Innospec Inc.

This is David Jones. I'm Inispec's General Counsel and Chief Compliance Officer. Late yesterday, we reported our financial results for the quarter ended June 30, 2022. The earnings released in this presentation are posted on the company's website. During this call, we will make forward-looking statements, which are predictions, projections, and other statements about future events. These statements are based on current expectations and assumptions that are subject to risk and uncertainties that could cause actual results to differ materially from the anticipated results implied by forward-looking statements. The risks and uncertainties are detailed in Inspec 10-K, 10-Q, and other filings of the SEC. Please see the SEC site or Inspec site for these and other documents. In our discussions today, we've also included non-GAAP financial measures. A reconciliation to the most directly comparable GAAP financial measure is contained in the earnings release. The non-GAAP financial measure should not be considered as a substitute for or superior to those prepared in accordance with GAAP. They are included as additional items to aid investor understanding of the company's performance in addition to the impact that these items and events have on financial results. With me today from InnoSpec are Patrick Williams, President and Chief Executive Officer, and Ian Clemonson, Executive Vice President and Chief Financial Officer. And with that, I turn it over to you, Patrick.

Thank you, David, and welcome everyone to InnoSpec's second quarter 2022 conference call. This was another very good quarter for InnoSpec. volume, price, and mix improvements drove double-digit increases in sales and operating income in all businesses. Our manufacturing supply chain teams have remained extremely resourceful through these ongoing global imbalances, and we continue to build on our reputation as a consistent and reliable partner to our customers. Performance chemical sales grew in all end markets. Operating income was up 61% over last year, and EBITDA margin surpassed 20%. Personal care demand drove most of the margin in operating income improvement over the prior year and more than offset weaker demand in smaller segments like European home care. To support personal care growth, we are adding capacity under our current two-year $70 billion organic investment program. In addition, this quarter we opened our new 20,000 square foot global technology center which supports R&D and technical services across all our performance chemicals business segments. To further position for long-term growth, last week we closed on the purchase of significant additional land adjacent to our primary U.S. performance chemicals manufacturing facility in North Carolina. Fuel Specialties delivered an 11% increase in operating income over a strong comparative quarter last year. Gross margins remain at the lower end of our target range. However, we expect improvement as inflation normalizes and higher margin in markets like jet fuel fully recover. We continue to have success in introducing our innovative technologies into new applications and in markets. Several of these segments, like low-slope marine fuel, renewable fuels, and non-fuel application areas, have delivered double-digit growth over the past several years. These opportunities have exciting growth potential and are aligned with global sustainability objectives. Oilfield services operating income approximately doubled versus the prior year. Despite continued growth in our production chemicals segment, recovery in our completions business and overall performance is still below our internal expectations. We expect sequential operating income and margin expansion to continue in the coming quarters. Now I will turn the call over to Ian Clementson, who will review our financial results in more detail. Then I will return with some concluding comments. After that, Ian and I will take your questions. Thanks, Patrick.

Turning to slide 7 in the presentation, the company's total revenues for the second quarter were $467.6 million, a 32% increase from $354.5 million a year ago. Overall gross margin decreased slightly by 0.7 percentage points from last year to 29.9%. EBITDA for the quarter was $52.9 million compared to $50.6 million last year and net income for the quarter was $32.3 million compared to $22.4 million a year ago. Our gap earnings per share were $1.29 including special items. the net effect of which decreased our second quarter earnings by 29 cents per share. A year ago, we reported gap earnings per share of 90 cents, which included a negative impact from special items of 40 cents per share. Excluding special items in both years, our adjusted EPS for the quarter was $1.58 compared to $1.30 a year ago. Turning to slide eight, Revenues in performance chemicals for the second quarter were $169 million, up 32% from last year's $128.2 million. Volumes grew 6%, with a positive price mix of 34%, offsetting an adverse currency impact of 8%. Gross margins of 25.8% were up by 1.2 percentage points, compared to 24.6% in the same quarter in 2021. benefiting from the growth in higher margin personal care business. Operating income increased 61% from last year to $28.8 million. Moving on to slide 9, revenues in fuel specialties for the second quarter were $176.4 million, 23% higher than the $143.1 million reported a year ago. Volumes grew by 3% and there was a positive price mix effect of 27% offsetting a negative currency impact of 7%. Fuel specialties gross margins are 32.3% with 2.7 percentage points below a relatively strong quarter last year and will remain at the lower end of our expected range until inflation moderates. Operating income increased 11% from last year to 31.5 million. Moving on to slide 10, revenues and oilfield services for the quarter were £122.2 million, up 47% from £83.2 million in the second quarter last year. Gross margins of 32.2% were broadly the same as last year, and operating income of £4.5 million was a £2.3 million improvement from a year ago. Turning to slide 11, Corporate costs for the quarter were £18.5 million compared with £11.6 million a year ago, due mainly to higher personnel-related expenses driven by increased share-based compensation and performance-related accruals. The effective tax rate for the quarter was 23.6% compared to 44.1% a year ago, which included the enacted change in the United Kingdom tax rate impacting deferred tax. The adjusted effective tax rate for the quarter was 22.8% compared to 24.2% last year. Moving on to slide 12, cash generation for the quarter was impacted by a 43.7 million cash outflow for working capital, which resulted in an operating cash outflow of 7.5 million before capital expenditures of 9 million. As of June 30th, Innispec has $71.4 million in cash and cash equivalents and no debt. And now I'll turn it back over to Patrick for some final comments.