Innospec(IOSP) - 2024 Q1 - Quarterly Results

Innospec Q1 2024 Financial Results Overall Financial Performance In Q1 2024, Innospec's revenue slightly decreased to $500.2 million, while operating income surged 23% to $50.5 million, with GAAP EPS rising to $1.65 and adjusted non-GAAP EPS to $1.75 Q1 2024 Key Financial Metrics (vs. Q1 2023) | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $500.2M | $509.6M | -2% | | Net Income | $41.4M | $33.2M | +25% | | GAAP Diluted EPS | $1.65 | $1.33 | +24% | | Adjusted EBITDA | $64.0M | $52.7M | +21% | | Adjusted non-GAAP EPS | $1.75 | $1.38 | +27% | - The company declared a semi-annual dividend of 76 cents per common share, a 10% increase[3] Q1 2024 GAAP to Non-GAAP EPS Reconciliation | (per diluted share) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Reported GAAP EPS | $1.65 | $1.33 | | Special Items Adjustments | $0.10 | $0.05 | | Adjusted non-GAAP EPS | $1.75 | $1.38 | Business Segment Performance Overall performance was driven by Performance Chemicals' doubled operating income, solid profitability in Fuel Specialties, and operating income growth in Oilfield Services despite revenue declines Segment Performance Summary (Q1 2024 vs Q1 2023) | Segment | Net Sales (Q1 2024, in millions) | Net Sales (Q1 2023, in millions) | Operating Income (Q1 2024, in millions) | Operating Income (Q1 2023, in millions) | | :--- | :--- | :--- | :--- | :--- | | Performance Chemicals | $160.8M | $151.4M | $21.1M | $10.4M | | Fuel Specialties | $176.9M | $190.3M | $33.4M | $32.4M | | Oilfield Services | $162.5M | $167.9M | $16.9M | $15.9M | Performance Chemicals Performance Chemicals revenue grew 6% to $160.8 million, with operating income more than doubling to $21.1 million, driven by volume and acquisitions - Revenue growth was driven by 13% volume growth and 6% from acquisitions, offset by a 14% adverse price/mix[11] - Operating income approximately doubled over the prior year period, and gross margins increased by 7.5 percentage points[11] - The recent acquisition of QGP Quimica Geral S.A. is performing in line with expectations and was immediately accretive[9] Fuel Specialties Fuel Specialties revenues decreased 7% to $176.9 million, but operating income grew 3% to $33.4 million, with gross margins improving to 34.3% - Revenues were down 7% due to a 6% adverse price/mix and a 2% reduction in volumes[12] - Gross margins of 34.3% were within the targeted 32 to 35 percent range and operating margins improved over the prior year[10][12] Oilfield Services Oilfield Services revenues declined 3% to $162.5 million, but operating income increased 6% to $16.9 million, despite gross margin contraction - Operating income grew 6% and margins expanded compared to the prior year, as softer results in production chemicals were offset by improvements in other segments[11][13] - In the short-term, the company expects production chemicals activity to remain below previous quarters[11] Financial Position and Cash Flow The company generated $80.6 million in operating cash flow, significantly up from the prior year, ending the quarter with a strong, debt-free balance sheet and $270.1 million in net cash - The company generated $80.6 million in cash from operating activities during the quarter[2][6][15] - The balance sheet remains strong and debt-free, with the net cash position improving to $270.1 million at the end of the quarter[2][15][17] Cash Flow Comparison (Q1 2024 vs Q1 2023) | (in millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $80.6 | $21.8 | | Net cash used in investing activities | ($14.3) | ($22.0) | | Net change in cash and cash equivalents | $66.4 | $0.4 | | Cash and cash equivalents at end of period | $270.1 | $147.5 | CEO Commentary and Outlook The CEO highlighted a strong start with 23% operating income growth and margin expansion, expressing optimism for Performance Chemicals and Fuel Specialties, and noting the debt-free balance sheet provides strategic flexibility - The CEO described the quarter as a "very strong start to the year," with a 23% increase in operating income and margin expansion driven by good performance in all businesses[8] - The company is cautiously optimistic about maintaining the performance improvement in Performance Chemicals throughout 2024[9] - The strong cash position and balance sheet provide significant flexibility for potential M&A, continued dividend growth, buybacks, and organic investment[17] Financial Statements (Schedules) Schedule 1: Condensed Consolidated Statements of Income This schedule details the income statement for Q1 2024, showing net sales of $500.2 million and net income of $41.4 million, an increase from the prior year Condensed Consolidated Statements of Income | (in millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net sales | $500.2 | $509.6 | | Gross profit | $155.7 | $147.8 | | Operating income | $50.5 | $41.0 | | Income before income taxes | $55.3 | $45.0 | | Net income | $41.4 | $33.2 | | Diluted EPS | $1.65 | $1.33 | Schedule 2: Segmental Analysis and Non-GAAP Reconciliation Schedule 2A details segmental net sales and operating income, while Schedule 2B reconciles GAAP Net Income of $41.4 million to Adjusted EBITDA of $64.0 million for Q1 2024 Schedule 2A: Segmental Analysis of Results | (in millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net sales: | | | | Performance Chemicals | $160.8 | $151.4 | | Fuel Specialties | $176.9 | $190.3 | | Oilfield Services | $162.5 | $167.9 | | Operating income: | | | | Performance Chemicals | $21.1 | $10.4 | | Fuel Specialties | $33.4 | $32.4 | | Oilfield Services | $16.9 | $15.9 | Schedule 2B: Non-GAAP Measures (Net Income to Adjusted EBITDA) | (in millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net income | $41.4 | $33.2 | | Interest income, net | ($2.1) | ($0.3) | | Income taxes | $13.9 | $11.8 | | Depreciation and amortization | $10.3 | $9.2 | | Other adjustments | $0.5 | ($1.2) | | Adjusted EBITDA | $64.0 | $52.7 | Schedule 3: Condensed Consolidated Balance Sheets This schedule presents the balance sheet as of March 31, 2024, showing total assets of $1,732.8 million and cash and cash equivalents increasing to $270.1 million Key Balance Sheet Items | (in millions) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $270.1 | $203.7 | | Total current assets | $912.9 | $885.7 | | Total assets | $1,732.8 | $1,707.4 | | Total current liabilities | $364.9 | $371.5 | | Total liabilities and equity | $1,732.8 | $1,707.4 | Schedule 4: Condensed Consolidated Statements of Cash Flows This schedule details Q1 2024 cash flows, highlighting $80.6 million in net cash from operating activities and a $66.4 million net increase in cash for the period Condensed Consolidated Statements of Cash Flows | (in millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $80.6 | $21.8 | | Net cash used in investing activities | ($14.3) | ($22.0) | | Net cash provided by financing activities | $0.5 | $0.4 | | Net change in cash and cash equivalents | $66.4 | $0.4 | | Cash and cash equivalents at end of period | $270.1 | $147.5 |