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00:46 Thank you. Hello, everyone and thank you for joining us on today’s call.

With us on the call are Simon Bates, President and Chief Executive Officer and Craig Merrill, Chief Financial Officer. If you have not done so already, please go to our website, gcpat.com and click on the Investors tab to obtain copies of our earnings release, which contains tables with our financial results, along with a slide presentation with supporting materials.

01:11 Some of our comments today will include forward-looking statements under the U.S. federal securities law.

Actual results may differ materially from these projected or implied due to a variety of factors, including, but not limited to the impacts of COVID-19. We refer everyone to our more robust forward-looking statement disclaimer and discussion of these risk factors facing our business in our earnings release and SEC filings.

We will discuss certain non-GAAP financial measures, which are described in more detail in our earnings release and on our website. 01:42 Our comments on forward-looking statements and non-GAAP financial measures apply both to the prepared remarks and to the Q&A.

References to EBITDA refer to adjusted EBITDA, references to EBIT refer to adjusted EBIT, and references to margin refer to adjusted gross margin, adjusted EBITDA margin or adjusted EBIT margin as defined in our press release. All revenue and associated growth rates in this discussion are stated on a comparable constant currency basis, which adjusts for the impact of foreign currency.

02:14 I will now turn the call over to Simon.

02:16 Thanks Will. Good morning and thank you for joining today’s call.

Our financial performance in the third quarter was within the expectations, which we laid out in early August. What is notable is that we delivered these results despite cost inflation being significantly higher than we had forecast in the quarter both for raw materials and transportation.

02:41 Notably, SG&A was down by more than eight point five percent year-over-year in the quarter. A direct result of our efforts to right size the business.

I’m confident we are building leaner and more agile business and setting GCP for future success. This will become more evident once macro conditions have normalized.

03:05 Now, I'd like to give a little bit more insight about our segment results. Given the market dynamics, I am very pleased with the performance of the SBM business.

For twenty twenty one, we forecast both revenue and operating income growth year-over-year. Our employees have done an outstanding job in improving service and driving better results in this segment.

03:27 For the SCC business, the supply changes disruptions and year-over-year cost inflation started earlier and have been more severe when compared to the SBM segment. Unfortunately, the cost inflation impact in the SCC segment has accelerated and price recovery is lagging.

We are clear on the actions we need to take to improve profitability in the SCC business. The addition of David Campos as our new president the SCC Americas business is already bringing tangible change.

We are working closely with David on developing a revenue and profit improvement plan for business, and I look forward to sharing more on this in future calls. 04:10 Since I joined GCP, a little over thirteen months ago.

We’ve focused on improving the competitiveness of the business so that we can drive revenue and margin improvement. When we last spoke in August, I shared that this was one of the tougher working environments that I have experienced.

This remains a very dynamic and challenging period. Our revenue and margins have been negatively impacted by raw material shortages, cost inflation, transportation bottlenecks, and tight labor markets.

The GCP team is working diligently to address the challenges. We evaluate every opportunity to streamline production processes find substitute raw materials where possible, and we continue to prioritize the customer.

04:55 I want to make sure we recognize our employees for their continued focus on meeting our customers’ needs despite the unprecedented challenges. They have done and continue to do a truly remarkable job.

Looking into twenty twenty two, we will continue to focus on the things that we can control and on repositioning the business for growth. We will accomplish this through the combination of building out our organizational capability and improve focus on the customer.

Given our strong balance sheet, we can accelerate our strategic plan through the right M&A. I'd now like to turn the call over to Craig.

Craig?

05:33 Thank you, Simon. Good morning, everyone, and thank you for joining us today.

As a reminder, all sales and associated growth rates in my comments are on a constant currency basis. I will discuss GCP’s third quarter results, including comments on each of our business segments.

Lastly, I will provide commentary on the remainder of twenty twenty one. 5:53 GCP’s constant currency sales of two hundred and forty six point one million dollars were zero point nine percent lower than prior year, but generally in line with our expectations.

We had forecasted stable demand year-over-year with respect to revenues but with a slight impact for material and logistic constraints globally, which we started to see in the late quarter too. 06:16 Price for the quarter improved one point three percent compared with third quarter twenty twenty as price continued to come through from pricing actions implemented earlier in the year.

GCP’s gross margin decreased seven hundred and ten basis points to thirty three point nine percent as higher raw material and logistic costs impacted margins at a higher rate versus our Q3 forecast with a significant impact on the SEC segment. Selling, general and administrative costs of fifty nine point two million dollars decreased eight point five percent during the quarter, partially offsetting the gross margin compression and stronger than our forecast due to lower employee cost.

06:59 GCP’s income from continuing operations attributable to GCP shareholders totaled seven point eight million dollars compared with one hundred million dollars for the third quarter twenty twenty. Of course, the prior year period included eighty two point five million dollars in gains from the sale of the Cambridge corporate Office.

07:17 GCP’s adjusted EBIT totaled twenty four point five million dollars compared with thirty six million dollars in prior year quarter, down approximately thirty two percent. Adjusted EBIT margin decreased four seventy basis points to nine point eight percent due to higher raw material and logistics costs.

Adjusted EBITDA margin was fourteen point three percent for the third quarter or five hundred basis points lower versus the same period in twenty twenty. 07:46 Our capital spending year-to-date is twenty three point nine million dollars versus twenty eight million dollars prior year-to-date, reflecting improved discipline of capital deployment.

To better service our customers, we continue to hold higher inventories as we work through significant supply chain disruptions. Therefore, for the first nine months of twenty twenty-one, net cash provided by operating activities from continuing operations equals twenty five point eight million dollars versus fifty nine point three million dollars compared to prior year.

08:22 Now looking at the specific performance of our two segments for the third quarter. SCC'S constant currency sales were up one point three percent to one hundred and forty point one million dollars due to favorable impact of price increases.

We saw year-over-year growth specifically around global cement additives and geographically in both in Latin America and Europe. The SCC volume offset was generally in Asia, where we saw intermittent government restrictions due to COVID-19 impacting demand.

08:55 Gross margins in the SCC segment declined year-over-year by nine hundred basis points to thirty one percent in the third quarter due to high raw material costs and logistics costs which accelerated in the quarter. SCC gross margins will be unfavorably impacted for the remainder of the year in comparison to twenty twenty, mainly due to the inflation headwinds including shipping and freight costs.

09:23 SCC segment operating income was seven point seven million dollars with segment operating margin of five point four percent, a decrease of eight hundred and twenty basis points compared with the prior year quarter, primarily due to higher raw material costs. Historically, third quarter has been our strongest margin quarter for SCC and unfortunately, the severity of the inflation we have a significant impact on our SCC full year results in twenty twenty one.

09:53 Turning to the SBM segment for the quarter. SBM sales, constant currency totaled one hundred and six million dollars during the third quarter, a three point seven percent decrease versus the third quarter twenty twenty due to lower sales volumes.

The volumes were slightly lower than we expected as we reduce shipments to certain property developers in China to reduce credit risk. We did see solid volume growth in certain product lines, such as our Stirling Lloyd business and our specialty construction products group, which includes the fireproofing, injections and flooring products.

10:32 Although SBM’s gross margin decreased four sixty basis points to thirty seven point nine percent compared with the third quarter of twenty twenty due to higher raw material costs, it was in line with our expectations. SBM segment operating income totaled twenty point nine million dollars with operating margins at nineteen point four percent a three ninety basis point decrease versus prior year.

However, year-to-date SBM’s operating margins continue to outpace twenty twenty margins due to volume growth, productivity, good mix and cost leverage to date. 11:09 Now, looking to quarter four, it is clear that inflation and logistics cost increases will continue to impact our financial results on a year to year comparable basis particularly in the SCC segment.

We continue to take actions we believe are needed to offset these costs, however, we do not believe the actions will be sufficient to substantially lift margins sequentially moving into the fourth quarter for SCC. We are using our balance sheet in order to better service our customers and when we continue to do so in order to ensure we have product to supply into twenty twenty two without disruption.

11:47 As a result, we expect to have on hand more physical inventory volume versus our historical trend at year end. Certainly, the second half of twenty twenty one has been an extremely challenging time to operate with material shortages, global supply chain disruptions, and the changing labor dynamics.

The global teams have done a great job working together to manage through the day to day disruptions to meet order commitments and keep construction projects on track. 12:22 We do expect our gross margins to remain compressed for the short-term.

Price increases continue to be implemented. However, we believe it will take a couple more quarters for price to overcome inflation and stabilize margins.

The impacts on gross margin are expected to be more unfavorable on the SCC segment versus the SBM segment as approximately two thirds of our inflation is impacting our SCC segment. 12:51 We forecast SG&A expenses for the full year to be down approximately eight million dollars year-over-year and we expect the further favorable impact in twenty twenty two.

And this will continue to partially offset the temporary margin compression. Our expense management and restructuring programs are ahead of schedule.

We currently have approximately four eighty two million dollars of cash and cash equivalents on hand at the end of the third quarter, slightly lower than forecast as we are holding higher inventory. 13:25 In closing, we are pleased with our progress and although the environment is challenging on both the supply side and logistics.

We expect quarter four revenues to be in line with our regular seasonality following our quarter three results. With higher price capture in Q4 versus Q3.

Our strong balance sheet continues to provide significant flexibility and opportunity to deliver shareholder value, whether it would be return of capital to shareholders, M&A or a combination. 13:55 During the year, we have accelerated our efforts to identify and broaden the scope of potential M&A opportunities, which will provide increased capability scale and leverage for our organization.

I will now turn it back over to Simon. Simon?

14:13 Thanks, Craig. Twenty twenty one has been a truly dynamic year.

Our operating plan assume both cost inflation and productivity improvements. I’m very pleased to say that between productivity and SG&A reductions, we will realize more than twenty million dollars improvement in our operating expense and efficiency by the end of the year.

Consequently, had cost inflation been in line with our budget or historical norms our results would have been well in excess of our operating plan. 14:45 Unfortunately, in the short term, these unprecedented increases in cost have negatively impacted our consolidated results.

Although we feel very good about the progress we are seeing in the underlying business, we have naturally switched our focus to address margin through price and to drive further productivity improvements. 15:06 I also want to note that we are ahead of schedule on the exit from our Cambridge facility and we have stood up our new head office in Alpharetta, Georgia.

New state-of-the-art R&D facility in Wilmington, Mass is under construction and will be ready for occupancy in Q1 twenty twenty two. The execution of our strategic priorities to date has improved the business and coupled with the use of our strong balance sheet we are committed to deliver shareholder value.

15:38 Thank you for joining our call and we look forward to taking any questions.

16:17 Hi good morning.

16:20 Good morning.

16:21 Good morning, Mike.

16:22 I was wondering if you could talk first about the volume impact that you saw related to supply chain disruption, raw material availability and maybe even labor shortages or labor availability and maybe kind of parse that out between the SCC segment and SBM. I guess the question is how much higher could volumes have been, if not for these disruption impacts?

16:51 Mike, I think it's a good question. It's not something we formally capture or calculate.

But I can tell you it from a production standpoint would be inability to get raw materials or having to switch to alternate raw materials with the challenges of getting labor in some of our facilities, the inability at times to source materials in a timely manner that is coming across an ocean. We've also seen as we've tried to ship product, a lack of trucks that are available and so, I would tell you, Mike, those supply chain disruptions have impacted our volumes in every geography that we operate.

These aren't limited or different honestly by geography and has equally impacted both the SBM and the SCC segment.

17:56 All right. And then on the price versus cost front, maybe just talk about how you see that trending over the next few quarters.

Any thoughts on do we expect to see peak margin headwinds and when we might expect to see some margin recovery?

18:18 Yeah, Michael. It's Craig.

I'm going to give you a little bit more detail here just on the numbers. So, We generally had about twenty five million dollars worth of freight raw material inflation in the quarter.

We mitigated about half of that through price productivity and our SG&A efforts and you'll see that in the margin basically, if you just use those numbers, that's the margin drop. Unfortunately, we expect that to continue into Q4.

So, really sequentially, I think the margins are going to be about the same. Inflation is going to be about the same.

We are going to get a little bit more price. So, we're working to do a little more favorable into Q4.

Honestly, most of its around SCC, that's where we've got the challenges. On SCC normally, in history, we've been able to formulate around and use different materials.

One material goes up and other one's neutralize, we changed it out and we formulate unfortunately with a tsunami of price increases and supply chain disruptions, you can't get the product that you want to switch into properly or the freights gone up or the cost has gone up. So that's where we've been challenged on SCC.

That's a temporary issue. 19:41 Our business models really strong and formulation and where we've been hampered there.

That's why the SCC margins have come down more than we would like them to, obviously and more than historical even when we've had inflation like this. So, we're working through that and once the supply chain disruptions ease a little bit and stabilize over the next probably by the end of the year, we're hoping.

Into next year, we'll start to grab back those margins in SCC.

20:06 And just talk a little bit about our SBM segment. Clearly for our waterproofing, building envelope business and our fireproof business, these are job driven contract driven and consequently, your pricing is specific to a job and generally and our peers would be in the same situation, you're looking at a three to four months month drag on the ability to move price specific to the next job.

Having said all of that, we did announce global price increases at the beginning of October for our SBM business and we will be doing the same again in January.

20:50 All right. And then as it relates to the SG&A line, those costs appear to be down quite a bit sequentially you mentioned the restructuring actions that you've taken, but I think also you mentioned in the press release, some changes in incentive accrual.

So, I wanted to get a sense of how much of that SG&A reduction is sustainable and what portion of it might be related to some true up of the accruals?

21:16 Yeah, some is definitely a drop of some incentive accruals. Listen, it's sustainable.

We accelerated some of our moves on our operating expense reduction. So, it is sustainable.

I think you won't get any further lift I think in Q4 honestly, because we are starting to, we've got the Atlanta office that we're now in that's what we're speaking from right now honestly. So, I think we're probably flat in Q4 with no further uplift, but we will roll over, we haven't even got fully Michael, the benefit of all of the Cambridge rent for next year, we'll get that benefit.

Because that's certainly more expensive than the Atlanta rent, including the R&D facility in Wilmington. We'll get the benefit of a number of actions we've taken in the second half here with reduction to headcount.

During the year, by the time we end up at the end of the year. Will be down in G&A one hundred headcounts approximately, which will roll over and help us next year.

Even if we have to put back some incentive next year as we roll through the year. So, we'll be net positive and we're looking good on those programs.

22:38 All right. And then my last question for now have to do with a comment that you made about reducing sales into China to limit your credit risk.

Can you give us a little bit more detail on I guess how you're viewing risk within that environment given some of the issues that have been in the headlines recently?

22:58 Yes. So, payment terms in China for most of those on phone probably know it.

It's almost between half a year to a year, depending on what customer you're working with. We're just kind of in the middle of that.

So, I won't get into the detail. So, we're kind of split right down the middle of that terms.

So, we thought it more prudent with all the issues going on. We have some developers we sell to, there's one that's fairly into the situation you read about and so we've restricted any more volumes to that developer until we get some payment and so we lost about three million dollars to three point five million dollars’ worth of revenue in Q3 and we'll probably lose a little bit more in Q4, it could be five million dollars in Q4 on a year-over-year wrap, but we think that's the prudent thing to do.

We're not nervous. We're not going to get paid.

We've got some customers that are paying us very well and we're selling to them and in fact Stirling Lloyd product has been being sold there and we've really increased those sales in China, but that particular developer we're just holding back and giving up some volume until we get payment. So, we can give you further update on the next call once we work through it.

Does that answer your question, Michael?

24:16 Yeah. It does.

Go ahead.

24:17 Maybe I give a bit more color from my perspective. Mike.

There's three revenues streams in China. Stirling Lloyd business, our fireproofing business and our waterproofing business.

We're seeing year-over-year growth in our fireproofing and our Stirling Lloyd business. This particular issue impacts building envelope, our waterproofing business.

And I think we've taken a strong stance in terms of protecting our credit risk and there is a short-term impact to our revenues, but I emphasize the short-term.

24:58 Just one more layer of challenges that you have to deal with. Thanks very much.

I'll turn it back for now.

25:04 Thanks, Mike.

25:06 Thanks, Michael.

25:14 Thank you. Good morning, everyone.

25:18 Good morning, Rosemarie.

25:19 Good morning.

25:20 Simon and Craig. I was wondering if you could – If you could talk about the specific end markets.

The trends you are seeing, and which ones are being affected by – well obviously, all of them are being affected by the shortages, being affected by the logistics and so on. But in terms of demand for the industry of the role.

Have you seen a slowdown, do you have pent up demand can you give us a feel for what is going on out there in the marketplace?

25:54 In a succinct manner, Rosemarie, it's probably going to be a challenge when we speak about the segment and geography, but I would say broadly we sell into infrastructure, and we sell into commercial new construction, and we sell into residential repair and remodel. 26:15 I would say we are positively – have been positively surprised by the commercial new construct in market this year in particular in North America and that's resulted in some good results for our waterproofing and fireproofing businesses.

On the residential repair and remodel, we've seen nice growth year-over-year. I think as we pointed out before, our exposure, particularly in North America to residential new construction is quite limited, and that would have been the strongest segment in North America this year and then that's really talking specifically about our SBM business for our SCC business because our customers are essentially cement producers and ready mixed concrete producers.

We get full exposure across all the different segments in terms of residential commercial and infrastructure. I think where we see nice growth this year, and it's been global growth that could have been better had we had access to more raw materials has been our infrastructure business.

And that's a segment that we enjoy and like and is likely to be more robust over the next three years than residential or commercial.

27:44 So looking at the infrastructure, how much do you think you have lost, or revenues delayed because of the shortage?

27:58 Well, Rosemarie, let me -- I use math a little bit more than probably I should. But we said at the beginning -- if you remember at the beginning of Q3, we said we thought we'd be up about 6% to 8%, right, in revenue for the full year.

I think now we're looking at around 5% approximately -- between four percent and five percent as reported, right? I'm going to say as reported.

So if you think about that, you could argue that I would think the global construction market has probably lost a point or two for the full year versus what expected they expected to. So, quite a bit, but we are seeing -- what happens with Rosemarie in any specialty infrastructure projects, in any one of those projects, if they're missing one product or they're missing one item to finish the sequence of the job, they cannot continue the job, and they're having a problem switching out to other items, alternative items because they can't get it either.

So that's slowing down the bigger jobs. One of the reasons why, and we're not in new construction residential, unfortunately, the folks who are in new construction residential or light commercial, they can switch out and they can move to another job and come back to a certain job.

They have much more flexibility. On the high income commercial and the infrastructure and where we play.

29:23 The jobs just can't switch out products. So that's delayed.

Now the good news about that we'll get that in twenty twenty two because the jobs what we're seeing in our pipeline is the jobs are not going away. Money is cheap.

People are still continuing to invest and still completing those jobs. It's just they'll move into twenty twenty two.

And this is when we talk about supply chain disruption. It's not on the – just on the inbound.

It's also on the outbound on the demand and people delaying some need for our products because their projects are delayed. So hopefully, that's helpful.

30:01 Yes. That is very helpful.

Thank you. And so this actually brings up my next question, which is regarding M&A.

Is it safe to assume that it is going to open the residential construction market to you in a much larger fashion? And is that -- do you have something that could eventually close by year-end?

30:29 We are very, we have put a lot of time and effort, Rosemarie, into M&A. And we're very thoughtful and specific about where we would invest our shareholders' funds.

And we are clear on the geographies where we want to play, and we are clear on the segments where we think an investment is prudent. And we've talked about infrastructure as an example.

I think the global construction trends or information, for example, from IHS would suggest that global construction should grow at about 2% to 3% the next three years. But the infrastructure spend is likely to grow at more 6%.

And so we think infrastructure would be a prudent investment. And we also, of course, when we think about North America, residential new construction, given the pent-up demand that is a decade in the making, we think, although growth may be limited, that will remain a strong and robust segment over the next two or three years.

And we think that would be a prudent investment, too.

31:42 Thank you. And one last question if I may.

So, you are lagging pricing increases. I understand that it is difficult to waste price in some particular areas.

Are you considering surcharges in order to offset at least the higher cost of logistics?

32:01 It's a daily conversation Rosemarie honestly, and every option is on the table and every option has been discussed and is part of our execution plan.

32:11 Yes. And maybe, Rosemarie, I'll weigh in on that.

The – we expect more price in Q4. We actually have committed price from customers that we haven't received price in their current jobs or projects because we don't have the ability to get it on those projects, but they've committed to give it to us on the next projects, which are now being shipped in Q4, and that will roll through Q4 and Q1.

And in SBM, honestly, we're doing well between price and productivity, and this will be our low margin mark for SBM. And it'll pick up through a little bit of Q4, and then it'll come more normalized into next year.

SCCs where we're focused, to your point. We have inbound freight and outbound freight on SCC, and it is challenging.

And we're attempting to do surcharge and then working with our vendors on some of the extra freight costs overseas and inbound overseas because it's a global supply chain for SCC versus SBM, which is a little more local, and it's easier to handle.

33:13 All right. Thank you very much.

31:29 Thank you.

33:23 Hey guys. It's Dan Rizzo for Laurence.

Just one quick question. Is there a way to shorten or change your supply chain?

I mean, obviously not right now because you're just doing issues since to kind of change things, so this doesn't happen right to again. I mean, I guess it's kind of closing the horse out, but I just wondering if you're looking at that.

33:44 Dan, I truly believe every company that is impacted by the supply chain challenges is asking the very same question. And again, it's a daily conversation.

And decisions that you would like to make, as Craig said, in terms of switching to an alternate material, it's just not feasible right now. But I think it does beg the question, how do you more fundamentally secure yourself against the prospect of this happening?

And it is a current and continuous conversation and will be part of our strategic planning going forward. But to your point, Dan, the horse has already bolted.

And it's now thinking about what we can do over the next twelve, twenty four months rather than what we can do right now, unfortunately.

34:39 Yes.

34:39 Yes. And Dan, I'll just -- sorry, Dan.

I'll just reemphasize that, that's predominantly a challenge on the SCC part. And we've actually got the benefit from that global supply chain for years.

And unfortunately, with the increasing freight, the blackouts in China now on production on areas and even across Asia, that's challenging getting product, let alone the cost increase is going up. So to your – your point is very valid, and we need to have some sort of balance in that.

35:09 It sounds like that a lot of the issues or at least the volume issues in SCC, because of the shortages, are just pent-up demand. So I just make sure I'm thinking about this right.

That would suggest that once this is over, be it three months, six months, nine months from now, you should see a pretty large restock cycle as people basically catch up, particularly given the infrastructure demand that are growing worldwide.

35:34 Yes, On SBM certainly because we have Stirling Lloyd, we actually have back orders on Stirling Lloyd right now right through the quarter. On some of the BAE.

SCC tends to restock fairly quickly, but I think our customers are not moving the product out to those projects. So, you are right.

I think it will extend the cycle. I don't know if there'll be a big bang in Q1 or two, but it will end the cycle on the replenishment of inventory.

36:05 And Dan, to your question -- it's Simon. I'll give a little bit more color.

Specific actions that we had taken that actually were going to drive some very nice productivity improvements for us year-over-year have been negated by the inability to get the product that we planned to replace the raw or the cost of that raw has increased so much that it negates the productivity improvement. The second thing because – what you asked, what can you do?

Clearly, we have taken the decision to increase our physical inventory and quite substantially. And I think surprisingly, that meant for some customers in some segments, we've actually been able to drive an improvement in our on-time and in full on certain projects for certain customers.

And I think that's a testament to our supply chain group that we've been able to do that in these challenging times.

37:13 Thank you very much.

35:29 Thanks, Dan.

37:22 Yes, hi, good morning, everyone. How are you doing?

37:27 Hey, Chris.

37:28 Hi, Chris.

37:29 If I could follow up on Rosemarie's question about M&A. You've lined up the strategy and the target sort of areas and geographies.

And I think you've seems like you've had that sort of set for a while now, I guess. What's just sort of the -- what's the sticking point right now?

Is it just -- are there no targets? Are they not selling?

Or is the multiples too high? Have you lost that on some targets?

Or are you guys – is it COVID or are you guys been distracted with the supply chain issues? I mean what's really sort of the sticking point in getting this done?

38:01 No, we've actually dedicated a lot of time and effort to M&A. In some cases, we have lost out.

In some cases, we've decided the price is too high. In some cases, we decided there isn't enough good fit and synergies.

And so, we want to be thoughtful – we want to be discerning we actually have a very good pipeline and feel good about some of the targets that we are pursuing.

38:37 So, lot of reasons, I guess.

38:40 Yes.

38:40 And then if I could ask historically, I can't remember in both your businesses, when you had to raise prices, a decent amount. Is there any impact demand or is there some elasticity or is there any switching out and some more commodity like product or anything like that if we get this sort of historical when that, has that happened in the past?

39:06 Yes. Generally, I mean, we're managing the balance between price and volume.

And generally, there's not switching out as long as we are sensible, we communicate effectively and we're clear to the customer on exactly where they're getting the price. And the challenge is the timing.

I mean, certainly, if we're going to jam the customer and put him in a very difficult position with his pricing to his customer or his – their project or her project. That's an issue.

So hence, the reason why the delay a little bit on our part because we don't want to lose volume. We haven't lost volume that we know of as we're tracking where we had, I think, about two or three years ago, we did move price and we lost volume.

And you can see in twenty nineteen, it came back to haunt us on the SBM side. So we're very thoughtful on this price approach.

Of course, we've got the wind in our back with the inflation. So we're going to get the price.

We are driving productivity to offset it, too. And I think at the end of this, we'll be more competitive, and we'll be able to grow the business on the backs of that versus just working on price and margin, honestly.

40:20 All right. Thanks, guys.

40:24 Thanks, Chris.

40:43 Hi. Yes.

Just one last one for you around free cash flow. Looking even at the adjusted number, you're quite a bit behind where you were last year.

I know you mentioned the higher inventory levels. But maybe just as we're starting to think about free cash flow for next year, maybe walk us through some of the puts and takes there.

Presumably, working capital becomes less of a headwind. Expect to see some earnings growth in there.

But also how do we think about the cash for restructuring and repositioning into next year as well as capex next year versus this year?

41:23 I mean I'll give you a general comment, Mike, and then Craig will probably follow up with more specific data. But very deliberate decision on Craig and my part early this year as we saw challenges on raw material pricing and the indications of shortages that we bought early.

And we bought a lot. We're very deliberate.

So I'd say the majority of the change in the free cash flow comes from increasing physical inventory. What I am pleased to say is that throughout the course of this year, we've made some changes within our supply chain group, and I think we have a very talented group.

And I think that's part of the reason why we've been able to improve service levels to some customers even in these challenging times. But we will definitely be targeting that group with a reduction in physical inventory once the supply chain disruptions have abated and driving that improvement in free cash flow next year.

Craig?

42:27 Yeah. So, Michael, I'll play in on Chris’ question a little bit on this too.

So, we decided to carry this extra inventory. One of the reasons was the support number.

I'm from the commercial. I have a commercial background to support the commercial teams on pricing.

The last thing you want to do with customers is give them a price increase and then tell them that you can't service them with the product. So, we're supporting our commercial teams and our customers on that.

42:52 We have about fifteen percent to twenty percent more cost in our inventory this year than we did last year, about half of that is inflation and the other half as the decision Simon and I made to carry extra volume to make sure we can service the customers. So, we'll read the benefit of that next year not at the end of this year because the supply chain disruptions are keeping on.

But next year, we'll read the benefit that because we expect to bring that down slightly next year. But just to give you some numbers, we do expect to spend probably about five million dollars to eight million dollars more CapEx next year than this year.

That would be on the projects. We've identified some nice productivity projects in mostly North America on the SBM side.

So, that’s where the number will be at, will be at forty five million dollars give or take on CapEx.

43:41 Interest expense will stay the same next year right at this moment. Unless we do M&A, and we can get a target closed, which would change it.

Restructuring, we're trying to accelerate the restructuring not just for the savings, but we want to get over it, so we can operate the business effectively just from operating point of view. So, you're going to see less cost on dollars in restructuring next year, So that's probably going to give us a bump of ten million dollars or fifteen million dollars.

So, you're going to see probably our anticipation, our best cash conversion in year will be twenty twenty two once we get pass this current restructuring.

44:17 Very helpful. Thanks.