Trinseo(TSE) - 2025 Q1 - Quarterly Results

First Quarter 2025 Financial Results Trinseo's Q1 2025 results show decreased net sales but improved Adjusted EBITDA, driven by licensing income and restructuring savings, despite an increased net loss due to higher interest and refinancing costs Q1 2025 Highlights Trinseo reported its first quarter 2025 financial results with a decrease in net sales but an increase in Adjusted EBITDA year-over-year, primarily driven by licensing income and restructuring savings, despite a net loss increase due to higher interest expense and refinancing costs | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net Sales | $785 million | $904 million | | Net Loss | $(79) million | $(76) million | | Diluted EPS ($) | $(2.22) | $(2.14) | | Adjusted Net Loss* | $(49) million | $(69) million | | Adjusted EPS ($)* | $(1.37) | $(1.94) | | EBITDA* | $30 million | $38 million | | Adjusted EBITDA* | $65 million | $45 million | - Net loss of $79 million included $25 million of refinancing costs for debt transactions closed in January 2025[3] - Adjusted EBITDA of $65 million was $20 million above prior year, driven by $26 million of polycarbonate technology licensing income and savings from restructuring actions, partially offset by lower equity income from Americas Styrenics and lower volumes[3][5] - Cash used in operations of $110 million and capital expenditures of $9 million resulted in Free Cash Flow of negative $119 million, which included a seasonal working capital build and $25 million of refinancing-related costs[3] CEO Commentary on Q1 Performance CEO Frank Bozich noted that core business results were in line with expectations and sequentially higher, marking the 7th consecutive quarter of year-over-year Adjusted EBITDA improvement despite persistent market weakness, attributed to early management actions - Core business results in Q1 were in line with expectations and sequentially higher due to prior quarter customer destocking and seasonality[6] - Achieved 7th consecutive quarter of year-over-year Adjusted EBITDA improvement, driven by management actions taken early in the industry downturn[6] First Quarter Results by Business Segment The company's business segments showed mixed performance in Q1 2025, with Engineered Materials and Polymer Solutions reporting increased Adjusted EBITDA, while Latex Binders and Americas Styrenics saw declines, influenced by varying market demands, pricing, and strategic actions Engineered Materials Engineered Materials saw a 2% net sales decrease due to lower volume, but Adjusted EBITDA increased by $16 million from higher margins and moderating input costs | Metric | Q1 2025 | Q1 2024 | Change | | :----- | :------ | :------ | :----- | | Net Sales | $278 million | $282.5 million | -2% | | Adjusted EBITDA | $26 million | $10.4 million | +$15.6 million | - Lower sales volume was partially offset by higher pricing, leading to a 2% decrease in net sales[12] - Adjusted EBITDA increased by $16 million year-over-year, reflecting higher margins from moderating input costs[12] - Sales volume growth in consumer electronics and PMMA geographic expansion was offset by lower market demand in automotive and building and construction[12] Latex Binders Latex Binders experienced a 13% net sales decrease and a $2 million Adjusted EBITDA decline, primarily due to lower volumes in paper applications | Metric | Q1 2025 | Q1 2024 | Change | | :----- | :------ | :------ | :----- | | Net Sales | $209 million | $241.5 million | -13% | | Adjusted EBITDA | $24 million | $25.7 million | -$1.7 million | - Net sales decreased 13% year-over-year due to lower volumes, primarily in paper applications in Asia and Europe, partially offset by higher prices[12] - Adjusted EBITDA decreased by $2 million year-over-year due to lower volume[12] - Net sales to CASE applications accounted for 15% of total segment net sales, with volume increasing 3% over prior year in a flat market environment[12] Polymer Solutions Polymer Solutions' net sales decreased by 22% due to reduced low-margin polystyrene sales, yet Adjusted EBITDA increased by $15 million, boosted by fixed cost reductions and licensing income | Metric | Q1 2025 | Q1 2024 | Change | | :----- | :------ | :------ | :----- | | Net Sales | $298 million | $380 million | -22% | | Adjusted EBITDA | $44 million | $29.1 million | +$14.9 million | - Net sales decreased 22% year-over-year, primarily due to intentionally reducing low-margin polystyrene sales[12] - Adjusted EBITDA increased by $15 million year-over-year, as lower volumes and margins were more than offset by fixed cost reductions and $26 million of polycarbonate technology licensing income[12] Americas Styrenics Americas Styrenics reported a negative Adjusted EBITDA of $2 million, an $8 million decrease year-over-year, primarily due to an unfavorable timing impact | Metric | Q1 2025 | Q1 2024 | Change | | :----- | :------ | :------ | :----- | | Adjusted EBITDA | -$2 million | $6.2 million | -$8.2 million | - Adjusted EBITDA was negative $2 million, an $8 million decrease from prior year, mainly driven by an unfavorable timing impact[12] Second Quarter 2025 Outlook Trinseo has withdrawn its full-year guidance due to macroeconomic uncertainty, providing a Q2 2025 Adjusted EBITDA outlook of $55 million to $70 million, driven by seasonal volumes and cost improvements Outlook and CEO Commentary Trinseo has withdrawn its full-year guidance due to macroeconomic uncertainty, focusing solely on Q2 2025. CEO Frank Bozich anticipates Q2 Adjusted EBITDA of $55 million to $70 million, driven by seasonally higher volumes, lower Engineered Materials costs, and improved AmSty performance, offsetting Q1's polycarbonate technology license income - Withdrew all full-year guidance previously furnished due to high macroeconomic uncertainty limiting the ability to assess future end-market demand[8] - Anticipates Adjusted EBITDA of $55 million to $70 million in Q2 2025[9] - Expected Q2 drivers include seasonally higher volumes, lower costs in Engineered Materials, and improved Americas Styrenics performance, offsetting Q1 polycarbonate technology license income[9] Key Q2 2025 Outlook Figures Trinseo provides specific financial projections for the second quarter of 2025, including ranges for net loss, Adjusted EBITDA, and free cash flow | Metric | Q2 2025 Outlook | | :----- | :-------------- | | Net Loss | $61 million to $46 million | | Adjusted EBITDA | $55 million to $70 million | | Free Cash Flow | Approximately breakeven (includes $21 million from polycarbonate technology license income) | Conference Call and Webcast Information Details for Trinseo's Q1 2025 financial results conference call and webcast are provided, including registration, access to materials, and replay information Conference Call and Webcast Details Trinseo will host a conference call on May 8, 2025, to discuss its Q1 2025 financial results, with registration links provided for both Q&A participants and listen-only webcast attendees. Financial results and presentation slides will be available on the Investor Relations website and via Form 8-K filing, with a replay and transcript archived online - Conference call to discuss Q1 2025 financial results scheduled for Thursday, May 8, 2025, at 10 a.m. Eastern Time[10] - Registration links are provided for asking questions during the Q&A session and for listening-only webcast[11] - Financial results and presentation slides will be posted on the Company's Investor Relations website and furnished via Form 8-K filing; a replay and transcript will be archived online until May 8, 2026[14][15] About Trinseo Trinseo is a global specialty material solutions provider with approximately $3.5 billion in net sales in 2024, serving diverse industries across North America, Europe, and Asia Pacific Company Overview Trinseo is a specialty material solutions provider that partners with companies across various industries, including building and construction, consumer goods, medical, and mobility, leveraging its expertise and global presence. The company reported approximately $3.5 billion in net sales in 2024 - Trinseo (NYSE: TSE) is a specialty material solutions provider, partnering with companies to deliver innovative and sustainable material solutions[16] - Serves a wide range of industries including building and construction, consumer goods, medical, and mobility, with operations in North America, Europe, and Asia Pacific[17][18] - Reported net sales of approximately $3.5 billion in 2024[18] Use of Non-GAAP Measures Trinseo uses non-GAAP financial measures like Adjusted EBITDA and Free Cash Flow to assess performance and trends, acknowledging they are not GAAP alternatives Explanation of Non-GAAP Measures Trinseo utilizes non-GAAP financial measures such as Adjusted Net Income, EBITDA, Adjusted EBITDA, Adjusted EPS, and Free Cash Flow to evaluate business trends and performance, manage operations, and assess profitability. These measures are considered useful for investors and management but are not GAAP alternatives and may not be comparable to similarly named measures used by other companies - Uses non-GAAP measures (Adjusted Net Income, EBITDA, Adjusted EBITDA, Adjusted EPS, Free Cash Flow) to evaluate business trends, performance, and profitability[19] - Believes these measures provide useful information for investors and management, assisting in comparing operating performance and evaluating pricing strategies[19] - Non-GAAP measures are not recognized in accordance with GAAP and should not be viewed as alternatives; definitions and reconciliations are provided in the financial statement notes[19] Cautionary Note on Forward-Looking Statements This section highlights that forward-looking statements are subject to inherent uncertainties and risks, including global economic conditions and raw material costs, which could cause actual results to differ materially Forward-Looking Statements Disclosure This press release contains forward-looking statements, which are subject to inherent uncertainties, risks, and changes in circumstances that could cause actual results to differ materially from expectations. Key risk factors include global economic conditions, tariffs, cost savings initiatives, raw material costs, credit profile, energy costs, and indebtedness - The press release contains forward-looking statements, identified by words like 'expect,' 'anticipate,' 'believe,' reflecting management's current expectations and assumptions[20] - Forward-looking statements are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict[20] - Factors that could cause actual results to differ include global economic conditions, tariffs, ability to generate cost savings, raw material costs, credit profile, energy costs, indebtedness, and compliance with regulations[20] Condensed Consolidated Financial Information (Unaudited) This section presents Trinseo's unaudited condensed consolidated financial statements, including statements of operations, balance sheets, and cash flows for Q1 2025 and comparative periods Condensed Consolidated Statements of Operations Trinseo's Condensed Consolidated Statements of Operations show a decrease in net sales from $904.0 million in Q1 2024 to $784.8 million in Q1 2025, resulting in an increased net loss from $75.5 million to $79.0 million, and diluted EPS remaining negative at -$2.22 | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net sales | $784.8 million | $904.0 million | | Cost of sales | $721.0 million | $843.4 million | | Gross profit | $63.8 million | $60.6 million | | Operating loss | $(29.0) million | $(3.3) million | | Net loss | $(79.0) million | $(75.5) million | | Net loss per share- diluted | $(2.22) | $(2.14) | Condensed Consolidated Balance Sheets As of March 31, 2025, Trinseo's balance sheet shows a slight increase in total assets to $2,655.0 million from $2,644.1 million at December 31, 2024. Cash and cash equivalents decreased significantly, while accounts receivable and inventories increased. Long-term debt also increased from $2,200.7 million to $2,305.1 million, contributing to a larger shareholders' deficit | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $126.1 million | $209.8 million | | Accounts receivable, net | $470.5 million | $379.9 million | | Inventories | $383.7 million | $347.2 million | | Total assets | $2,655.0 million | $2,644.1 million | | Current liabilities | $689.3 million | $720.9 million | | Long-term debt, net | $2,305.1 million | $2,200.7 million | | Shareholders' equity (deficit) | $(679.2) million | $(619.9) million | Condensed Consolidated Statements of Cash Flows Trinseo's cash flow statement for Q1 2025 shows increased cash used in operating activities to $110.2 million from $66.2 million in Q1 2024. Cash used in investing activities decreased, while cash provided by financing activities turned positive at $32.8 million, primarily due to net proceeds from the issuance of 2028 Refinance Term Loans and proceeds from Accounts Receivable Securitization Facility, despite repayments of 2025 Senior Notes | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Cash used in operating activities | $(110.2) million | $(66.2) million | | Capital expenditures | $(8.7) million | $(15.7) million | | Cash used in investing activities | $(8.7) million | $(11.0) million | | Cash provided by (used in) financing activities | $32.8 million | $(9.2) million | | Net change in cash, cash equivalents, and restricted cash | $(83.6) million | $(89.6) million | | Cash and cash equivalents—end of period | $126.1 million | $166.4 million | - Financing activities in Q1 2025 included net proceeds from issuance of 2028 Refinance Term Loans ($115.0 million) and proceeds from Accounts Receivable Securitization Facility ($70.0 million), offset by repayments of 2025 Senior Notes ($115.0 million)[27] Notes to Condensed Consolidated Financial Information This section provides detailed notes to the unaudited condensed consolidated financial information, including segment net sales, non-GAAP measure reconciliations, and liquidity measure definitions Note 1: Net Sales by Segment Note 1 provides a breakdown of Trinseo's net sales by segment for the three months ended March 31, 2025, and 2024, showing a decline across all reporting segments, with Polymer Solutions experiencing the largest percentage decrease | Segment | Q1 2025 Net Sales (millions) | Q1 2024 Net Sales (millions) | | :---------------- | :--------------------------- | :--------------------------- | | Engineered Materials | $277.3 | $282.5 | | Latex Binders | $209.3 | $241.5 | | Polymer Solutions | $298.2 | $380.0 | | Total Net Sales | $784.8 | $904.0 | - Americas Styrenics results are comprised entirely of earnings from its 50%-owned equity method investment, and thus net sales are not separately reported within consolidated statements of operations[29] Note 2: Reconciliation of Non-GAAP Performance Measures to Net Income Note 2 details the definitions, usefulness, and limitations of non-GAAP performance measures like EBITDA, Adjusted EBITDA, Adjusted Net Income (Loss), and Adjusted EPS, providing reconciliations to GAAP Net Loss for both Q1 2025 and a forecast for Q2 2025 Definitions and Usefulness This section defines non-GAAP measures like EBITDA, Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS, explaining their utility for evaluating operational performance and business trends - EBITDA is defined as income from continuing operations before interest expense, net; income tax provision; depreciation and amortization expense, used for evaluating operational performance[30] - Adjusted EBITDA further adjusts EBITDA for items like loss on extinguishment of long-term debt, asset impairment charges, restructuring charges, and acquisition-related costs, to indicate ongoing performance and business trends[31] - Adjusted Net Income (Loss) and Adjusted EPS provide transparent information by removing the impact of certain transactions and activities not considered part of core operations, aiding period-to-period comparability[32] Q1 2025 Reconciliation Table This table provides a reconciliation of non-GAAP performance measures, including EBITDA, Adjusted EBITDA, Adjusted Net Loss, and Adjusted EPS, to GAAP Net Loss for Q1 2025 and Q1 2024 | Metric | Three Months Ended March 31, 2025 (millions) | Three Months Ended March 31, 2024 (millions) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net loss | $(79.0) | $(75.5) | | EBITDA | $30.2 | $37.9 | | Adjusted EBITDA | $64.8 | $45.0 | | Adjusted Net Loss | $(48.5) | $(68.5) | | Adjusted EPS | $(1.37) | $(1.94) | | Adjusted EBITDA by Segment | Three Months Ended March 31, 2025 (millions) | Three Months Ended March 31, 2024 (millions) | | :------------------------- | :------------------------------------------- | :------------------------------------------- | | Engineered Materials | $25.7 | $10.4 | | Latex Binders | $24.5 | $25.7 | | Polymer Solutions | $44.5 | $29.1 | | Americas Styrenics | $(1.8) | $6.2 | | Corporate Unallocated | $(28.1) | $(26.4) | | Total Adjusted EBITDA | $64.8 | $45.0 | - Adjusted EBITDA for Q1 2025 was $64.8 million, an increase from $45.0 million in Q1 2024, driven by factors including a $24.9 million loss on financing transactions in 2025 and restructuring charges[34] Q2 2025 Forecasted Reconciliation Table This table presents the forecasted reconciliation of non-GAAP performance measures, including Adjusted EBITDA, Net Loss, and Adjusted EPS, for the second quarter of 2025 | Metric | Three Months Ended June 30, 2025 (millions) | | :-------------------------------- | :------------------------------------------ | | Adjusted EBITDA | $55 - 70 | | Net Loss | $(61) - (46) | | Adjusted Net Loss | $(61) - (46) | | EPS - diluted ($) | $(1.72) - (1.30) | | Adjusted EPS ($) | $(1.72) - (1.30) | - Reconciling items to Adjusted EBITDA and Adjusted Net Income (Loss) are not typically forecasted due to their nature as being primarily driven by non-core operations and cannot be estimated without unreasonable cost or uncertainty[41] Note 3: Reconciliation of Non-GAAP Liquidity Measures to Cash from Operations Note 3 defines Free Cash Flow as a non-GAAP liquidity measure, explaining its usefulness for evaluating the company's ability to generate cash from core operations, service debt, and pay dividends, while also providing its reconciliation to cash from operating activities for Q1 2025 and Q1 2024 Definitions and Usefulness This section defines Free Cash Flow as a non-GAAP liquidity measure, highlighting its utility for assessing the company's ability to generate cash for debt service and other obligations - Free Cash Flow is defined as cash from operating activities less capital expenditures, used to evaluate ongoing ability to generate cash through core operations[37] - Provides useful analytical indicators for management and investors regarding the ability to service indebtedness, pay dividends, and meet ongoing cash obligations[37] - Free Cash Flow is not intended to represent cash flows from operations as defined by GAAP and may not be comparable to similarly named measures used by other companies[38] Q1 2025 Free Cash Flow Reconciliation Table This table provides a reconciliation of Free Cash Flow, a non-GAAP liquidity measure, to cash used in operating activities for Q1 2025 and Q1 2024 | Metric | Three Months Ended March 31, 2025 (millions) | Three Months Ended March 31, 2024 (millions) | | :-------------------------- | :------------------------------------------- | :------------------------------------------- | | Cash used in operating activities | $(110.2) | $(66.2) | | Capital expenditures | $(8.7) | $(15.7) | | Free Cash Flow | $(118.9) | $(81.9) |