Q4 2018 Earnings Presentation - Innospec...EARNINGS PRESENTATION | FEBRUARY 2019 David Jones VP,...

Q4 2018EarningsPresentation20 FEBRUARY 2019 | 9AM EST

Forward Looking StatementsThis presentation contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. Such forward-looking statements include statements (covered by words like “expects,” “estimates,” “anticipates,” “may,” “believes,” “feels” or similar words or expressions, for example) which relate to earnings, growth potential, operating performance, events or developments that we expect or anticipate will or may occur in the future. Although forward-looking statements are believed by management to be reasonable when made, they are subject to certain risks, uncertainties and assumptions, and our actual performance or results may differ materially from these forward-looking statements. Additional information regarding risks, uncertainties and assumptions relating to Innospec and affecting our business operations and prospects are described in Innospec’s Annual Report on Form 10-K for the year ended December 31, 2017 and other reports filed with the U.S. Securities and Exchange Commission. You are urged to review our discussion of risks and uncertainties that could cause actual results to differ from forward-looking statements under the heading "Risk Factors” in such reports. Innospec undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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EARNINGS PRESENTATION | FEBRUARY 2019

©2018. Innospec Inc. All Rights Reserved.

Use of Non-GAAP Financial MeasuresThe information presented in this presentation includes financial measures that are not calculated or presented in accordance with Generally Accepted Accounting Principles in the United States (GAAP). These non-GAAP financial measures comprise adjusted EBITDA, income before income taxes excluding special items, net income excluding special items and related per share amounts together with net debt. Adjusted EBITDA is net income per our consolidated financial statements adjusted for the exclusion of charges for interest expense, net, income taxes, depreciation, amortization and acquisition fair value adjustments. Income before income taxes, net income and diluted EPS, excluding special items, per our consolidated financial statements are adjusted for the exclusion of amortization of acquired intangible assets, tax charge due to U.S. Tax Reform, restructuring charge, acquisition related costs, adjustment of income tax provisions, foreign currency exchange losses/(gains), foreign exchange loss on liquidation of subsidiary, fair value acquisition accounting and (profit)/loss on disposal of subsidiary. Net debt is total debt less cash and cash equivalents. The Company believes that such non-GAAP financial measures provide useful information to investors and may assist them in evaluating the Company’s underlying performance and identifying operating trends. In addition, these non-GAAP measures address questions the Company routinely receives from analysts and investors and the Company has determined that it is appropriate to make this data available to all investors. While the Company believes that such measures are useful in evaluating the Company’s performance, investors should not consider them to be a substitute for financial measures prepared in accordance with GAAP. In addition, these non-GAAP financial measures may differ from similarly-titled non-GAAP financial measures used by other companies and do not provide a comparable view of the Company’s performance relative to other companies in similar industries. Management uses adjusted EPS (the most directly comparable GAAP financial measure for which is GAAP EPS) and adjusted net income and adjusted EBITDA (the most directly comparable GAAP financial measure for which is GAAP net income) to allocate resources and evaluate the performance of the Company’s operations. Management believes the most directly comparable GAAP financial measure is GAAP net income and has provided a reconciliation of adjusted EBITDA and net income excluding special items, and related per share amounts, to GAAP net income in our earnings release.

©2018. Innospec Inc. All Rights Reserved. 3


Earnings Conference Call

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David JonesVP, General Council & Chief Compliance Officer Introduction

Patrick S. WilliamsPresident & CEO

Business Commentary

Ian CleminsonExecutive Vice President & CFO

Financial Performance

©2018. Innospec Inc. All Rights Reserved.

Summary of 4th Quarter Performance



Strong foundation for further organic and acquisition growth

All Strategic Businesses deliver growth and margin improvements to plan

Record quarterly revenues; Strong growth in Fuel Specialties and Oilfield Services

GAAP EPS $0.83 impacted by U.S. Tax Reform; Adjusted EPS of $1.62 - another quarterly record

Full year revenue close to $1.5 billion up 13 percent on prior year

Excellent cash generation; leverage down to 0.5x adjusted EBITDA

FinancialPerformance

Q4 2018 Consolidated Results ($ in millions)

Revenues up 12 percent

Operating income up 22 percent

Adjusted EPS up 10 percent

Full year:

Sales close to $1.5 billion

Operating income up 10 percent

Record Adjusted EPS of $4.83

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Q4 2017 Q4 2018 ©2018. Innospec Inc. All Rights Reserved.

*Operating income is before restructuring charge and profit on disposal of subsidiary

$353.8

$395.0

Net Sales

$37.1

$45.2

Operating Income*

$55.1 $55.1

Adjusted EBITDA

$1.47 $1.62

EPS Adjusted

+12% +22% - +10%

Q4 2018 Fuel Specialties ($ in millions)

Strong volume growth drives revenue increase

Margins within expected range although at lower end due to product mix

Operating income up: 12 percent for the quarter

8 percent for the full year

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+11%

-4.1%PTS

-1% -2%

©2018. Innospec Inc. All Rights Reserved.Q4 2017 Q4 2018

$146.0

$162.0

Net Sales

$31.7 $35.6

Operating Income

35.8%32.8%

Gross Margin

$32.8 $36.5

Adjusted EBITDA

+11% +12% +11%-3.0% pts

Q4 2018 Performance Chemicals ($ in millions)

Modest revenue growth for the quarter

Gross margins continue to improve

Full year revenue up 12 percent

Full year operating income up 37 percent

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+13%

+3.4%PTS

+49%

+36%


$109.8 $110.4

Net Sales

$10.4 $10.5

Operating Income

19.1%20.8%

Gross Margin

$15.3 $15.3

Adjusted EBITDA

+1% +1% -+1.7% pts

Q4 2018 Oilfield Services ($ in millions)

Continued strong revenue growth, even with lower crude prices

Further margin improvement

700 percent increase in operating income

Record Sales exceed $400 million for the year

Full year operating income more than double 2017

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+25%

-8.0%PTS

+11%+2%


$79.9

$108.5

Net Sales

$1.0

$8.0

Operating Income

33.0% 34.0%

Gross Margin

$5.6

$12.3

Adjusted EBITDA

+36% +120%+1.0% pts +700%

Q4 2018 Octane Additives ($ in millions)

Order fulfilled as expected

Margins down due to higher cost inventory and lower production volumes

Full year sales down 43 percent

Full year operating income down 63 percent

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-58%

+2.7%PTS

-59% -58%


$18.1

$14.1

Net Sales

$7.5

$3.4

Operating Income

48.6%

25.5%

Gross Margin

$7.8

$3.7

Adjusted EBITDA

-22% -55% -53%-23.1% pts

Q4 2018 Corporate Items ($ in millions)

Corporate costs within normal range

Full year adjusted effective tax rate 23.7%

Geographical split of profits pushes rate higher

Some negative headwinds from U.S. Tax Reform

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-59%


$13.5 $12.3

Corporate Costs

20.2%

23.7%

FY Adjusted Effective Tax Rate

Q4 2018 Balance Sheet ($ in millions)

Very strong operating cash generation in Q4

Full year operating cash generation up 27 percent on 2017

Net debt reduced to 0.5x adjusted EBITDA

Very strong balance sheet

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-59%


$134.1

$87.8

Net Debt

$245.4

$280.4

Trading Working Capital

0.7

0.5

Net Debt:Adjusted EBITDA(LTM)

Concluding Comments

Concluding Comments



Very strong balance sheet; leverage further reduced

Significant organic growth projects in the pipeline

Innospec’s best year yet; Record sales and adjusted EPS

All strategic business units improved sales and margins over the year

Very strong operating cash generation up 27 percent on 2017

Continued disciplined approach to acquisition opportunities

YOUR OPPORTUNITY TO ASK QUESTIONS

Final Comments



Thank you for your continued support

Q1 2019 Results

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May 7th - Results Release After Close May 8th - Conference Call

Q4 2018 Earnings Presentation - Innospec...EARNINGS PRESENTATION | FEBRUARY 2019 David Jones VP,...

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