Good morning. My name is Katie and I will be your conference operator today. Welcome to the Luxfer Second Quarter 2022 Earnings Conference Call. All lines have been placed on mute. After the speakers' prepared remarks, we will hold a question-and-answer session. Now, I will turn the conference over to Mike Gaiden, Vice President of Investor Relations and Business Development for Luxfer. Mike, please go ahead.

Thank you, Katie. Welcome everyone to Luxfer’s second quarter 2022 earnings call. With me today is Andy Butcher, Luxfer's Chief Executive Officer, and Steve Webster, Luxfer's Chief Financial Officer. On today's call, we will provide details of our second quarter and year-to-date 2022 performance as detailed in the press release issued yesterday. 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 obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. Please refer to the Safe Harbor Statements on Slide 2 of today's presentation for further details. Now, I will turn the call over to Andy for his summary comments on the quarter, after which Steve will provide details of our financial results. Following Steve's remarks, Andy will provide additional details about Luxfer’s growth outlook before Q&A. Andy, please go ahead.

Thank you, Mike, and welcome everyone. Please turn to Slide 3. I'm pleased to share with you details of our second quarter performance which resulted in sequentially improved revenues and profits. I want to start today by expressing my thanks to the entire Luxfer team who once again worked through a challenging supply chain backdrop to deliver for our customers. Our team's focus and dedication helps build on the momentum seen in our Q1 results. On this slide, I want to highlight three key messages. Firstly, regarding our financial performance, we delivered more than 10% year-over-year sales growth in the second quarter, continuing the double-digit gains we also realized in Q1. Our Q2 top-line expansion was driven by our ongoing success in passing through cost inflation as well as increased volumes. Our Q2 adjusted diluted earnings per share of $0.36 certainly showed progress towards our previously outlined guidance for the full year. Our Elektron segment led our overall performance with increased profits and notable sales strength in many areas. We were also encouraged by gas cylinder’s sequential improvements in sales and profitability, as well as the order inflow for alternative fuel systems. Our capital position remains solid with a net debt to EBITDA ratio of 1.2 times, helped by a return to free cash flow generation. Secondly, we continue to see healthy levels of demand in Q2. Revenue in a broad range of our major end markets increased versus the prior year. The more than 25% revenue growth in our transportation markets and 14% growth in industrial end markets was particularly pleasing. We also continued to implement actions to offset inflation of our input costs. While our supply chain has improved from year-end, as expected, we are still dealing with some areas of availability and logistical challenges which continue to inhibit our ability to grow volumes further. Thirdly, our solid first-half performance and firm backlog position us to achieve our 2022 adjusted diluted EPS guidance of $1.35 to $1.50. Moreover, our year-to-date results and broader outlook reinforce our confidence in achieving our longer-term 2025 EPS goal of $2 or more. Turning to Slide 4, I would like to provide more details on current business conditions. During the second quarter, we sustained a healthy pace of orders, increasing our backlog and reflecting broad customer demand across our business units. Performance was strong in both our transportation and industrial end-user segments, although defense and first response were lower due to slower demand for flameless ration heaters. We were pleased by strength in aerospace and automotive markets, as well as with commercial magnesium revenues. In alternative fuels, we were encouraged by increasing hydrogen systems orders in Europe following the success of early prototype deliveries. This development further reinforces our positive long-term view of growth opportunities in hydrogen. Supply chain conditions remain uneven. The rate of raw material price increases has reduced, bringing some improvements in visibility and costs which is helpful. At the same time, we continue to grapple with recurring material availability constraints, long supply lead times, and logistical bottlenecks. These same conditions will also continue to impact some of the key industry customers we serve. For example, some parts of the automotive industry remain constrained by component shortages, and we see ad hoc delays in other sectors as well. The force majeure condition remains ongoing at U.S. Magnesium, and the labor market remains tight. Given these supply conditions and the backdrop of an evolving macro environment, monitoring market developments and close coordination and communication with customers and suppliers remain top priorities. We continue to review both macroeconomic and local end market indicators amid the sustained demand we see for our portfolio. While our demand remains relatively strong, I want to take a brief moment to discuss how we expect our business to perform if macroeconomic conditions slow. From a revenue perspective, our balanced portfolio holds many diversification benefits. Substantial portions of our business hold reduced direct ties to cyclical economic influences including defense, first response, and healthcare. Further, underlying demand for a number of our products comes from recurring replacement cycles, while other portions of our business, for example alternative fuels, are driven by secular tailwinds including regulatory, legislative, and social mandates. From a cost perspective, we are undoubtedly well positioned today thanks to our simplified footprint with lower operating costs and flexibility to adjust capacity. We also sit in a strong position from a balance sheet perspective with low leverage levels, high available liquidity, and the ability to adjust capital expenditure levels as warranted. Overall, we believe we are perfectly positioned to deal with evolving macro conditions. Given the current strong demand growth, we remain highly focused on successful execution. Having a customer-first discipline alongside our highly engineered product lines provides us a competitive advantage and allows us to offer responsible lead times while passing through material inflation costs. Our manufacturing plants are flexible, and our footprint allows us to balance supply from different facilities. Our ability to execute has been assisted by our long-term relationships with many of our suppliers and the targeted inventory that we put in place earlier in the year. All of these factors give us optimism and visibility to meet the needs of our customers and advance towards our financial objectives. Now, let me turn the call over to Steve for details on our second quarter financial performance.

Thanks, Andy. I'll begin on Slide 5 with a summary of our performance by end market. As a reminder, we classify ourselves into three key end markets: defense, first response, and healthcare; transportation, which includes alternative fuel, aerospace, and automotive; and general industrial. On this slide, we've included quarterly and year-to-date numbers for 2022 as well as the two preceding full financial years. The commentary on the slide references the current quarter only. In the defense, first response, and healthcare end markets, sales decreased by 4.8%, largely due to lower replenishment orders for flameless ration heaters, which we attribute to lower levels of U.S. troops deployed in the field, a trend we expect to continue throughout quarter three. However, similar to quarter one, in quarter two we realized strong demand for magnesium powders used in military flares, while first response and healthcare revenues remained solid. Quarterly sales in transportation expanded 26.1% following quarter one's 11.6% increase. We continued to benefit from the recovery in demand for aerospace products, including our magnesium alloys used in helicopter gearboxes, as well as cylinders used in the deployment of aircraft escape slides and delivery of cabin oxygen. Demand for automotive products also performed well, especially magnesium billet for alloy wheels, as well as our autocatalysis lines. While alternative fuel sales were lower in the quarter, we are encouraged by the acceleration of hydrogen systems orders, as Andy mentioned, which support our optimism for this exciting future growth opportunity. Sales in the General Industrial end market increased 13.8% for the quarter on the heels of quarter one’s 28.4% increase. Electronic games drove this performance, with sales in nearly all commercial categories demonstrating growth amid our actions to pass through rising cost inflation. Commercial magnesium powders, graphic arts, and zirconium oxides led this broad-based strength. Overall, we're encouraged by quarter two revenue performance, which enabled us to further advance towards our 2022 financial targets. Now, please turn to Slide 6 for a summary of our second quarter results. Second quarter sales of $109.5 million increased $10.5 million, or 10.6%, from the prior year. Our quarterly revenue benefited from $13 million of price actions taken to address input cost increases and enjoyed $1.3 million of volume growth. We experienced foreign exchange headwinds of $3.8 million, meaning sales revenues increased by 15% excluding FX. Consolidated adjusted EBITDA of $16.9 million for the quarter decreased $0.4 million or 2.3% from the prior year. Though we enacted additional price actions, this effort did not fully offset the aggregate impact of cost inflation and other supply chain disruptions as anticipated. As we implement further price adjustments in the second half, we remain confident in our ability to pass through cost inflation to our customers, where not limited in the near-term by contracts. Overall, we are pleased with our performance in quarter two amid dynamic operating conditions. Let's review our segment results on Slide 7. Elektron revenues of $63.4 million rose 20.8% from the prior year, driven by our firm efforts to pass through input cost inflation, as well as strong demand in our aerospace, automotive, and industrial end markets. Our Elektron EBITDA of $13.2 million increased by 10.0%, helped by cost pass-through and modest foreign exchange gains. Gas cylinder segment sales of $46.1 million decreased a nominal $0.4 million or 0.9% from the prior quarter. Excluding the $2 million adverse foreign exchange impact, underlying revenues increased by $1.6 million or 3.6%. EBITDA of $3.7 million declined from the prior year’s $5.3 million, hampered by input cost inflation and near-term contractual limitations on pass-through. Given the sequential financial improvement and our continued strong order backlog, we remain confident in the outlook for this segment. Now let's turn to our key balance sheet and cash flow metrics on Slide 8. Luxfer’s capital position continues to serve as one of our core strengths. Our balance sheet health has enabled us to better support our customers amid some ongoing challenges to the broader supply chain. We delivered $0.6 million in free cash flow to the quarter, improving from the $10.3 million outflow seen in quarter one. While our working capital at 26.6% of annualized sales exceeds our 21% to 23% target, we believe our short-term investments in inventory serve as a key differentiator in our long-term customer-first strategy. As in quarter one, our accelerating sales volume within the quarter further contributed to the elevated working capital position at period end. We remain committed to our 21% to 23% working capital target and expect progress back towards this level as supply chain conditions normalize. With net debt of $70.6 million, our net debt to EBITDA ratio measured a modest 1.2 times, and I'm pleased to report that on a trailing 12-month basis, we delivered 14.5% ROIC based on adjusted earnings. We expect this balance sheet strength to serve us well in both the near and long term. Let's now review our current 2022 financial guidance on Slide 9. With our quarter two performance in line with expectations, we remain on track to deliver adjusted diluted EPS of $1.35 to $1.50 this year. We continue to expect revenue growth of 12% to 20% to underpin this earnings forecast. We're encouraged by strong demand levels backed up by healthy order flow across most of our product lines, while carefully monitoring the broader macro economy. At the same time, we anticipate that some near-term softness affecting defense, including flameless ration heaters, will likely cause our second-half earnings to be more weighted to the fourth quarter. Also on foreign exchange, the strength of the U.S. dollar represents a translation headwind to UK sales at a rate below $1.30 to the Pound. At a profit level, however, a weaker Pound is generally favorable to our UK businesses since a sizable portion of sales is invoiced in currencies other than Sterling, complementing a lower operating cost base when translated in dollars. As mentioned earlier, we continue to address the challenges brought by cost inflation with our efforts to pass through these increases to customers. Our work in this area will be further enhanced when some of our existing contract terms enable increased cost pass-through at the start of next year. While these same supply chain pressures have driven our working capital levels higher, we remain focused on free cash flow conversion and expect significant improvements in the second half, but recognize that our 100% free cash flow conversion target may be pressured this year. That said, as a reminder, we will benefit from no anticipated pension contribution in 2022 compared to our $18.2 million contribution in 2021. We also expect to make the remaining cash payment later this year associated with a French manufacturing facility that we closed in 2019, after which we do not anticipate further significant restructuring outlays. Next, I would like to review our capital allocation priorities on Slide 10. We continue to emphasize a balanced approach to the redeployment of free cash flow back into our business. First and foremost, we are reinvesting in our organic growth opportunities such as hydrogen systems and zirconium applications. We view this activity as both the highest return and lowest risk of our cash flow. We will also continue to return a portion of our free cash flow to shareholders. Earlier this year, we increased our quarterly dividend by 4% to $0.13 per share. During the second quarter, we took advantage of the broader weakness in the equity markets to repurchase $2.2 million in shares, accelerating from $1.5 million in quarter one, and adding to last year's $6.4 million of repurchases. Over the medium term, we aim to supplement these two areas of activity with select bolt-on M&A opportunities that add to our growth and return objectives to create additional shareholder value. We are evaluating our acquisition candidate pipeline for opportunities to intelligently complement our organic growth strategy, but doing so cautiously in the current environment. In summary, we expect to generate significant free cash flow over the next several years, which we will invest in line with this balanced approach to capital deployments. And now I'd like to turn the call back over to Andy to talk about our longer-term objectives.

Thank you, Steve. Before concluding our prepared comments, I would like to update you on the developments of our growth strategy, as shown on Slide 11. Over the last two months, Steve and I have spent a significant amount of time evaluating our business with the rest of the Luxfer Executive Leadership Team. Together, we've visited our major business units in both North America and Europe, we have met with a significant number of investors and potential investors, we've engaged with our customers, and we've reviewed growth strategies with each of our local management teams. Most importantly, we've listened to our customers, employees, shareholders, and other stakeholders. In turn, we leaned in, asked more questions, and dug deeper. A number of key areas of business strength were identified from this dialogue. We are encouraged by our technical expertise in high-performance materials. We're excited about the range of product developments underway. We are pleased to see the flexibility of our global operations. We've been inspired by the enthusiasm of our employees and their commitment to our customers, and our whole leadership team is optimistic as we embrace the challenge to unlock shareholder value through delivering profitable growth. So now we are formulating a concentrated approach to delivering that profitable growth. Firstly, we are focusing on opportunities where we enjoy tailwinds in Clean Energy, light weighting, and safety, health, and technology. Secondly, we're enhancing our internal operating model to support our growth strategy. This model is based on six critical processes: strategy deployment, lean operations, new product developments, commercial excellence, sustainability, and people excellence. And thirdly, all of these efforts are underpinned by a strong focus on investing in our people. We firmly believe that our human capital will prove critical to our success today and in the years ahead. And now I would like to conclude by summarizing our strong positioning for value creation on Slide 12. Luxfer’s mission is to help create a safe, clean, and energy-efficient world. We're a global industrial company with market-leading products. We work with high technology materials and target value-added niche applications. We participate in attractive end markets, and we are aligned with the secular growth in clean energy, light weighting, and safety, health, and technology. We deliver leading returns on capital with a strong balance sheet and consistent cash conversion. We realize healthy margins and take a balanced approach to capital allocation. We are primed for growth with a broad pipeline of new products. We have many compelling commercial opportunities, and we are committed to unlocking shareholder value. There is a bright future ahead of us. To conclude our prepared comments, we are pleased with the Q2 results that we have shared with you today. We are optimistic about the new opportunities for 2023 and beyond, and we look forward to providing further updates as we progress. Now, I would like to turn the call over to the operator to begin the Q&A session. Katie, please go ahead.

Thank you, sir. Our first question will come from Chris Moore with CJS Securities. Your line is now open.

Good morning, everyone. I appreciate you taking a few questions. To start, can you describe the trends in order growth compared to backlog growth? While I understand you don’t provide specific figures, could you discuss the year-over-year changes in order growth and backlog growth?

Yes, the order intake was strong during quarter two. We now hold a higher order backlog than we did at the end of quarter one, and indeed, higher than at the same time last year. Even allowing for the increase in prices, we've seen higher volumes as well. So we're pleased with that. We have a slight weakness in demand as we mentioned, where demand is now weighted towards quarter four, and that's a little unhelpful. As a result, I think we expect our earnings, Chris, to be weighted towards quarter four, as we indicated. At this point, I would think our Q3 EPS could look more like Q1 EPS. But of course, we're maintaining our full-year guidance and overall, we're pleased with the order strength in a wide range of areas: magnesium plates, alloy wheels, medical cylinders, that initial sterile supply of hydrogen vehicle cylinders for trucks. So while we watch the global macroeconomic backdrop carefully, we like the demand picture we have in many areas of the business.

Got it. Appreciate that. So the revenue growth guide is staying at 16% I think midpoint. Volume was up slightly Q2 down in the first half overall. Can you maybe just talk about that volume assumption that's embedded into the revenue growth guide?

Yeah, so 12% to 20% revenue growth. More of that is going to come from changes in price than from volume. But we are going to see some stronger volumes for the full year, so we're pleased about that. Now I think that volume growth would be higher where we are not wrestling with some of those supply chain struggles. They're improved since what we were seeing at this time of the year but they are still hampering our execution in a number of areas. And so we look for that to improve further as we run through the year and into 2023.

Got it. And last one for me, maybe you can talk a little bit more about the cost pass-throughs on the gas cylinders, and the contractual arrangements that have kept you from catching up to as quickly as you would have liked. What's the timing there and kind of what are some of the mechanisms on the contractual arrangements?

Yeah, let me talk broadly to that. But we are passing through our material cost increases to our customers wherever allowed by contracts and agreements, of course. I would like to say that while we're seeing some changes in demand associated with our pricing, that's a relatively muted level so far, which I think speaks well to our differentiated and niche application products. Now, as you say, in some cases, there are timing elements in our contracts that determine the rate of that cost pass-through. That's most notable with our contracts or agreements in cylinders and with automotive catalysts. You'll have seen that 88% of our cost inflation in quarter two is being recovered. So we're encouraged by that, but not satisfied with it. There are further cost pass-throughs planned in Elektron in the second half of this year. More work on material cost pass-through in cylinders as contracts unwind. Some of that goes through in the second half of 2022 but that especially takes effect as we enter 2023, Chris.

Got it, okay. So a little bit of improvement there in late 2022 and more in 2023, helpful. I will leave it there. I appreciate it, guys.

Thank you. Our next question will come from Phil Gibbs with KeyBanc Capital. Your line is now open.

Hey, good morning. Well, in terms of the second half, you gave us some pretty good color generally there. Is the idea that the third quarter is going to have a weak mix within Elektron of the Sun's business in terms of both the MRE and in the flares and essentially, you think some of that begins to come back from the timing perspective in Q4?

Yes, we've got quite good order strength as we go into quarter three and quarter four with some good momentum we think. The order bank is solidly ahead of last year. But yes, a significant portion of our flameless ration heaters, where we do have orders, is weighted towards quarter four. To a certain extent, that's true for some of the chemical detection kits as well. So that's unhelpful. But concentrating on Elektron in particular, the magnesium photoengraving plate looks strong; we're seeing increasing momentum for that as we go towards the end of Q3 and into Q4. We've got stronger demand for alloy wheel billet and solumag remains steady as well. So that's the breakout of the mix in Elektron.

Okay, terrific. The management team effectively has turned over the course of the last several months. You outlined a number of things or objectives looking ahead. Is this consistent with the prior management style or objectives, or have there been alterations to that deal?

That's a great question. Thank you for that, Phil. This is very much an evolution, not a revolution, a continuation of the game plan that the company has been following for some years, completing the execution of our work on simplification and now moving into a growth phase. Steve and myself, who have been with the company for a significant length of time, are continuing to drive forward with that, perhaps with a higher emphasis on growth at the moment, and a renewed commitment to strengthening our internal operating system. You should see this as a continuation and a reinvigoration of our long-term growth strategy.

Thank you. And then just lastly, maybe reiterate what you said on pension contributions and then timing and size of cash restructuring payments that may come this year. Thank you.

Yes, Phil, I will take that. Yeah, pension contributions. I think if you recall, in the UK, we made a special one-off contribution last year. So that was really driving the total contribution up to the $18 million or so I mentioned in the remarks. The agreement that we have with our trustees in the UK is that it's unlikely we'll have to make any further payments over the next three years. That pension plan in the UK is now in a surplus position and has historically been in deficit. We feel pretty comfortable on that. We've got a much smaller plan in the U.S., a defined benefit plan, which we are in the process of basically buying out that liability. We think that should happen probably in quarter one of next year. So we're not anticipating cash outflows this year. That would be in the region of maybe $3 million to $5 million, I think in quarter one of next year to get that completely off our books. So I think really positive there on the pension in terms of the absence of cash. Restructuring, yes, as I said in the remarks, we should be done with France for this year. We did spend $6 million to $7 million in quarter one on France; there's been a small amount of restructuring cash, I think in quarter two, around about $500,000 to $600,000. We think the final payment for France should go through quarter three, quarter four this year; in total, it will be no more than around $3 million. Total cash for restructuring this year, I think as we've said previously, will be around about $10 million.

Thank you.

Thank you. Our next question will come from Chip Moore with EF Hutton. Your line is now open.

Good morning, thanks. Just wanted to follow-up on supply chain and raw material availability, I guess. Magnesium, obviously, we're aware of the issues there. But I’m curious about carbon fiber and some of the other key inputs?

Yes, thanks, Chip. Good morning. Overall supply chain improved from year-end, certainly. We continue to see challenges with magnesium, as you say. No significant update from last quarter. On carbon fiber and indeed on other fibers, pricing remains elevated, supply is constrained; there are some specialist fibers such as aramid fibers which are highly constrained. That's a product that gets used on our slides and oxygen deployment in aerospace. Overall on carbon fiber, we're getting decent availability from our long-term partners, and we've put in place some targeted inventory. On sands, coming mainly out of Richards Bay in South Africa, the mine reopened, of course, as we reported in last quarter's call, which is positive. Now the nearby port there is facing significant bottlenecks at the moment, which is due to the large amounts of material that's now awaiting export on the other side of that outage. We are working to not only receive shipments from Richards Bay but also to qualify and utilize alternatives from sand suppliers elsewhere in Africa as well as in Asia. That will ensure greater supply robustness over the medium to long-term and ensure we can meet our growing demand expectations. Until those are in place, the sand supply does remain an area of elevated concern. So overall, improved from year-end, but still a continued challenge, Chip.

That supplies, is there a sense of how much sales might have been restrained this quarter or any stock outs or anything like that continuing?

Yes, it's really hard to quantify that, but we would say low, single million dollars of revenue associated with that.

Perfect. And then just one more from me, just sort of long-term you talk about the product pipeline and some growth focus areas and maybe focusing a bit more on growth. Maybe just kind of expand on some of the products that you're excited about?

Yes, I mean, we're excited about the long-term growth opportunities in those secular growth areas of clean energy, light weighting, safety, health, and technology, where there's some nice tailwinds from regulatory, legislative initiatives, and social mandates. I just feel Luxfer holds a great opportunity to address some of the key challenges facing our world in sustainability and safety and technology. So we talked quite a bit about hydrogen, and we remain really excited about that. The elevated hydrocarbon pricing and awareness of energy security only help underscore that case, and we're really, really pleased that two of our hydrogen customers are about to enter low volume production with medium and heavy-duty trucks in Europe. We secured an important follow-on production order from a European bus manufacturer. So we like hydrogen, we like CNG, but we also like some of the electron products around clean energy. The magnesium powder technology that we're looking at with lithium-ion batteries and possible use of zirconium in fuel cell membranes. So yes, I could go on and on. We like our positioning for the secular growth in our clean energy, light weighting, and safety health and technology.

Excellent. Okay. Very good. Thanks. I'll hop back in queue. Thank you.

Thanks, Chip.

Thank you. An encore recording of this conference call will be available in about two hours. A link to a recording of the webcast will be available on Luxfer’s website at www.luxfer.com. Thank you for joining us today. The next regularly scheduled call will be in October of 2022 when the company discusses its third quarter 2022 financial results. This ends the Luxfer conference call. Have a great day.