performance we experienced compared to the automotive sector is clearly being driven by other areas of our industrial business. Our construction and machinery segments have shown substantial double-digit growth sequentially, helping to mitigate some of the automotive challenges. Additionally, I want to highlight that content per vehicle is increasing in both our industrial solutions and electronics segments. Therefore, this situation isn’t solely about unit sales; the value exceeds the units, positioning us to perform better than unit growth when it resumes.

Got you. Regarding the graphics business, especially the strength in North America, is the lack of discussion about Europe due to its smaller size in your business, or is there something about your customers in that market that hasn't responded as positively as those in North America?

The graphics business is performing very, very well. It had a great quarter on a year-over-year and sequential basis. That business was just better in North America than in Europe, but it wasn't poor in Europe at all. That performance is being driven by new investment from CPG customers and really strong commercial execution. We're winning a lot of business there and we're poised for another year of good growth in graphics into next year. Thanks Bob.

Today, we encourage everyone to ask a question, but please limit yourself to one question and one follow-up. We'll now hear from Kieran de Brun with Mizuho. Your line is open.

Hi. Good morning.

Good morning, Kieran.

I wanted to delve deeper into the quarter. It appears you took significant actions that helped mitigate some of the challenges related to supply and logistics, and you're also making further moves on the raw material front by building up inventories as we approach the end of the year. If this situation lasts longer than anticipated, could you discuss the measures you implemented this quarter? Additionally, are there any other strategies you can employ in the short term to address this?

Yes, absolutely. So raw material price inflation and logistics cost inflation were material impacts in the quarter, which was expected. We've been taking price over the course of the year. We're not quite caught up from a raw material inflation perspective relative to the price actions we've taken. But we have taken price and you're seeing that through the P&L and we will continue to as necessary to support margins. Logistics costs were a couple million dollars of a headwind sequentially and we expect that to also persist. We haven't taken price relative to logistics as yet. I would note however that our EBITDA margins on an organic basis are up year-over-year over a point and a half. That's been hidden by the pass-through metal impact. So metal price inflation has been staggering this year and so you see that in our reported margins. But excluding the impact of metal, we've actually improved our margins year-over-year despite all this inflation. So, we are getting the price that we're trying to take, but we've got a bit more of that to do.

Right. And then just a quick follow-up on the electronic side. I mean, you mentioned the investments that we're seeing from the customer perspective in terms of CapEx, which we should we be thinking about that creating a demand pull maybe in the back half of next year and into 2023? And just how are you positioning yourself to maybe win share as some of these new investments come online?

Yes. So our business has been executing exceptionally well commercially in the electronic space and in our other businesses as well. We have won more business year to date than we won in all of 2020 just as an example. So, we are winning large customer engagements. Our CapEx is higher in part, because we're investing in equipment to support customers new line builds. And so that's what gives us a lot of confidence and conviction not just in the secular trends that are supporting our business, but in our ability to participate disproportionately from them.

And we will go next to Jon Tanwanteng with CJS Securities. Your line is open.

Hi. Good morning guys. Thank you for taking my questions. Nice quarter and being able to hold the line in the guidance for the year. It's pretty impressive considering what else is going on in the industry right now. My first question is just in your discussions with customers, are they telling you to expect any easing and supply chain constraints as we head into next year? Do you have any kind of visibility at all? Is there any specific commentary that we should be thinking about?

I believe that customers, especially in the automotive sector, were optimistic at the start of the third quarter about improvements by year-end, but that has not materialized. They are now facing the reality that recovery in automotive will be postponed into at least 2022. In terms of visibility on that recovery, it is limited. We observe the demand, particularly when examining dealer inventories and used car prices, but we are uncertain about when the supply chain bottlenecks will be resolved.

Okay. Fair enough. Regarding price increases, have you experienced any resistance from customers? I know you mentioned that you have not been able to pass on the logistics costs. Is there a specific reason for that, or do you anticipate being able to implement those changes in the next one or two quarters?

Yes. Taking price is never easy, but we've been effective at doing so. There's a bit of a lag always from the decision to take price to the negotiation with the customer to that price increase actually going through, that lag is a quarter or so. Historically, we've had great surcharges on external logistics. Our internal logistics we've covered ourselves. And so some of the cost increase we've seen is associated with our internal freight, which is something we have decided not to pass on. With regard to other raw material inflation that we're catching up on, we are prepared to take action to support our margins as we have here to date and as you are seeing in our margins structure and our ability to withstand what's been very significant raw material inflation year-to-date.

Okay. Thank you. That helps.

We will take our next question today from Josh Spector with UBS. Your line is open.

Yes. Hey guys. Thanks for taking the question. I guess just first to maybe follow-up on the price cost dynamic and specifically an industrial. So assuming you are getting pricing and if we assume that metals prices and raws kind of stabilize where they are, is there anything you would add to that 360 EBITDA like base for next year for price recapture from price cost headwinds this year?

So I'm trying to understand that question, Josh. Are you saying, is there additional earnings growth from additional price actions that would support a number above 560?

Yes. Another way to ask is where do you perceive pricing stands now in industrial? Is it beginning to cover the metals costs? If pricing remains stable and raw materials do as well, will that be enough to recover and increase margins without relying on volume growth in that sector next year?

I see. So raw material prices have inflated over the course of 2021. And we have a bit more work to do to support the very strong margin we had in the first quarter, for example. So, I wouldn't be counting on incremental price to contribute growth over and above that 560. The growth above that 560 is going to be driven by volume and to some extent mix, as our mix is increasing as we move more into EVs. The other thing I'd note, you refer to metal price specifically. We pass through most of our metal price. And so while it has an optical impact on margins, it doesn't have a dollar impact to profitability dollars.

Okay. Fair enough. And just trying to contextualize a electronics year-to-date very strong growth. I don't know if you have the data to say, what you think unit growth was underlying your volume growth? And what your outperformance has been there year to date? And is the driver of that new wins or more content penetration? And does that rate change or that outperformance rate change when we start to think about 2022 better or worse?

The best indicator for our electronics business is the growth in printed circuit board volume. We expect circuit board growth for 2021 to increase from high single digits to 14% or 15%, and we are clearly growing beyond that, indicating our strong performance. Looking ahead to 2022, we anticipate growth in handset units, with a significant rise in 5G handsets leading to more content per unit. We expect to continue outperforming by several points due to our commercial execution. We are very confident in our underlying growth and our ability to excel.

And we will go next to Chris Kapsch with Loop Capital Markets. Your line is open.

Yes, good morning. Just a follow-up question about your electronics business and your formal comments and I guess response to another question about the new business wins addressing the printed circuit board space and ecosystem. You mentioned I guess a good amount of new business and being higher on a year-over-year basis, year-to-date. Can you just talk about the cadence of this activity on a sequential basis as the level of quoting activity been steady, is it improving? What's going on sequential basis?

Yes. So the seasonality we see through the top line is also reflected in the seasonality we see in terms of customer engagement. And so, customers are seeking RFPs and doing technology roadmap exchanges more towards the beginning of the year in advance of platform launches towards the tail end. So some of that commercial activity has slowed down. But that's what we would have expected at this point through the year. And so, we feel good that we built in growth based on our wins in the period to date for next year and beyond.

Okay. And just as a follow-up, do you believe that your gaining market share is due to these new account wins or turnkey system specifications? Can you speak about that? Also, have you noticed any changes in the competitive behavior of your key competitor who is in the process of being acquired? Thank you.

Sure. Thanks Chris. So for starters from an industry perspective, there's much more growth in the high end, higher technology, circuit board space than there is in the lower end. So just naturally by virtue of diverging growth rates, the higher end is where the share gains are occurring or the higher end participants are growing share, and we're one of those. So we would expect our share to grow just organically by virtue of industry dynamics. That said, we are getting traction in markets that we have underpenetrated that we're strategically investing behind, and we've made it very clear to the industry that we are open for business and investing aggressively behind our business, and very, very focused on that. And so, we feel like we've got an opportunity to take some share. And the calculation of share takes a little while and is done in hindsight. But data points do seem positive in that regard.

We will move now to Duffy Fischer with Barclays. Your line is open.

Yes. Good morning, Ben.

Good morning, Duffy.

Just a question around the contractual pass-through on the metal and maybe a few of the other raw materials that are contractual. Because they've moved so much can you help us size this year within your COGs, how much do you think is going to be COGs that have contractually moved with price versus those you would actually physically have to go out and try to get price to offset?

Yes, that's a good question, Duffy. We reported $110 million in pass-through metals from our assembly business for the quarter. There are additional pass-through metals, such as palladium and gold, that are not included in that total. Overall, we are passing through several hundred million dollars of metal. I estimate that inflation in this category has been around $200 million, while the rest of our cost of goods sold is not contractually pass-through. We have been actively pursuing price increases in each of our businesses and have been successful in obtaining those increases to counterbalance the inflation in raw materials.

Great. Thanks. And then, when you look at your auto business next year, obviously, you have an idea kind of wins. You have an idea, EV, hybrid, stuff like that. How much faster do you think you can grow volume than the market next year? And again, let's say that number is 3% faster. Does that change whether autos are up 5% or down 5%? Or is that really kind of a linear add-on as we go forward?

Yes. A difficult question to answer. But about 25% of our business is automotive oriented that's captured in both the industrial surface treatment business and in our electronics business. And the reason that we have confidence we can outperform units in auto is because we're seeing increasing content per vehicle in both of those businesses with significantly more content in an e-vehicle versus an internal combustion engine. So one and a half to two times the content on an electric vehicle versus an internal combustion vehicle. And over the long term, our expectation is that content per ICE vehicle grows 2% to 3% faster than unit growth. So depending on e-vehicle penetration, you could see in excess of 3% outperformance to units. And I don't see a big difference if units are up 2% or 5% for example or more in that equation. I think the biggest variable is EV penetration out of the unit growth. Perfect. Thank you guys.

And we will take our final question today from Angel Castillo with Morgan Stanley. Your line is open.

Hi. Can you hear me?

Yes.

Good morning, and thank you for the question. I wanted to follow up on the safety stock discussion. Could you provide more details on what typical inventory days look like and where you've currently moved? Additionally, as you mentioned that auto safety stock will continue to be part of the base next year, do you need to increase it further, or are we at the appropriate level and just maintaining this higher safety threshold?

Yes. Thanks for the question. This is Carey. Normally, in our business, we see inventory days between the mid to high 60s getting closer to 70, depending on the quarter. We actually haven't creeped up that much. I think we're a few days higher than we were if we look at our average over the course of several years. We think year to date we've built something like 40 or 50 worth of safety stocks. We intentionally did that. We think that's the right thing to do to support our customers. It's what's supporting the top line growth. And obviously, we think that that inventory will be easily sellable into next year and beyond. As we think about the rest of the year, we're anticipating a small release of working capital to deliver the free cash flow that we've guided to, that's really more driven by the sales, sequential sales expectations than it is anything it became at least of safety stocks. For next year, I would expect when we see the supply chain constraints reduce that safety stock will release and we should see a much better conversion to free cash flow from EBITDA next year.

Understood. That's very helpful. And then in terms of growth next year. So, that was very helpful. Thank you for providing the base that we should think about. Is we've kind of contemplate that within kind of the broader scope of your organic growth trajectory that you've outlined in the past investor days, I think it was roughly 4%. Could you give us kind of guardrails as we think about 2022? I know it's early. But what kind of gets you to be above that or below that? And kind of is that the right way to think about 2022 from our organic basis?

Sure. The basis is the EBITDA before the synergies. We expect our electronics business to grow beyond its stable long-term rate, considering the stable long-term rate we communicated at our previous Investor Day and the significant progress we've observed in the past two years from the secular trends driving that business. The bigger variable is the automotive industry and when it will start to recover. If it begins to recover in the first half of the year, we could see significant outperformance compared to that long-term target from the automotive segment. However, if this recovery is delayed and supply chain issues continue, we cannot rely on significant growth from that part of the business. Therefore, the automotive sector will be the biggest factor influencing the extent of outperformance relative to that long-term growth rate.

Thank you.

Thanks, Angel.

And this does conclude our Q&A session for today. I will turn the call back for any additional or closing remarks.

Thanks very much, everybody for joining. We look forward to seeing and speaking with you in the days and weeks to come. Have a good day.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.