Ingevity Corporation Common Stock

Good morning or good afternoon all, and welcome to the Ingevity third quarter 2023 earnings call and webcast. My name is Adam and I'll be your operator for today. If you'd like to ask a question during the Q&A portion of today's call, you may do so by pressing star followed by one on your telephone keypad. I will now hand the floor over to John Leipharver to begin. So John, please go ahead and do everything.

Thank you, Adam. Good morning and welcome to Ingevity's third quarter 2023 earnings call. Earlier this morning we posted a presentation on our investor site that you can use to follow today's discussion. It can be found on ir.engevity.com under events and presentations. Also throughout this 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 measures are included in our earnings release and are also in our form 10-K. We may also make forward-looking statements regarding future events and future financial performance of the company during this call. And we caution you that these statements are just projections and actual results or events may differ materially from these projections as further described in our earnings release. Our agenda is on slide three. Our speakers today are John Fortson, our President and CEO, and Mary Hall, our CFO. Our business leads, Ed Woodcock, President of Performance Materials, Rich White, President of Performance Chemicals, and Steve Hume, President of Advanced Polymer Technologies, are available for questions and comments. John will start us off with some highlights for the quarter, and Mary will follow with a review of our consolidated financial performance and the business segment results for the third quarter. John will then provide an update on guidance, followed by remarks addressing our announcement last night regarding the repositioning of our performance chemical segment and its expected impact. With that, over to you, John.

Thanks, John, and hello, everyone. Let's begin on slide four. As you know, we made an announcement last night to reposition and restructure the company, and this includes the closure of our Derrida, Louisiana facility, among other actions. These decisions are consistent with our objective of being a top-tier specialty chemicals company and are part of the execution of our long-term growth strategy. We are committed to maximizing the profitability and earning stability of the company, and later in the call, I'll go into detail about how these actions get us closer to our goals. But first, a few comments on our third quarter performance. To level set, last year's third quarter revenue and EBITDA were the highest ever for our company. Our performance chemicals and advanced polymer technology segments led the way last year with both posting record quarters in a very robust demand environment. This quarter this year, our strongest performing segment was performance materials, which posted EBITDA margins north of 50%. We saw modest revenue growth and strong EBITDA drop through due to increased demand of our automotive activated carbon in both North America and Asia Pacific. Impacts in the quarter from the auto industry strike were very limited. Additionally, the increased demand for hybrids over battery electric vehicles benefited the segment and bodes well for the segment longer term as well. Advanced polymer technologies saw their volume drop in all business lines across all regions due to the continued industrial slowdown, but the team maintained their focus on profitability, improving their EBITDA margins by nearly 1,000 basis points. The team is using this time to advance the adoption of our products and new economy markets like bio plastics, where our capital products and able biodegradability and areas such as packaging agriculture and sustainable fibers for apparel. In performance chemicals payment had another great quarter as international expansion continues with strong adoption of our products progressing in South America. I would say the number of projects the team saw in the US was not as robust as we had hoped, as funding from the infrastructure bill was slow to make its way into local levels. But we do expect those dollars will be put to work, and our teams are ready to deliver solutions that use less energy during the paving process, make roads last longer, and improve safety for drivers and pedestrians through more reflective markings. Industrial specialties continues to feel the impacts from the lack of rosin demand, particularly in the adhesives in markets. And during the quarter, we also saw a slowdown in drilling activity, which resulted in weaker oilfield sales. The price we're paying for CTO, as expected, increased in the quarter, reaching approximately 25% of the company's total cost of goods sold. As a result, even with the addition of Ozark, Performance Chemicals saw lower sales and a sharp drop in EBITDA. I'll speak more on these market dynamics and how we are responding after Mary finishes a review of Q3 financials. Mary?