It has been about a month since the last earnings report for Ingevity (NGVT) . Shares have added about 18.1% in that time frame, outperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is Ingevity due for a pullback? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent catalysts for Ingevity Corporation before we dive into how investors and analysts have reacted as of late.Ingevity’s Q2 Earn ...

Core Insights - Ingevity Corporation (NGVT) reported a second-quarter 2025 loss of $146.5 million or $4.02 per share, an improvement from a loss of $283.7 million or $7.81 per share in the same quarter last year [1] - Adjusted earnings for the quarter were $1.39 per share, up from $1.01 a year ago, surpassing the Zacks Consensus Estimate of $1.02 per share [1][9] - Revenues decreased by 6.5% year over year to $365.1 million, primarily due to lower sales in the Performance Chemicals segment [2] Segment Performance - The Performance Chemicals division generated revenues of $167.9 million, down approximately 9.5% year over year, with Road Technologies sales at $119.5 million (down 7.4%) and Industrial Specialties at $48.4 million (down 14.2%) [3] - EBITDA for the Performance Chemicals segment increased by 244% to $32 million, attributed to successful repositioning and cost savings [3] - Performance Materials revenues fell by 2.1% year over year to $153.9 million, impacted by lower sales in Asia and Europe, while North America saw higher sales; segment EBITDA was $77.1 million, down 6.2% [4] - Advanced Polymer Technologies segment sales decreased by 9.6% to $43.3 million due to reduced customer demand, particularly in Europe, with segment EBITDA down 90.8% to $0.9 million [5] Financial Overview - Operating cash flow for the second quarter was $79 million, with free cash flow of $66.8 million; no share repurchases occurred during the quarter, leaving $353.4 million remaining under the current $500 million authorization [6] - Net leverage improved to 3x from 3.3x in the previous quarter [6] 2025 Outlook - NGVT has revised its 2025 EBITDA guidance upwards, now expecting adjusted EBITDA between $390 million and $415 million, compared to the previous range of $380 million to $415 million; sales estimates remain between $1.25 billion and $1.40 billion [7][9] Stock Performance - NGVT shares have increased by 50.8% over the past year, outperforming the industry average increase of 1.2% [8]

PART I - FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company reported a reduced net loss of $146.5 million in Q2 2025, with total assets at $1.88 billion and operating cash flow improving to $104.4 million [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net sales for Q2 2025 decreased to $365.1 million from $390.6 million in Q2 2024, while gross profit increased to $137.9 million, leading to a net loss of $146.5 million | Financial Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $365.1 M | $390.6 M | $649.1 M | $730.7 M | | **Gross profit** | $137.9 M | $123.2 M | $251.3 M | $222.9 M | | **Goodwill impairment charge** | $183.8 M | $349.1 M | $183.8 M | $349.1 M | | **Net income (loss)** | $(146.5) M | $(283.7) M | $(126.0) M | $(339.7) M | | **Diluted earnings (loss) per share** | $(4.02) | $(7.81) | $(3.46) | $(9.36) | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets decreased to $1,877.7 million, primarily due to a goodwill impairment, with total liabilities at $1,757.0 million and total equity at $120.7 million | Balance Sheet Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $76.9 M | $68.0 M | | **Goodwill** | $4.3 M | $175.2 M | | **Total Assets** | $1,877.7 M | $2,022.6 M | | **Long-term debt** | $1,235.6 M | $1,339.7 M | | **Total Liabilities** | $1,757.0 M | $1,827.4 M | | **Total Equity** | $120.7 M | $195.2 M | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities significantly improved to $104.4 million for the six months ended June 30, 2025, while investing activities decreased and financing activities reflected net debt payments | Cash Flow Activity (Six Months Ended June 30) | 2025 | 2024 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $104.4 M | $17.6 M | | **Net cash provided by (used in) investing activities** | $(14.3) M | $(34.1) M | | **Net cash provided by (used in) financing activities** | $(74.0) M | $33.7 M | | **Change in cash, cash equivalents, and restricted cash** | $20.5 M | $13.4 M | [Notes to the Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes detail a **$183.8 million** goodwill impairment charge, ongoing Performance Chemicals repositioning with **$335.1 million** incurred, and an accrued **$93.4 million** for a BASF jury verdict under appeal - A non-cash goodwill impairment charge of **$183.8 million** was recorded for the Advanced Polymer Technologies (APT) reporting unit in Q2 2025, representing all goodwill associated with the unit. This was triggered by escalated global trade tensions, increased consumer uncertainty, and unfavorable movements in valuation inputs like the discount rate[58](index=58&type=chunk)[60](index=60&type=chunk) - The company expects to incur total charges of approximately **$365 million** for the Performance Chemicals repositioning. Through June 30, 2025, **$335.1 million** has been incurred, with an expected **$10 to $15 million** in cash charges remaining for 2025[106](index=106&type=chunk)[107](index=107&type=chunk) - The company is appealing a jury verdict in favor of BASF, for which it has accrued **$93.4 million** as of June 30, 2025, inclusive of post-judgment interest. A final resolution of the appeals is expected within twelve months[131](index=131&type=chunk)[132](index=132&type=chunk) | Segment Net Sales (in millions) | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :--- | :--- | :--- | :--- | :--- | | **Performance Materials** | $153.9 | $157.2 | $300.7 | $302.3 | | **Performance Chemicals** | $167.9 | $185.5 | $262.9 | $332.5 | | **Advanced Polymer Tech.** | $43.3 | $47.9 | $85.5 | $95.9 | | **Total Net Sales** | $365.1 | $390.6 | $649.1 | $730.7 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q2 net sales declined 6.5% due to repositioning, while gross profit improved, and 2025 Adjusted EBITDA outlook was revised - The company reaffirmed its 2025 sales outlook of **$1.25 billion to $1.4 billion**[230](index=230&type=chunk) - The Adjusted EBITDA outlook for 2025 was revised to a range of **$390 million to $415 million**, reflecting improved profitability in the Performance Chemicals segment and current forecasts for North American light vehicle production[232](index=232&type=chunk) - The Performance Chemicals repositioning, initiated in November 2023, has resulted in total realized cash savings of approximately **$103 million** as of June 30, 2025[173](index=173&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Q2 2025 net sales decreased by $25.5 million due to volume decline, while gross profit increased by $14.7 million from lower manufacturing costs and a LIFO liquidation benefit | Net Sales Variance (Q2 2025 vs Q2 2024) | Amount (in millions) | | :--- | :--- | | **Volume** | $(37.6) | | **Price/Mix** | $10.5 | | **Currency Effect** | $1.6 | | **Total Change** | $(25.5) | - Q2 2025 gross profit increased by $14.7 million, driven by favorable pricing/mix ($11.4M), decreased manufacturing costs ($11.2M), and a LIFO liquidation benefit ($4.1M), which offset unfavorable sales volume ($11.5M)[182](index=182&type=chunk) [Segment Operating Results](index=35&type=section&id=Segment%20Operating%20Results) In Q2 2025, Performance Materials saw sales and EBITDA decline, Performance Chemicals' sales fell but EBITDA surged, and Advanced Polymer Technologies experienced significant sales and EBITDA drops | Segment EBITDA (in millions) | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | **Performance Materials** | $77.1 | $82.2 | (6.2%) | | **Performance Chemicals** | $32.0 | $9.3 | +244.1% | | **Advanced Polymer Technologies** | $0.9 | $9.8 | (90.8%) | | **Total Segment EBITDA** | $110.0 | $101.3 | +8.6% | [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) Operating cash flow significantly increased to $104.4 million for the first six months of 2025, with **$400.0 million** available under the revolving credit facility and projected capital expenditures of **$50-70 million** for 2025 - As of June 30, 2025, the company had **$400.0 million** of undrawn capacity under its revolving credit facility[240](index=240&type=chunk) - Projected capital expenditures for the full year 2025 are estimated to be between **$50 million and $70 million**[246](index=246&type=chunk) - No common stock was repurchased during the six months ended June 30, 2025. At quarter-end, **$353.4 million** remained available under the 2022 share repurchase authorization[245](index=245&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency, interest rates, and commodity prices, with CTO risk significantly reduced post-repositioning - The company's exposure to Crude Tall Oil (CTO) price risk has been significantly reduced following the Performance Chemicals repositioning and termination of a long-term supply contract[260](index=260&type=chunk) - As of June 30, 2025, approximately **$485 million** of borrowings have a variable interest rate component. A hypothetical **100 basis point** increase in rates would increase annual interest expense by about **$4.8 million**[258](index=258&type=chunk) [Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[264](index=264&type=chunk) - No changes occurred during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[264](index=264&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company is appealing a jury verdict in favor of BASF Corporation, for which it has accrued $85.0 million, as detailed in Note 13 - The company is involved in a legal proceeding with BASF Corporation and has accrued for the full amount of the jury's verdict. The case is currently under appeal. Details are provided in Note 13[129](index=129&type=chunk)[131](index=131&type=chunk)[267](index=267&type=chunk) [Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) Risk factors remain largely unchanged, with new emphasis on tariffs and potential disruptions at key single-site manufacturing facilities - Recent changes to U.S. and international tariffs, particularly with China, are expected to make it more difficult or costly to export products and import raw materials, potentially reducing demand and profitability[269](index=269&type=chunk) - The company faces risk from potential disruptions at its manufacturing facilities, noting that certain key products are made only at a single site, such as the Covington, Virginia plant, with limited ability to shift production elsewhere[272](index=272&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No common stock was repurchased in Q2 2025, with **$353.4 million** remaining available under the 2022 share repurchase authorization - No shares of common stock were repurchased by the company during the three months ended June 30, 2025[273](index=273&type=chunk)[275](index=275&type=chunk) - Approximately **$353.4 million** remains available for repurchase under the 2022 share repurchase authorization as of June 30, 2025[275](index=275&type=chunk) [Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including employee stock plans, a separation agreement, and CEO/CFO certifications

Financial Data and Key Metrics Changes - Second quarter sales were $365 million, down 7% year-over-year primarily due to repositioning actions in Industrial Specialties and adverse weather conditions affecting paving activity [7][8] - Adjusted gross margin improved by 600 basis points, leading to a 9% increase in adjusted gross profit, with adjusted earnings up 39% and adjusted EBITDA up 9% [7][8] - Consolidated EBITDA margin reached 30.1%, an improvement of over 400 basis points, despite increased spending for innovation and operational efficiency [8][9] Business Line Data and Key Metrics Changes - Performance Materials sales declined by approximately $3 million or 2%, with higher revenue in North America offset by declines in Europe and Asia [10] - APT segment experienced a 10% drop in sales due to weaker customer demand and indirect tariff impacts, resulting in an EBITDA of about $1 million for the quarter [12][14] - Performance Chemicals sales were down about 10%, but segment EBITDA was more than three times last year's number, with EBITDA margin approaching 20% [15][17] Market Data and Key Metrics Changes - Auto production forecasts have been revised, with expectations for lower production year-over-year in all major markets except China [11] - The APT segment's performance was significantly impacted by tariff uncertainty, particularly in Europe, affecting customer order patterns [13] - The paving season was negatively impacted by wet weather, but there was strong performance in June and July, leading to cautious optimism for the second half [15][17] Company Strategy and Development Direction - The company is advancing its strategic portfolio assessment, with the sale process for the Industrial Specialties business and CTO Refinery in an advanced stage [5][19] - A focus on core competencies and value creation is guiding the review of the entire portfolio, with an investor update expected later this year or early next year [19][37] - The company aims to maintain strong EBITDA margins and free cash flow while navigating macroeconomic uncertainties [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a year-end net leverage target of below 2.8 times, supported by strong free cash flow and improved earnings [18][19] - The company has seen three consecutive quarters of year-over-year improvement in EBITDA and free cash flow, indicating a positive trend [19] - Management acknowledged the challenges posed by macroeconomic factors but remains optimistic about the company's strategic direction and execution [19] Other Important Information - A noncash goodwill impairment charge of $184 million was recorded for the APT segment due to shifts in customer order patterns and market conditions [8] - The company is experiencing improved cash flow due to disciplined working capital management and lower CapEx, raising the midpoint of its free cash flow guidance [9][18] Q&A Session Summary Question: Update on inspectors' standalone ex payment and CCO prices - Management indicated they do not break out profitability but suggested looking at seasonal profitability comparisons [21] Question: Investments mentioned in prepared remarks - Management highlighted ongoing investments in partnerships, particularly in the EV segment and process purification applications [23][25] Question: Thoughts on leadership changes in the segment - Management confirmed an active search for new leadership and ongoing internal momentum to reorganize the business [26][27] Question: Performance Chemicals margin insights - Management noted that the second half margins are expected to be similar to the first half, without the drag from high-cost CTO [29][31] Question: Drivers of improved free cash flow - Management attributed improved free cash flow to better earnings and inventory management initiatives [32][33] Question: Strategic review process for the portfolio - Management confirmed that the review is ongoing and will consider core competencies and growth opportunities [35][37] Question: CTO pricing and market conditions - Management stated that current CTO prices are lower than previous high costs, and they are less dependent on market fluctuations [39][41] Question: Performance Materials pricing resilience - Management emphasized the value provided to customers, which has allowed for consistent pricing despite volume declines [43][44] Question: Assessment of Advanced Polymer Technologies segment - Management acknowledged new leadership and ongoing portfolio review, indicating potential for future growth [46][48] Question: Future cash deployment strategies - Management indicated priorities include organic investments, share repurchases, and potential M&A opportunities once leverage targets are met [50][51]

Core Viewpoint - Ingevity's shares have increased by approximately 6.4% since the last earnings report, but this performance is below that of the S&P 500 index [1]. Group 1: Recent Performance - The stock has underperformed relative to the S&P 500 over the past month [1]. - There is uncertainty regarding whether the positive trend will continue or if a pullback is imminent before the next earnings release [1]. Group 2: Analyst Activity - Analysts have not made any earnings estimate revisions in the last two months, indicating a period of quiet regarding expectations for the company [2].

Core Insights - Ingevity Corporation (NGVT) reported a first-quarter 2025 profit of $20.5 million or 56 cents per share, a significant improvement from a loss of $56 million or $1.54 per share in the same quarter last year [1] - Adjusted earnings for the quarter were 99 cents per share, up from 47 cents a year ago, excluding one-time items [1] Revenue Performance - Revenues decreased by 16.5% year over year to $284 million, primarily due to lower sales in the Industrial Specialties product line and the Advanced Polymer Technologies segment [2] - The Performance Chemicals division generated revenues of $95 million, down approximately 35.4% year over year [2] - Road Technologies' product line sales were $44.3 million, down 3% [2] - Industrial Specialties' product line sales fell 50% to $50.7 million due to repositioning measures aimed at exiting lower-margin markets [2] - Performance Materials unit revenues rose around 1.2% year over year to $146.8 million, driven by volume growth in the Asia Pacific region and China [3] - Advanced Polymer Technologies segment sales decreased by 12.1% to $42.2 million, with EBITDA up 31.6% to $12.5 million due to higher utilization rates [4] Financial Metrics - First-quarter operating cash flow was $25.4 million, with free cash flow of $15.4 million [5] - No share repurchases occurred during the quarter, leaving $353.4 million remaining under the current $500 million authorization [5] - Net leverage improved to 3.3x from 3.6x in the previous quarter [5] 2025 Outlook - NGVT revised its 2025 guidance to account for potential risks from lower expected global auto production, projecting sales between $1.25 billion and $1.40 billion and adjusted EBITDA between $380 million and $415 million [6] Stock Performance - NGVT shares have declined by 26.1% over the past year, compared to a 3.1% decline in the industry [7]

Financial Performance - Ingevity Corporation reported net sales of $284.0 million for Q1 2025, a decrease of approximately 16.5% from $340.1 million in Q1 2024[166]. - The gross profit for Q1 2025 was $113.4 million, compared to $99.7 million in Q1 2024, reflecting an increase in gross profit margin[166]. - The net income for Q1 2025 was $20.5 million, a significant recovery from a net loss of $56.0 million in Q1 2024[166]. - Adjusted EBITDA for the three months ended March 31, 2025, was $91.3 million, compared to $74.4 million in 2024, reflecting an increase of 22.5%[200]. - Cash provided by operating activities for the three months ended March 31, 2025, was $25.4 million, an increase of $37.5 million compared to the same period in 2024[218]. Cost Management - The company incurred approximately $12.3 million in restructuring and other charges in Q1 2025, down from $62.8 million in Q1 2024[166]. - Gross profit for Q1 2025 increased by $13.7 million, primarily due to decreased manufacturing costs of $18.1 million and LIFO liquidation benefit of $4.5 million, partially offset by unfavorable sales volume of $7.7 million[170]. - Selling, general and administrative expenses (SG&A) decreased by $4.1 million (nine percent) to $43.1 million, representing 15 percent of net sales in Q1 2025[171]. - Research and technical expenses increased by $0.9 million, with a percentage of net sales rising to 2.7 percent in Q1 2025 due to lower sales[172]. Segment Performance - Performance Materials net sales increased by $1.7 million (one percent) in Q1 2025, driven by favorable pricing and sales mix[185]. - Performance Chemicals net sales decreased by $52.0 million (35 percent) in Q1 2025, primarily due to repositioning actions and a slower start to the road paving season[187]. - Advanced Polymer Technologies net sales decreased by $5.8 million (12 percent) in Q1 2025, primarily due to a volume decline and unfavorable pricing[192]. - Segment EBITDA for Performance Chemicals improved by $10.3 million in Q1 2025, reflecting cost savings from repositioning actions[191]. Future Outlook - The company expects net sales for 2025 to be between $1.25 billion and $1.4 billion, reflecting a downward adjustment due to an estimated 10% reduction in North America light vehicle production[207]. - The Performance Chemicals reportable segment anticipates improved net sales in its road technologies product line compared to 2024, while the Advanced Polymer Technologies segment expects flat net sales due to weak end market demand[207]. - Projected Adjusted EBITDA for 2025 is expected to be between $380 million and $415 million, with Performance Materials segment EBITDA anticipated to decline compared to the prior year[208]. Cash and Capital Management - As of March 31, 2025, the company had $71.5 million in cash and cash equivalents, with $67.5 million held by foreign subsidiaries[211]. - The company has $353.4 million remaining under its stock repurchase authorization as of March 31, 2025, with no common stock repurchased during the three months ended March 31, 2025[215]. - Capital expenditures for the three months ended March 31, 2025, totaled $10.0 million, a decrease of $6.6 million compared to $16.6 million in 2024[220]. Foreign Operations and Currency Impact - Approximately 27% of the company's net sales in the first three months of 2025 came from foreign-based operations in Europe, South America, and Asia[226]. - A hypothetical 10% adverse change in the average exchange rates of the Brazilian real, Chinese renminbi, and euro to the U.S. dollar would have decreased net sales by approximately $3.5 million or 1% for Q1 2025[226]. Interest Rates and Debt Management - Total interest expense for Q1 2025 was $19.4 million, down from $22.3 million in Q1 2024[177]. - The company entered into a floating-to-fixed interest rate swap with a notional amount of $200 million, converting floating rate debt to a fixed rate of 3.84% until August 2026[227]. - As of March 31, 2025, approximately $547 million of borrowings had a variable interest rate component with a weighted average interest rate of 5.80%[228]. - A hypothetical 100 basis point increase in variable interest rates would have increased annual interest expense by approximately $5.5 million or 8% for Q1 2025[228]. Raw Material Costs - Crude tall oil (CTO) represented 8% of the cost of sales for Q1 2025, with raw material CTO spend of approximately $10 million[230]. - A hypothetical unhedged 10% increase in CTO prices would have increased the cost of sales by approximately $1.0 million or 1% for Q1 2025[230]. - Natural gas constituted approximately 5% of the cost of goods sold for Q1 2025, with a hypothetical 10% increase in natural gas pricing resulting in a $0.9 million increase in cost of sales[231]. - As of March 31, 2025, the fair value of open natural gas derivative contracts was a net asset of $1.0 million[231]. Accounting Policies - The company's critical accounting policies have not substantially changed from those described in the 2024 Annual Report[225].

Financial Data and Key Metrics Changes - First quarter sales were $284 million, down 17% year-over-year primarily due to repositioning actions in Performance Chemicals and weak industrial demand [12] - Adjusted gross profit increased by 10% to $129 million, with gross margin improving over 1,000 basis points [12] - Adjusted EBITDA rose by $17 million, with margins improving from 21.9% to 32.1%, marking the fourth consecutive quarter of year-over-year margin improvement [13][25] - Free cash flow improved by $44 million year-over-year to $15 million, reflecting repositioning benefits [14] Business Line Data and Key Metrics Changes - Performance Materials saw higher sales due to favorable regional and product mix, with volume growth in China driven by government incentives [15] - Advanced Polymer Technologies (APT) experienced lower overall sales, with North America and EMEA showing higher volumes while Asia faced decreased volumes due to inventory adjustments and increased competition [21] - Performance Chemicals sales decreased by 35% due to repositioning actions, but segment EBITDA improved by $10 million year-over-year [23] Market Data and Key Metrics Changes - North American auto production is expected to decline by approximately 10% year-over-year, impacting guidance for the Performance Materials segment [10][17] - The average age of automobiles in the U.S. is at an all-time high of around 14 years, indicating a future need for replacements [18] Company Strategy and Development Direction - The company is focused on disciplined execution of its strategy to optimize the portfolio and drive business performance, aiming to create significant value for shareholders [10] - Management is actively monitoring macro demand conditions and tariffs, believing the direct impact on the business will be minimal [9][26] - The company is exploring strategic options for Industrial Specialties and the North Charleston refinery, with discussions progressing well [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledges challenges in the operating environment but remains confident in the company's ability to deliver strong profitability in 2025 and beyond [10][26] - The company has widened its guidance range to account for potential declines in auto production, reflecting a cautious outlook [27] Other Important Information - The company has introduced a new leader for APT, Michael Shukov, who brings over 25 years of experience in specialty chemicals [22] - The company expects to generate strong free cash flow, especially in the second half of the year, affirming prior guidance of leverage less than 2.8 times by year-end [14][59] Q&A Session Summary Question: Pricing in Performance Materials business - Management indicated that pricing remains a lever that can be adjusted if production declines or unexpected tariff impacts occur, but currently, business conditions are stable [30][31] Question: Update on strategic review of Industrial Specialties - The strategic review process is progressing well with significant interest, and management aims to provide updates before the end of the year [35][38] Question: Strategic and operational priorities in a volatile environment - The focus remains on disciplined execution, optimizing business performance, and reducing leverage while exploring growth opportunities [41][42] Question: Impact of EV slowdown on forecasts - The company has adjusted guidance based on a 10% reduction in North American auto production, but remains optimistic about the long-term potential of EV technologies [47][49] Question: Filtration market capacity for potential shifts - The filtration market is sizable and can absorb underutilized capacity, although it is considered a lower-margin market compared to automotive [56] Question: Long-term leverage goals - The long-term target for leverage remains between 2 to 2.5 times, with current efforts focused on reducing leverage to below 2.8 times by year-end [59]

Financial Data and Key Metrics Changes - First quarter sales were $284 million, down 17% year-over-year due to repositioning actions in Performance Chemicals and weak industrial demand [10] - Adjusted gross profit increased by 10% to $129 million, with gross margin improving over 1,000 basis points [10] - Adjusted EBITDA rose by $17 million, with margins improving from 21.9% to 32.1%, marking the fourth consecutive quarter of year-over-year margin improvement [11][12] - Free cash flow improved by $44 million year-over-year to $15 million, reflecting benefits from repositioning actions [12] Business Line Data and Key Metrics Changes - Performance Materials saw higher sales due to favorable regional and product mix, with EBITDA margins remaining near 54% [13][15] - Advanced Polymer Technologies (APT) experienced lower overall sales, but EBITDA increased by $3 million, with margins rising to 29.6% [19] - Performance Chemicals sales decreased by 35% primarily due to repositioning actions, but segment EBITDA showed year-over-year improvement of $10 million [21][22] Market Data and Key Metrics Changes - North American auto production is expected to decline by approximately 10% year-over-year, impacting guidance for the Performance Materials segment [8][15] - Volume growth was observed in China due to government incentives driving higher vehicle sales, while North American volumes were down year-over-year [13][14] Company Strategy and Development Direction - The company is focused on disciplined execution of its strategy to optimize the portfolio and drive business performance, aiming to create significant value for shareholders [8][24] - The strategic review of Industrial Specialties and the North Charleston refinery is progressing well, with expectations to communicate a path forward before the end of the year [22] Management's Comments on Operating Environment and Future Outlook - Management is actively monitoring developments related to tariffs and macro demand conditions, believing the direct impact on the business will be minimal [7][24] - Despite headwinds, the company is confident in its ability to deliver strong profitability in 2025 and beyond [8][24] Other Important Information - The company has introduced a new President for APT, who brings over 25 years of experience in transforming business profitability [20] - The average age of automobiles in the U.S. is at an all-time high, suggesting a future need for replacements [15] Q&A Session Summary Question: Pricing in Performance Materials business - Management indicated that they have a strong position and are seeing encouraging performance, with pricing being a lever they can pull if needed [29][30][32] Question: Update on strategic review of Industrial Specialties - The process is progressing well with a broad degree of interest, and management is being deliberate in their approach [34][36] Question: Strategic and operational priorities in a volatile environment - The focus remains on disciplined execution, optimizing business performance, and reducing leverage [40][41] Question: Cash flow forecast amidst potential auto production decline - Management is confident in free cash flow generation even in a declining sales environment due to effective working capital management [43][44] Question: Impact of EV slowdown on forecasts - While EVs are slowing down, management remains optimistic about the adoption of new technologies and their investment in Nexeon [47][48][50] Question: Filtration market capacity for potential volume shifts - The filtration market is sizable and can absorb underutilized capacity, although it is a lower margin market compared to auto [53][54] Question: Long-term leverage goals - The long-term target for leverage remains between 2 to 2.5 times [58]

FIRST QUARTER 2025 EARNINGS PRESENTATION May 6, 2025 Use of non-GAAP financial measures: This presentation includes certain non‐GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures. Reconciliations of non‐GAAP financial measures to GAAP financial measures are provided within the Appendix to this presentation. Investors are urged to consider carefully the comparable GAAP measures and the reconciliations to those measures provided. The company does not attempt to provid ...