Ingevity Corporation (NGVT) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Ingevity Corporation's Annual Meeting of Stockholders. [Operator Instructions] At this time, I would like to turn the conference over to your Chairman and Interim President and CEO, Mr. Rick Kelson. Sir, please begin.

Thank you. Good morning, ladies and gentlemen. I'm Rick Kelson, Chairman of the Board and Interim President and CEO of Ingevity Corporation. And it's my pleasure to welcome all of you to the 2020 Annual Meeting of the Stockholders. Joining me today is Kathy Burgeson, General Counsel and Secretary. I would also like to recognize the other members of our company's Board of Directors as well as the other members of our company's leadership team, all of who are present on our call today. Our other Board members are: Jean Blackwell; Diane Gulyas; Luis Fernandez-Moreno; Fred Lynch, who is also the Lead Independent Director; Mike Fitzpatrick; Karen Narwold; and Dan Sansone. Our other leadership team members are: John Fortson, Exec VP, CFO and Treasurer; Ed Woodcock, Exec VP and President Performance Materials; Mike Smith, Executive VP and President Performance Chemicals; Cindy Burns, Senior VP Human Resources; and Marty Heyne, Senior Vice President Operations. Also on the call today are [ Natalie Prosie ] and [ David Cooter ], representing PricewaterhouseCoopers LLP, the company's independent auditors; as well as [ Beth Vanderbeck ], who is serving as the inspector of elections for today's virtual meeting. All registered stockholders who have joined the virtual meeting have access to view our agenda and the rules of conduct for the virtual meeting. First, we will complete the formal business of the meeting. Any stockholders will have the opportunity to ask questions or make comments on the proxy ballot proposals, after they have been read by the secretary, by using the virtual online question feature. Upon conclusion of the formal business of the Annual Meeting, we will adjourn, and there will be a question or discussion period to allow for an opportunity for any stockholder to ask a question relating generally to Ingevity's business, also by using the virtual meeting online question feature. And now our Secretary will report on the mailing of the notice for this meeting and the presence of a quorum.

Good morning. This meeting is held pursuant to notice and access delivery, which was distributed on or about March 9, 2020, to each stockholder of record as of February 24, 2020, and who is entitled to vote and to attend this meeting. A list of stockholders entitled to vote at this meeting has been available at the registered office of the company for more than 10 days prior to this meeting in compliance with the bylaws of the company and the corporate statutes of Delaware, and is also available for examination today online during the meeting. All documents concerning the call and notice of the meeting will be filed with the records of the meeting. The count of the shares present immediately prior to the commencement of the meeting indicated that out of 41,832,440 shares outstanding on our record date, there are 37,603,074 shares of the company's common stock present in person or by proxy. This is 89.88% of our outstanding common stock. I declare that a quorum is present. For those of you who have not submitted a proxy or intend to change your vote, you may do so online when the polls have been opened for voting.

Ingevity is asking its stockholders to consider and vote upon 3 proposals at this meeting, each of the proposals and Board recommendations will be read by our Secretary.

The first proposal to be acted upon by the stockholders is the election of the 8 directors of the company to serve for a 1-year term through the 2021 Annual Meeting. Information has been provided about each of our directors in the company's proxy statement. The Board of Directors recommends that you vote for all of the nominees. The second proposal is the ratification of the appointment of PricewaterhouseCoopers LLC as our independent registered public accounting firm for fiscal year ending December 31, 2020. The Audit Committee of the Board of Directors has appointed PwC as the company's independent auditors for 2020, and the Board of Directors recommends that the stockholders vote for the ratification of this appointment. The third proposal is to approve, on an advisory or nonbinding basis, the compensation of certain executive officers of Ingevity. The Board of Directors recommends that the stockholders vote for proposal #3.

It's now time for discussion or comments, if any, on these ballot items. Please refer to the rules of conduct provided to you online. Any stockholder wishing to address the meeting with questions or comments regarding any of these proposals should submit your question or comment online following the instructions. Administrators, have we received questions or comments related to the proposals?

No, Mr. Chairman. There are no questions or comments related to the proposals.

The question and comment period related to the proposal is now closed. This concludes the reading of our proposals, and I declare that the polls are now open for voting. Those stockholders who wish to vote should follow instructions to submit your vote online at this time. Upon completion, our inspector of election will review the votes to be counted. We're going to wait, give people a chance if they want to vote online. [Voting]

The polls are about to close. I declare that the polls are now closed for voting. While the ballots are being counted, I'd like to review some of our accomplishments in 2019, and how we're poised to succeed in 2020. During 2019, we made significant progress on our strategic initiatives aimed at delivering organic and inorganic growth. And despite a sluggish global industrial economy, our execution was crisp. We delivered significant revenue and earnings growth, margin accretion, improved working capital and outstanding cash flow. Our Performance Chemicals segment delivered a strong performance despite weak industrial demand. Revenues were up 9%, yet segment EBITDA were up 21% versus the prior year. Remarkably, since our spin in May of 2016, this segment has achieved a 1,000 basis point improvement in the segment's EBITDA margins. Our Performance Materials segment delivered another year of record revenue and earnings as adoption of more stringent regulations related to the gasoline vapor emission control drove volumes. Revenues were up 23% and segment EBITDA were up 26% versus the prior year. For the company overall, in light of the global macro headwinds we encountered, our financial performance was strong. Revenues for the year were $1.293 billion, up 14%. Our adjusted EBITDA of $397 million was up 24% versus the prior year. Adjusted EBITDA margin accreted to 30.7% of sales, up approximately 240 basis points from 2018. As we look toward 2020, certainly, the impact of the coronavirus and resulting global economic turndown will have an impact on our results. We're continuing to monitor the situation and commit to our stockholders that we will keep you informed about our expectations for the year as warranted. Most importantly, we continue to place the greatest emphasis on the safety and health of our employees. In March, we issued a news release outlining the steps we're taking related to the coronavirus, and we continue to monitor this situation and adjust our measures to keep our people safe. We are also working diligently to exercise our business continuity plans so that we can continue to supply our customers. Lastly, we remain confident in our financial position, and our liquidity is strong. Looking longer term, we believe that given the attractiveness of our markets, the soundness of our strategy and the strength of our future -- and the strength of our people, our future remains bright. Will the inspector of elections, please, report the results of the balloting?

Yes, Mr. Chairman, the ballots have been counted. On proposal #1, director election, the number of votes cast in favor of each of the 8 nominees exceeds the number of votes cast against each of the nominees. On proposal #2, ratification of appointment of independent registered accountants, the number of votes cast in favor of the proposal exceeds the number of votes cast against the proposal. And on proposal #3, the say on pay for executive compensation proposal, the number of votes cast in favor of the proposal exceeds the number of votes cast against the proposal. Mr. Secretary?

I hereby declare that the 8 nominees for our Board of Directors, as named in our proxy statement, have been duly elected, and proposals #2 and #3 are hereby approved. The final results with the exact number of votes cast for, against or abstaining for each proposal will be reported in the company's Form 8-K to be filed with the SEC within 4 business days of this Annual Meeting.

This concludes the official business portion of our meeting and the Annual Meeting is officially adjourned. We have now come to that part of the agenda providing for general Ingevity-related questions and discussion. Any stockholder wishing to address the meeting should submit their question via the virtual meeting portal. Administrators, have we received any questions or comments related to the business?

No, Mr. Chairman, there are no questions or comments related to the business.

Then the question and discussion by a stockholder period is now closed. I would like -- I would, again, like to express my appreciation to the stockholders who attended the virtual meeting as well as those who submitted their proxies, but were not able to be present. Thank you, and be safe.