Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Chemours Company Third Q uarter 2023 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Brandon Ontjes, Vice President of FP&A and Investor Relations, you may begin your conference. Hi. Thanks, Rob. Good morning, everybody. Welcome to the Chemours Company's Third Quarter 2023 E arnings Q&A Conference Call. I'm joined today by Mark Newman, President and Chief Executive Officer, and Senior Vice President and Chief Financial Officer, Jonathan Lock. Before we start, I'd like to remind you that comments made on this call, as well as in the supplemental information provided in our presentation and on our website, contain forward-looking statements that involve risks and uncertainties as described in Chemours' SEC filings. These forward-looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events that may not be realized. Actual results may differ, and Chemours undertakes no duty to update any forward-looking statements as a result of future developments or new information. During the course of this call, management will refer to certain non-GAAP financial measures that we believe are useful to investors evaluating the company's performance. A reconciliation of non-GAAP terms and adjustments are included in our release and at the end of our presentation. As a reminder, our prepared remarks, a full transcript, plus our earnings deck, have been posted to the investor relations section of our website, along with our earnings release. This morning's call will focus purely on Q&A. With that, I'll turn the call over to our CEO, Mark Newman. Mark? Thanks, Brandon, and good morning, everyone. Thanks for joining us. 2023 has been a challenging year with a weaker second half than we expected, but the Chemours team remains focused on driving long-term shareholder value and improvements in our three industry-leading businesses. Most of our year-over-year performance deterioration has been driven really by lower TT volumes, and we have responded with reductions of the TT transformation plan, which will shine through in 2024 as we see demand weakness decelerating. Our APM business is also seeing some demand weakness, especially in Advanced Materials, but we have achieved double-digit growth year to date of 11% in our Performance Solutions, and this business remains tied in to long-term secular gains in advanced electronics and clean energy, which we're hugely excited about. Then finally, our TSS business continued with strong performance with another record net sales. This is the 7th quarterly net sales record in a row. As we look again to 2024, we have the step down in the AIM Act that's gonna drive further Opteon adoption and beyond 2024, realization of immersion cooling in 2025. So again, we're excited about the work that's on the way here at the company, and despite the challenging environment we see ourself in, remain focused on what we have to do going forward into 2024. So with that, I'll turn it over to Rob to begin our Q&A. At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. Your first question today comes from the line of Duffy Fischer from Goldman Sachs. Your line is open. Yes, good morning, guys. Mark, I was hoping you could just walk through on the step-down for HFO coming up this year. Historically, it seems like there's been a little bit more pre-buying of the older product, but this time that doesn't seem to have happened. So can you just walk through what's transpired over the last year? Do we build a little bit of HFC volume at the distributor level earlier this year, and that's why there's not a price bump and a run for the door here late? And then how do you see that playing out next year? It seems like there is distributor inventories. When next year do you see that push that the step down really starts to accelerate the volumes for HFO? Duffy, great question. And you know, as you said, we have always indicated that we would wait till Q4 to see based on usage of inventory and quota usage in the year, whether we would indeed have a step up in HFC volumes. Interestingly, what we have seen in Q4 is higher HFC pricing, and so there is an indication in my mind that there is increasing interest in HFCs ahead of the quarter step down. Clearly, as we go into 2024, our view will be that, you know, there will be continued ramp-up in HFO volumes. You know, whether that happens at the beginning of the year or more ratably we'll wait to see. But clearly, as we look at the OEM adoption of HFO platforms, you know, we see meaningful growth in HFOs in 2024, for the full year. Okay. And then in Europe, we had an issue about a year into their big step down, where you started to get some illegal product flowing in. How were you guys set up differently in the U.S.? Have you identified potential routes for that, and then who is, I guess, kind of the policing force, if you notice that you would go after? Do you feel like that's set up well enough that you can stop that from happening in the U.S.? Yeah. Well, first of all, we did a lot of work as an industry with the EPA in implementing the AIM Act to, you know, take every precaution to make sure that didn't happen here. Clearly, you know, there's fewer borders, you know, as it relates to the U.S., Canada, and Mexico, than there is in the E.U. with 28 member countries. But listen, I think the industry, not just us, but you know, the OEMs who have invested significantly in the HFO franchise are very focused on rolling out that adoption. Obviously, there's meaningful climate benefit with HFOs. And so, I think that risk is a lot lower here in the U.S., and certainly we're not seeing any meaningful indication of that risk today. Great. Thank you, guys. Your next question comes from the line of John McNulty from BMO Capital Markets. Your line is open. Yeah, good morning. Thanks for taking my question. So I was hoping maybe we could peel back the onion a little bit on the TT business, because the volume weakness that you're seeing definitely doesn't seem to be matching up with what the end customer's volumes are doing. And I guess I'm a little bit surprised it's gotten actually worse as we've gone through the year. And normally, I'd be a little nervous you're losing share or something like that, but in this case, you've got a lot of longer-term contracts locked up, so it doesn't look like that's the case. I guess, can you help us to think about where that demand disconnect is, and when maybe we see the end of that destocking and kind of a normalization, even if it's lower than kind of, whatever, 2019-type levels, but when we see a normalization of that business, I guess how should we be thinking about that? Yeah. So, John, it's a great question, and as I said in my opening remarks, you know, we are seeing clear indications of this demand weakness decelerating. We typically think of a TT cycle as 12-18 months, and clearly, you know, when we look at demand deterioration starting in late Q3 last year, you know, we're at the 12-month marker here. And as I said, you know, we're seeing real deceleration in the demand reduction. And in fact, I would say, you know, as we look at our AP order book, we're seeing indication there of regaining demand. Now, you know, as we look out into next year, our expectation would be that, you know, demand gains are more gradual. But you know, it feels to us like the destocking is over. Obviously, as we go into Q4, which is typically a weaker quarter for TT, our expectation is that, you know, volumes will be flat to slightly down. I'll ask Jonathan to comment on sort of more volume details there. Yeah, Mark, thanks. Just building on your comments. You know, as you said, we are starting to see some green shoots here in AP, while demand, you know, around the rest of the world is fairly muted. But part of the transformation plan, part of the TT transformation plan that we started with the Kuantan shutdown, was to control what we can control, right? So that plan is gonna deliver $15 million of cost savings in the fourth quarter, and, you know, $50 million-$100 million over the course of next year, right? So, we plan on showing $100 million improvement in our TT earnings profile into 2024, and that's really what the team is focused on driving for the remainder of the year and on into next year. So, John, we're really excited about the transformation in TT that's underway, and ensuring that we can be, you know, the most cost competitive, the lowest cost, and the best TiO2 producer in the world. Got it. Okay, fair enough. And then maybe we could just shift on, on this, on our second question, just, over to the TSS business and the data center opportunity that you, that you highlighted in the prepared remarks. I mean, you're talking about some pretty significant cuts in terms of how data centers can cut down their energy. I guess, can you help us in some way to frame the market potential for a product like this, as you kind of ramp it up in late 2025 and into 2026 and 2027? Yeah. So first of all, the immersion cooling market represents a whole new add to our TSS franchise, beyond the strong Opteon platform. So we're hugely excited about the potential of almost another business on top of what we already have going into 2025. As we have looked at the addressable market, you know, I think their estimates now running out through 2030 suggest this is a $2 billion to $3 billion addressable market. But John, as you know, I mean, every day you hear another headline on AI, and all that is happening in quantum computing, that is really driving a significant growth in data centers. You know, the energy reduction for cooling servers is an estimated 90%, in a certainly high 80s, based on the math I've seen. It's a significant reduction in energy, and also a significant reduction. It essentially eliminates water usage for cooling data centers, where today you're cooling massive amounts of air. You know, both in terms of the climate impact and obviously, the opportunity, it's significant. We're in the process right now of going through the product registration process, and as we've said earlier, you know, we plan to start commercializing that product in 2025. Obviously, you know, we'd have a significant ramp from there as we look at the addressable market that I talked about by 2030. Got it. Thanks very much for the call. Your next question comes from the line of Josh Spector from UBS. Your line is open. Yeah, hi. Thanks for taking my question. So I wanted to follow up on TSS a bit, and just, you know, when you talk about your cut to guidance for the year, you framed it more in terms of TT expectations change. You know, within TSS, I guess, would you say your expectations change much for this year? And kind of related to that, when you think about the rollout for next year, you said you're going to grow, but prior step-downs were kind of coincident with a lot of the changes on the auto OEM side, where there was more complete conversion. How does that take place over this next year, where it's more HVAC-related and OEMs don't have to change their equipment until the year after next? And has any sell-through around there changed? So really, what's changed around your expectations in next year? T here's an equipment transition happening through next year to be ready for 2025. So our expectation based on our interaction with the OEMs, is that there will be growth next year on TSS Josh, we'll cover 2024 guidance when we get there. As we think of our guide for this year, obviously, the main challenge that we're having this year is TT volumes. And as I said in my opening remarks, we're also seeing some weakness on the Advanced Materials franchise of our APM business. And in that business we are focused on growth mainly in our PFA business that goes into semicon and in Nafion which services the rapidly growing hydrogen market. Today, we're sold out of both Nafion and PFA. We're actively working on expansion at our Washington Works plant in West Virginia. We're having some permitting delays, which in fact impacted our Q3 growth in Performance Solutions. The team believes we're close to having a permit there, and of course, that will be reflected as we ramp that plant up in early 2024 in our 2024 results. Again, very excited about the secular growth in both TSS and APM. Growth is never linear, and in APM, it's a lot to do with permitting on the PFA perspective. It's also related to how quickly you can debottleneck, and obviously, every quarter doesn't yield the same results as we debottleneck our Nafion production. But again, long-term secular growth intact. Thanks, Mark. Appreciate that. Just, I guess, me coming back to TSS, there's been, I think, some changes within the equipment side about, you know, what's going to be allowed heritage-wise or otherwise into next year. I honestly don't really know if some of the changes have been positive or negative for adoption for you guys. Can you comment on any of that? Yeah, I understand there is the industry is still working through the recent regulation change with the EPA. You know, it could have some near-term impact favoring HFCs. But listen, I think the focus on the complete changeover by early 2025 and all that's needed to meet that date is gonna drive good Opteon traction in 2024. The other thing I would say is, you know, we've continued to see very strong auto builds. And I think as we look into next year, you know, I think the current expectation is that will continue, which is also good. We'll also remember as there's more EV adoption, that's larger charge size. So listen, you know, as we'll talk more about 2024 in February when we complete the year here. But again, very excited about the growth that we see coming in both TSS and APM. Okay, thank you. Your next question comes from the line of Hassan Ahmed from Alembic Global Advisors. Your line is open. Morning, Mark and Jonathan. You know, a question on the TT side of things, as it relates to cost curves. Look, obviously, your margins have compressed a fair bit. I mean, latest quarter, 10% EBITDA margins, and you're obviously one of the lowest cost producers out there. So I'm just trying to understand where the marginal producer economics are right now and how sustainable. I mean, I'd like to think there's a large chunk of the industry that's in the red right now. And how sustainable that sort of environment really is, and how that plays into how you're thinking about 2024 and beyond. Hassan, that's a great question, and obviously, when you look at our results this year, you know, pretty significant volume hit to the franchise. You know, we had higher input costs as we started the year. You know, it was quite a bit of inflation on the input side, you know, going into the beginning of this year. And, you know, under Denise's leadership, the team's done a lot of work to drive both variable costs and fixed costs down. Clearly, you know, with lower volume and lower fixed cost absorption, you know, that's not reflecting. Those improvements are not reflecting, you know, in our, in our EBITDA margin today. But certainly, as we look into next year, we would expect those margins to, you know, to expand and to come back to where we would expect them to be longer term. The point... I'll ask Jonathan to make a comment, but I'll just say there's, you know, clearly there's a lot of product that I think is in the market today at kind of a marginal cost, you know, pricing reflecting marginal cost, not full cost, and that's not sustainable over the long term. And what we're focused on is, you know, absolutely being at the low end of the cost curve, and, you know, the work that the team's doing with the TT transformation plan gives us the confidence to commit to $100 million for next year. And as we said in the script, you know, we're not stopping there. Denise and the team are really focused on ensuring that our franchise is the global winning franchise in high, high, high purity or high quality chloride pigment. Uh, Jonathan? Yeah. You know, the only thing I'd add there is, you know, Hassan, we've kinda seen that coming, right? And the actions, as Mark said, that Denise took early in the year, while painful, we think are absolutely necessary in order to drive our cost of manufacturing down. So we're gonna see, again, $15 million of that benefit show up here in the fourth quarter as a result of the Kuantan closure, and a full $100 million show up next year through the TT transformation plan. As we go through the next couple of quarters, we'll continue to update you on the progress against that $100 million, as well as initial, you know, additional initiatives that we're launching, as we think about it, to optimize the entire manufacturing chain, right? From our mines to our pigment plants and all of the associated overhead. We've got our eyes firmly fixed on, you know, getting to lowest cost. So, I will continue to update you on the path to that first $100 million and incremental savings, as they become visible to us. Fantastic. You know, if I could dig a little deeper into those incremental savings that you mentioned, Jonathan. Obviously, you know, the transformation plan, $100 million over there, but, you know, as I sort of sit there and think through the sort of goings-on as they relate to your input costs, right? I mean, ore costs had been high, but I'd like to imagine that, you know, in this weak sort of volume environment, you know, ore costs are beginning to look a little shaky, and I'd also like to think chlorine costs are looking a little shaky. So above and beyond the $100 million that you guys are talking about for 2024, as it relates to the transformation plan, I mean, how do you think, you know, the input cost side of things could sort of play out, next year? Hey, Hassan, you were breaking up there a little bit, but let me just say, yes, you know, a number of the input costs have come down this year. And obviously, as we look into next year, we're driving, you know, further reductions, you know, through our procurement team across a number of input. A lot of the cost focus so far has been on really our fixed costs with the Kuantan closure, other efficiency gains in our plants, and other focuses on yield improvements, both in our pigment plants and at our mines. So listen, we're, as I said, you know, we're committed to the $100 million, but you should take from my comments that, you know, we're not stopping there. We're focused on driving all forms of cost reduction in TT, you know, given the current market dynamics. Super helpful. Thank you so much, Mark and Jonathan. Your next question comes from a line of Laurence Alexander from Jefferies. Your line is open. Good morning, just two quick questions. One, on the TT productivity program, can you flesh out how you think about it changing your incremental margins when volumes recover? And then secondly, on the data center, cooling, initiative, what you see is the CapEx required to support the growth, out through 2030? Hey, Laurence, this is Jonathan here. You know, obviously, as we look at the kind of controllables in TT, we're taking the cost out today. And as we, you know, as the market recovers, hopefully, you know, starting here in 2024, those cost savings will accrete to the bottom line more rapidly as we can spread the cost over, you know, a larger tonnage base. Today, we're not manufacturing, we're not operating our plants at anywhere near the optimal levels in order to get the right amount of fixed cost absorption. So the gains from, you know, market recovery are gonna come, hopefully starting in 2024. We're not counting on that as we kind of look at the op-cost opportunities, but as they come, that will just compound on top of the $100 million cost savings that we're putting into place today. With respect to the CapEx, you know, we haven't guided to 2024 CapEx or even 2025 CapEx. Just to give you an idea, you know, of how the immersion cooling plan would roll out, we'd start with a smaller pilot plant. You know, that's not a significant capital outlay, at some point here, you know, pre-commercialization. Then, you know, depending on what we think the volume needs are, we—or, you know, a larger facility to bring it more fulsome to market, probably, you know, sometime 2026-2027 time frame. Those are plans yet to come. We're really excited about getting the product commercialized in the first instance, and also finding the hyperscaler, the right set of hyperscaler partners to really make a mark in terms of how data centers are built and the amount of energy and water that get consumed. Hey, Laurence, I just wanted to add to Jonathan's comment a minute here. Clearly, you know, with the closure on the TT question, clearly with the closure of Kuantan, you know, we're now down to 3 large plants to service all our customer needs. And what we typically see is we probably have more fixed cost leverage than some of our other competitors, given how large our plants are. Obviously, you know, as we look at a more gradual recovery, you know, we'll see how that translates into, you know, margin recovery, but again, remain very focused on both fixed and variable cost. And then, you know, on the immersion cooling side, again, we're very focused on how we commercialize that in a very thoughtful way. And then the last point I would make is, you know, we are very disciplined around capital allocation. And, you know, we will allocate capital against... If you think about our five strategic priorities, you know, we're allocating capital to improve how we improve our TT earnings and margins. We're allocating capital to grow TSS. We're allocating capital to grow APM in the high-value markets of advanced electronics and hydrogen. And then finally, you know, we continue to make real progress on resolving legacy liabilities with the MOU arrangement we have with DuPont and Corteva. So if you look at how we're deploying capital, it is all in a way that, you know, over time, will really drive, you know, meaningful returns to our shareholders. Just to put a bow on it, if you do get the data immersion solution to a billion-dollar business, can you give a sense for what the incremental CapEx that would require? I mean, regardless of the timing. And then your return on capital on that would probably presumably be above kind of your historical targets. I mean, given the market that you're selling into and the savings you're providing, is that fair? That's fair. And listen, you know, as Jonathan said, you know, we'll have, we usually have a much smaller investment near term, as we do proof of commercial concept, and then more later. So, you know, we're really talking about capital, you know, in a really out year period here to get to, you know, the TAM that we talked about in 2030. So we'll have more to say about that later. But listen, this would be very high return, high margin growth because this is really driving significant value to data centers. Oh, by the way, data centers, you know, you know, today account for 1% of the global carbon footprint and a meaningful consumption of water. We see a real value to our customers and the planet here in this product, and we're keen to bring it to market. Thank you. Your next question comes from the line of Vincent Andrews from Morgan Stanley. Your line is open. Hi. I was wondering if you all could provide some additional details on trends in the outlook for TiO2 market. Specifically, I was wondering what you're seeing on imports and exports across the different regions, if you could provide a little color on the setup for 2024, and if there are any notable trends within inventory levels in the channel? Yeah, I mean, thanks for the question. It's Jonathan here. You know, as we look at it, right, in terms of the destocking in TiO2 started in the third quarter of last year. So as Mark said earlier in the call, it's been with us now for quite a long time, right? We're going on 12 months. And, you know, even as we feel like we've gotten you know, we can kinda see the bottom here and the demand destocking has decelerated here in the third quarter, going into the fourth quarter, you know, we're not seeing, you know, outside of Asia Pacific, we're not yet seeing the green shoots of a turn, right? But we believe that in terms of the actions that we've taken, we're well-positioned for that market turn. But to answer the question kinda directly, you know, we are seeing, you know, some green shoots here in Asia Pacific. Inventory levels, as a result of kind of prolonged destocking down the chain, do not appear to be high. And with the cost transformation that we've started in this year, we believe we're well positioned to take advantage of the cyclical turn when it happens. So, you know, I think that obviously as we move into the, you know, into February and we put, you know, we close the books on 2023 and we give our guidance for 2024, we'll have a much better sense for whether or not 2024, coating season will develop in the way that we hope it does. Stay tuned, and we'll continue to update you both on the transformation plan as well as our perspective on, you know, the 2024 recovery. Awesome. Appreciate the color. Do you mind also providing some additional detail on the $1 million of run rate cost savings expected for next year? You mentioned earlier during the call that the facility closure may be $50 million-$100 million of savings, if I heard you right. Is there a range for that $100 million, $100 million dollars of cost savings that you're expecting next year? And, I mean, is there, you know, some upside to that depending on what other actions you're taking? Yeah. So the cost savings that we're committing to for next year is $100 million on a run rate basis. $50 million of that is driven by the Kuantan facility closure that we announced on our last call. So we are planning on delivering $100 million of run rate savings here next year. And as I said a couple of questions ago, you know, we're gonna continue to build on that number, and we look forward to giving updates as we get more line of sight to incremental run rate savings beyond the $100 million as we go through the next couple of quarters. Okay. Thank you. We have reached the end of our question and answer session. Mr. Mark Newman, I turn the call back over to you for some final closing remarks. Thanks, everyone, for joining us today. Look, the year has been a challenging year, and the Chemours team has really responded well in focusing on the things we control, in driving cost reduction in TT, and in being focused on how we service the growth in TSS and APM as we go into next year. And we'll continue to, you know, look forward to staying in touch with you and to continuing to drive real value for our shareholders as we go forward. Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.