Ingevity Corporation (NYSE:NGVT) Q3 2023 Earnings Conference Call November 2, 2023 10:00 AM ET

Company Participants

John Nypaver - VP of IR & Treasurer

John Fortson - President, CEO & Director

Mary Hall - EVP & CFO

Richard White - SVP & President, Performance Chemicals

Stuart Woodcock - EVP & President, Performance Materials

Conference Call Participants

Vincent Anderson - Stifel, Nicolaus & Company

Jonathan Tanwanteng - CJS Securities

John McNulty - BMO Capital Markets

Daniel Rizzo - Jefferies

Christopher Kapsch - Loop Capital Markets

Operator

Good morning or good afternoon, and welcome to the Ingevity Third Quarter 2023 Earnings Call and Webcast. My name is Adam, and I'll be your operator for today. [Operator Instructions]. I will now hand the floor over to John Nypaver to begin. So John, please go ahead.

John Nypaver

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.ingevity.com under Events and Presentations. Also throughout this call, we may refer to non-GAAP financial measures, which are intended to supplement and 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 3. 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 Hulme, 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 Chemicals segment and its expected impact. With that, over to you, John.

John Fortson

Thanks, John, and hello, everyone. Let's begin on Slide 4. As you know, we made an announcement last night to reposition and restructure the company, and this includes the closure of our DeRidder, 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 the earnings 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 in new economy markets like bioplastics, where our capital products enable biodegradability in areas such as packaging, agriculture and sustainable fibers for apparel.