Q1 2021 Element Solutions Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the element solutions Q1, 2021 financial results conference call. At this time all participants are in a listen only mode. Later, you will have the opportunity to ask questions. During the question and answer session. You can register to ask a question at any time by pressing star and one on your touch.
On the phone please.
Please note todays call, maybe recorded and I will be standing by if you should need any assistance.
I will now turn the call over to Perenco Carne senior director of strategy and Finance. Please go ahead.
Good morning, and thank you for participating in our first quarter 2021 earnings Conference call. Joining me, our executive Chairman Chairman Martin Franklin CEO, Ben <unk> and CFO Carey Dorman.
In accordance with regulation FD of fair disclosure and we are webcasting. This conference call any redistribution retransmission or rebroadcast of this call any form without the express written consent of the element solutions and is strictly prohibited during today's call. We will make certain forward looking statements that reflect our current views of the company's future performance and financial results. These statements are.
And based on assumptions and expectations of future events that are subject to risks and uncertainties. Please.
Refer to our earnings release, and 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 from the company's website at Www Dot element solutions, Inc. Dot com and the investors section under news and 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 <unk> CEO of element solutions.
Thank you Erin and good morning, everyone. Thanks for joining.
We had an outstanding quarter to begin 2021, continuing our momentum exiting our record fourth quarter of 2020.
Underlying demand remained robust and the electronic supply chain and the broader industrial economy continued to accelerate.
These results demonstrate the positive inflection, we've seen and our core markets driven by the secular megatrends and increasing electronics and automotive applications increase.
Increasing penetration of electric vehicles.
And the increasing content and value and higher and five <unk> mobile technology.
Our team is executing well on our strategy of positioning the business and attractive growth market and capturing value above and beyond market growth even in these faster growing areas.
Our volumes across our circuitry assembly semi and industrial businesses and we're very strong.
And the increasing demand and our end markets stretched our broader supply chains and created challenges and the first quarter.
Logistics became complicated due to an availability of containers and delays at ports and certain raw materials are becoming scarce and more expensive.
We're fortunate to have a nimble supply chain that helps insulate us from significant disruptions.
Our teams navigated these pressures of well to meet the surge and demand.
The benefit of volume and higher growth from higher margin products, which we believe should be of recurring trend more than offset and the supply chain cost inflation realized and the first quarter.
Our cash flow reflects the decision to build stock in case of persisting raw material shortages.
We also saw an impact from shortages of semiconductors on the automotive supply chain.
The industrial business, a muted growth from automotive customers and the west which was more than offset by strong demand and the broader construction machinery and building products markets.
While the global economy is proving resilient and the pandemic is far from over and many of the countries and which we operate.
The accelerating pace of vaccination is cause for hope, but there's a long road ahead of us.
The safety and security of our employees and partners around the world remain our number one priority and we continue to operate under a companywide health and safety protocols.
We are deeply grateful to our colleagues who have remained focused on supporting our company and our customers and the midst of this extended challenging backdrop.
On slide three you can see a summary of our record first quarter financial results.
We grew the top line of 11% organically year over year, and adjusted EBITDA by 25 per cent.
This level of organic growth slightly higher than the pace of growth and the fourth quarter of 2020 reflects sustained sequential strength and high end electronics market and our industrially oriented businesses further improved by our lapping the shutdowns and Asian automotive markets that accompanied the COVID-19, and the first quarter of 2002.
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Both FX translation and pass through metal pricing positively impacted our net sales results by 4% and 5% respectively.
Okay.
And constant currency terms first quarter, adjusted EBITDA grew 20% and adjusted EBITDA margin expanded 60 basis points year over year.
Volume and mix drove positive margins, partially offset by an increase and pass through metals.
At the same time, our operating expense reflects muted travel across all regions.
We expect Opex to increase sequentially over the course of the year and the pace of vaccination and accelerate and economies begin to reopen more fully however, we expect to manage opex to grow less than sales.
Our adjusted EBITDA margin, excluding the impact of the $87 million of pass through metal sales and our assembly solutions business was 29, 8%.
Adjusted earnings per share growth of 48% and the quarter reflects the improvement and operating profit and lower interest expense due to our 2020 bond refinancing and a lower adjusted tax rate and of demonstrates our ability to compound earnings per share growth well in excess of adjusted EBITDA growth through prudent allocate.
And of capital and liability management.
Cary will now take you through our first quarter performance and more detail Carey.
Thanks, Dan Good morning, everyone.
On slide four we share of additional detail and the drivers of organic net sales growth and our two segments.
Organic growth for electronics was 18% and the first quarter with all three verticals growing at double digit rates.
Global consumer and automotive electronics market sustain their high levels of the math sequentially I mean last beginning of COVID-19, shutdowns and late Q1 and 2020.
Strong demand from automotive and power electronics markets dropped 27% organic growth and assembly solutions at the business lapped declines and automotive electronics demand, particularly in Asia.
Assembly solutions was the only vertical and electronics and decline in Q1 of 2020.
Our circuitry solutions vertical grew 11% organically year over year, driven by strong demand in China, and the Americas for both mobile and automotive electronics.
Semi solutions also grew 11% organically seeing similar and market demand drivers for our wafer plating and advance the assembly products.
On a year over year basis, adjusted EBITDA margins and our electronics segment expanded 140 basis points, primarily due to operating leverage on the significantly higher sales dollars and part of mix impacts.
We experienced raw material inflation and the quarter from metals and other inputs metals.
The metals price increased significantly in most cases these are contractually passed onto customers, although the impact margins as net sales growth with no contribution to profit.
Other input price inflation was more modest.
And we worked to offset these price increases by passing them on to customers typically with a modest lag effect.
Despite this inflation margins improved both in the quarter and year over year.
For the first quarter organic net sales and industrial and specialty increased 1% as growth and industrial solutions offset declines and graphics and energy solutions.
Industrial solutions grew 8% organically recovering from the weak Q1, 2020 that was impacted by the COVID-19 pandemic and Asia.
Graphic solutions declined organically by 12% year over year compared to a difficult Q1, 2020 comp on the business grew 10% organically on the back of consumer packaging demand spiking early last year.
Graphics was only down modestly on a sequential basis, driven by weaker than expected demand and Asia corrugated packaging market, which we expect to rebound in the coming quarters.
Energy solutions continues to be impacted by volatile energy prices.
The business showed increasing net sales sequentially and the LNG prices have stabilized at higher levels.
Slide five addresses cash flow and the balance sheet.
We generated $24 million of free cash flow and the first quarter of the year.
This was impacted by two dynamics unique to the first quarter.
Our 2020 annual incentive compensation payments and our semiannual bond interest payment, which moved from Q2 Q1 after our refinancing last August.
Adjusting for these two items free cash flow would be roughly flat to Q1 of 2020.
The other large use of cash and the quarter was the sequential build in working capital of approximately $40 million.
Inventory was the primary driver growing by approximately $45 million compared to year end 2020, driven by a combination of increased raw material prices higher than expected demand and the need for increased safety stock to the global supply chain disruption.
And difficult times, we believe we can differentiate ourselves to business continuity.
As we did at the beginning of 2020, we made the decision and if Q1 to increase our safety stock to ensure we can continue to deliver for our customers.
As we look to full year 2021, we now expect to generate approximately $285 million of free cash flow.
This increase is driven by our updated expectations for adjusted EBITDA for the year, and partially offset by an increase and our cash tax and working capital investment expectations.
Our net leverage at the end of Q1 2021 was two seven times.
We were pleased to see that both Moody's and S&P recognized our continued strong credit position by upgrading all of our debt instruments and corporate ratings by either one or two notches.
And with that I will turn it back to Beth.
Thanks, Gary.
And the back of the strength and the first quarter, we're updating our guidance for 2021, which you can see on slide six.
We expect to continue to benefit from the compelling secular trends that drove record results this quarter.
We believe our markets remain very healthy and overall, our teams are executing well against our strategies to capture value beyond market growth.
We expect second quarter, adjusted EBITDA to be and the range of $125 million to $130 million.
This expectation is based on a similar top line result, with slightly lower margins driven by the impact of headwinds from rising raw materials and freight costs higher opex from travel and our annual salary increases and of modestly stronger U S. Dollar.
These results represent adjusted EBITDA growth of approximately 50% over the second quarter of 2020, and which we experienced the greatest negative impact from the pandemic.
We are increasing our full year 2021, adjusted EBITDA expectation to a range of between 500 and $510 million representing year over year growth of approximately 20%.
This is up from our prior guidance of approximately 7% growth.
Embedded in this guidance for the back half of the year is uncertainty as to how the pandemic driven the seasonal shift and manufacturing we've seen over the past several quarters continues to play out and.
In addition, we assume no significant relapsed to undermine progress against the virus.
We're also raising our expectation for full year 2021, adjusted earnings per share to greater than $1 30, a meaningful increase from our previous guidance range of $1 10 to $1 15.
This translates to at least 35% year over year growth.
Importantly, while this guidance range assumes no additional capital allocation to buy back shares or make acquisitions, we believe our healthy balance sheet and the strong free cash flow generation. We've demonstrated continue to afford us flexibility to deploy capital through the rest of the year, including potential bolt on acquisitions.
We continue to seek opportunities to deploy excess capital and the best interest of our shareholders and expect to increase our cash dividend and the second quarter by 20% to <unk> <unk> per share.
Our first.
The results demonstrated the resilience and strategic strength of our business and reinforced the conviction we have around the secular mega trends driving our growth now and over the longer term.
At the same time, we believe we are executing on our strategy for element solutions to benefit disproportionately from these trends with targeted investments and strategic growth areas like high and printed circuit board applications power electronics and sustainable solutions.
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 around the world responsible for this record quarter.
With that operator, please open the line for questions.
And as a reminder, if you would like to ask a question today. Please press star and one on your Touchtone phone and our first question will come from Steve Byrne with Bank of America. Your line is open.
Yes. Thank you.
Then I'd be curious to hear your views on how your electronics customers are responding to the chip shortage.
For example, what can the due to increase throughput and is there any shifting and their purchasing patterns such as moving to you know of premium products that might accelerate true could or are they relying more on your sort of.
Of this too.
The two correct problems and anything along those lines that.
And I could give you maybe more of the of <unk>.
Share gain and down the road.
Yeah. Thanks for the question, Steve clearly, there's a big bottleneck in the electronic supply chain, where supply of isn't meeting demand, particularly in the semiconductor space and you've seen the large semiconductor fabricators.
<unk>, increasing and ramping up their capex spend accelerating it.
Going forward, we've seen customers and bill.
And building extra stock of our products to support additional throughput. So that has been having something of an impact recently and we're seeing customers and the printed circuit board market, increasing their capacity and putting in new lines and we've been winning a great deal of business as capacity ramps.
So overall as we said before there's been a there is a significant tailwind not just in the short term, but our conviction and growth over the long term is also firmed our products are the higher and within our within our industry and there are and the higher end and because.
They provide better quality, which translates to better yield and and so we do expect to be taking share over time as customers are insisting upon that to improve their throughput to meet demand.
Okay, and thank you and just thinking about your end markets.
Lay out here and in the electronics and many of the industrial and manufacturing customers that you have and it seems logical that your expertise and innovation and and.
Trading technologies, and an adhesion and would have some.
Sure and benefits between those those end markets, but when you think about you know all of the or other.
And markets are perhaps there was some benefit and the plating business unit the.
The one that kind of jumps out is is the the drilling of fluids on the.
Offshore platforms and is that it is one of the ability.
The business that has some some synergy to us and it is not obvious to us are indoors.
And potentially one that you might divest.
So so far.
The portfolio across all of our and market shares.
Several attributes our.
And our products represent a small portion of our customers' overall cost theyre formulated rather than and synthesize of their asset light.
We rely not just on on what's in the product, but and technical service our customers rely on our people and so theres quite a bit of overlap from an operating model perspective, while there may not necessarily be the same level of overlap from a commercial perspective with certain of our smaller businesses, but they're great businesses with strong margins.
And great cash flow characteristics.
So we see value and the breadth of our portfolio and they give us avenues for additional capital allocation, which could be interesting for us we're not.
Put any of our businesses up for sale.
And they're very high quality businesses that improve the breadth of our of our portfolio.
Okay. Thank you.
Okay.
Okay.
And so all of our participants we do ask that you limit yourself to one question and one follow up today and we will now continue to Chris Capps with loop capital markets. Your line is open.
Hey, good morning, Thanks, and just wondering if you could comment on what's contemplated in your second quarter and full year guidance with respect to automotive builds, especially in light of what for.
You mentioned last night about production curtailments and assuming other oes will have similar comments, but can you just provide color on and on that.
Yeah, absolutely so.
As we said and our prepared remarks and thanks for the question Chris.
We saw less growth and our automotive business.
And then we would have anticipated coming into the quarter because of the chip shortages, but that was more than offset from other end markets within our industrial business that although they are smaller like machinery industrial equipment and building products relative to auto are growing really really nicely and.
So we saw growth and that industrial business, despite the slowdown and the auto space and we anticipate that to continue into the second quarter as as we've articulated with our guidance for the second quarter, we expect a similar top line result.
And and significantly more free cash flow. So I would think free cash flow and the second quarter, we will approach $100 million.
With regard to the second half of the real question around seasonality.
Is how.
And the impact of COVID-19.
Drives a shift of continued shift and seasonal manufacturing patterns. We clearly saw that in 2020 and a normal year, the third quarter as of peak for us with things and the fourth quarter down sequentially, whereas last year. We saw the opposite Q4 was 20% greater than Q3, and a typical year November and December we saw.
See a slowdown in activity and last year November and December were our biggest months and so from where we sit today.
And we can't we don't really have visibility there is uncertainty as to how the seasonal manufacturing patterns. We've seen in the past will play out.
And that's what will determine the third quarter and fourth quarter phasing and the relative strength of the first half relative to the second half, but we've got a good level of confidence that there are many ways for us to achieve our full year guidance.
In the context of automotive builds or otherwise.
Okay. Thanks, and then the follow up is on your comments about you know getting expect the and getting your fair share of at least your fair share of new business says.
Sort of plating and printed circuit board manufacturing capacity is built out and just can you just characterize like the the cycle as that plays out.
There is new capacity being brought on to address where the tsunami and and demand growth for the the entire electronics industry ecosystem.
And this something that well the sort of like a one quarter lag before you start seeing benefit from that or is it something that that what youre seeing now in terms of getting spec in Israel and something that's going to contribute to growth next year any color on sort of the cycle and how that plays out. Thank you.
Absolutely it's a good question Chris.
So we have visibility into when customers are putting in new manufacturing lines, whether thats automotive or electronics, and we're close to the customers, helping design what that solution should be including our chemistry and in most cases with third party equipment, we're not and equipment manufacturer, but we of equipment partners that will pull.
And the equipment that our chemistry goes into so we've got visibility as to as to when those lines are coming online we win and piece of business anywhere between three and six months before it starts producing and so the business that the growth. We're seeing now is installed capacity.
From prior quarters, the ultimate driver of our sales is.
And the throughput through those new lines and so we don't have great visibility into absolute underlying volume on a go forward basis, but we have a sense of our share and we have a sense of our capacity growth and clearly there is capacity growth.
Coming through at the moment net.
And that's why we say we've got conviction in and the inflection that we saw last year, having long legs. This isn't just additional throughput its additional capacity and underlying industry and market growth.
Okay.
Thank you.
We'll go now to Josh Spector with UBS. Your line is open.
Yeah, Hey, guys. Congrats on the great quarter, you guys and the full ESI team there.
The first and a near term question just looking at second quarter, you talked about flat sequential sales. The EBITDA is down about 10 million wondering if you could kind of bucket that in terms of what's the raws catch up what's temporary costs coming back and and what are other items and related to that would you say you'd be caught up on the raw.
The real and temporary cost pull back by the end of the second quarter.
Yes. So thanks for the question Josh you capture of the two buckets right.
First with regard to Opex. We are we are seeing progress against COVID-19 and we do expect travel to increase sequentially, which is part of the driver. In addition to the annual salary increases.
And that would be less than half of of the.
The sequential impact to EBITDA and the rest is raw material price inflation.
And given our supply chain raw materials will come through Cogs and the second quarter, we didn't see a big impact other than metals and the first quarter and so.
And we will see some pressure and the second quarter than we are out actively taking price to offset that with regard to how long that persists it's really.
Hard to hard to speculate because raw material prices have been volatile and so we may continue to see increasing raw materials over the course of the year and will be and from our customers offsetting that the price actions, albeit with a modest lag for as long as prices are going up to us.
Okay I appreciate that and just stepping back looking at your 2021 guide here the pretty impressive step up versus a few years ago I guess in your opinion and it kind of where are you now.
You know versus where you thought you'd be and just assuming we see of continued gradual recovery here from the economic perspective do do we grow ESI off of 2021 levels at what you would call of your typical algorithm.
Growth or is there anything else, we should be thinking about.
Okay.
Yes so.
Clearly the secular megatrends that that we've been talking about as growth drivers for this business since we launched element solutions and 2019.
And took root and accelerated in 2020.
And we believe these are long term growth drivers. This is not a flash in the Pan This is not a blip.
There are long legs to the market growth that we're experiencing supported by and enhanced by our execution of our strategy, which is to focus our efforts on the faster growing sub segments and getting more than our fair share.
Of the value from that growth and so that's what we're seeing play playing out in 2021 and we would expect that to continue to play out in 2022 supported by prudent capital allocation and.
Bought some businesses over the past several years, we've successfully integrated them.
And are contributing to growth are contributing to profit growth and we'll continue to do so.
Going forward, we should allow for us to to deliver on our ambitious objectives.
Got it thank you.
We will go now to Bob Court with Goldman Sachs. Your line is open.
Thanks, and good morning.
Good morning, Bob.
You guys had a little bit of of restrained cash flow you mentioned and building inventories through the first quarter and then obviously the guidance suggests or predigest generation through the balance of the year.
And buyback a lot of stock.
So how do you think about capital deployment and I was just.
Running some of your peer group and it looks like multiples and the space of climb 25, 30% and some cases, even higher those are public market.
Metrics, so what's going on and the and the assets Youre looking at and should.
Should we expect maybe a bigger tilt towards repurchases the year for <unk>.
<unk>.
Yeah. Thanks for the question Bob.
And you rightly point out cash flow has been strong EBITDA growth has given us from the multiple perspective of the healthiest balance sheet.
And that we've had since we've been element solutions and and prudent capital allocation has always been part of element strategy to compound earnings per share we.
We've always been opportunistic in that regard so.
And prior years, we've leaned more towards buying back stock, but we've also built a pretty good track record of.
Of.
And buying businesses at attractive values and integrating them well.
And so we are out now continuing to look for value in the market.
And we've got confidence, we'll be able to find that.
Going forward here, while keeping our balance sheet healthy.
And when you look at.
Obviously, the electronics is just moving along very nicely and the industrial side less so.
When you gave the guidance for the year, what does the cadence of recovery that you've baked in for that industrial and specialty segment. Thanks.
Yeah.
Within the industrial and specialty segment, we've got three businesses the industrial surface treatment business, which is the biggest.
And it is lapping a very slow second quarter.
In 2020, and still of slow second and third quarter in 2020, and we had a pretty strong fourth quarter as we referred to so we would expect the the industrial surface treatment to continue to perform at or above the levels. We saw in the first quarter going forward here until we run up against that fourth quarter comp.
With regard to the two smaller businesses the graphics and the offshore business. The graphics business is comping against Q1 and 2020 when you Couldnt buy.
Packaged food and the supermarkets, who was a big bump in demand and Q1 and 2020, followed by a slowdown and so we do expect.
Progress on a year over year basis, and sequentially and the graphics business. Similarly, and the offshore business, we have a lag to energy price recovery and so a lot of energy price volatility and weakness last year.
<unk>.
Had a negative impact on that business and the second half, which persisted into the first quarter and we do expect that business to grow sequentially from here as well.
And Martin May have had a thought with regard to your prior question, Bob Martin anything you want to add with regard to capital allocation.
Yeah look I think I think you really covenant well I don't think the what I would tell you is the we're never against buying our own stock.
And if we think that that's the highest and best use of our capital we've done that before.
With hindsight, probably wish we did more I would tell you that.
And we're going to increase the dividend and as you think you've seen and and continue to look for all the way to return capital to shareholders.
But it's been right and he said there are strategic opportunity that the.
Good tuck ins for this company that that's still out there.
We prove that and I think Vince and.
And the organization of proven that they can produce a significant amount of the incremental value to the company by tucking those in and finding ways to take products into much broader territories and they're.
We're going to continue we're going to continue looking for those opportunities.
Perfect. Thank you.
Thanks, Bob.
We will go now to Duffy Fischer with Barclays. Your line is open.
Hi, guys you have Shawn here from.
Duffy, it's Tim and good morning.
I guess just I appreciate your commentary on the back half.
But just to dig a little deeper.
It seems like your guide, you're implying roughly $240 million and EBITDA in the back half.
As you think about just modeling Q3 Q4 at this juncture.
Is it fair to split that relative to the relatively evenly and your mind or.
Would you push us one way or the other of their.
Yeah. So we made some comments about this little earlier, Sean, but it's hard to tell based on where we sit today if manufacturing patterns return to normal seasonality, which would have a bigger third quarter than fourth quarter.
Or if major product launches from our OEM customers will be delayed again this year, which is part of what drew what drove Q4 of 2020 to be such and exceptionally strong quarter.
The mobile phone launches that typically ramp in Q3 and slow down and the in November and December were pushed a bit and so we saw very strong performance in those typically slow November and December into the first quarter of this year.
So.
It's hard to predict what that phasing looks like.
But in a typical year would have Q3 being bigger than Q4, and given what 2020 looks like we would expect pretty strong growth year over year and Q3, because we will be lapping some of the the call. It ramp up from the Q2 shutdowns and Q3 of 2002.
91.
Whereas Q4 of 2020 relative to a very strong of 2021 relative to a very strong 2020, you may not see the same level of earnings.
Got it.
Very helpful. And then just as a quick follow up.
And what as we sit here today and just your working capital outlook for the rest of the year.
And assuming continued top line strength.
It seems like your re cash flow guide and maybe a bit conservative. So I just wanted to get a sense of the puts and takes there thanks very much.
Yes, So we had a big working capital build and the first quarter and.
The.
That was driven by increasing raw material prices and are building safety stock, having quite a bit of product on the water driven by delays at ports.
And our working capital build assumes caught and modest additional investment of our working capital in our free cash flow forecast assumes modest additional investment and there is some conservatism and that the ultimate level of working capital is going to depend on seasonal sales patterns of if youre, just talking about and how persistent the current supply chain disruptions.
<unk>.
Are we going to want to continue to hold those levels of.
Safety stocks and it'll carry if there's anything you'd add and I. Thank you.
Net of all of that.
Okay.
Thanks, Sean.
Next question.
And once again that is star and one of you would like to ask a question. We will go now to John <unk> with CJS Securities. Your line is open.
Hey, good morning, guys. Thank you for taking my questions and really nice quarter and guidance out there.
My first one is the could you. Please talk about your ability to recover pricing and margins and the second half what's baked into your back half expectations today in terms of inflation.
And your ability to and your pricing power at this point.
Yeah. So so we have a history of getting price when our raw material prices go up in some cases net contractual like in with our pass through metals and in some cases, it's not but we've proven and ability to do so and this is a market and which we can do so but there is some.
The lag there and so we do expect some pressure on gross margins in the second quarter from raw material price inflation that we've seen year to date, we arent and taking a view as to the direction of raw material prices from here in our guidance and so I think that it's fair to assume that the.
The margin expectation is for the second quarter is reasonably consistent with with the back half.
Anything further Kerry.
Okay.
And anything else John Yes.
Yes.
I mean.
The high class problem and have it looks like Youre getting close to hitting your 2022 stretch targets are you already accruing for that comp.
And included in your guidance just kind of the tell.
Tell us what the expectation there.
And it was an ambitious target debt that remains ambitious and we haven't hit it yet and so we'll cross that bridge when we do.
And when and if we could.
Fair enough.
We will take a follow up question from Josh Spector with UBS. Your line is open.
Hey, guys. Thanks for the out of the follow up here just a question on assembly and the strength and that business earlier in the call you talked about how auto OEM production rates came in lower than you expected, but you know the assembly on the organic sales basis, maybe 10% above 2019 levels.
Whats going on there that you would highlight that's driving that that upside and is it sustainable or is it share gain or how would you characterize that.
And the assembly businesses is having a great.
Ron and has great momentum at the moment there are a few things of that drove the performance and the assembly business. When you look at it on a year over year basis, we had the greater impact in Asia from COVID-19 in Q1 of <unk> of last year, and we lap that.
General electronics strength, not just high end electronics strength of supporting that business and the assembly business is one of our more industrially oriented businesses certainly within the electronics business. The most industrial the oriented business and so auto did have and have a negative impact on it generally speaking, but our assembly busy.
And the cells really highly value added specialized technology into the electric vehicle market.
She is still growing very very nicely and we have ongoing projects with leading EV companies all over the world the new entrants in the space the legacy Oems and are electrifying their fleets.
And that that category of products is growing very fast it's of high margin category of products got a great long term trajectory from here and so we do expect that assembly business to continue to see outsized growth.
As we look forward.
Okay. Thank you.
Okay.
And at this time I will hand, it back to you banquet glitch first closing remarks. Thanks.
Thanks, Catherine Thank you to everybody for joining and we look forward to speaking with you again soon and stay safe.
This does conclude today's program. Thank you for your participation you may disconnect at any time.
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