Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Koppers’ Third Quarter 2024 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. [Operator Instructions]. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Quynh McGuire, Investor Relations. Please go ahead.

Thanks, and good morning. I'm Quynh McGuire, Vice President of Investor Relations. Welcome to our third quarter 2024 earnings conference call. We issued our press release earlier today. You may access it via our website www.koppers.com. As indicated in our announcement, we have also posted materials to the Investor Relations page of our website that will be referenced in today's call. Consistent with our practice in prior quarterly conference calls, this is being broadcast live on our website and a recording of this call will be available on our website for replay through February 8, 2025. At this time, I would like to direct your attention to our forward-looking disclosure statement seen on Slide 2. Certain comments made on this conference call may be characterized as forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of assumptions, risks and uncertainties, including risks described in the cautionary statement included in our press release and in the company's filings with the Securities and Exchange Commission. In light of the significant uncertainties inherent in the forward-looking statements included in the company's comments, you should not regard the inclusion of such information as a representation that its objectives, plans and projected results will be achieved. The company's actual results, performance or achievements may differ materially from those expressed in or implied by such forward-looking statements. The company assumes no obligation to update any forward-looking statements made during this call. References may also be made today to certain non-GAAP financial measures. The press release, which is available on our website, also contains reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures. Joining me for our call today are Leroy Ball, Chief Executive Officer of Koppers; and Jimmi Sue Smith, Chief Financial Officer. I'll now turn this discussion over to Leroy.

Thank you, Quynh. Good morning everyone. I'm pleased to share the details of another strong performance delivered by our global Koppers team in the third quarter, which includes record third quarter sales and record third quarter profitability and better safety performance. We generated improved sequential profitability in our railroad and carbon materials businesses, helped by cost reduction initiatives undertaken earlier this year. On the other hand, we continue to experience reduced year-over-year volumes in our legacy utility pole business and lower sequential profitability in our Performance Chemicals business due to higher raw material costs. Now, as always, we believe that our balanced and diversified business portfolio, as well as our team's ongoing commitment to solving everyday challenges will keep us on track to meet our 2024 goals. So let's begin on Slide 4 by looking at some of our key metrics from the quarter. Consolidated sales of $554.3 million represented a record third quarter compared with sales of $550.4 million in the prior year quarter. Our Railroad and Utility Products and Services segment reported record third quarter sales while Performance Chemicals sales slightly declined due to Brown Wood sales now being reported as intercompany and Carbon Materials and Chemicals still seeing some demand weakness. We generated adjusted EBITDA of $77.4 million, a new third quarter record compared with $70.70 million in the prior year. Adjusted EBITDA margin was 14% versus 12.8% in the prior year. Third quarter diluted earnings per share was $1.09 compared with $1.22 in the prior year quarter while adjusted earnings per share for the quarter were $1.37 compared with $1.32 in the prior year quarter. Operating cash flow was $29.8 million for the third quarter and $44.7 million for the year-to-date period through September of 2024. That's versus $81.6 million and $79.5 million in 2023 respectively.…

Thanks, Leroy. We issued a press release this morning detailing our third quarter 2024 results. My comments today are based on that information. Starting on Slide 9, third quarter sales rose by $4 million or 0.7% from the prior year, a record for third quarter sales. By segment RUPS sales increased $14 million or 6%, also a third quarter record. PC sales decreased $3 million or 1.5% and CMC sales decreased $7 million or 5.5% from the prior year quarter. On Slide 10, adjusted EBITDA was $77 million, which was a third quarter record resulting in a 14% margin. By segment, RUPS generated adjusted EBITDA of $25 million with a 10% margin. PC delivered adjusted EBITDA of $40 million with a 22.6% margin and CMC reported adjusted EBITDA of 13 million with a 9.8% margin. On Slide 11, our RUPS business achieved record third quarter sales of $248 million compared to $234 million in the prior year quarter. As we realized $10 million of price increases mainly for domestic crossties and utility poles in Australia. Volumes in our domestic utility pole business were up 11%, primarily attributable to Brown Wood volumes and our railroad bridge services business saw increased activity. These increases were partly offset by lower activity in our crosstie recovery business. From a market trend perspective, prices for untreated crossties remain relatively stable compared to the prior year quarter crosstie procurement declined by 11% and crosstie treatment was lower by 8%. Adjusted EBITDA for RUPS remained consistent with the prior year quarter at $25 million. Profitability was flat year-over-year even with a net sales increase and $3.4 million from improved plant utilization as these gains were offset by $14.1 million of higher raw materials operating and SG&A costs. On Slide 12, our Performance Chemicals business generated third quarter…

Thank you Jimmi Sue. Now let’s take a look at the notable happenings from the third quarter. Our Utility and Industrial Products team members stepped up to help communities devastated by Hurricane Helene and Hurricane Milton which impacted 48 of our utility customers across eight states. As pictured on Slide 20, our people responded in a huge way to meet the demand for new poles as utilities rebuild their networks and restore power to affected residents. Despite dealing with their own personal losses from the storms, UIP employees shipped nearly 40,000 utility poles to affected areas across the Southeastern U.S. with more to come. Storm response is where our team shines, showing up for our customers and their communities to help them through the toughest of times. It’s been a truly heroic effort by many individuals and Koppers is proud to play a key role in the recovery efforts. Now on to a review of each of the businesses. I’ll start with Performance Chemicals on Page 23. The third quarter continued to be solid from a volume standpoint as our legacy MicroPro ground contact volumes were slightly ahead of Q3 2023, which is similar to the sales volume comparison of this product category for the year-to-date September period. Our above ground residential volumes were weaker in Q3 and through three quarters were down about 4% compared to prior year due primarily to geographic and customer mix. The trends are expected to persist through the fourth quarter with slightly more softness in our ground contact product line as some recent market share losses will begin to take effect during Q4. The data on existing home sales continues to be disappointing. While new home construction has picked up some of the slack in available housing stock. Remodeling spending should begin to come…

[Operator Instructions] Our first question today comes from Gary Prestopino from Barrington Research. Please go ahead with your question.

Sure. Hi, good morning everyone.

Good morning.

Hey Leroy, you mentioned some competitive issues and share losses in PC. Could you go into that a little bit more please? What's going on there?

Sure, so. Yes, Gary. So we've traditionally, I think since we've owned the business, have had anywhere from two to three-year agreements with our major customers in performance chemicals. And you might remember going back, I think to the end of 2022 when we were experiencing a lot of inflationary pressures on the cost side and some erosion margin. We were actually going through a renewal of agreements with our customer base that went out two years and we were able to get significant price increases pushed through to, enable us to recapture a lot of the cost increases that we were eating at that point in time. And we're in that phase right now where renewals are happening for the next two to three years. And as we're going through that process with the significant price increases that we had to push through the last time, it's just created an opportunity, I think, for others, if you will, to make a case is to why some of these customers should shift some volume over. So we've seen some erosion from that standpoint and we will see some erosion from that standpoint in terms of our customer base. But I'd say from an overall standpoint, some of that was probably due to happen at some point in time given the amount of significant share gains that we have picked up over the last five, six years. And so I look at this as sort of normal competitive actions and reactions. We've been on quite a run where it's been us who then, taking a lot of share over the last few years. And there's, this particular case, I think on a net overall basis there'll be a little bit shifting back the other way. We are picking up some share and from some other customers and things like that. So it's not – it's not all going one way. But from an overall net standpoint, this will be 2025 will be a year where we lose a little share, which is the first time that's probably happened in a long time for us.

Okay, thank you for that. And then just on your overall summary, you said contemplating sale or shutdown of various operations. Can we assume that, that would just be some manufacturing capacity or could that even be assumed a significant restructuring within your business segments?

I wouldn't go that far. I mean we still have some smaller businesses that again, some align maybe a little better with the overall core of the business, others maybe not as much. And so, if there's an opportunity to again, you move any of those smaller businesses, we might look to do that if the price was right. As it relates to capacity, we've shuttered a lot of capacity over time, went through a major restructuring when we went from 11 facilities in Carbon Materials and Chemicals down to three. There's not a whole lot much more week, week can do there. But there are some things that certainly we believe we can do that might be short-term in nature, some could be long-term in nature depending upon our view of where the markets are at and where they're going. So we're evaluating to make the right decision for Koppers and our shareholders and that market has seen a little bit of tough times over the past 18 months and in particular in North America. So there's things that I think we have to look at and, again, the shareholders would expect us to look at. And so we will look at that. And our communication in terms of putting that out there is really more or less just to let everyone know that, we everything is on the table for us and continues to be.

Yes. And then just lastly, how does the acquisition pipeline look? And after Brown Wood, would you have an appetite for doing something in 2025?

I think, yes, so we continue to try and keep up relationships and ensure that folks know that, we have an interest in continuing to grow in that business. And it's really about when the time is right. On the other side of things, which you can never quite tell. So we're certainly open to opportunities that might arise and we'll continue to keep that pipeline going. How that goes? Again, you can't always choose when the other party is ready to make a move. So it's hard to say about whether anything would materialize in 2025 or not. But we certainly that, that is an interest of ours and we believe it creates a good opportunity for us. So we do remain open to that.

Okay, thank you.

Yes, thank you.

And our next question comes from David Marsh from Singular Research. Please go ahead with your question.

Hi guys. Congrats on the quarter, and thanks very much for taking the question. Appreciate it.

Yes, thank you.

Just wanted to start notice that your SG&A sequentially was down a couple million dollars in the current quarter, which was actually a very positive surprise. Can you talk about the sustainability of that in light of your comments around the potential reduction?

Yes, I mean I think as always, we're looking at ways that we can improve the business, improve our profitability, react and respond to things that are happening around us. We've had for us, I think, a fairly aggressive growth plan over the last four years leading through this 2025 strategy that had some significant, again for us that are in low growth markets, growth associated with it. Right. So a lot of capital that we've invested and we had sized up for that as well. And so those investments have been made. We've seen a couple of the markets that we're in end up kind of coming down into what we would consider trough periods. We have some net market share losses heading into 2025 in our Performance Chemicals business. So we're looking at what we can do to, resize, streamline the organization to sort of fit, a year where again, we flat overall sales in 2025. And so we think there are some opportunities to do that within our SG&A category and as well as on the operating side. So it's not just exclusive to that, but what you saw there in terms of the quarter, there's an expectation that, that will continue for us moving forward. And again, we're not prepared at this point in time to talk about by how much the savings could be. We'll do that in February, but we're working through that right now and. But I would say certainly that the expectation is that, that is a focus of ours and you'll see that sort of performance, I think, continue moving forward.

That's great. And then just looking at your interest expense was up obviously due to the debt related to the acquisition. But since the quarter we've had a couple of interest rate cuts. Could you kind of help quantify the impact on interest expense of the 75 basis points in rate cuts that we've seen so far by the Fed?

Yes, I think Jimmi Sue would be perfect to respond to that.

Yes, thanks, Leroy. I would say that you would want to apply that to about $500 million of our debt, because we are hedged for a big portion of what's out there. So you can kind of think about it that way.

Yep, perfect. Got it. Thank you. And then just kind of following on the first question with regard to acquisitions, in terms of, you guys have different business lines and obviously there's a lot of different factors in each one of them. But could you kind of help prioritize like in your mind right now, like the order of priority where you would look to acquire something in terms of the different business lines?

I think, yes, that's actually pretty easy. I mean, for us, we see most of the opportunity on the utility side of the business. It's the area that we are smallest in. It's the areas where we cover less geography. That's the area where quite frankly [ph] show the most opportunity. So that would be high on our list. Secondary to that would be anything that might make sense around our Performance Chemicals business that would help us, if you will, add around the preservative business that we have in place there today. Outside of that, there is we already hold a significant share in the rail side of the business. So there's really nothing much to do there. We're not looking to really grow outside of that in maintenance way, in any way. And then CMC, again, that is a business that has been in some tough straits for a number of years. And so we think being one of the last few remaining distillation companies provides some level of advantage moving forward, but we're not looking to build around that other than, again, if things happen to take off in some of our new products that we're trying to get into starting out in our European location.

Great. Thank you guys. Appreciate it.

Yep. Thank you.

Ladies and gentlemen, with that, we'll be concluding today's question-and-answer session. At this time, I'd like to turn the floor back over to CEO, Leroy Ball for closing remarks.

Thank you. Yes no, look, we appreciate the interest in Koppers. We still think that we have a lot of runway to continue to show improvement. We're expecting again a continued improvement in 2025 and strong performance and beyond that as well. We look forward to sharing again the details of how we see 2025 shaping up in early next year when we do our fourth quarter earnings call and currently look forward to unveiling more details around our 2030 strategy in September of next year. So thank you again for all your support.

Ladies and gentlemen, with that will conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.