Ingevity Corporation (NGVT) Earnings

Management highlights

• Portfolio Transformation Strategy - Completed the sale of the road markings product line in Q2 2026, following the earlier 2026 divestiture of industrial specialties, simplifying the portfolio and freeing resources for high-return opportunities - The strategic alternatives process for Advanced Polymer Technologies is progressing well and is now in an advanced stage, with a focus on delivering maximum value to shareholders - $10 million of $20 million in stranded costs from recent divestitures have already been eliminated, with at least $15 million total expected to be cut • Overall Financial Performance - Total Q2 2026 sales were $314 million; excluding the road markings divestiture, sales increased 5% year-over-year with growth across all three segments - Adjusted EBITDA increased 14% year-over-year to $115 million, with adjusted EBITDA margins expanding 600 basis points to 36.6% - Adjusted earnings per share increased to $1.74, driven by stronger operating performance, lower interest expense, and a reduced share count from ongoing share repurchases - Free cash flow excluding a litigation settlement was ~$89 million, with free cash flow per share of $2.52; capital expenditures were $10 million, and trailing 12-month net leverage improved to 2.5x, reaching the upper end of management's target leverage range • Capital Allocation - Repurchased $35 million in shares during Q2 2026, leaving ~$211 million remaining under the current $300 million authorization; the company is ahead of pace to complete the full repurchase commitment by the end of 2027 - Continued deleveraging and disciplined investment in high-return organic growth opportunities, strengthening financial flexibility for long-term value creation • Organic Growth Milestones - Secured the first municipal water treatment contract for PFAS filtration, providing commercial validation of the differentiated performance of Ingevity's carbon technology - Advancing additional organic growth opportunities in warm mix asphalt technologies and energy storage to diversify the company's long-term growth profile

Guidance

Management raised full-year 2026 guidance reflecting strong first-half execution, with the following updates: • Increased full-year adjusted EBITDA and adjusted earnings per share guidance from prior ranges • Raised the low end of the full-year free cash flow guidance, with the new range set at $220 million to $245 million; the upward adjustment from improved earnings was partially offset by higher planned inventory levels to support automotive customer demand and seasonal pavement inventory build • Full-year guidance for Performance Materials segment EBITDA margins targets the mid-50% range, which implies slight second-half margin pressure from planned maintenance outages at two Performance Materials facilities and expected weaker North American auto production in the back half of 2026, both of which were already factored into prior guidance • Advanced Polymer Technologies remains included in reported results and guidance; guidance does not assume any proceeds from a potential future sale of the segment, as the sale process is still ongoing

Segment performance

1. Performance Materials: Sales increased 4% year-over-year to $161 million, contributing 51.3% of total Q2 2026 segment revenue. Segment EBITDA increased 6% to $86 million, with an EBITDA margin of 53.6%. Growth was driven by higher volumes, favorable product mix, annual pricing actions, and stronger demand for advanced carbon solutions from the consumer shift to hybrid vehicles. 2. Pavement Technologies (formerly Performance Chemicals, post road markings divestiture): Reported sales declined 22% year-over-year due to the divestiture; excluding the divestiture impact, sales increased 3% year-over-year. Segment EBITDA declined by $3.4 million year-over-year due to the loss of road markings earnings from the prior year period, offset partially by core business improvements. Excluding the divestiture impact, EBITDA margin expanded 300 basis points to 24.4%, contributing approximately 33.1% of total Q2 2026 segment revenue. 3. Advanced Polymer Technologies: Sales increased 14% year-over-year to $49 million, contributing 15.6% of total Q2 2026 segment revenue. Segment EBITDA increased to $11 million from $2 million in the prior year, with an EBITDA margin of 22.7%. Improvements came from favorable product mix, higher asset utilization, pricing surcharges for raw material/energy cost pressures, and the absence of 2025 operational downtime from a boiler installation project, plus competitor supply disruptions tied to the Middle East conflict.

Risks & headwinds

• Volatile geopolitical environment and the ongoing Middle East conflict created raw material and energy cost headwinds for Advanced Polymer Technologies, and broader macroeconomic conditions remain dynamic • Higher asphalt prices have driven project delays and softer demand for Pavement Technologies in China and South America, creating near-term demand headwinds in those regions • Weaker expected North American auto production in the second half of 2026 and planned maintenance outages will create margin pressure for Performance Materials relative to Q2 2026 results • Forward-looking projections are inherently uncertain, and actual results may differ materially from guidance due to unforeseen market or operational changes

Analyst Q&A

• Q: Analyst Lee Jagoda asked about short-term Performance Materials margins relative to Q2 2026 amid expected lower U.S. auto production, as well as medium-term margin changes from new opportunities like PFAS filtration. /

  A: Management confirmed the structural shift to hybrid vehicles continues to drive a higher-value product mix that supports long-term margin expansion, and PFAS filtration provides an additional mid-term margin benefit. They noted that planned outages and lower auto production will lead to a slight expected step-down in margins in the second half relative to Q2, with the full-year segment margin target set for the mid-50% range, consistent with prior guidance.

• Q: Jagoda also asked if the strong $11 million Q2 EBITDA for Advanced Polymer Technologies reflects the current sustainable run rate, or if seasonal factors are driving the result. /

  A: Management explained the segment has no meaningful seasonality; the strong result reflects improvement off a multi-year demand trough and benefits from competitor supply disruptions tied to the Middle East conflict, where Ingevity was able to fill gaps left by affected suppliers. The team has executed well even in the volatile operating environment.

• Q: Analyst John McNulty asked how higher asphalt prices impacting Pavement Technologies demand will affect project timing – whether delayed projects will push to 2027 or result in permanently lost spending. /

  A: Management confirmed that despite international headwinds from higher asphalt prices, core Pavement Technologies still grew year-over-year excluding the divestiture, with warm mix additive growing 8%. All current headwinds are already incorporated into guidance, with delays most pronounced in international markets rather than North America, and the company continues to monitor the situation closely.

• Q: McNulty also asked why Ingevity won its first PFAS filtration contract, whether it was due to technology differentiation or competitive pricing. /

  A: Management clarified Ingevity was not the lowest bidder; the customer selected Ingevity's activated carbon technology for its clear performance differentiation. The technology is easy to drop-in to existing systems, has lower total cost, and is particularly effective at removing larger PFAS molecules, a fast-growing market with new regulatory requirements in the U.S.