Avient Corp (AVNT) Q3 2026 Earnings Call Transcript

DATE

Nov. 4, 2026

CALL PARTICIPANTS

• Director of Investor Relations - George Thomas Clark
• President and Chief Executive Officer - Michael J. Frank
• Senior Vice President and Chief Financial Officer - Giuseppe Di Salvo

TAKEAWAYS

• Adjusted EPS -- $0.86, increasing 23% and exceeding management's guidance of $0.80 by $0.06 due to better-than-expected sales in the packaging, healthcare, and building and construction markets.
• Total Revenue -- $891 million, growing 10.5% driven by broad-based strength across both operating segments.
• Organic Sales -- growing 10.6% year over year, reflecting a 0.1% negative impact from unfavorable foreign exchange translation.
• Adjusted EBITDA Margin -- 17.3%, expanding 80 basis points to a third-quarter record behind productivity initiatives and favorable sales mix.
• Specialty Engineered Materials Sales -- growing 15% organically, with eight out of nine end markets contributing to year-over-year gains.
• Color, Additives and Inks Sales -- growing 8% organically, supported by pricing actions to offset inflation and demand for functional additives.
• Asia Organic Sales -- growing 20% year over year, benefiting from high-performance computing and electronics demand in local markets.
• Adjusted EBITDA -- $154.4 million, increasing 16% as higher sales and operational leverage offset inflationary pressures.
• Debt Reduction -- $50 million during the quarter, bringing the total debt reduction over the last 18 months to $250 million.
• Full-Year Adjusted EPS Guidance -- $3.22 to $3.32, raised from the previous range of $3.10 to $3.25 reflecting confidence in fourth-quarter demand.
• Full-Year Adjusted EBITDA Guidance -- $593 million to $603 million, narrowing the range at the midpoint from the prior forecast of $590 million to $603 million.
• Adjusted Free Cash Flow Guidance -- $215 million to $230 million, raised from the previous low end of $210 million.
• Share Repurchases -- 281,000 shares for approximately $10.9 million during the fourth quarter to date, marking the first buyback activity for the company since 2022.
• Volume Growth -- 1% at the total company level, with price and mix accounting for the remainder of organic growth.
• Defense and Consumer Markets -- growing double digits in the Specialty Engineered Materials segment, where they represent over one-third of total segment sales.
• Healthcare Sales -- returning to double-digit growth in the third quarter following customer inventory rebalancing that weighed on performance during the first half of the year.
• Capital Expenditures -- approximately $120 million for the full year, representing an increase from $107 million in 2025 to support strategic growth investments.
• Net Leverage -- 2.2 to 2.3 times expected by the end of 2026, compared to 2.6 times at the end of 2025.
• EMEA Sales -- remaining muted relative to other regions due to weaker demand in the consumer, industrial, and transportation sectors.
• Variable Compensation -- $30 million to $35 million estimated headwind for the year, contributing to higher corporate expenses as the business meets performance targets.
• Building and Construction Market -- growing double digits in the U.S. and Canada, driven by demand for commercial infrastructure investment and lightweighting applications.
• Raw Material Inflation -- mid-single-digit levels expected for the full year, with hydrocarbon raw materials accounting for 35% of total purchases.
• Operating Leverage -- 120 basis points of EBITDA margin expansion in the Color, Additives and Inks segment, reaching 20.1% behind higher sales and cost discipline.

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RISKS

• Di Salvo stated, "While this dynamic weighed on the first half health care sales, the underlying demand and secular trends supporting growth remain intact," referring to the ongoing inventory rebalancing by customers for drug delivery and remote monitoring devices.
• Management warned that organic sales growth in EMEA was muted relative to other regions due to persistent demand weakness in the consumer, industrial, and transportation end markets.
• Frank stated, "Our outlook accounts for continued macroeconomic uncertainty including demand pressures related to persistent inflation and higher interest rates."

SUMMARY

Avient Corporation (NYSE:AVNT) reported third-quarter financial results that exceeded management's expectations, supported by 10.6% organic sales growth and record adjusted EBITDA margins of 17.3%. Management reported broad-based strength across both the Specialty Engineered Materials and Color, Additives and Inks segments, particularly within the healthcare, defense, and building and construction markets. The company raised its full-year guidance for adjusted earnings and free cash flow while resuming share repurchases for the first time since 2022. New CEO Michael J. Frank indicated a strategic focus on accelerating the commercialization of innovations, optimizing the manufacturing footprint, and enhancing cross-segment collaboration to drive long-term profitable growth.

• CEO Frank identified an opportunity to shift from sequential to simultaneous scaling of new material science solutions across the global customer base to accelerate innovation impact.
• Management noted that the company is taking a fresh look at its manufacturing footprint and supply chain to improve plant utilization and decrease operational complexity.
• The company is utilizing tools and technologies, including artificial intelligence, to leverage its global procurement scale and create step-change savings.
• Healthcare sales, which represent 8% of revenue in both operating segments, returned to double-digit growth as customer inventory levels began to stabilize.
• Asia remains a significant growth engine, growing 20% in the quarter behind demand for high-performance computing and electronics components used in semiconductor fabs and data centers.
• Frank indicated that while M&A is not expected in the immediate near term, the company will rebuild its acquisition muscle as it continues to delever the balance sheet.

INDUSTRY GLOSSARY

• Adjusted EBITDA Margin: A non-GAAP profitability metric calculating earnings before interest, taxes, depreciation, and amortization as a percentage of sales, excluding special items.
• Growth Vectors: High-growth market segments identified by the company, including healthcare, personal safety, electronics, and sustainable solutions.
• Functional Additives: Specialty chemical components added to materials to provide specific performance benefits, such as barrier technologies for food packaging or foaming agents for lightweighting.
• Specialty Engineered Materials (SEM): A business segment focused on sophisticated polymer formulations and composite technologies for complex engineering applications.
• Color, Additives and Inks (CAI): A business segment providing custom colorants, additive concentrates, and specialty inks for various industrial and consumer applications.
• Inventory Rebalancing: A period where customers reduce their held stock levels, resulting in lower orders for suppliers despite stable end-user demand.

Full Conference Call Transcript

Operator: Good morning, ladies and gentlemen, and welcome to the AVN Corporation's webcast to discuss the company's Third Quarter 26 Results. My name is Kevin, and I will be your operator today. At this time, all participants are in a listen only mode. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to George Thomas Clark, Director of Investor Relations at Avient.

George Thomas Clark: Thank you, and good morning to everyone joining us on the call today. Before we begin, we would like to remind you that statements made during this webcast may be considered forward looking statements within the meaning of the Private Securities Litigation Reform Act of 2000. Forward looking statements will give current expectations or forecasts of future events, and are not guarantees of future performance. They are based on management's expectations and involve a number of business risks and uncertainties. Any of which could cause actual results to differ materially from those expressed in or implied by the forward looking statements.

We encourage you to review our most recent reports, including our 10-Ks or any amendments for a complete discussion of these factors and other risks that may affect our future results. During the discussion today, the company will use both GAAP and non GAAP financial measures. Please refer to the presentation posted on the Investor Relations section of the Avient website where the company describes the non GAAP measures and provides a reconciliation for historical non GAAP financial measures to their most directly comparable GAAP financial measures. A replay of this call will be available on our website. Information to access the replay is listed in today's press release, which is available at aviant.com in the Investor Relations section.

Joining me on the call today is our President and Chief Executive Officer, Mike Frank and Joe DeSalvo, Senior Vice President and Chief Financial Officer. I will now hand the call over to Mike to begin.

Michael J. Frank: Thank you, George, and good morning, everyone. I want to start by saying thank you to the Global Avient team for welcoming me to the company and to the Board for their trust and support. I am truly honored to join Avient. As I have gotten to know the company, my excitement for the value we can create has only grown. It really comes down to 4 key themes, the people, the business, innovation, and the opportunity ahead for Avient. I will start with the people because they are truly the core of what determines the company's success.

In my brief time with Avient, I have been struck by the focus on and the passion for the customer, and on innovation. That permeates across the entire organization. In addition, it is clear to me that we have a strong leadership team that is focused on the strategy and our purpose. Over the past few weeks, I have met with several of our stakeholders, including employees, at both our headquarters and operating sites. Customers, suppliers and investors. I came away impressed and excited by the opportunity that lies ahead. We are delivering today with a strategy that is working, but I also believe we have the opportunity to do even more.

Of course, I am also excited about the business itself and the markets we serve. Avient's diverse portfolio of technologies sits at the intersection of several powerful secular trends including health care, personal safety and protection, lightweighting, electronics, and others. These trends are creating significant opportunities for innovative material solutions and positions us well to compete and deliver sustainable organic growth over time. The world is demanding that materials do more. And innovation is the thread that connects all these opportunities. And it is 1 of Avient's core strengths.

By combining deep technical and regulatory expertise, with close customer collaboration, we are creating solutions that strengthen our market positions, expand our addressable opportunities, and generate durable growth. it is only been 3 weeks, but it is clear to me that we have a strong organization, a differentiated portfolio of technologies exposure to attractive growth markets and a proven ability to innovate. The strategy is sound. The disciplined execution by our operating segments is strong, and the opportunity ahead of us is significant. As evidenced by our third quarter results, and updated outlook. The third quarter reflected broad based strength across the business with results exceeding expectations demonstrating the continued effectiveness of the company's strategy.

Adjusted EPS of $0.86 came in $0.06 ahead of expectations and total company organic sales increased 10.6% year over year, Our focus on profitable growth along with the benefit from productivity initiatives increased adjusted EBITDA margins by 80 basis points over the prior year to a third quarter record of 17.3%. Given the healthy performance through the first 3 quarters, we are raising our full year adjusted EPS adjusted EBITDA and free cash flow outlook at the midpoint reflecting our confidence amidst ongoing macroeconomic uncertainty. Joe will cover all the details in later slides. From these business results, it is clear we have momentum.

And before I comment on my initial impressions, and opportunities, allow me to provide some context on the mandate I received from our Board. This is not a turnaround story, and the Board believes our strategy is well defined. However, they also believe we have opportunities to accelerate the growth trajectory of our business which is core to my mandate. Again, it is early days, but let me provide 3 examples of where I see opportunities to start to unlock more value. Firstly, we need to accelerate the translation of innovation into profitable growth.

We have strong innovation capabilities and we need to find ways to scale our unique technologies across our customer base more quickly For example, we have innovated some incredible material science solutions for a medical device company but we are scaling it sequentially instead of simultaneously. Secondly, our customers are looking for us to bring them solutions. Solutions to the big challenges they are trying to solve.

This is an opportunity to enhance how we approach market segments in a holistic manner I have seen some instances when we approach opportunities through the lens of a single technology, business, or individual customer by strengthening our collaboration between our 2 segments, I believe we can better leverage the breadth of our portfolio. And lastly, we have real opportunity to optimize our end to end supply chain. I am taking a fresh look at our operations, including our manufacturing footprint, our product portfolio, and how we go to market. This effort will help us optimize our cost of service and expand our opportunities for profitable growth in some of our more mature markets.

Ultimately, this will not only help to boost growth, but also aid in improving margins as plant utilization increases and complexity decreases. All of that said, we will not sacrifice the progress we have made on margin expansion to drive growth and we are committed to maintaining our focus on productivity and cost discipline. Strong free cash flow will be a meaningful measure of success reflecting our ability to efficiently convert earnings into cash, to provide greater financial flexibility and enhancing returns. That brings me to our capital allocation priorities. First and foremost, we will continue investing in the business to support organic growth and strengthen our competitive position.

Second, we will remain committed to returning capital to shareholders including through our dividend. Beyond those priorities, we will take a balanced and disciplined approach to deploying excess cash evaluating opportunities to reduce debt, repurchase shares, or pursue other value enhancing investments. Our objective is to allocate capital in a manner maximizes long term shareholder value while maintaining the financial flexibility to support future growth opportunities. As such, in the near term, the key metrics I will be focusing on will be profitable sales growth, adjusted EBITDA margins, and free cash flow. Avient is a company with a clear purpose a strong foundation, and strategy that is delivering results. And I see opportunities to help accelerate that strategy.

I see a company with attractive positions in our core markets, and growth vectors differentiated technologies deep customer relationships, with market leaders and a talented team that understands how to execute. My objective is to help unlock even more of that potential increase the pace of execution and ensure that we are fully capitalizing on the opportunities in front of us to materialize a brighter future. With that, I will turn the call over to Joe to discuss our third quarter financial results in more detail. Go ahead, Joe.

Giuseppe Di Salvo: Thank you, Mike, and good morning, everyone. I want to reinforce Mike's comments on our strategic framework. Our teams bring this strategy to life every day, and it continues to deliver results. Our fundamentals are sound. And we are seeing meaningful opportunities to build on this foundation and the momentum we have. In the third quarter, we delivered $0.86 of adjusted EPS, $0.06 ahead of expectationss. Driven by better than expected sales in the Color Additives and Ink segment, primarily in the packaging, health care, and building construction markets. Total company year over year organic sales growth of 10.6% during the third quarter was supported by pricing, new business wins, and robust demand for our growth vectors.

Which led to favorable mix and overall volume growth. Total volume growth was approximately 1% in the quarter. With price and mix contributing the balance of the organic growth. The considerable mix benefit during the quarter was driven by growth in functional additives, such as our chemical foaming agents and barrier technologies. Chemical foaming agents improve light weighting while enhancing material performance in the building and construction market. And barrier additives are primarily used in food and beverage packaging to extend shelf life. While volume growth may appear modest, we are selling more value added differentiated products leading to profitable sales growth.

This and our continued focus in company wide productivity initiatives help expand total company adjusted EBITDA margins by 80 basis points year over year to 17.3%. Higher sales and margin expansion led to adjusted EBITDA growth of 16% and adjusted EPS growth of 23% over the prior year third quarter. Healthy cash flow generation in the quarter enabled debt pay down of $50 million further strengthening the balance sheet. As seen through the September year to date results, shown on the right hand side of the slide, our strategy continues to deliver tangible results. We delivered 4% organic sales growth and 70 basis points of adjusted EBITDA margin expansion.

This translated into 8% adjusted EBITDA growth and 13% adjusted EPS growth, excluding the impact of foreign currency translation. Our momentum was broad based this quarter, with both segments in every region contributing to growth. Shifting to our segment results. Our Color Additives and Ink segment delivered another strong quarter, generating 8% organic sales growth, and 15% EBITDA growth with all regions and end markets contributing. Sales growth was driven by pricing to offset inflation as well as favorable mix from demand for functional additives. New business wins through our key account strategy are also delivering results in packaging and consumer applications.

Particularly in Asia and Latin America, In the US and Canada, building and construction grew double digits driven by demand for applications supporting commercial infrastructure investment. Operating leverage from higher sales and productivity actions offset inflation and higher variable compensation leading to 120 basis points of EBITDA margin expansion and EBITDA margins of 20.1% for the segment. Our specialty engineered materials segment organic sales grew 15% in the quarter, with 8 out of 9 end markets contributing to the year over year sales growth. The segment's 2 largest markets, defense and consumer, accounting for over 1-third of the segment sales, grew double digits in the quarter.

Demand for defense continues to be supported by increased spending by military and law enforcement agencies. Sales growth in the consumer end market is driven by new business gains and favorable year over year demand for recreational equipment. Packaging and telecommunications, particularly in Asia, continue to benefit from demand for our technology used in high performance computing and electronics delivering double digit growth. Applications supporting commercial infrastructure investments in building and construction, energy, and telecom also grew double digits. And I am pleased to report that health care sales in the Specialty Engineered Materials segment returned to double digit growth in the third quarter.

As we highlighted in our last 2 earnings calls, we are experiencing some rebalancing of inventory levels by our customers, especially for drug delivery remote monitoring devices. While this dynamic weighed on the first half health care sales, the underlying demand and secular trends supporting growth remain intact. Our teams continue to build on a solid project pipeline working closely with leading pharmaceutical as well as medical device and equipment companies. This broad based demand led to the segment's strong organic sales growth of 15%. Higher sales combined with productivity initiatives resulted in EBITDA margin expansion of 140 basis points, to 21.3% for the segment. In the third quarter, every region delivered organic sales growth.

Pricing actions to offset raw material inflation were a tailwind for all regions, with volume growth contributing in Asia, The US and Canada, and Latin America. Organic sales growth in EMEA was muted relative to the other regions due to weaker demand for several end markets including consumer, industrial, and transportation. Asia grew 20% year over year, following 18% growth in the second quarter. With both operating segments delivering double digit growth. Asia continues to exemplify our strategy in action. Our key accounts approach is enabling us to win with local customers, while our innovative technologies position us to continue to benefit from secular growth in high performance computing electronics.

With this backdrop, I will now cover our updated financial outlook for 2026. We are raising our full year guidance range for adjusted EPS and raising the low end of our range for adjusted EBITDA and adjusted free cash flow. We now expect adjusted EBITDA to be in the range of $593 million to $603 million adjusted EPS to be in the range of $3.22 to $3.32 and adjusted free cash flow to be in the range of $215 million to $230 million Our outlook accounts for continued macroeconomic uncertainty including demand pressures related to persistent inflation and higher interest rates.

Despite these factors, we remain confident in our execution and momentum through 3 quarters will enable us to deliver a strong finish to 2026. We have also updated our full year capital outlook to approximately $120 million At this updated level, capital expenditures are expected to be above the $107 million invested in 2025, driven by strategic growth investments. Our healthy cash flow generation continues to support balance sheet improvement. During the third quarter, we repaid another $50 million of debt bringing our total debt reduction over the last 18 months to $250 million Our expectation for net leverage is to exit 2026 in the range of 2.2 to 2.3 times compared to 2.6x at the end of 25.

Going forward, I expect we will take a balanced approach to deploying excess cash for further debt reduction and opportunistic share repurchases. To that end, to date in the fourth quarter, we have repurchased 281 thousand shares for approximately $10.9 million This is the first share-buyback activity since 2022, and represents a notable shift in our capital allocation strategy. With that, we will now open the line for Q&A.

Operator: Our first question comes from Vincent Andrews with Morgan Stanley. Your line is open.

Vincent Andrews: Thank you, and good morning, everyone. Mike, welcome. Thought I maybe would ask you a little bit on the new strategy. You know, I talk. I under. Hear you on the innovation fast to market. You want to gain share. Improve the supply chain. It kind of sounds like the classic more better, faster approach. Maybe you could do 2 things. 1, could you talk a little bit about your background which obviously leans heavy into agriculture, but you have probably done these types of things in prior roles. So maybe you could bridge that to Avient Forest. Then secondarily, really appreciate the KPIs you are going to follow.

But maybe you can give us a little bit of a sense of, you know, the speed at which you think you can impact those KPIs You know, was it 2027? Is it 2028? We will really see an inflection? And if you are not 100% sure on the timing yet because you are it is early days, maybe give us a sense of the signpost ahead that you will be providing. Thank you.

Michael J. Frank: Sure. Good morning, Vincent, and thank you for the question and good to reconnect. So firstly, on my background, Vincent, as you mentioned, I have got deep agricultural experience, but I think, you know, clearly, there is a learning curve. Here at Avient in terms of our products and our customers. But I think, you know, at the core of our business, there is a lot of familiar themes. You know, what we need to do better than our competition is we need to serve our customers and create more value, and we are doing that through differentiated solutions. We are driving, and we need to continue to drive higher operational excellence. And that is been core to my background.

And lastly, and as important as the first 2, you know, we need to ensure that we have a highly energized and efficient organization that is really aligned and focused on the strategy. And so those are the things that I have done in my past and that is what I will be doing here at Avient. As we said in our prepared remarks, we have momentum. And the strategy is set. But I. I would also say it is early innings in the strategy. So we still have more work to do. To align the organization, align our resources, to ensure that we can implement with speed against that strategy.

And, again, I gave a couple of examples, you know, in terms of how we approach our customers, and I think we have more opportunity to do more cross selling. And accelerate the pace at which our innovation is being felt in the marketplace. On the KPIs, again, we talked about margins. Organic growth, and, you know, the. And free cash flow. So those will be the 3 things that we are really focusing on. I think on margins, obviously, there is a lot of levers that we are going to pull there.

You know, I think we have demonstrated this year that the price strategy that we have led and got ahead of our inflationary cost, has been very effective, and I think that is 1 of the strengths of Avient. But I also think we need to really unlock volume growth opportunities in addition to pricing. And, you know, as Joel mentioned in his comments, you know, Europe in particular has been muted in terms of our results there and our volume. And so that is an opportunity to really reassess how do we get back to volume growth in Europe and more globally.

And then finally, you know, on free cash flow, obviously, you know, as Joe mentioned, we are going to continue delever the balance sheet. And as we do that, we have more strategic opportunities to think about how we deploy capital. But we are gonna continue to really focus on generating free cash flow to give us those strategic options going forward. So in terms of the speed at which I think you are gonna see the impact, we will have more to say on that Vincent, when we come to our Q4 earnings in February. And talk about our FY 2027 operating plan and guidance at that time. Thank you.

Operator: 1 moment for our next question. Our next question comes from Mike Harrison with Seaport Research Partners. Your line is open.

Michael Harrison: Hi. Good morning, and welcome aboard, Mike. Wanted to dig in a little bit on the health care strengths. You mentioned that you were still maybe seeing some inventory rebalancing in that drug delivery space. But maybe just a little bit more color on how you are seeing health care trends I guess, play out to finish this year and how you are seeing that growth opportunity in healthcare into next year?

Michael J. Frank: Yeah. Thank you, Mike, and thanks for the welcome. You know, let me start with a comment, then I am gonna pass it to Joe to maybe peel the onion back a little bit further. Obviously, health care is 1 of our growth vectors, and we saw another good quarter in health care. There is some components of that in terms of the injectable pens where we are seeing some inventory rebalancing. But broader than that, we have a number of plays with our technology across health care both in CAI and in SEM business units, And so we are seeing a strong growth even though there was some inventory rebalancing.

But I will pass it to Joe to make some comments as well.

Giuseppe Di Salvo: Thanks, Mike. Yeah, Mike, so if you look back at our healthcare business, it reflects about 8% of sales in both segments. So it is you know, similar in both segments and how it contributes to the overall end market exposure. And if you look back at the last 2 years, our healthcare sales have been up double digits. You know, back to back years. And so that is a pretty good testament to what we see in terms of the long-term growth trajectory of that end market. We have really deep customer relationships with the leaders in this space. These are long-term, sticky relationships. We have differentiated capabilities.

We have certain certifications at our facilities that allow us to participate in this end market. And, you know, as we said, we had a little bit of a slow start to the first half of the year due to the inventory rebalancing and some of the things that I mentioned in my prepared remarks as well as what Mike said. But long-term, this will be a growth vector for us and this will contribute to growth in both segments. Alright. Thanks for that.

Michael Harrison: And if I could, you noted the kind of modest share repurchase in the quarter. The balance sheet is getting to a point where we can start thinking about some more meaningful capital deployment in sounds like near term, you are going to be balancing between share repurchase and debt pay down, but maybe a good time to ask Mike how M&A might fit into the capital deployment strategy from here.

Michael J. Frank: Yeah. Thanks, Mike. Look, we are going to continue to be very disciplined as we said in our capital allocation approach. We are gonna fund maintenance CapEx and dividends. That will be our priority. I think, you know, in terms of other strategic opportunities, know, whether they be M&A growth CapEx, share buybacks, those will compete for capital. And you know, as we continue to delever, we will have more and more optionality in terms of how we think about those specific options. Obviously, you know, we did some share buybacks. In. As we started this quarter. And so that is, you know, that is also an option that we are looking at in terms of how we deploy capital.

But, Joe, may want to say a few other things there.

Giuseppe Di Salvo: Yeah. Mike, if you look back at the last couple of years, the year included, we are generating a little over $200 million of free cash flow. So that is our operating cash flow less our capital expenditures. And so with over $200 million of free cash flow, we need about $100 million a year to fund and sustain our dividend, which we are committed to. And then that leaves excess cash of $100 million at least a year. We can take a more balanced approach now that our balance sheet's in a stronger position. And maybe pay down some debt as well as do opportunistic share repurchases.

Just given where interest rates are going and they are likely to be higher that I think we need to continue to be balanced in that. We paid down $250 million of debt in the last 18 months. So as I look ahead at the next 12 to 18 months, I would say that we would still consider paying debt, but also look at opportunistic times to buy back our shares where we feel that the value is well below the intrinsic value of the company. Thank you.

Operator: 1 moment for our next question. Our next question comes from Laurence Alexander with Jefferies. Your line is open.

Laurence Alexander: Hey, it is Dan Rizzo for Laurence. You mentioned scaling faster and some of the changes you are going to make. Over the last few years, have you lost opportunities because you did not scale fast enough or you did not meet client needs fast enough, and that is something that needs to be corrected?

Michael J. Frank: Yeah. Thanks, Dan. Look, I do not think this is a correction. This is about how can we accelerate As you can see in our results, we are. We had very strong results year to date, and again, in Q3. So, yeah, I do not see this as a correction. I see this really as an opportunity to accelerate You know, how do we take our innovation, and scale it you know, as we bring it to 1 customer, scale it to multiple customers at the same time. And I think as we you know, really focus on that being our objective, I do think we scale our innovation faster.

Laurence Alexander: I guess with that in mind, how. I guess, how bespoke is your. Are some of your products? I mean, are there products that are only specifically for 1 customer? Or it is a little broader than that and something you can work on? I did not know. I do not. I just was wondering how tailored they are. And how you can kind of overcome that.

Michael J. Frank: Yeah. I mean, so again. And this gives us stickiness. I would say our products you know, especially in the CAI business, but also in parts of our SEM business, are highly tailored. To the customer needs. And as Joe said, like, in some markets like health care, we are also specked in to those end uses. And so you know, that creates a lot of stickiness And so we work very closely. Our technology teams work very closely with our sales teams at the customer So when their design teams are thinking about innovation for their products that they are that they are selling. We are we are working with them shoulder to shoulder.

So we are we are very embedded with our customers from a technology standpoint. And creating solutions that are that are quite unique to their end use. Alright. Thank you very much.

Operator: 1 moment for our next question. Our next question comes from Frank Mitsch with Fermium Research. Your line is open.

Frank Mitsch: it is Aziza on for Frank. I also wanted to say, welcome, Mike. We look forward to working with you in this role. My first question was around price versus raws. In 3Q, can you elaborate further on what you saw there and maybe provide some outlook for 4Q?

Giuseppe Di Salvo: Hey, Ziza. This is Joe. From a raw material inflation, for the full year, we are probably expecting about mid-single-digit inflation on the total basket of raw materials. Most of that is coming from the hydrocarbon raw materials as you would expect. Which account for about 35% of our raw material purchases. You know, our business model allows us to price contemporaneously, and so we have done a really nice job this year of pricing in line with raws. And so been able to offset that increase. And you see that coming through as part of our sales growth. As part of that is related to pricing. Got it.

Frank Mitsch: And, you know, 3Q saw that pickup in corporate expense. Can you maybe elaborate further there? And you know, give us a guidepost for 4Q on that?

Giuseppe Di Salvo: Yeah. So I think that probably if you are looking year over year, you know, we are up due to our variable compensation, which we talked about at the beginning of the year when we set our guidance. Are expecting about $30 million to $35 million of variable compensation, headwind coming into this year. And as you have seen, you know, we have been able to raise our guidance the last couple of quarters. And so the business is performing well and we are well on track for a little better variable comp payout this year than certainly better than last year.

And so a portion of that $35 million or so, $30 million to $35 million is showing up in corporate, and that is what is driving that. Got it. Thanks, guys.

Operator: Thank you. 1 moment for our next question. Our next question comes from Ghansham Panjabi. Your line is open.

Ghansham Panjabi: Yes, thank you. Good morning, everybody. And I will echo my congratulations to you as well, Mike. Best wishes in your new role. You know, I guess going back to your prepared comments and, you know, the comment you made about accelerating growth as part of your mandate, by the board for you, which is also 1 of the most difficult things for any company to do, especially in our coverage. You know, what do you think it would entail from a change perspective either internally or through a acquired capabilities? What is the realistic timeline as it relates to, you know, actually seeing that manifest in terms of incremental sales growth? Thank you.

Michael J. Frank: Yeah. Thanks for the question. Look, you know, as we talk about, our company sits at the intersection of several secular trends. And so that and of itself gives us an opportunity to really think about how do we play in those trends. And I think our strategy is quite clear as to how we think about both our core business and our growth vectors. Now I also believe that, again, we are in the early innings of implementing our strategy. So we have not we have not aligned all of our resources against that strategy in and of itself.

So I do I do believe we still have opportunities to really get our organization like, really hyper focused on the growth vectors get it more leaned out across our core business, And as we do that, I think we can expand our margins in the core business be even more competitive so we can drive both price and volume and then accelerate our opportunity in the growth factors. And so that is what the plan is going to be.

And, again, I think some of this has been in the works, but I do think we can we can now move forward even more aggressively And, again, on the timing of that, look, I think, you know, these growth vectors we believe, are gonna play out over the sec. The next several years. And so we will have more to say on that, I think, as we get into our Q4 earnings, you know, it would be too early for me to comment, you know, specifically in terms of how to think about that in 2027 and beyond.

Ghansham Panjabi: Understood. And then Joe, I, you know, I may have missed this in the answer to the last question, but did you break out specific what volumes were by segment during the third quarter? I am just trying to get a sense as to whether the underlying demand patterns have changed in any way. I know you are cycling through easier comparisons for both as well. Thank you.

Giuseppe Di Salvo: Yeah. I did not break out the segment. I talked about the total company. It was first the third quarter was really in line with the second quarter, about 1% overall. Volume growth contributed to the sales growth. In the third quarter, the Engineered Materials segment grew around 3%, and the color business was slightly down just under. Well, just about 1%. And that is really driven due to the greater exposure to Europe, which we talked about there being a little more muted demand there. And so the volume growth in Europe was what challenged the color segment. And absent that, the color segment would have had a little bit of growth in the quarter as well.

So overall, about 1%, SEM grew, and Color was flattish to slightly down due to Europe. Perfect. Thank you so much.

Operator: Thank you. 1 moment for our next question. Our next question comes from Peter Osterland with Truist Securities. Your line is open.

Peter Osterland: Hey, good morning, Mike and Joe. Thanks for taking the questions. So first, Mike, on the opportunities you walked through, just wanted to ask about the potential to optimize, your supply chain and manufacturing footprint. Could you just characterize what the major sources of increased efficiency could be? And what do you expect this to look like at this point? Is this more targeting gradual continuous improvements? Or are you contemplating potentially implementing a larger, more broad based restructuring program?

Michael J. Frank: Yeah, good morning, Peter. And thanks for the question. Look, I would say, you know, we are taking a fresh look at our footprint. Particular. We have got a broad footprint, and you know, 1 of the strengths, obviously, we are close to our customers, we are gonna continue to have a footprint geographically you know, that serves our local customers in each of our regions. That is important in our business, and we will continue to have a supply chain that reflects that. That being said, we do have a lot of plants. And the team has been looking at that, I know, over the past several years. And there is been some progress on that.

But I do think that you know, we will look at opportunities to potentially accelerate that. Again, consistent with our overall strategy. And so again, it would be too early to, you know, to talk about or announce any kind of restructuring program. But that will be 1 piece. I would say the second piece is, and this is probably you know, across the entire supply chain, but also within the growth vectors is you know, I think there is opportunities in procurement to really leverage our global procurement scale and using tools and technologies, including AI, to really get, you know, even more dialed into the opportunities to create savings across our procurement opportunity.

And so those are a couple of examples of where, you know, I believe that there is, you know, a step change opportunity for us in terms of leaning out our supply chain. Very helpful. Thank you.

Peter Osterland: And then just as follow-up, I wanted to ask on the bifurcation of the business between kind of the GDP plus growth and the growth platform where you are targeting the double digit growth CAGR. Could you just update us what portion of current revenue sits in what you define as the faster-growth platforms? And maybe within that basket, where do you see the strongest growth opportunities ahead over, call it, the next 12 to 18 months?

Michael J. Frank: Yeah. So, you know, we are seeing, obviously, our growth vectors growing at a faster rate you know, we think this year they are gonna be in the high single digits. Really close to double digit. And our core business will be in that GDP plus range. And so that is exactly how it is playing out this year, and that is what we would expect you know, going forward. You know, the size of our growth vectors is in the range of $600 million. And so you know, that helps you size in terms of that, as that business. Continues to grow in that close to double digit, high single digit range. What kind of leverage we have there.

Obviously, as that flywheel gets bigger, then, you know, that should help our overall growth as well. Do you wanna make some further comments?

Giuseppe Di Salvo: No. I think you summarized it well. I mean, it is been the story the last couple of years, Peter, as you look back at this kind of low-growth choppy macro environment, the growth vectors have carried the day, and it is contributed to our ability to grow revenues at least modestly over the last couple of years, but it is also contributed to our margin and how we have improved, you know, benefited from favorable mix from growing in these higher value, higher margin areas of the business. Great. Thanks a lot.

Operator: Our next question comes from Aleksey Yefremov with Barclays. Your line is open.

Analyst: Hey, thanks and good morning everyone. This is Ryan Weiss on for Mike. I want to echo my congratulations on the new role and, looking forward to working together. Joe, I guess question for you. Can you kind of give us a walk through maybe growth kind of by end market just in 3Q? And then, you know, I appreciate that it is still early and it is there is a lot of uncertainty in the market. But, you know, are there markets in which you feel confident about growing volume next year? Or maybe areas that you have, like, slightly easier comps and should see some, some form of growth Appreciate any color. Thanks.

Giuseppe Di Salvo: Sure. Thanks, Ryan. So for the third quarter, pretty much every end market grew. So we track 9 end markets. that is where we include in our materials. And so if you look at all those 9 end markets other than transportation, every end market grew. And transportation was kind of flattish for the quarter, and that is really just driven by global auto builds, particularly in Asia, has been just down a little bit and slower than I would have been for the last couple of years.

And so I think as I think about the end markets into next year, it is gonna be a similar story that we have seen the last couple of years where areas like health care, our defense business, you know, those 2 areas continue to have robust pipeline. We have talked a lot about high performance computing electronics, and that shows up really primarily in Asia, but primarily in the 2 end markets packaging and telecommunications. And so we continue to see a strong pipeline and demand there.

And then if I look at our packaging, which is our largest end market, I think we will continue to see, you know, solid, stable demand there just with our functional additives and barrier additives that we supply into that market. And so those are the areas that I would expect to be stable to continue to show growth into 2027. Awesome. Thanks. And then just a follow-up from me. I mean, you guys talk a lot about electronics and high performance compute and how you are seeing fast growth in Asia. I think there is somewhat embedded between different end markets, maybe kind of the way you guys describe them. Right?

I think some shows up in pack and you guys are talking about you know, wins there. Is that primarily within semi, or is that different areas? Just if you could kind of help us size, you know, where the business kind of sits and where those share gains are coming. Thanks. Yeah. It primarily sits in the Engineered Materials business and primarily shows up in the telecom end market and the packaging end market. And it is, you know, we are providing materials that go into semiconductor, you know, wafer handling and chip handling for semiconductor fabs. As well as high speed connectors and components that go into data centers.

And then we also have some wire and cable that also can end up in data centers. Thank you.

Operator: 1 moment for our next question. Our next question comes from Abigail Eberts with Wells Fargo. Your line is open.

Abigail Eberts: Hi, thanks for taking my question and welcome Mike. Following up on your commentary about building and construction, from commercial infrastructure investment. Can you just give us a feel for what end markets or sectors that is coming from? Is that from data center infrastructure investment or something else? Thanks.

Giuseppe Di Salvo: So, hey, Abigail. We have commercial infrastructure is really showing up in building and construction. So it is a combination of the color business and engineered materials. So we have chemical foaming agents that are going to light weighting and materials that are used in building construction there. And then also our wire and cable business that is going into the infrastructure spend and, you know, build out that is happening which shows up in both segments. Got it. Thanks.

Operator: 1 moment for our next question. Our last question comes from David with Deutsche Bank. Your line is open.

Analyst: Mike, back on innovation to accelerate, do you need more people Do they need more tools and training? Do you need different people? You need the outside help? Any color on how some of the mechanics of that could work. Thank you.

Michael J. Frank: Yeah. Good morning, David. Thank you. No, look, I do not think we need more people. We have got you know, from an innovation and R&D standpoint, we have got strong investment in both people and technology. I think it is really about how do we get even more focused We have a number of growth factors. I think sometimes we have you know, some competition across our business units in terms of how to tackle a problem. I think we can synergize and say, how do we bring our technologies best as Avient to solve our customers' solutions and not necessarily through the eyes of our business segments but through the eyes of our customers.

And so I do think it is a bit of a process thing. And then it is getting even more clear on where are we making investments. And, you know, where are we making some small bets but also where we make some bigger bets. And so I do think know, we are we are having a fresh look at that, and I and I do believe that is gonna create some opportunity for us. Good. Thank you for that. And just on M&A, Mike, do you need to rebuild the M&A muscle at Avient? Do you need to build a target list of potentials? And before you can begin actually doing M&A, is that part of the process?

And if so, how long will that take, and has that begun? Thank you. Yeah. So, you know, I think, David, that it. it is. You are you are right. We have been focused over the last you know, several years on delevering. And so, you know, we I would not expect any you know, meaningful M&A in the near term. Again, as we think about capital allocation, M&A is an opportunity that we do think lies ahead of us. But it is gonna compete for other opportunities for capital. So yeah, I think you framed it well. We do need to rebuild that muscle. But, you know, we will do that in time.

I think we still have you know, opportunity to delever even further. We have got really good uses of capital here in the near term. And, you know, M&A will come into a clearer focus. You know, I would say, you know, in the near term, but not immediately. Thank you.

Operator: Thank you, David. And I am not showing any further questions at this time. And as such, this concludes today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.

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