FULLER H B CO Q1 FY2025 earnings call

• Maintained pricing discipline despite weak market conditions and drove market share gains. • Focused on managing cost structure and optimizing portfolio mix to reach >20% EBITDA margin target. • Utilized global sourcing infrastructure where 97% of products sold in a region are produced there, acting as a hedge against currency and tariffs. • Streamlining cost structure, improving operational efficiency, and looking forward to updates at Investor Day in October.

In HHC, organic revenue was up 4% year on year with solid volume growth and positive pricing, but EBITDA margin was 12.7% (down). Engineering adhesives had organic revenue decline 2% in Q1, but EBITDA increased 16% with margin at 18.7%. Building Adhesive Solutions (BAS) had organic sales up 2% y/y, EBITDA up 2%. America's organic revenue was down 1% y/y, but BAS achieved over 8% organic growth. EIMIA had organic revenue up 4% y/y, and Asia Pacific organic revenue up 7% y/y.

• Reiterated 2025 guidance: net revenue down 2%-4%, organic revenue flat to up 2% y/y. • Adjusted EBITDA expected in range of $600M-$625M (1%-5% y/y growth). • Full-year adjusted EPS range $3.90-$4.20 (2%-9% y/y growth). • Operating cash flow expected $300M-$325M, weighted to second half. • Q2 EBITDA expected $150M-$160M.

• Weak overall market demand and unpredictable geopolitical conditions. • Impact of raw material costs on margins. • Currency fluctuations affecting financial performance.

Q: Can you give a sense of customers' thinking through volatility and prebuying in front of tariffs?

A: No significant prebuying seen, customers cautious but focused on innovation. In HHC, repositioning in hygiene and winning with innovation. Solar business margins improving as moving to higher-end panels.

Q: Outlook for HHC margin restoration?

A: Expect improving margins in HHC, aiming for 16%-17% EBITDA margin range, with pricing increases realized and raw material impact subsiding.

Q: Thoughts on working capital and cash flow?

A: Working capital increase due to volume/pricing growth, but normalized trends and self-help actions expected to improve working capital as percentage throughout year.

Q: March demand and seasonal uptick?

A: Saw strong phase three in Q1, continuing progression, no push out/movement of volumes, volume growth expected flat rest of year.

Q: China market trends?

A: Mid to high single-digit growth in China, HHC and EA businesses performing well, repositioning EA away from solar into other applications.

Q: Tesla Cybertruck recall and Fuller adhesive?

A: Not Fuller product, but opportunity in automotive exterior trim with structural adhesives.

Q: Raw materials and HHC impact?

A: Raw materials inflation affecting HHC, but flat sequentially from Q4 to Q1, expecting favorable comparisons as annualizing against last year's increases.

Q: Nonrecurring charges?

A: Estimated nonrecurring charges around $40-50M pre-tax for remainder of year, with acquisition costs decreasing.

Q: Europe and US economy trends?

A: Half of 30 market segments accelerating, US consumer weak, Europe construction market not good but HHC in Europe had share wins.

Q: Tariffs impact on customers?

A: Hard to quantify indirect impact, but H.B. Fuller positioned well in recession with ability to drive down raw material costs.

Q: PFAS replacement products?

A: Working on PFAS-free alternatives, leading in market with innovation, particularly in electronics.