Operator: Greetings, and welcome to Diversey Holdings Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. I would now like to turn this conference over to your host, Mr.

Grant Graver, Investor Relations. Thank you, sir. You may begin your presentation.

Grant Graver: Thank you. Hello, everyone, and welcome to Diversey's third quarter conference call.

With me today are Phil Wieland, our CEO; and Todd Herndon, our CFO. Our earnings release and the slides we'll reference on this call are available on Diversey's website at ir.diversey.com. Please take a moment to read the cautionary statement in these materials, which state that this teleconference and the associated supplemental material may include estimates of future performance. These are forward-looking statements and actual results could differ materially from those projected. Factors that could cause actual results to differ are described under the Risk Factors section in our filings with the SEC.

On this call, we will reference certain non-GAAP measures. Please see the accompanying slides and our filings with the SEC for a definition and reconciliation to the most closely comparable GAAP measures. And now, I'm happy to pass it over to our CEO, Phil Wieland.

Phil Wieland: Thank you, Grant, and good morning to everybody. I'm happy to report another quarter of strong progress against our strategic plan.

Let me update you on the five key headlines for the quarter. Firstly, the top-line was showing good momentum in both our institutional and SMB segments. In SMB, our very high win rates during 2020 and 2021, plus the introduction of water treatment are paying dividends. In institutional, the recovery of our base business continues to be encouraging, with strong Q3 growth over prior year. This is fueled by share gain from new business wins, investments in commercial excellence, and our global accounts infrastructure, strong innovation pricing, and of course reopening in some markets.

Page 6 of the presentation highlights our progress returning to pre-pandemic levels, as we see a strong recovery in North America and improving position in Europe, and a slower recovery in the rest of the world. Whilst, the remaining COVID impacts around the world frustrate our customers, we remain confident in a full recovery. And this will be one of our levers for growth as we head into 2022. We continue to see infection prevention well ahead of 2019, with many countries more than doubled 2019 on a year-to-date basis, and others with a slightly lower increase versus 2019. This segment of the market has seen normalization from the strong growth we experienced in 2020, but is still significantly above pre-pandemic levels.

Although, it’s difficult to judge exact trends given the complexity of the overall environment, we are encouraged by increased hygiene standards and market receptivity to our differentiated infection prevention portfolio, as we deepen penetration in North America and expand into new geographies. In summary, we believe we will drive growth in our business in Q4, and acceleration into 2022. And we're increasingly well-positioned for long-term growth. The second key element of the quarter is around pricing. Pricing remains critical for us as a result of the cost inflation that we've seen build through the year.

We continue to step up pricing in the third quarter, and have good pricing momentum for the fourth quarter and into 2022. We've realized roughly 3% top-line growth from pricing actions year-to-date, and expect to reach mid-single digit percent in the fourth quarter. We expect this increased level of pricing to continue into 2022. The third element, margin, Diversey continues to execute well in a challenging environment, and we are pleased to have increased EBITDA margins from 14.7% in Q1 to 15.6% in Q2 to 16.0% in Q3, as we signaled we would, when we last reported. Our margin improvement has been solid and consistent for several quarters now, and provides confidence around our longer-term target of 20%.

Number four, customer value proposition. We continue to be encouraged by our winning customer value proposition with a stronger than ever pipeline of opportunities, very high customer retention, and record net promoter scores. Based on our progress to-date, we remain very confident in our ability to take share, and drive long-term operating leverage in the large and fragmented markets we serve. And finally, number five, M&A, we continue to execute against our strategy with M&A. In Q3, we closed the Tasman acquisition in Australia that we announced last quarter.

And we've recently closed a deal that we're excited about in Canada. The acquisition pipeline has never been stronger. Now, I'd like to highlight progress on ESG. We recently filed our annual sustainability report, which we've done annually for more than 15-years. However, this year, we're resetting our strategy and goals.

Our enhanced sustainability strategy is called Protect, Care, Sustain, and it follows the ESG framework commonly used today. It's set out on Page 8, protecting the environment, caring for society, and sustaining good governance will be the focus of our new approach. We are committed to ambitious goals in this area, and we'll measure and report on our progress annually. Throughout our history, our commitment to sustainability hasn't changed. It's deeply embedded in the culture of the company.

It defines who we are, and what we stand for. I'd also like to state how proud I am of our global teams for the way they're responding to the current global challenges. Our supply chain teams are managing freight issues, our procurement teams, are managing a difficult and fast-changing raw material landscape. And our R&D teams are working tirelessly to reformulate products. All of this is aimed at limiting the impact on our customers, which has been very well handled by our customer facing teams.

This is a time of truly exceptional circumstances. Diversey’s deep rooted behavior, and being customer driven, is putting us in a great position to deliver a fantastic 2022. Finally, you'll remember that our medium-term growth algorithm is to grow organic top-line faster than the market rate of 3%. To add 2% to the top-line through M&A, to expand margins to 20%, and to generate significant cash to delever and fuel investments in growth. We're confident that we will enter next year with great momentum due to our market share gains, effective management of inflation through price and cost actions, ongoing market reopenings, higher post-pandemic cleaning and infection prevention standards, and a very robust pipeline of M&A opportunities.

And with that, let me pass over to our CFO, Todd Herndon, to discuss Q3 financial results in more detail.

Todd Herndon: Thanks, Phil. Let me start on Page 11, with a summary of our consolidated results. Q3 net sales were down 2.4% versus prior year as reported, but increased quarter-over-quarter as expected, with sales increasing by $14.7 million, or 2.3% versus Q2. As Phil mentioned, the recovery of our base institutional business is progressing well.

And we continue to win new customers with significant recovery still ahead of us, as reopenings progress around the world. Our F&B business continues to win new customers and grow revenue, while improving margins. Consolidated adjusted EBITDA for Q3 is in line with 2020, and is 2.1% above 2019. Overall, we are very happy with the progress we're making on margins, despite inflationary and supply chain pressures. On Page 12, let's review our segments starting with institutional.

Institutional revenue declined 6.7% versus Q3 2020, as the strong recovery in the base business was more than offset by the tough comp to the increased level of infection prevention that we experienced in Q3 of last year. We've seen strong recovery in the more developed geographies with much more to come, as developing geographies and sectors, such as facility services and hospitality continued to recover. We also believe our infection prevention business is stabilizing after the one-time effects of COVID, and is well-positioned to grow with our investments in new products and regions. In Q3, institutional revenue has recovered to within 3.4% of pre-COVID 2019 levels. Even with lower revenue and challenging raw material and supply chain environment, we were able to increase our adjusted EBITDA margin over both 2019 and 2020, through operational efficiency programs and pricing.

We are also now at the inflection point where the combination of stronger customer retention, new business wins, continued reopenings, and increased hygiene intensity will drive further quarter-over-quarter growth in Q4, and into 2022, absent further supply chain disruption. Before moving to SMB, I'd like to quickly highlight one of our environmentally friendly products, Oxivir Tb, which was rated by Newsweek and the Leapfrog Group as a best infection prevention product in 2021. Oxivir Tb is a hospital-grade disinfectant, it contains our patented accelerated hydrogen peroxide technology. It's rated as the lowest level of hazard and requires no safety warning, or PP&E. It's great to be recognized, but more important is the feedback from our customers that our infection prevention solutions lower infection rates, without compromising employee safety.

It's also better for the environment than other disinfectants, breaking down to just oxygen and water. On Page 13, let's review our food and beverage segment, where revenue grew by 12% compared to Q3 2020. More impressive was the 29.9% growth in our adjusted EBITDA over that period, given our continued scale and focus on cost improvement. As a result, our F&B segment ended the quarter with a strong margin of 19.3%, which was up 270 basis points compared to 2020. When comparing to 2019, revenue expanded by 9% and our adjusted EBITDA grew by 25.6%.

Exhibiting the continued momentum we're experiencing closing new business wins around the world, along with increasing traction in water treatment. One of the innovations I'd like to highlight for F&B is Deosan HH+, which is a sustainable footbath solution to help prevent lameness in ruminant farm animals. It's estimated that 25% of cattle suffer from lameness. Potential treatments use copper sulfate to repair the [indiscernible] and hoofs, which is an environmentally damaging heavy metal. HH+ uses copper nitrate, which is water soluble, and therefore has a much lower environmental impact.

This presents a great upsell opportunity across our global agricultural business. On Page 14, you'll see our financial bridge from Q3 2020 to Q3 2021. I've already discussed the institutional and SMB movements. You'll also see we had small favorable FX and a benefit from M&A. One other item to note in the quarter, during Q3, we had a change in the way we account for income taxes.

It had the effect of increasing our rate in the quarter, does not change our full year outlook on adjusted ETR and has no impact on cash flow. With that, let me turn to the balance sheet, cash flow and liquidity on Page 15. Beginning with free cash flow, Q3 2021 had an outflow of $41 million compared to free cash flow of $6 million in Q3 2020. Within the $41 million Q3 2021 outflow is $8 million for the purchase of Tasman Chemicals, and $12 million have higher cash interest payments, which were accelerated around the refinancing. Our recent refinancing lowered our interest rates and extended the loan maturities out to 2028 and 2029.

Assuming interest rates and the floating rate debt remain constant, we anticipate annual interest expense savings of more than $11 million, which could increase to $14 million when we trigger a step down of the interest rate, upon achieving a net leverage ratio of 4.5 times. The overall cost of our debt is relatively low at less than 4%. We have a strong liquidity profile with over $500 million available as of quarter-end, which we view as a strong asset, given the fragmented market we operate in, and a very robust M&A pipeline, Phil noted earlier. Our leverage remained stable at 4.85 times net debt to adjusted EBITDA compared to 4.74 times last quarter. The 0.1 times increase was driven by roughly $33 million of refinancing fees.

We believe we'll deliver by year-end as our LTM EBITDA improves, inclusive of this significant investment in our new facility in Kentucky we announced in Q2, and a provision for some M&A in the quarter. In Q4, we expect to generate more than $70 million of free cash flow net of strategic investments in M&A, and our supply chain strategic investment. So, let me conclude with some comments on our general outlook. Our business is expected to be a positive comp year-on-year in Q4. Absent further supply chain disruption, and continues to improve as markets reopen, and we continue to implement new business that we've won over the last year.

For infection prevention, we're seeing demand lower than what we experienced in 2020 during the pandemic, but still much higher than pre-pandemic levels, which is likely to continue in the future due to elevated hygiene standards. In the fourth quarter, we expect to continue quarter-over-quarter progressive growth in sales, adjusted EBITDA and adjusted EBITDA margin, as mentioned last quarter, and accelerating momentum into 2022. And with that, I'll pass it back to Phil, for a closing summary.

Phil Wieland: Thanks, Todd. As a leading provider of hygiene, infection prevention and cleaning solutions amidst the pandemic, we are well-positioned to capture significant growth due to elevated cleaning standards as markets continue to reopen.

We're building great momentum for 2022 and beyond, with an improving top-line, aggressive pricing to combat inflation, and a strong funnel of acquisitions. And now, I look forward to your questions. Operator, will you please begin the question-and-answer session?

Operator: At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Vincent Andrews with Morgan Stanley. You may proceed with your question.

Vincent Andrews: Hi, thank you. Good morning, everyone. Just wondering as we look into the fourth quarter, if you could just give us a little bit more of a sense of what type of top-line growth to expect. And maybe, just a little bit more thought on the price cost trade-off in the fourth quarter and how that will trend?

Phil Wieland: Yeah. Vincent, thanks for the question, Phil here.

So, let me start with the with the price cost part of the question. So look, we've seen sort of 5%-ish cost inflation in the period today, about 3% on price. We think our price is going to step up more like sort of mid-single digits in Q4, as we talked about quite a lot of extractions going in there. But it's also likely that our costs are going to step up, as well. So we do think that we're going to see some more accretion in our margins.

But it's not going to necessarily accelerate very significant layers with managing that further cost inflation against the price we're putting through. On the top-line, look, I think we will see some growth, as Todd just mentioned, in the fourth quarter. We've been delivering somewhere like $15 million to $20 million improvement each quarter. It may not be as much as that in the fourth quarter. As you know, we've got a reopening happening, it's not obvious that there's going to be a huge amount of reopening more in Q4 versus Q3, of some of those countries with the lower rates of vaccination are not necessarily improving in that period.

So, in summary, I'd say, both margin and top-line continuing to get better, but not necessarily huge steps forward. I hope that helps.

Vincent Andrews: No, that's very helpful. And then maybe just on infection prevention, do you think we're now sort of at the run rate or this is sort of where it's going to sort of bounce around that plus or minus? But, it is going to indeed normalize at a higher level than you originally anticipated, and this is a good, once we lap this rate, we'll stop talking about it.

Phil Wieland: Well, I'm not sure I want to stop talking about it, because our product roadmap.

To get to the core of your question, honestly, it's just so hard to say, because as we look at different countries, as we look from month-to-month, there's just some real diversity and spread of performance. So look, it's certainly true that we've seen a reasonable amount of normalization and infection prevention so far, whether there's a bit more to come, I think there certainly could be. But, offices really globally not yet reopened. And until we see that, again, it's going to be hard to get a full picture. So not a very complete answer, but probably the best we can do at this stage, as things are still unfolding.

Vincent Andrews: I appreciate that. Thank you very much for your comments.

Operator: Our next question comes from the line of George Tong with Goldman Sachs. You may proceed with your question.

George Tong: Hi, thanks.

Good morning. I wanted to dive deeper into whether or not you're seeing impact from supply chain disruptions. Are you seeing any delays or difficulty in obtaining supplies or seeing pricing impact or cost impact from some of the supply chain disruptions that we're seeing across the economy?

Phil Wieland: George, the short answer to that question is, yes. It's really tough out there. And I think you know, anyone that says otherwise, probably living in a different world.

We do see labor challenges. We do see raw material challenges, transportation is difficult. It's just a daily, weekly, monthly, ongoing challenge. We're assuming this is going to continue as well, into 2022. So, whilst we are focusing on all elements of our strategic plan we talked about before, this is something that we are extremely focused on managing.

I think, if I was looking for a positive, I'd say, we're well equipped to deal with this versus some of our smaller competitors. But I don't want to understate, this is a challenge. I think we're doing well, but it's not going away anytime soon.

George Tong: Okay. Maybe just a follow-up on that point a little bit.

What are some strategies that you have to mitigate the risks of supply chain disruptions? And, what kind of impact could further supply chain disruptions, so a new elongation of the timeframe of those disruptions have on either top-line or margin performance?

Phil Wieland: Yeah. So look, we're doing a lot as you'd imagine. So for example, our R&D team are working on a whole range of reformulations outside of the registered products, to make sure that we've got the more readily available materials going into our products. We're also reducing the SKU range where we can, where it doesn't have a significant impact on customers. Really, just focusing on making sure that the materials that are available, we can use as flexibly as possible, to make sure that we're getting it and satisfying all the customers as fast as possible.

So, we're really focusing across every part of the supply chain. But we're actually being pretty creative with some of the solutions here as well.

George Tong: Got it. Very helpful. Thank you.

Operator: Our next question comes from the line of Andy Wittmann with Baird. You may proceed with your question.

Andy Wittmann: Okay. Thanks for taking my question. I thought I would talk about or ask about the food and beverage segment in particular.

The margins there, I think, kind of stuck out to me as being fairly positive. So I was wondering, Phil, or Todd, if you could talk about what are the reasons for the margin expansion? Obviously, you had decent top-line growth here. So I have to think some of those leveraged, but is there mix, pricing, other factors that are driving that? And can you talk about the sustainability of the margin profile that you realized in the quarter? Basically asking, was there anything kind of unique to the quarter that wouldn't be expected to occur?

Phil Wieland: Yeah, let me take that. Let me start by saying our F&B leader would take issue with fairly positive. I think he's somewhat more excited about that because the momentum he is driving.

But look, why are we doing well in F&B? At the heart of it, we have been winning business, some of which is last year that we've rolled out this year, more than that we've won this year. So that's adding to the-top line, but also we're winning at nice margins. So that in itself is helpful. And the additional volume is obviously giving us some leverage through, as I think you're suggesting. As for whether it's sustainable, certainly expect us to continue to look to deliver some really nice top-line growth, albeit, we're certainly not immune from these inflation challenges.

And I think it's fair to say that the cost pressure in SMB is even greater than it is in institutional. So, it's going to be a battle to continue to drive the margin accretion that we've seen, and that's likely probably the slow a little bit, but it will peak going forward.

Andy Wittmann: That's helpful. Thank you for that. Just for my follow-up question, I guess I wanted to talk about the overall kind of outlook for growth in terms of like a net new basis.

You mentioned high retention, I don't know if there's any more detail you can give on your retention rates overall, certainly, like last year, there wasn't a lot of switching. But things are getting more normal. So I'm wondering if retention has changed from those very high levels that we realized during the depths of the pandemic. And then, if you could talk maybe about kind of sales force productivity, you mentioned kind of subjectively a couple times that new sales have been good. Maybe there's other commentary, you can give us that give us a little bit more detail on that, so that we could just kind of assess that as well.

Phil Wieland: Yeah, sure. So on retention, I'd say no change. We've talked about 98%, 99%, that's really continued. We really haven't seen any material losses. I mean, I can think of one off top of my head, which was resulted from a bit of pricing that we pushed through.

Our competitor was prepared to take a price cut, which we wouldn't. But, outside of small examples like that, the retention remains really strong. In terms of new business, I’d say, despite the fact we've won a lot, our pipeline has also got much stronger. So, it's very hard to give predictions there. But, all I can say is, we feel we've got momentum, and we feel it's going to keep going.

We've got new leadership in our global accounts business. We've focused a lot on commercial excellence, and it's early days, but it seems to be moving in the right direction.

Andy Wittmann: Thank you very much.

Operator: Our next question comes from the line of Edlain Rodriguez with Jefferies. You may proceed with your question.

Edlain Rodriguez: Thank you. Good morning, guys. Phil, you've talked about the cost pressure in F&B being greater than institutional. Is that where you are trying to push most of the price in? And is it a little more challenging to get price in there than on institutional?

Phil Wieland: Look, our job here is to maintain percentage margin to the extent the cost inflation is higher, so our price increases need to be higher, because over time, that's the only way we can maintain percentage margin. So yes, to the extent that the costs are higher in F&B, so our prices need to be higher, too.

And that's what we're getting on with.

Edlain Rodriguez: And just a follow-up on that, clearly, I think for this year, your price is still going to lag the cost inflation. As we get into next year, like how long do you think it's going to take you to kind of recover all the costs?

Phil Wieland: Yeah, look, it's a really tough one, because what we don't know is how much more cost is coming. So, when we were sitting in the summer, we were thinking with the inflation that we could see then, we were going to have it fully passed through probably in the first quarter of next year. But what's unfolded, of course, is another wave of cost inflation.

So that obviously is going to take another wave of pricing to recover. But it's really hard to predict what's then going to happen with further cost pressure. We are now planning, we're assuming we're going to have further costs inflation right through 2022. And therefore, we've got further price. If that happens, then of course, it's going to be beyond that, before we fully get the margin recovery, although, we feel good, that we'll certainly get the dollars in the year as it comes through.

Edlain Rodriguez: Okay. Thank you very much.

Operator: Our next question comes from the line of Jeff Zekauskas with JP Morgan. You may proceed with your question.

Jeff Zekauskas: Thanks very much.

I think infection protection revenues were $815 million or so in 2020. What are they going to be this year?

Phil Wieland: Jeff, it's impossible to give you an accurate answer on that question. I mean, if I step back and say, how are things unfolding versus what we expected, I would say that infection prevention has probably normalized, a little bit faster than we would have expected. But, exactly what happens beyond, it's hard to say. Overall, new business, water treatment, pricing, M&A good, infection prevention, a little bit lower than we expected at this stage, we plan for it to come down further in ‘22 how that panning out is really tough to say.

But, we'll update you when we can, as the facts lay out.

Jeff Zekauskas: What order of magnitude, like, what's the revenue decrease? And when do you expect the quarterly revenue in infection protection to begin to go up?

Phil Wieland: So, I think we'll probably see further reductions in infection prevention into Q4 this year. And I think we'll see a little bit more normalization, certainly into the first part of next year. And then I think we'll start to see grow, I think will flatten out. And then the investments that we've made outside of North America, I think we'll start to see those accelerating and infection prevention globally, starting to grow a little bit more.

The other thing that's hard to predict is what's happening with hand sanitizer, because what we're seeing is, as markets reopen, certainly the hand sanitizer picks up in line with that. And as those markets in the developing world reopen, let's see what happens.

Jeff Zekauskas: Thanks so much.

Operator: Our next question comes from the line of John Roberts with UBS. You may proceed with your question.

John Roberts: Thank you. Would you expect any primary shares to be part of any follow on offerings?

Phil Wieland: John, I can’t answer that question at this stage. I think all options are right, but it's tough for me to answer that clearly at this stage.

John Roberts: Okay. On Slide 6, is that the combined institutional and F&B excluding infection prevention? Or is that just institutional excluding infection prevention?

Phil Wieland: Yeah, good point.

That's institutional, John. So I mentioned the COVID impact was more modest. We did have some. But, that was in the single to low double digit millions. So not that material.

This page really represents institutional.

John Roberts: Thank you.

Operator: Our next question comes from the line of Gary Bisbee with Bank of America. You may proceed with your question.

Gary Bisbee: Hey, good morning.

I guess, the first question just on margins, obviously, you're doing a nice job delivering expansion there, despite the cost headwinds, and certainly understand the pricing dynamic and how they can help. But can you give some color on what strategies are really the key drivers of that? I know you've called out a number of them in the pre-IPO process. And have you stepped on the gas faster on some of those strategies, such that maybe you're pulling some of that future opportunity forward into this year? I guess, I'm just wondering if given all these things, how you're thinking about the medium-term margin story from here relative to how you told it in the IPO process. Thanks.

Phil Wieland: Sure.

Todd, do you want to pick that one up?

Todd Herndon: Sure. I can do that. I think that our outlook for our margin opportunity is not any different than it was at the time of the IPO. The things that we control are clearly still in our control. There were three or four different areas that we said we would focus on.

We've focused on those areas and are driving them, whether it be our operational effectiveness program or earnings improvement program, as we call it internally. We're making significant progress this year on G&A in particular, as we look at, how we deliver continued functional cost savings. The current supply challenges with respect to acquisition of raw materials, has actually helped us accelerate some of the work we're doing on portfolio, which we mentioned, was an important component going forward of generating further procurements synergies, because we're now looking at ways to harmonize the portfolio potentially faster, so that we can aggregate that demand and look at the composition of the cost of our products that we go to market with. We announced in Q2 the establishment of a lease in Kentucky related to a footprint opportunity in North America, which we see as a significant opportunity to improve margin more in the 2023 period. And so, all of that work that we're working on in a continuous improvement one of our key five behaviors that Phil launched last year, is on plan with what we viewed in the IPO as an opportunity for us to reach our mid to long-term target.

So we believe that we're doing a good job controlling what we control, and executing well within the company on that. And, with the challenging environment this year, we're pretty pleased with where we are on the cost base. The other thing I would say, just as we think forward to 2022, we would hope that with our outlook to some growth next year that we've become a more efficient company during the COVID time, and can leverage our fixed costs over growth that we fully anticipate coming in 2022.

Gary Bisbee: Okay, that's helpful. And then if I could go back to infection prevention, just more question.

Can you give us an update on how the global rollout of the AHP products going? Is reopening helpful to that? In that, it's easier to get in and sell? Or, is it a challenge to the extent that you start to be past the worst of it, there's less like incentive for people to aggressively upgrade and change what they're doing or add more use of these products? Thank you.

Phil Wieland: Sure. So, in terms of the global rollout, so we are now manufacturing right around the world and selling right around the world. In terms of reopening, look, it's mixed, because clearly, businesses that are closed are not buying anything. So there's no opportunity.

It's certainly true outside of healthcare that when businesses are open, but there's a heavy focus on COVID that’s the height of the opportunity, and that comes down a little bit with a normalization we talked about earlier. And we're seeing that trend both in North America where the product was first launched, and in the other places around the world.

Gary Bisbee: Okay. If I could just sneak one more quick one in. The tax commentary, does that imply that the Q4 tax rate would likely be lower? I think you said the full year unchanged, but it was much higher this quarter.

Or can you just level set what might be a reasonable expectation in Q4? Thank you.

Todd Herndon: Yeah, let me take this, it’s Todd. I guess, what I would start with is saying, our nine month adjusted ETR landed about 31%. As of Q2 on a year-to-date basis, we were at 20 on our ETR. So a higher ETR was expected in the back-half of the year.

While we originally expected the higher ETR to blend in over Q3 and for our tax accounting change we described in our 10-Qs, required we take the full impact of the differential rates into Q3. Our full year view hasn't changed. We continue expect to land at 30% to 31% for the full year adjusted ETR. So it's really a quarterly phasing comment.

Gary Bisbee: Great.

Thank you.

Operator: Our next question comes from the line of Arun Viswanathan with RBC Capital Markets. You may proceed with your question.

Arun Viswanathan: Great. Thanks for taking my question.

Good morning. I guess, two questions. So first off on the raw side, what can you do to mitigate the impact there? Are there surcharge mechanisms that you'd want to implement? I guess, I'm just asking mainly about chlorine and caustic, just given some tightness there that looks like it will persist into ’22, just given capacity, rationalization and logistical issues. So, yeah, maybe we can just address that first. Thanks.

Phil Wieland: Yeah. Look, you're absolutely right. So, we've been taking a lot of prices we talked about. There are certain materials, example, being the one you mentioned, where some element of surcharge also exists, because sometimes it's faster for us to get a surcharge into the market. And the movement in these raws is fast.

It's also to true to say that on some of those products, particularly in the SMB business, our contracts with customers are directly related to the index, and therefore there's a natural movement and reflection of what's going on in the underlying index anyway.

Arun Viswanathan: Okay, great. Thanks for that. And then, just maybe if you could review kind of how we should think about leverage and how that evolves over the next year? Thanks.

Phil Wieland: Todd, do you want to take that one out?

Todd Herndon: Yeah, I can take that one.

Our thought process is following; we aspire, of course, to reduce our net debt leverage, and that hasn't changed. With respect to how we think about it with M&A, tuck-in acquisitions will require cash, but won't material increase our leverage profile on a pro forma basis, as post synergies, they get to roughly net that level that we have today, and create a lot of equity value. We do understand the importance of the delevering over time. The uptick in leverage in Q3 again, was driven by the refinancing, which clearly has a benefit going forward of roughly $14 million in cash interest savings going, once we hit the 4.5 times net debt level. And we were able to extend those towers out to 2028 and 2029.

We do expect to delever in Q4, in addition to funding our investment in the Kentucky facility and M&A which we referenced. We would also expect to further delever in 2022, as we generate strong free cash flow and grow EBITDA. We're going to continue to focus on delevering in the mid to long-term towards 3 times, as we communicated earlier this year. So, that's how we think about leverage going forward.

Arun Viswanathan: Thanks.

Operator: Our next question comes from the line of Christopher Parkinson with Mizuho. You may proceed with your question.

Unidentified Analyst: Good morning. This is [indiscernible] on for Chris. I was just wondering overall for the business, if you could discuss the opportunities that you're seeing on a regional basis.

And if you're seeing more opportunities for new business wins, as well as to gain market share, I guess in some of the reopening economies, as opposed to the more mature economies? Or that's just broad based, and you're winning in most geographies? Thank you.

Phil Wieland: Yeah, sure. Look, I think we're seeing good momentum and good progress around most of the world, certainly across North America, across Europe, India. I think the tougher areas right now have been Southeast Asia, and a ANZ, just because they've remained in a tough lockdown situation, and not sustained for a long time. But, we're pretty confident, Australia's just started reopening.

There is very early signs of Southeast Asia coming out of their lockdown. So hopefully, we'll be able to get stuck back into some more growth over there. But really, that's been the story of the last couple of quarters.

Unidentified Analyst: And then, maybe just a quick one on sustainability. It seems like there's a big demand pool for more sustainable solutions from customers.

I mean, can you discuss a little bit what your sustained kind of new product pipeline looks like in terms of sustainable solutions? And how we should think about mix from those new products, as well as your ability to gain share to those products going forward?

Phil Wieland: Yeah, this is big. I mean, we put on Page 7 in the pack, how we're starting to think about ESG and the new plan that we've put in place. This is really big. I think just in the last six or 12-months, the amount of customers coming to us asking for help, how can we be at the heart of their ESG strategy, and seeing us as a really key partner to help and then make progress is actually really heartening and really encouraging. So, we're really redoubling our efforts on ways to save water, energy, packaging in particular.

And look, it's going to take some time, some of these developments take some time and rollout take some time. But I think this is going to be an even bigger driver of growth going forward than probably before 12-months ago.

Unidentified Analyst: Thank you.

Operator: Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn this call back over to Mr.

Phil Wieland for closing remarks.

Phil Wieland: Yeah, look, thank you for that. In summary, I’d just say that we're really pleased as we close out the third quarter and where we are on new business and share gains on, our pricing, on our cost and efficiency drive, on M&A and the base coming back. We have as we talked about seeing some normalization in infection prevention. We think that as this rolls out, we're going to see some growth in Q4, both in revenue and margin.

And then we're going to see an acceleration of our top-line in ‘22, and that reopening that we showed in the pack, really starts to come through, particularly in Europe and rest of world. And that allied with the ongoing price share in M&A makes us feel really good about the top-line as we head into ‘22. So look, thank you for listening. Thanks for attending. I hope we've answered your questions.

Have a good day.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Enjoy the rest of your day.