H. B. Fuller Company

call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to review your question, press star and number one key again. Thank you. Stephen Rezones, you may now begin the conference.

Thank you, Operator. Welcome to HB Fuller's first quarter 2024 investor conference call. Presenting today are Celeste Mastin, President and Chief Executive Officer, and John Corcoran, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will have a question and answer session. Before we begin, let me remind everyone that our comments today will include references to certain non-GAAP financial measures. These measures are supplemental to the results determined in accordance with GAAP. We believe that these measures are useful to investors in understanding our operating performance and to compare our performance with other companies. Reconciliation of non-GAAP measures to the nearest GAAP measure are included in our earnings release. Unless otherwise noted, comments about revenue refer to organic revenue, and comments about EPS, EBITDA, and profit margins refer to adjusted non-GAAP measures. We will also be making forward-looking statements during this call. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from these expectations due to factors covered in our earnings release, comments made during this call, and the risk factors detailed in our filings with the Securities and Exchange Commission, all of which are available on our website at investors.hpfuller.com. I will now turn the call over to Celeste Mastin. Celeste?

Thank you, Stephen, and welcome, everyone. We are off to a good start to the year with first quarter financial results largely consistent with our expectations. Our team is maintaining commercial discipline, proactively innovating to create win-win opportunities for our customers and pricing to that value, while also driving restructuring savings and synergy realization on the 2023 collection of acquisitions. We continue to proactively respond to changing business dynamics to drive strong adjusted EBITDA growth, margin expansion, and robust cash flow. Looking at our consolidated results in the first quarter, organic revenue declined 4% year on year due to anticipated pricing adjustments and slightly lower volume. The impact from pricing was in line with our expectations and primarily represents index-based pricing adjustments. In the first quarter, the year-over-year impact from pricing was similar to Q4, while volume declined slightly year-over-year, driven principally by HHC's hygiene market segment. From a profitability perspective, taking into consideration that our first quarter is always our lowest margin quarter of the year due to the seasonality of our business, we performed very well. We grew adjusted EBITDA 12% year-on-year to $123 million, expanded adjusted EBITDA margin by 160 basis points year-on-year to 15.2%, and grew adjusted EPS by 22% year-on-year. On balance, global economic conditions remained similar to last quarter. Manufacturing activity continues to be subdued, evidenced by PMI readings below 50% for more than a year in both the United States and Europe. Our outlook assumes manufacturing activity will be weak through the end of the year. However, from a year-on-year comparison standpoint, constrained manufacturing activity will be more than offset by the absence of the destocking impact that weighed so heavily on 2023 volume. In this slow growth economic environment, it is essential that we continue to innovate and price to value, leveraging the vast set of tools and capabilities we have created to continue to expand our margins. Our customers have increased their focus on developing lower cost versions of their products to better suit the market environment. and we play an important role in bringing robust bonding solutions that enable their success. We also leverage our reformulation capabilities to develop solutions that help lower our customers' costs while maintaining or improving our margins. Now let me move on to review the performance in each of our segments in the first quarter. In HHC, Organic revenue was down 9% year on year due to lower volume and anticipated index-based pricing adjustments. Pricing was down mid-single digits as expected. Excluding hygiene, HHC volume was flat year over year and has continued to strengthen sequentially over the past three quarters. The decline in hygiene volume reflects our customers adjusting their inventory levels to take into consideration lower than forecasted demand, our exit of lower margin business, and disruption in certain emerging markets due to currency controls and restrictions. HHC's responsible pricing actions, focus on reliability and innovation, and selective pursuit of profitable growth opportunities in its leveraged market segments enabled it to increase adjusted EBITDA 4% and increased adjusted EBITDA margin by 130 basis points year-over-year despite lower organic revenue. In engineering adhesives, organic revenue declined 2% in the first quarter. Strength in the electronics and automotive market segments was offset by slower demand in the woodworking market segments. Overall, the diversification of EA's portfolio has resulted in relatively strong and consistent volume performance despite the challenging global manufacturing environment. Adjusted EBITDA increased 5% in EA and adjusted EBITDA margin increased 90 basis points year-on-year to 15.9%. Favorable net pricing and raw material cost actions and restructuring benefits drove the increase in adjusted EBITDA margin year-on-year. In construction adhesives, organic sales increased 10 percent year-on-year. The absence of customer destocking and the expectation for a return to a more normal construction season in North America benefited CA during the quarter. Roofing was particularly strong with organic sales increasing more than 20 percent year-on-year. Adjusted EBITDA for construction adhesives increased nearly $7 million versus the first quarter of last year, and adjusted EBITDA margin expanded 530 basis points to 8.4%. Net price and raw material cost management, improved volumes, and restructuring savings drove the improvement in adjusted EBITDA margin year on year. Recall, the first quarter is CA's seasonally lowest volume, and thus, seasonally lowest EBITDA margin quarter. Geographically, America's organic revenue declined 2% year-on-year, driven by HHC, which declined 8% versus the prior year in the Americas region. HHC organic revenue was adversely impacted by some lingering destocking activity, as well as volume declines in hygiene. EA and CA combined achieved organic revenue growth of more than 4% year-on-year in the first quarter in the Americas region. In EIMEA, organic revenue decreased 13% versus the first quarter of last year, with all GBUs experiencing similar magnitude declines. Economic conditions have deteriorated in Europe, reflecting overall cost of living challenges on consumers' purchasing power. In addition, volume in EIMEA was adversely impacted by developments in Egypt and the broader Middle East region due to currency restrictions and continued political uncertainty. In Asia Pacific, organic revenues increased 2% year on year, strength in China, which achieved a mid-single-digit increase in organic sales, more than offset weaker demand throughout the rest of the region. We continue to remain optimistic about our business in China. With no direct exposure to the Chinese construction market and strong representation in the electronics and automotive market segments, we're encouraged by what we're seeing. And while we expect some uneven market activity over the near term, we will continue to grow through innovation share gains in our select markets of choice. Now let me turn the call over to John Corcoran to review our first quarter results in more detail and our outlook for 2024. Thank you, Celeste.