H. B. Fuller Company

Turn the call over to Steven Brazones, Vice President of Investor Relations. You may begin.

Thank you, Operator. Welcome to H.P. Fuller's second 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. I'm very pleased with our strong second quarter financial performance, which reflects the team's steadfast commitment to execution while driving our long-term strategy to focus on more profitable, higher growth segments of the market. We continue to innovate and deliver customized, value-enhancing solutions to our customers while acquiring highly profitable, fast-growing businesses to expand our market presence in the most differentiated segments. As we execute our restructuring program focused on streamlining our global footprint, we are driving sustainable enhancements to our cost structure and improving our ROIC. In a large total addressable market where we win one application at a time, we continue to meaningfully move the needle and remain on track to deliver adjusted EBITDA margin greater than 20% in the next three to five years. Looking at our consolidated results in the second quarter, our organic sales trend continued to improve. driven by organic volume growth of more than 3% during the quarter, with volume up in all three global business units. Overall, organic revenue was flat year on year, as volume growth was offset by reformulation activity and index-based pricing adjustments. From a profitability perspective, we executed well and delivered very strong results on slightly stronger than anticipated volume growth consistent with our second half expectations. We grew adjusted EBITDA 10% year-on-year to $157 million and expanded adjusted EBITDA margin by 120 basis points year-on-year to 17.1%. Now let me move on to review the performance in each of our segments in the second quarter. In engineering adhesives, organic revenue increased 2.5% in the second quarter, marking a return to positive organic growth. Strength in the electronics, automotive, aerospace, and recreational vehicle market segments was partially constrained by slower demand in the woodworking and clean energy market segments. EA delivered a strong quarter, representative of our expectations given the many growth segments in this GBU. Adjusted EBITDA increased 13% in EA and adjusted EBITDA margin increased 160 basis points year-on-year to 18.4%. Favorable net pricing and raw material cost actions and restructuring benefits drove the increase in adjusted EBITDA margin year-on-year. In HHC, the organic revenue development improved sequentially on a return to positive volume growth. Reformulation activity and index-based pricing adjustments resulted in a decline in organic sales during the second quarter for HHC. Strength in bottle labeling, packaging, and medical partially offset continued, although lessening, organic sales declines in the hygiene market. Adjusted EBITDA was flat year-on-year for HHC in the second quarter. Despite lower organic revenue, an adjusted EBITDA margin expanded 50 basis points year-on-year to 16.6%. Favorable net pricing and raw material cost actions, restructuring benefits, and acquisitions drove the increase in adjusted EBITDA margin year-on-year. In construction adhesives, organic sales increased 7% year-on-year on strong demand in roofing, which achieved a 20% increase in organic sales. Construction market conditions have improved and are more consistent with the normal construction season thus far. Adjusted EBITDA for construction adhesives increased 24% versus the second quarter of last year to $23 million, and adjusted EBITDA margin expanded 90 basis points to 15%. Net price and raw material cost management, improved volumes, and restructuring savings drove the improvement in adjusted EBITDA margin year on year. Geographically, America's organic revenue was flat year on year in the second quarter. EA and CA both achieved positive organic growth during the quarter, and on a combined basis achieved organic revenue growth of more than 6% year on year in the Americas region, driven by strong growth in electronics, aerospace, and roofing. HHC organic revenue declined 7% versus the prior year. The hygiene market, while slightly improved in the Americas, continued to negatively impact organic sales development for HHC in the region. In EIMEA, year-over-year organic revenue development, while still down, improved significantly relative to the first quarter as expected. The organic sales development for all GBUs improved sequentially, although still declined modestly year-on-year. This bounce back was expected as much of the demand weakness experienced in the first quarter was temporary. We would expect the trend to continue to improve as we progress through the remainder of the year. In Asia Pacific, organic revenues increased 7% year on year, driven by strength in electronics, automotive, beverage labeling, and flexible packaging. Strength in China, which nearly achieved a double-digit increase in organic sales, drove the region's organic sales growth. We have a winning strategy, a focused team, and a strong track record of execution. Our path to 20% adjusted EBITDA margin is multifaceted and includes restructuring opportunities, volume growth, improved organic mix between growth and leverage market segments, and acquisitions of higher growth, higher margin businesses in the most differentiated adhesive applications. During the second quarter, we completed the acquisition of ND Industries, This highly strategic and financially compelling acquisition expands our market presence into a new and exciting growth market segment, fastener locking solutions, which is a combined system of adhesives and mechanical fasteners. The acquisition accelerates one of our top growth priorities and is consistent with our focus on proactively driving capital allocation to the highest margin, highest growth market segments within the functional coatings, adhesives, sealants, and elastomer, or case, industry. As part of the acquisition, products under ND Industries' Vibratite brand will be added to HB Fuller's existing epoxy, cyanoacrylate, UV curable, and anaerobic product ranges. This acquisition represents a very financially compelling transaction for HB Fuller. ND's full-year 2024 sales are expected to be approximately $80 million at greater than 30% EBITDA margin. Total purchase price was approximately $250 million, equating to a pre-Synergy enterprise value to EBITDA multiple of less than 10 times and a post-Synergy EBITDA multiple of approximately 6 times. Our M&A pipeline is robust, and we continue to evaluate a number of potential transactions. We have proven the ability to acquire multiple companies while simultaneously reducing our leverage ratio. Given this capability, we have reinitiated our share repurchase program, allowing us to both invest for growth and return additional capital to shareholders. Now let me turn the call over to John Corcoran to review our second quarter results in more detail and our updated outlook for 2024. Thank you, Celeste.