Good morning. My name is Daniel and I will be your conference operator today. I would like to welcome everyone to The Chemours Company Third Quarter 2024 Results Conference Call. Currently, all participants are in 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 begin your conference.

Good morning, everybody. Welcome to The Chemours Company's third quarter 2024 earnings conference call. I'm joined today by Denise Dignam, Chemours' President and Chief Executive Officer; and our Chief Financial Officer, Shane Hostetter. Before we start, I would like to remind you that comments made on this call as well as in the supplemental information provided 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 is included in our press release issued this morning. Also, we have posted our earnings presentation to our website earlier today. With that, I will turn the call over to Denise Dignam.

Thank you, Brandon, and thank you everyone for joining us. In addition to releasing our quarter three results earlier this morning, we outlined a refreshed corporate strategy for Chemours. This strategy is the result of a lot of hard work over the last several months and we are excited to share it with you. We have strong businesses, good momentum across the company and a path to value creation. Shane and I will start with our strong third quarter performance, provide our outlook for the fourth quarter and share some key considerations as we head into 2025. We will then review our refreshed strategy and take your questions. Starting with the quarter, there were two key factors that contributed to our strong performance. Our teams demonstrated consistent and effective operational execution across the business and we continue to put many of the one-off events and disruptions from earlier this year behind us. We are pleased to see stability in the macro environment around our target markets and with strong continued execution, we are confident that we will be well-positioned to meet customer demand. Our efforts are reflected in year-over-year volume increases across all of our businesses and stronger-than-anticipated results in our TSS and TT businesses. Our TSS business hit a sales record for the third quarter with a robust 21% year-over-year increase in Opteon Refrigerants. This reflects nearly 60% of our total TSS refrigerant sales for the quarter, up from 50% in the prior year. These results are in line with our previous expectations of double-digit growth in Opteon Refrigerants and affirm our continued transition to Opteon as we move deeper into stationary air conditioning adoption. We saw the same execution in our TT business with volumes stronger than we anticipated even with some of the lagging constraints from the…

Thank you, Denise, and good morning everyone. Let's take a closer look at our financial results. Our consolidated net sales for the third quarter were approximately $1.5 billion, up 1% compared to the prior year quarter. This increase was driven by a 5% increase in volume, partially offset by a 3% decline in pricing with currency a slight 1% headwind. Turning to adjusted EBITDA, we saw a slight decrease from $211 million last year to $208 million this quarter. This decline was largely attributable to lower pricing with smaller impacts from currency fluctuations and portfolio changes. However, these declines were partially offset by increased volumes as well as cost reductions. As a point of reference, in last year's fourth quarter, we revised our prior year non-GAAP adjusted EBITDA including the third quarter to eliminate adjustments for raw material write-offs and also to correct the understatement of accrued liabilities related to contract litigation following the decommissioning of our Taiwan facility. These revisions should help clarify last year's third quarter results for comparison purposes under US GAAP. For the third quarter, Chemours reported a net loss of $27 million or $0.18 per diluted share compared to net income of $12 million or $0.08 per share in the prior year. The current quarter net loss includes a $56 million non-cash impairment charge. Aligning with our capital focus, we reviewed assumptions for all strategic projects in the third quarter to ensure spend was prudent and appropriate for their respective returns. This analysis included new industry projections for hydrogen, which indicated slower growth and reduced near-term demand. In response, we adjusted certain strategic spend, specifically delaying investments in our hydrogen venture, which triggered a review of the APM segment, resulting in a full impairment of the segment's goodwill. Excluding our impairment charge, our consolidated adjusted…

Thank you, Shane. Since becoming CEO in March, I focused my time on stabilizing the company, adding a new leadership partner in Shane and spending a lot of time with our stakeholders to help develop our path forward. As I shared in the prior quarter, this effort reflected a new set of Chemours' values in safety, integrity, partnership, ownership and respect, providing the foundation for our new vision to deliver trusted chemistry, making people's lives better and helping our communities to thrive. Our refreshed strategy, which we are calling Pathway to Thrive, capitalizes on the fundamental strengths of our businesses, our incredible talent and competitive differentiators. It provides a clear framework and actionable steps to create short and long term value centered around our four pillars operational excellence, enabling growth, portfolio management and strengthening the long term. We have set a number of key targets over the next three years and are confident that solid execution across the business will drive differentiated value creation for shareholders. I'd like to now provide some additional detail around each of these four pillars. Starting with operational excellence, we can achieve incremental run rate cost savings of greater than $250 million across the company starting next year through 2027. This overall cost savings plan comprises an additional $100 million cost savings program under our TT Transformation Plan and $150 million in targeted savings evenly across the other businesses and corporate costs. We have developed a programmatic approach for achieving these cost savings including the use of efficiency creating technology across the company. Given the cyclicality of our industry, cost management must be part of our DNA. It's a continuous exercise for us and while we have addressed much of the low hanging fruit, we continue to be disciplined and committed to operating as efficiently…

[Operator Instructions] And our first question comes from Arun Viswanathan with RBC Capital Markets. Your line is open.

Great. Thanks for taking my question. Congrats on the results. Good to see the new strategy rolled out as well. I guess just maybe I'll have a question in TSS as well as TT. So in TSS, how long do you think we'll be waiting through these higher levels of inventories of HFCs and what kind of pricing drag do you expect as you move into '25 from that? Thank you.

Yeah, Arun, thanks for the question. As I think about the inventory levels, we haven't given guidance on the actual levels on that side, but Denise did talk about this on the script of thinking through the pricing related to HFCs at the current price is going to last at these levels into '25 given just the dynamics of the inventory and supply.

Yeah, maybe I’ll just add on. So you know that our strategy is to lead in the transformation, the transitions are to HFO technology and our Opteon product line and we continue to have double-digit growth in this area. Over time the Freon portfolio is going to become less and less relevant as quota declines. And going into 2025, we believe that these levels will remain kind of where they are. Our job is to maximize value and -- in this conversion and really to -- really this Opteon maximizing our potential in this next step down in like commercial and residential.

Okay. Thanks. And then on TT, I'm just wondering how you see your utilization rates evolving as you move into '25. Have you seen any noticeable or improvement in demand levels? We've been hearing obviously mostly sluggish, although, with the rate cuts approaching, do you have any optimism that maybe we could see some increase in demand as we move into maybe the back half of '25? Thanks.

Sure. Hey, thanks for the question. So first of all, I just really want to congratulate the team on such a great strong third quarter. Our plants are running well and our team is executing excellently. Our position actually for TiO2 has been consistent, I would say, for the year. We don't see market any kind of momentum-changing there. There's not really a sign of market recovery, but we're very excited about the interest rate reductions in the US. We'll see what happens this week with the Fed. And also some reductions in Europe. We have seen some small share gains going in Europe. Nothing to write home about, but definitely there's something there with Chinese producers picking up some share in Europe. We've done a tremendous job executing on the transformation plan. We're ahead of plan. Going into 2025, we feel confident and we're going to be ready to take advantage of any market opportunity that comes our way.

Thanks.

Thank you. Our next question comes from Josh Spector with UBS. Your line is open.

Yeah. Hi, good morning. I wanted to follow up on Shane's comments on TSS margins. Looking at 2025, I think Shane, you said greater than 30% if Freon prices stay where they are. I think your guidance reflects around 31% this year. And our view was that Corpus would come on at a higher margin and help the segment into 2025. So what are some of the other moving pieces that you think about and is there anything negative I guess we need to be baking in about why margins would be down year-over-year or is your framework just conservative at this point? Thanks.

Yeah. Thanks, Josh. Yeah, you're right with the greater than 30% on that side. As I think about other perspectives to think about within that margin guidance, we put a slide in the deck to kind of look at the balance between price and volume. But there's also a bucket around cost and other. With that HFC pricing, we do anticipate quota on that side to be purchased. Raw materials with the mix between stationary and that coming on board into next year will have an impact as well. And then as we think about the balance between Corpus production and those that we source outside of the US, that probably will be a little bit less in that bucket as you pointed out as Corpus comes on.

Okay. Thanks. And if I could just ask quickly on the cost savings, how much are you expecting to achieve in '24 from that greater than $250 million number you talked about in '25?

So, maybe just to talk about the -- for '24, we are expecting -- we've already exceeded the plan for the TT Transformation so far. We're expecting additional value going into the fourth quarter. As part of operational excellence, we've really laid out a really robust plan of cost savings really across the company, incremental savings on top of the TT Transformation Plan through 2024. Maybe I'll let Shane talk a little bit more about the details.

Yeah. Thanks, Denise. Yeah, I think that point that it's incremental. So as we think about 2025, '26 and '27, we anticipate $250 million out in those years with about 50% of that $250 million being run-rated at the end of '25. That said, with the intricacies around the cost-out program, we do anticipate some of the value that we talked about the earnings run rate being towards the back half of '25.

Okay. Thanks.

Thank you. And our next question comes from Mike Leithead with Barclays. Your line is open.

Great. Thanks. Good morning, team. First two related to the APM goodwill impairment. First, I usually think of goodwill assessment being a year-end process. So what prompted the timing of it now? Was it the investment deferral related to hydrogen, if I heard you right? And second, I think you previously talked about the segment over the medium-term growing GDP plus with low 20s percent EBITDA margins. What is sort of the new financial algorithm for this business?

Yeah. Thanks, Mike. I'll take the impairment item first and decide. Coming into the quarter, I really wanted to make sure we looked at just overall investments with a strategic lens of how much capital outlay there is versus related returns. And as we looked at the hydrogen investment, still very important to us, however, the market shifted on us. Really the future cash flows associated with us were a little bit delayed. And so with that, we made the choice to put on hold investments in this area until we really have more clarity on the market development. And as you mentioned, right, goodwill impairment is usually an annual test for us in the fourth quarter. However, this decision did trigger an assessment of the fair value of the segment and therefore really drove the impairment in the quarter.

Yeah, I mean -- and I'll just comment relative to what our expectations are around the margin, what we previously said. So I would say in APM, for sure, we have work to do. All the pillars of Pathway to Thrive apply for APM. So reducing costs with operational excellence, focusing growth on high return, low risk investments and making the decisions that -- as we did with hydrogen when we need to make them. Also shifting our portfolio to the high-value applications and then looking at streamlining our product and asset footprint. So work to do, but we have a plan. We're very confident in our Performance Solutions portfolio and we believe we'll get to the projections that we previously talked about.

Great. That's super helpful. And then second, I wanted to ask, as you're working through the refreshed corporate strategy and the outline is helpful, two as it relates to the TT business. One, is there any change to your go-to-market strategy there? Obviously a lot in the world's changed since you initially took this approach a few years ago. Has that changed at all? And then second, has the role of the TT business in the portfolio changed at all? And what I mean by that is you're highlighting a shift towards higher value growth markets. I would say TiO2 probably doesn't really grow greater than 5% annually like you intend for the company. So when you thought through everything, does TT in the long term belong in the Chemours' portfolio?

Sure. Maybe I'll take your -- the second question first. First of all, as we develop the Pathway to Thrive, we've done significant work to understand how these -- the roles of each business. And we believe that there's substantial benefit to our shareholders for these businesses to stay together. We have a strong combined footprint and especially in the coming years. And I just want to highlight three key points. First is, these are complex businesses with large manufacturing assets and scale helps. There's lots of synergies that we can leverage, particularly when you think about running safe operations. Also, the cash generation of the TT business is important for growth. In TSS and APM, especially as we're looking at the market cycle and also the product lifecycle right now of -- in TSS and APM is really important. And then third thing is just around our legacy legal liabilities and they're complex and in many cases, our claimants are the people who regulate us. So we need to maintain purposeful relationships so that we can resolve these matters and enabling our growth. So with all of those things, we're confident that this structure and these pillars actually deliver the most value for our shareholders.

Great. Thank you.

Thank you. Our next question comes from Vincent Andrews with Morgan Stanley. Your line is open.

Thank you and good morning, everyone. Wondering if I could just ask around Freon, I think, Shane, your comments were sort of assumed that prices stayed where they are. What's the latest in terms of where inventories are and where demand is? And as we think into '25 and some of the moving parts that could move around demand, whether it's interest rates, housing, autos, whatever, what do you think the range of outcomes is on pricing for next year?

Yeah, as I think about the Freon pricing, we talked about the inventory levels a little earlier. There's certainly still levels from an HFC perspective in the market and that is really keeping overall Freon prices down at where they're at. And we talked about really the anticipation of those levels staying in '25. As we think about just overall demand for HFOs, right, on this side, we're really happy with the stationary market and the commitment to residential as well as commercial into the next year. I think obviously with interest rates and other areas from an economic perspective and what that might provide, we're excited that hopefully as we think about next year, it might be a little bit more in the back half kind of a demand on that perspective. I don't know, Denise, if you want to add anything.

Yeah, I think you summed it up well.

So maybe just to follow up on that, to be a bit more specific, we've seen the Fed cut rates, but we've seen the back end of the curves kind of work their way back up and mortgage rates are back in the 7s. So, to keep prices flat where they are, do we actually -- do you need to see the back end of the curve come down to sort of allow for some pickup in demand on whether it's new homes or existing homes or things like that, or even to get better rates for automobile, for new cars? So if we stay in a high-end back end of the rate curve, does that hurt pricing do you think or not?

Yeah, I mean I think as we think about just overall pricing, I think the curve coming down certainly could help on that side, but it really depends upon the inventories on the HFC level and how they actually play out here.

I think the other thing that just to keep in mind is that this is a regulatory transition and the quota will be reduced. So that in itself is a driver that we have full confidence in the growth that we're going to see continued double-digit growth in Opteon.

Thank you very much.

Thank you. Our next question comes from Laurence Alexander with Jefferies. Your line is open.

So, good morning. I have two questions. First, can you give some perspective on how the FERC ruling on nuclear power in the grid kind of last week might affect the demand pull for your immersion solutions relative to some of the alternatives? Secondly, can you give an example of how sort of looking at the assets on a return basis has shifted priorities compared to what was in place, say, over the last three years?

Sure. So I'll give some comments relative to announcements on the nuclear power. First of all, that's fantastic. It's going to take a lot of time. Those kinds of transitions don't happen overnight. I don't see it as -- I think it's a positive trend just in general in order to advance these advanced chips. But from an immersion cooling perspective, it really doesn't change the picture. While the product has sustainability benefits of reducing power consumption, water footprint, it has a huge performance benefit, right? So with this technology being able to get over 500 watts, 600 watts, 700 watts, 800 watts, it's not something that you can do with the current technology. So I don't see that -- I see them kind of maybe complementary in order to make the transition that we need to make.

I'll take the second question. Yeah. On the -- looking at our overall asset and capital outlay related to returns, I really wanted to make sure, as we think about how we're investing given where our leverage is, given where we're on that side we want to make sure we're investing smartly with the appropriate returns. And I think it's allowed us to make sure that we're balancing the investments on that side as well as our liquidity from a debt perspective as well as settling with the litigation matters while returning cash to our shareholders. So I think it's just one more key element providing guidance for us to really execute on our capital priorities.

Thank you.

Thank you. Our next question comes from John Roberts with Mizuho. Your line is open.

Thank you. In your three-year growth target of 5%, are you counting on any growth from titanium dioxide? You talk about acid footprint optimization and so forth. How are you thinking about the three-year growth there?

Sure. When we -- in that projection, what we've dialed in is, you know that there's cyclicality in some of the business in particular TT. So we have actually dialed in some downside cyclicality in that. What we have in that 5% CAGR is some market recovery as well as cyclicality. We also have our own efforts around commercial excellence and things that we're going to be doing as well as what's happening, what's going to be happening with our Opteon growth with the AIM Act and the stepdown and our PFA Line 2. I don't know, Shane, if there's anything else that you think we should…

Yeah. And I just want to make sure we highlight, Denise mentioned the cyclicality. As we think about the market from that perspective, we're anticipating that there is a bit of a return. But that's not the bulk of it. The bulk of it is commercial as well as just executing what we execute and controlling what we control.

And then remind me what originally created the goodwill in APS that you're now writing down.

Sure. Yeah, that goodwill, when we spun the company or when the company was spun from DuPont, that goodwill was assigned to that segment based on just the fair value of the given time.

Got it. Thank you.

Thank you. And our next question comes from Hassan Ahmed with Alembic Global Advisors. Your line is open.

Good morning, Denise and Shane. A question on TT. You guys obviously addressed some of the near and medium-term issues and opportunities. Could you talk a bit about the sort of anti-dumping measures that we are seeing out there? Obviously, it started with the EU and now it's spreading to other countries and regions. So what potentially could be the opportunity for you guys there, be it as soon as 2025 and beyond?

Thanks, Hassan. So there has been a lot of activity in this area, whether it's tariffs or anti-dumping duties. And so there's definitely -- there's signs there that would be helpful for us. But I want to go back to our Pathway to Thrive. Our job is to control what we can control. And we've done really a great job building out our transformation plan -- the TT Transformation Plan. And that really has to be key to our future, which is continuing to drive to continued low cost position. And that's really what's going to be important in the long run.

Understood. Understood. And again, if I could just sort of dig a bit deeper into the nearer-term side of things. Sequentially in Q3, you guys within TT had flat volumes and you sort of talked about some market share gains there because obviously relative to your competitors, it seemed you outperformed sequentially in Q3 on the volume side of things. Now for Q4, for TT, you guys are talking about mid to high single-digit declines, right, which again surprises me a little bit, or maybe it's just a function of the market that after the sort of massive destocking that we saw over the last couple of years, I would have thought that maybe seasonality would not be that acute. So if you could sort of explain the sequential move from Q2 to Q3, the relatively flat volumes there, the near-term Q4 guidance you're giving and how we should think about what tends to be a seasonally strong first half with the backdrop of all the destocking and the like, and again, this anti-dumping side of things, could we actually potentially in a lower interest rate environment see a nice solid uptake in volumes?

Okay. Maybe just there's a lot there.

Apologies.

It's okay. It's okay. So going from Q2 to Q3, I mean, just want to say that the team did a great job, really just that commercial excellence at work there as well as great operational performance. Going into Q4, I mean for sure there's seasonality and if we look at in particular in North America, I don't think that's a surprise. But we were, as I said, able to pick up a little share in Europe. So we see some stability there. Certainly, there is strong momentum if interest rates continue to drop, if there's anti-dumping duties, for sure, lower interest rates are going to drive that TT market. So yeah, we see there could be a potential for upside in 2025.

Very helpful. Thank you so much, Denise.

Thank you. And our next question comes from Caleb Boehnlein with BMO. Your line is open. Caleb, please check your mute button.

Yeah. Hi, this is John McNulty on for Caleb. Let me start out with a question on the corporate strategy and the cost cutting. So of the $250 million of savings that you expect, can you help us to understand how much of that is just true cost-outs and how much of it would be efficiency measures that are somewhat dependent on volumes recovering?

Yeah. Thanks, John. As I think about just the balance, right, we have a programmatic item on that side that the majority of this is identified cost-out savings whether it be through procurement, enhancing operations, functional optimization or asset footprint on that side. So I would say it's more your former than anything on that side.

Yeah. And then maybe just to add on to what Shane has said, look at the -- what we say is really critical for us to perform and to deliver this value is operational excellence. The low-hanging fruit is been addressed. This is really about approaching everything with diligence. We know that transformation can never stop and productivity has to be top of mind. We've had great productivity in TT and we're just going to extend that to all the other businesses in corporate following the same, I'll say the same playbook.

Got it. Okay. Fair enough. And then just a question on the data center opportunity, I think you're still -- well, I guess can you give us an update as to when you're on track to have that pilot facility up? I think it was supposed to be middle of '26 or second half of '26. So maybe you can give us an update there. And then have you seen or can you speak to the interest that you're seeing regarding the potential for contracts from either hyperscalers or even OEM partners that you might be looking to work with? Can you help us to think about that?

Yeah. So for data centers what we talked about was in '26 to be able to have commercial quantities available for sale. So we're still on track for that and we hope to in the short term to announce what our plans are for that. Relative to the interest we're seeing, we are seeing a lot of interest. This is a really special technology with a lot of value, so we're seeing a lot of interest. But as I talked about before, this is a new technology. So it's going to take time for that adoption but certainly no -- nothing but positive signs.

Okay. Got it. Actually, if I could sneak one last one in just around the Freon pricing or the Freon sales that you've been reporting. So if I think about what you've reported over the last few years, in '22 and '23, there was a sequential drop from 2Q to 3Q of somewhere in the neighborhood of 25% to 30%. This year, it was less, it was around 14%. Should we take that as a sign that some of this destocking, whether it's the pricing pressure tied to it or the volume pressure, we've kind of found that bottom and now we're just stabilizing? Is that kind of the right takeaway or is there something else that might be driving that?

Yeah. So, thanks, John. As we think about just the dynamics, right, we've talked about HFCs fading on that side with HFO adoption coming on that side, we're very happy and really seeing strong adoption in the HFOs on the Opteon side, especially ahead of when the stationary market ahead of this from an AMAC change. Now, as we think about kind of just how these are going down, we do think that the declines within Freon are steadying, right? I mean, we do foresee that continuing as HFO adoption continues, but it's certainly at a slower pace than what we've seen in the past.

Got it. Thanks very much for the color.

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