Innospec(US:IOSP)2025-05-09 10:10Q1 2025 Financial & Operational Highlights Innospec reported a 12% revenue decrease and 21% net income decline in Q1 2025, alongside strong cash generation and increased shareholder returns Financial Performance Summary In Q1 2025, Innospec reported a 12% revenue decrease to $440.8 million and a 21% net income decline to $32.8 million, with balanced segment performance Financial Performance Overview | Financial Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $440.8 million | $500.2 million | -12% | | Net Income | $32.8 million | $41.4 million | -21% | | GAAP Diluted EPS | $1.31 | $1.65 | -21% | | Adjusted non-GAAP EPS | $1.42 | $1.75 | -19% | | Adjusted EBITDA | $54.0 million | $64.0 million | -16% | - The quarter's results were balanced, with strong Fuel Specialties growth offsetting weaker Performance Chemicals and Oilfield Services performance16 Cash Flow and Capital Allocation Innospec generated $28.3 million in operating cash flow, maintained a debt-free balance sheet with $299.8 million net cash, and enhanced shareholder returns through dividends and buybacks - Operating cash flow was $28.3 million, with the quarter ending in a $299.8 million net cash position and a debt-free balance sheet1413 - The semi-annual dividend increased by 10% to $0.84 per common share1215 - A new $50 million share buyback program was initiated, with 34,100 shares repurchased for $3.3 million during the quarter1415 Management Commentary & Outlook Management noted a balanced quarter with strong Fuel Specialties performance offsetting other segments, anticipating delayed recovery in Performance Chemicals and Oilfield Services due to market volatility, while maintaining confidence in overall stability and strategic flexibility - Performance Chemicals: Initial momentum slowed due to customer caution regarding tariff announcements, delaying the return to 2022 operating income and margin levels7 - Fuel Specialties: The segment achieved double-digit operating income growth driven by margin improvement, with a focus on full-year operating income growth8 - Oilfield Services: Results were below expectations due to no recovery in Latin America and lower US activity, with no Latin American recovery anticipated next quarter9 - Overall Outlook: Fuel Specialties is expected to remain stable, while sequential recovery in Performance Chemicals and Oilfield Services may be delayed by the economic environment, with the strong balance sheet supporting M&A, dividends, and buybacks1415 Segment Performance Q1 2025 segment performance was mixed, with Fuel Specialties achieving 10% operating income growth despite revenue decline, while Performance Chemicals saw a 6% operating income drop and Oilfield Services a 76% plunge due to revenue decrease and weaker sales mix Performance Chemicals Performance Chemicals revenues grew 5% to $168.4 million driven by volume and price/mix, but a 2.4 percentage point gross margin decrease led to a 6% decline in operating income to $19.8 million Performance Chemicals Segment Metrics | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $168.4 million | $160.8 million | +5% | | Gross Margin | 21.0% | 23.4% | -2.4 p.p. | | Operating Income | $19.8 million | $21.1 million | -6% | Fuel Specialties Fuel Specialties revenues decreased 4% to $170.3 million, yet operating income grew 10% to $36.9 million, driven by a 1.4 percentage point increase in gross margin to 35.7% Fuel Specialties Segment Metrics | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $170.3 million | $176.9 million | -4% | | Gross Margin | 35.7% | 34.3% | +1.4 p.p. | | Operating Income | $36.9 million | $33.4 million | +10% | Oilfield Services Oilfield Services revenues fell 37% to $102.1 million, with gross margins contracting 6.9 percentage points to 28.4%, leading to a 76% decrease in operating income to $4.1 million Oilfield Services Segment Metrics | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $102.1 million | $162.5 million | -37% | | Gross Margin | 28.4% | 35.3% | -6.9 p.p. | | Operating Income | $4.1 million | $16.9 million | -76% | Financial Statements This section presents the company's Q1 2025 consolidated income, balance sheet, cash flow statements, and segmental analysis, along with non-GAAP reconciliations Condensed Consolidated Statements of Income This statement details the company's Q1 2025 income, showing a decline in net sales from $500.2 million to $440.8 million and net income from $41.4 million to $32.8 million Condensed Consolidated Statements of Income | (in millions, except per share data) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net sales | $ 440.8 | $ 500.2 | | Gross profit | 125.1 | 155.7 | | Operating income | 42.5 | 50.5 | | Net income | $ 32.8 | $ 41.4 | | Diluted EPS | $ 1.31 | $ 1.65 | Segmental Analysis of Results This schedule provides a detailed breakdown of net sales and operating income for Performance Chemicals, Fuel Specialties, and Oilfield Services segments for Q1 2025 versus Q1 2024 Segmental Analysis of Results | (in millions) | Q1 2025 Net Sales | Q1 2024 Net Sales | Q1 2025 Operating Income | Q1 2024 Operating Income | | :--- | :--- | :--- | :--- | :--- | | Performance Chemicals | $ 168.4 | $ 160.8 | $ 19.8 | $ 21.1 | | Fuel Specialties | 170.3 | 176.9 | 36.9 | 33.4 | | Oilfield Services | 102.1 | 162.5 | 4.1 | 16.9 | | Total | $ 440.8 | $ 500.2 | $ 43.1 | $ 51.2 | Reconciliation of Non-GAAP Measures (Adjusted EBITDA) This schedule reconciles GAAP Net Income to Adjusted EBITDA, showing Q1 2025 Net Income of $32.8 million reconciled to an Adjusted EBITDA of $54.0 million Reconciliation of Non-GAAP Measures (Adjusted EBITDA) | (in millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net income | $ 32.8 | $ 41.4 | | Interest income, net | (2.4) | (2.1) | | Income taxes | 11.6 | 13.9 | | Depreciation and amortization | 10.9 | 10.3 | | Other adjustments | 1.1 | 0.5 | | Adjusted EBITDA | $ 54.0 | $ 64.0 | Condensed Consolidated Balance Sheets This statement presents the company's financial position as of March 31, 2025, showing total assets increased to $1,774.6 million and a strong liquidity position with $299.8 million in cash and no debt Condensed Consolidated Balance Sheets | (in millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $ 299.8 | $ 289.2 | | Total current assets | 977.1 | 956.6 | | Total assets | $ 1,774.6 | $ 1,734.7 | | Total current liabilities | 357.6 | 371.4 | | Total liabilities | 508.9 | 518.6 | | Total equity | 1,265.7 | 1,216.1 | Condensed Consolidated Statements of Cash Flows This statement details Q1 2025 cash flows, showing $28.3 million from operations, $15.5 million used in investing, and a net cash increase of $10.6 million Condensed Consolidated Statements of Cash Flows | (in millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $ 28.3 | $ 80.6 | | Net cash used in investing activities | (15.5) | (14.3) | | Net cash (used in)/provided by financing activities | (3.8) | 0.5 | | Net change in cash and cash equivalents | 10.6 | 66.4 | | Cash and cash equivalents at end of period | $ 299.8 | $ 270.1 |