Q1 2024 Innospec Inc Earnings Call

Operator: Please see the SEC site and Innospec site for these and related documents. In our discussions today, we've also included non-GAAP financial... A reconciliation to the most directly comparable GAAP financial measure is contained in the earnings report. The non-GAAP financial measures should not be considered as a substitute for or superior to those prepared in accordance with GAAP. They are included as additional items to aid investor understanding of the company's performance in addition to the impact these items and events have on financial results. With me today from Innospec are Patrick Williams, President and Chief Executive Officer, and Ian Cleminson, Executive Vice President and Chief Financial Officer. With that, I turn it over to you, Patrick.

Thank you welcome to <unk> first quarter earnings call the earnings release for the quarter. In this presentation are posted on the company's website.

This call will make forward looking statements, which are predictions and other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from the anticipated results implied by such forward looking statements.

The risks and uncertainties are detailed in the spectra, K 10, Qs and other filings with SEC.

Please see the FCC side and now expect site for these and related documents.

In our discussions today will also include non-GAAP financial measures a reconciliation to the most directly comparable GAAP financial measure is contained in the earnings release the non-GAAP.

Financial measures should not be considered as a substitute for or superior to those prepared in accordance with GAAP.

So you have additional items to eight investor understanding of the company's performance. In addition to the impact these items and events had on financial results with me today from newspaper, Patrick Williams, President and Chief Executive Officer, and he Clemenson Executive Vice President and Chief Financial Officer.

Patrick S. Williams: Thank you, David, and welcome everyone to Innospec's first quarter 2024 conference call. I am pleased to report a strong start to 2024. Excellent performance across all our businesses drove double-digit operating income growth and margin improvement. Performance chemicals delivered on our target for sequential improvement, and operating income more than doubled over last year. While customers remain disciplined in their order patterns, volumes have improved in our key markets. Supported by our strong organic growth and technology pipeline, we are cautiously optimistic that we can maintain this improvement in 2024.

Patrick S. Williams: Trevor you Patrick Thank you, David and welcome everyone <unk> first quarter 2024 conference call.

Patrick S. Williams: I am pleased to report a strong start to 2024.

Trevor: Excellent performance across all of our businesses drove double digit operating income growth and margin improvement.

Trevor: Performance chemicals delivered on our target for sequential improvement as operating income more than doubled over last year.

Trevor: While customers remained disciplined in their order patterns volumes have improved in our key end markets.

Trevor: Supported by our strong organic growth in technology pipeline, we are cautiously optimistic that we can maintain this improvement in 2024.

Patrick S. Williams: In addition, our recent QGP acquisition is performing in line with expectations as was immediately accreted. Our focus remains on continued progress returning operating income run rates and margins to levels consistent with full year 2022. Innospec achieved another steady set of results. Gross and operating margins improved over the prior year and were within our targeted range. Our team has continued to build a strong pipeline of regional product and market growth opportunities in both fuel and non-fuel applications.

Trevor: In addition, our recent few GP acquisition.

Trevor: Performing in line with expectations as it was immediately accretive.

Trevor: Our focus remains on our continued progress returning operating income run rates and margins to levels consistent with full year 2022.

Trevor: Fuel specialties achieved another steady set of results.

Trevor: And operating margins improved over the prior year.

Trevor: Our targeted range.

Trevor: Our team has continued to build a strong pipeline of regional product and market growth opportunities in both fuel and non fuel applications.

Patrick S. Williams: Oilfield services achieved operating income growth and market expansion over the prior year. However, softer production chemicals activity in the corner was more than offset by further improvement in our other segments. In the second quarter, we expect significant headwinds in production chemicals activity, and consequently, operating income will be substantially lower than previous quarters. However, we are cautiously optimistic that operating income run rates will return to our targeted $15 to $20 million per quarter range in the second half of the year.

Trevor: Oilfield services achieved operating income growth and margin expansion over the prior year.

Trevor: Softer production chemicals activity in the quarter was more than offset by further improvement in our other segments.

Trevor: In the second quarter, we expect significant headwinds and production chemicals activity.

Trevor: And consequently, operating income will be substantially lower than previous quarters.

Trevor: We are cautiously optimistic the operating income run rates will return to our targeted 15% to $20 million per quarter range in the second half of the year.

Ian Philip Cleminson: Now I will turn the call over to Ian Cleminson, who will review our financial results in more detail, then I will return with some concluding comments. After that, Ian and I will take your questions. Ian? Thanks, Patrick, and good morning.

Trevor: Now I will turn the call over to Ian <unk>, who will review our financial results in more detail.

Trevor: And then I will return with some concluding comments after that Ian and I will take your questions.

Ian Philip Cleminson: Thanks Patrick and good morning everyone. Turning to slide 7 in the presentation, the company's total revenues for the first quarter were £500.2 million, a 2% decrease from £509.6 million a year ago. Overall gross margin increased by 2.1 percentage points from last year to 31.1%. Adjusted EBITDA for the quarter was £64 million, compared to £52.7 million last year. Net income for the quarter was £41.4 million, compared to £33.2 million a year ago.

Ian: Thanks, Patrick and good morning, everyone.

Ian: <unk> seven in the presentation. The Companys total revenues for the first quarter were $522 million and.

Ian: 2% decrease from $509 6 million a year ago.

Speaker Change: Overall gross margin increased by two one percentage points from last year to 31, 1%.

Ian: Adjusted EBITDA for the quarter was $64 million compared to $53 7 million last year.

Ian: Net income for the quarter was $41 4 million compared to $33 2 million a year ago.

Ian Philip Cleminson: So this is slide eight. Our gap earnings per share were $1.65, including special items, the net effect of which decreased our first quarter earnings by 10 cents per share. A year ago, we reported gap earnings per share of $1.33, which included a negative impact from special items of 5 cents per share. Excluding special items in both years, our adjusted EPS for the quarter was $1.75 compared to $1.38 a year ago.

Ian: Our GAAP earnings per share of $1 65.

Ian: Including special items, the net effect of which decreased our first quarter earnings by <unk> 10 per share.

Ian: A year ago, we reported GAAP earnings per share of $1 33.

Ian: Which included a negative impact from special items of <unk> <unk> per share.

Ian: Excluding special items in both years, our adjusted EPS for the quarter was $1 75 to $1 38, a year ago.

Ian: Turning to slide eight.

Ian Philip Cleminson: Revenues in performance chemicals for the first quarter were £160.8 million, up 6% from last year's £151.4 million. Growth attributable to the QGP acquisition of 6%, volume growth of 13%, and a positive currency impact of 1% were offset by an adverse price mix of 14% due mainly to lower raw material costs flowing through to selling prices, whose margins of 23.4% increased 7.5 percentage points compared to 15.9% for the same quarter in 2023, benefiting from increased sales and production volumes.

Ian: Revenues in performance chemicals for the first quarter were $160 8 million up.

Ian: 6% from last year's $151 4 million.

Ian: Growth attributable to the <unk> acquisition of 6% volume growth of 13% and positive currency impact of 1% were offset by an adverse price mix of 40% due mainly to lower raw material costs flowing through to selling prices.

Ian: Gross margins of 23, 4% increased seven five percentage points compared to 15, 9% in the same quarter in 2023 benefiting from increased sales and production volumes.

Ian Philip Cleminson: Operating income of £21.1 million, approximately doubled on last year. Moving on to slide 9, revenues in fuel specialties for the first quarter were £176.9 million, down 7% from the £190.3 million reported a year ago. An adverse price mix of 6% and a 2% reduction in volumes were partially offset by a positive currency impact of 1%.

Ian: Operating income of $21 1 million approximately doubled on last year.

Ian: Moving on to slide nine revenues in fuel specialties for the first quarter were $176 9 million down 7% from $190 3 million reported a year ago.

Ian: An adverse price mix of 6%.

Ian: Percent reduction in volumes were partially offset by a positive currency impact of 1%.

Ian: Gross margins of 34, 3% with four one percentage points above the same quarter last year.

Ian: Operating income of $33 4 million was up 3% from $33 4 million a year ago.

Ian: Adjusting for the $7 4 million inventory write off in Brazil in the prior year gross margins were 34, 1% and our price income 69, 8%.

Ian: The decrease in adjusted operating income year on year was mostly due to the timing of sales in our gas business.

Ian Philip Cleminson: Gross margins of 34.3% were 4.1 percentage points above the same quarter last year. Operating income of £33.4 million was up 3% from £32.4 million a year ago. Adjusting for the £7.4 million inventory write-off in Brazil in the prior year, gross margins were 34.1%, and operating income was 39.8%. The decrease in adjusted operating income year-on-year was mostly due to the timing of sales in our outgas business. Moving on to slide 10, revenues and oilfield services for the quarter were £162.5 million, down 3% from £167.9 million in the first quarter last year.

Ian: Moving on to slide 10 revenues in oilfield services for the quarter were $163 5 million down 3% from $167 9 million in the first quarter last year.

Ian Philip Cleminson: Gross margins of 35.3% decreased 4.2% from last year's 39.5% on a week of sales. However, operating income of £16.9 million increased 6% on £15.9 million one year ago. In the second quarter, we expect operating income to be significantly lower due to a slowdown in our production chemicals business. We expect operating income to be in the $7-$10 million range, but we are cautiously optimistic that operating income run rates will return to our $15-$20 million per quarter range in the second half of this year.

Ian: Gross margins of 35, 3% decreased four two percentage points from last year's 39, 5% on a weaker sales mix.

Ian: Operating income of $16 $9 million increased 6% from $15 9 million one year ago.

Ian: In the second quarter, we expect operating income to be significantly lower due to a slowdown in our production chemicals business we.

Ian: We expect operating income will be in the 7% to $10 million range. However, we are cautiously optimistic operating income run rates will return to a $15 million to $20 million per quarter range in the second half of this year.

Ian Philip Cleminson: Turning to slide 11, corporate costs for the quarter were $20.2 million compared with $17.7 million a year ago, due mainly to the growth and timing of IT expenditure and higher performance-related remuneration. The effective tax rate for the quarter was 25.1% compared to 26.2% a year ago. Moving on to slide 12, free cash generation for the quarter was excellent, with an operating cash inflow of £80.6 million before capital expenditures of £14.3 million. As of March 31, Innospec had £270.1 million in cash and cash equivalents. No doubt. Now I'll turn it back over to Patrick for some final comments.

Ian: Turning to slide 11, corporate costs for the quarter, which were <unk> 2 million compared to $17 7 million a year ago, due mainly to the growth and timing of expenditure and higher performance related remuneration.

The effective tax rate for the quarter was 25, 1% compared to 26, 3% a year ago.

Ian: Moving on to slide 12 free cash generation for the quarter was excellent with an operating cash inflow of $80 6 million before capital expenditures of $14 3 million.

Ian: As of March 31st and expect to have $270 1 million in cash and cash equivalents and no debt.

Ian: And now I'll turn it back over to Patrick for some final comments. Thanks.

Patrick S. Williams: Thanks, Ian. I am very pleased with the strong performance of all our businesses delivered in the quarter, including the new acquisition. In partnership with our customers, we remain well-placed for growth, for technical innovation, and excellent customer service over the medium to long term. This quarter, our board approved a further 10% increase in our semi-annual dividend to $0.76 per share, with net cash of over $270 million. We continue to deliver on our record of returning value to shareholders while maintaining flexibility for M&A, dividend growth, organic investment, and buyback. Now, I will turn the call over to the operator, and Ian and I will take your questions.

Patrick S. Williams: Thanks Ian.

Patrick S. Williams: Very pleased strong performance of all our businesses delivered in the quarter, including the new acquisition.

Patrick S. Williams: In partnership with our customers, we remain well placed for growth through technical innovation and excellent customer service over the medium to long term.

Patrick S. Williams: This quarter, our board approved a further 10% increase in our semiannual dividend to <unk> 76 per share.

Patrick S. Williams: With net cash of over $270 million.

Patrick S. Williams: We continue to deliver on our record of returning value to shareholders, while maintaining flexibility for M&A dividend growth organic investment and buybacks.

Patrick S. Williams: Now I will turn the call over to the operator, Amy and I will take your questions.

Operator: Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We will now go to your first question. One moment, please. And your first question comes from the line of Mike Harrison, Seaport Research Partners. Please go ahead.

Amy: Thank you. So I'll ask a question you will need to press star one on one on your telephone.

Amy: Aimed to be announced soon.

Amy: Your question. Please press star one on one again.

Amy: We will now go to your first question.

Amy: One moment please.

Amy: Your first question comes from the line of Mike Harrison Seaport Research partners. Please go ahead.

Patrick S. Williams: Hi, good morning. Congratulations on a strong start to the year. Thanks, Mike. Thanks, Brian.

Michael Joseph Harrison: Hi, good morning, Congrats on a strong start to the year.

Michael Joseph Harrison: Thanks, Mike Thanks, Mike.

Patrick S. Williams: I was hoping that you could provide a little bit of additional detail on what you're seeing in the performance chemicals business. You mentioned that some customers are remaining disciplined in their orders. Just curious, does that mean there's still some lingering destocking effects going on in some product lines? Maybe help us understand what you've been seeing in terms of order patterns and trends as you look at kind of that February into March into April time frame. Yeah,

Speaker Change: Was hoping.

Michael Joseph Harrison: You could provide a little bit of additional detail on what youre seeing in that performance chemicals business. You mentioned that some customers are remaining disciplined in their orders just curious does that mean, there's still some lingering destocking effects going on in some product lines.

Michael Joseph Harrison: Maybe help us understand what you've been seeing in terms of order patterns and trends as you look at kind of a bad February into March into April timeframe.

Patrick S. Williams: Yeah, Mike, we're still seeing very positive trends. I think the de-stocking was by application, by business, for instance, agriculture. But if you look at overall performance chemicals, i.e., personal care, home care, et cetera,

Michael Joseph Harrison: Yes, Mike we're still seeing very positive trends I think the destocking.

Michael Joseph Harrison: By application by business for instance, agriculture, but if you look at overall performance chemicals E personal care home care et cetera.

Patrick S. Williams: Globally, we're seeing an uptick. We're seeing strong order patterns coming into the second quarter. We feel like these stockings have been put behind us. And we're just moving forward. You know, we're finally starting to see the market come back to some normalcy, And we believe that throughout the year.

Michael Joseph Harrison: Globally, we are seeing an uptick we're seeing strong order patterns coming into second quarter.

Michael Joseph Harrison: We're feeling like Destocking has been put behind us.

Michael Joseph Harrison: And we're just moving forward with.

Michael Joseph Harrison: Finally, starting to see the market come back to some normalcy.

Michael Joseph Harrison: And we believe that throughout the year, we will see an uptick continue.

Michael Joseph Harrison: Q2 looks very strong to date.

Patrick S. Williams: And maybe just in terms of the price mix number in performance chemicals, I believe in the past, you had said that that's mostly mix, and if ag is soft, I would understand where that's affecting mix, but it also sounded like

Michael Joseph Harrison: And maybe just in terms of that price mix number in performance chemicals I believe in the past.

Michael Joseph Harrison: You had said that that's mostly mix and if AG is soft I would understand where that's affected mix, but it also sounded like you were saying that.

Michael Joseph Harrison: Raw materials are lower and that's weighing on pricing, maybe just a little more color there and when you might expect to see some stabilization in that price mix number in performance chemicals.

Michael Joseph Harrison: Yes.

Michael Joseph Harrison: The year over year comments.

Michael Joseph Harrison: So we are seeing much lower raw material costs now starting to flow through to the revenue lines.

Patrick S. Williams: That was a year-over-year comment, so we are seeing much lower raw material costs now starting to flow through to the revenue lines. There's still a little bit of mix in there. Ag is not where we'd like it to be. But as Patrick alluded to, our main business in personal care and home care, we're seeing great volume growth year-over-year, and sequentially we're

Michael Joseph Harrison: Still a little bit of mixing that Ikea is not where we'd like it to debate was Patrick alluded to it.

Michael Joseph Harrison: Business in personal care home care we're.

Michael Joseph Harrison: We're seeing great.

Volume growth year over year and sequentially, we continue to see the business expanding so we.

Michael Joseph Harrison: We expect raw materials to stabilize so we expect price mix to sort of flatten out throughout the rest of the year, but we're in good shape going into Q2 and for the rest of the year.

Michael Joseph Harrison: Sure.

Ian Philip Cleminson: All right, and I guess for my last question, I understand the commentary that you provided on Q2 in the oil field business, but I was just hoping that you could give us maybe some broad thoughts on the full year outlook. The consensus number is $6.75. I know I can't just annualize the first quarter given what you said about the oil field, but annualizing Q1 would get you more to a $7-type EPS number. So maybe it could just help level set us on some of the modeling assumptions that we should be keeping in mind for the rest of the year.

Michael Joseph Harrison: Alright.

Speaker Change: I guess for my last question.

Speaker Change: Understand the commentary that you provided on Q2 in the <unk>.

Speaker Change: The oilfield business, but I was just hoping that you could give us maybe some broad.

Speaker Change: Thoughts on the full year outlook. The consensus number is $6 75.

Speaker Change: I know I can just annualize the first quarter, given what you said about oilfield.

Speaker Change: And annualized in Q1 would get you gets you more to $7 type EPS number.

So maybe just help level set us on some of the modeling assumptions that.

Speaker Change: That we should be keeping in mind for the rest of the year.

Ian Philip Cleminson: Yeah, let me take that one. So oil field, obviously, we've guided in the comments earlier to a £6-10 million operating income quarter. Our expectation is that in Q3 and Q4, we get back into that £15-20 million operating income range. There's no reason, as we sit here today, why we can't do that. So that broadly puts us in that 60 to 70 million operating income range for the full year in the oil field.

Speaker Change: Yes, Mike let me take that one.

Speaker Change: So oilfield, obviously, we've guided.

Speaker Change: The comments earlier through a six to seven $6 million to $10 million.

Operating income quarter.

Michael Joseph Harrison: Our expectation is that in Q2, Q3, Q4, we get back into that $15 million to $20 million operating income range.

Michael Joseph Harrison: There is no reason why we can't do that so that broadly puts us in that $60 million to $70 million operating income range for the full year in the oilfield market.

Patrick S. Williams: Mike, can I just give you an additional color?

Michael Joseph Harrison: Just just to give an additional color.

Patrick S. Williams: There is the potential for us to start seeing some orders in the latter part of Q2. Again, I think, as Ian said, let's stick to the numbers that he's put forward for Q3-Q4 as well.

Michael Joseph Harrison: There is potential we start seeing some orders flat.

Michael Joseph Harrison: The latter part of Q2.

Michael Joseph Harrison: But again I think as you had said, let's stick to the numbers that you put forward for Q3 Q4 as well.

Michael Joseph Harrison: Okay.

Ian Philip Cleminson: All right, thanks very much.

Speaker Change: Alright, thanks very much.

Speaker Change: Thanks, Mike.

Operator: Once again, if you would like to ask a question, please press stars 1 and 1 on your telephone keypad. We will now go to our next question. And your next question comes from the line of David Silver from...

Speaker Change: Thank you.

Speaker Change: So again, if you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: We will now go to our next question.

Speaker Change: And your next question comes from the line of David Silver from CL King <unk> Associates. Please go ahead.

David Cyrus Silver: Yeah, hi, good morning. Morning, David. Good morning.

David Cyrus Silver: Yes, hi, good morning.

David Cyrus Silver: Good morning, Jeff Good morning, David Good morning.

David Cyrus Silver: I'd just like to start out with a.

David Cyrus Silver: Um, you know, I just like to start out with a clarification. I guess I'm just curious, but in the oil field, there's kind of a disparity between how the gross margin line performed versus the operating income. You know, just curious, but you talked about lower margins on the gross profit line, but there was, you know, something of an increase year over year on operating income. So what between the gross profit and how would you kind of characterize, you know, that?

David Cyrus Silver: Clarification, I guess I'm, just curious, but an oil field there is kind of a disparity between how the gross margin.

<unk> performed versus the operating income just curious, but you talked about lower margins.

David Cyrus Silver: On the gross profit line, but there was.

David Cyrus Silver: Something of a.

David Cyrus Silver: The increase year over year on operating.

David Cyrus Silver: Income.

David Cyrus Silver: What between the gross profit or how would you kind of characterize that I.

David Cyrus Silver: I don't know, those two lines on the... come on, the segment financials kind of going in opposite directions. And is that something that will persist through the year? Or is that kind of just a one-quarter phenomenon? Thanks. Yes, David, that's what we're looking at.

Speaker Change: I don't know those two those two lines on the.

Speaker Change: On the segment financials kind of going in opposite directions, and is that something that will persist.

Speaker Change: Through the year or is that kind of just.

Speaker Change: One quarter phenomenon.

Ian Philip Cleminson: Yes, David, what we're looking at here is that we had a slowdown in our production chemicals business in the quarter, but the rest of our business has continued to execute extremely well, off the same cost base, so we've been able to grow the revenues, maintain the costs, and that's what's helped year-over-year operating income come higher. Our production chemicals business does attract a lot of service-intensive work. So that is a high cost.

Speaker Change: Yes, David.

David Cyrus Silver: We've had a slowdown in our production chemicals business in the quarter for the rest of our businesses continued to execute extremely well.

David Cyrus Silver: After the same cost base. So we've been able to grow the revenues maintain the costs and that's what's helped year over year operating income higher than our.

David Cyrus Silver: Production chemicals business to the chucks of loss servicing sentences.

David Cyrus Silver: Work, so that is a high costs. So we've just dropped a little bit of RSA online.

Ian Philip Cleminson: So we've just dropped a little bit in our SAR line. And as the production chemicals business comes back, you'll see that SAR line rise a little bit as well. So nothing unusual, just the business is doing well outside of production chemicals, and we're pleased with the results.

David Cyrus Silver: And as the production chemicals business comes back you'll see that they are.

David Cyrus Silver: All lines rise a little bit as well so.

David Cyrus Silver: Unusual just the business is doing well outside of production chemicals.

David Cyrus Silver: With the results.

David Cyrus Silver: No, thank you for that. I admit, when I read it, I had to look it over a couple of times and think about it.

Speaker Change: Thank you for that.

Speaker Change: I admit when I read it I had to look at over a couple of times and think about it. So thank you for clarifying that.

Patrick S. Williams: So, thank you for clarifying that. On the fuel specialty side, you know, there is kind of a margin pickup is getting back to that targeted, I don't know, 32 to 35% range. Just, you know, a couple of questions about that. So, would you say that the more recent margin improvement is related to the return of jet fuel aviation markets kind of returning more to normal? Or would you say that the margin improvement is maybe the margin improvement this quarter is maybe tied to you know some different end markets or product lines? No, it's...

Speaker Change: On the fuel specialties side.

Speaker Change: There is.

Speaker Change: The margin pickup is getting back to that targeted I don't know, 32% to 35% range.

Speaker Change: A couple of.

Speaker Change: Questions about that so.

Would you say that the more recent margin improvement is that related to the return of.

Speaker Change: Jet fuel aviation.

Speaker Change: Markets kind of returning.

Speaker Change: More to normal or would you say that the margin improvement is maybe.

Speaker Change: The margin improvement this quarter is maybe tied to.

Speaker Change: Some different end markets or product lines.

Patrick S. Williams: No, it's different in markets, David. We didn't have a lot of jet fuel in the quarter. It tends to be lumpy because its consistent block intact is lower in raw materials. Steady prices in the marketplace, increased volumes. It's a little bit of everything, and you know we set a plan years ago to get these margins up, and the group's done a really good job. So, you know, as we see an increase in half gas... We should see maybe potentially even a low margin uptick there as well.

Speaker Change: No. It's different end markets, David we didn't have a lot of jet fuel in the quarter it tends to be lumpy.

Speaker Change: It's consistent blocking and tackling lower raw materials.

Speaker Change: Steady prices in the marketplace.

Speaker Change: Increased volumes, it's a little bit of everything.

Speaker Change: We said of our planned years ago to get these margins up and the group's done a really good job.

Speaker Change: So as we see an increase in <unk> gas.

Speaker Change: We should see maybe potentially even a low margin uptick there as well.

David Cyrus Silver: Okay, and then also sticking with fuel specialties for one more, but the comment in the press release, and I'm sorry, I'm fumbling with my pages, but it seemed like you did call out a number of growth opportunities in different, multiple end markets across the fuel specialties portfolio. And I mean, over the last several years, you've definitely launched a number of new initiatives. You know, Ocean Going Vessel, I'm sorry, additives and stationary power, et cetera, along with some other opportunities.

Speaker Change: Okay, and then also sticking with fuel specialties for one more.

Speaker Change: But the comment in the press release, and Im sorry, Im fumbling with my pages, but.

Speaker Change: It seemed like you did call out a number of growth opportunities in different in multiple end markets across the fuel specialties portfolio.

Speaker Change: And I mean over the last several years, you've definitely launched a number of new initiatives.

Speaker Change: Ocean going vessel.

Speaker Change: I'm sorry.

Speaker Change: Additives and stationary power et cetera.

David Cyrus Silver: Which of those or, you know, what would you call out as kind of the more promising ones right now that led you to kind of call that out during the in the press release? Thank you. Yeah, Dave, I think it's a co-

Speaker Change: Along with it.

Speaker Change: Some other opportunities.

Speaker Change: Which of those or.

Speaker Change: What would you call out as kind of the more promising ones right now that that led you to kind of call that out during the.

Speaker Change: In the press release, thank you.

Patrick S. Williams: Yeah, David, I think it's a combination of the IMO products and GDI. If you look at a lot of Eastern European nations...

Speaker Change: Yes, David I think its a combination really emo products and GTI.

Speaker Change: If you look at a lot of eastern European Nations.

Patrick S. Williams: They're starting to use the Gasoline Direct Injection product, and that's been a nice subject. We've been preaching that for quite some time, and the hope was that it would start getting some legs, and we're finally starting to see that. So, GDI's taken off, IMO's taken off, and applications outside of fuels had a good quarter as well. So, in general, we see some nice tailwinds in this fuels business that we gotta continue to take advantage of.

Speaker Change: They're starting to use the gasoline direct injection product.

Speaker Change: That's been a nice up tick we've been preaching for quite some time.

Speaker Change: And the hope was that it would start with his legs.

Speaker Change: And we're finally, starting to see that so <unk> taken off by most taken off in applications outside of fuels.

Speaker Change: I had a good quarter as well so in.

Speaker Change: In general we see some nice tail winds in this fuels business that we've got to continue to take advantage of it.

David Cyrus Silver: Very good. One more, if you don't mind, on performance chemicals and, in particular, the QGP contribution. So, you know, you did call out the sales growth. I was wondering, you know, if you could maybe kind of talk about that 6% increase as kind of, you know, above trend or, or right on trend, you know, just kind of how that relates to your overall expectations, let's say, for the first 12 months, revenue generation from that asset, related to that acquisition.

Speaker Change: Very good.

Speaker Change: One more if you don't mind on.

Speaker Change: Performance chemicals and in particular on the <unk>.

Contribution.

Speaker Change: You did call out the sales growth I was wondering if you could maybe kind of talk about that 6% increase as kind of a.

Speaker Change: Above trend or we're right on trend just just kind of how how does that relate to your overall expectations, let's say for the first 12 months revenue generation from that asset.

And then secondly, you did take a small charge I guess for adjustments to the contingent consideration.

Speaker Change: Related to that acquisition.

David Cyrus Silver: If I'm interpreting it correctly, I mean, I think that means it's performing at or above, you know, original expectations. And, you know, if that's the case, I mean, if you wouldn't mind qualitatively talking about what that adjustment to continue, the contingent consideration, was related to, and maybe there is a maximum earn out associated with that that maybe we should think about, just kind of framing the contribution from QGP and the implications of the incremental charge you took for contingent consideration. Thanks. Sure, David.

Speaker Change: Hey, there if I'm interpreting it correctly I mean, I think that means it's performing at or above.

Speaker Change: Original expectations.

Speaker Change: And if thats the case I mean, if you wouldn't mind qualitatively talking about what that is.

Speaker Change: Adjustments to continue.

Speaker Change: Contingent consideration was related to and maybe is there a maximum earn out associated with that maybe we should think about just.

Speaker Change: Framing the contribution from <unk> and the implications of the.

Speaker Change: Incremental charge you took for contingent consideration.

Ian Philip Cleminson: Sure, David. So in terms of KGV's performance in the first quarter, it's exactly on track from a revenue and operating income perspective. What's really pleasing for us is that the business performed exactly how we expected it. But behind that, there's an awful lot of work going on with the integration across our manufacturing, our sales, our finance, and our supply chain. And we see lots of opportunity in that business going forward to bring all that together and to see some real growth, but we are very confident that we've made a great acquisition, the people are fantastic, and the integration is going really well.

Speaker Change: <unk>.

Speaker Change: Sure David.

David Cyrus Silver: So in terms of kg ggp's.

Speaker Change: This quarter.

Speaker Change: The on track from a revenue and operating income perspective.

Speaker Change: What's really pleasing for us is that the.

Speaker Change: The business performed exactly how we expected it but behind that there is an awful lot of work going on with the integration.

Speaker Change: Across our manufacturing our sales our finance supply chain and we see lots of opportunity in that business going forward now is going to take us a little bit of time.

To bring all that together and to see some real growth, but we are very confident that we've made a great acquisition. The people fantastic integration is going really well as we move through the year into next year. We think we can accelerate that growth. So as we said everything is back on track, which is great in terms of the contingent consideration not just the accretion charge going through.

Ian Philip Cleminson: As we move through the year and into next year, we think we can accelerate that growth. So, as we sit here, everything is bang on track, which is great. In terms of the contingent consideration, that is the accretion charge going through. That's absolutely expected. There are no changes to our expectations of the earn out right now, but obviously, as we transition over the next 2-3 years, we'll keep you updated on what that earn out is going to look like, but right here, right now, everything is on track and looking good.

David Cyrus Silver: Okay, thank you for that. I'm going to get back in queue. Thank you.

Speaker Change: Absolutely expected.

Speaker Change: No changes to our expectations of the earn out right now.

Speaker Change: That will change from quarter to quarter and as the business travel.

Speaker Change: Transitions over the next two to three years.

Speaker Change: We'll keep you updated on multiyear announced going to look like right now everything is on track and looking good.

Speaker Change: Okay. Thank you for that I'm going to get back in queue. Thank you.

Speaker Change: Thanks, David.

Speaker Change: Thank you.

Patrick S. Williams: Thank you. There are no further questions. I will now hand the call back to Patrick Williams.

Speaker Change: There are no further questions I will now hand, the call back to Patrick Williams.

Patrick S. Williams: Thank you all for joining us today, and thanks to all our shareholders, customers, and Innospec employees for your interest and support. If you have any further questions about Innospec or matters discussed today, please give us a call. We look forward to meeting up with you again in August to discuss our second quarter 2024 results. Have a great day.

Patrick S. Williams: Thank you all for joining us today, and thanks to all our shareholders customers and Joseph <unk> employees for your interest and support.

Patrick S. Williams: If you have any further questions about his spec where matters discussed today. Please give us a call. We look forward to meeting up with you again to discuss our second quarter 2024 results in August have a great day.

Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker Change: Okay.

[music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Sure.