Q2 2024 H.B. Fuller Co Earnings Call

June 27, 2024

Thank you for standing by and welcome to the HB Fuller second quarter 2020 for earnings conference call.

Operator: 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 would like to ask a question during this time, please do so now by pressing the star followed by the number one on your telephone keypad. If you would like to withdraw your question again, press the star number one.

Operator: 34 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, press the star one. Thank you.

Speaker Change: All lines have been placed on mute to prevent any background noise.

Speaker Change: After the speaker's remarks, there will be a question and answer session.

Speaker Change: If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad.

Steven Brazones: I now like to turn the call over to Steven Brazones, Vice President of Investor Relations. You may begin.

Speaker Change: If you would like to withdraw your question, again, press the star 1. Thank you. I'd now like to turn the call over to Steven Brazones, Vice President of Investor Relations. You may begin.

Operator: Thank you. I'd now like to turn the call over to Steven Brazones, Vice President of Investor Relations. You may begin.

Steven Brazones: Thank you, operator. Welcome to HB Fuller's Second Quarter of 2024 Investor Conference Call. Presenting today are Celeste Mastin, President and Chief Executive Officer; John Corkrean, Executive Vice President and Chief Financial Officer.

Steven E. Brazones: Thank you, operator. Welcome to HB Fuller's second quarter 2024 investor conference call. Presenting today are Celeste Mastin, President and Chief Executive Officer, and John Corkrean, 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-capital issues. These measures are supplemental to the results determined in accordance with GAAP.

Speaker Change: Thank you, Operator. Welcome to HB Fuller's second quarter 2024 investor conference call. Presenting today are Celeste Mastin, President and Chief Executive Officer, and John Corkrean, Executive Vice President and Chief Financial Officer.

Steven Brazones: After our prepared remarks, we'll have a question-and-answer session. Before we begin, let me remind everyone that our comments today will include references to certain non-caponential measures. These measures are supplemental to the result 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 is 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.

Steven E. Brazones: 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 is 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. 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.

Speaker Change: After our prepared remarks, we will have a question and answer session.

Speaker Change: Before we begin, let me remind everyone that our comments today will include references to certain non-cap financial measures.

Speaker Change: These measures are supplemental to the results determined in accordance with GAAP.

Speaker Change: We believe that these measures are useful to investors in understanding our operating performance and to compare our performance with other companies.

Speaker Change: Reconciliation of non- GAAP measures to the nearest GAP measure are included in our earnings release.

Speaker Change: Unless otherwise noted, comments about revenue refer to organic revenue, and comments about EPS, EBITDA, and profit margins refer to adjusted non-GAAP measures.

Steven Brazones: 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 the factors covered in our earnings release, comments made during this call, and the risk factors detailed in our filing with the Securities and Exchange Commission, all of which are available on our website at investors.hpfuller.com.

Steven E. Brazones: 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.hbfuller.com. I will now turn the call over to Celeste Mastin.

Speaker Change: 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.

Speaker Change: 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.hbfuller.com.

Celeste Mastin: I will now turn the call over to Celeste Mastin.

Celeste Mastin: Celeste?

Celeste Mastin: Thank you, Steven, 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 a just-it-even-down margin greater than 20% in the next three to five years.

Celeste Beeks Mastin: Thank you, Steven, 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 ROI.

Speaker Change: I will now turn the call over to Celeste Mastin. Celeste?

Celeste Beeks Mastin: 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.

Celeste Beeks Mastin: 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.

Celeste Beeks Mastin: 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 margins 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 years. Overall, organic revenue was flat year-on-year, as volume growth was offset by reformulation activity and index-based pricing adjustments.

Celeste Beeks Mastin: 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.

Celeste Mastin: 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 expectation. 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%.

Celeste Beeks Mastin: 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.

Celeste Beeks Mastin: Overall, organic revenue was flat year-on-year, as volume growth was offset by reformulation activity and index-based pricing adjustments.

Celeste Beeks Mastin: 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, strengthened the electronics, automotive, aerospace, and recreational vehicle market segments, 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 the adjusted EBITDA margin increased 160 basis points year-on-year to 18.4%.

Celeste Beeks Mastin: 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%.

Celeste Beeks Mastin: Favorable net pricing and raw material cost actions and restructuring benefits drove the increase in adjusted EBITDA margin year on year. In HHC, 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 HHS. Strengthened bottle labeling, packaging, and medical, partially offset continued, although lessening, organic sales declines in the hygiene market

Celeste Beeks Mastin: Now let me move on to review the performance in each of our segments in the second quarter.

Celeste Beeks Mastin: In engineering adhesives, organic revenue increased 2.5% in the second quarter, marking a return to positive organic growth.

Celeste Mastin: It turned a positive organic growth. Strengthened 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 GPU. 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 improves 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.

Celeste Beeks Mastin: strengthened the electronics, automotive, aerospace, and recreational vehicle market segments was partially constrained by slower demand in the woodworking and clean energy market segments.

Celeste Beeks Mastin: EA delivered a strong quarter, representative of our expectations given the many growth segments in this GBU.

Celeste Beeks Mastin: Adjusted EBITDA increased 13% in EA and adjusted EBITDA margin increased 160 basis points year-on-year to 18.4%.

Celeste Beeks Mastin: Favorable net pricing and raw material cost actions and restructuring benefits drove the increase in adjusted EBITDA margin year-on-year.

Celeste Beeks Mastin: 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.

Celeste Mastin: Strengthened 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, and 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 and roofing, which achieved a 20% increase in organic sales. Construction market conditions have improved and are more consistent with a normal construction season thus far.

Celeste Beeks Mastin: Strengthen bottle labeling, packaging, and medical. Partially offset continued, although lessening organic sales declines in the hygiene market.

Celeste Beeks Mastin: Adjusted EBITDA was flat year-on-year for HHC in the second quarter, despite lower organic revenue, and the 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 for roofing, which achieved a 20% increase in organic sales. Construction market conditions have improved and are more consistent with a normal construction season thus far.

Celeste Beeks Mastin: Adjusted EBITDA was flat year-on-year for HHC in the second quarter despite lower organic revenue and adjusted EBITDA margin expanded 50 basis points year-on-year to 16.6 percent.

Celeste Beeks Mastin: Favorable net pricing and raw material cost actions, restructuring benefits, and acquisitions drove the increase in adjusted EBITDA margin year-on-year.

Celeste Beeks Mastin: 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 a normal construction season thus far.

Celeste Mastin: 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 America's region. Driven by strong growth in electronics, aerospace, and roofing, HHC organic revenue declined 7% versus the prior year.

Celeste Beeks Mastin: 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. However, geographically, America's organic revenue was flat year-on-year in the second quarter.

Celeste Beeks Mastin: Adjusted EBITDA for construction adhesives increased 24 percent versus the second quarter of last year to 23 million dollars and adjusted EBITDA margin expanded 90 basis points to 15 percent.

Celeste Beeks Mastin: Net price and raw material cost management, improved volumes, and restructuring savings drove the improvement in adjusted EBITDA margin year-on-year.

Celeste Beeks Mastin: 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. However, HHC's 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.

Celeste Beeks Mastin: Geographically, America's organic revenue was flat year-on-year in the second quarter.

Celeste Mastin: The hygiene market, while slightly improved in the Americas, continued to negatively impact organic sales development for HHC in the region.

Celeste Beeks Mastin: 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.

Celeste Mastin: in E.I. Mia, 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.

Celeste Beeks Mastin: In EIMEA, year-over-year organic revenue development, while still down, improved significantly relative to the first quarter, as expected.

Celeste Beeks Mastin: The organic sales development for all GBUs improved sequentially, although it 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.

Celeste Beeks Mastin: The organic sales development for all GBUs improved sequentially, although still declined modestly year on year.

Celeste Beeks Mastin: 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.

Celeste Beeks Mastin: In Asia-Pacific, organic revenues increased 7% year-on-year, driven by strength in electronics, automotive, beverage labeling, and flexible packaging.

Celeste Beeks Mastin: Strength in China, which nearly achieved a double-digit increase in organic sales, drove the region's organic sales growth.

Celeste Mastin: We have a winning strategy, a focused team, and a strong track record of execution. Our path to 20% adjusted EVA-Domarjan is multi-faceted, 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.

Celeste Beeks Mastin: 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, an 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.

Celeste Beeks Mastin: and acquisitions of higher-growth, higher-margin businesses in the most differentiated adhesive applications.

Celeste Beeks Mastin: 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 C As part of the acquisition, products under ND Industries' Vibra-Type brand will be added to HB Fuller's existing epoxy, cyanoacrylate, UV curable, and anaerobic product ranges.

Celeste Beeks Mastin: During the second quarter, we completed the acquisition of ND Industries.

Celeste Beeks Mastin: 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 codings,

Celeste Mastin: As part of the acquisition, products under ND Industries, Vibratite brand, will be added to HP Fuller's existing epoxy, cyanoacrylate, UV curable, and anaerobic product ranges. This acquisition represents a very financially compelling transaction for HP Fuller. ND's full-year 2024 sales are expected to be approximately $80 million at greater than 30% eva-domarjan. Total purchase price was approximately $250 million, equating to a pre-synergy enterprise value to eva-domarjan of less than 10 times, and a post-synergy eva-domarjan 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.

Celeste Beeks Mastin: adhesives, sealants, and elastomer, or case, industry.

Celeste Beeks Mastin: As part of the acquisition, products under ND Industries' Vibra-Type brand will be added to HB Fuller's existing epoxy, cyanoacrylate, UV curable, and anaerobic product ranges.

Celeste Beeks Mastin: 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 a greater than 30% EBITDA margin. The 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 million.

Celeste Beeks Mastin: 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.

Celeste Beeks Mastin: 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, I will turn the call over to John Corkrean to review our second quarter results in more detail and our updated outlook for 2024. Thank you, Celeste.

Celeste Beeks Mastin: Our M&A pipeline is robust, and we continue to evaluate a number of potential transactions.

Celeste Mastin: Given this capability, we have re-initiated our share repurchase program, allowing us to both invest for growth and return additional capital to shareholders.

Celeste Beeks Mastin: We have proven the ability to acquire multiple companies while simultaneously reducing our leverage ratio.

Celeste Beeks Mastin: Given this capability, we have re-initiated our share repurchase program, allowing us to both invest for growth and return additional capital to shareholders.

John Corkrean: 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 to the left.

Celeste Beeks Mastin: Now let me turn the call over to John Corkrean to review our second quarter results in more detail and our updated outlook for 2024.

John J. Corkrean: I'll begin with some additional financial details on the second quarter. For the quarter, revenue was up 2.1% versus the same period last year. Currency had a negative impact of 1.7%, and acquisitions increased revenue by 3.9%. Adjusting for those items, organic revenue was down 0.1%, with volume up 3.3% and pricing down 3.4%. You're on your own in the court.

John Corkrean: I'll begin with some additional financial details on the second quarter. For the quarter, revenue was up 2.1% versus the same period last year. Currents had a negative impact of 1.7%, and acquisitions increased revenue by 3.9%. Up 210 basis points versus last year, driven by the net effect of pricing and raw material actions, restructuring savings, and higher volume. Adjusted selling, general and administrative expense was up 9% year on year as expected, with acquisitions driving approximately half of the increase and the rest of the increase resulting from higher wage inflation and higher variable compensation, partially offset by restructuring savings.

John J. Corkrean: Thank you, Celeste. I'll begin with some additional financial details on the second quarter. For the quarter, revenue was up 2.1 percent versus the same period last year. Currency had a negative impact of 1.7 percent, and acquisitions increased revenue by 3.9 percent.

John J. Corkrean: Adjusting for those items, organic revenue is down 0.1%, with volume up 3.3% and pricing down 3.4% year-on-year in the quarter.

John J. Corkrean: Adjusted gross profit margin was 31.1%, up 210 basis points versus last year, driven by the net effect of pricing and raw material actions, restructuring savings, and higher volume. Adjusted selling, general, and administrative expense was up 9% year-on-year, as expected, with acquisitions driving approximately half of the increase and the rest of the increase resulting from higher wage inflation and higher variable compensation, partially offset by restructuring. Adjusted EBITDA for the quarter of $157 million was up 10% year-on-year, reflecting the net positive impact of the Pricing and Raw Material Cost Act.

John J. Corkrean: Adjusted selling, general, and administrative expense was up 9% year-on-year, as expected, with acquisitions driving approximately half of the increase and the rest of the increase resulting from higher wage inflation and higher variable compensation, partially offset by restructuring savings.

John Corkrean: Adjusted EBITF for the quarter of $157 million was up 10% year on year, reflecting the net positive impact of pricing and raw material cost actions, volume leverage, restructuring savings, and the favorable contribution of acquisitions, which more than offset higher variable compensation and wage inflation versus the prior year. Adjusted earnings for share of $1.12 was up 20% versus the second quarter of 2023, driven by strong operating income growth. Viewer to date operating cash flow increased $21 million year on improved profitability and lower networking capital as a percentage of revenue. This strong growth in EBITF and cash flow resulted in net debt to adjusted EBITF of 3.1 times at the end of the second quarter, down from 3.3 times at the end of the second quarter of last year.

John J. Corkrean: Adjusted EBITDA for the quarter of $157 million was up 10% year-on-year, reflecting the net positive impact of pricing and raw material cost actions.

John J. Corkrean: Volume Leverage, Restructuring Savings, and the Favorable Contribution of Acquisitions, which more than offset higher variable compensation and wage inflation versus the prior year. Adjusted earnings per share of $1.12 was up 20% versus the second quarter of 2023, driven by strong operating income growth. Year-to-date operating cash flow increased $21 million year-on-year on improved profitability and lower net working capital as a percentage of revenue.

John J. Corkrean: Adjusted earnings per share of $1.12 was up 20% versus the second quarter of 2023, driven by strong operating income growth.

John J. Corkrean: Year-to-date operating cash flow increased $21 million year-on-year on improved profitability and lower net working capital as a percentage of revenue.

John J. Corkrean: This strong growth in EBITDA and cash flow resulted in net debt to adjusted EBITDA of 3.1 times at the end of the second quarter, down from 3.3 times at the end of the second quarter of last year. On a sequential basis, the ratio increased from 2.8 times to 3.1 times, reflecting the acquisition of Indy Industries, on a pro forma basis, including the acquired EBITDA from NDN. Net debt to adjusted EBITDA was 3.0 times at the end of the. During the second quarter, we re-initiated our share repurchase program and acquired 182,000 shares.

John Corkrean: On a sequential basis, the ratio increased from 2.8 times to 3.1 times, reflecting the acquisition of indie industries on a pro forma basis, including the acquired EBITF from indie industries. Net debt to adjusted EBITF was 3.0 times at the end of the quarter.

John J. Corkrean: On a sequential basis, the ratio increased from 2.8 times to 3.1 times, reflecting the acquisition of Indy Industries. On a pro forma basis, including the acquired EBITDA from Indy Industries, net debt to adjusted EBITDA was 3.0 times at the end of the quarter.

John Corkrean: During the second quarter, we re-initiated our share repurchase program and acquired 182,000 shares. Now that our net debt to adjusted EBITF ratio has returned to more historical levels and given our expectations for continued strong free cash flow, we anticipate regularly repurchasing shares with the goal of offsetting annual share creep from equity-based compensation programs. With that, let me now turn to our guidance for the 2024 fiscal year.

John J. Corkrean: Now that our net debt-to-adjusted EBITDA ratio has returned to more historical levels and given our expectations for continued strong free cash flow, we anticipate regularly repurchasing shares with the goal of offsetting annual share creep from equity-based compensation. With that, let me now turn to our guidance for the 2024 fiscal year. As a result of our strong first half performance and recent acquisition activity, offset somewhat by the impact of the strengthening U.S. dollar, we are updating our previously communicated financial guidance for fiscal 2024 as follows.

John J. Corkrean: During the second quarter, we re-initiated our share repurchase program and acquired 182,000 shares.

John J. Corkrean: Now that our net debt-to-adjusted EBITDA ratio has returned to more historical levels, and given our expectations for continued strong free cash flow, we anticipate regularly repurchasing shares with the goal of offsetting annual share creep from equity-based compensation programs.

John J. Corkrean: Net revenue growth is now expected to be in the range of 2% to 4%, with organic revenue flat to up 2% year-on-year. Adjusted EBITDA is now expected to be in the range of $620 million to $640 million, equating to growth of approximately 7-10% year-on-year. Net interest expense is now expected to be approximately $130 million.

John Corkrean: As a result of our strong first half performance and recent acquisition activity, offset somewhat by the impact of the strengthening US dollar, we are updating our previously communicated financial guidance for fiscal 2024 as follows. Net revenue growth is now expected to be in the range of up 2% to 4%, with organic revenue flat to up 2% year on year. Adjusted EBITF is now expected to be in the range of $620 million to $640 million, equating to the growth of approximately 7% to 10% year on year. Net interest expense is now expected to be approximately $130 million. Our adjusted effective tax rate is now expected to be between 26.5% and 27.5%.

Speaker Change: With that, let me now turn to our guidance for the 2024 fiscal year.

Speaker Change: As a result of our strong first-half performance and recent acquisition activity, offset somewhat by the impact of the strengthening U.S. dollar, we are updating our previously communicated financial guidance for fiscal 2024 as follows.

Speaker Change: Net revenue growth is now expected to be in the range of up 2% to 4%, with organic revenue flat to up 2% year-on-year.

Speaker Change: Adjusted EBITDA is now expected to be in the range of $620 million to $640 million, equating to growth of approximately 7% to 10% year-on-year.

John J. Corkrean: Our adjusted effective tax rate is now expected to be between 26.5% and 27.5%. The full-year depreciation and amortization expense is expected to be approximately $170 million, and our fully diluted share count is now expected to be approximately $56.5 million. Combined, these assumptions result in full-year adjusted diluted earnings per share in the range of $4.20 and $4.45, equating to year-on-year growth of between 9% and 15%. I still expect full-year operating cash flow to be between $300 and $350 million. Finally, based on the seasonality of our business, we would expect third quarter EBITDA to be in the range of $165 million to $175 million. Now, let me turn the call back over to Celeste.

Speaker Change: Net interest expense is now expected to be approximately $130 million. Our adjusted effective tax rate is now expected to be between 26.5% and 27.5%.

John Corkrean: Full year depreciation and amortization expense is expected to be approximately $170 million. and our fully deluded share count is now expected to be approximately 56.5 million shares. Combined, these assumptions result in full-year adjusted diluted earnings per share in the range of $4.20 and $4.45, equating to year-on-year growth of between 9% and 15%. We still expect full-year operating cash flow but to be between $300 and $350 million. Finally, based on the seasonal alley of our business, we would expect third quarter EBITDA to be in the range of $165 million to $175 million.

Speaker Change: Full year depreciation and amortization expense is expected to be approximately $170 million.

Speaker Change: And our fully diluted share count is now expected to be approximately 56.5 million shares.

Speaker Change: Combined, these assumptions result in full-year adjusted diluted earnings per share in the range of $4.20 and $4.45, equating to year-on-year growth of between 9% and 15%.

Speaker Change: We still expect full year operating cash flow to be between $300 and $350 million.

Speaker Change: Finally, based on the seasonality of our business, we would expect 3rd quarter EBITDA to be in the range of $165 million to $175 million.

Celeste Mastin: Now, let me turn the call back over to Celeste.

Celeste Mastin: Thank you, John. At HB Fuller, we are committed to working alongside our customers to test new ideas, optimize bonding performance, and develop highly tailored adhesive solutions. It is through this unique collaborative approach that we are able to innovate with speed and enable our customers' success. We have the privilege of collaborating with and creating solutions for an extensive group of customers.

Celeste Beeks Mastin: Thank you, John. At HB Fuller, we are committed to working alongside our customers to test new ideas, optimize bonding performance, and develop highly tailored adhesive solutions. It is through this unique collaborative approach that we are able to innovate with speed and enable our customers' success. We have the privilege of collaborating with and creating solutions for an extensive group of customers. In April, we recognized the most innovative product introductions that resulted from these partnerships in 2023 by naming Anhui Huasun, GAF, and Nine as the inaugural winners of the HB Fuller Customer Innovation Award.

Speaker Change: Now let me turn the call back over to Celeste. Thank you, John . At HB Fuller, we are committed to working alongside our customers to test new ideas, optimize bonding performance, and develop highly tailored adhesive solutions.

Celeste Beeks Mastin: It is through this unique collaborative approach that we are able to innovate with speed and enable our customers' success.

Celeste Mastin: In April, we recognized the most innovative product introductions that resulted from these partnerships in 2023 by naming Onwi Hwasan, GIF, and Nine as the inaugural winners of the HB Fuller Customer Innovation Awards. We are proud to recognize these customers for their exceptional achievements that leverage our unique technology to improve our world. Let me share a little more about this year's winners. Onwi Hwasan Energy is a market leader in solar panel construction, and their heterogeneity technology solar modules were recognized for their ability to offer power that is more efficient and reliable than previous generations of solar modules.

Celeste Beeks Mastin: We have the privilege of collaborating with and creating solutions for an extensive group of customers.

Celeste Beeks Mastin: In April , we recognized the most innovative product introductions that resulted from these partnerships in 2023 by naming Anhui Huasun.

Celeste Beeks Mastin: We are proud to recognize these customers for their exceptional achievements that leverage our unique technology to improve our world. Let me share a little more about this year's winner. Anhui Hwasun Energy is a market leader in solar panel construction, and their heterojunction technology solar modules were recognized for their ability to offer power that is more efficient and reliable than previous generations of solar modules.

Celeste Beeks Mastin: GAF, and NINE as the inaugural winners of the HB Fuller Customer Innovation Awards.

Celeste Beeks Mastin: We are proud to recognize these customers for their exceptional achievements that leverage our unique technology to improve our world.

Celeste Beeks Mastin: Let me share a little more about this year's winners.

Celeste Beeks Mastin: Anhui Hwasun Energy is a market leader in solar panel construction, and their heterojunction technology solar modules were recognized for their ability to offer power that is more efficient and reliable than previous generations of solar modules.

Celeste Mastin: This improved solution has helped to facilitate the broader adoption of clean energy. GIF, a standard industries company, and North America's largest roofing and waterproofing manufacturer, was recognized for its Energy Guard, non-halogenated polyiso insulation, which gives architects and contractors an energy-efficient solution designed to help meet their sustainability goals. This product line offers excellent thermal value and is free of potentially hazardous flammary-tardant chemicals. The product offering holds numerous sustainability certifications.

Celeste Beeks Mastin: This improved solution has helped to facilitate the broader adoption of clean energy. GAF, a Standard Industries company and North America's largest roofing and waterproofing manufacturer, was recognized for its EnergyGuard non-halogenated poly-iso insulation, which gives architects and contractors an energy efficient solution designed to help meet their sustainability goals. This product line offers excellent thermal value and is free of potentially hazardous flame retardant chemicals. The product offering holds numerous sustainability certifications.

Celeste Beeks Mastin: This improved solution has helped to facilitate the broader adoption of clean energy.

Celeste Beeks Mastin: GAF

Speaker Change: a Standard Industries company and North America's largest roofing and waterproofing manufacturer.

Speaker Change: was recognized for its EnergyGuard non-halogenated poly-iso insulation, which gives architects and contractors an energy-efficient solution designed to help meet their sustainability goals.

Speaker Change: This product line offers excellent thermal value and is free of potentially hazardous flame-retardant chemicals. The product offering holds numerous sustainability certifications.

Celeste Mastin: Nine, a leading feminine hygiene company in India and producer of sanitary napkins, was recognized for introducing India's first biodegradable solution, which helps to mitigate adverse impacts on the environment. This is particularly crucial in India, where high population density, combined with a still developing disposal system for feminine products, has led to a push for more sustainable solutions. Incredibly, nine new products reduce the estimated decomposition time from 800 years to less than 18 months for a sanitary napkin in a way.

Celeste Beeks Mastin: A leading feminine hygiene company in India and producer of sanitary napkins was recognized for introducing India's first biodegradable solution, which helps to mitigate adverse impacts on the environment. This is particularly crucial in India, where high population density, combined with a still developing disposal system for feminine products, has led to a push for more sustainable solutions. Incredibly, Nine's new product reduces the estimated decomposition time from 800 years to less than 18 months for a sanitary napkin in a lamp.

Speaker Change: 9. A leading feminine hygiene company in India and producer of sanitary napkins was recognized for introducing India's first biodegradable solution which helps to mitigate adverse impacts on the environment.

Speaker Change: This is particularly crucial in India, where high population density combined with a still developing disposal system for feminine products has led to a push for more sustainable solutions.

Speaker Change: Incredibly, Nine's new product reduces the estimated decomposition time from 800 years to less than 18 months for a sanitary napkin in a landfill.

Celeste Mastin: Congratulations to these customers for innovating to improve our world and for being our inaugural Innovation Award winners.

Celeste Beeks Mastin: Congratulations to these customers for innovating to improve our world and for being our inaugural Innovation Award winner. HB Fuller was also recognized for innovation in the second quarter, winning our second consecutive annual innovation award from the Adhesive and Sealance Council following our win in 2023 for our EV Protect product. This year, we were honored for our new thermoplastic encapsulant platform for photovoltaic modules used in the construction of solar panels. Our products have application in newer thin-film modules and are advantaged by lower levelized costs of electricity, enabling the creation of solar panels that generate power at a lower cost per watt than traditional technology.

Celeste Mastin: HB Fuller was also recognized for innovation in the second quarter, winning our second consecutive annual Innovation Award from the Adhesive and Sealant Council following our win in 2023 for our EV Protect product. This year, we were honored for our new thermoplastic and capsule platform for photovoltaic modules used in the construction of solar panels. Our products have application in newer thin film modules and are advantaged by lower-levelized costs of electricity, enabling the creation of solar panels that generate power at a lower cost per watt than traditional technology. We are very proud of our clean energy team, and we thank our peers at the ASC for the 2024 Innovation Award.

Speaker Change: Congratulations to these customers for innovating to improve our world and for being our Inaugural Innovation Award winners.

Speaker Change: HB Fuller was also recognized for innovation in the second quarter, winning our second consecutive annual innovation award from the Adhesive and Sealant Council following our win in 2023 for our EV Protect product.

Speaker Change: This year, we were honored for our new thermoplastic encapsulant platform for photovoltaic modules used in the construction of solar panels.

Speaker Change: Our products have application in newer thin film modules and are advantaged by lower levelized costs of electricity, enabling the creation of solar panels that generate power at a lower cost per watt than traditional technology.

Celeste Beeks Mastin: We are very proud of our clean energy team, and we thank our peers at the ASC for the 2024 Innovation Award. To wrap up, we are very pleased with our first half financial results and the continued incremental improvement we are driving throughout the business consistent with our strategic plan. The team is executing well, and there is complete alignment across the organization. We have one focus, creating customized, value-added adhesive solutions for our customers.

Celeste Mastin: To wrap up, we are very pleased with our first half financial results and the continued incremental improvement we are driving throughout the business, consistent with our strategic plan. The team is executing well, and there is complete alignment across the organization. We have one focus: creating customized value-added adhesive solutions for our customers. We're set to deliver another year of improved profitability and ROIC, strong cash flow, and we are on pace to achieve our long-term financial targets and drive attractive shareholder returns.

Speaker Change: We are very proud of our clean energy team, and we thank our peers at the ASC for the 2024 Innovation Award.

Speaker Change: To wrap up, we are very pleased with our first half financial results and the continued incremental improvement we are driving throughout the business, consistent with our strategic plan.

Speaker Change: The team is executing well and there is complete alignment across the organization. We have one focus, creating customized, value-added adhesive solutions for our customers.

Celeste Beeks Mastin: We're set to deliver another year of improved profitability and ROIC, strong cash flow, and we are on pace to achieve our long-term financial targets and drive attractive shareholder returns. That concludes our prepared remarks for today. Operator, please open the line for questions. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.

Speaker Change: We're set to deliver another year of improved profitability and ROIC, strong cash flow, and we are on pace to achieve our long-term financial targets and drive attractive shareholder returns.

Celeste Mastin: That concludes our prepared remarks for today.

Operator: Operator, please open the line for questions. Thank you. We will now begin the question and answer session.

Operator: If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.

Speaker Change: That concludes our prepared remarks for today. Operator, please open the line for questions.

Speaker Change: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. Your first question today comes from the line of Ghansham Panjabi from Baird. Your line is open.

Matt Krieger: Your first question today comes from the line of Gensham Punjabi from Baird. Your line is open.

Operator: Your first question today comes from the line of Ghansham Panjabi from Baird. Your line is open. Hi, good morning, everyone. This is actually Matt Krieger sitting for Ghansham.

Matt Krieger: Good morning, everyone. This is Matt Krieger sitting for Gajam. I just wanted to focus my first question in on volumes for the quarter and for the rest of the year. You highlighted that all three segments demonstrated volume growth. I think this was the first time since early 2022 that this can be said.

Matthew T. Krueger: You know, I just wanted to focus my first question on volumes for the quarter and for the rest of the year. So, you highlighted that, you know, all three segments demonstrated volume growth. I think this is the first time since early 2022 that this can be said, but can you provide some added detail on segment volumes during the quarter specific to each segment? And then, you know, how the third quarter kicked off and maybe what your budgeted volume is. You know, what should we be thinking about for the second half? Good morning.

Speaker Change: Hi, good morning everyone. This is actually Matt Krieger sitting for Ghansham.

Speaker Change: You know, I just wanted to, you know, focus my first question in on volumes for the quarter and for the rest of the year, so

Matt Krieger: Can you provide some added detail on segment volumes during the quarter specific each segment and then how the third quarter has kicked off and maybe what your budgeted volume expectations by segment are for the year just trying to get a sense of what should we be thinking about for the second half.

Speaker Change: You know, you highlighted that, you know, all three segments demonstrated volume growth. I think this is the first time since early 2022 that this can be said.

Speaker Change: But can you provide some added detail on segment volumes during the quarter, specific to each segment, and then, you know, how the third quarter has kicked off, and maybe what your budgeted volume expectations by segment are for the year, just trying to get a sense of.

Celeste Mastin: Sure, Matt. And welcome. Good morning.

Celeste Beeks Mastin: So, when you look at our volume performance over Q2 by segment, the highest volume performance was logged by our construction adhesive business, which you would expect because they're mid-season right now, and last year was definitely a weak construction season. So, their volume growth is up double-digit percent. EA also had a strong quarter from a volume perspective and, you know, showed mid-single-digit volume growth. And HHC, low single-digit volume growth, but volume growth all the same.

Celeste Mastin: So when you look at our volume performance over Q2 by segment, the highest volume performance was logged in by our construction adhesive business, which you would expect there. Their mid season right now and last year was definitely a weak construction season. So their volume growth is up double-digit percent. EA also had a strong quarter from a volume perspective and showed mid single digit volume growth and HHC low single digit volume growth, but volume growth all the same. So we've seen the destocking that was occurring in HHC now solidly in the rear view mirror, and we're feeling good about all three of these businesses from a volume out with perspective.

Speaker Change: You know, what should we be thinking about for the second half?

Speaker Change: Sure, Matt.

Speaker Change: and welcome.

Speaker Change: Good morning.

Speaker Change: So, when you look at our volume performance over Q2 by segment,

Speaker Change: Highest volume performance was logged in by our construction adhesive business.

Speaker Change: which you would expect. They're mid-season right now, and last year was definitely a weak construction season. So they're up, volume growth is up double-digit percent.

Speaker Change: EA also had a strong quarter from a volume perspective and, you know, showed mid-single-digit

Speaker Change: volume growth.

Speaker Change: and HHC.

Speaker Change: Low single-digit volume growth, but volume growth all the same. So, we've seen the destocking that was occurring in HHC now solidly in the rearview mirror, and we're feeling good about all three of these businesses from a volume outlook perspective.

Celeste Mastin: When we look at P7, we're seeing continued strong performance on volume, and actually what we've seen is, you know, we were already projecting volume growth for the second half of the year and around mid single digit, and we actually have now seen that earlier than planned, which really explains our second quarter. Got it. That's helpful.

Celeste Beeks Mastin: So, we've seen the destocking that was occurring in HHC now solidly in the rearview mirror, and we're feeling good about all three of these businesses from a volume outlook perspective. When we look at P7, we're seeing continued strong performance on volume. And actually, what we've seen is, you know, we were already projecting volume growth for the second half of the year at around mid-single-digit. And we actually have now seen that growth earlier than planned, which really explains our second quarter. I got it.

Speaker Change: When we look at P7, we're seeing continued strong performance on volume and actually, what we've seen is, you know, we were already projecting volume growth.

Speaker Change: for the second half of the year, and around mid-single digit. And we actually have now seen that earlier than planned, which really explains our second quarter.

Matthew T. Krueger: That's, that's helpful. And then, you know, just, Can you provide some added detail on the benefits from the cost optimization and restructuring of the business that's gone on so far? You know, how much have you achieved to date? You know, how much opportunity is there left under the current program, the current effort? And then, you know, how should this progress through the remainder of the year? Maybe, you know, a first half contribution versus second half contribution type split or something like that, just to give us a sense of the scale of the benefit that we're looking at. Sure.

Celeste Mastin: And then, you know, just, you know, can you provide some added detail on, you know, the benefits from the cost optimization and restructuring of the business that's gone out so far? You know, how much have you achieved to date, you know, how much opportunity is there left under the, you know, the current program, the current effort? And then, you know, how should this progress through the remainder of the year, maybe, you know, a first half contribution versus second half contribution type split or something like that, just to give a sense of the scale of the benefits that we're looking at.

Speaker Change: Got it. That's, that's helpful. And then, you know, just

Speaker Change: Can you provide some added detail on, you know, the benefits from the cost optimization and restructuring of the business that's gone on so far? You know, how much have you achieved to date? You know, how much opportunity is there left under the, you know, the current program, the current effort?

Speaker Change: You know, how should this progress through the remainder of the year? Maybe, you know, a first half contribution versus second half contribution type split or something like that, just to give us a sense of the scale of the benefit that we're looking at.

Celeste Mastin: Sure. So, so when we announced the restructuring last year, we announced a $45 million restructuring program over three years. In the first year, 2023, we delivered about $10 million toward that end. This year, we're on track for what will be about $20 million restructuring savings, and the remainder will then occur in 2025. Yeah, Matt, in terms of kind of impact by, you know, quarter or first half for the second half, I would say we were probably seeing 35% to 40% of that $20 million in the first half, and we'll see the rest in the second half.

Celeste Beeks Mastin: So when we announced the restructuring last year, we announced a $45 million restructuring program over three years. In the first year, 2023, we delivered about $10 million toward that end. This year, we're on track for what will be about $20 million of restructuring savings, and the remainder will then occur in 2025. Yeah, Matt, in terms of kind of impact by, you know, quarter or first half or second half, I would say we were probably seeing 35-40% of that $20 million in the first half, and we'll see the rest in the second half.

Speaker Change: Sure.

Speaker Change: So when we announced the restructuring last year, we announced a $45 million dollar restructuring program over three years.

Celeste Beeks Mastin: So it'll ramp up a little bit as we go through the year, got it, got it, that's helpful, um, and that 20 million was incremental math right on top of the 10, yeah, yeah. Okay, that's it for me. I'll hop back in.

Speaker Change: In the first year, 2023, we delivered about $10 million toward that end. This year, we're on track for what will be about $20 million of restructuring savings, and the remainder will then occur in 2025.

Speaker Change: Yeah Matt, in terms of kind of impact by you know quarter or first half or second half, I would say we were probably seeing 35-40 percent of that 20 million in the first half and we'll see the rest in the second half, so it'll ramp up a little bit as we go through the year.

Celeste Mastin: So it'll ramp up a little bit as we go through the year.

Matt Krieger: God, I've got it. That's helpful. Matt, 20 million was incremental, Matt, right? On top of the 10. Yep. Makes sense. Okay.

Matt Krieger: That's it for me. I'll hop back in. Thank you very much.

Speaker Change: Got it, got it, that's helpful. And that $20 million was incremental, Matt, right, on top of the $10.

Celeste Mastin: Great. Thanks. And our regards to Gunsham. Great. Thank you.

Matthew T. Krueger: Thank you very much. Great, thanks, and our regards to Ghansham. Your next question comes from a line Kevin McCarthy from Vertical Research Partners. Your line is open. Yes, thank you, and good morning.

Speaker Change: Yep, yep, yep, yep, makes sense.

Kevin Mccarthy: Your next question comes from a line of Kevin McCarthy from Vertical Research Partners. Your line is open.

Speaker Change: Okay, that's it for me. I'll hop back in. Thank you very much.

Speaker Change: Great, thanks, and our regards to Ghansham.

Kevin Mccarthy: Yeah, thank you, and good morning.

Kevin William McCarthy: Celeste, congrats on the acquisition of ND Industries. I was wondering if you could maybe address a few questions related to that deal. In listening to your comments on sales and margins, would it be fair to say that you're baking in, say, $5 to $7 million of EBITDA per quarter in the back half of the year? And, just qualitatively, maybe comment on your early experience now that you've owned it for five weeks and maybe what the integration roadmap looks like over the near term. Medium-term strategic thoughts; those sorts of comments would be welcome. Sure, Kevin. And good morning.

Speaker Change: Great, thank you.

Kevin Mccarthy: Celeste, congrats on the acquisition of ND Industries. I was wondering if you could maybe address a few questions related to that deal. In listening to your comments on sales and margins, would it be fair to say that you're baking in, say, five to seven million of EBITDA per quarter in the back half of the year?

Speaker Change: Your next question comes from a line of Kevin McCarthy from Vertical Research Partners. Your line is open.

Kevin William McCarthy: Yes, thank you and good morning. Celeste, congrats on the acquisition of ND Industries.

Kevin William McCarthy: I was wondering if you could...

Kevin William McCarthy: maybe address a few questions related to that deal.

Speaker Change: In listening to your comments on sales and margins, would it be fair to say that you're baking in, say, 5 to 7 million of EBITDA per quarter in the back half of the year?

Celeste Mastin: And then just qualitatively, maybe comment on your early experience now that you've owned it for five weeks, and maybe what the integration roadmap looks like over the near term and medium term strategic thoughts; those sorts of comments would be welcome. Sure, Kevin.

Speaker Change: And then just qualitatively, maybe comment on your early experience now that you've owned it for five weeks and maybe what the integration roadmap looks like over the near term and medium term strategic thoughts, those sorts of comments would be welcome.

Celeste Mastin: And good morning. So we're baking in call it $13 million of benefit from ND in the second half. So about six, about six a quarter. And our experience with the team to date has already just been amazing. We acquired some terrific technology there and some amazing, amazing people. You know, when you look at their business, a portion of that business was adhesive that they produced under the Fiber Type brand. And you know, we have, we were a believer in that brand. We love that brand. Mark, we already had a lot of cyanobacterial, a lot of cyanobacterial aids.

Celeste Beeks Mastin: So we're baking in, call it $13 million of benefit from ND in the second half. So, about six a quarter. And our experience with the team to date has already been amazing.

Kevin William McCarthy: Sure, Kevin. And good morning.

Speaker Change: So we're baking in call it 13 million dollars of benefit from ND in the second half

Celeste Beeks Mastin: We acquired some terrific technology there and some amazing, amazing people. You know, when you look at their business, a portion of that business was adhesives that they produced under the Vibra-Type brand, and we have, we're a believer in that brand. We love that brand.

Speaker Change: So about six, about six a quarter.

Speaker Change: And our experience with the team to date has already just been amazing. We acquired some terrific technology there and some amazing, amazing people.

Speaker Change: You know, when you look at their business...

Celeste Beeks Mastin: Mark, we already had a lot of cyanoacrylates, a lot of cyanoacrylates, and UV curables and epoxy systems. But what they had that was really unique for us was a very advanced anaerobic product offering. And so, when you look at this anaerobic product offering, it's tremendous. They take what's basically a two-part epoxy, they encapsulate that, they impart that into a carrier system, a liquid carrier system, which then gets coated on a mechanical fastener.

Speaker Change: A portion of that business was adhesives that they produced under the Vibortype brand and

Celeste Mastin: And UV curables and epoxy systems. What they had that was really unique for us was a very advanced anaerobic product offering. And so when you look at this anaerobic product offering, it's tremendous. They take what's basically a two-part epoxy. They encapsulate that. They impart that into a carrier system, a liquid carrier system, which then gets coated on a mechanical fastener. And it remains in her. You saw the pictures on the presentation we just showed until the threads are combined. And when the threads are combined, the product mixes and cures into what is really a structural bond.

Speaker Change: You know, we have, we're a believer in that brand. We love that brand.

Speaker Change: Mark, we already had a lot of cyanoacrylate, a lot of cyanoacrylates, and UV curables and epoxy systems. What they had that was really unique for us was a very advanced

Speaker Change: anaerobic product offering.

Speaker Change: And so when you look at this anaerobic product offering, it's tremendous. They take what's basically a two-part epoxy. They encapsulate that.

Celeste Beeks Mastin: And it remains inert, you saw the pictures in the presentation we just showed, until the threads are combined. And when the threads are combined, the product mixes and cures into what is really a structural bond. So, this is, you know, we're excited to bring this to even more of our big OEM customers in the aerospace and automotive space. Think heavy equipment; this really provides a strong structural bond. So as I look at the operation, it's a very good fit for us because it capitalizes on two things we do very well.

Speaker Change: They impart that into a carrier system, a liquid carrier system, which then gets coated on a mechanical fastener.

Speaker Change: And it remains inert, you saw the pictures on the presentation we just showed, until the threads are combined.

Celeste Mastin: So this is, you know, we're excited to bring this to even more of our big OEM customers in the aerospace and automotive space; think heavy equipment. This really provides a strong structural bond. And part of the business that we acquired is also the actual coating of these customers' fasteners. So this brings us even closer to our customer base and allows us to do what we know how to do very well, which is apply, and he's...

Speaker Change: and when the threads are combined.

Speaker Change: The product mixes.

Speaker Change: and Cures into what is really a structural bond. So this is, you know, we're excited to bring this to even more of our big OEM customers.

Speaker Change: in the aerospace and automotive space.

Speaker Change: Think Heavy Equipment.

Speaker Change: This really provides a strong structural bond, and part of the business that we acquired is also the actual coding of these customers' fasteners.

Celeste Mastin: As I look at the operation, it's a very good fit for us because it capitalizes on two things we do very well. One, formulate adhesives that meet customer needs. And secondarily, understand how those adhesives are actually applied in use to the extent that we are doing the applying now at ND.

Speaker Change: So this brings us even closer to our customer base and allows us to do what we know how to do very well, which is apply adhesives.

Celeste Beeks Mastin: One, formulate adhesives that meet customer needs, and secondarily, understand how those adhesives are actually applied in use to the extent that we're doing the application now at ND. From an integration perspective, we're implementing based on our standard integration playbook. So we've got a regimented group of activities that we do regularly that are scheduled through each month throughout the next two years.

Speaker Change: So, as I look at the operation, it's a very good fit for us because it capitalizes on

Speaker Change: Two things we do very well. One, formulate adhesives that meet customer needs, and secondarily, understand how those adhesives are actually applied in use to the extent that we're doing the applying now at ND.

Celeste Mastin: From an integration perspective, we're implementing based on our standard integration playbook. So we've got a regimented group of activities that we do regularly that are scheduled through each month, month throughout the next two years. And even today, our leaders are legacy HB Fuller leaders and the leader from that business that we've acquired who now becomes a market segment leader here at HB Fuller are already in Europe looking at opportunities with customers there to geographically expand the business. In fact, one of the tailwinds that we really appreciated in the business was that one major competitor to ND Industries, because of supply chain issues, had decided to exit the market, leaving an opportunity for us to grow volume there and expand rather quickly.

Speaker Change: From an integration perspective, we're implementing based on our standard

Speaker Change: integration playbook. So we've got a regimented group of activities that that we do regularly that are scheduled through, you know, each month throughout the next throughout the next

Celeste Beeks Mastin: And even today, our leaders, our legacy HB Fuller leader, and the leader from that business that we've acquired, who now becomes a market segment leader here at HB Fuller, are already in Europe, looking at opportunities with customers there to geographically expand the business. In fact, one of the tailwinds that we really appreciated in the business was that one major competitor to ND Industries, because of supply chain issues, had decided to exit the market, leaving an opportunity for us to grow volume there and expand rather quickly. So we've got really grand plans for ND Industries, and we're so glad to have that team on board. That's super helpful.

Speaker Change: Two years?

Speaker Change: And even today, our leader, our...

Speaker Change: legacy HB Fuller leader and the leader from that business that we've acquired who now becomes a market segment leader here at HB Fuller are already in Europe looking at opportunities with customers there to geographically expand the business.

Speaker Change: In fact, one of the tailwinds that we really appreciated in the business was that

Speaker Change: One major competitor to ND Industries, because of supply chain issues, had decided to exit the market, leaving an opportunity for us to grow volume there and expand rather quickly. So we've got a really...

Celeste Mastin: So we've got really grand plans for ND Industries and we're so glad to have that team on board. That's super helpful.

Celeste Beeks Mastin: As a second question, Celeste, I was wondering if you could comment on your price experience in each of the segments, second quarter, and taking into account that. The comparisons look very different on pricing moving forward. How would you characterize pricing prospects for the fiscal third quarter? Would you expect... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .., https://www.yifei.com.au, Yeah, so there's a few impacts affecting pricing, that affected price in the second quarter, but, you know, that I can speak to for the second half. HHC does have a lot of index-based pricing agreements, which I've spoken about before.

Kevin Mccarthy: As a second question, Celeste, I just want to have a good comment on your price experience in each of the segments in the second quarter and taking into account that your comparisons look very different on pricing moving forward. How would you characterize pricing prospects for the fiscal third quarter? Would you expect the negative numbers there to flatten out or perhaps even turn back to positive territory at some point?

Speaker Change: grand plans for ND Industries and we're so glad to have that team on board.

Celeste Beeks Mastin: And when you look at our pricing performance in both the first quarter and the second quarter of this year, a lot of the negative numbers there were driven by the correction that's happening on these index-based pricing agreements. What we're seeing to date is that raw materials are steadily increasing. We monitor about 4,000 different raw materials. And as I look forward, you know, 80% of those are flat to increasing. So we will see with these big customers, the index-based pricing agreements start to level out in the third quarter and then increase with raw materials over time.

Speaker Change: That's super helpful. As a second question, Celeste, I was wondering if you could comment on your price experience in each of the segments in the second quarter.

Speaker Change: And taking into account that, you know, your comparisons look very different on pricing moving forward.

Speaker Change: How would you characterize pricing prospects for the fiscal third quarter? Would you expect the negative numbers there to flatten out or perhaps even turn back to positive territory at some point?

Celeste Mastin: There's a few impacts affecting pricing, the affected price in the second quarter, but that I can speak to for the second half. HHC does have a lot of index-based pricing agreements, which I've spoken about before. And when you look at our pricing performance in both the first quarter and the second quarter of this year, a lot of that negative numbers there were driven by the correction that's happening on these index-based pricing agreements. What we're seeing today is that raw materials are steadily increasing. About, we monitor about 4,000 different raw materials, and as I look forward, 80% of those are flat increasing.

Celeste Beeks Mastin: The other pricing experience we're having that we'll see more of in the second quarter is reformulating products. So, particularly in an environment like this, when customers are very cost sensitive, they will ask for help on their product, on their customer, on their adhesive price. And typically, what we will do where it makes sense is to work with them to replace certain raw materials within their existing formula with others that are lower cost or come from different suppliers in order to overall reduce the price we can offer that customer on that product.

Celeste Beeks Mastin: So, there's a few impacts affecting pricing, that affected price in the second quarter, but, you know, that I can speak to for the second half.

Celeste Beeks Mastin: HHC does have a lot of index-based pricing agreements, which I've spoken about before. And when you look at our pricing performance in both the first quarter and the second quarter of this year, a lot of that negative numbers there were driven by

Celeste Beeks Mastin: the correction that's happening on these index-based pricing agreements.

Celeste Beeks Mastin: What we're seeing to date is that raw materials are

Celeste Beeks Mastin: Steadily increasing, we monitor about 4,000 different raw materials.

Celeste Mastin: So we will see with these big customers, the index-based pricing agreements start to level out in the third quarter and then increase with raw over time.

Celeste Beeks Mastin: As I look forward, you know, 80% of those are flat to increasing. So we will see with these big customers the index-based pricing agreements.

Celeste Mastin: The other pricing experience we're having that we'll see more of in the second quarter is reformulating products. So particularly in an environment like this when customers are very cost-sensitive, they will ask for help on their product, on their customer, on their adhesive price, and typically what we will do where it makes sense is to work with them to replace certain raw materials within their existing formula with others that are lower cost or come from different suppliers in order to, overall, reduce the price we can offer that customer on that product. So we're lowering our cost; as we do that, we're sharing it with the customer, and there's not a margin impact to us, but you will see a pricing impact start to occur.

Celeste Beeks Mastin: start to level out in the third quarter and then increase with Ross over time.

Celeste Beeks Mastin: The other pricing experience we're having that we'll see more of in the second quarter is reformulating products.

Celeste Beeks Mastin: So, particularly in an environment like this, when customers are very cost-sensitive.

Celeste Beeks Mastin: They will ask for help on their product, on their customer,

Celeste Beeks Mastin: And typically what we will do, where it makes sense, is to work with them to replace certain raw materials within their existing formula with others that are lower cost or come from different suppliers in order to overall reduce

Celeste Beeks Mastin: So we're lowering our cost as we do that, and we're sharing it with the customer. And there's not a margin impact to us, but you will see a pricing impact start to occur. So when we look at our full year guidance, while we had been projecting a price of negative 2% to 3%, we're going to see more in the 1% to 2% range at this point. Thank you so much.

Celeste Beeks Mastin: The price we can offer that customer on that product. So, you know, we're lowering our cost as we do that, we're sharing it with the customer, and there's not a margin impact to us, but you will see a pricing impact.

Celeste Mastin: So when we look at our full year guidance, while we had been projecting price of negative two to three percent, we're more in the, we're going to see a little more than one to two percent range at this point.

Celeste Beeks Mastin: So when we look at our, you know, full year guidance,

Celeste Beeks Mastin: You know, while we had been projecting price of, you know, negative 2% to 3%, we're more in the, you know, we're going to see a little more in the 1% to 2% range at this point.

Kevin Mccarthy: Perfect.

Kevin Mccarthy: Thank you very much.

John J. Corkrean: Maybe I can just add a little color just if you're thinking about this sequentially, Kevin, for purposes of modeling. So, you know, in the first half of the year, our prices were down roughly 3.3, 3.4 percent, and Celeste said that would narrow as we go through the back half of the year, based on the fact that the indexes have now leveled, and we'll actually start to see a little bit of benefit from those.

John Corkrean: Maybe I can just add a little color just if you're thinking about this sequentially, Kevin, for purposes of modeling. So, you know, first half of the year, our prices were down roughly 3.3%, 3.4%. And this is less than that will narrow as we go through the back half of the year. You know, based on the fact that indexes have now leveled and will actually start to see a little bit of benefit from those, will also annualize against some of the price adjustments we had in the second half last year.

Speaker Change: Perfect. Thank you so much. Maybe I can just add a little color just if you're thinking about this sequentially, Kevin, for purposes of modeling. So, you know, first half of the year our prices were down roughly 3.3, 3.4 percent and this Celeste said that will narrow as we go through the back half of the year.

John J. Corkrean: We'll also annualize against some of the price adjustments we had in the second half last year. If you're thinking about, you know, the 3, you know, 3-ish, 3.5 percent of the first half, I would say in Q3 it will probably be closer to, you know, a negative 2 percent, and Q4 maybe, you know, kind of a negative 1 to negative 2%, something in that range. I see. Thank you. Your next question comes from the line of Patrick Cunningham from Citi. Morning, Patrick. Morning, Kevin.

John Corkrean: So, if you're thinking about, you know, the three to, you know, three-ish, three and a half percent of the first half, I would say I'm Q3, it'll probably be closer to, you know, a negative 2%, and Q4 maybe, you know, kind of negative 1 to negative 2%, something in that range. I see.

Speaker Change: You know, based on the fact that indexes have now leveled and we'll actually start to see a little bit of benefit from those. We'll also annualize against...

Speaker Change: Some of the price adjustments we had in the second half last year. So, if you're thinking about the 3-ish, 3.5% of the first half, I would say on Q3 it'll probably be closer to a negative 2%.

Patrick Cunningham: Thank you, John. Your next question comes from a line of Patrick Cunningham from City.

Patrick David Cunningham: Yeah, I think it just, I think in terms of HHC, I wanted to drill down into, you know, volume outlook for the year. I think you've said some ongoing supplements in the hygiene space. I guess the first part of the question is, is de-stocking mostly complete within that sector and how should we expect it to evolve throughout the year? And then, just broadly across HHC, it does seem we're getting some, you know, lingering data points on consumer weakness in the U.S. and Europe still somewhat weak. So, you know, what's your level of confidence in, you know, solid positive volumes in the back half across HHC? Yeah. Sorry, Patrick.

Patrick Cunningham: Your line is open.

Speaker Change: and Q4 maybe, you know, kind of negative one to negative two percent, something in that range.

Patrick Cunningham: Morning Patrick. Yeah, I think it just, I think in terms of HAC, I wanted to drill down into, you know, volume outlook there year. I think you've said some ongoing summit in the hygiene space.

Speaker Change: I see. Thank you, John .

Speaker Change: Your next question comes from the line of Patrick Cunningham from Citi. Your line is open.

Celeste Mastin: I guess the first part of the question is desocking mostly complete within that sector, and how should we expect it to evolve throughout the year. And then just broadly across HAC, you know, it does seem we're getting some, you know, lingering, you know, data points on consumer weakness in the US and Europe still somewhat weak. So, you know, what, you know, what's your level of confidence in solid positive volumes in the back half across HAC? Yeah.

Patrick David Cunningham: Good morning, Patrick.

Patrick David Cunningham: Yeah, I think it just, I think in terms of HHC, I wanted to drill down into, you know, volume outlook there. I think you've cited some ongoing supplements in the hygiene space.

Patrick David Cunningham: I guess the first part of the question is, is destocking mostly complete within that sector and how should we expect it to evolve throughout the year? And then just broadly across HHC, it does seem we're getting some lingering data points on consumer weakness in the U.S. and Europe still somewhat weak. So what's your level of confidence in solid positive volumes in the back half across HHC?

Celeste Mastin: Sorry, Patrick. So, I would say we would expect the volume trends to continue. We saw that from Q1 to Q2. And I think if you look across the portfolio, you know, it's generally, we've seen a return to volume growth in almost every market segment. So, you know, eight out of the 12 market segments are showing volume growth in Q2. Hygiene continues to be a soft spot. We've spoken about that during the last call, but that's actually improved quite a bit from Q1 to Q2. So, I think we would expect to see, you know, an improvement each of the next two quarters.

John J. Corkrean: So I would say we would expect the volume trends to continue. We saw that from Q1 to Q2. And I think if you look across the portfolio, generally, we've seen a return to volume growth in almost every market segment. So eight out of the 12 market segments are showing volume growth. Hygiene continues to be a soft spot.

Patrick David Cunningham: Yeah.

Patrick David Cunningham: Hello.

Speaker Change: Sorry, Patrick.

Speaker Change: So I would say we would expect...

Patrick David Cunningham: The volume turns to continue. We saw that from Q1 to Q2.

John J. Corkrean: We spoke about that during the last call, but that actually improved quite a bit from Q1 to Q2. So I think we would expect to see an improvement in each of the next two quarters. I think we're still projecting that the hygiene volume, or I should say hygiene organic growth for the full year will be down, kind of low single digits, but you should see an improvement each of the next two quarters. Yeah, when I think about the year's organic growth for the year in HHC, it'll be a slight negative, but most of that will be, well, that will be entirely pricing overcome to some extent by volume, that

Patrick David Cunningham: And I think if you look across the portfolio, you know, it's generally, we've seen a return to volume growth in almost every market segment. So, you know, eight out of the 12 market segments are showing volume growth.

Celeste Mastin: I think we're still projecting that the hygiene volume, or I should say hygiene organic, for the full year will be down kind of low single digits, but you will see, and you should see, an improvement each of the next two quarters. Yeah, when I think about the year, organic growth for the year in HAC, it'll be a slight negative, but most of that will be, well, that will be entirely pricing, overcome to some extent by volume. Got it that helpful.

Patrick David Cunningham: in Q2.

Patrick David Cunningham: Hygiene continues to be a soft spot. We've spoken about that during the last call, but that's actually improved quite a bit from Q1 to Q2. So I think we would expect to see, you know, a

Patrick David Cunningham: a improvement each of the next two quarters. I think we're still projecting that the hygiene volume, or I should say hygiene organic for the full year will be down, kind of low, single digits, but you should see an improvement each of the next two quarters.

Speaker Change: Yeah, when I think about the year, organic growth for the year in HHC, it'll be a slight negative, but most of that will be, well that will be entirely pricing overcome to some extent by volume.

John J. Corkrean: And then just on in terms of expectations for capital expenditures and free cash flow for the year, where do we stand there? And just given the sizable acquisition that you did, should we expect more of a bias towards repurchases for the balance of the year, or would you maybe still have an appetite for another $100 million plus? So when you look at our capital forecast, it remains at $140 million for the year.

John Corkrean: And then just on in terms of expectations for, you know, capital expenditures, free cash flow for the year, you know, where, where do we stand there and just give him a sizable acquisition that you did. Should expect more of a bias towards reproaches for the balance of the year, or would you maybe still have that site for another $100 million plus year. So, when you look at our capital forecast, it remains at $140 million for the year.

Speaker Change: Got it. That's helpful. And then just in terms of expectations for capital expenditures, free cash flow for the year, where do we stand there? And just given the sizable acquisition that you did,

Speaker Change: Should we expect more of a bias towards repurchases for the balance of the year, or would you maybe still have appetite for another $100 million-plus deal here?

Celeste Beeks Mastin: And let's just talk for a few minutes about the M&A pipeline. Our M&A pipeline is very robust. We continue to identify and work closely with owners of businesses in those select spaces where we can acquire at reasonable prices businesses that have much higher EBITDA margins than our own, which you saw, you know, ND Industries is a great example of that, and that are in, you know, faster-growing spaces. So I think it is safe for you to consider for modeling purposes expenditures of up to $350 million in M&A this year. And your question on repurchase, so we'll continue to repurchase shares to offset equity-based compensation programs. You've seen us initiate that in Q2. We'll continue that throughout the year. Thank you so much.

John Corkrean: And let's just talk for a few minutes about the M&A pipeline. So, our M&A pipeline is very robust. We continue to identify and work closely with owners of businesses in those select spaces where we can acquire at reasonable prices, businesses that are much higher EBITDA margin than our own, which you saw. Indeed, industry is a great example of that. And that are in, you know, faster growing spaces. So, I think, you know, safe for you to consider for modeling purposes, you know, expenditures of up to $350 million in M&A this year.

Speaker Change: So when you look at our capital forecast, it remains at $140 million for the year. And let's just talk for a few minutes about the M&A pipeline. So our M&A pipeline is very robust.

Speaker Change: We continue to identify and work closely with owners of businesses in those select spaces where we can acquire at reasonable prices.

Speaker Change: businesses that are much higher EBITDA margin than our own, which you saw, you know, ND Industries is a great example of that, and that are in, you know, faster growing spaces.

Speaker Change: So, I think, you know, safe for you to consider for modeling purposes, you know, expenditures of up to $350 million in M&A this year.

John Corkrean: And well, your question on repurchase. So we'll continue to repurchase shares to offset equity-based compensation programs. You've seen us initiate that in Q2. We'll continue that throughout the year. Great.

Speaker Change: We'll continue to repurchase shares to offset equity-based compensation programs. You've seen us initiate that in Q2. We'll continue that throughout the year.

John Corkrean: Thank you so much.

Jeffrey Zekauskas: Your next question comes from a line of Jeffrey Zekauskas from JP Morgan.

Celeste Beeks Mastin: Your next question comes from the line of Jeffrey Zekauskas from J.P. Morgan. Your line is open. Morning, Jeff. Thanks, Britt. Hi, good morning.

Jeffrey Zekauskas: Your line is open. Morning, Jeff.

Jeffrey John Zekauskas: Thanks, Britt. And in terms of the financial leverage that Fuller is willing to bear as part of the executed Acquisition Program, is it fair to say that you want to stay with us?

John Corkrean: Thanks for it.

John Corkrean: I Good morning. Thanks very much.

John Corkrean: In terms of the financial leverage that Fuller is willing to bear to execute its acquisition program, is it fair to say that you want to stay within a three to four times, unless something really unusually good came up? Is that where they're evolving to? Or 2024 and 25? Now, Jeff, so I would put that range in the two and a half to three times. And that's where we've been operating over the course of this year. Now we're at 3.1 with ND Industries. But as you look back, what you see is that as we acquire these businesses, we have simultaneously been able to continue to reduce that leverage.

Speaker Change: Great, thank you so much.

Speaker Change: Your next question comes from a line of Jeffrey Zekauskas from J.P. Morgan. Your line is open.

Jeff: Morning, Jeff. Thanks, Britt. Hi. Good morning.

Celeste Beeks Mastin: three to four times, unless something really unusually good. Is that where we're evolving? No, Jeff.

Speaker Change: In terms of the

Jeffrey John Zekauskas: financial leverage that Fuller is willing to bear to execute its acquisition program. Is it fair to say that you want to stay within

Celeste Beeks Mastin: So I would put that range in the two and a half to three times. And that's where we have been operating over the course of this year. You know, now we're at 3.1 with ND Industries. But as you look back, what you see is that as we acquire these businesses, we have simultaneously been able to continue to reduce that leverage, given the strong synergies that come with the businesses we're buying, their EBITDA, and our ability to further grow their EBITDA. So I'd consider two and a half to three times as much as more, so the reasonable range of operators. And then maybe a couple of questions for John.

Jeff: a three to four times unless something really unusually good came up. Is that where we're evolving to for 2020?

Speaker Change: 24 and 25

Jeff: No, Jeff, so I would put that range in the two and a half to three times.

Speaker Change: And that's where we've been operating over the course of this year. You know, now we're at 3.1 with ND Industries. But...

John Corkrean: Given the strong synergies that come with the businesses, we’re buying their EBITDA and our ability to further grow their EBITDA. So I'd consider two and a half to three times as more, so the reasonable range of operation. Okay.

Speaker Change: As you look back, what you see is that as we acquire these businesses, we have simultaneously been able to continue to reduce that leverage.

John Corkrean: And then maybe a couple of questions for John. The benefit from ND in the second half is more than $10 million, and you increased your lower end of your guide by 10 million. So is it the case that the base business or whatever reason is a little bit weaker than you expected because the increase is smaller than the acquisition benefit?

Speaker Change: given the strong synergies that come with the businesses we're buying their EBITDA and our ability to further grow their EBITDA. So I'd consider two and a half to three times as more so the reasonable range of operation.

John J. Corkrean: The benefit from ND in the second, $10 million, and you increased the lower end of your guide by $10. So, is it the case that the base, for whatever reason, is a little bit weaker than you are because the increase is smaller than the acquisition? Yeah, it's probably... I'm sorry, but if I can go ahead, go ahead, Jeff.

Speaker Change: Okay, and then maybe a couple of questions for John .

Speaker Change: The benefit from ND in the second half is more than

Speaker Change: $10 million and you increased the lower end of your guide by $10 million.

John Corkrean: Yeah, it's probably. I'm sorry if I can go ahead, Jeff. I'm sorry. And then secondly, your EBITDA was up about 10%. Your adjusted EBITDA was up about 10% this quarter. And your acquisition sales benefit was about 4%. So when I do the calculation, it looks like acquisition benefits from EBITDA were about 6 million. So what I get is sort of an organic EBITDA growth of about 5.5%. Is that a calculation that's roughly right?

Speaker Change: So, is it the case that the base business...

Jeffrey John Zekauskas: And then secondly, your EPA was up about 10 your adjusted EPA was up about 10% this, and your acquisition sales benefit was about 4%. You know, that's it. So when I do the calculation, it looks like acquisition benefits from either were about 6 million. So, what I get is sort of an organic epithelial cell of about five and a half. Is that a calculation that's roughly right? Well, I think you'

Speaker Change: for whatever reason is a little bit weaker than you expected.

Speaker Change: because the increase is smaller than the acquisition benefit.

Speaker Change: and secondly, I'm sorry if I can... Go ahead Jeff.

Speaker Change: I'm sorry. And then secondly, your EBITDA was up about 10, your adjusted EBITDA was up about 10% this quarter.

Speaker Change: And your acquisition sales benefit was about 4%.

Speaker Change: So when I do the calculation, it looks like acquisition benefits from EBITDA were about $6 million.

John Corkrean: Well, I think you'd have, so let me go to your first question, John, round the guidance. So the 10 million, yeah, that's roughly right, a little bit more than that. One of the things we saw in the second quarter was a continued strengthening of the US dollar. And we factor that into our guidance as well. We thought that started to show up in Q2. It kind of increased as we went through Q2. and we would expect the full year to be about a negative 2% impact from FX, and so that would reflect a higher impact in the second half.

John J. Corkrean: So let me go to your first question about guidance. So the 10 million. Yeah, that's, that's roughly right. A little bit more than that. One of the things we saw in the second quarter was the continued strengthening of the US dollar, and we factor that into our guidance as well. We saw that start to show up in Q2, and it kind of increased as we went through Q2. And we would expect the full year to have about a negative 2% impact from FX.

Speaker Change: So what I get is sort of an organic epithelial growth of about five and a half percent.

Speaker Change: Is that a calculation that's roughly right?

Speaker Change: Well, I think you'd have so let me go to your first question around the guidance. So the 10 million Yeah, that's that's roughly right a little bit more than that

Speaker Change: One of the things we saw in the second quarter was a continued strengthening of the U.S. dollar, and we factored that into our guidance as well. We saw that start to show up in Q2. It kind of increased as we went through Q2.

John J. Corkrean: And so, you know, that would reflect, you know, a higher impact in the second half. Yeah, the devaluation of the Egyptian pound, the Turkish Lira was down about 7%, and then you have the renminbi euro also weakening against the dollar.

John Corkrean: The evaluation of the Egyptian pound, Perkish Lira, was down about 7%, and then you have the Renman B Euro also weakening against the dollar. So we factor that into the second half; that pretty much offsets the impact of the ND Industries contribution to EBITAS. So we kind of look at it as we're adding ND; we've got some negative FX, and the guidance for the most part of the second half is unchanged.

Speaker Change: and we would expect the full year to be about a negative 2% impact from FX.

John J. Corkrean: So we factor that into the second half, and that pretty much offsets the impact of Indy Industries' contribution to EBITDA. You know, we kind of look at it as we're adding ND, we've got some negative effects, and the guidance for the most part in the second half is unchanged. When you look at the second quarter, yeah, I think the $6 million might be a bit high. We only got $1 million from Indy Industries in the quarter. It's probably around $4 million, but I get your point.

Speaker Change: and and so you know that would reflect

Speaker Change: You know, a higher impact in the second half. Yeah, devaluation of the Egyptian pound.

Speaker Change: Turkish Lira was down about 7% and then you have the Renminbi Euro also weakening against the dollar. So we factor that into the second half. That pretty much offsets the impact of the Indy Industries contribution to EBITDA.

John Corkrean: When you look at the second quarter, I think the 6 million might be a bit high; we only got a million from ND Industries in the quarter. It's probably around 4 million, but I get your point. The other impact you have to factor in, though, is FX, right, because it wasn't nearly negative 2% impact. So yeah, I think on a netting out FX and ND, it's maybe a little less than 10%, but it's high single digits.

Speaker Change: You know we kind of look at it as we're adding in D We've got some negative effects and the guidance for the most part in the second half is unchanged

John J. Corkrean: The other impact you have to factor in though is FX, right? Because it wasn't nearly a negative 2% impact. So, yeah, I think on a, you know, netting out FX and ND, it's maybe a little less than 10%, but it's high single digit, and I could squeeze in one last. And maybe this is for Celeste.

Speaker Change: When you look at the second quarter, yeah, I think the $6 million might be a bit high. We only got $1 million from Indy Industries in the quarter. It's probably around $4 million, but I get your point.

Celeste Mastin: I could squeeze in one last one. Yeah, maybe this is for Celeste. What do you think is what kind of growth rate do you expect for ND in sales over a three to five year period? And what's been its historical growth rate? Yeah, so growth rate over a three to five year period, you know, we're looking revenue growth for greater than 10% per year on that business. Historically, it has not performed to that level, but that has primarily been because it's been a little capital constrained. This is the private owners; throw everything into these businesses, and it could use a couple million more CapEx here and there.

Speaker Change: The other impact you have to factor in though is FX right because it wasn't nearly negative 2% impact so yeah I think on a you know netting out FX and in ND it's maybe a little less than 10% but it's high single digits

Celeste Beeks Mastin: What do you think is, what kind of growth rate do you expect for ND? Yeah, so growth rate over a three to five year period, you know, we're looking for revenue growth of greater than 10% per year on that business. Historically, it has not performed to that level.

Speaker Change: And just if I could squeeze in one last one.

Speaker Change: Maybe this is for Celeste. What do you think is, what kind of growth rate do you expect for Indy in sales over a three to five year period? And what's been its historical growth rate?

Celeste Beeks Mastin: But that is primarily because it's been a little capital constraint, right? You know, this is a private owner who throws everything into these businesses. And, you know, it could use a couple of million more CapEx here and there. And they have expanded over time in sort of stages. And we're just at the point where they're ready for that next stage of expansion. Just to add to that, Jeff, Celeste commented, you know, a major competitor leaving the US market creates a big opportunity in the near term.

Speaker Change: Yes, so growth rate over a three to five year period, you know, we're looking at revenue growth for greater than 10%.

Speaker Change: per year on that business.

Speaker Change: Historically, it has not performed to that level, but that is primarily been because it's been a little capital constrained, right? You know, this is a private owner's...

Celeste Mastin: And they have expanded over time in sort of stages, and we're just at the point where they're ready for that next stage of expansion.

John Corkrean: Yeah, and just add to that, Jeff. Celeste commented, "you know, major competitor, you know, leaving the US market creates a big opportunity in the near term." But the big opportunity is geographic expansion, right? This is a business that's almost entirely US-based. As Celeste alluded, you know, we've already got the team looking at opportunities in Europe; there's opportunities in Asia. So, you know, this will be a deal that brings a lot of commercial synergies with us. And that's something that we're much better suited to do than a private owner, given that we already have a well-entrenched footprint around the world.

Speaker Change: You know, throw everything into these businesses and, you know...

Speaker Change: It could use a couple million more capex here and there and they have expanded over time in sort of stages And we're just at the point where they're ready for that next stage of expansion

Celeste Beeks Mastin: The big opportunity is geographic expansion, right? This is a business that's almost entirely US based. As Celeste alluded to, we've already got the team looking at opportunities in Europe, and there are opportunities in Asia, so this will be a deal that brings a lot of commercial value. And that's something that we are much better suited to do than a private owner, given that we already have a well-entrenched footprint around the world. Great! Thank you so much.

Speaker Change: And just to add to that, Jeff, Celeste commented, a major competitor leaving the U.S. market creates a big opportunity in the near term. But the big opportunity is geographic expansion, right? This is a business that's almost entirely U.S.-based.

Speaker Change: As Celeste alluded, we've already got the team looking at opportunities in Europe , there's opportunities in Asia, so this will be a deal that brings a lot of commercial synergies with it.

John Corkrean: Great.

John Corkrean: Thank you so much. Sure.

Mike Harrison: Your next question comes from a line of Mike Harrison from Seaport. Your line is open.

Celeste Beeks Mastin: Sure. Your next question comes from the line of Mike Harrison from Seaport. Your line is open. Hey, Mike. Hi. Good morning.

Speaker Change: And that's something that we're much better suited to do than a private owner, given that we already have a well-entrenched footprint around the world.

Mike Harrison: Hey, Mike. Good morning. Congrats on a nice quarter. I was wondering if we could talk a little bit about the engineering adhesive's business. I guess, first of all, I'm curious if you can walk through the volume growth that you're seeing in some of the key and market within that business. If I assume that electronics was still kind of leading the pack, but what are you seeing in areas like transportation, clean energy, and some of the stuff that's exposed to construction mark. Yeah, sure. So really strong this quarter in EA were Automotive, Aerospace, Electronics, RV and Glass.

Michael Joseph Harrison: Congratulations on a nice quarter; I was wondering if we could talk a little bit about the engineering adhesives business. I guess, first of all, I'm curious if you could walk through the volume growth that you're seeing in some of the key end markets. Within that business, I assume that electronics are still kind of leading the pack. But what are you seeing in areas like transportation, clean energy, and some of the stuff that's exposed to the construction market? Yeah, sure.

Speaker Change: Great, thank you so much.

Speaker Change: Sure.

Speaker Change: Your next question comes from a line of Mike Harrison from Seaport. Your line is open.

Michael Joseph Harrison: Hey Mike. Hi, good morning, congrats on a nice quarter.

Michael Joseph Harrison: I was wondering if we could talk a little bit about the engineering adhesives business. I guess, first of all, I'm curious if you can walk through.

Celeste Beeks Mastin: So, really strong this quarter in EA were automotive, aerospace, electronics, RV, and glass. And I'll talk about all of these. So automotive is, is, you know, a business where we are aggressively taking share, it's been strong, and it's going to remain strong in the second half. In fact, we've seen double digit increases, I'm talking 20 to 60% increases in interior trim applications, in exterior trim applications, like plastic lift gates and adding spoilers to automotive structures, the EV powertrain. In fact, we're making a thermally conductive So in headlight sealants and headlights them, many of the EV producers.

Michael Joseph Harrison: The volume growth that you're seeing in some of the key end markets within that business, I assume that electronics was still kind of leading the pack. But what are you seeing in areas like transportation, clean energy and some of the stuff that's exposed to construction markets?

Celeste Mastin: And I'll talk about all of these. So automotive is, you know, a business where we are aggressively taking share. It's been strong. It's going to remain strong in the second half. In fact, we've seen double-digit increases. I'm talking 20 to 60%. In interior trim applications, in exterior trim applications, like plastic list gates and adding spoilers to automotive structures, the EV power train. In fact, we're making a thermally conductive gap filler. Now being used in the EV power train in the lighting applications. So headlight sealants and headlight controls. So the team has really been able to work as a strong innovation partner with these big companies around the world in the automotive space and has, you know, become part of the innovation process with these customers.

Speaker Change: Yeah, sure. So really strong this quarter in EA were automotive,

Speaker Change: Aerospace, Electronics, RV, and Glass, and I'll talk about all of these. So automotive is

Speaker Change: You know, a business where we are aggressively taking share, it's been strong, it's going to remain strong in the second half. In fact,

Speaker Change: We've seen double-digit increases. I'm talking 20 to 60 percent increases.

Speaker Change: and Interior Trim Applications.

Speaker Change: in exterior trim applications like...

Speaker Change: Plastic lift gates and adding spoilers to automotive

Speaker Change: The EV powertrain, in fact, we're making a thermally conductive gap filler now being used in the EV powertrain, in the lighting applications.

Celeste Mastin: So I anticipate automotive being very strong, both the IC units as well as EVs where we have an incredibly strong position in China working with some many of the EV producers. In glass, you know, we just, the glass business is really been, there's a lot of momentum in the glass business that's driven by our Forest G innovation, which is unique product that enables, you know, a lot of architectural advances as well as thin, thin pain triples.

Speaker Change: So, in headlight sealants, in headlight controls, you know, so the team has really been able to work as a strong innovation partner with these big companies around the world in the automotive space and has, you know, become part of the innovation process.

Celeste Beeks Mastin: In glass, you know, we just, the glass business has really been There's a lot of momentum in the glass business that's driven by our 4SG innovation, which is a unique product that enables a lot of architectural advances, as well as thin-pane triples. And so, in the glass business, the most automated customer in Europe actually just committed 100% of all their business to us. In the U.S., we've leveraged our profile wrapping position with one U.S. OEM from 25% share to 100% share, thanks to the product quality and the customer service we bring.

Speaker Change: with these customers. So I anticipate automotive being very strong, both the ICE units as well as EVs where we have an incredibly strong position in China working with many of the EV producers.

Speaker Change: In glass, you know, we just, the glass business has really been...

Celeste Mastin: And so in the glass business, the most automated customer in Europe actually just committed 100% of all their business to us in the US. We've leveraged our profile wrapping position with 1 US OEM from 25% share to 100% share. Thanks to the product quality and the customer service we bring. And, you know, again, this market is going to continue to grow for us regardless of what happens in construction. And we're seeing, and I say that because of the innovation, right, we're seeing customers invest in forest G lines in the second half, so that'll continue to grow; we'll continue to grow in that ultimate end market.

Speaker Change: There's a lot of momentum in the glass business that's driven by our 4SG.

Speaker Change: Innovation, which is a unique product that enables

Speaker Change: You know, a lot of architectural advances as well as thin-pane triples.

Celeste Beeks Mastin: And again, this market is going to continue to grow for us, regardless of what happens in construction. And we're seeing, and I say that because of the innovation, right? We're seeing customers invest in 4SG lines in the second half, so that'll continue to grow, will continue to grow in that ultimate end market. Aerospace has been incredibly exciting. We just introduced a non-chrome corrosion inhibitive sealant for fuselage sealing for aerodynamic

Speaker Change: Right, and so in the glass business, the most automated customer in Europe actually just committed 100%.

Speaker Change: of all their business to us in the U.S. We've leveraged our profile wrapping position with one U.S. OEM from 25% share to 100% share.

Speaker Change: Thanks to the product quality and the customer service we bring and You know again this market is going to continue to grow for us regardless of what happens in construction

Celeste Mastin: Aerospace has been incredibly exciting. We just introduced a non-chrome corrosion inhibitive sealant for fuselage sealing, for aerodynamic smoothing. We've taken some share with that. We've taken share in the aerospace environment because we have flame, smoke, toxicity approved products for the interior trim. And we just want some business in India, in aerospace, polysulfides for sealing the door hatches on emergency doors, which I'm sure we're all very glad about, and the edge sealing on parts of helicopters. So, a lot of strong performance. Really, as I see this aerospace team take their disadvantaged portfolio we have and start to now introduce it around the world because of this global market segment leader structure that we're operating within.

Speaker Change: And we're seeing, and I say that because of the innovation, right, we're seeing customers invest in 4SG lines in the second half, so that'll continue to grow, will continue to grow in that ultimate end market.

Celeste Beeks Mastin: We've taken some share with that. We've taken share in trim in the aerospace environment because we have flame smoke toxicity-approved products for the interior trim. And we just won some business in India in aerospace, polysulfides for sealing the door hatches on emergency doors, which I'm sure we're all very glad about, and the edge sealing on parts of helicopters. So a lot of strong performance, really, as I see this aerospace team take this diversified portfolio we have and start to now introduce it around the world, because of this global market segment leader structure that we're operating within. And then finally, electronics. I mean, what can I say?

Speaker Change: Aerospace has been incredibly exciting. We just introduced a non-chrome corrosion-inhibitive sealant for fuselage sealing, for aerodynamic smoothing. We've taken some share with that. We've taken share in...

Speaker Change: Prem in the

Speaker Change: in the aerospace environment because we have flame smoke toxicity approved products for for the interior trim and We just won some business in India in aerospace

Speaker Change: polysulfides for sealing the door hatches on emergency doors, which I'm sure we're all very glad about, and the edge sealing on parts of helicopters.

Celeste Mastin: And then finally, electronics. I mean, what can I say? The electronics business has been growing like crazy. Really, our position in China has been a nexus of that growth. We're very involved with customers there in their development process, and we actually just moved our leader of our consumer electronics space from China to the US to ensure, again, that we're effectively expanding that electronics business in every region we possibly can. We're pretty happy with the EA business and their growth potential and what we're seeing there. In fact, most of our growth segments, when you look at how the growth versus leverage segments are allocated within our GPUs, about two-thirds of them are in the EA business.

Celeste Beeks Mastin: The electronics business has been growing like crazy. Really, our position in China has been a nexus of that growth. We're very involved with customers there in their development process, and we actually just moved our leader of our consumer electronics space from China to the U.S. to ensure, again, that we're effectively expanding that electronics business in every region we possibly can.

Speaker Change: So, a lot of strong performance, really, as I see this aerospace team.

Speaker Change: Take this advantaged portfolio we have and start to now introduce it around the world.

Speaker Change: because of this global market segment leader structure that we're operating within.

Speaker Change: And then finally, electronics. I mean, what can I say? The electronics business has been growing like crazy. Really, our position in China has been a nexus of that growth.

Celeste Beeks Mastin: We're pretty happy with the EA business and its growth potential and what we're seeing there. In fact, most of our growth segments, when you look at how the growth versus leverage segments are allocated within our GBUs, about two-thirds of them are in the EA business. In fact, we've just added another with fastener locking systems. But another growth opportunity in that space is ePower. I actually just met with a customer in the ePower space who's introducing new battery technology for the non-passenger car EV battery market, and we're their exclusive supplier.

Speaker Change: We're very involved with customers there in their development process, and we actually just moved our leader of our consumer electronic space.

Speaker Change: from China to the U.S. to ensure, again, that we are effectively expanding that electronics business in every region we possibly can.

Celeste Mastin: In fact, we've just added another with fast and/or locking systems, but another growth opportunity in that space is e-power. I actually just met with a customer in the e-power space who's introducing new battery technology for the non-passenger car EV battery market, and we're their exclusive supplier. So we've got customers in India by an EV protect for battery applications. It's really a very exciting space for us, and it is growing quickly.

Speaker Change: We're pretty happy with the EA business and their growth potential and what we're seeing there.

Speaker Change: Most of our growth segments, when you look at how the growth versus leverage segments are...

Speaker Change: allocated within our GBUs. About two-thirds of them are in the EA business. In fact, we've just added another with fastener locking systems.

Celeste Beeks Mastin: So we've got customers in India buying EV Protect for battery applications. It's really a very exciting space for us, and it is growing. It's growing quickly, and Mike, you made you would ask about, you know, the impact of kind of construction-oriented markets. Because we did call that out in Q1 as a soft spot for engineering adhesives, which seemed probably a little counter to the comments we were making about construction, our construction adhesives business unit.

Speaker Change: But, you know, another growth opportunity in that space is e-power. I actually just met with a customer.

Celeste Mastin: Mike, you had asked about the impact of the construction-oriented markets because we did call that out in Q1 as a soft spot for engineering adhesives, which seemed probably a little counter to the comments we were making about construction. Our construction adhesives business unit. But remember, I think we tried to make it clear that the construction business, our construction business, is almost entirely US-based, which is performing very well. The EA businesses that are construction-related glass, woodworking panels are very global, and Europe was really slow in Q1. That improved in Q2. So we're seeing improvement in the construction-related businesses, so less called out glass is one of the highlights.

Speaker Change: in the e-power space who's

Speaker Change: introducing new battery technology.

Speaker Change: for the non-passenger car EV battery market and we're their exclusive supplier. So, we've got customers in India buying EV Protect for battery applications. It's really a very exciting space for us and it is growing. It's growing quickly.

Celeste Beeks Mastin: But remember, I think we tried to make it clear that the construction business, our construction business is almost entirely U.S. based, which is performing very well. The EA businesses that are construction-related, glass, woodworking, panels, are very global. And Europe was really slow in Q1.

Michael Joseph Harrison: And, Mike, you would ask about, you know, the impact of kind of the construction-oriented markets.

Speaker Change: Because we did call that out in Q1 as a soft spot for engineering adhesives, which seemed probably a little...

John J. Corkrean: That improved in Q2. So those are the, we're seeing improvement in the construction related businesses. Celeste called out glass as one of the highlights.

Speaker Change: counter to the comments we were making about construction, our construction adhesives business unit. But remember, I think we tried to make it clear that the construction business, our construction business is almost entirely U.S. based, which is performing very well.

Celeste Beeks Mastin: So that's a positive sign, and we would expect that to continue into the second half. All right, that's definitely helpful, Culler. And then the EBITDA margin in your engineering adhesive business is pretty strong. You said 160 basis points of year over year improvement. I know that, long term, you see EA as a segment that can consistently deliver 20% EBITDA margin or higher. But is that 20% margin level something that we should expect you guys to achieve in the second half based on what you're seeing today?

Celeste Mastin: That's a positive sign, and we would expect that to continue into the second half. Alright, that's definitely a helpful color.

Speaker Change: The EA businesses that are construction related, glass, woodworking, panels.

Celeste Mastin: And then the EBITDA margin in your engineering adhesives business is pretty strong. You said out of 60 basis points of year-over-year improvement. I know that long-term you see EA as a segment that can consistently deliver 20% EBITDA margin or higher.

Speaker Change: are very global, and Europe was really slow in Q1. That improved in Q2, so we're seeing improvement in the construction-related businesses. Celeste called out glass as one of the highlights, so that's a positive sign, and we would expect that to continue into the second half.

Celeste Mastin: Is that 20% margin level something that we should expect you guys to achieve in the second half based on what you're seeing today? So Mike, I would say we were at 18% in Q2. We would expect that to step up as we see continued volume improvement and in D. So, yeah, I think the second half average should be closer to 20% than the 18. And that's in the second half.

Speaker Change: Alright, that's definitely a helpful color. And then the EBITDA margin in your engineering adhesive business is pretty strong. You said 160 basis points of year-over-year improvement.

Celeste Beeks Mastin: So, Mike, I would say, you know, we were at 18 percent in Q2, and we would expect that to step up as we see continued volume improvement and in D. So, yeah, I think the second half average should be closer to 20 percent than it was at 18. And that's in the second half.

Speaker Change: I know that long term you see EA as a segment that can consistently deliver 20% EBITDA margin or higher. Is that 20% margin level something that we should expect you guys to achieve in the second half based on what you're seeing today?

Celeste Beeks Mastin: When we think about where we're taking the portfolio over the next three years, our aim is for HB Fuller to be, in total, a 20% EBITDA margin business. How are we gonna get there? Remember, we have the growth segments and we have the leverage segments. Our growth segments need to deliver 25% EBITDA margin plus. Our leverage segments need to be... above 15. Our leverage segments are already pretty close to 50.

Celeste Mastin: When we think about where we're taking the portfolio over the next three years, our aim is for HBFuller to be in total a 20% EBITDA margin business. How are we going to get there? Remember, we have the growth segments, and we have the leverage segments. Our growth segments need to deliver 25% EBITDA margin, plus our leverage segments need to be above 15. Our leverage segments are already pretty close to 50%. So our objective now is to continue to acquire and grow in these faster growing, higher margin spaces, very differentiated spaces. And to your point, you'll be watching EA in the lead to that end.

Michael Joseph Harrison: So, Mike, I would say, you know, we were at 18% in Q2, you know, we would expect that to step up as we see continued volume improvement and in D. So, yeah, I think the second half average should be closer to 20% than the 18.

Michael Joseph Harrison: And that's in the second half when we think about where we're taking the portfolio over the next three years

Michael Joseph Harrison: Our aim is for HB Fuller to be, in total, a 20% EBITDA margin business.

Celeste Beeks Mastin: So our objective now is to continue to acquire and grow in these faster growing, higher margin spaces, very differentiated spaces. And to your point, you know, watching, you know, you'll be watching EA in the lead to that end. All right, thanks very much for the additional color.

Michael Joseph Harrison: How are we going to get there? Remember, we have the growth segments and we have the leverage segments. Our growth segments need to deliver 25% EBITDA margin plus. Our leverage segments need to be...

Mike Harrison: Alright, thanks very much for the additional color.

Michael Joseph Harrison: Our leverage segments are already pretty close to 15.

David Begleiter: Thanks, Mike. Again, if you'd like to ask a question, press star one on your telephone keypad. Your next question comes from a line of David Begleiter from Deutsche Bank.

Michael Joseph Harrison: Thanks, Mike. Again, if you would like to ask a question, press star 1 on your telephone keypad. Your next question comes from a line David Begleiter from Deutsche Bank. Hi, this is David Huang here for Dave.

Michael Joseph Harrison: So, our objective now is to continue to acquire and grow in these faster growing, higher margin spaces, very differentiated spaces, and to your point, you know, watching, you know, you'll be watching EA in the lead.

David Begleiter: Your line is open. Hi, this is Dave, a long year for Dave.

David Huang: I guess just going back to the guidance, it sounded like volume is tracking ahead of expectation and pricing will become less negative in the second half. Why did you reduce the top end of your organic sales guidance from three to two percent? Hey David.

David Begleiter: I guess just going back to the guidance, the Sunday-like volume is tracking ahead of expectation, and pricing will become less negative in the second half.

Michael Joseph Harrison: to that end.

Speaker Change: All right, thanks very much for the additional color. Thanks, Mike.

John Corkrean: Why did you reduce the top end of your organic sales guidance from 32%? Hey, David. So, you know, the two adjustments we made is we actually changed our guidance from zero to 3% organic growth to zero to 2% organic growth. And the two changes we made were effectively we took the impact of price for the full year from about one negative one to 2% to a negative 2 to 3% and volume. We were projecting a full year impact of 2 to 4% and now we're projecting 3 to 4%. So we actually kind of upped the volume assumption on the bottom end of our range, and then I'll offset that with a slightly more negative impact from price.

Speaker Change: Again, if you would like to ask a question, press star 1 on your telephone keypad. Your next question comes from the line of David Begleiter from Deutsche Bank. Your line is open.

John J. Corkrean: So, you know, the two adjustments we made are we actually changed our guidance from 0% to 3% organic growth to 0% to 2% organic growth. And the two changes we made were effectively taking the impact of price for the full year from about negative 1% to 2% to a negative 2% to 3%. And volume, we were projecting a full year impact of 2% to 4%, and now we're projecting 3% to 4%. So we actually kind of upped the volume assumption on the bottom end of our range and then offset that with a slightly more negative impact from price. Okay, I got it.

Speaker Change: Hi, this is David Huang here for Dave. I guess just going back to the guidance, it sounded like volume is tracking ahead of expectation and pricing will become less negative in the second half. Why did you reduce the top end of your organic sales guidance from 3% to 2%?

Speaker Change: Hey David, so the two adjustments we made is we actually

Speaker Change: changed our guidance from 0% to 3% organic growth to 0% to 2% organic growth.

Speaker Change: and the two changes we made were effectively we took the impact of price for the full year from about one negative one to two percent to a negative two to three percent

John Corkrean: Okay, got it.

John J. Corkrean: And then on working capital, do you still expect that to be a source of cash for the next four years? I'm not sure it's going to be a source of cash. I think it was a source of cash in Q1 and a use of cash in Q2 as we return to volume growth. So it's going to be, I think for the full year, probably relatively neutral.

John Corkrean: And then a working capital. Do you do expect that to be a source of cash for the four year? I think we're I'm not sure it's going to be a source of cash. I think it was a source of cash in Q1 and a use of cash in Q2 as we returned the volume growth. So it's going to be, I think, for the full year, probably relatively neutral. We still expect kind of our full year working capital to get down, you know, closer to 16% or closer to, you know, between 15 and 16%. So we believe we'll see continued sequential improvement.

Speaker Change: and volume, we were projecting a full year impact of 2-4% and now we're projecting 3-4%.

Speaker Change: We've kind of upped the volume assumption on the bottom end of our range and then offset that with a slightly more negative impact from price.

John J. Corkrean: We still expect our full year working capital to get down closer to 16% or closer to between 15 and 16%. So we believe we'll see continued sequential improvement, but year over year, it will probably be up because of the volume growth. Okay.

Speaker Change: Okay, got it. And then on working capital, do you still expect that to be a source of cash for the full year?

Speaker Change: I'm not sure it's going to be a source of cash. I think it was a source of cash in Q1 and a use of cash in Q2 as we return to volume growth. So it's going to be, I think for the full year, probably relatively neutral.

John Corkrean: But year over year, it will probably be up because of the volume growth.

John Corkrean: Okay, got it.

John Corkrean: Thank you.

John Corkrean: You know, back to your back to your price volume comment. David, I mean, when you look at the change in midpoint for our adjusted evita projection, you know, really when you think about it, we're going, we're increasing our midpoint by about $5 million, which you've seen in Q2. And offsetting the benefit of Indian industries with effects.

David Huang: Back to your price volume comment, David, when you look at the change in midpoint for our adjusted EBITDA projection, really, when you think about it, we're increasing our midpoint by about $5 million, which you saw in Q2, and offsetting the benefit of Indy Industries with FX. So, not a lot of other changes happening. Okay, good. Your next question comes from a line from Rosemarie Morbelli from Gabelli Funds. Your line is open.

Speaker Change: We still expect kind of our full year working capital to get down.

Speaker Change: You know, closer to 16% or closer to, you know, between 15 and 16%. So we believe we'll see continued sequential improvement, but year over year, it will probably be up because of the volume growth.

Speaker Change: Okay, got it. Thank you.

John Corkrean: So not, not a lot of other changes happening. Okay, got it.

Speaker Change: Back to your price-volume comment, David, I mean, when you look at the change in midpoint for our adjusted EBITDA,

John Corkrean: Thank you.

Rosemarie Morbelli: Your next question comes from a line of Rosemary Morebelli from Gabelli Funds. Your line is open.

Speaker Change: projection you know really when you think about it we're going we're increasing our midpoint by about five million dollars which you've seen in Q2

Rosemarie Morbelli: Thank you.

Rosemarie Jeanne Morbelli: Thank you. Good morning, everyone, and congratulations on a strong quarter. Thanks, Rosemarie.

Celeste Mastin: Good morning, everyone. And congratulations on the strong quarter. Thanks, Rosemary.

Speaker Change: and offsetting the benefit of ND Industries with FX. So not a lot of other changes happening.

Celeste Beeks Mastin: Celeste, the company's focus and, obviously, the ND acquisition are showing that you are following the playbook you have mentioned previously on the leverage categories with a margin of 15%. Are there any divestiture potentials that we should expect in order for you to get to that 20% plus EBITDA margin over the next three to five years? And so when you look at that leverage category, we are very close to 15%. And, you know, we don't have many businesses that don't deliver a benefit. Now, we are looking at all of them with a very different lens than we have in the past.

Celeste Mastin: Celeste, the company's focus and obviously ND, the ND acquisition is showing that you are following the playbook you have mentioned previously on the leverage categories with a margin of 15%.

Speaker Change: Okay, good. Thank you.

Speaker Change: Your next question comes from a line of Rosemarie Morbelli from Gabelli Funds. Your line is open.

Celeste Mastin: Are there any diversity to your potential that we should expect in order for you to get to that 20% plus EBITDA margin over the next three to five years? So when you look at that leverage category, we are very close to 15 percent, and we don't have many businesses that don't deliver a benefit. Now we are looking at all of them with a very different lens than we have in the past. As you know, we have requirements to be a leverage business revolving around raw material scale, ability to play, pick where we play selectively, so that's always the first thing we'll look at.

Rosemarie Morbelli: Thank you. Good morning everyone and congratulations on the strong quarter.

Speaker Change: Thanks, Rosemarie.

Speaker Change: Celeste, the company's focus and obviously ND, the ND acquisition is showing that you are following the playbook you have mentioned previously on the leverage categories.

Speaker Change: With a margin of 15%, are there any divestiture potential that we should expect in order for you to get to that 20% plus EBITDA margin over the next three to five years?

Celeste Beeks Mastin: As you know, we have requirements to be a leveraged business revolving around raw material scale, the ability to... pick where we play selectively. So that's always the first thing we'll look at. We'll look at a market segment and say, we want to stay in as many of these segments as we can. If we pick where we play effectively, is this going to be a higher margin but maybe a little smaller business? So that's sort of the first evaluation point.

Speaker Change: So when you look at that leverage category, we are very close.

Speaker Change #100: Many businesses that don't deliver.

Celeste Mastin: We'll look at a market segment and say, we want to stay in as many of these segments as we can. If we pick where we play effectively, is this going to be a higher margin, but maybe a little smaller business. So that's sort of the first evaluation point. If we find, as we're going through the portfolio, that we see a business that we don't think meets our leverage parameters, can't meet those characteristics, we'll certainly consider divesting it. One thing to keep in mind is that in this business, while our plants and infrastructure is allocated to a global business unit for management purposes, almost all of our plants are technology-based, and they produce for multiple business units.

Speaker Change #100: Now, we are looking at all of them with a very different lens than we have in the past.

Speaker Change #100: As you know, we have requirements to be a leveraged business revolving around raw material scale, ability to

Celeste Beeks Mastin: If we find, as we're going through the portfolio, if we see a business that we don't think meets our leverage parameters, can't meet those characteristics, we'll certainly consider divesting it. One thing to keep in mind is that in this business, while our plants and infrastructure are allocated to a global business unit for management purposes, almost all of our plants are technology-based, and they produce for multiple business units. So the prospect of separating out a market segment and exiting it does have, can have other consequences where we have shared plants. So it is, it's a complicated evaluation, but certainly we have it underway, and we're very, you know, critically evaluating all of these businesses on a regular basis. Thanks, Celeste.

Speaker Change #100: Pick where we play selectively, so that's always the first thing we'll look at. We'll look at a market segment and say, we want to stay in as many of these segments as we can.

Speaker Change #100: If we pick where we play effectively, is this going to be a higher margin, but maybe a little smaller business?

Speaker Change #100: So, that's sort of the first evaluation point. If we find, you know, as we're going through the portfolio, if we see a business that we don't think meets our leverage.

Speaker Change #100: ...parameters can't meet those characteristics, we'll certainly consider divesting it. One thing to keep in mind is that in this business...

Celeste Mastin: So the prospect of separating out a market segment and exiting it does have, can have other consequences where we have shared plants. So it is a complicated evaluation, but certainly we have it underway, and we're very critically evaluating all of these businesses on a regular basis.

Speaker Change #100: While our plants and infrastructure is allocated to a global business unit for management purposes,

Speaker Change #100: almost all of our plants.

Speaker Change #100: are technology-based.

Speaker Change #100: and they produce for multiple business units. So the prospect of...

Celeste Mastin: Thanks a lot. So you just said that all of the plants are servishing, so if I can use that term, all of your operations, all of your businesses. So how do we go from that comment to restructuring and eliminating, lowering your overall infrastructure? So most of them are shared; most of them are technology-based. That doesn't mean that there's not opportunity or redundancy to eliminate plants. And in fact, since we started our optimization exercise, we've announced that we're exiting nine plants out of the 80 that I started with. So there are opportunities to continue to streamline the footprint.

Celeste Beeks Mastin: So you just said that all of the plans are servicing, so if I can use that term, all of your operations, all of your businesses. So how do we go from that comment to restructuring and eliminating, lowering your overall costs? So most of them are shared. Most of them are technology-based. That doesn't mean that there's not an opportunity or redundancy to eliminate plants.

Speaker Change #100: Separating out a market segment and exiting it does have, can have other consequences where we have shared plants.

Speaker Change #100: So it is, it's a complicated

Speaker Change #100: evaluation, but certainly we have it underway and we're very, you know, critically evaluating all of these businesses on a regular basis.

Speaker Change #101: Thanks, Celeste. So you just said that all of the plans are...

Speaker Change #102: servicing, so if I can use that term, all of your operations, all of your businesses. So how do we go from that comment to restructuring and eliminating, lowering your overall infrastructure?

Celeste Beeks Mastin: And in fact, since we started our optimization exercise, we've announced that we're exiting nine plants out of the 80 that I started with. So there are opportunities to continue to streamline the footprint. We're at nine today.

Speaker Change #103: So most of them are shared, most of them are technology-based.

Celeste Mastin: We're at nine today, and as I look forward, I see we're evaluating three to six more. Right now, we have in process. So there are ways to rethink our infrastructure that we are focused on. Secondarily, I would say we've also started looking at our warehouse infrastructure. And in the US, we have a network optimization program underway to evaluate and streamline our warehouse infrastructure. So you know, there's quite some opportunities to take fixed costs out of this business. That's never easy, and we want to be very careful as we proceed forward. But there are many opportunities.

Celeste Beeks Mastin: And as I look forward, I see we're evaluating three to six more. Right now, we have three in the process. So there are ways to rethink our infrastructure that we are focused on. Secondly, I would say, we've also started looking at our warehouse infrastructure. And in the US, we have a network optimization program underway to evaluate and streamline our warehouse infrastructure, so there are quite some opportunities to take fixed costs out of this business. That's never easy.

Speaker Change #104: That doesn't mean that there's not opportunity or redundancy to eliminate plants. And in fact, since we started our optimization exercise, we've announced that we're exiting nine plants.

Speaker Change #104: out of the 80.

Speaker Change #104: that I started with. So there are opportunities to continue to streamline the footprint.

Speaker Change #104: We're at nine today, and as I look forward...

Speaker Change #104: You know, I see we're evaluating three to six more right now we have in process. So there are ways to rethink our infrastructure that we are focused on.

Celeste Beeks Mastin: And we want to be very careful as we proceed forward. But there are many opportunities. Thank you, and if I may sneak in one last one, looking at any ND 30% EBITDA margin, that was when they were operating on their own and not as part of a public company. Are you allocating some of the additional costs of being public and, therefore, their growth, so we can anticipate that margin not to stay at that 30%?

Speaker Change #104: Secondarily, I would say we've also started looking at our warehouse infrastructure. And in the U.S., we have a network optimization.

Rosemarie Morbelli: Thank you.

Celeste Mastin: And if I may sneak in one last one, looking at any ND 30%, David Amargin, that was when they were operating on their own and not as part of a public company. Are you allocating some of the additional cost of being public? And therefore, we cannot dissipate that margin, not to stay at that 30% level. You should anticipate that margin to remain an increase over time. Yes, I mean, they certainly will end up supporting some corporate costs, but there are also synergies on the business and opportunities for us to reduce cost within it. So that we will employ.

Speaker Change #104: Program underway to evaluate and streamline our warehouse infrastructure. So, you know, there's quite some opportunities to take fixed costs out of this business.

Speaker Change #104: That's never easy, and we want to be very careful as we proceed forward, but there are many opportunities.

Celeste Beeks Mastin: You should anticipate that margin to remain an increase over time. Yes, I mean, they certainly will end up supporting some corporate costs, but there are also synergies in the business and opportunities for us to reduce costs within it. So, that we, you know, will employ. Plus, as we continue to expand the business and grow volume, we'll get additional operating leverage out of that. So I'd say 30% is the low watermark, Rosemarie.

Speaker Change #105: Thank you. And if I may sneak in one last one, looking at any ND, 30% EBITDA margin.

Speaker Change #106: That was when they were operating on their own and not as part of a public company. Are you allocating some of the additional cost of being public?

Speaker Change #106: And therefore, we can anticipate that margin not to stay at that 30% level.

Celeste Mastin: Plus, as we continue to expand the business and grow volume, we'll get additional operating leverage out of that. So, say 30% the low water mark, Rosemarie.

Speaker Change #107: You should anticipate that margin to remain an increase over time. Yes, I mean, they certainly will end up supporting some corporate costs, but there are also synergies on the business and opportunities for us to reduce cost within it.

Celeste Mastin: Okay, thank you very much.

Rosemarie Jeanne Morbelli: Okay, thank you very much. Thank you. And that concludes our question and answer session. I will now turn the call back over to Celeste Mastin for closing remarks. Thank you everyone for joining us. We look forward to speaking with you again next quarter. This concludes today's conference call. Thank you for your participation. You may now disconnect.

Operator: Thank you.

Celeste Mastin: That concludes our question and answer session.

Celeste Mastin: I will now turn the call back over to Celeste Mastin for closing remarks. Thanks everyone for joining us. We look forward to speaking with you again next quarter.

Speaker Change #107: So, that we, you know, will employ. Plus, as we continue to expand the business and grow volume, we'll get additional operating leverage out of that. So, I'd say 30% is the low watermark, Rosemarie.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change #108: Okay, thank you very much.

Rosemarie Morbelli: Thank you.

Speaker Change #109: That concludes our question and answer session. I will now turn the call back over to Celeste Mastin for closing remarks.

Celeste Beeks Mastin: Thanks everyone for joining us. We look forward to speaking with you again next quarter.

Speaker Change #110: This concludes today's conference call. Thank you for your participation. You may now disconnect.

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