Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Koppers' Second Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] Please note that this event is being recorded. I will now turn the call over to Quynh McGuire. Please go ahead.

Thanks, and good morning. I'm Quynh McGuire, Vice President of Investor Relations. Welcome to our second quarter 2025 earnings conference call. We issued our press release earlier today. You can access it via our website at www.koppers.com. As indicated in our announcement, we've 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 November 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. Also, references may 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 and Chairman of the Board of Koppers; and Jimmi Sue Smith, Chief Financial Officer. At this time, I'll turn the discussion over to Leroy.

Thank you, Quynh. Good morning, everyone. I'm here this morning to report on Koppers' second quarter performance and our progress in transforming into a high-performance organization, delivering mid- to high teens margins and stronger cash flow, while staying rooted in our purpose of protecting what matters and preserving the future. This morning, you'll hear how we continue to make good progress in all controllable areas, while we fight through what has mostly been a sluggish demand environment across our entire portfolio. On Slide 4, you'll see that on the plus side of the ledger, we lowered year-to-date SG&A by 13% compared with the prior year period. We reduced our team member numbers for 14 straight months, equating to an 11% drop in FTEs since April '24. We generated cash flow of over $50 million in the quarter, posted adjusted EBITDA margins north of 15% for the first time in 8 years, brought our capital spend annual run rate down below $60 million, signed a definitive agreement to sell our Railroad Structures business, which has been a drag to margin, ceased production at our phthalic anhydride plant a month earlier than planned, deployed $24 million of capital to dividends, share repurchases and debt reduction and launched our Catalyst transformation process to unleash the ingenuity in the organization to deliver benefits that will bring Koppers to consistent mid- to high teens EBITDA margins by the end of 2027. The biggest negative is on the demand side. And unfortunately, it's across the board. PC volumes beyond our previously disclosed market share loss are running a few percent down for the first 6 months, whereas we have projected them to be up for the year. Class I demand looks to be tailing off in the second half as it did last year, which is…

Thanks, Leroy. Earlier today, we issued a press release detailing our second quarter 2025 results. My comments today are based on that information. As seen on Slide 14, we had consolidated second quarter sales of $505 million, down 10.4% from the prior year. By segment, RUPS sales decreased by $4 million or 1%. PC sales were down by $26 million, 15%; and CM&C sales decreased by $28 million, or 22% compared with the prior year quarter. On Slide 15, adjusted EBITDA for the second quarter was $77 million with a 15.3% margin. By segment, RUPS generated adjusted EBITDA of $32 million with a 12.6% margin. PC delivered adjusted EBITDA of $29 million and a 19% margin, while CM&C reported adjusted EBITDA of $17 million with a 16.2% margin. On Slide 16, our RUPS business generated second quarter sales of $250 million compared with $254 million in the prior year. Lower volumes of Class I crossties and lower crosstie recovery activity contributed to this decrease, partly offset by higher commercial crosstie volumes, price increases for crossties and increased activity in our railroad bridge services business. Untreated crosstie market prices remained stable compared to last year. Crosstie procurement was down 13%, while crosstie treatment was down 1%. RUPS also delivered adjusted EBITDA of $32 million compared with $22 million in the prior year. Profitability improved due primarily to $7.7 million of lower costs from raw materials, SG&A and freight along with net sales price increases. On Slide 17, our Performance Chemicals business reported second quarter sales of $151 million compared to $177 million in the prior year. We experienced a 15% volume decrease, mostly in the Americas from previously discussed market share shifts in the U.S. Adjusted EBITDA for PC came in at $29 million compared to $44 million in the prior…

Thank you, Jimmi Sue. So now on to a quick review of each of the businesses, starting with our Performance Chemicals, or PC business on Page 26. As Jimmi Sue noted, we finished the second quarter with adjusted EBITDA and PC of just under $29 million, which equates to a respectable 19% margin. While that doesn't come close to measuring up against last year's monster second quarter, it's actually a respectable result in the context of the current state of the housing, repair and remodeling and industrial markets we serve, which all continue to be stagnant. We see some signs of life on the industrial side, however, which I'll speak to shortly in my UIP commentary. If you strip away the market share loss experienced this year, our volumes are lower from prior year by about 2%. That's down from our expectations to start the year of a couple of percent improvement based upon expectations of our customer base at that time, which have turned more dour after 4.5 months of tepid sales activity. As things currently stand, we are not seeing or hearing anything that would indicate that second half volumes will look any different than what we've seen for most of this year. The external data continues to paint an uninspiring picture in the near term as drivers for treated products like existing home sales, new home starts and repair, remodeling indices all seem stuck in neutral, and our customer base is now looking towards 2026 for signs of improvement. As we forecasted last quarter, we managed to fend off most of the impact of higher tariffs so far. The only quantifiable impact to date is the threatened and now actual Kopper tariff. This has caused the separation between the COMEX and LME exchanges, resulting in approximately $2…

[Operator Instructions] Our first question today comes from Liam Burke with B. Riley.

Leroy, on RUPS, how have the contracts with the Class I customer has been going? Are you satisfied that you've got agreements that are in place that are satisfactory for you guys?

Well, I mean -- so they are long-term contracts, and they have varying expiration dates on them. Some, again, still have several years. I'd say you can again look at our improved results and there's 2 ways to go, obviously, pricing. And then the cost side of the equation. As I had mentioned in prior calls, we had a heavy push to try and recover a lot of the cost increase we had seen from -- I'd say, the '22 through mid-'24 time frames. And I think we've maximized all we are going to be able to do at this point on that until we have some contracts expiring. The last year, we've been heavily focused on trying to push the cost side of the equation down. And I think the results show that we've been somewhat successful from that standpoint. The third piece of it is volume. And they are -- the sites -- they're heavily fixed cost oriented. So when you don't get the throughput into the plants, that has an impact. And so, as we look at this year and our expectations -- and again, this is going to be a great year for RUPS. I think we're going to finish the year in double-digit margin territory, which we haven't for quite some time. And again, we're showing that over the past several quarters in terms of the significant improvement. But it could be even better if we have -- we're experiencing the volume increases that were forecast to us at the end of last year heading into this year as we were planning out our production schedule. So that's a disappointment. I mean overall, the numbers will -- the volume numbers will still be up for the year. They just won't be up by as much as they were signaling. Now that gives me hope that all that does is push that into '26, and maybe we'll see even higher volumes in '26. But we won't know that until we get out to next year. And I think, again, one of the lessons from the last couple of years is to, I think, put some level of conservatism into what we're being told because it's now become 2 years running that we have been signaled that the volumes will be higher, and then for varying reasons, our customer base have pulled back once they got out sort of to the midyear point.

Great. On PC, the residential side of the business, you kind of -- we know about market share losses. We also know about the existing home sales. So that's sort of working its way through, and you're still holding high-teens margins. On the industrial side, you're showing some life there. Could you tell -- give us me a sense as to how much follow-through you'd expect from that part of the business?

Yes. We are seeing some life there, and that's a positive. The life there will show up in a greater way in the UIP piece of the business. The industrial preservative side of PC is not what really drives the business and the results there. It is more on the residential side. Obviously, it will be additive of -- we can see that volume pick up because, again, it will increase the throughput at our plants and obviously result in higher volumes and higher sales. But for us to see a meaningful movement on the PC side in terms of results moving back, we've got to see some pickup on the residential side. And 2% down, all things being told is -- it's not awful. But again, coming into the year, I think there was a little more enthusiasm around seeing at least a couple percent uptick. And then when you're talking about a 4% overall difference going from a couple of percent up to a couple of percent down, that, again, over the course of the year, can have a meaningful impact. So the good news is -- I think we all believe this is something that's temporary and we'll start to see an uptick at some point. Right now, I think folks are looking out into 2026 in terms of that optimism. So I think we've all resigned ourselves to the fact that the back half of the year is probably not going to look much different from an overall demand standpoint than the front half.

The next question is from Gary Prestopino with Barrington Research.

Leroy, getting to this Catalyst it was -- well, I don't know what I want to call it a restructuring or whatever. Was any of this -- this is something new that's coming to the fold, right, beyond what you were doing with your strategic transformation on the 5-year plan. Is that kind of, correct?

Yes. It's coming in, I'd say, to help underpin and really support the plan on a -- structurally on an ongoing basis. So it really applies a different lens to how we approach the generation of opportunities in the organization, how we evaluate them, how we measure them, how we plan for them, track them. It really is a change management process that will unlock opportunities. And we've already seen it unlock opportunities that -- that are going to be meaningful in terms of -- I think, leading us to a sustainable improvement in performance. And where I would contrast it to other, if you will, cost saving initiatives that we would have done in the past or others would have done in the past. In many cases, those initiatives, your kind of taking a little bit of a brute force approach and you're slashing somewhat indiscriminately, and you take the pain for a period of time. Those costs sort of work their way back because they need to because you haven't been thoughtful about the approach that's been taken in terms of how you've trimmed it. And -- this is really about changing the process and making those changes sustainable. So improving technology, improving the skill sets of individuals across the organization to enable us to be able to effectively do more with less. And again, have it be something that we can carry on as opposed to -- you do it for a temporary time frame. And then 3 years later, you look back and everything that you cut right back there again. And so -- so it is an important part of the strategy that we've been working on because it gives us a sound foundation for all the other things that we want to do that can be additive to the business.

Okay. And then you cited in your comments, the adjusted EBITDA margin target.

Yes.

I didn't -- I wasn't able to write that down. Can you just give me that?

So it's really -- it's mid- to high teens. I mean, I think that we absolutely can get there. I think you've seen a little -- actually a preview of it with this quarter. I mean we -- so we have not had a quarterly EBITDA margin above 15% since 2017. And we got there in this quarter, despite the fact that sales were down year-over-year by 10%. And obviously, we did it through a number of cost levers. But it gives you some indication that, again, if we're successful in Catalyst, right, these are costs that should not just be coming back in as the demand picks up and goes the other way, but should be sustainable. And so imagine how that drops to the bottom line when you got more volume coming through the queue and adding to the top line. I mean it's going to -- it will be significantly impactful. And so yes, mid- to high teens margins is what we are targeting and what we believe is achievable.

Okay. And then just kind of looking at going through your narrative and all that, it seems that the PC business definitely relative to where you were when you gave guidance at the end of Q1, the PC business has continued to slip...

Yes.

And it looks like the railroad business, the rebound you were looking for is not coming back. It's not going to be there for the back half of the year. Is that kind of a good summation?

Well, look, the railroad business is still going to have a great year. It's had a great first half. It's going to have a great year. I'd say, yes, we don't think that the back half of the year -- there's risk in the back half of the year in terms of it being as strong. We don't think the volumes are going to drop off a bit, but we are going to get impacted a little bit in terms of product and customer mix. We -- again, we may decide that we want to turn some inventory into cash because, again, the volumes aren't now projected as that strong of levels as what we had thought coming in. And if we do that, right, we're going to take some absorption hit, which would have an impact. Again, that's a discretionary call as to whether we want to do that or not, but we wanted to give ourselves a little bit of room there. So -- the -- I want to just caution RUPS is going to have a very good year. If it doesn't quite reach where we had originally forecasted at the beginning of the year, I would not deem that a failure. PC is a little bit of a different story. Yes. Certainly, the numbers have slipped quite a bit. We've talked on the past call about -- about modest tariff impacts in our ability to manage that. I think for the most part, that is true. The numbers I've talked about in the grand scheme of things are not necessarily large. And I think that if we were seeing a -- again, a small bump in volume this year instead of a small decline, we probably -- again, we probably wouldn't be talking about it. We would be able to more than absorb it and -- but when you're talking about a small volume decline, and no ability to then, at that point, more or less overcome those numbers. Now all of a sudden, they get a little bit more magnified. So not big overall, but a couple of million here, a couple of million there. You're not getting volume to sort of recover some of that, and it starts to add up. And then at some point for us, at least, it was like, okay, we don't think we're going to be able to make this up in the back half. So we want to make sure that we provide a range -- a target range that we have a high degree of confidence that we can meet. And so that's kind of the summation of it. But PC, yes, would be the -- I'd say, the biggest impact and certainly RUPS in terms of the change from last quarter to this, but it's going to still have a pretty good year overall.

Yes. Okay. I just wanted to clarify that. I didn't mean to infer that the PC -- the railroad was not going to have a good year. You said a forecast and drop in demand from 8% to 4%. So okay.

Yes.

The next question is from Michael Mathison with Sidoti & Company.

Congratulations on all the margin improvement this quarter, you guys. A couple of questions from my end. There was some news about a proposed consolidation among the big 6 rail companies, 2 of them are proposing to merge. Will that change life for you guys from either a pricing or a demand standpoint?

Hard to say. Hard to say. I think that's yet to be determined. There -- we have business with all of the Class Is, and we consider them all very important customers. And so my hope would be that we would -- if that merger ultimately goes through, we would continue to serve the merged company in a way that is at least as much as we do today. But it's tough to say right now, it's so early on.

Fair enough. Just coming back to margins going forward. Everybody has a lot of curiosity. It obviously took a lot of work to reach 15%. You're now targeting high teens. That's another 200 basis points in lift. Is there anything specific that you could point to that would drive such a big transformation in the margin?

At this point, it's just volume recovery, right? I mean if you look across our businesses, it's rare, and I talk about it often, right? I believe the value in our business is its diversity. And so we typically have at least 2 to 3 businesses sort of on the upside of the cycle and maybe 1 or 2 down or vice versa. 1 or 2 up and 2 or 3 down. It's a unique circumstance for either all of them to be down or all of them to be up. We are in this period, and I think we're getting closer to the end of this period where they're all sort of in a lull, and that's unusual. And so that's why I point to a 15% margin in an environment where we're down 10% on the top line and say, think about what that would look like if PC -- when PC goes from minus 2 in terms of volumes to plus 2. And think about it when UIP starts to see its rebound from what up until this point -- up until this quarter has been, again, year-over-year declines in volume. Think about RPS, which is going to be up this year, but last year ended down in volume and for the most part, has been somewhat flat. And then CM&C, a similar sort of story. I mean it's been down in the past couple of years. You start to see a little bit of a recovery there. All that savings that we're generating is going to drop to the bottom line. And so, that's how I perceive basically getting that margin lift that we're talking about. We're not done on the cost side. There is more to come. And so we'll be adding additional benefits there. And then you start to see some of the markets come -- they don't have to be in all the businesses. You see some of these markets start to rebound a little bit. And all of a sudden, you're going to see a compounding effect on the profitability and the margin. That's why I say I really feel like we're at a tipping point here. We're so close. It may not be in '25 because the business is -- has its seasonal cycles, and we're going to be moving into the down part of the seasonal cycle as we get to the back part of the year or the fourth quarter of the year. But as we come into '26, I am really, really hopeful that we start to see some improvement in the end markets because if we do, I think we're going to see a significant amount of improvement.

Great. Good luck in the back half of the year.

Thank you, Michael.

Thank you.

Appreciate that. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to CEO, Leroy Ball, for any closing remarks.

Thank you. I really appreciate everybody's time and attention today. As I mentioned, a lot of really good things going on in the organization, and I look forward to being back here in November, with hopefully some better news and some signs of improvement as we look out into 2026. So thank you, everyone, and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.