Status Update

Jun 28, 2021

Slides

Good day, and thank you for standing by. Welcome to the Commerz Company's Advanced Performance Materials Investor Webinar. At this time, participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jonathan Locke, Vice President of Corporate Development and Investor Relations. Please go ahead. Good morning, everyone. I'm Jonathan Locke, Vice President of Corporate Development and Investor Relations for The Chemours Company. It's my pleasure to welcome you to our Advanced Performance Materials deep dive. I'm joined today by Mark Newman, our Chief Operating Officer and incoming CEO and Denise Bignan, President of our Advanced Performance Materials segment. Before we start, I'd like to remind you that comments made on this call, as well as the supplemental information provided in our presentation and on our website contain forward looking statements that involve risks and uncertainties, including the impact of COVID-nineteen on our business and operations and the other risks and uncertainties described in the documents Chemours has filed with the SEC. These forward looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events that may not be realized. Actual results may differ and Chemours undertakes no duty to update any forward looking statements as a result of future developments or new information. During the course of this call, management will refer to certain non GAAP financial measures that we believe are useful to investors evaluating the company's performance. A reconciliation of non GAAP terms and adjustments are included at the end of this presentation. With that, let's take a look at the agenda on slide three. We'll lead off with our incoming CEO, Mark Newman, who is going to provide some thoughts on Chemours overall and offer his perspective on how APM fits into the portfolio. Denise Dignan will then share her vision for the APM segment and discuss how we are positioning this business to win over the long term. We believe APM is an underappreciated part of the Chemours investment thesis, and Denise will present our strategy for unlocking APM's full potential. We will wrap up with a Q and A session to help answer any questions you may have on today's content. And of course, this recording and the charts will be available on our website following the call. I'm going to turn things over now to Mark Newman to kick things off. Mark? Thank you, Jonathan, and thank you, everyone, for joining us today. I'm excited to be speaking with you all as the incoming CEO of Chemours. Over the last thirty days, I've spent significant time meeting with our employees, customers, and other stakeholders. I have come away incredibly energized by those conversations, and they've only enhanced my belief in the potential of to solve the world's most pressing problems through the power of our chemistry. In a few short days, we will mark the sixth anniversary of the formation of Chemours. From our beginning, we have set out to create a different kind of chemistry company. As a result of the actions we have taken over the past six years, we have built a solid foundation and achieved a more focused and nimble company that is poised for growth. As we look to the future, we remain committed to the communities where we operate and to our shared planet. This is more than just a promise. We are unwavering in pursuit of our corporate responsibility commitments such as to reduce absolute greenhouse gas emissions by 60% by 02/1930 on a pathway to net zero by 02/1950, to reduce air and water process emissions of fluorinated organic chemicals by more than 99%, and to reduce our landfill volume intensity by 70%. I am proud of the progress we are making and the energy and passion of every Chemours employee to make these goals a reality. Further, we see our agreement with DuPont and Corteva as integral in addressing potential legacy liability claims, which we believe are predominantly centered around our sites. We continue to work closely with the states in which we operate to both address legacy issues and ensure our operations remain protective of human health and the environment. As I look ahead, I see a company full of promise. In the near term, we are focused on successfully navigating through the end of the COVID-nineteen pandemic, safely serving our customers and delivering on our goals for 2021. Our growth going forward will be fueled by courageous innovation and relentless customer focus. Chemours is committed to innovation, creating the chemistry and responsibly manufacturing the materials which underpin secular trends such as five g, telecommunications, and clean energy. You're going to hear more about that today from Denise and a lot more about our innovation plans going forward as we continue to leverage our investment in the Chemours Discovery Hub. We will combine the power of our innovation and the energy of our 6,500 employees to unleash the full potential of all our businesses. We will do so responsibly and are fully committed to doing what's right for our people and our planet. Finally, we continue to be committed to creating long term shareholder value and, of course, returning cash to our shareholders. A brighter future for Chemours and all our stakeholders is something each and every one of our 6,500 global employees believe in. We will work hard to create that future together. Turning to the next chart, let's review a few of the highlights and key takeaways from today's deep dive. As you recall, we realigned our segments at the end of twenty twenty to enhance customer focus, drive execution and accountability, all while providing greater transparency for our investors. We believe this improved focus will improve our ability to efficiently allocate resources to the highest value opportunities for Chemours. Today, we'll be going one level deeper on our Advanced Performance Materials or APM segment, home to our Teflon, Nafion, Viton and Krytox brands. APM's unique portfolio is well positioned to be the material of choice as modern society increased demands on material performance. This segment has been undergoing transformation over the past several years, designed to stabilize operations, simplify operating procedures and reduce costs. The result is a streamlined business, which is poised to capture the upside of the recovery from COVID-nineteen and realize full potential of our chemistry through long term secular growth. We believe this will help us reinforce our market leading positions across all our brands. Finally, we will share more information regarding our growth programs in semicon, five gs, and hydrogen, so you can understand why we are excited about our near, medium, and long term growth. Before turning things over to Denise, I'd like to spend a minute on our management team on Chart six. Over the last several years, we have built a strong leadership team of business unit presidents and functional leaders who will write the next chapter for Chemours. I'm especially proud of this group. My role in selecting them for the position they play on the team, and the value we can unlock together. This is an excellent management team made up of diverse, high caliber driven individuals. Even more importantly, we share a collective passion for Chemours and the teams we lead. I'd like to introduce Denise Dignam, President of our APM business. Denise has had a long distinguished career at DuPont and Chemours. A chemical engineer by training, she has held a number of marketing, operations, and technical leadership positions across the company over the last thirty years. She has been a driving force behind the operational improvements and productivity initiatives we have executed in our APM segment and has helped jump start the segment's sales momentum post COVID. With that, I'll hand it off to Denise. Thank you, Mark. Let's turn to Chart seven. First, I want to say how thrilled I am to share the ATM story with you today. With a significant transformation already underway, this business has a solid foundation and fantastic growth potential based on the alignment of our core capabilities and the secular growth trends. The separation of APM into the standalone segment shown here provides the necessary differentiated focus to drive excellence and execution. When APM sat inside of Fluoroproducts, it was hard to see the details and understand the drivers for cash generation, internally and externally. In the discussion today, I will describe the current business, our ambitions and our plans to give you that visibility so that you are as confident as I am by the prospects of APM today and into the future. To kick things off, I thought it would be helpful to start at some of the basics of the APM business. Starting at the top left, our advanced technology and unique ability to deliver solutions to our customers is reflected in our leadership position. We are an industry leader in high end polymer and advanced material applications with a number one or number two position across most product categories. Our materials are certainly not commodities bearing countless applications serving more than 1,500 customers and distributors across a wide array of end markets around the world. No customer represents more than 5% of our sales. These customers rely on our ability to help solve their biggest problems in areas such as dynamic material performance, reliability, processability and sustainability, which ultimately lead to value creation and strong relationships as we look to grow together. Looking to the numbers, our 2020 financial results were significantly impacted by the COVID-nineteen global pandemic. Fast forward to the present and we are now two quarters into a rapid recovery. In March, we achieved our highest monthly sales since our 2015 spin and achieved a pre pandemic quarterly sales rate in the first quarter. We remain committed to achieving high teens EBITDA margins starting in Q2, driven by a continuation of the favorable sales environment and the business' high variable margins. APM is in a tremendous position supported by our backward integrated supply chain and high operating leverage. This position has only been strengthened over the last several years as we have reduced our fixed cost position since 2018 by roughly 30,000,000 while also improving operating reliability and making significant investments in sustainability. Going forward, our productivity work will continue, allowing us to reinvest in R and D and product development to drive growth. We are investing in the future while being mindful to optimize our cash spend. Our actions to date have reduced run and maintain capital by 45% since 2019. We are also releasing more capital for highly attractive growth investments even while we fund investments in sustainable manufacturing. Let's move to Chart eight. Look, in a nutshell, we have transformed and are poised to deliver. We are global leaders in fluoropolymers and this chemistry is needed to advance critical applications for secular growth opportunity. We have already accomplished a lot. We are starting from a position of strength through our investments in sustainability, our leaner capital and cost structure and operations redesign, which I have been privileged to lead. We have made investments in marketing and technology capabilities to take advantage of the secular growth trends, rethinking how we approach market back R and D to innovate. All of the building blocks are in place to execute on the growth mission. Over the next few years, the pathway to GDP plus sales growth is clear with even more potential over time as key secular trends take hold. We own this now as a standalone APM business unit. I am confident in realizing APM's growth potential and achieving EBITDA margins in the low 20s by 2022 with attractive cash generation. What gives us our confidence in the growth trajectory for APM? Our products are positioned to deliver solutions for the world's most challenging problems. Let's move to chart nine. We all know society is expecting more from technology. We are moving faster and demanding more. This requires innovation across all fields, especially in electronics, communication and energy where things are getting smaller, faster, hotter and more flexible. Society also expects that these products will be manufactured safely and responsibly and in a way that advances the UN sustainable development goals. All of this under the backdrop that our society is faced with bigger, more challenging problems from decarbonizing the economy to protecting our soil, air and water. Countries and governments around the world are also struggling to balance globalization with the need to protect national interest in key sectors, whether it is The U. S. Infrastructure plan, China's Five Year plan or the EU Green Deal, the plans call for technological advancements that perform better with our products. Our business is poised to participate fully in this transformation. We are powering progress. Turning to chart 10, the pace of change and ambitious goals that we have set for ourselves in APM really energize me. When my leadership team and I met to determine the vision and mission of our new business unit, we saw these challenges as opportunities, a chance to solve these problems with our customers. And that requires a level of focus that we haven't had before. We have to change our approach instead of creating products and hoping they meet the market's needs. We need to listen to our customers, anticipate the needs of the market, develop applications that we know solve their problems and have a strong return. We needed to invest in innovation, deploying people and capital to create a robust pipeline. We're doing this with an agile mindset to increase our innovation cadence. We needed to continue our focus on sustainability and responsible manufacturing to the point of it being a competitive advantage as there is growing demand for more sustainable solutions. And we are doing all of this from a position of humility knowing that we need to listen to all of our stakeholders who are essential to bringing forward these solutions to advance society. Let's move to chart 11. As a chemical engineer, I could nerd out on what fluoropolymers are and how they become essential in so many critical applications. I won't bore you with a whole science lesson, but I think it's important to understand what makes fluoropolymers so unique to understand what a gem APM is. Fluoropolymers have a unique combination of properties that no other material has. Let me explain why. They are the best electrical insulator, can withstand very high temperatures, are chemically resistant and have very low friction since it all comes in neat polymer form with a very clean and high purity material. To solve the challenges of society, many applications need a combination of two or more of these properties. If you need one of these properties, there are alternatives. If you need two or more, very likely, fluoropolymers are the best or the only solution. Moving to chart 12, we will walk through in detail some key applications that our fluoropolymers are uniquely suited for. Now that you know what makes fluoropolymers so unique, let's look at how you interact with them every day and how they enable the world around you. Your mobile device, your smart TV and Bluetooth speakers have all gotten smaller and thinner while the functionality increases because of our Teflon PFA products used to make their semiconductor chips. Our Krytox lubricants, Teflon resins and coatings and Vitan elastomer steels have made it possible for smaller but more powerful powertrains in combustion and hybrid vehicles. Also, knowing you're in your car enjoying a quiet ride, it's our Krytox lubricants that are at work. That's just in automobiles. Imagine how important durability, chemical inertness and material compatibility become when applied to aerospace and defense applications. And as the world moves rapidly to decarbonization, our Nafeon ion exchange membranes will play a major part in storing energy that comes from the solar panels or wind turbines you see on the horizon. To make the hydrogen economy a reality, you need hydrogen fuel cells and water electrolyzers. The core of these applications is our Nafeon membrane because durability and good chemical resistance and high temperature performance are required. Our Nafeon ion exchange membranes are a critical part of generating clean hydrogen, which maximizes the environmental benefit of all renewable sources. Turning to Chart 13. To reiterate, we are an industry leader in fluoropolymers. We are number one or number two across our brands and across an extensive range of applications and markets. Here we highlight a sampling of our applications that represent nearly half our revenue. It would take many charts like this one to represent the full breadth of applications that we serve today. So what makes us a leader in this industry? Our customers choose Chemours because of our leading technical know how and high end advanced materials that solve many of the most challenging problems. These are not bulk commodity offerings sold by the ton in railcars. Our offerings are sold by the kilogram or square meter from drums of resin pellets, tubes of greases, containers of coatings, rolls of films and membrane fabrics. If we made this chart in 2019, the headings would have been our products such as PFA, FEP, PTFE and SKM. Today, we have shifted away from the static view of our offerings towards a more customer centric approach where instead we focus on innovative market backed solutions to our customers' most challenging problem. This approach will truly unlock the growth potential of the business. Let's take a look at Chart 14. Solving tomorrow's challenges will require us to continue delivering these innovative solutions. We invented fluoropolymers, so we fundamentally understand how to design fluoropolymer molecules to enable specific performance. We are material processing and manufacturing experts. Our technology foundation is solid and we are building upon that for the future, but that's only the beginning. We know innovation must be sustainable and we are committed to corporate responsibility. That's why we have committed to a 99% reduction in emissions of fluorinated organic compounds to air and water as one of our 10 corporate responsibility commitments for CRC goals. We know of no other company that has made this type of commitment, but we aren't just talking about it, we're doing it. Since our goal was announced, we have achieved significant development in abatement technology and made noteworthy progress towards our emissions reduction goal. We expect to hit 70% of the goal by 2025. This commitment to responsible manufacturing is industry leading and sets us apart from our competition. We demonstrated what is possible and with a significant portion of these investments completed, we are well positioned to build upon our strong sustainability foundation delivering our innovative offerings. As a proof point of our commitment, we were just awarded the American Chemistry Council twenty twenty one Sustainability Leadership Award in product safety, innovation and transparency. Just like fluoropolymers are poised to win because of their unique combination of properties, APM will win because we combine our technical expertise with our commitment to responsible manufacturing. This combination drives value for our customers and enables our future growth. Let's turn to Chart 15. Innovation is a competitive advantage. The new state of the art Chemours Discovery Hub or CDH will be a critical enabler of our innovation engine, bringing together the power of 300 scientists into a 312,000 square foot research facility designed with collaboration in mind. TDH is one of the only facilities in the country studying fluoropolymer science, tapping into our strong partnership with the University of Delaware. Our scientists pioneer improvements to our products and invent solutions for our customers most pressing needs. This one facility houses several critical technical functions, including technical service, which provides direct customer support and application expertise for existing and new products applications development with advanced processing and testing equipment that provides the capability to develop new engineering solutions, fundamental research with state of the art labs to develop new patent protected game changing innovations and process engineering enabling best in class production of new unique chemistries. This world class facility provides an environment for scientists to experiment and develop new products that will make the world a better place. Moving on to Slide 16, I would like to share a few areas where we see our innovation engine is driving growth today and shaping the future. Semiconductors are critical in today's world. They are in every electronic device. You may not realize how much chemistry is used in the manufacture of semiconductors. They are made in facilities with many high purity aggressive chemicals. These chemicals are transported through Teflon PFA tubes, valves and pumps. Teflon PFA has been and will continue to be key to semiconductor manufacturing because you need a solution with a high purity level, chemical resistance and in some cases high temperature performance. APM is the leader in liquid handling facilities for semicon manufacturing. Without our innovations in liquid handling materials like our Teflon PFA product line, advancements in manufacturing of semiconductors would not be possible. We know of no other material that meets the specifications and performance requirements. Chemours product leadership model set the PFA standards for quality and purity for the semiconductor industry. Over the last forty years, we've been developing the leading products in semicon fabrication, which is why we are specified by all leading semicon companies. The new advanced node manufacturers are investing massive amounts of capital and they need to rely on proven materials like our Teflon PFA for successful operation. To produce advanced logic nodes, which are used to enable advanced computing, five gs and electronic devices, approximately 0.5 kilograms of our Teflon PFA is needed per square foot. And as you have read, new manufacturing capacity is expected to be built in The U. S. By the leading semiconductor manufacturers including TSMC, Intel and Samsung. These announced facilities are expected to be large mega fab. For context, on average, an advanced node mega fab is about 600,000 square feet. Considering the already announced U. S. Capacity builds, we believe the total incremental addressable global market opportunity for Teflon PFA is very large, on the order of $100,000,000 by 2025. As the industry leader with the only PFA manufacturing capacity in The United States, we are well positioned to service the needs of our customers and benefit from this high growth area. On chart 17, I'll tell you about five gs, another area I am confident will drive growth. While five gs is a term most people are familiar with, the world is just starting to understand its potential. Sub-six gigahertz five gs is being rolled out now. But the five gs that will bring performance required to support the future, five gs millimeter wave has barely begun. Autonomous driving, smart agriculture, remote medical diagnosis and the broad use of augmented reality will require this next generation of five gs. Supporting that level of interconnectedness and performance will require very fast data signals with high frequency data transfer. To reliably provide these data signals in copper conductors, we need very good electrical insulation. That is where Teflon fluoropolymers come in because they are the best insulators. The high frequency data signals also travel a shorter distance leading to a need for more antennas, more base stations and more data centers and they all require our product. The combination of more communication infrastructure and the need for new insulating material we believe will result in a 20% market CAGR. We are assuming this translates into a total addressable market in the 100,000,000 to $200,000,000 range, creating a significant revenue growth opportunity for Chemours. What's more, we're confident in our ability to expand our potential in this space. We have been leading new applications in this industry since we discovered the first fluoropolymer PTFE in 1938. '15 years ago, we launched FEP 9,494 for local area network cables and we are still the market leader. Recently, we launched Teflon FEP 9,898 and our Teflon Foam for use in data centers and USB C cables, both providing superior electrical properties for advanced high speed data cables. We are now taking this knowledge and experience from the round cable to the flat circuit board for five gs applications. Our innovation track record continues. We are creating the materials, the next generation fluoropolymers that will make the five gs world a reality. Let's turn to the promise of hydrogen on Chart 18. Chemours is passionate about the potential of hydrogen. Quite simply, it's about protecting our shared planet and improving conditions for our children and future generations to come. The central thesis of the Paris Agreement adopted in 2015 was limiting the global temperature increase to below two degrees Celsius. The time to act is now. Countries and companies around the world are rallying to search for solutions to meet this goal. Green hydrogen is the most promising alternative fuel to reduce greenhouse gas emissions and transportation as well as other industries that largely rely on fossil fuels. Green hydrogen, which is the hydrogen produced through the electrolysis of water utilizing renewable resources is the ultimate clean energy. That is why is committed to advancing clean green hydrogen. In 2021 Chemours joined the Hydrogen Council to realize the potential of hydrogen's role in the global energy transition. We will enable future generations to prosper on our shared planet through the power of our chemistry. As you will see on Chart 19, 20 20 was the year hydrogen became real. This was the year when hydrogen moved from a clean energy concept to an investable solution addressing our global warming crisis. Today, the line of sight to curb global warming is coming into focus with over 75 countries having net zero emission goals and hydrogen specific strategies. The pace of investment in green hydrogen production via water electrolysis is moving in lockstep with the government strategies on net zero emissions. Hundreds of projects have become active over the past few years and there is an expanding pipeline planned for the rest of the decade. By an order of magnitude, the projected capacity of water electrolysis has increased in the past few years. It stands to eclipse even the boldest aspirations one could have envisioned when the Paris Accord was signed in 2015. With pledges of over $70,000,000,000 this ramp up is being supported by governments across the world. These pledges are in the areas related to establishing a robust ecosystem including the production, distribution and applications that utilize hydrogen. Hydrogen will create a circular cycle that can power our shared planet, enabling us to achieve the goal of limiting global warming, sustaining the expanding global population. It's an area we are prepared to lead. Let me tell you how on Chart 20. We have the core chemical and process capabilities that are critical to enabling the production and use of hydrogen. Our brand, Mafion, is a leading and trusted brand for materials and membranes used in fuel cells and water electrolysis, specifically proton exchange water electrolysis called PEN water electrolysis. As opposed to other approaches, PEN electrolysis based systems reach operating stability much quicker, operate at a lower temperature and have a smaller footprint. This makes PEN water electrolysis systems ideal to couple with renewable energy sources such as solar and wind. These are also ideal for hydrogen distribution systems for vehicles when space may be more limited. Mafeon membranes are a critical component in pan electrolysis and fuel cell stacks. We are literally at the center, enabling the flow of protons while controlling the migration of hydrogen and oxygen. Chemours invented the field of durable ionomer membranes and remains a trusted technology leader. Our Nafeon membranes are considered the reference material in the industry. Our deep knowledge of fluorinated polymers and our backward integration allow us to optimize material to rapidly meet our customers' new performance requirements, while being able to scale quickly to meet the growing demand. So how do we take advantage of this evolving market in a specific space like diesel parity? Let's turn to Chart 21. Innovation is absolutely critical to make green hydrogen and fuel cells competitive with diesel fuel and combustion engine. Chemours is focused on serving the PEM, electrolysis and heavy duty fuel cell application spaces by providing a portfolio of products to meet our customers' needs. Chemours isn't standing still and resting on our reputation. We are establishing development and commercial partnerships, adding skills and knowledge globally, investing capital in selected areas to build capabilities and strengthening our ability, including capacity to deliver. We are getting closer to our customers to understand their evolving needs while driving new technology development. Our new product roadmap targets improvements in membrane efficiency, durability and even recyclability. We are planning for multiple new product launches each year investing to make these products a reality. These innovations will help drive diesel and hydrocarbon parity before the end of the decade. It is still early days in the hydrogen story. The market today for pan membrane is small, but the potential is huge. According to projections from Rollingberger, pen membranes could evolve into a multi billion dollar market by 02/1930, ranging between $2,000,000,000 and 3,600,000,000.0 depending on hydrogen policy and consumer demand scenarios. Our entire organization is energized to be at the center of this world changing effort to decarbonize the economy. We play a key role with our customers in advancing the commercial relevance of Penn in electrolyzers and fuel cells. To wrap it up, let's move to Chart 22. I know I shared a lot of information with you today, but this is just the start of the conversation. Hopefully, you now have a sense of our strong foundation and our future focus. My highly talented organization will continue to drive market leadership and value from our existing business, while building innovative solutions across our growth priorities. Commercializing five gs and clean energy applications will require time and investment, both of which Chemours is committed to. By delivering further cost and productivity gains together with disciplined growth oriented capital spend, we will start to see the benefit of these investments from 2023 onwards. We are committed to generating GDP plus sales growth and low-20s EBITDA margin. Thank you for your time and attention. I look forward to continuing the dialogue around this gem of the business. Let me turn it back over to Mark Newman for closing remarks. Thank you, Denise, and thank you for joining us today and allowing us to share our enthusiasm for APM. The improved focus and execution following segment realignment is putting APM on a trajectory towards an attractive profitability and cash generation profile as it moves through the economic recovery and ultimately into secular growth later in the decade. I truly believe that the work Denise and her team are doing has the potential to unlock incredible value and be transformational for the company. With that, operator, let's open the line for questions. And your first question comes from Josh Spector with UBS. Yes. Hey, everyone. Thanks for taking my question and thanks for the update today. Just a question to go back to the Electronics side of things. I think you have kind of the recurring sale versus the CapEx sale. What's the split of that difference? And while we're having some growth here for the next few years on strong demand, is there a risk that there's a step down? Or is there something that drives that would make a recurrence of growth? Hi, Josh. It's Mark. Great question. And I'm going to ask Denise to fill in some details here. But clearly, we're very excited about the growth here. It really is mainly driven by the ratio of new fabs. And obviously, as the only U. S. Supplier of these products and the focus on The U. S. Infrastructure in this area, we see significant growth potential here as it relates to this business. But let me ask Denise to just give you a little bit more thought on where we see the growth here. Sure. I mean we have a lot of confidence in the growth trajectory for in the electronics space. We're projecting about an 8% CAGR. And it really falls in the area, as Mark said, around semiconductors but also in communications. We are leaders in both of these spaces, and we are investing for growth. So we really do see a robust future in the Electronics segment for APM and Chemours. That's helpful. And just as a follow-up, if I go back to your earlier Investor Days when you gave some of the kind of portfolio split, you used to talk about a third of the portfolio was more differentiated. You get to about fifty-fifty by 2022. Where would you say you are on that journey based on what you're expecting on 2022? Are you on plan, behind, ahead? And you talked about investments in innovation. Does that speed up that portfolio shift in your opinion? Yes. So Josh, I think that question around what we committed to back in 2017 is worthy of some reflection. As I think of the business in the last several years, When I think of the APM business, I kind of see three distinct pieces of the complete realization of the full potential. The first is really the turnaround that Denise has really and her team have really driven. That's really allowing us to see the kind of margin improvement we're seeing today. And it's turnaround in terms of operations, reliability, throughput, cost reduction, basics of product development and marketing. And I think all of those foundational things are in place. So while net net, we probably are a little bit behind in terms of what we said back in 2017, I'm fully confident that with the focus and execution that I see in the APM team, we're ready to grow. As I see the next leg of the journey, so first is turnaround. The next leg is really around GDP plus growth. And I see that really being the dominant theme between here and sort of the middle of this decade. And then a lot of the secular growth, we're starting to see already. But whether it's five gs or hydrogen, they're relatively small today, but really are poised to take off in a really significant way towards more towards the middle of the decade. So it's a really great arc, but it's really driven by those three factors. And to the earlier point, we are really we have a lot of the foundational stuff in place today to enable that growth trajectory. Maybe just to add some specifics around the foundation and what we're doing. We have now a marketing organization, a true professional marketing organization that we've invested in. And we've been able to do that through some of our cost productivity efforts. We've made significant investments. You heard about our Discovery Hub, but also around these key areas for secular growth, some capital for our R and D, but also in people in R and D. We also really looked at our structure and how do we move more quickly. So we've changed our structure from a regional structure to a global structure for much faster decision making through key focal points for those decisions. And we also have adopted an agile mindset. From an operations standpoint, we've been hugely successful with agile, really being able to unlock cost productivity, capacity release, and we're deploying that and applying that when it comes to our innovations as well. So feeling really confident about, as Mark said, a strong foundation. And your next question comes from the line of Josh Silverthin with Wolfe Research. Hey, thanks. Good morning, guys, and thanks for doing this. You had that Slide 13 where you talk about numerous end markets where you're number one or number two. Can you talk about which ones are kind of highly fragmented here, where there may be a strategy for roll up? And which ones you may, number one, have a clear gap between you and number two? Yes. So maybe I'll take this question and ask Denis to add a little more color. But the way I think about it is, first of all, we're an overall leader in this segment with respect to fluoropolymer chemistry globally. And as the chart shows, we are either the market leader or second in any particular market. The way I look at this portfolio is it has very high value in use across the full spectrum. Clearly, there are some applications where there is more value in use and higher margin profile. And then as we look at the secular growth opportunities, some of the investment will be organic and some of the investment could be inorganic, where we either want to increase our speed of execution or we have a desire to become more relevant in terms of the emerging infrastructures, whether it's five gs or hydrogen. So clearly, what we've always said as a company is any inorganic activity will be focused on our core businesses. Clearly, ATM is such a business. And where we see opportunity to speed up execution, that could be part of the overall plan here going forward. Denise, if there's any other additional thoughts. Yes. Mean, I think you hit on it, Mark. I think the key areas which we are differentially managing to invest and whether that's organically or inorganically are in the areas of communications, electronics and energy. And that energy can be from electric vehicles to the hydrogen economy of electrolysis or in fuel cells. Got it. Thanks. And I guess kind of a follow-up to that. Is there any big CapEx need that you guys need to put into the business right now to get ahead of the visible growth that you see in semis and five gs or hydrogen? Or is there enough capacity at existing facilities to support this growth? So maybe I'll make a comment at the top of the house in terms of Chemours CapEx and then ask Denise to give some reflections on CapEx inside the APM segment. The way I see it today is we can drive the growth in all of our key businesses in this kind of approximately $400,000,000 CapEx zip code. As we move forward in time, what you should expect, especially within the APM segment, is we'll get over the hump here in terms of sustainable CapEx to drive our responsible manufacturing commitment and specifically our CRC commitments around fluoridemissions. But as Denise alluded to in her presentation, we're substantially we're making good progress on that front. And over time, those investments would start to become smaller, which would leave more room for growth. So I'd say the overall mix of cabinets within APM will show more increase in growth. And we certainly think within the 400,000,000 number for Chemours, we think that's quite doable today. Denise? Yes. So I think of it in capital in the three buckets. Mark's talked about the sustainability capital. We also have our run and maintain capital for our sites as well as our growth capital. We're deploying what we're calling a capital modality mindset in the business and really making sure that every dollar spent on capital is needed. So if you look at our run and maintain, as I stated in the presentation, we've been able to reduce that through our efforts in reliability and improved operations of our facility, but also just the use of our technologies around Agile. So the Agile methodology, actually, over the last two years, we've been able to release 10% of our capacity just through using the agile methodology. We actually have about 13% more in the next couple of years that we're going to be deploying in, we call, capital release. If you look at where we're looking to spend for growth, obviously, that capacity release really, really helps. But we are looking to invest in these growth areas. One thing to note, though, is investments in this business is not like a large continuous process that you might find in a TT or a TSS business. These are specialty product lines. We have batch reactors. We have flexibility in those assets to do different things. But with that said, we are definitely within our capital framework, we do have growth built in. We have especially for the markets where we think that there's going to be significant growth, we've actually mapped out what we think a 50 case would be, what we think a 90 case would be. And we actually we have a partner where we have the largest capacity of monomers, specialty monomers in the world. But we've mapped out what that would take, and we have confidence and plans to be able to deliver on that growth within our current capital framework over the next decade. And your next question comes from John McNulty with BMO Capital Markets. Yeah. Thanks for taking my question. So looking at the trajectory of what you're calling for in the margin improvement from 2021, where it looks like you're to be kind of in the high teens and then low 20s next year, I guess, is it just operating leverage that gets you there next year? Or are there some incremental kind of big cost chunks that are coming out? Or is it mixed? Can you help us to understand kind of how you kind of run from the level that you're looking at this year to what looks to be a pretty chunky number for next year? Yes. So John, we are increasing our margin goal here. Back in Q1, we talked about being in the high teens this year based on the strong recovery we're seeing in this business. We pulled that up to Q2. And then as we go into 2022, we're targeting to be in the low 20s EBITDA margin. So really, this is a build in our confidence level based on how we're running the business today. It largely is driven by the operating margin or the operating leverage rather of the business. These are high value end use products. And so when you get the kind of throughput that Denise just talked about through some of this agile manufacturing techniques, where you really use leverage significant data analytics to release capacity without the ongoing dependence on capital, that release of high margin or high variable margin production is really the engine to drive further margin improvement. A lot of the margin improvement today has come through cost reduction. That's kind of in our foundational stage. And as you heard from Denise, there is a continued reinvestment impact, probably an increased investment in R and D, in product development, in marketing to really drive the top line growth. So I would say a lot of the cost reduction from here is going to be reinvested for growth, which really drives both the top line and the bottom line. And then the last thing I would add, John, is this business historically has not really been a dues paying member on free cash flow generation. And that's starting to change with the business running at this level and with Denise's focus on capital for Galeny. Denise, I don't know if you have any other things to add to that. No, I think that's I think you hit it, John. Good. Thanks. Got it. Thanks for the color on that. And maybe just one follow-up question. It sounds like you've got some big high growth opportunities. And presumably, I assume those businesses have better margins. I guess, is there a way to think about, say, what the top third of your products generates in margin versus the overall average? And how we should be thinking about how overall margins may progress as we kind of go through the middle of the decade? Yes. So clearly, I mean, this is a high value portfolio, but there are certainly applications where there's higher value in use. So there is a bit of a spread. And I'd say there's likely to be some margin enhancement in terms of mix going forward. But a lot of what you see in terms of GDP plus growth through the middle of the decade would be representative of the margin profile today with some margin enhancement along the way. Got it. Fair enough. Thanks very much for the color. Your next question comes from Matthew Deal with Bank of America. Hi, thanks. Thank you, Denise. I'm just wondering, would you look into the PVDF market at all? I know some of your competitors overseas are talking pretty enthusiastically about that market and as it relates to electric vehicles and value added technology there? So clearly, as we outlined in our presentation, we have exposure in our portfolio to the electric vehicle market and, in fact, have focused activities around that. I'll ask Denise to comment specifically on your question. Yes. I mean, at this point, that's not something that's within our portfolio. There's a lot of, I'll say, capacity that's been announced around PBF that I think will serve the market well in the future. It's not really a focus for us. And based on our assessment, I think there's other higher value applications we can play in that we're more interested given our capacity and given our chemistry. Fair. Maybe just Go ahead, sorry. I was going to ask, so obviously, PFAS headlines have picked up a bit. And Mark, appreciate your commentary at the beginning, kind of walk through the steps the company is taking. But are customers getting nervous about fluoropolymers in the PFAS backdrop? And how do you kind of convince them or talk to them that the polymerized side is different perhaps from like the monomer dispersive side of the equation? Yes. So first of all, no new news today in terms of PFAS or new developments to share on the call. So I would probably don't necessarily want to make this an expose on PFAS. Clearly, we are engaged with our customers to make sure they understand the science. And the way I think about our conversation with all of our stakeholders is, one, we're really focused on the responsible manufacturing aspect. And this is not talk. We've been investing significant capital dollars and OpEx around reducing our floor emissions consistent with our CRC commitments. From a legacy perspective, clearly, DuPontCortiva deal derisks our balance sheet. So some customers have a question around our balance sheet and are proud to tell them about our cash generation and how this has derisked us. And then lastly, the point we remind everyone is our liabilities with respect to PFAS is primarily in and around our sites. And so we are addressing that through responsible manufacturing and through other work as we address some of the legacy footprint of our operations. So I'd say today, this is not a big issue with our customers, but certainly one in which we stay engaged with them on so that they understand what we're doing and they understand the science as it relates to the products they're using. We will now take questions from the webcast. All right. We got one question from the webcast here from the line of Bob Koort. You noted that pen membranes could grow to a 2,000,000,000 to $3,000,000,000 addressable market. Pen electrolyzers are already commercialized. Can you please help us with your current market share and your expectations for share as the big ramp up approaches? And then a follow-up to that, how much CapEx will be required to meet that growth? Yes. So maybe I'll ask Denise to share a little more details in terms of how we stack up in this market versus our competitors. The takeaway today is, as we look at both electrolyzers and fuel cells for heavy duty, as shown in the chart, we see this as a 2,000,000,000 to $3,000,000,000 addressable market. This is by 02/1930, so obviously, there's some runway to get there. But relative to the revenue of this of our entire segment today, this is quite significant. And so as we look at it today, I think our napium membrane, as we see it, is a reference membrane for the electrolyzer market. And as Denise referenced, significant work underway across all of our membranes, both for electrolyzers and fuel cells to make sure that we stay ahead of the curve. So any set of points, ask you to make a few comments. Sure. As so in this market, currently, it's an nascent market today with massive growth potential. We have a large share in this space today. But going forward, we believe the winner is going to be one that takes advantage of looking at this from a systems approach. We are ideally suited to do that with our backward integration. We have the largest specialty monomer capacity in the world. And with our market backed approach, with our technology, our fundamental technology, we can work with the monomers that really will enable this technology. Many reports have said that up to 30% of the efficiency, so let's say, outside of economy of scale, the true efficiency is going to come from the membrane. And when you think about the membrane, it's not just the membrane, it's the system. It's the chemistry with the membrane, with the catalyst. And those that can take a systems approach to really help with the improvement in efficiency are going to be the winner. So we feel really, really strong about not only where we are today, but where we're going to be in the future of this market. Thanks, Denise. And maybe just a question on CapEx. Bob, I think I answered it earlier. But clearly, we think we believe across all of our businesses that we'll continue to be able to fund growth within the $400,000,000 overall CapEx budget. And clearly, we continue to evaluate the investments that we need to make in hydrogen over and above our installed capacity, which is significant to really capture the growth potential here. Great. That's all we had from the webcast. Mark Newman, I'll turn it back over to you for some closing remarks. Yes. So thanks for joining us today. When we formed the APM and TSS segments back at the end of last year, we committed to providing more insights into each of these businesses. But what we said to our investors is we expected this new segment would drive a higher level of focus, a higher level of execution and more accountability and transparency to our investors. And I hope, as a result of this deep dive today, you've come away feeling or seeing the level of focused execution and drive for growth in these businesses. A number of folks have asked me coming into the CEO role, what's most critical on day one. And I'd say it's a continued focus on execution to deliver a great 2021. We're having a great year. We revised our guidance upward in Q1, and we continue to run our operations well with a high degree of focus that you've seen here today. So I look forward to talking to you with our Q2 results towards the July. We're really excited about the next chapter of Chemours and all the growth that's ahead of us and the leadership team that's here to deliver it. So thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.