Cabot Corporation

Good day, and thank you for standing by. Welcome to CABIT's first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Steve Delahunt, Vice President, Treasurer, and Investor Relations. Please go ahead, sir.

Thanks, Norma. Good morning. I would like to welcome you to the Cabot Corporation Earnings Teleconference. With me today are Sean Cohane, CEO and President, and Erica McLaughlin, Executive Vice President and CFO. Last night, we released results for our first quarter of fiscal year 2024, copies of which are posted in the Investor Relations section of our website. The slide deck that accompanies this call is also available in the investor relations portion of our website and will be available in conjunction with the replay of the call. During this conference call, we will make forward-looking statements about our expected future operational and financial performance. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding these factors appears in the press release we issued last night and that our 10-K for the fiscal year ended September 30, 2023, and in subsequent filings we make with the SEC, all of which are also available on the company's website. In order to provide greater transparency regarding our operating performance, we refer to certain non-GAAP financial measures that involve adjustments to GAAP results. The non-GAAP financial measures referenced on this call are reconciled to the most directly comparable GAAP financial measure in a table at the end of our earnings release issued last night and available in the investor section of our website. I will now turn the call over to Sean, who will discuss the first quarter highlights, followed by an update on our execution against our strategy, and then discuss the company's recent cash flow performance. Eric will review the first quarter financial highlights and the business segment results. Following this, Sean will provide a strategic summary and closing comments and open the floor to questions. Sean?

Thank you, Steve. Good morning, ladies and gentlemen, and welcome to our call today. I am pleased with our first quarter results, which were aligned with our expectations and reflected strong year-over-year growth. We delivered adjusted earnings per share of $1.56, which is up 59% as compared to the same period in the prior year, setting us off to a strong start to fiscal year 2024. I would like to thank our entire global Cabot team for their resilience and commitment to execution as we navigate these dynamic times. EBIT and reinforcement materials was up 37% year over year, demonstrating the structural improvements we have made in recent years to the business and a structurally tight supply-demand balance in the mature regions. We also concluded our customer agreements with strong pricing and mix improvements in all regions that total an annualized increase year over year of $75 million. Net of inflationary and other cost increases, we expect the pricing and product mix benefits to equate to an EBIT increase of approximately $15 million per quarter for the remaining three quarters of fiscal year 2024, as compared to the same quarters of fiscal 2023. These results reflect the favorable supply and demand outlook and Cabot's value proposition of supply reliability, quality, and sustainability leadership. EBIT in performance chemicals was up 17% compared to the first quarter of fiscal 2023, as demand in the segment appears to have generally stabilized and the effects of destocking have diminished. While we did see some signs of pickup in our automotive applications, Demand in other key end markets for this segment remained consistent with the September quarter. Cash flow was strong in the quarter, which supported the return of $55 million to shareholders through a combination of share repurchases and dividends. And finally, we continue to be recognized for our leadership and sustainability. For the fifth consecutive year, we were named to Newsweek's list of most responsible companies. This distinction recognizes our strong performance in the areas of environmental, social, and governance, and we are very proud of this recognition. With the company off to a strong start to our fiscal 2024 and a track record of disciplined execution, I am confident in our ability to deliver continued earnings and cash flow growth consistent with our Creating for Tomorrow strategy. As we discussed last quarter, The EBIT performance in the reinforcement materials segment has increased dramatically over the past eight years, supported by the long-term resilience of the replacement tire market and an increasingly tight supply-demand balance in the mature regions. The industry is also facing stricter environmental regulations that require producers to make significant abatement investments to ensure reliable and sustainable supply to our customers. These investments raise the barriers to entry for additional capacity, roughly doubling the cost of new capacity. Furthermore, I believe we have structurally improved our performance through a commitment to commercial and operational excellence across the company. Over the past decade, we have invested in the marketing and sales capabilities of our team and relentlessly pursued continuous improvement across our manufacturing network to drive excellence in yields, OEE, and energy recovery. As a result of these factors, I believe the outlook for this business remains strong. Our expectation is that we will see continued earnings growth driven by enhanced pricing and product mix, volumes that move in line with growth of passenger and freight miles driven, differentiated capacity ads in high growth markets such as Indonesia, continued efficiency benefits from yield, OEE and energy recovery, And finally, innovation contributions through our evolved sustainable solutions and E2C technology platforms. In our fiscal 2023, performance chemicals results were impacted by significant destocking, but we have seen these impacts diminish in our most recent quarters. While we do not expect the same impact to our sales volumes from destocking in fiscal 2024, we have not yet seen signs that some of our key end markets, such as building and construction, infrastructure, and consumer durables, are moving back to prior levels. This segment is comprised of a core group of businesses with a GDP plus growth outlook and strong earnings potential. In addition, we are building out our strategic positions in battery materials and inkjet, two growth vectors that offer compelling long-term growth and where we believe we have a strong right to win. In battery materials, we expect the market to grow between 20% and 30% over time, and we are well positioned with the leading global EV battery makers, particularly as they expand in the Western economies. In inkjet, we are winning share with printer OEMs that are serving the packaging market as it transitions from traditional analog printing to digital. EBIT in this segment is expected to grow north of 20% per year, and we are well positioned to capture this growth. We remain confident that these businesses can be material contributors to Cabot's earnings profile in the coming years. With this portfolio of businesses, we have been delivering strong earnings growth over time. When we met in December of 2021 at our investor day, we had just completed fiscal year 2021, and had achieved adjusted earnings per share of $5.02, which represented a compound annual growth rate of 12% from 2015. We set a three-year target at that investor day with the expectation to grow adjusted earnings per share between 8% and 12% by 2024. Our current outlook for fiscal 2024 puts us in this band and would reflect a 9% CAGR at the midpoint of our guidance range. While the macroeconomic environment has weakened since Investor Day in 2021, we continue to manage the businesses dynamically and execute to deliver on our commitments. I remain confident in the resilience and strength of our portfolio and in achieving the corporate Investor Day target for adjusted earnings per share growth. In addition to strong growth and adjusted earnings per share, the Cabot portfolio has robust cash flow characteristics. On a trailing 12-month basis, our strong execution has resulted in operating cash flow of $648 million. Free cash flow yield over that same time period was 8.3%, which puts us in the top quartile of the S&P 1500 Chemicals Index. Our cash generation power allows us to pursue a balanced capital allocation strategy focused on funding strategic investments to deliver long-term earnings growth and returning cash to shareholders while maintaining a strong investment-grade balance sheet. We have maintained a continuous and growing dividend since 1968, and that commitment remains a core part of our capital allocation priorities. Over the last 12 months, we paid $89 million in dividends, including an 8% increase in May, reflecting our confidence in the long-term cash flow outlook for the company. We would expect to continue to raise the dividend over time as our earnings grow. We also repurchased $114 million of shares over the last 12 months. We plan to offset dilution every year and will be opportunistic with additional purchases based on our outlook for cash flow and the timing of growth investment opportunities. The dividends paid and shares repurchased total $203 million in the past 12 months, equating to a total payout ratio of 61%. We also set a corporate discretionary free cash flow target at our December 21 investor day, which was to generate in excess of a billion dollars of discretionary free cash flow over three years. We are also on track to achieve this target in fiscal 2024. The strength of our cash flow generation and disciplined capital allocation are fundamental to the strong cabinet investment thesis and are a priority for this management team. I will now turn it over to Erica to discuss the segment and financial performance in the quarter. Erica?