Ingevity Corporation (NYSE:NGVT) Q3 2018 Earnings Conference Call Transcript

Oct 25, 2018 • 11:00 am ET

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Ingevity Corporation (NYSE:NGVT) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Ingevity's Third Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. Later we'll conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Dan Gallagher. Please go ahead.

Executive
Daniel Gallagher

Welcome to Ingevity's Third Quarter 2018 Earnings Conference Call. Earlier this morning, we posted a presentation onto the Investors section of our website. If you haven't already done so, I'd encourage you to download the file, so you can follow along on the call. You can find it by visiting ir.ingevity.com under Events and Presentations.

(Forward-Looking Cautionary Statements)

Throughout this call, we may refer to non-GAAP financial measures, which are intended to supplement, not substitute for, comparable GAAP measures. Definitions of these non-GAAP financial measures and reconciliations to comparable GAAP financial measures are included in our earnings release and can be found on the Investor Relations section of our website.

Our agenda is on slide number three. With me today, as usual, are Michael Wilson, President and CEO; and John Fortson, EVP and CFO. First, Michael will comment on the highlights of the quarter and then review the performance of our two segments. John will discuss our current financial status, our outlook and our revised guidance. And then, Michael will make some brief closing remarks before we open the line for Q&A. Mike Smith, President of Performance Chemicals; and Ed Woodcock, President of Performance Materials will join the call for Q&A.

With that, I'll turn it over to Michael.

Executive
Michael Wilson

If you'll turn with me to slide number four, you'll note some highlights for the quarter. As you can see and as we anticipated, we turned in a strong performance in the third quarter. We benefited from demand growth across the Board. In addition, our businesses manufacturing operations are executing according to plans and expectations.

Revenues in the third quarter were over $311 million, which is about 18% higher when compared to the previous year's quarter. While volumes were by far the largest driver to the company's financial results, price and mix improvements were solid contributors. Adjusted EBITDA was $91 million, up 25% versus the prior year's quarter, predominantly, due to the revenue impacts. We also had lower raw materials and production costs, these positives were partially offset by higher freight and distribution costs. In the quarter versus the prior year, we also experienced increased SG&A from the acquisition of Georgia-Pacific's pine chemicals business, as well as higher legal costs and costs associated with mergers and acquisitions activity. Our third quarter adjusted EBITDA margin of 29.1% was up 160 basis points from the prior year quarter margin of 27.5%.

As you can see on slide number five, our Performance Chemicals segment posted another strong (Technical Difficulty) Segment sales in the second quarter were about $215 million, up more than 20% versus the prior year. The Georgia-Pacific pine chemicals acquisition contributed significantly