Ingevity Corporation Q4 FY2025 earnings call

• In early December 2025, shared strategic portfolio review findings with plan to grow adjusted EPS by 10% and free cash flow per share by 5% through 2027 and initiated sales processes for advanced polymer technology segments and road markings product line.
• Completed sale of North Charleston CTO refinery and majority of industrial specialties product line to mainstream Pine products on Jan 1, 2026, reducing portfolio volatility, strengthening profitability and cash flow profile, and enhancing strategic flexibility.
• 2025 total company adjusted EBITDA grew almost 10% over 2024 with industry leading margins over 30%, generated $274 million free cash flow, reduced leverage to 2.6 times and bought back over 1 million shares.
• Performance materials EBITDA margins above 50% and held revenue flat despite auto challenges. Performance chemical segment lowered CTO exposure ahead of divestiture and pavement technologies grew year over year. APT faced tough market conditions but team focused on operational discipline.

Performance materials: Sales of $607 million in line with prior year, segment EBITDA declined 2% y-o-y due to lower volume and higher SG&A but EBITDA margin remained strong at 53.8%. Performance chemicals: Combined results include continuing and discontinued operations. Sales declined primarily due to repositioning actions. Pavement Technologies sales flat to 2024 with volume growth in NAFTA offset by lower infrastructure spend in South America and benefited from pricing and mix shift. Road markings experienced price pressure but volumes grew slightly. Total segment EBITDA increased $45 million y-o-y. APT: Faced headwinds from tariffs and weak end market demand, sales declined 15% and segment EBITDA 18% lower y-o-y due to volume declines offsetting improved operating efficiency but EBITDA margin was 20%.

• 2026 guidance includes full year of APT and road markings (excluding divested industrial specialties product line). Sales expected to be between $1.1 and $1.2 billion, adjusted EBITDA between $380 and $400 million, adjusted EPS in range of $4.08 to $5.20.
• Performance materials sales expected to grow low single digits with margins consistent with 2025. Performance chemicals including road markings expected to grow mid-single digits with EBITDA margins in mid-teens. APT expected flat to low single digit growth with margins around 20%.
• CAPEX expected consistent with 2025 at 40 to 60 million dollars. Plan to use free cash flow of 225 to 250 million dollars to continue share buybacks in line with $300 million through 2027. Expect to reduce and maintain net leverage within 2-2.5 times range in 2026.

Q: Give update on progress of potential asset sales and context on $300 million buybacks.

A: Processes for APT and road markings continue to progress, encouraged by interest shown, expect to announce something before end of year and update guidance as things go along. Buybacks of $300 million over next two years to be executed with a cadence throughout the year.

Q: Update on $15 million of stranded costs exiting by end of year, cadence.

A: Clear line of sight to eliminate $15 million by end of year, accumulating throughout the year more so in back end, some costs tied up in TSA expected to wrap up mid-year.

Q: Performance materials business, assumptions on auto production volume, geographic commentary, seasonal cadence.

A: Auto industry resilient, stable environment assumed for 2026 with potential upside if supply chain issues abate and reduced EV adoption trend in North America. Performance materials has technical advantage in filtration with focus on water, pharma, food and beverage, early in discovery process.

Q: Peak or mid-cycle margins for segments once recovery occurs.

A: Performance materials expected to maintain margins north of 50%, performance chemicals road markings transact expected to uplift margins, APT assumed low to mid 20s. Performance chemicals mid-teens EBITDA margin composition of businesses, road markings lower margin diluting but pavement technologies alone expected around 18% margins by 2027. Seasonality of performance chemicals segment with 90% annual EBITDA in Q2 and Q3 and 75% sales in Q2 and Q3.

Q: Performance materials technology base help in other areas like water treatment, major regulations.

A: Hardwood based activated carbon has unique separation properties valued by customers in filtration, focus on water, pharma, food and beverage. Major regulation in China seven (tier three) expected end of 2020s, India emissions standards, North America Endangerment Act positive for longevity. No priority on acquisitions for pavement technologies in next couple years, focus on cash flow, leverage reduction, and share buybacks.