Good morning, ladies and gentlemen, and welcome to the Trinzio First Quarter 2025 Financial Results Conference Call. We welcome the Trinzio Management Team, Frank Bozich, President and CEO, David Stacey, Executive Vice President and CFO, and B. Van Kessel, Senior Vice President, Corporate Finance and Investor Relations. Today's conference call will include brief remarks by the management team, followed by a question and answer session. The company distributed its press release along with its presentation slides after close of market on Wednesday, May 7th. These documents are posted on the company's investor relations website and furnished on a Form 8-K filed with the Securities and Exchange Commission. If anyone should require operator assistance during the call today, please press star then zero on your telephone. I will now hand the call over to B. Van Kessel.

Thank you, Greg, and hello everyone. At this time, all participants are in listen-only mode. After our brief remarks, instructions will follow to participate in the question and answer session. Our disclosure rules and cautionary notes on forward-looking statements are noted on slide two. During this presentation, we may make certain forward-looking statements, including issuing guidance and describing our future expectations. We must caution you that actual results could differ materially from what is discussed, described, or implied in these statements factors that could cause actual results to differ include but are not limited to risk factors set forth in item 1a of our annual report on form 10k or in our other filings made with the securities and exchange commission the company undertakes no obligation to update or revise its forward-looking statements today's presentation includes certain non-gap financial measurements a reconciliation of these measurements to corresponding gap measures is provided in our earnings release and in the appendix of our investor presentation a replay of the conference call and transcripts will be archived on the company's investor relations website shortly following the conference call the replay will be available until may 8 2026 Now, I would like to turn the call over to Frank Bozic.

Frank Bozic Thanks, Bea, and welcome to our first quarter 2025 earnings call. Core business results in the first quarter were in line with expectations and sequentially higher due to seasonality and prior quarter customer destocking. Despite persistent market weakness, the first quarter was Trinzio's seventh consecutive quarter of improved year-over-year adjusted EBITDA improvement, driven by various management actions we took early in this industry downturn. Against the backdrop of trade uncertainty and lower consumer confidence, our adjusted EBITDA improved to $65 million. This is up $20 million versus prior year as a result of restructuring actions we've taken, improved business mix, and the polycarbonate licensing agreement we previously announced. Our focus has been on executing actions aligned to our transformation strategy and driving growth in areas that represent opportunities in any business environment. The levers we possess to continue growing our more specialized technologies are specifically related to geographic expansion, material replacement, process change, and sustainability. With this focus, in the first quarter we grew our volume in recycled content containing products by 33% over prior year, consumer electronic applications by 43%, PMMA resin volumes in Asia more than doubled, and case volumes grew by 3% in a flat demand environment. Last year we announced our proprietary asset and technology license deal with DPAC Chemtech, and with the recognition of 26 million dollars in licensing income in q1 this year i'm pleased to say the projects are on track and delivering in line with their expectations in total we estimate these projects are worth 52 million dollars as our two companies work together we continue to view this agreement as mutually beneficial and see this as the initial steps of a strategic and collaborative partnership in India. Before I turn the call over to Dave, I'd also like to talk a bit about China as a growth market. We'll cover tariffs later on. While we believe India will be a broad growth opportunity for us, in China we have been more focused on our more specialized products in our portfolio. For the last couple of years, the team has been working to grow our more specialty PMMA products, and these efforts are starting to pay off. That, plus our sustainable solutions for consumer electronics, are important growth drivers for us in China. Combined in Q1, they delivered 50% volume growth versus prior year, and we are adding resources for further growth. Now I'd like to turn the call over to Dave.

Thanks, Frank. I'd like to give a little more color on the first quarter and what we're seeing in the early part of Q2, prior year, despite lower volumes sold into automotive and building and construction applications. This was more than offset by higher margins for moderating input costs, particularly natural gas in Europe, as well as better sales mix. Latex binders adjusted EBITDA was similar to prior year, despite lower volume. Most of this volume decline was into paper and board applications in China, where we've seen demand weaken considerably since the tariff announcements. Offsetting this was improved mix with higher sales in case and battery, as well as benefits from our cost savings initiatives. Lastly, polymer solutions adjusted EBITDA was also above prior year, despite significantly lower volume due to $26 million of polycarbonate licensing income in the quarter and our own polycarbonate restructuring actions. Segment volumes were down 15%, driven by lower automotive sales in all three regions, as well as uneconomic volume and polystyrene that we have declined to accept for the time being. First quarter free cash flow was negative $119 million and included $25 million of outflows related to our refinancing that closed in January. Aside from this, we had a typical seasonal working capital outflow of $84 million as we rebuilt receivables after a very slow end of Q4. We expect free cash flow in the second quarter to be about break even and then positive in the second half of 2025. Now I'll hand the call back over to Frank.

Thanks, Dave. Before I get into our outlook, I'd like to highlight our potential exposure to the proposed tariffs. Over 95 percent of our product sales are produced within the region in which they are sold, so we anticipate pay little direct impact. That said, tariffs or disruptions to trade have created an uncertain demand environment, particularly in China and for the automotive industry. We're seeing these impacts in China early in the second quarter where tariff uncertainty has had a significant impact on demand for many of the industrial applications we supply. On the flip side, tariffs may have a positive pricing and demand impact in certain regions where we're a local producer. For example, in 2024, the U.S. ABS market was about 400 kilotons, of which over 30 percent was satisfied by imported products, most of which came from Asia. Last year, between 10 and 15 percent of PMMA resin and surface applications in the U.S. were supplied by Asian imports. Lower imports can obviously have both positive volume and higher price impacts. The largest unknown around tariffs is their impact on overall demand, which could be significant. In December last year, we furnished full year 2025 guidance in connection with the announcement of our debt refinancing transaction. Since then, the economic and geopolitical conditions have become more uncertain and even more difficult to predict. Therefore, we are withdrawing all previously furnished full-year guidance and will only provide an outlook for the other. We expect second quarter adjusted EBITDA to be between $55 million and $70 million, led by seasonally stronger volumes in building and construction, lower cost in engineered materials, and improved Amstai earnings. We are encouraged by our first quarter performance, and we believe we are seeing the impact of our restructuring actions and the transformation strategy reflected in our results. We continue to gain traction with our specialty and sustainable offerings and remain committed to our focus on higher growth and higher margin business. In the near term, we're confident in our ability to navigate these uncertain business conditions and positively manage those things in our control. And now we're happy to take your question.

Thank you. And just a reminder, if you'd like to ask a question today, simply press star one on your telephone keypad once again star one and we will just wait a moment to assemble the q1a roster and it looks like our first question today comes from the line of hassan amed with alambic global partners hassan please go ahead morning frank and dave um you know just a question around um some of the volume patterns you guys are seeing you know you You guys obviously talked about the EM business and, you know, consumer electronics sort of volumes being up 43% over there.

So, you know, my question basically is that, you know, did you see some sort of uneven sort of volume patterns ahead of, you know, some of these tariffs being implemented? You know, just trying to get a sense of the sustainability of some of these volumes you guys are seeing.

Yeah, Hassan, thanks for the question. We looked at this really closely, and we don't really see any pre-buying to beat the tariffs or a lumpiness in the demand. In fact, the Q1 demand has continued into Q2 so far. And if you think about this business, you know, we've made a big effort over the past several years to win new applications and new customers with recycled material. So, you know, again, we see it right now. We don't see any indication that it was distorted by pre-buying to beat tariffs.

Understood. Very helpful. And just two really quick ones. One, on the free cash flow guidance for Q2. You know, you guys talked about being sort of break-even free cash flow-wise. How comfortable are you with attaining that with the sort of guidance range you've given? So that's one side of it. And the other side of it is what are you guys seeing in terms of industry shutdowns, particularly on the styrene, polystyrene side of things?

Yeah, Hassan, good morning. I'll answer the first part. But look, we're pretty – I mean, we're confident in being able to hit that. We've obviously – you know, we've got – we've obviously got one month in the books already and, you know, some visibility into May as well. I mean, we do have – you know, we do have working capital levers that we can pull in and continue to manage very closely, you know, particularly in inventory. So, you know, Q1 is a seasonally weak working capital quarter for us because of a, you know, working capital bill, variable compensation payments, things like that. So, you know, I'd say sitting here where we are today, I think we feel pretty confident in Q2. The other thing I'll point out is that related to the DPAC or the Polycarbonate Licensing Transaction, we did collect $21 million in April. So we've already collected that and that's obviously you know part of the-included in the guidance as well.

Yeah, Hassan, regarding your second question on the impacts of styrene closures, Frankly, we don't really see a big impact or any negative impact to our business, obviously, because we're no longer a styrene producer in Europe, and the European market is significantly oversupplied. So our ability to source material hasn't been hampered in any way. And, you know, as it relates to Amstai, Amstai is very competitive, has one of the best cost positions in the industry. And, you know, they continue to produce the, you know, styrene monomer has been a very good business for them. So we don't really see any impacts to our business. Very helpful. Thanks so much, Frank and Dave.

Thank you, Hassan. And our next question comes from the line of Matthew Blair with TPH. Matthew, please go ahead.

Thank you, and good morning. We had two questions on Amstai. Can you talk a little bit more about the performance in the first quarter? I think the slides mentioned some headwinds from timing issues, but were there also headwinds from outages, both on the styrene as well as polystyrene side? And then the second question is, is there any update on the Amstai sale process?

Maybe let me just take the last question first, and then I'll hand the – Dave can talk about the performance in the quarter. So, look, we're fully committed to market Amstai and monetize this asset. But, you know, we're waiting. Our focus is to maximize the value. And so as such, we're going to wait for the best valuation environment that we can get. And, you know, when that comes, we'll begin more actively marketing the asset.

So, Matthew, so in the – let me start, I guess, with the – as you mentioned, the timing and just explain the cause of that as it relates to Amstai. The North American benzene prices fell over 30 percent kind of late in 2024, and that had a timing impact on Amstai in Q4, which moved – which kind of bled into Q1 as well. and it was exacerbated by the low volumes. Low volumes sold both styrene and polystyrene, so it takes longer for that. There's kind of a lagged effect of the higher-priced benzene going through the P&L. So that's what really impacted the first quarter. That was about an $8 million impact in the first quarter. They did also accelerate a relatively minor turnaround from early Q2 into late Q1. That was about another $2 million impact on the quarter. So the two of those combined are about $10 million impact on Q1, which, you know, look, they did negative two. You know, if you add back that 10, that's eight. I mean, that's still a, you know, by any historical standard, that's still a weak quarter. And you are right, there was a polystyrene outage at one of their polystyrene sites that's been resolved. So all other outage issues have been resolved. We do expect significantly better results for Amstai in the second quarter than what we've seen in the first quarter.

Sounds good. And then maybe if I could follow up, can we talk a little bit more about this opportunity in battery binders? i don't i don't know if we've seen any mention of that previously and is this um you know the slides mentioned it's related to grid so so i guess this is more on the industrial side and not exactly auto's exposure is that the right interpretation the um yeah so thanks for the question actually we've been investing uh technical resources in anode binders so we make a latex binder that goes into the anode of lithium ion batteries um and you know the biggest effort

and we've been winning uh new platforms and new awards in that in that area with the various uh battery manufacturers and we've been expanding uh our qualifications to new batteries you know battery producers around the world now we have a sort of a unique advantage in this we have a good technology which we've demonstrated and also we have a global footprint that makes this a bit unique relative to the rest of the suppliers to the industry so as they expand globally we can supply that binder in each region and so it's it's been a very very good growth business for us and we expect to continue growing because we have a you know we have a very low penetration of the top 15 suppliers today, but it's becoming meaningful. You know, the applications, we just wanted to point out that some of the applications that we have recently won are related to grid storage, and that seems to be getting a lot of traction, but we also have solutions and have one business that go into mobility and automotive batteries. So, yeah, hopefully that answers the question.

Yes, thank you very much.

All right, thanks, Matthew. And one last reminder, if you'd like to ask a question, again, star in the number one on your telephone keypad. Once again, star one. And our next question comes from the line of Lawrence Alexander with Jeffries.

Lawrence, please go ahead. Hey, guys. It's Dan Rizwan for Lawrence. So I understand with the seasonality with cash flow and what you expect from the second quarter, You did say that you expect cash flow to be positive in the second half of the year, but I was wondering if it's – I mean, is there a path to getting back to break-even or positive cash flow for the full year of 2025?

I guess what I would – the way I would answer that, I would point you to slide 13 in our earnings deck, and we've shown this slide the past couple of earnings releases, And it's a list of our cash outflows, you know, CapEx, interest, taxes, restructuring costs, et cetera. And if you add it all up, it's $370 million. So, you know, so I think our EBITDA would need to be $370 million to be cash flow break-even for the year. Now, we're not giving full-year guidance, obviously. But now, the other thing I would say related to that is you know, the working capital number in here to the extent there would be incremental deterioration in the business and EBITDA was Obviously we would be able to offset that, you know, with inventory actions. You know, that would, I think, would more than offset, frankly, any EBITDA deterioration if we did see that. But so that's what I would point you to. Again, I apologize for not directly answering your question, but since we're not giving annual EBITDA guidance, I just think that's the best way to kind of...

No, thanks for the color. And then is there a possibility or is there like any other licensing deals that could happen with something else or another technology you're working on? Is that something that could be just another avenue of growth?

So I think the simple answer is yes. And, you know, we see a lot of interest in our recycling technologies broadly from the industry. And we're scaling those up and demonstrating those at commercial scale. So I think in the future that could also be an opportunity and frankly the polycarbonate technology is very attractive and a very good technology as demonstrated by the interest from DPAC. So you know I wouldn't preclude that we could do more in the polycarbonate area too.

Thank you very much.

Thanks Lawrence. And our next question comes from the line of Frank Mitch with Vermeium Research. Frank, please go ahead.

Thank you. Good morning.

I want to follow up on Amstai.

You know, on a normal basis, you said about $8 million in 1Q, and you expected it to be materially higher. I forget exactly the euphemism to be higher in the second quarter. Last quarter, you indicated that, you know, you thought 2025 would kind of get us closer to that average of $65 million or so. So how are you thinking about Amstai profitability and any orders of magnitude you could provide around that would be very helpful?

Yeah, Frank, like we said last year, the average from 2020 to 2024 for Amstai was about $68 million of EBITDA contribution. and we expect to be much closer to that than we were to last year's performance, which by memory was 15. So again, I, you know, notwithstanding the timing impact that we saw in Q1, I think, you know, we still have the confidence in that trajectory.

Okay, great. So we're going to be mid 40s or higher by year end, potentially on Amstai. And yeah, coming back, I mean, one of the highlights was clearly consumer electronics, that 43% growth. And last quarter, it was up 61%, which are not normal sort of growth. I'm just curious if you could expand upon that business and kind of orders of magnitude as well in a portfolio, because, you know, obviously these numbers are pretty eye-popping.

Yeah, so let me give you examples of where we're supplying into those applications. So almost all consumer electronic brands are products that we would supply into. And if you, you know, so this could be the device itself. It could be chargers. It could be any number of other products. And one of the big drivers in consumer electronics is sustainability or circularity. And we've been able to meet all of the technical requirements with very high levels of recycled material contained in our product. So, you know, upwards of over 50 percent recycled content. And we believe we have a unique advantage because of that. So if you name a brand or if you think of a brand, we're probably in some of their devices with that material, with a sustainable solution. And if you go to page in our presentation, you can see that it's not insignificant. It's 20% of our Asia-Pacific revenue is consumer electronics. And to give you a sense, is this one of the higher margin businesses, more specialized businesses that we have in the portfolio? So that, you know, you can do some of the arithmetic to get to, you know, an order of magnitude of how big that is.

Yeah, so it's interesting because Asia Pacific was down significantly, and yet this business was up significantly. So, obviously, the rest of Asia Pacific was, you know, was very problematic.

Well, so, yeah, the rest of Asia Pacific, what was driving Asia Pacific from a significant, you know, on a significant downward trajectory was the sales that go into appliances. So you could see, you know, appliances is for our HIPPS products and is a big, you know, polystyrene is a big application for us in Asia. And then paper and board, you know, was is also got off to a very slow start. And we think that a lot of that is tariff driven. So, you know, but those tend to be the lower margin parts of our business also. So I would say in Asia, it was where we saw significant negative volume developments year over year was in the appliances and paper and board. And then obviously in the other areas, the more formulated products improvements.

Frank, I just want to add one thing, just related to the comment on volume. I mean, you know, so if you look at Asia in particular for us, polystyrene is about 45% of our total Asia volume. So when we're talking about Trinzio as a whole and volume changes as a whole, polystyrene kind of dwarfed just because of the market size. I mean, it really dwarfs, you know, kind of overwashes by a large margin. volume changes in consumer electronics, for example, that have far higher margins, obviously, but the volumes just aren't there. So Frank's right. In Asia is where we've seen two things. It's where we've kind of walked away from the uneconomic business on a year-over-year basis. It's also where we've, you know, the home appliance, the export market for appliances out of China has been cut, has been severely affected by the tariffs. So that's the real driver of the polystyrene decline on a year-over-year basis, and then we've got latex binders as well, which goes into paper and board applications in China is down, you know, kind of mid-teens year-over-year, and I think that's also really kind of been, you know, exacerbated by the tariff.

Okay, terrific. Thanks so much.

All right. Thank you, Frank. And that does conclude today's question and answer session, as well as today's call. So thank you all for joining us, and you may now disconnect. Have a great day, everyone.