Cabot Corporation

Thank you for standing by and welcome to Cabot's second quarter fiscal year 2026 earnings conference call. Currently, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. To remove yourself from the queue, you may press star 1-1 again. I would now like to hand the call over to Robert Rist, Vice President of Investor Relations. Please go ahead.

Thank you, Lateef. Good morning. I'd like to welcome you to the Cabot Corporation's 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 second quarter of fiscal 2026, 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 relation portion of our website and will be available in conjunction with the replay of this 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 under the heading Forward-Looking Statements in the press release we issued last night and in our annual report on Form 10-K for the fiscal year ending September 30, 2025, and in subsequent filings we make with the SEC, all of which are 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. Any non-GAAP financial measure presented should not be considered to be an alternative to a financial measure required by GAAP. Any non-GAAP financial measure referenced on this call are reconciled to the most direct 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 second quarter highlights, followed by several company and business updates. Erica will review the second quarter financial highlights and the business segment results. Following this, Sean will provide closing comments on our fiscal 2026 outlook and then open the floor to questions. Sean?

Thank you, Rob. Good morning, ladies and gentlemen, and welcome to our call today. I am pleased with our strong execution during the second quarter as we continue to operate at a high level in a challenging and very dynamic environment. delivering adjusted earnings per share of $1.61. While the Iran conflict introduced a new dimension of geopolitical uncertainty during the quarter, the resilience of the Cabot team and our enduring strengths as a company once again served as the foundation for strong execution. Our global footprint and highly developed operating platform of commercial and operational excellence enabled us to take quick actions to support our customers' evolving needs and implement countermeasures to address rapidly rising energy and transportation costs to protect profitability. While we have an unwavering commitment to discipline daily execution, we also remain focused on the long term, guided by our Creating for Tomorrow strategy and the pillars of grow, innovate, and optimize. During these dynamic times, We continue to make important strategic choices that will strengthen the company and build long-term shareholder value. I will highlight a few of these areas of focus in my upcoming remarks, but I will first provide a bit of color on business performance in the quarter. EBIT and reinforcement material segment was 93 million, down 29% from the prior year quarter and in line with our expectations. The segment's 3% higher volumes as compared to the prior year were more than offset by lower gross profit per ton driven by calendar year 2026 customer agreement outcomes and increased competitive intensity in Asia Pacific. The performance chemical segment delivered a strong quarter with EBIT of $59 million, up 18% from a year ago, supported by continued momentum in our high-value battery materials and specialty carbons product lines. combined with higher gross profit per ton from an improved product mix and optimization efforts. This result was ahead of our expectation as demand levels were stronger than expected, particularly in March. Operating cash flow was again solid in the quarter. We generated $77 million in cash from operations, which allowed us to return $73 million to shareholders through a combination of dividends and share repurchases. Given the strength of our underlying cash flow generation and our confidence in the long term, earlier this week we announced a 5% increase in our quarterly dividend. On an annualized basis, the new dividend rate will be $1.89 per share versus $1.80 per share previously. This increase is consistent with our balanced capital allocation framework, where we seek to allocate cash to support long-term strategic growth and return capital to shareholders. As we did last quarter, I want to briefly highlight our battery materials product line, which delivered another strong quarter and continues to be an increasingly important strategic growth driver for Cabot. We remain very well positioned in this space with a differentiated portfolio of conductive additives, formulations, and blends supported by deep customer relationships across the global battery value chain. While the foundation of our battery and materials product line is built around our strength in conductive additives, we continue to broaden our participation in this application through our fume metal oxide products used in cathode and separator coatings and aerogel for thermal management. Our strategy is to leverage our deep application know-how, strong customer relationships, and global footprint to support customers as they build gigafactories globally. In the second quarter, battery materials delivered 43% revenue growth year-over-year, driven by continued growth in China as well as Europe. Trailing 12-month EBITDA margins were approximately 24%. Performance was driven by strong execution of our existing customer programs, increasing penetration and energy storage applications, and the benefit of capacity that is now fully available to support customer demand. complementing our strong revenue in Asia, we remain focused on supporting our customers in Western geographies as new gigafactory capacity comes online. The multi year power co agreement announced last quarter is a good example of this approach, reinforcing our role as a trusted partner to leading OEMs and supporting long term growth. As a result, this business is scaling meaningfully and we expect to generate approximately 40 million of EBITDA in fiscal year 2026. Continued investment in battery energy storage systems alongside continued EV adoption is driving robust demand for our portfolio and reinforces our confidence in the long-term trajectory of this business. Data centers are a strategic focus area for us, and I would like to highlight how Cabot materials are supporting the build-out of data center infrastructure, particularly as AI-driven demand continues to accelerate. At the center of this ecosystem are the data centers themselves, which require highly reliable storage. Battery energy storage systems, or BESS, play a critical role in data centers by providing long-duration storage power stabilization, and uninterruptible power. And our battery materials product portfolio is a key enabler of performance in these systems. Our conductive additives, formulations, and blends are designed to improve battery reliability, efficiency, and lifecycle performance, supporting the increasingly demanding requirements of energy storage applications tied to data centers. Beyond our battery materials product line, our broader performance chemicals portfolio plays an important role across data center infrastructure applications. This includes materials used in power distribution cables, thermal management systems, adhesives and sealants, as well as bonding paste for wind turbines that support renewable energy generation feeding into the grid. Taken together, this opportunity underscores how Cabot's materials are critical across the power generation and storage value chain, from renewable generation to distribution and battery storage, positioning us well as customers invest to support data center growth. Turning to our network optimization initiatives, we are taking a series of proactive countermeasures to reinforce our leadership position and sustain strong margins in cash generation in the current business environment. As a reminder, on the cost reduction front, we've been executing programs targeting $30 million in savings during fiscal 26, including procurement savings, headcount reductions in reinforcement materials and associated supporting functions, and accelerated deployment of process technology to improve yield and manufacturing efficiencies. We are on track to hit this target. Furthermore, as we noted last quarter, we have reduced our capital expenditures to a range of $200 million to $230 million for the full year to align with the current environment. In addition, this quarter, we are also taking specific capacity rationalization actions to better align our manufacturing network with current demand levels and to optimize our footprint for long-term strategic value. Yesterday, we announced targeted asset rationalization actions in South America and Europe. We have ceased manufacturing operations at our Argentina reinforcing carbons facility, and we intend to cease production at multiple manufacturing lines at our Netherlands carbon WAC facility, subject to consultation processes. The actions in total represent approximately 120,000 metric tons of capacity. targeting an annual run rate cost benefit of approximately $22 million with full delivery of cost saving benefits targeted by the middle of calendar 2027. The expected cash cost to execute these closures is approximately $24 million over the next two to three fiscal years. Importantly, we are working with our existing customers and anticipate maintaining sales with supply from other TABIT locations across our global network. These are difficult but necessary actions, and I want to thank our employees for their significant contributions to Cabot over the years. I believe these actions will improve our operating efficiency and further enhance the competitiveness of our global network as we navigate this challenging demand environment. I will now turn it over to Erika to discuss the financial and performance results of the quarter in more detail. Erika?