Cabot Corporation [CBT] Conference call transcript for 2021 q4
2022-02-01 12:35:23
Fiscal: 2022 q1
Operator: Good day and welcome to the Fourth Quarter 2000 -- I'm sorry. Good day and welcome to the First Quarter 2022 Cabot Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be question-and-answer session. To ask a question during the session As a reminder, this call is being recorded. I would now like to turn the call over to Steve Delahunt, Vice President, Investor Relations. You may begin.
Steve Delahunt: Thanks, Michelle (ph) and good morning. I would like to welcome you to the Cabot Corporation earnings teleconference. With me today are Sean Keohane, CEO and President and Erica McLaughlin, Senior Vice President and CFO. Last night, we released results for our first quarter of fiscal year 2022, copies of which are posted in the Investor Relations section of our website. The slide deck that accompanies this call is also available in the Investor Relations portion of our website and will be available in conjunction with the replay of the call. During this conference call, we will make forward-looking statements about our expected future operational and financial performance. Each forward-looking statement, is subject to risks and uncertainties that could cause actual results to differ materially from those projected income statement. Additional information regarding these factors, appears in the press release we issued last night, and in our 10-K for the fiscal year ended September 30, 2021. And in subsequent filings, we made with the SEC, all of which are available on the company's website. In order to provide greater transparency regarding our operating performance, we refer to certain non - GAAP financial measures that involve adjustments to GAAP results. Any non - GAAP financial measure referenced on this call is reconciled to the most directly comparable GAAP financial measure in a table at the end of our earnings release issued last night and available in the Investors section of our website. I will now turn the call over to Sean, who will discuss the first quarter highlights, provide an update on our strategy and then discuss our progress in the areas of Battery Materials and ESG. Erica will review the company and business segment results along with some corporate financial details. Following this, Sean will provide closing comments and open the floor to questions. Sean.
Sean Keohane: Thank you, Steve. Good morning, ladies and gentlemen, and welcome to our call today. I'm very pleased with results in the first quarter as we delivered adjusted earnings per share of $1.29, which is up 9% compared to the same quarter last year. Performance across our businesses was strong, and I'm very proud of our execution discipline across all facets of the Company. Additionally, our discretionary free cash flow during the quarter was robust and this is important in the repurchase of shares and an increase to the dividend of 6%. Our team executed exceptionally well in the quarter and this made the difference in successfully navigating a dynamic macro environment. The quarter was marked by strong progress against our key strategic objectives. And I would like to highlight a few noteworthy accomplishments. We recently concluded our calendar year 2022, Reinforcement Materials, customer agreements, and are very pleased with the outcomes having achieved substantial price increases in all regions. As we shared during Investor Day, the market environment remains supportive and Cabot's value proposition of supplier reliability, quality, and global reach continues to resonate with customers. This is especially true in this period where supply chains are stressed and customers are increasingly looking to de -risk their operations through regionalization of the supply base. This plays very well to our strengths as a company, as we can support our global customers with local supply in all regions. During the quarter, we also continued to build momentum in Battery Materials and we advanced a number of ESG priorities. I will elaborate on both of these fronts, but before I do, I think it's important to connect our priorities to our strategy. During our recent Investor Day, we launched our new Creating for Tomorrow strategy. This strategy is inspired by our purpose to create materials that improved daily life and enable a more sustainable future. As we execute our strategy, we will leverage our strengths to lead in performance and sustainability today and into the future. And we will deliver on this strategy by advancing three key pillars; driving advantaged growth, delivering innovative chemistry to enable a better future, and relentlessly pursuing continuous improvement in everything that we do. By pursuing our Creating for Tomorrow strategy, we will grow, transform and reshape the valuation potential of the Company. Our strategic outlook is underpinned by an expectation of a supportive market environment and the clear connection of our products to compelling macro trends. As a result, our targets call for strong growth of adjusted earnings per share and robust discretionary free cash flow to fund growth and return capital to shareholders. Of our many compelling growth options, we are particularly excited about the momentum we are building in Battery Materials. And so I'd like to transition now to give you an update on our progress in this critical growth vector. As one of our key growth vectors along with Inkjet and E-2C, Battery Materials, is a key part of our creating for tomorrow strategy, and is expected to be a major driver of our growth and reshaping the valuation of the company. The market size for conductive carbon additives in lithium-ion batteries is expected to be approximately $2 billion by 2025, with 30% plus growth expected through 2030. Cabot is very well-positioned given the breadth of our conductive carbon additive portfolio, our global footprint of assets, and our strong local commercial and technical support. The Cabot value proposition is resonating strongly with leading customers, as evidenced by our success in selling to six of the top eight battery producers which represent approximately 90% of the market. During the first quarter, volumes increased 58% year-over-year and we were recently qualified in a new EV platform with the top five battery manufacturer, with sales expected to start in fiscal Q3. Given the strong demand outlook, we advanced important capacity projects in the quarter, including the announced acquisition of a plant in Tianjin, China. We expect to close this deal in the second quarter of this year when we will start our upgrade and conversion of equipment to produce Battery Material products. Also, we are on schedule to start up our new specialty carbons plant and Xuzhou, China, which is expected to free up additional Battery Material capacity in other parts of our network. Given the strong momentum, we expect our fiscal year 2022, full year EBITDA to be in the range of $25 million to $35 million. The lithium-ion battery application holds great promise for Cabot and we are both capable and determined to realize its full potential. Sustainability is integrated into everything we do at Cabot and we advanced a number of important ESG priorities in the quarter. We are committed to reducing our environmental impact while supporting our customers with innovative materials to help them achieve their sustainability goals. We recently announced that we are joining other leading companies to align our sustainability agenda with the Paris Climate Agreement to achieve net zero carbon dioxide emissions by 2050. For many years, we have focused on reducing our environmental impact and our net zero ambition is a natural progression in our sustainability journey. Aligned with this ambition, we recently completed an assessment according to the Task Force on Climate-related Financial Disclosure or TCFD, and published our risks and opportunity matrix. This matrix is posted on our website. Our continued leadership in ESG was also further recognized with two notable achievements. First, we were recognized by Newsweek as one of America's most responsible companies. This is the third consecutive year that we have been included on Newsweek's list and we're very proud of this recognition. And second, we were named by Investor’s Business Daily as one of their 100 best ESG companies in 2021. Bringing the power of innovative chemistry to solve our customers sustainability challenges, and reduce our impact is what motivates us and it's essential to our purpose. I look forward to updating you on further developments, as we progress on our journey. I will now turn the call over to Erica to discuss the financial results of the quarter in more detail. Erica.
Erica McLaughlin: Thanks Sean. I'll start with discussing results for the Company and then review the segment results. We reported another strong quarter with adjusted EPS for the first quarter of a $1.29, up 9% compared to the first quarter of fiscal 2021 and up 16% sequentially with better-than-expected results in both the Reinforcement Materials and Performance Chemicals segments. Discretionary free cash flow in the quarter was $72 million given by a strong EBITDA and we ended the quarter with a $179 million of cash. CapEx in the quarter was $30 million and we expect full-year CapEx to be in the range of $250 million to $275 million. This is an increase from our range last quarter, largely due to higher growth investments expected for Battery Materials in relation to the acquisition and conversion of the new plant in Tianjin, China. The balance sheet remains strong with total liquidity of $1.2 billion and net debt-to-EBITDA of 1.8 times as of December 31st. Our operating tax rate was 27% for the quarter and we anticipate the fiscal year rate will be between 27% and 28%. Now moving to Reinforcement Materials. During the first quarter, even for Reinforcement Materials decreased by $3 million as compared to the same period in the prior year. The decrease was principally due to higher costs associated with utilities and maintenance, largely offset by higher volumes and margins. Globally, volumes were up 4% in the first quarter as compared to the same period of the prior year. Due to 13% growth in Asia, flat volumes in the America and a 10% decrease in Europe. Higher volumes in Asia were driven by strong demand for replacement and off-the-road tires. Higher margins are driven by the benefit of higher energy prices on our energy center in yield investments. Looking to the second quarter of fiscal 2022, we expect a Reinforcement Materials EBIT to improve due to the outcome of our calendar year 2022, customer agreements. We expect volumes will remain solid with sequential improvement expected in Europe and the Americas, and the normal seasonal pattern in China, related to the Lunar New Year. Now, turning to Performance Chemicals, EBIT decreased by $2 million in the first fiscal quarter as compared to the same period in fiscal 2021 primarily due to lower volumes. Year-over-year volumes in the first fiscal quarter decreased by 3% in performance additives due to plant downtime of a fence line partner in our fumed metal oxides product line and 20% in formulated solutions due to the continued planned outage at our Belgium specialty compounds site. While overall segment volume declined, we delivered impressive volume growth of 58%, as Sean noted, in products sold to Battery Materials application as we continue to see growth driven by higher EV demand. Partially offsetting , we delivered higher unit margins from favorable product mix in both our specialty carbons and fumed metal oxide product lines and strong pricing in our fumed metal oxide product line. Looking ahead to the second quarter of fiscal 2022, we expect a step up in sequential volumes as our specialty compounds and fumed metal oxide plants come back online. And as we achieve continued momentum in our Battery Materials and Inkjet growth sectors. We expect to continue to successfully implement price increases to offset rising input and operating costs across the segment. Moving to the next slide. As we talked about at Investor Day in December, we're making capital allocation decisions that aligned with and support our Creating for Tomorrow strategy. The capital investments and the acquisition announced this quarter are to support our growth agenda. In addition to these growth investments, we are also focused on providing an attractive return of cash to shareholders. During the quarter we increased our dividend 6% and return $40 million to shareholders through dividends and share repurchases. We are able to make these growth investments and return cash to shareholders while maintaining a healthy balance sheet with $1.2 billion in liquidity and net debt-to-EBITDA of 1.8 times. We were able to do it all, while retaining an investment-grade credit rating. I will not now turn the call back over to Sean.
Sean Keohane: Thank you Erica. I'll close out my prepared comments today by talking about our outlook for the remainder of the year. We're very pleased with the momentum coming out of the first quarter and we feel very good about how the rest of the year is shaping up. Based on our first quarter results and the outlook across our businesses, we are raising our guidance for adjusted earnings per share to be in the range of $5.50 to $5.90 for the fiscal year. We expect demand to remain strong due to the resilience of the replacement tire market and our diversified application portfolio in Performance Chemicals. As I mentioned earlier, we're very pleased with the outcome of our calendar year 2022. Reinforcement Materials customer agreements, and expect to see a corresponding step-up in earnings starting in the second quarter. We're also seeing strength across our Performance Chemicals segment with strong volumes, robust margins, and product mix, and disciplined pricing execution. The second quarter results are expected to improve on a sequential and year-over-year basis with adjusted EPS increasing as we move through the year. This profile is expected as we continue to build momentum in Battery Materials and as demand increases in Inkjet for packaging applications. Additionally, our new specialty carbons plant is expected to come online in the second half of fiscal 2022. Overall, I'm very excited about where we are as a company and where we're going. The long-term fundamentals of our businesses are strong, our end markets remain robust and we continue to execute at a high level. Looking ahead, we believe we have a winning formula, a talented team, an excellent portfolio of businesses set for growth, and a strong balance sheet, all of which position us to deliver on our strategic objectives and continue to grow and lead in our industry. Thank you very much for joining us today, and I will now turn the call back over for our question-and-answer session.
Operator: . Our first question comes from David Begleiter with Deutsche Bank. Your line is open.
David Wang: Hi. This is David Wang here for Dave. I guess, first can you quantify the benefits from higher unit margins due to higher energy prices? And I guess, what's the new oil price assumption that you've baked in your new guidance? And is there a sensitivity you can provide on your prices and your energy in your investment earnings?
Sean Keohane: Sure. Let me -- turn it over to Erica to try to provide a little color on that question.
Erica McLaughlin: Sure. In terms of Reinforcement Materials, I think you are asking about higher margins and the quantification. The increase in margins was $5 million year-over-year in the quarter and as we do each quarter when we forecast, we use the forward-curve of oil. So we would have used the latest forward-curve just recently in terms of what the oil price impact would be for the remaining of the year.
David Wang: Thank you. And then just on demand, can you talk about your visibility for demand? I guess, for your end markets, were you seeing any restocking happening and are you seeing any destocking at your OEM customers?
Sean Keohane: So the demand profile remains pretty robust. So across Reinforcement Materials, given their resilience of the replacement tire market, as well as some real strength in the OTR, off the road market. That is definitely providing good demand support in the business. As a reminder, somewhere in the 75% to 80% of the tire market is replacement and that tends to be more resilient, more stable, more durable. In Performance Chemicals in some more diverse portfolio of applications. But there's real strength across these applications due to a combination of factors and infrastructure related applications continue to grow very nicely and an emerging applications like batteries, given the growth in EV, continues to be quite strong. In terms of restocking, I think in general inventory levels to remain pretty tight across most value chain. We're not really seeing any level of restocking. In fact, I would say that probably inventory levels for most customers in the various value chains we serve are thinner than they would like them to be. So that's a general comment, but on a restocking point.
David Wang: Thank you.
Operator: Our next question comes from Mike Leithead with Barclays, your line is open.
Mike Leithead: Great. Thanks. Good morning guys.
Sean Keohane: Good morning.
Mike Leithead: First question for Sean, I was hoping you could flesh out a bit more what's driving the higher EPS outlook. Obviously, the first quarter was ahead but it looks like the remaining three quarters are now expected to be incrementally better than you thought a few months ago. I was hoping you could just unpack a bit more what's driving that better outlook.
Sean Keohane: Yeah, so demand remains quite robust, Mike, but overall it's really strong execution on pricing and so, let me try to give you a bit of color there. So, in Reinforcement Materials we realized better than expected outcomes for the 2022 tire customer agreements and so that definitely contributed to the raise in outlook for that business. And then in Performance Chemicals, while input factors are rising pretty much everywhere and the chemical industry is having to address that like everyone else. Our efforts to recover those rising input costs through pricing actions has been very successful and the execution of our teams has exceeded our previous outlook. You'll remember in Performance Chemicals; it tends to be more spot oriented rather than contractual. And so sometimes in a period of rising inputs, we may be chasing it a little bit but the team has really done a fantastic job and executing really well. And so that strength and timing we pricing action is contributing. And then finally, I'd say continued confidence in how the businesses are performing in terms of our growth vectors, in particular, Battery Materials. But across a number of the growth areas that we spent some time on during Investor Day. So, continued confidence building in those is also a factor here. So, those would be the primary drivers, Mike.
Mike Leithead: Great, that's super helpful. And then second question for Erica, maybe two quick things on cash flow this quarter. First, working capital was a $143 million use of cash. So is that a function of higher oil? Or is there something else lumpy in there? And second, I think if I look at the press release, the change in other assets line was a $36 million use of operating cash and the other financing line was $27 million use of cash. Are there any lumpy items in there that you flag, as well?
Erica McLaughlin: Sure. The first question which is the working capital, it is mainly the higher oil prices. So, the increase, you can see, is driven by higher inventory and receivables balances. The inventory balances are largely driven by the oil flow-through within those balances and some planned inventory build adding into Q2. The higher receivables is driven by the higher sales price largely from the pricing we've got down to recover the higher input costs. So I would not say there's anything unusual in the working capital. The view going forward obviously depends on oil prices. We assume that the global prices remain in line with current levels than we would expect a level off of the use of cash for working capital. We will see higher receivables, balances at the higher pricing in the Reinforcement Materials contract flows through in Q2. But then the oil impact should start to moderate, assuming we have flattish oil going forward. And then in terms of the cash flow, in terms of those other operating items, I'd say the only thing notable items flowing through there are, impacts from -- as we're restoring our plant in Belgium, there are impacts in there in terms of repairing of the site and then the insurance proceeds that come through that are pretty -- should pretty much offset that over time. But it is a bit lumpy in terms of what we receive in a given quarter from what we're spending versus what the insurance is coming back.
Mike Leithead: Great. Thank you.
Operator: Our next question comes from Josh Spector with UBS. Your line is open.
Josh Spector: Hi, thanks for taking my question and congrats on a really strong quarter and outlook. I just want to ask broadly on China. Given you guys have a leading position there, there's definitely increased focus around what's going on in China, demand and COVID impacts, etc. Curious if you could share what you saw in the quarter and how Cabot's operations and your customers operations ran and if you have any thoughts about if China shifts their COVID policy management to -- from a tight control to perhaps more of managing an endemic type situation, does that provide -- create any risk to your outlook at all? And I think a lot of your comments seem to be kind of business as usual so just making sure that we're thinking about that, right? Thanks.
Sean Keohane: Sure. So thanks Josh for the comments and the question. We're certainly very pleased with the performance and the outlook. So, first in terms of China, what we saw in the quarter was quite strong performance. And so in Reinforcement Materials across Asia - Pac, volumes were up -- were up strongly, and our perform -- and China as a be a big piece of that. Our performance in China continued to go quite well in the quarter. So as we elaborated during the recent Investor Day, we really consider ourselves a great operator in China. And I think that that continued to show through in the quarter were plans ran well and while the situation at this time is dynamic, we're well able to manage that. Now, as we go forward here, our expectation is for a fairly stable economic environment in China through the balance of 2022. I think the government there has recently adopted some new policies related to this power shortage issue that was well discussed in the early fall, autumn period. There now allowing electricity prices to float out, which has been stimulating power producers to produce more energy. So, there were some issues related to policies there that I think have improved the situation, and so we don't we don't expect any material disruption going forward. The government is also in an effort to balance economic growth along with their other priorities has been, looking to stimulate the economy in certain ways, reducing interest rates, accelerating suspending, infrastructure, and some of these areas that are helpful. I think they're sort of keenly focused on trying to, trying to balance this. Now, on the -- on the COVID front, they've definitely managed in terms of at least reported cases to a much lower level than anywhere else in the world and have had this zero-COVID policy. I think ultimately sustaining that policy will probably prove to be challenging but on balance, I actually consider it to be positive as it relates to our businesses because when there are COVID outbreaks, they tend to take fairly draconian actions which can cause disruptions. And I think if it, over time, transitions to more of a management -- managing COVID approach, then there probably will be a little more stability and that -- that will -- on balance be I think a good thing. So I -- that's how I that's how I see it. But I think that they probably will have to make a transition at some point here from what has been a very tight COVID policy.
Josh Spector: Thanks and I appreciate those thoughts. And just quickly on performance volumes. I mean, you're talking about a lot of things kind of flowing through perhaps later this year. And obviously, I think you get past some of the plant shutdowns. Curious just how high volumes could be year-over-year in the second half in performance?
Sean Keohane: We're definitely have been impacted in the first quarter with some plant related impacts, where we're pleased that this quarter, the Belgian masterbatch plant will be coming back online. So that's positive, and some of the impacts from our FMO partners disruptions should work themselves out here as well. So, I think we'll see a more normal volume profile as we move forward. I think the best way to think about, first of all, it's a diverse portfolio across Performance Chemicals of applications but on balance, these grow at somewhere one-and-a-half to two times GDP and may cause differences by application. And so I think that's still the best way to think about it. So pretty solid growth. Now, there are some areas where we are outperforming and expect to continue to outperform and go well above those numbers. The best example there, of course, there are efforts in batteries where we're expecting to grow at a very high rate above the market growth rate for that business. We feel, we feel pretty good about -- about the volume -- the volume outlook in this business, and as we bring on some new capacity later in the year. Particularly around specialty carbons, that will continue to support the volume growth, both for our legacy, especially carbons applications, but also, we'll have some capacity support for batteries.
Josh Spector: Okay, thanks. Congrats again.
Sean Keohane: Thanks Josh.
Operator: Our next question from Laurence Alexander with Jefferies, your line is open.
Dan Rizzo: Good morning. It's Dan Rizzo for Laurence. How are you?
Sean Keohane: Hey Dan. How are you?
Dan Rizzo: I think you mentioned that the battery market is going to grow at 30%. A year starting 2025 that you think just said, are you going to outpace that? I was wondering what capacity expansions are going to be needed to, kind of keep up with that growth. Not necessarily over the next two years, but say over the next, eight to 10 years?
Sean Keohane: Yeah. So the market just to recap, Dan, so the market for the batteries is growing at 30ish, 30 plus percent based on a number of reported market studies. So that's something that's happening right now and we project that to go for out through the end of the decade, through 2030. Now, as we have shared during our Investor Day, and we have expectations to outpace that and so over the next three years, we are expecting to grow this business at 50 plus percent. And that's purely a function of the Cabot value proposition here in terms of the breadth of our conductive carbon additives portfolio, our global footprint of assets, and the fact that we've got application technology labs and technical and commercial teams all over the world. This is really, I think, a real strength of Cabot and I think that resonates with customers. Now on the capacity front, for sure there'll be capacity adds that are required here. A number of them have been underway over the last couple of years to meet the growth that we're already putting up in this business. And then there will be further adds. It will be required here, as our plant in Xuzhou, China comes on for specialty carbons. That'll one lock some capacity elsewhere in our network to support batteries and then the Tianjin announcement that we just made, where we'll convert an upgrade that facility will provide, then further runway for these high-value conductive carbons. On the carbon nanotube front, we also have capacity expansions underway, there. So, if you think about over the next three years, there's somewhere on the order of a $100 million of CapEx that we'll be spending across the conductive carbon whack and carbon nanotube footprint to build capacity to keep fueling this growth here. We've got a good line of sight on it. We're building great momentum and we're putting the plans in place to continue to have the capacity to meet the needs of this market. Again, we're -- I think it holds great promise and we're certainly determined at our efforts here.
Dan Rizzo: I think you said that dual control in China is easing. But I was wondering has it occurred to you lately, or are your customers that much at all? It doesn't seem like it's been a headwind as highlighted by others within the chemical world.
Sean Keohane: Yeah. It hasn't had a material impact on us and as I said, I think there were some actions taken by China a few months ago that have eased some of the power shortages there. So, I think that's good in the short-term and China will obviously have to continue to balance how it supports economic growth and how it transitions to continue to reduce the environmental impact. But in terms of Cabot's operations, we've not had any material impact. We've been operating really well, I'm very pleased with that. And I think it's again, as a function of all of the things that we've built over the years and why we're a great operator there. Certainly, a lot of experience in our 30 + years, really strong joint venture partners where together, we can manage through these things and our -- the way we operate, run our plants, the level of environmental performance that we deliver, I think is appreciated by the Chinese regulatory authorities. So we're able to manage it. But it's always a fairly dynamic situation in China. But again, it comes down to the advantage going to thanks.
Dan Rizzo: Thank you very much.
Operator: Our next question comes from Chris Kapsch, with Loop Capital. Your line is open.
Chris Kapsch: Good morning. So one question I had was in the context of your revised guidance, sir. You characterize the better expected pricing realization from the contract negotiations as a key or maybe the key driver. Just wondering if there's any way you could quantify that benefit either in terms of carbon black prices on a year-over-year basis, or perhaps in terms of gross profit metrics for the segment, all else equal?
Sean Keohane: Sure. So Chris, just as a recap, I think a few things driving the upward revision on guidance, certainly the outcomes from the entire customer agreements and I'll comment on that a bit more but also I think really strong execution on pricing and Performance Chemicals and really real time we've passed through there. And then third, the continued momentum in these growth vectors of Battery Materials, but also Inkjets. So those are really the three drivers. On the agreements that entire customer agreements, we're definitely overall very pleased with the outcome. I think the supply chain situation impacting the world really placed a lot of value on Cabot as reliable global supplier and we're pleased with that and resulted in some fairly substantial price increases but also volumes that we expect to be in line with the regional demand. So again, overall, pretty strong results. Now, the net impact of all of this, probably the best way to think about it is maybe somewhere in the order of $15 million per quarter net of rising costs around the world. So these contract outcomes included factors like cost-based prices but also factors to recover rising costs like higher natural gas costs or in certain parts of the world, if there are CO2 costs, we've been able to negotiate the recovery of those. So important to understand that point, but net of those rising costs which were recovered, the net impact is somewhere in that 15 million per quarter range, is probably the best way to think about it.
Chris Kapsch: That's helpful, then you alluded to the follow-up, but just the spike in gas and energy prices in Europe, were you simply able to mitigate that through DTA or other actions, or was there converse, I guess any benefit from your energy's center Cogen operations from what's going on over there.
Sean Keohane: Yes. So certainly as energy prices are higher than that, benefits in terms of the Energy Center contributions for sure. Then as energy prices are higher then, some of the technology and yields we're -- that we do is more valuable. So that's been long been the case, and that is the case now. With respect to higher natural gas costs, certainly they've shot up in Europe, but we've been able to largely offset that through combination of DCA adjustment, flow - throughs. And on the more spot side of the business, whether it's in reinforcement or in specialty carbons through spot market actions. So certainly a dynamic situation but pleased with the way the team has been able to manage it.
Chris Kapsch: Great and thanks, and if I could just sneak in one more. So in the Battery Materials business you've talked about that market growing and I get it, 30% to 35% a year through the decade you guys outperforming that. So how do you gauge that out-performance, sir is it on a -- are you -- do you have visibility on a customer-by-customer basis from the specifications where you get qualified that you're getting an outsized benefit from relative to the market growth or any way to, just comment on how you're validating that out performance relative to the market. Thank you.
Sean Keohane: Thanks, Chris. So I think a couple of ways. So one is certainly our volume growth, and that's a backward-looking indicator. But in the quarter, our volumes in this business grew at 58%, so certainly that's well above the market growth, and an indicator of our strong performance here. But again, that's a bit more of a backward-looking one. In terms of forward-looking, we do have pretty good visibility. So the market is fairly concentrated. I think I commented in the past that the top eight producers represent about 90% of the market. And that can move around a little bit and certainly there's a long tail after the top eight but it's a fairly concentrated group of big battery producers. And so we certainly know how we're connected into various programs and how our qualification efforts are progressing. So, that gives a certain measure of visibility. What is difficult to project is exactly who will win and at what rate? And so that's something that is always a little bit of a moving target, but our participation is pretty broad. Here, we're currently serving six of those top eight with development programs, with the others in process here. So the ultimate winners and losers, if I could state it that way is somewhat less of an issue because we're able to participate broadly here. But hope that way gives you a little bit of color on how we try to look at things both from a backward looking, are we achieving our objectives? And then forward-look.
Chris Kapsch: Thanks for the color. Appreciate it.
Operator: There are no further questions, I'd like to turn the call back over to Sean Keohane.
Sean Keohane: Great. Thank you very much, Michelle. Thank you all for joining today, and we look forward to engaging with you again next quarter. And thank you for your support of Cabot. Have a great day.
Operator: So I conclude the program. You may now disconnect. Everyone, have a great day.
