Good morning and welcome to the Stepan Company Third Quarter 2024 Earnings Conference Call. During the presentation, all participants will be in listen-only mode. Afterward, we will conduct a question-and-answer session. You will then hear an automated message inviting you to raise your hand. To ask your question, please press star one again. Please be advised that today's conference is being recorded. As a reminder, this call is being recorded on Wednesday, October 30, 2024. It is now my pleasure to turn the call over to Mr. Sam Hinrichsen, Vice President and Interim Chief Financial Officer of Stepan Company. Mr. Hinrichsen, please go ahead. Good morning and thank you for joining Stepan Company's Third Quarter 2024 Financial Review. Before we begin, please note that information in this conference call contains forward-looking statements which are not historical facts. These statements involve risks and uncertainties that could cause actual results to differ materially, including but not limited to prospects for our foreign operations, global and regional economic conditions, and factors detailed in our Securities and Exchange Commission's filings. In addition, this conference call will include discussions of adjusted net income, adjusted EBITDA, and Free Cash Flow, which are non-GAAP measures. We provide reconciliations to the comparable GAAP measures in the earnings presentation and press release, which we have made available at www.stepan.com under the investor section of our website. Whether you are joining us online or over the phone, we encourage you to review the investor slide presentation. We make these slides available at approximately the same time as when the earnings release is issued, and we hope that you find the information and perspectives helpful. With that, I would like to turn the call over to Mr. Quinn Stepan, the Chairman of Stepan Company. Good morning. Today, we announce that our Board of Directors has appointed Luis Rojo as the Company's President and CEO and a member of the Board effective immediately. Luis succeeds Scott Behrens, who has served in that role for the past three years. We thank Scott for his leadership and his many contributions to the growth and diversification of Stepan over his 30-year career with the company. As you are aware, Luis has served as the CFO of Stepan for the past seven years. During his tenure, Luis has developed a deep understanding of all aspects of our business, and while he naturally has a strong financial mindset that will serve him well in the CEO role, he is also a strategic thinker and will ensure we execute on present market and operational opportunities. He is a passionate leader who cares deeply about our customers, employees, and shareholders. Together with the strong team we have at Stepan, he will drive our profit recovery and deliver value for our shareholders. The board and I have great confidence in Luis and look forward to working with him in his new role. With that, I would like to turn the call over to Luis. Congratulations, Luis. Thank you, Quinn, and good morning, and thank you all for joining us today to discuss our third quarter 2024 results. I plan to share highlights from our third quarter performance and will also share updates on our key strategic priorities, while Sam will provide additional details on our financial results. The company reported third quarter Adjusted EBITDA of $53 million, up 11% versus the prior year. This double-digit Adjusted EBITDA growth was driven by improved volumes and margins in our surfactant business. Global sales volume was down 1%. Double-digit growth in several surfactant end markets was fully offset by demand weakness and competitive pressures in our polymers business. We believe the sluggish demand in polymers is related to global macroeconomic uncertainties, low overall construction activity, and the high interest rate environment. Third quarter adjusted net income was up significantly, driven by improved surfactant and Specialty Products results and a lower tax rate. Year-to-date, adjusted EBITDA was $152 million, up 7% versus the prior year, driven by improved volumes and margins. Free Cash Flow for the first nine months of the year was $7 million, and we remain confident that we will close 2024 with positive Free Cash Flow. The company is on track to deliver our $50 million cost reduction goal for 2024 through ongoing disciplined efforts in supply chain and the workforce productivity actions taken in the last quarter of 2023. During the third quarter of 2024, the company paid $8.4 million in dividends to our shareholders. Our Board of Directors declared a quarterly cash dividend on Stepan common stock of $0.385 per share, payable on December 13, 2024. This represents a 2.7% increase in our dividends. Stepan has paid and increased its dividend for 57 consecutive years. Sam will now share some details about our third quarter results. Thank you, Luis. My comments will generally follow this slide presentation. Slide 5 shows the total company net income bridge for the third quarter compared to last year's third quarter and breaks down the increase in adjusted net income. Because this is net income, the figures noted are on an after-tax basis. Third quarter 2024 adjusted net income was $23.7 million, or $1.03 per diluted share, versus $14.7 million, or $0.64 per diluted share for the third quarter of last year, a 61% increase year-over-year. The adjusted net income increase was driven by higher surfactant volume and margins and a lower effective tax rate, partially offset by polymers' operating income. In the third quarter, we executed tax projects that allowed us to reduce GILTI income to zero while still expecting to let bonus depreciation for the Pasadena capital investment. With those actions and additional projects, we are now projecting an effective tax rate for 2024 in the range of 19%- 20%. Slide 6 shows the total company Adjusted EBITDA bridge for the third quarter compared to last year's third quarter. Adjusted EBITDA was $53.1 million versus $48 million in the prior year, an 11% increase year-over-year. We will cover each segment in more detail, but to summarize, we delivered Adjusted EBITDA growth in Surfactants and Specialty Products, partially offset by global Polymers. Higher corporate expenses reflect $3.3 million related to the Asia fraud event. The investigation is now closed and confirmed that this was an isolated and contained event. Slide 7 focuses on the Surfactants segment results. Surfactant net sales were $383 million for the quarter, a 2% increase versus the prior year. Selling prices were up 1%, primarily due to improved product and customer mix. Volume was up 3% year-over-year, primarily due to double-digit growth within the Agricultural, Oil field and the Construction and Industrial Solutions end markets, as well as sales with our distribution partners. Latin America's surfactant volume grew mid-single digits as we added new and recovered business in the consumer volumes in Mexico. Global agriculture grew 22%, in line with our expectation for a recovery in the second half of 2024. Foreign currency translation negatively impacted net sales by 2%. Surfactant adjusted EBITDA for the quarter increased $12.6 million, or 40% versus the prior year. This increase was primarily driven by the 3% growth in sales volume and improved customer and product mix. This was partially offset by pre-operating expenses at the company's new facility in Pasadena, Texas. Now on slide eight, polymer net sales were $150 million for the quarter, a 12% decrease versus the prior year. Selling prices decreased 3%, primarily due to the pass-through of low raw material costs and competitive pressures. Volume declined 11% in the quarter. Global Rigid Polyols volume was down 13% due to sluggish demand and competitive pressures. We believe the sluggish demand is related to global macroeconomic uncertainties, overall low construction activity, and the high interest rate environment. Specialty Polyols volume was up low single digits. Foreign currency translation positively impacted net sales by 2%. Polymers Adjusted EBITDA decreased $6.3 million, or 21%, versus the prior year, primarily due to the 11% decline in sales volume. Finally, Specialty Products' net sales were $14.3 million for the quarter, a 24% decrease versus the prior year, primarily due to lower selling prices. Sales volume was down 5% versus the prior year, while Adjusted EBITDA increased $1.3 million, or 33%. The increase in adjusted EBITDA was primarily due to higher unit margins within the medium-chain triglycerides product line. Turning to Slide 9, for the first nine months of 2024, cash from operations was $94 million, or 11% lower than the same period last year due to the previously mentioned increase in inventory levels to prepare for the hurricane season and the two polymer plant turnarounds planned for the fourth quarter. We expect to return to lower inventory levels during the fourth quarter of 2024. Free Cash Flow was positive at $7 million for the first nine months as capital investments returned to historical levels. During the first nine months, we deployed $87 million against capital investments and $25 million for dividends. Now on Slide 10 and 11, Luis will update you on our strategic priorities and capital investments. Thanks, Sam. I will focus my comments on our cost initiative, business strategy, and the progress of our major capital investments. Year-to-date, the company recognized $34 million in pre-tax savings despite the impact of incremental expenses related to the Millsdale flood event and the Asia flood event. These savings were partially offset by pre-operating expenses of our new Pasadena site and overall inflation. The Millsdale site continued to advance our water management initiatives. We will continue working on short-term improvements as well as our long-term infrastructure projects. We remain pleased that several of our surfactant businesses continue to deliver double-digit volume growth during the quarter. Our customer will always remain at the center of our strategy and innovation. Our long-standing Tier 1 customers value our technical capabilities and our ability to manufacture and deliver quality products at the scale they need. Our Tier 1 customer base remains a solid foundation of our business. Continuing our new customer acquisition with Tier 2 and Tier 3 customers remains a key priority. This is an important and profitable growth channel within our surfactants business. In the first nine months, our volume grew high single digits, and we added over 1,200 new customers. Our diversification strategy into more Functional products remains a key focus area. In the first nine months, we grew double digits in oil field and Construction and Industrial Solutions. Our agricultural business resumed growth and delivered 22% year-over-year volume growth in the third quarter after a difficult first half. We remain optimistic Rigid Polyol demand will increase as the market gets more macroeconomic clarity and the interest rate environments improve. Insulation remains a critical enabler of a more sustainable and energy-efficient world. Our polymers business continues to focus on developing the next-generation rigid polyol technologies that can increase the energy efficiency and cost performance of our customer insulation products. Additionally, we are excited about the new products we are introducing in the growing spray foam end market. Moving to Slide 11, construction of our new alkoxylation production facility in Pasadena, Texas, is 99% complete, and we are excited to start the plant in December. We expect the full contribution run rate of the plant to be achieved in the second half of 2025. After completing a three-year capital investment program last year, Stepan now has the largest installed Low 1,4-dioxane production capacity serving the North America merchant market. For the first nine months of 2024, margin contribution from Low 1,4-dioxane products grew versus the prior year. To conclude, we remain pleased that several of our surfactant businesses continue to deliver double-digit volume growth during the quarter. Third quarter agricultural volumes grew in double digits, aligned with our expectation for a second half 2024 recovery. We remain optimistic rigid polyol demand will increase as the market gets more macroeconomic clarity and the interest rate environment improves next year. Free Cash Flow should continue to improve versus the prior year, driven by the completion of our Pasadena investment, growth in market volumes, and our continued focus on cost reduction. We believe we are positioned to deliver full-year adjusted EBITDA growth and positive Free Cash Flow. This concludes our prepared remarks. At this time, we would like to turn the call over for questions. Marvin, please review the instructions for the questions portions of today's call. Thank you. At this time, we'll collect the question-and-answer session. As a reminder to ask a question, you'll need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. And our first question comes from the line of Mike Harrison of Seaport Research Partners. Your line is now open. Hi, good morning. Congrats, Luis, on your new role. Was hoping that you could answer a couple of questions for me on the surfactants business first. I'm very curious. On the ag business, you set up double digits. Obviously, it's been a long road for that business to recover. Is your sense that you're seeing sustained improvement in demand as you're starting to look at Q4 and maybe orders even for Q1 of next year? Or are there maybe some signs that there was a one-time inventory replenishment that happened in Q3 and maybe order patterns could be a little bit choppy as we look at the next couple of quarters? Good question, Mike. No, we are very pleased with the performance in our agricultural business. As we said in our prepared remarks, the business grew 22% in the quarter. We are happy to declare the end of this trough, and hopefully, we won't talk anymore about this trough in the future. But this is 100% in line with how we communicated guidance and perspective in the first two quarters, right? We said we were expecting this trough in the first two quarters, and then we were expecting growth in the second half. We are delivering the growth in Q3. Q4 is looking okay. I mean, it's looking good. October is looking in the same proportion. And remember that this is the heavy season for North America on the ag business. So Q4 is going to remain a critical quarter for us, and we see good signs. We are monitoring other ag companies. FMC reported yesterday, and other companies have been reporting, and we feel good about the ag business. All right. That's good to hear, and then I also noticed in the slide deck there that Europe looked like it was maybe the biggest driver of year-over-year improvement in surfactants earnings, and it seems like a lot of positive dynamics are going on in Europe. Can you talk about what you're seeing there? Yeah. This is in line with our ag business as well, so we are very pleased with the performance of the surfactant business in Europe. Kudos to the team there, and we are seeing the same positive trends in ag. All right, and then just in terms of the consumer side of the surfactants business, it sounds like maybe that's where there was some weakening. I don't know if that's market-driven or destocking-driven. Any thoughts on what's going on on the consumer side and could that start to stabilize? Yeah. The global consumer business has a few ups and downs. And we were down on the personal care side, driven by some of our customers losing some business and some share and impacting us sequentially because of that. But the good news is that when you think about the laundry and cleaning business, right, which at the end is our biggest volume business, it grew 4% in the quarter. So we are pleased that the laundry and cleaning business continues to do well. And that's a key indication of how the consumer continues spending in laundry and cleaning. So ups and downs, but we're pleased with the cleaning business. All right. Last question for me, and then I'll turn it over, is you've talked a little bit about $60 million in quarterly EBITDA being kind of the near-term earnings potential. You came in at $53 million this quarter. Can you talk about some of the areas that are maybe still dragging on your performance? I know there was a $3 million impact from the cyber fraud situation. But just kind of curious, is $60 million a quarter still the type of level that you would expect to be able to reach as we start to look into early 2025? Thank you. Thank you, Mike. As you know, we don't provide guidance, Mike. And let me remind that my comment last quarter was about we delivered last quarter with a lot of one-time impacts. And when you exclude those one-time impacts, you were rightly, as you mentioned, in the $60 million EBITDA. What I will say is that we are posting $53 million with a $3.3 million one-time event due to the fraud issue in Asia and with a depressed volume business in the Polymers side. As you saw, Polymers EBITDA went down $6.3 million. And we don't believe that's going to be always the case, right? So you have those particular two items driving the quarter to $53 million. All right. Thanks very much. Thank you. One moment for our next question. Our next question comes from the line of Dave Storms of Stonegate. Your line is now open. Good morning. Good morning, Dave. Congrats on the new role there, Luis, and just kind of wanted to start with Rigid Polyols. You mentioned a couple of times that there's obviously macro headwinds. Are there any specific catalysts that you're keeping an eye on that might bring some clarity to the macro market, and maybe how fast could we see a rebound there if any of those catalysts come to fruition? Great question, Dave. Look, as we said, and you can see a lot of statistics out there, the construction activity, both residential and non-residential, is pretty weak. Now, if you look at it, it has been very weak in the short term, and the expectation is that with moderation in interest rates, we should see a pick up in activity in 2025. Let me remind you guys that this is a market that has been growing high single digits over the last 10 years - 20 years. The need for better insulation is there. The new codes in different states and different countries in Europe continue changing. And we believe the market growth, even though it was seven, eight, nine percent in the past, we believe it's not going to be that we believe we're going to see this type of market growth three, four, five percent into the future. So we are confident with our rigid polyol business in the next five years when you look at trends in pent-up demand for re-roofing and all the construction that happens early 2000s that needs re-roofing in the next five years. All those trends are very, very positive. So we feel good about the lamination market growth opportunities going forward. And we are heavily working on our diversification strategy to get into the high-margin and growing spray foam business, which is critical for us as well to get into residential insulation and all of that. But great question, and we feel good about the polymers business for the future. Understood. Thank you for that. And then just turn over to the surfactants. It's great to see some of the initiatives kind of take hold as you work on just always bettering your customer mix. How much more room is there, do you think, to continue improving the customer mix? And are there any initiatives to kind of highlight on that front? Great point, Dave. We have been talking a lot about tier two, tier three. This is an area where there are at least I mean, there are 40,000 customers out there that we are not reaching all of them today. So that's why we have a big program and a big focus on tier two, tier three. That business has been growing double digits. That also shows the strength of the consumer and is a very good indication on how the economy is doing when you have such a broad set of customers, right, that we either go direct or we either go with our distributors. These are thousands of thousands of customers. And when you see them growing strong double digits, that's a very good sign that the demand is strong. And now we need to keep reaching more of those consumers. So our customer acquisition strategy in tier two, tier three is key. It's new customers. Then when you are in the customer, it's more products because we still have a lot of customers where we only sell one or two products. And then sweetening the mix within that customer to higher margin and to higher value type of products. So it's a three-step strategy on our tier two, tier three. And it's still a good opportunity for us to continue to work on. That's perfect. Thank you. And then maybe just one more of a logistical question. As we're looking into Q4, should we expect any planned shutdowns or plans for maintenance or anything like that outside of what would be a normal cadence? Perfect question because we put it in the prepared remarks. We have two turnarounds in the polymers business now. That's why we built inventories in Q3. That's why Free Cash Flow was only minus $4 million because we built a lot of inventory in Q3. Actually, the impact of inventory, you can see it in the cash flow, is $29 million. So significant increase because of the hurricane season and also because of the polymers turnaround. So that's going to impact absorption, as you can imagine, in Q4. But of course, this is just an absorption, one-time impact, and it's nothing related to the long-term health of the business. We are executing those turnarounds now, and they are going pretty well. That's perfect. Thank you for taking my questions, and good luck in the fourth quarter. Thank you. Thank you. One moment for our next question. Our next question comes from the line of David Silver of CL King & Associates. Your line is now open. Yeah. Hi. Thank you. I'll also send my congratulations to Luis and Samuel for the new roles. I'd like to maybe just start with a question on your CapEx outlook for next year, so it was good to see that Free Cash Flow has turned positive beginning this quarter, I guess, and the company is coming off of a period of elevated, I would say, spending on CapEx and some other things. When we are thinking about next year, Luis, can you maybe discuss what the new kind of sustaining level of CapEx, maintenance, environmental, safety, etc., what that level is, and then could you identify areas where Stepan will still be spending discretionary CapEx? In other words, taking advantage of opportunities or higher return projects? Thank you. Thank you, David, for the question. And look, we have been clear that after this heavy CapEx period behind Low 1,4 and Pasadena that we will return to our normal CapEx level of around $120 million - $130 million, right? That's the range that we provided this year, even though we have spent some money still in Pasadena. And that's what we are expecting going forward. Now, that's the base. And we will continue looking for opportunities to grow and to invest CapEx that deliver a good return for our shareholders. And there are still ideas that we are exploring, and we will communicate them when they are confirmed. But we still have opportunities to invest and to grow. I mean, when you think about the oil field business, this is a business where we're growing 30%-40% this year. We still have very low shares. And the CapEx that we will need is not significant CapEx and new plans or things like that, right? It's blending capabilities. It's one small reactor. It's packaging. It's things like that. So you are not going to see a major CapEx cycle for Stepan in the short term with the opportunities that we have. And that should allow us to continue delivering positive Free Cash Flow for our shareholders. Okay. Great. Thank you for that. I wanted to ask about your marketing efforts. And I'm looking at slide 10 in the upper right-hand corner, customer intimacy and extended reach. So you've been very clear over a multi-year period about trying to take advantage of your formulation capabilities and expand your share of Tier 2 and Tier 3 customers. You also mentioned here focused growth with strategic Tier 1s. Could you share maybe one or two examples of where Stepan still sees growth with the Tier 1 customers who I assume have a lot of formulation or a lot of development capabilities? Where does Stepan see the opportunities with their biggest strategic customers? Yeah. Great question, David, and tier ones remain a critical foundation of our business, right, and when you think about tier one, you need to think about two buckets. You need to think about consumer, which is true, and we are still investing with tier one customers. In Latin America, for example, we talk a lot about in the last few quarters, all the investments that we did in Mexico with new contracted business there, and you also need to think about the tier one customers on the functional side, so when you think about ag and when you think those businesses, those are going to be extremely important, and then that's Latin America, that's functional. The third leg will be all our capacity and capabilities that we have in Low 1,4-dioxane in the North America market. We are the biggest, and we have the best capabilities and state-of-the-art assets, and we will continue leveraging those with our tier one customers. Okay. Great. And then a final question maybe for you, Luis. You've been in place here at Stepan for a number of years, and you were with Procter & Gamble before that. And you're now taking the reins here. I should have prefaced my remarks by saying I dialed in a few minutes late, so I apologize if you touched on this already. But I was interested in your early thoughts about how a Stepan company run by yourself is going to differ from how it was operated or the strategies that were employed under your recent predecessors and whatnot. So what should we look for in terms of change in strategic direction or just overall philosophy with you in charge now, Luis? Thank you. Thank you, David. Great question, and of course, it's day one, and we will continue adjusting our plans and strategy. What I will say is that I'm extremely honored and humbled for the opportunity. We have a very strong team in Stepan. It's not about Luis. It's about the team in Stepan. This team, I know this team. I have been here for almost seven years, and I know what this team can deliver, and I think working together and making sure that we are clear and we are focused on the biggest priorities and the biggest opportunities that we have in the short and midterm is going to continue delivering profitable growth and shareholder value, so I'm extremely pleased with the team that I have and with the team that is going to help me to deliver what we need to deliver. And we are not going to change the overall big, big strategic areas where we are focusing, but we are going to make surgical changes. We're going to make surgical investments in a few areas to accelerate the growth and to make sure that we are more focused on those activities instead of the 100 opportunities that we may have today. So extremely happy with the team, and I'm sure the team is going to deliver the results. Very good. I appreciate all the color. Thanks, Luis. Thank you, David. Thank you. This concludes the question-and-answer session. I'll now like to turn it back to Luis Rojo for closing remarks. Thank you very much for joining us on today's call. We appreciate your interest and ownership in Stepan Company. Have a great day. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.