Sensient Technologies Corporation

Good morning and welcome to the Sentient Technologies Corporation 2024 third quarter earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Tobin Tornehl. Please go ahead, sir.

Tobin Tornehl Good morning. Welcome to Censian's earnings call for the third quarter of 2024. I'm Tobin Tornehl, Vice President and Chief Financial Officer of Censian Technologies Corporation. I'm joined today by Paul Manning, Censian's Chairman, President and Chief Executive Officer. Earlier today, we released our 2024 third quarter results. A copy of the earnings release and the slides we'll be using during today's call are available on the investor relations section of our website at sentient.com. During our call today, we will reference certain non-GAAP financial measures which remove the impact of currency movements, cost of the company's portfolio optimization plan, and other items as noted in the company's filings. We believe the removal of these items provides investors with additional information to evaluate the company's performance and improves the comparability of results between reporting periods. This also reflects how management reviews and evaluates the company's operations and performance. Non-GAAP financial results should not be considered an isolation from or a substitute for financial information calculated in accordance with GAAP. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is available in our press release and slides. We encourage investors to review these reconciliations in connection with the comments we make today. I'd also like to remind everyone that comments made during this call, including responses to your questions, may include forward-looking statements. Our actual results may differ materially from those that may be expressed or implied due to a wide range of factors, including those set forth in our SEC filings. We urge you to read CENTAN's previous SEC filings, including our 10-K and our forthcoming 10-Q for a description of additional factors that could potentially impact our financial results. Please keep these factors in mind when you analyze our comments today. As we introduced during our last quarterly call, we will be referring to a slide deck that will be referenced through today's call. This slide deck is also available on our website. We'll start on slide five of that deck. Now we'll hear from Paul Manning. Thanks, Tobin.

Good morning and good afternoon. Sensei reported strong local currency revenue growth of approximately 9% in the third quarter. This revenue increase was primarily volume-driven with price contributing low single digits. Our consolidated local currency adjusted EBITDA was up 13% for the third quarter of 2024. The company's third quarter adjusted EBITDA margin was 17.6%, up 60 basis points from the prior year's third quarter. With the continued resumption of volume growth across the groups, we expect revenue and EBITDA growth to continue to be strong in the fourth quarter. The volume improvement is due to our high level of new sales wins across each of our groups. Our focus on sales execution, the end of customer destocking, and the stabilization of end customer demand in North America and Europe. Our sales pipelines remain robust in each of our regions. Each group is focused on expanding new sales win rates and working with our customers to support their development needs and new product launches. Turning to slide six, the color group had an excellent quarter delivering 13% local currency revenue growth and 31% local currency operating profit growth. The group's third quarter EBITDA margin was 22.2%, an increase of 250 basis points versus the prior year's third quarter. The group's year-to-date local currency revenue is now up 5%, and local currency operating profit is up approximately 11%. We saw solid volume growth in both the food and pharmaceutical and personal care product lines. We expect this volume growth to continue throughout the remainder of the year. The group is benefiting from its strong new sales win, particularly in natural colors, innovative products, and exceptional customer service. As we expected and discussed during our last few calls, volume is the main driver of the strong operating leverage we now see in the color group. We expect this leverage to continue in the fourth quarter, and we expect the relationship between local currency revenue and operating profit growth in the fourth quarter to be similar to the group's third quarter results. For the year, I now expect the color group to deliver high single-digit local currency revenue growth previously I expected the group to deliver mid to high single digit growth. Turning to slide seven, the flavors and extracts group had a strong quarter delivering 7% local currency revenue growth and 13% local currency operating profit growth. The group's third quarter EBITDA margin was 16.4% of 30 basis points versus the prior year's third quarter. The group's year-to-date local currency revenue is up 8% and local currency operating profit is up approximately 9%. The group continues to benefit from its strong new sales wins, its innovative product offerings, and its focus on sales execution and customer service. The flavors extracts and flavor ingredient product lines reported solid volume growth in the quarter, which contributed to the group's operating leverage improvement. We expect this leverage to continue in the fourth quarter, and we expect the relationship between local currency revenue and operating profit growth in the fourth quarter to be similar to the group's third quarter results. For the year, I now expect the Flavors Group to deliver high single-digit local currency revenue growth. Previously, I expected the Flavors Group to deliver mid to high single-digit growth. Now turning to slide eight. The Asia Pacific Group reported 13% local currency revenue growth and 15% local currency operating profit growth in the third quarter. The group reported a strong third quarter EBITDA margin of 23.8%, which is in line with prior year. The group's year-to-date local currency revenue is up 9% and local currency operating profit is up approximately 8%. The group continues to experience solid growth in all regions and continues to have a high level of new sales wins. The group is performing very well and I expect Asia Pacific to have a strong finish in 2024. I expect the group to deliver in the fourth quarter at least what the group delivered in the third quarter for local currency revenue and operating profit growth. I expect the Asia Pacific group to deliver at least high single digit revenue growth for the full year of 2024. Turning to slide nine, after challenging 2023, Centene's 2024 performance puts us back on track with our long-term goals of mid-single-digit local currency revenue growth and high single-digit local currency adjusted EBITDA. In 2024, we now expect to deliver consolidated high single-digit local currency revenue and adjusted EBITDA growth. We previously expected to deliver mid to high single digit growth for both local currency revenue and adjusted EBITDA. We also expect to deliver mid single digit local currency adjusted EPS growth. The reason for the mid single digit adjusted EPS growth is primarily because of higher taxes and higher interest expense. Looking ahead to 2025, we expect our local currency revenue to grow at a mid-single-digit rate. We expect a decrease in our interest expense as a result of our focus on debt repayment and a lower expected interest rate environment. We also expect our tax rate to be relatively flat at approximately 25%. As we began to do last quarter, We thought it would be helpful to highlight a few new technologies within our businesses. Turning to slide 10, we've highlighted a couple of our flavor technologies. The first to profile is called Scentimelt. Scentimelt is a novel technology that allows our bakery and savory customers to incorporate color and flavor bursts into their end products. Bakery and savory products are known for challenging production conditions, which typically degrades the performance of flavor and color. Sensimelt Technology can overcome these challenging manufacturing conditions, extend product shelf life, and maintain the desired flavor profile. TrueBoost is a second technology we'd like to highlight. It is a portfolio of products that supports our customers' continuing efforts to reduce sugar and salt, amplify the boldness of flavors, and enhance the overall mouthfeel of products by imparting juiciness and creaminess to the end products. TrueBoost provides natural and clean label benefits across all of our customers and markets. More information on these technologies and others can be found at our website. Overall, the growth we are experiencing is a direct result of the implementation of our strategy and the opportunities from the markets we have chosen to operate in. I'm excited about the growth opportunities within each of our groups, and I remain optimistic about 2024 and the future of our business. Tobin will now provide you with additional details on the third quarter results.