Good morning, ladies and gentlemen. My name is Bo and I will be your conference operator today. Welcome, everyone to Luxfer's Third Quarter 2024 Earnings Conference Call. All lines have been placed on mute. After the speakers’ prepared remarks, we will hold a question and answer session. Now at this time, I'll turn things over to Kevin Grant, Vice President of Investor Relations and Business Development at Luxfer. Kevin, please go ahead.

Thank you, Bo and good morning, everyone. Welcome to Luxfer's Third Quarter 2024 Earnings Conference Call. This morning, we'll be reviewing Luxfer's financial results for the third quarter ended September 30th, 2024. I'm pleased to be joined today by Andy Butcher, our Chief Executive Officer; and Steve Webster, our Chief Financial Officer. Today's webcast is accompanied by a presentation that can be accessed at luxfer.com. Please note, any references to non-GAAP financials are reconciled in the Appendix of the presentation. Before we begin, a friendly reminder that any forward-looking statements made about the company's expected financial results are subject to future risks and uncertainties. We undertake no obligations to update any forward-looking statements, whether as a result of new information, future events or otherwise. Please refer to the Safe Harbor statement on Slide 2 of today's presentation for further details. During today's call, we will be providing adjusted third quarter 2024 financial results, excluding the Graphic Arts business, legal recoveries and expenses for both 2024 and 2023. Now let me introduce CEO of Luxfer, Andy Butcher. Please turn to Slide 3. Andy, please go ahead.

Thank you, Kevin, and good morning, everyone. Thank you for joining us. In the third quarter, the Luxfer team continued to build on the positive momentum we've established throughout this year, achieving steady revenue improvements and enhancing profitability. We sustained strong operational efficiency, while capitalizing on some improved market conditions, demonstrating the quality and adaptability of our organization. I'm also pleased to announce the sale of the Lakehurst, New Jersey property for $7.3 million. Our sales for the third quarter came in at $91.4 million, representing a 1.2% increase year-over-year. This was supported by the demand in our Defense, First Response and Healthcare sectors, particularly in the Meals Ready-to-Eat and the Defense Powders product lines. Additionally, we took advantage of a tactical shift from several customers who expedited their orders into the third quarter from the fourth, driven by prospects of potential hurricanes and port strikes. This contributed to the strong Q3 performance, yielding higher-than-anticipated sales volumes and further supporting margin improvements. In terms of profitability, we achieved an adjusted EBITDA of $13.5 million, which is a 22.7% improvement over last year. We also generated our third consecutive quarter of adjusted EBITDA margin growth, reaching 14.8%. This result was driven by our ongoing cost reduction and operational efficiency efforts. Our operating cash flow for the quarter was $12.8 million, which further contributed to maintaining our strong balance sheet and reducing our net leverage to 1.3 times. So, as we approach the closing months of 2024, we are notably encouraged. The progress we have made in the first three quarters puts us on track to deliver an elevated full year 2024 guidance and we anticipate that our focus on operational efficiencies and strategic investments sets a firm foundation into 2025. We are well positioned to navigate market challenges and to make the most of emerging opportunities as they develop. I am pleased with our recent progress. Now, let's turn to Slide 4 for a quick update on our comprehensive strategic review with a specific focus on the divestiture of the Graphic Arts business. The sale of Graphic Arts is now expected to close in the first half of 2025. The business has been making good progress in turning towards profitability and generating cash, although the originally identified buyer did not meet our valuation expectations and we are now engaged with other interested parties. We remain fully committed to securing the best possible outcome for Luxfer and our shareholders in a timely manner. Meanwhile, we continue enhancing our Gas Cylinders and Elektron segments by reducing costs and executing profitable growth opportunities, driven by innovation and strategic investments. The advancements we made this year have been encouraging. We also remain attentive in assessing market conditions to maximize future shareholder value. At this point, I'll turn the call over to Steve to provide a deeper dive into our financial results and the updated full year guidance for 2024. Steve?

Thanks, Andy and good morning, everyone. I'd like to start by reviewing our consolidated financial results and bridges for the third quarter of 2024. Please note that the non-GAAP numbers I refer to are on an adjusted basis, excluding the Graphic Arts business and excluding the legal recoveries or expenses from 2024 and 2023 comparisons. Now let's turn to Slide 5. In the third quarter, we delivered impressive results. Sales were $91.4 million and gross profit was $20.7 million, resulting in a gross margin of 22.6%, reflecting lower input costs and a favorable sales mix. Our adjusted EBITDA came in at $13.5 million with margins of 14.8%, showing a sequential improvement of 150 basis points. Adjusted earnings per share rose to $0.27, up 35% year-over-year, highlighting our improved profitability, driven by both the restructuring initiatives and effective cost management. Cash flow from operations remained robust at $12.8 million and our free cash flow totaled $9.3 million, demonstrating our disciplined approach to capital management. We ended the quarter with net debt reduced to $66 million, further strengthening our balance sheet with leverage improving to approximately 1.3 times, excluding Graphic Arts. Looking at the sales bridge, our revenue for the third quarter was $91.4 million, compared to $90.3 million in the same period last year. This increase is primarily driven by a $1.6 million foreign exchange tailwind and a $0.3 million net contribution from price adjustments. Note that we continue to benefit from increases in Gas Cylinders, largely offset by pricing reductions in our Elektron segment as we pass through lower input costs. We also experienced a $0.8 million impact from lower volumes with improvements in Elektron, offset by declines in Gas Cylinders. Now turning to the profit bridge, our third quarter adjusted EBITDA was $13.5 million, up from $11 million in…

Thanks, Steve. I now want to take some time with you to again highlight some of the innovations that will help drive Luxfer to future sustainable growth. Please turn to Slide 9. Our focus is on achieving long-term growth through innovation and products development, which is the key segment of the Luxfer Business System. You will remember that the business system is the foundation of our strategy for delivering sustainable value and achieving customer growth. Last quarter, we shared our enthusiasm for the long-term strategic opportunities with our clean energy products and our intent to drive growth in the CNG and hydrogen sectors. We remain confident in the significant potential here especially in CNG and bulk gas transportation although that transition is happening over time alongside electrification and other impactful trends. I would characterize our expectations as being for steady growth rather than for an immediate surge in sales during 2025. In our next call, though, I expect to be able to announce the shipments of the first modules from our new Nottingham bulk gas facility. For today, I want to spotlight three smaller product ranges that represent our commitments to growth and innovation, RotaMag alloy, L7X medical cylinders and our expanded and updated HeaterMeals portfolio. First, RotaMag. Sales have grown 30% per annum over the last five years, driven by the rapid adoption of RotaMag as an added value option in lightweight, high-performance automotive materials. This growth underscores the automotive market's increasing demand for advanced materials that boost performance, fuel efficiency and sustainability. Second, our L7X medical cylinders provide a lightweight solution for efficient oxygen delivery. We’ve secured orders from key healthcare and industrial partners, this product has achieved global adoption, delivering significant cost savings in logistics and refills. This success has notably strengthened our market presence with L7X…

Thank you., Mr. Butcher. [Operator Instructions] And we'll go first this morning to Steve Ferazani at Sidoti.

Good morning, Andy. Good morning, Steve. Thanks for really covering the highlights on the quarter. I wanted to start with asking about the impressive margins in Elektron. I'm trying to get a sense of, are we getting close to what you think are sustainable margins there. What I'm asking is, is that all your lower cost magnesium that's now passing through the income statement? Or is there still higher cost magnesium that you're working through? Is this more of a sustainable margin? And how much did it benefit from the pull forward?

Thanks, Steve. This is Andy. Yes, we were pleased with the continued improvement in the margins in Elektron and that's been helped by some improved product mix, as well. I'll perhaps ask Steve Webster to provide a little bit of color.

Yeah, I mean, in terms of – you asked about the pull forward. It's difficult to get an exact number on that. It's probably around about $2 million plus of revenue with I guess, the fixed cost element deleveraging, you'd probably get maybe up to $1 million of additional margin on that. I mean, clearly, on that side of the business, the Meals Ready-to-Eat did very well in terms of the quarter with the hurricane activity. In terms of margin and sustainability, I mean, that's about an 18% margin for Elektron. Normally, we would have thought sort of 20%, if you go back a couple of years, was an Elektron margin, we would aspire to. So we're not quite there yet. But clearly, we're a little bit lower, I guess, on the revenues and the volumes. There's still some recovery to come back, which I think could get us close to that 20% in the future.

Great. I wanted to ask about, the other surprise to me was the strength in your European sales, because when I looked at the Q, it looks like you were up in every major European market. On the Industrial side, that seems a little counterintuitive. Can you talk a little bit about what's going on in Europe and what's driving that growth?

Yeah, so part of that – this is Andy, part of that has been the Industrial Cylinder sales into Europe, which has been helpful, out of gas cylinders. We've then also seen some stronger performance in some of the traditional lines in Europe. So yes, that was an improved area for us in the quarter, Steve.

Okay. Can you touch on where you are with the new UK facility? Is that producing yet? And also, I'll make it a bigger question. Can you talk about – you talked – you said gradual a lot with that - with the CNG engines. Can you talk about what you're seeing so far with the new engine that's now being produced?

Yeah, let me talk to both of those. So first of all, the Nottingham Bulk Gas Transportation module facility. The first module is going through final assembly. It's looking good and we're looking forward to seeing it in the field with our first customer. That will be in the UK at the end of the year. So, I do think that transportation of hydrogen is going to be a really important link in the green hydrogen chain. And pleased to be providing that lightweight, high-capacity product into the market. So, that's on track and we'll see that slowly, but steadily ramp up as we go through 2025. You also asked about the CNG markets and you mentioned the North American product, the new CNG engine that's coming out to support that. And we're seeing some initial fleet customer orders coming through now at the prototype trial level with some interest in some follow-on larger orders. Now the manufacturing of the engine is only just starting to ramp up now and that's planned to go on through 2025. So, I think, some of the recent forecasts are maybe a little bit more measured now for 2025 than the earlier higher levels. But we should see a good ramp there going on maybe in the middle of next year.

Okay. You think, primarily, it's testing right now. So these are going to be slower initial orders, then with success you see the ramp later. Is that sort of what I'm hearing?

Yeah, now we've got some – you remember, we preloaded the system with some good amounts of inventory. And I think that's starting to get drawn down now by these prototype trial levels. But I'm certainly not expecting any significant impact for us on quarter four, and maybe even not in quarter one. But certainly, as we get into the middle of next year, looking for that to really, really move the needle in terms of the adoption of CNG in North America.

Yes. That's great. A last one for me. Can you just touch on where you stand with the Graphic Arts sale? I know, you originally had a lot of interested parties. You had narrowed it down to one. It sounds like you've reopened that. Can you talk about where that process is? Where the conversations are? And why you would have confidence you can close it in the first half of next year?

Yeah, I'll take that, Steve. Yes, so first half of next year is now our aim. We had said previously we hope to be able to do it by the end of this year. I mean, we were working with an exclusive – on an exclusive basis with a single buyer. Ultimately, we're looking for a fair price for our shareholders and also sensible warranties are also important in any deal. I mean, we don't want to rush a transaction. With this individual buyer, they ultimately weren't willing to meet our valuation. So we have moved on. I mean we've got a number of parties who are interested, some of which we were already engaged with previously before we chose to go exclusive. So, some of those parties have already done a reasonable amount of work. But there are a couple of new ones coming in, as well. So, it can take a bit longer to get these things done. But I think, that the way we're sort of fairly far down the road already with some of them, I think there's a reasonable chance we can do it in the first half of next year.

Great. Thanks a lot, Steve. Thanks, Andy.

Thank you. And it appears we have no further questions today. Mr. Butcher, I'd like to turn things back to you for any closing comments.

Thank you, Bo, and thank you for the questions, Steve. In closing, I think I want to emphasize how proud we are of the progress that Luxfer has made this year and especially the performance in the third quarter. The foundation that we've laid with sequential growth in profitability, strengthened operational efficiencies, strategic investments in clean energy mean we're not just now responding to market challenges, we're actively driving our future. Our balance sheet is stronger. Our focus is sharper. Our opportunities are promising. We're excited about the future and remain committed to maximizing value for our shareholders. Thank you for your continued support and confidence in Luxfer. We look forward to updating you next quarter.

Thank you. This does conclude Luxfer's Q3 2024 Earnings Call. A recording of this conference will be available in about two hours. A link to the recording of this webcast will be available on Luxfer's website at www.luxfer.com. Again, thanks so much for joining us, everyone and we wish you all a great day. Goodbye.