Diversey Holdings, Ltd.

Greetings. Welcome to Versi Holdings Limited first quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now like to turn the conference over to Grant Graver, Investor Relations. Thank you. You may begin.

Thank you. Hello, everyone, and welcome to Diversity's first quarter conference call. With me today are Phil Wieland, our CEO, and Todd Herndon, our CFO. Our earnings released and the slides we'll reference on this call are available on Diversity's website at ir.diversity.com. Please take a moment to read the cautionary statements in these materials, which state that this teleconference and the associated supplemental materials may include estimates of future performance. These are forward-looking statements, and actual results could differ materially from those projected. Factors that could cause actual results to differ are described under the Risk Factors section in our filings with the SEC. On this call, we will reference certain non-GAAP measures. Please see the accompanying slides and our filings with the SEC for definitions and reconciliations to the most closely comparable GAAP measures. And now, I'm happy to pass it over to our CEO, Phil Wieland, for his comments.

Thanks, Grant. It's fantastic to be giving our first earnings update as a public company, having come out of the gate delivering a strong first quarter. Everyone connected with diversity is proud of our company and its new status as DSEY, and we're driven to see it reach its full potential as a leader in our market. For those of you who invested at IPO, thank you. I hope you've enjoyed the ride so far. What you will hear today will be consistent with the expectations we set and represent some great progress on our strategic themes. Starting with our first quarter results, we saw 2% top-line growth versus the 2019 pre-COVID baseline, despite very heavy lockdowns impacting many of our customers in most parts of the world. Margins continued to expand delivering very strong adjusted EBITDA growth of over 75% against the 2019 pre-COVID baseline, and even modest growth against the pre-lockdown 2020, which benefited from significant infection prevention sales. We were, of course, impacted by the Texas freeze, resulting in raw material cost pressure, but we didn't experience any supply disruption. Our procurement and commercial teams have been working incredibly hard to mitigate the financial impact. We've seen significant net new customer wins in both our institutional and F&B segments, importantly at a creative margin, as customers have valued our product and service offering. We've been rewarded for our extra efforts during the difficult COVID times by extremely low customer churns. This is also reflected in our customer net promoter score, which is at record levels. Our strategic plan is bearing fruit with meaningful progress in all areas. We've seen some important launches from our innovation pipeline. In particular, in institutional, we've launched a residual efficacy product to complement our infection prevention range. And in F&B, we've launched a system that expands our digital offering by providing real-time insights on both cleaning standards and water and energy usage for our CIP customers. Recognizing that some of you may be new to the diversity story, I want to cover some information that we shared on the roadshow to ensure everyone has the same baseline, starting on page five of the presentation. Diversity has been growing for almost 100 years. We were a 2.6 billion top line company in 2020. We grew at constant currency on average over 3% from 2017 to 2019, and then around 2% during the COVID year of 2020. We had adjusted EBITDA margins of around 15% in 2020, having grown on average 160 basis points per annum since 2018. We operate in an estimated $46 billion total addressable market across over 80 countries and have the number one or number two position in almost all markets we serve based on net sales in 2020. Our resilience during COVID was also seen in the 2008-2009 financial crisis. Central to this is our diversification by geography, We're roughly a third, a third, a third across North America, Europe, and emerging markets. By end market and by customer, no customer greater than 2% of our revenue and the top 50 customers around 25% of our revenue. On the next page, you'll see why we're so excited about diversity's potential. Firstly, it's the market. We are one of only two global players in a GDP-plus growing market with highly recurring revenue and very sticky customer relationships. Secondly, we have real momentum. Our teams are motivated by our mission to protect and care for people. We've made progress in a major transformation plan under which we've invested a lot in our team, our infrastructure, and our values. This, alongside our long heritage in our product, innovation, service, and the environment, is delivering good growth top and bottom line. Thirdly, we are executing against a clear plan to grow our top line through targeted initiatives, adjusted EBITDA margin to our target of 20%, and inorganically through tuck-in acquisitions that enhance our business and strategic team. Over the page, you'll see how we serve our customers by delivering business-critical solutions across two segments. Institutional, which is roughly three-quarters of our group revenue, and food and beverage, which is the remaining quarter. And we win in our marketplace because we have, number one, the broadest product offering across chemicals, dosing, dispensing, plus machines. We believe we are unique in this respect. a superior infection prevention portfolio. Three, service that customers value and can rely on. Four, strong distributor relationships that access all parts of the market cost-effectively. And five, a team who are bought into our mission to protect and care for people and are living our values to be inclusive, customer-driven, to always improve, to have bias for action, and to be accountable for results. Over on page 8, we describe our marketplace, which is structurally very attractive because, firstly, what we do is mission critical for our customers. Secondly, our model of installing equipment that only takes our product and can only be serviced by us produces high recurring revenues. Thirdly, the cost to our customers of a hygiene problem, such as the closing of their facility, far outweighs the cost we represent to their business. And fourthly, customers increasingly want the comfort and security of their respective brands. We compete on our product impact and customer service. Our estimated core serviceable addressable market is approximately $32 billion and growing at 3%. We have one strong and respected global competitor who we encounter in some parts of the market, and then 75% of the market that's made up of much smaller local and regional competitors. We have also been expanding our market opportunity into an estimated $14 billion of newer markets with such products as residual efficacy infection prevention in institutional and water treatment in food and beverage. On the next page, we describe how sustainability has been central to diversity's operations for many years. We are focused on people through our mission to protect and care the planet by significantly reducing our own energy, waste, water, and greenhouse gas emissions, and customers by the use of our products to deliver energy, waste, and water reductions at customer sites, helping them to meet their own environmental targets. We are driven by a desire to do the right thing But this strategy also makes sense financially, as it supports our retention and margin plan. We expect to issue a refreshed vision in this area later in 2021, reaching further to achieve even greater outcomes. On page 10, you'll see our growth plan is built on four pillars. Firstly, in our institutional segment, the recovery of around $400 million temporary decline in 2020 revenue due to the COVID impacted sectors, and the ongoing benefit of our work over the last couple of years to build and grow in infection prevention, to scale our North American food service business, to enhance our commercial excellence globally, to expand in the fastest growing parts of the market, that's global customers and emerging markets, and to accelerate the right innovation to support customer outcomes. The second pillar in our F and B segment, we intend to accelerate in core geographies where we have a superior proposition and to cross-sell water treatment to provide a one-stop shop for customers to buy cleaning, hygiene, and water treatment together. In the third pillar, we intend to expand adjusted EBITDA margins to 20% at an expected average rate of 50 to 100 basis points per annum to improve sourcing, strategic pricing, supply chain improvement, and operational excellence through SG&A cost initiatives. On our fourth pillar, we intend to accelerate M&A by executing the best opportunities within our plentiful pipeline to add, at accretive multiples, businesses that add strategically, whether that's through supply chain capability, product or technology capability, or geography. On the next page, Q1 has been extremely busy and productive, even leaving aside the IPO. In terms of market recovery, reopening has been slower than most people hoped. Whilst the US, UK, and China are progressing positively in Q2, other important markets like mainland Europe, Canada, India, and other emerging markets now appear unlikely to meaningfully reopen until Q3. However, with respect to our institutional segment growth initiative, we've completed our infection prevention supply-side rollout and seen a large volume of contract signs. Our global accounts team have been very busy winning significant new annualized business, and the hunters introduced in our commercial excellence initiative are responsible for an accelerated win rate. The F&B segment had a very strong quarter. They accelerated on top of a stellar 2020, winning record levels of net new business in Q1 this year. It was also exciting to watch the launch of water treatments, where we have recorded several small wins and encouragingly our first global account success. This is ahead of schedule. In terms of margin, we were pleased to see the accretion despite the difficult lockdown environment. We saw early benefit from consolidating supply sources having completed the first phase of our plan to align formulae. Implementing strong price increases in Q1 with further increases planned thereafter in response to raw material inflation. Continued good progress with our G&A work. Of particular note was the establishment of a new captive finance centre in Eastern Europe for the transactional finance processes. And we have seen good pipeline progress in M&A, with two deals now in formal diligence processes and a number of others in developed discussions with vendors. Now I'll pass over to Todd, our CFO, to discuss Q1 financial results in a little more detail.