Good morning. My name is Lovely, and I will be your conference operator today. I would like to welcome everyone to The Chemours Company First Quarter 2024 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the conclusion of the prepared remarks. I would like to remind everyone that this conference call is being recorded. I would now like to hand the conference call over to Brandon Ontjes, Vice President of Investor Relations for Chemours. You may now begin your conference.

Good morning, everybody. Welcome to the Chemours Company's first quarter 2024 earnings conference call. I’m joined today by Denise Dignam, President and Chief Executive Officer; and our Interim Chief Financial Officer, Matt Abbott. Before we start, I'd like to remind you that comments made on this call, as well as in the supplemental information provided in our presentation and on our website, contain forward-looking statements that involve risks and uncertainties, as described in Chemours' SEC filings. These forward-looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events that may not be realized. Actual results may differ, and Chemours undertakes no duty to update any forward-looking statements as a result of future developments or new information. During the course of this call, we will refer to certain non-GAAP financial measures that we believe are useful to investors evaluating the company's performance. A reconciliation of non-GAAP terms and adjustments are included in our release issued yesterday. Also, we posted our earnings presentation to our website last evening. With that, I will turn the call over to Denise Dignam.

Thank you, Brandon, and good morning, everyone. I'm going to start this morning by talking about our overall performance and dive more deeply into TT. Then I'm going to turn the call over to Matt to cover our segment level performance as well as our balance sheet and liquidity position. I'll then provide our outlook for the second quarter and spend some time on TSS, because I received a lot of questions from many of you on this business during our recent meetings. We'll then close with your questions. Let's start with our first quarter performance. Our TT segment met our top line expectations for the quarter. Adjusted EBITDA for TT was better than expected for 3 primary reasons. First, our actions to allocate TiO2 volumes to higher yield regions, second, more favorable than expected timing of lower cost or consumption, which we anticipate will shift mostly to the second quarter and third, our transformation plan continuing to produce strong results. Our APM and TSS segments both performed in line with our expectations for net sales and adjusted EBITDA for the first quarter. The economically sensitive end markets served by APM began to show some signs of a modest recovery during the quarter. TSS in addition to benefiting from traditional seasonality across the refrigerant's product portfolio continue to leverage its advantage in Opteon stationary blend to support the transition to low GWP solutions in connection with the recent incremental regulatory step downs in the U.S. and Europe. In these regions, TSS also experienced the continued trends in opt in demand for aftermarket automotive solutions in line with our expectations. Now back to TT. We have not seen our order book velocity at these levels since the third quarter of 2022 and we are seeing early signs of restocking. However, we…

Thank you, Denise. Good morning, everyone. Our consolidated net sales for the first quarter were approximately $1.4 billion, compared with net sales of $1.5 billion for the same period in 2023, primarily reflecting a 6% decrease in volumes in APM and TSS and a 5% decline in price across all three businesses. Consolidated adjusted EBITDA decreased 37% year-over-year from $304 million to $193 million. This decrease was primarily driven by demand weakness combined with lower cost absorption in APM and a slower start to 2024 in TSS, partially offset by the cost out actions in TT that Denise just mentioned. This decline in consolidated adjusted EBITDA also includes a $5 million unallocated item related to third-party costs associated with the TT transformation plan. We expect this amount to recur quarterly for the remainder of the year. Consolidated net income was $52 million compared with $145 million in the prior year quarter. Net income per diluted share was $0.34 compared with $0.96 in the prior year quarter. Our corporate expenses were $55 million in the first quarter of 2024, a $10 million increase versus the prior year quarter and approximately $25 million lower than expected. Some of the costs related to the outcome of the Audit Committee's internal review and the company's remediation of material weaknesses were lower than we forecasted. The costs related to these efforts approximated $14 million during the first quarter, while other anticipated expenses moved into the second quarter. Adding to this, the first quarter further benefited from lower stock based compensation expenses, driven by lower overall achieved performance and the negative discretion exercised by the Board of Directors on former executives' compensation. Finally, the company recognized lower than anticipated environmental remediation expenses in the first quarter due to timing of planned work. We expect corporate expenses…

Thank you, Matt. Let's turn to our outlook. For now, we're going to continue to provide an outlook for the quarter ahead. On a consolidated basis, we expect net sales to increase approximately 15% sequentially in the second quarter with consolidated adjusted EBITDA growing in line also up approximately 15%. We expect TT to achieve sequential net sales growth in the range of 15%, reflecting the strength in our order book. Although we haven't observed a broad level market catalyst, we have seen some slight seasonal demand strength in limited end markets and in some regions. We anticipate adjusted EBITDA for TT growing in line with the sequential increase in net sales. The growth will be supported by higher volumes and improved fixed cost absorption. However, this will be partially offset by the timing shift of higher cost or consumption from the first quarter to the second quarter. We expect TSS to grow sequentially in the mid-teens for both net sales and adjusted EBITDA driven by both seasonality and elevated demand for Opteon products. The projected sequential growth for adjusted EBITDA incorporates a modest offset from higher input costs from non-Corpus Christi source materials to service demand growth as well as lower fixed cost absorption on our legacy refrigerant production. It also includes continued investment in next generation refrigerants and emerging cooling. We anticipate these R&D investments over the year to be approximately $15 million. Finally, we anticipate APM net sales to grow in the low-teens sequentially, driven by the Performance Solutions product portfolio. We expect a slight improvement in performance across the Advanced Materials product portfolio, reflecting the modest recovery that I mentioned earlier in some of our economically sensitive end market. We also anticipate adjusted EBITDA increasing close to 30% sequentially in APM as mixed and fixed cost…

[Operator Instructions] Our first question comes from Duffy Fischer from Goldman Sachs.

First question, we're getting a lot of incomings just around the guide. So first, the guide you gave last quarter, basically 2 working days left in the quarter and you walked us to 160 came out at 193. So just how can the gap be that big? Are you confident in like your reporting systems that you're getting the right numbers and timely? And then second on that, the guide for this quarter, what would you call kind of one time in there as we use this quarter's guide as a bridge to move forward? I think about things like the internal review cost, does that naturally go away as the year progresses? Are there anything else, that gets meaningfully better that we can identify today?

So I'm going to start it off. And relative to the difference in the EBITDA versus our, what we discussed at the last earnings call. There's really two primary reasons. One of them is related to our, the shift in our ore cost. And the second one is related to changes in the corporate costs, which I'll have Matt talk about. But just first talking about the shift in ore. One of the things to highlight about our competitive advantage and how we run our circuit is. We have ability to run a very, very wide variety of ores. And we can change that whatever we're running really day-to-day. And you can look at a given plant site and you could say you could be running 7 different ores in a day, different blends. And we change that based on what our production needs are, what plants are running. So it's actually pretty complicated. But I'm going to turn it over to Matt to talk about what is the process for understanding these costs and why that was a change versus what we shared with you in the last call. And then he can also talk about the corporate charges and the guide to the one time.

Yes. So I think on the ore cost, so as Denise said, the business is making supply chain optimization decisions all the time. And so as we think about the books, we close our books monthly. And so we typically get actual cost of manufacturing data in the early part of the subsequent month for the month that we're reporting on. So for March, obviously early April is when we started to get that actual data. We close our plants in SAP and run the material ledges on that monthly cycle. We don't close more frequently in that and so our ERP unfortunately doesn't give us that sort of near real time visibility to some of the costs that are coming through and some of those supply chain decisions. So for favorability coming through in the latter part of the quarter and in March, it was really April that we saw the full extent of that. Otherwise, we're operating with some estimates and given some of the variables there, those are quite complex estimations to work through. On the corporate side, it was really a couple of things. The internal review as I mentioned, those costs are around 14 in the quarter. We expect those to continue like that in the second quarter. And then we had some favorability in environmental and the incentive compensation in Q1 that we don't expect to be the same in the second quarter.

And then maybe as a follow-up, in TT, I think last year, the last comment I remember is you were running about 70% on contractual business, and you would think with PPI that number those contractual contracts would be up in price this year. Price for you guys was down 7%. So is there a meaningful shift to the amount of your sales that are on contract this year versus last year? And is the implication that the non-contractual stuff is down, if you just do the math like almost 20% to make up for what on the contractual side should be flattish to up?

Relative to TT and pricing, you're correct that approximately 70% of our business is contracted. The majority is through PPI and there is a lag in our contracts when that change is made in pricing. We also have a portion of that contracted business, which is negotiated. And those prices can change quarterly every 6 months. So there is a blend there as well as we have our more market exposed channels in distribution and in our flex channel. But the one thing I want to kind of draw your attention to is that we just can't look at deltas in pricing. I think, I just encourage you to look at absolute level of pricing. And I think what you'll see is that we really are market leaders when it comes to pricing. And feel really good about how we have managed price through this down cycle.

Our next question comes from John McNulty from BMO Capital Markets.

So a lot of moving parts in TSS this year with some of the HFC kind of destocking and refrigerants and you've got this big expansion project in the back half of the year as well. I guess, can you help us to think about the trajectory of TSS and its earnings as we progress through the year? And is it going to be the usual seasonality in terms of how it kind of ebbs and flows up in the middle and then back down in the back half? Is it a little bit different this time? I guess, can you help us to think about what would be kind of, what to expect on it this year versus kind of normal?

There's a couple of things that I can talk about. We're not going to give a guide for the full year, but I will say what we see for the year is we do see high levels of HFC inventory, but we do see also the growth as we talked about before mid to high-single-digits through the end of the decade with the regulatory, the technology transition, we see probably for the stationary side of the business more towards the mid-single-digits on that growth. So what I would say is just kind of stick to our long-term trajectory. This is a super critical and valuable portfolio for us and we're investing for the future. We see over the long-term continued growth, a decade of growth through the rest of the decade and over the 30% margins to persist.

So just so I'm clear expect that you should be able to hit the middle or the lower end that mid-single-digit target for even this year in terms of growth. Is that right? Did I understand that right?

Yes. You understood that right.

And then just the follow-up would be on the TT business. So obviously the low cost doors and then I guess high cost in 2Q make things a little bit lumpier than I guess we've seen in the past and it seems to have kind of eaten up at least in 2Q a little bit of the operating leverage in this business. I guess, how should we think about that going forward? Is it going to be a more continual kind of lumpy period or is this just kind of one piece that we work through and then back half of the year you're kind of back to lower cost ores, lower cost of inventory that you're working through and improve profitability? I guess how should we be thinking about that?

I think I would go back to what I had said earlier, John, is that a way to think about it is we make changes every day really on our ore blends and what production we're running. I think it really evolves as the market evolves for the year and again how we run our plants. So it's a key. I really can't give you any more clarity around that for the rest of the year other than we're going to make the best decisions as we run our plants and what ores we use as we run our facilities.

Our next question comes from Josh Spector from UBS Financial.

I wonder, if you just talk about TiO2. I know you don't have a full year guide here, but as you ramp your capacity, can you bring on more volumes into 3Q?

Yes. I mean, we have the capability to bring on more volume for sure. I'm not sure, Josh. Is there a follow-up question to that?

I guess the other piece I'd ask to follow-up is just as you think about TSS margins longer term here, you're talking about growth in 2 phase and other markets. What about another corpus expansion? Since it seems like that margin delta versus your JV is quite large, should we expect an investment there and what would be the timeline?

I would say, when we look at expansions, we're always trying to evaluate what's the right decision whether we build ourselves or we build with a partner. We've not yet made any decision on future additional capacity. We're really focused on this 40% expansion and then we'll, as things progress and we make decisions, we certainly will share those.

Our next question comes from Arun Viswanathan from RBC.

This is Adam on for Arun. Thanks for taking my question. If we were to look out the curve a little bit in TSS, assuming a reasonable market recovery by the time some of those 2 phase products are commercialized. What do you think the earnings contribution could be? Or that is to say, what do you think potentially mid cycle EBITDA could be for TSS a couple of years out?

I would say we're committed to the long-term trajectory. The mid to high-single-digit growth through the end of the decade and the greater than 30% margin. This is a disruptive technology and we're going to have new capacity that comes on in 2026. So it is difficult to say. This is a large market and we're talking about a $3 billion TAM. It's a pretty diverse ecosystem. There's going to be lots of technologies. Our technology, we believe, has the best value proposition. So we believe we're going to be a very sizable participant, but it really depends on how quickly it evolves. Again, we're going to have commercial capacity in 2026, a little bit hard to project that going out much farther, Adam.

And maybe more short-term, I know you guys have a big outflow of some of the restricted cash coming this quarter. I think it was something on the tune of $600 million. Is that most of the remaining outflows for this year? And how much of that restricted cash could we expect being like baseline level going forward?

So, yes, we do expect that restricted so the restricted obviously, the fund was funded in 2023, right? So from an accounting perspective, it's sitting there as restricted cash. Following the final judgments, you'll see that flow through the cash flow statement here in the second quarter. As we look out, we will continue to do our fundings to the MOU fund under the terms of the MOU with the other parties. And then from an overall cash perspective, as I indicated, we think we'll be sort of flattish to the midpoint of the year and then we expect a source of cash rather as we go through the second half of the year.

Our next question comes from Mike Leithead from Barclays.

Hi, Mike. Do you have a question?

Our next question comes from Hassan Ahmed from Alembic Global Advisors.

Question on TT. I know there are a bunch of moving parts and uncertainty and the like with regards to the European Commission's investigation on antidumping. But could you just broadly talk about potentially what the opportunity could be, if those antidumping measures are indeed go through in Europe.

So first of all, I guess what I want to say is we are really focused in TT on controlling what we can control and working towards taking a long-term view of being one of the lowest cost producers. We really, you can see in our results the benefit of our TT transformation plan and that work continues. I think that depending on what happens there could be some share shift. Again, it might be transitory depending on what happens with the antidumping case. But again, we're just focused on what we can control, making sure that we can compete in any environment and being low cost. As well as being phenomenal partners with our customers. We need to be reliable suppliers and then have true partnership.

And a question around the guidance. I'm obviously cognizant of the fact that you're not giving full year guidance. But you guys did $193 million in Q1 EBITDA and you're guiding to around $222 million in Q2. Obviously, there are a bunch of moving parts, seasonality, in terms of a headwind, but tailwinds wise maybe an economic recovery, cost cutting and the like. But if I were to just assume for a second that there really is no recovery and you guys really don't benefit that much from cost cuts. And I just straight line the $222 million for Q3 and Q4, I get to like roughly an EBITDA of $860 million for the full year. Clearly, there is going to be some sort of recovery. Clearly, you guys are going to benefit from cost cuts and the like. So, is it just fair to assume that at the very least, you'll do $900 million in EBITDA in '24?

As I said, I'm not going to give guidance for the full year. But I think going back to your point, I mean, certainly we're going to see benefits to our cost cuts. We've already seen that dramatically in TT and we're going to continue that focus. And again, we're going to control what we can control. The market is going to do what the market is going to do. We are in every one of our business. We're leading players in those markets. Whatever happens in the market, we'll participate in. We'll do the right make the right business decisions and continue to drive our productivity.

Our next question comes from Mike Leithead from Barclays.

I wanted to maybe, reask Hassan's question a bit differently or succinctly. Should 2Q be the peak of net leverage? Or how should we think about your leverage profile as we work through the second half?

No, I think, similar to that question earlier, I think we're at 3.7 now at the end of the first quarter. We think cash will be flattish as we approach the midpoint in the year. And then normal seasonality will kick in at that point and we expect to see a source of cash through the second half. So we think it will trend back more favorably in the second half. And then over the longer term, we aim to be around 3 times. That's our goal.

Is that fair to assume we'll probably finish the year above 3 times just given where earnings and cash flow are looking today?

Yes. We're not giving that full guide for the year, but it will be somewhere between 3 and where we are now.

We have our next question from an Analyst from Morgan Stanley.

This is Turner Hinrichs on for Vincent Andrews. I'm wondering if you could provide a little bit more color on Chinese TiO2 exports and what you're seeing in the region in terms of local production and demand.

Yes. I think the export data is pretty visible to the market. Year-over-year, there's a 10% increase quarter-over-quarter. It's lumpy, and certainly you can think about the EU dumping case as some of the driver for that increase here in March. But again, just going back to big picture, we're leaders in this market. We're focusing on what we control, driving to low cost position and making sure we can participate in the long run. Again just leaning to, we have very, very strong customer’s relationships. So we're driving to low cost, so we can participate in market, but there's more to serving customers in around the relationships and supply reliability and quality where we really are second to none.

Would you mind providing a little bit additional color on U.S. export versus domestic demand and the potential for tailwinds from restocking?

Turner, can you ask that question again?

Would you mind providing a little additional color on U.S. export versus domestic demand and the potential for any tailwinds from restocking?

Yes. I mean, I would just say is we're seeing the restocking. That's really what we're seeing going into the second quarter. Again, we haven't seen any market catalyst, whether think you're talking about interest rates or residential homebuilding things like that. So we think that the volume that we're seeing is relative to restocking.

We have reached the end of our question-and-answer session. Thank you for joining the Chemours first quarter 2024 results conference call. You may now disconnect.