Innospec Reports First Quarter 2024 Financial Results
Innospec Inc. (NASDAQ: IOSP) reported strong financial results for the first quarter of 2024, with a 23% increase in operating income driven by Performance Chemicals. The Company generated $80.6 million in cash from operations, leading to net cash of $270.1 million. The dividend was increased by 10%, with GAAP EPS of $1.65 and adjusted non-GAAP EPS of $1.75. Total revenues were $500.2 million, a 2% decrease from the previous year. Net income for the quarter was $41.4 million or $1.65 per diluted share. Adjusted EBITDA was $64.0 million, up from $52.7 million a year ago.
Strong contribution from Performance Chemicals driving a 23% increase in operating income.
$80.6 million cash generated from operations, leading to net cash of $270.1 million.
Dividend increased by 10%.
GAAP EPS of $1.65 and adjusted non-GAAP EPS of $1.75.
Total revenues decreased by 2% to $500.2 million.
Net income for the quarter was $41.4 million, down from $33.2 million last year.
A 3% decrease in revenues in Oilfield Services.
Operating income in Fuel Specialties down 7% from the previous year.
Insights
In reviewing Innospec Inc.'s financial health, it's clear that their first quarter report indicates a solid financial footing, particularly in the area of cash generation and liquidity. With
Despite a slight decrease in total revenues, the growth in net income and diluted earnings per share (EPS) reflects effective cost management and operational efficiency. The substantial increase in operating income, particularly the reported 23 percent, suggests robust profit conversion amidst a challenging environment. The varying performance across its business sectors—with Performance Chemicals stand out—may also indicate agility in adapting to market demands and resource allocation efficiency.
Observing the trends within Innospec's market segments reveals strategic positioning that may appeal to investors. The strength in Performance Chemicals, with operating income more than doubling, showcases not only growth potential but also the capacity for margin improvement. Investors should note that such performance could be indicative of effective product innovation and successful go-to-market strategies.
On the other hand, the Fuel Specialties and Oilfield Services segments present a mixed picture. Despite a decrease in revenues for Fuel Specialties, improved gross margins suggest a keen focus on profitability over volume. In contrast, Oilfield Services saw operating income growth despite lower gross margins—a sign that this segment might be experiencing a transition, focusing on particular high-margin services. These dynamics are important for investors to gauge the company's adaptability and growth prospects in varied market conditions.
Strong contribution from Performance Chemicals drives operating income growth of 23 percent
Dividend increased by 10 percent; Strong debt-free balance sheet
GAAP EPS of
ENGLEWOOD, Colo., May 09, 2024 (GLOBE NEWSWIRE) -- Innospec Inc. (NASDAQ: IOSP) today announced its financial results for the first quarter ended March 31, 2024. The Company declared its semi-annual dividend of 76 cents per common share for the first half of this year, representing an increase of 10 percent. This dividend will be paid on May 31, 2024 to shareholders of record on May 20, 2024.
Total revenues for the first quarter were
Results for this quarter include some special items, which are summarized in the table below. Excluding these items, adjusted non-GAAP EPS in the first quarter was
Cash from operating activities was
Adjusted EBITDA, income before income taxes excluding special items and net income excluding special items, and related per share amounts together with net cash, are non-GAAP financial measures that are defined and reconciled with GAAP results herein and in the schedules below.
| Quarter ended March 31, 2024 | Quarter ended March 31, 2023 | ||||||||||||||||||||||||
| (in millions, except share and per share data) | Income before income taxes | Net income | Diluted EPS | Income before income taxes | Net income | Diluted EPS | |||||||||||||||||||
| Reported GAAP amounts | $ | 55.3 | $ | 41.4 | $ | 1.65 | $ | 45.0 | $ | 33.2 | $ | 1.33 | |||||||||||||
| Amortization of acquired intangible assets | 2.8 | 2.1 | 0.08 | 2.6 | 2.0 | 0.08 | |||||||||||||||||||
| Foreign currency exchange gains | (1.1 | ) | (0.8 | ) | (0.03 | ) | (2.0 | ) | (1.5 | ) | (0.06 | ) | |||||||||||||
| Legacy costs of closed operations | 0.8 | 0.6 | 0.02 | 0.8 | 0.6 | 0.02 | |||||||||||||||||||
| Adjustment to fair value of contingent consideration | 0.8 | 0.5 | 0.02 | - | - | - | |||||||||||||||||||
| Adjustment of income tax provisions | - | 0.3 | 0.01 | - | 0.2 | 0.01 | |||||||||||||||||||
| 3.3 | 2.7 | 0.10 | 1.4 | 1.3 | 0.05 | ||||||||||||||||||||
| Adjusted non-GAAP amounts | $ | 58.6 | $ | 44.1 | $ | 1.75 | $ | 46.4 | $ | 34.5 | $ | 1.38 | |||||||||||||
Commenting on the first quarter results, Patrick S. Williams, President and Chief Executive Officer, said,
“This was a very strong start to the year for Innospec. Good performance in all our businesses drove a 23 percent increase in operating income with margin expansion.
Performance Chemicals operating income more than doubled over the prior year on higher sales and improved gross margins and delivered our target for sequential operating income growth. While customers remain disciplined in their order patterns, we are cautiously optimistic that we can maintain this improvement in 2024. In addition, our recent acquisition of QGP Quimica Geral S.A. is performing in line with expectations and was immediately accretive.
In Fuel Specialties, gross margins were within our targeted 32 to 35 percent range and operating margins continued to improve over the prior year. We have an exciting and diverse set of geographic and end-market opportunities in both fuel and non-fuel applications which we expect will provide a foundation for continued growth.
Oilfield Services delivered operating income growth and margin expansion compared to the prior year as softer results in production chemicals were more than offset by improvements in other segments. In the short-term we expect production chemicals activity to remain below previous quarters and will continue to pursue further sales growth and margin improvement in our other oilfield segments.”
Revenues in Performance Chemicals of
Revenues in Fuel Specialties of
Revenues in Oilfield Services of
Corporate costs for the quarter were
The effective tax rate for the quarter was 25.1 percent compared to 26.2 percent in the same period last year.
For the quarter, net cash provided by operating activities was
Mr. Williams concluded,
“I am very pleased with the strong performance that all our businesses delivered in the quarter including our new acquisition. We have a broad set of technology-based organic opportunities across the businesses which we expect will continue to advance driving further growth and margin improvement.
Cash generation was again excellent this quarter, and our net cash position strengthened to over
Use of Non-GAAP Financial Measures
The information presented in this press release 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 cash. Adjusted EBITDA is net income per our consolidated financial statements adjusted for the exclusion of interest income, net, income taxes, depreciation and amortization, foreign currency exchange gains, legacy costs of closed operations and adjustment to fair value of contingent consideration. 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, foreign currency exchange gains, legacy costs of closed operations, adjustment to fair value of contingent consideration and adjustment of income tax provisions. Net cash is cash and cash equivalents less total debt. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are provided herein and in the schedules below. 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 herein and in the schedules below.
About Innospec Inc.
Innospec Inc. is an international specialty chemicals company with approximately 2,400 employees in 22 countries. Innospec manufactures and supplies a wide range of specialty chemicals to markets in the Americas, Europe, the Middle East, Africa and Asia-Pacific. The Performance Chemicals business creates innovative technology-based solutions for our customers in the Personal Care, Home Care, Agrochemical, Mining and Industrial markets. The Fuel Specialties business specializes in manufacturing and supplying fuel additives that improve fuel efficiency, boost engine performance and reduce harmful emissions. Oilfield Services provides specialty chemicals to all elements of the oil and gas exploration and production industry.
Forward-Looking Statements
This press release 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,” “could,” “believes,” “feels,” “plans,” “intends” 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, 2023 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.
Contacts:
Corbin Barnes
Innospec Inc.
+44-151-355-3611
corbin.barnes@innospecinc.com
| INNOSPEC INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||
| Schedule 1 | ||||||||
| Three Months Ended March 31 | ||||||||
| (in millions, except share and per share data) | 2024 | 2023 | ||||||
| Net sales | $ | 500.2 | $ | 509.6 | ||||
| Cost of goods sold | (344.5 | ) | (361.8 | ) | ||||
| Gross profit | 155.7 | 147.8 | ||||||
| Operating expenses: | ||||||||
| Selling, general and administrative | (92.7 | ) | (96.2 | ) | ||||
| Research and development | (11.8 | ) | (10.6 | ) | ||||
| Adjustment to fair value of contingent consideration | (0.8 | ) | - | |||||
| Profit on disposal of property, plant and equipment | 0.1 | - | ||||||
| Total operating expenses | (105.2 | ) | (106.8 | ) | ||||
| Operating income | 50.5 | 41.0 | ||||||
| Other income, net | 2.7 | 3.7 | ||||||
| Interest income, net | 2.1 | 0.3 | ||||||
| Income before income taxes | 55.3 | 45.0 | ||||||
| Income taxes | (13.9 | ) | (11.8 | ) | ||||
| Net income | $ | 41.4 | $ | 33.2 | ||||
| Earnings per share: | ||||||||
| Basic | $ | 1.66 | $ | 1.34 | ||||
| Diluted | $ | 1.65 | $ | 1.33 | ||||
| Weighted average shares outstanding (in thousands): | ||||||||
| Basic | 24,893 | 24,801 | ||||||
| Diluted | 25,066 | 24,962 | ||||||
| INNOSPEC INC. AND SUBSIDIARIES | ||||||||
| Schedule 2A | ||||||||
| SEGMENTAL ANALYSIS OF RESULTS | Three Months Ended March 31 | |||||||
| (in millions) | 2024 | 2023 | ||||||
| Net sales: | ||||||||
| Performance Chemicals | $ | 160.8 | $ | 151.4 | ||||
| Fuel Specialties | 176.9 | 190.3 | ||||||
| Oilfield Services | 162.5 | 167.9 | ||||||
| 500.2 | 509.6 | |||||||
| Gross profit: | ||||||||
| Performance Chemicals | 37.7 | 24.1 | ||||||
| Fuel Specialties | 60.6 | 57.4 | ||||||
| Oilfield Services | 57.4 | 66.3 | ||||||
| 155.7 | 147.8 | |||||||
| Operating income: | ||||||||
| Performance Chemicals | 21.1 | 10.4 | ||||||
| Fuel Specialties | 33.4 | 32.4 | ||||||
| Oilfield Services | 16.9 | 15.9 | ||||||
| Corporate costs | (20.2 | ) | (17.7 | ) | ||||
| 51.2 | 41.0 | |||||||
| Adjustment to fair value of contingent consideration | (0.8 | ) | - | |||||
| Profit on disposal of property, plant and equipment | 0.1 | - | ||||||
| Total operating income | $ | 50.5 | $ | 41.0 | ||||
| Schedule 2B | ||||||||
| NON-GAAP MEASURES | Three Months Ended March 31 | |||||||
| (in millions) | 2024 | 2023 | ||||||
| Net income | $ | 41.4 | $ | 33.2 | ||||
| Interest income, net | (2.1 | ) | (0.3 | ) | ||||
| Income taxes | 13.9 | 11.8 | ||||||
| Depreciation and amortization | 10.3 | 9.2 | ||||||
| Foreign currency exchange gains | (1.1 | ) | (2.0 | ) | ||||
| Legacy costs of closed operations | 0.8 | 0.8 | ||||||
| Adjustment to fair value of contingent consideration | 0.8 | - | ||||||
| Adjusted EBITDA | $ | 64.0 | $ | 52.7 | ||||
| INNOSPEC INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
| Schedule 3 | ||||||
| (in millions) | March 31, 2024 | December 31, 2023 | ||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 270.1 | $ | 203.7 | ||
| Trade and other accounts receivable | 318.2 | 359.8 | ||||
| Inventories | 304.3 | 300.1 | ||||
| Prepaid expenses | 15.0 | 18.7 | ||||
| Prepaid income taxes | 4.4 | 2.8 | ||||
| Other current assets | 0.9 | 0.6 | ||||
| Total current assets | 912.9 | 885.7 | ||||
| Net property, plant and equipment | 268.7 | 268.3 | ||||
| Operating lease right-of-use assets | 43.5 | 45.1 | ||||
| Goodwill | 397.5 | 399.3 | ||||
| Other intangible assets | 57.7 | 57.3 | ||||
| Deferred tax assets | 10.4 | 10.4 | ||||
| Pension asset | 36.1 | 35.1 | ||||
| Other non-current assets | 6.0 | 6.2 | ||||
| Total assets | $ | 1,732.8 | $ | 1,707.4 | ||
| Liabilities and Stockholders’ Equity | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 166.4 | $ | 163.6 | ||
| Accrued liabilities | 163.6 | 185.9 | ||||
| Current portion of operating lease liabilities | 13.6 | 13.6 | ||||
| Current portion of plant closure provisions | 4.6 | 4.6 | ||||
| Current portion of accrued income taxes | 12.2 | 2.6 | ||||
| Current portion of unrecognized tax benefits | 4.5 | 1.2 | ||||
| Total current liabilities | 364.9 | 371.5 | ||||
| Operating lease liabilities, net of current portion | 30.0 | 31.6 | ||||
| Plant closure provisions, net of current portion | 56.6 | 57.0 | ||||
| Accrued income taxes, net of current portion | 11.6 | 11.6 | ||||
| Unrecognized tax benefits, net of current portion | 10.5 | 13.6 | ||||
| Deferred tax liabilities | 34.1 | 33.5 | ||||
| Pension liabilities and post-employment benefits | 13.0 | 13.3 | ||||
| Acquisition-related contingent consideration | 23.5 | 23.4 | ||||
| Other non-current liabilities | 2.4 | 2.3 | ||||
| Equity | 1,186.2 | 1,149.6 | ||||
| Total liabilities and equity | $ | 1,732.8 | $ | 1,707.4 | ||
| INNOSPEC INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| Schedule 4 | ||||||||
| Three Months Ended March 31 | ||||||||
| (in millions) | 2024 | 2023 | ||||||
| Cash Flows from Operating Activities | ||||||||
| Net income | $ | 41.4 | $ | 33.2 | ||||
| Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
| Depreciation and amortization | 10.4 | 9.3 | ||||||
| Adjustment to fair value of contingent consideration | 0.8 | - | ||||||
| Deferred taxes | 0.8 | 1.2 | ||||||
| Profit on disposal of property, plant and equipment | (0.1 | ) | - | |||||
| Non-cash movements on defined benefit pension plans | (0.8 | ) | (0.8 | ) | ||||
| Stock option compensation | 2.1 | 1.9 | ||||||
| Changes in working capital | 17.4 | (26.1 | ) | |||||
| Movements in plant closure provisions | (0.1 | ) | (0.3 | |||||
| Movements in income taxes | 8.8 | 0.8 | ||||||
| Movements in unrecognized tax benefits | 0.2 | 0.3 | ||||||
| Movements in other assets and liabilities | (0.3 | ) | 2.3 | |||||
| Net cash provided by operating activities | 80.6 | 21.8 | ||||||
| Cash Flows from Investing Activities | ||||||||
| Capital expenditures | (10.7 | ) | (17.7 | ) | ||||
| Proceeds on disposal of property, plant and equipment | 0.1 | - | ||||||
| Internally developed software | (3.7 | ) | (4.3 | ) | ||||
| Net cash used in investing activities | (14.3 | ) | (22.0 | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Non-controlling interest | 0.2 | - | ||||||
| Issue of treasury stock | 0.7 | 0.7 | ||||||
| Repurchase of common stock | (0.4 | ) | (0.3 | ) | ||||
| Net cash provided by financing activities | 0.5 | 0.4 | ||||||
| Effect of foreign currency exchange rate changes on cash | (0.4 | ) | 0.2 | |||||
| Net change in cash and cash equivalents | 66.4 | 0.4 | ||||||
| Cash and cash equivalents at beginning of period | 203.7 | 147.1 | ||||||
| Cash and cash equivalents at end of period | $ | 270.1 | $ | 147.5 | ||||
Amortization of deferred finance costs of
FAQ
What was the increase in operating income driven by?
The 23% increase in operating income was driven by the strong contribution from Performance Chemicals.
What were the total revenues for the first quarter of 2024?
The total revenues for the first quarter of 2024 were $500.2 million, a 2% decrease from the previous year.
What was the net cash position at the end of the quarter?
At the end of the quarter, the net cash position was $270.1 million.
What was the percentage increase in the dividend?
The dividend was increased by 10%.
What were the GAAP and adjusted non-GAAP EPS for the quarter?
The GAAP EPS was $1.65, and the adjusted non-GAAP EPS was $1.75.
