Ingevity Corporation Common Stock

Thank you, Mr. Gallagher. You may begin.

Thank you, Jesse. Good morning, everyone. Welcome to Ingevity's first quarter 2020 earnings conference call. On slide number two, you see earlier this morning we posted a presentation on the investor section of our website. If you haven't already done so, I'd encourage you to download the file so you can follow along on the call. You can find it by visiting ir.ingevity.com under events and presentations. For our participants who are logged on to our webcast, the slides should be visible in the online viewing pane. are also available to download. On slide two, you'll see our disclaimer that today's earnings call may contain forward-looking statements. Relevant factors that cause actual results to differ materially from these forward-looking statements are contained in our earnings release and in our SEC filings, including our Form 10-K and our most recent Form 10-Q. Longevity undertakes no obligation to publicly release any revision to the projections and forward-looking statements made during this call. or to update them to reflect events and circumstances occurring after the date of the call. Throughout the call, we may refer to non-GAAP financial measures which are intended to supplement, not substitute for comparable GAAP measures. Definitions of these non-GAAP financial measures and reconciliations to comparable GAAP financial measures are included in our earnings release and can be found on the investor relations section of our website. Our agenda is on slide three. With me today are Rick Kelson, Chairman of the Board and Interim President and CEO, John Fortson, Executive Vice President and CFO, Mike Smith, President of Performance Chemicals, and Ed Woodcock, President of Performance Materials. First, Rick will comment on the highlights of the quarter and then discuss some of the actions we've taken related to the coronavirus. Then, Mike and Ed will review the performance of our two segments. John will discuss our current financial status. and then Rick will make some remarks about our outlook for the rest of 2020 and John will review our revised annual guidance and the one-time special guidance we provided for the second quarter given the unusual nature of the current environment. Rick will offer some closing thoughts and then we'll open the call for Q&A. And with that, it's my pleasure to turn the call to Rick Kelson.

Thanks, Dan. And good morning to everyone. Thank you for joining us this morning. We appreciate your interest in longevity. If you turn this slide four, you'll note some highlights for the quarter. Longevity delivered strong first quarter despite initial impacts from the coronavirus or COVID-19. The effects of the coronavirus on the first quarter financial results were not as severe as we had expected in mid-February. Clearly, the reduction in Chinese auto demand impacted our performance materials results, to the extent we expected. However, most other COVID-19 related impacts in the performance chemicals appears to have been delayed. As John and I will discuss later, we expect the effects of the coronavirus to more significantly begin in the second quarter. Overall revenues in the first quarter were $288 million, up 4% when compared to the previous year's quarter. Despite weakness in China, the performance chemicals Performance Materials segment grew respectively in the quarter. Sales in the Performance Chemicals segment were essentially flat as increases in pavement and oil field technologies and the addition of the engineered polymer business were offset by weakness in the industrial specialties applications. With respect to earnings, adjusted EBITDAs were $92 million, up $9 million, or 10% from the previous year's quarter. For the fifth consecutive quarter, we achieved an adjusted EBITDA margin of 30% or more at 32% up 180 basis points versus the prior year. For the quarter, we generated outstanding free cash flow of $41 million versus the previous year's quarter of minus $36 million. This enabled us to reduce our leverage, which now stands at 2.7 times net debt to adjusted EBITDA. As I said earlier, we posted these solid results despite impacts from the coronavirus. And if you turn to slide five, I'd like to review some of the steps we've taken in relation to the pandemic. From the beginning, Ingevity recognized that the coronavirus had the potential to impact the global economy and took steps early. Our facilities in China took swift and efficient steps at the outset, and we have made sure we learned from their actions and instituted the proper precautions on a global scale. And I'm happy to report that currently we're not aware of any Ingevity employees domestic or international who has tested positive for COVID-19. We have taken what I believe to be a wide and appropriate set of measures which are listed on this slide. We activated our business continuity team and a task force to coordinate all of our efforts. We developed positive test scenarios and tools and enhanced employee communications. In terms of employee health, We've implemented work from home and social distancing initiatives, limited travel and visitation, provided free telehealth services to employees and dependents, and are taking temperatures at all production facilities. Our China locations all resumed full operation after the Chinese New Year. The performance chemical sites are running normally. We have scaled back operations at our performance material facilities and implemented temporary furloughs. and we have delayed planned capital projects at Covington, Virginia and Warrington in the UK. Financially speaking, out of an abundance of caution, we drew down $250 million from our revolver to ensure our liquidity during the crisis and in fact expect to see certain savings as a result. Lastly, we began a deep dive webinar series to provide investors with insights into the strategies of each of our businesses. We believe that we'll be taking all of the right steps to keep our employees safe and healthy, and we are working hard to be responsive to our customers and maintain a strong balance sheet and solid financial status. If you turn to slide six, you'll see the first quarter results for Performance Chemicals. At this point, I'll turn the call over to Mike Smith, President, Performance Chemicals. Mike?