Ingevity (NGVT) Q4 2025 Earnings Call Transcript

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Date

Thursday, Feb. 26, 2026 at 10 a.m. ET

Call participants

• President and Chief Executive Officer — David H. Li
• Chief Financial Officer — Phillip Platt

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Takeaways

• Adjusted EBITDA -- $398 million, up 10% year over year, with a margin rise of 500 basis points to 30.8%.
• Free cash flow -- $274 million, the highest in the last five years, and $220 million higher than 2024, reflecting the absence of $180 million in cash outflows, higher earnings, and a working capital benefit.
• Net leverage ratio -- Reduced to 2.6x, representing a near full-turn improvement, excluding proceeds from the Industrial Specialties sale.
• Share repurchases -- $56 million used to buy back over 1 million shares; $300 million of remaining repurchase authorization at year-end.
• Total sales -- $1.3 billion, an 8% decline, primarily linked to repositioning of Industrial Specialties and weakness in Advanced Polymer Technologies.
• Performance Materials EBITDA margin -- 53.8%, with revenue held flat despite global auto production declines due to tariffs and supply chain headwinds.
• Performance Chemicals segment EBITDA margin -- Expanded to 13.5% from 4%, supported by a $45 million increase in segment EBITDA and margin improvement after repositioning actions.
• Advanced Polymer Technologies (APT) sales -- Declined 15%; segment EBITDA down 18% due to market pressures, yet maintained a 20% EBITDA margin.
• GAAP net loss -- $167 million, including $337 million pretax special charges: $184 million non-goodwill impairment in APT, and $109 million cash asset impairment in Road Markings.
• 2026 financial guidance -- Projected adjusted EPS of $4.08 to $5.20; sales expected at $1.1 billion to $1.2 billion; adjusted EBITDA forecast between $380 million and $400 million.
• 2026 free cash flow guidance -- $225 million to $250 million, not including $95 million in pretax litigation-related payments to BASF in Q2.
• 2026 Performance Materials outlook -- Low single-digit sales growth anticipated, with EBITDA margins expected to remain above 50%.
• 2026 Performance Chemicals outlook -- Sales including Road Markings projected to increase mid single digits, with mid-teens EBITDA margins.
• Road Markings and APT sales processes -- Both divestment processes are progressing; "We are encouraged by the interest shown in both assets."
• Stranded cost reduction -- $15 million of stranded costs targeted for elimination by year-end, with the majority accumulating in the latter half of the year.
• Performance Chemicals segment seasonality -- Approximately 90% of annual EBITDA, and 75% of sales, will occur in Q2 and Q3 following the Industrial Specialties divestiture.
• Total diluted adjusted EPS -- $4.55, reflecting a 30% increase driven by repositioning and operational improvements.

Summary

Ingevity Corporation(NYSE:NGVT) finalized the sale of its North Charleston CTO refinery and the majority of its Industrial Specialties product line in early January, which management cited as a key action to reduce portfolio volatility and enhance cash flow. Company leaders stated the sales processes for both Advanced Polymer Technologies and the Road Markings product line are progressing, with transaction announcements expected before year-end. Management confirmed $300 million in share buybacks through 2027 will proceed independent of asset sales, and 2026 guidance excludes proceeds from both planned divestitures. Executives described the North American automotive market as stable with reduced EV adoption, and highlighted regulatory developments in China and India as potential long-term growth catalysts for Performance Materials. Margin and sales expectations for each segment through 2027 were explicitly detailed, and growth in higher-value filtration markets is planned, but not yet material to near-term forecasts.

• David H. Li said, "We expect 2026 adjusted EPS to be in the range of $4.08 to $5.20 in a year where we do not expect meaningful recovery in the global economy."
• Management confirmed $300 million of share repurchases are planned, "take a ratable cadence throughout the year is how we are thinking about it in our guide," through 2027, regardless of the timing or outcome of Road Markings and APT sales.
• Executives specified that roughly $20 million in shares had already been bought back in the first quarter of 2026.
• Phillip Platt stated about stranded costs, "we definitely have clear line of sight to eliminate that $15 million by the end of the year," with most reductions weighted to the back half.
• The company reported a total shareholder return of 45% in 2025, ranking highest among specialty chemicals peers, and top quartile within the Russell 2000 materials group.
• Performance Materials margins are expected to hold above 50%, and once Road Markings is divested, Performance Chemicals margins are guided to 18% in future years.
• About 90% of annual EBITDA, and 75% of sales, for the Performance Chemicals segment will occur in the second and third quarters due to seasonality.
• Upcoming emissions regulation in China ("China 7") and potential new requirements in India were identified as meaningful future growth drivers for the automotive carbon business.
• Management confirmed no significant acquisitions are planned in the near term, citing a priority to use cash generation for leverage reduction and share buyback.

Industry glossary

• CTO: Crude Tall Oil, a byproduct of the kraft pulping process used as a feedstock for specialty chemicals.
• Advanced Polymer Technologies (APT): Ingevity’s segment focused on engineered polymers, notably in automotive, packaging, footwear, and industrial markets.
• Pavement Technologies: Segment specializing in chemical additives and technologies for improved road paving and preservation methods.
• Road Markings: Product line within Performance Chemicals for pavement marking solutions, separated for divestiture.
• Industrial Specialties: Former product line involving specialty chemicals for adhesives, agrochemicals, and lubricants, now divested.
• NAFTA region: Geographic reference to North American Free Trade Agreement countries, mainly U.S., Canada, and Mexico.
• Stranded costs: Residual fixed costs remaining after the divestiture or exit of business segments.
• Honeycombs: Structured activated carbon canisters used in automotive emission control systems.

Full Conference Call Transcript

David H. Li: Thank you, Savi, and good morning, everyone. Please turn to slide four. Before we discuss the financial results, I would like to remind everyone that in early December, we shared the findings of our strategic portfolio review through a virtual event. During this presentation, we laid out our plans for growing adjusted earnings per share by 10% and free cash flow per share by 5% through 2027. We also announced the decision to initiate sales processes for our Advanced Polymer Technology (APT) segments and Road Markings product line. If you have not had a chance to listen to the webcast, I would highly recommend reviewing the materials on our website under Events and Presentations.

I am also pleased to confirm that on 01/01/2026, we completed the sale of our North Charleston CTO refinery and the majority of the Industrial Specialties product line to Mainstream Pine Products. With this transaction complete, we have reduced our portfolio volatility, strengthened our profitability and cash flow profile, and enhanced our strategic flexibility. Looking at our 2025 results, we are incredibly proud of the strong execution by our teams globally that enabled us to grow total company adjusted EBITDA by almost 10% over 2024, along with delivering industry-leading margins of over 30%. These results generated $274 million of free cash flow, slightly exceeding our commitments.

We used the cash to pay down debt and reduce leverage to 2.6x and to buy back over 1 million shares. Performance Materials continued to generate EBITDA margins above 50% and held revenue flat despite lower global auto production, which was impacted by tariff uncertainty and supply chain challenges, delivering another year of near record-level sales. This strong performance is a testament to the differentiated value that our activated carbon technology delivers to customers globally. The momentum from continued adoption of hybrids and fuel-efficient ICE vehicles is encouraging and supports our view of a long runway for this business.

We also continue to be encouraged by the optimization of our filtration business and see a bright future and good fit for the company in this application space. Within the Performance Chemicals segment, we meaningfully lowered CTO exposure ahead of the Industrial Specialties divestiture. Also, Pavement Technologies grew year over year as our innovative solutions facilitated the extension of the paving season into late fall to allow catch-up of projects delayed by adverse weather earlier in the year. Advanced Polymer Technologies continued to face tough market conditions due to tariff uncertainty and competitive pressure, which we are addressing with disciplined commercial actions and productivity initiatives.

Overall, we start 2026 with confidence and optimism as we continue to drive performance in our core businesses. I will now turn the call over to Phillip.

Phillip Platt: Thank you, Dave, and good morning all. Please turn to slide five. Consistent with last quarter, and with our November 2025 outlook for the full year, I will focus my comments on total company results, which will include both continuing and discontinued operations. As previously noted, beginning in 2025, the results of the Industrial Specialties product line have been reported within discontinued operations. As Dave has mentioned, we completed the sale of that product line earlier this year. Total company full-year 2025 sales of $1.3 billion declined 8% compared to last year. Performance Materials sales remained flat versus 2024, despite lower auto production driven by industry volatility from tariffs and supply chain disruptions.

Performance Chemical sales declined by $86 million, primarily due to our repositioning actions within Industrial Specialties. We also continued to see weakness in demand from indirect tariffs and competitive pressures in Advanced Polymer Technologies. In 2025, we recorded a GAAP net loss of $167 million, which included $337 million of pretax special charges. These charges primarily consisted of a non-goodwill impairment of $184 million in Advanced Polymer Technologies and a cash asset impairment of $109 million in Road Markings. For the remainder of my remarks, I will focus on the non-GAAP results, which exclude these special charges. Reconciliations of our non-GAAP financial measures to the most comparable GAAP measures are included in the appendix to this presentation.

Adjusted gross profit of $556 million increased 6.8% year over year, with gross margin expanding by 610 basis points. Total adjusted EBITDA increased 10% year over year to $398 million, with margins expanding 500 basis points to 30.8%. Total diluted adjusted EPS improved 30% to $4.55. This improvement in profitability reflects the successful execution of our PC repositioning actions, which have also resulted in lower overall raw materials, supply chain efficiencies, and plant footprint optimization. SG&A increased primarily due to higher variable compensation expense driven by improved business performance. We delivered industry-leading margins, and this performance is a clear testament to the resilience and strength of our business model. Moving on to slide six.

In the top-left chart, you will see how our strong earnings performance and disciplined capital management translated into free cash flow of $274 million, the highest level that we have generated in the past five years, and exceeded our updated guidance from November. The $220 million increase from 2024 was driven by the absence of approximately $180 million in cash outflows related to the Performance Chemicals repositioning, higher overall earnings, and a working capital benefit in Industrial Specialties. With this free cash flow, we resumed share repurchases in 2025, deploying $56 million to repurchase approximately 1 million shares. At year-end, our remaining share repurchase authorization was just under $300 million.

At the beginning of 2025, we committed to derisking our balance sheet and reducing net leverage from 3.5x to below 2.8x. Through our disciplined capital management, we exceeded that target, reducing net leverage to 2.6x, nearly a full-turn improvement versus the prior year. Importantly, this reduction does not include any of the proceeds from the sale of our Industrial Specialties product line, which closed in early January. With that, let us dive into segment results, beginning with Performance Materials on slide seven. Sales of $607 million were in line with the prior year, which is a strong result given that 2024 was a record year for that business.

Throughout 2025, the automotive industry faced significant disruption from tariff uncertainties, fires, and chip shortages. Against that backdrop, the resilience of our Performance Materials business becomes evident. While these dynamics led to slightly lower volumes, disciplined pricing actions helped to offset that impact, allowing us to hold year-over-year sales essentially flat. Segment EBITDA declined 2% year over year due to lower volume and higher SG&A. Despite this, EBITDA margin remained strong at 53.8%. Looking ahead, we remain confident that this business will maintain margins north of 50% supported by its technology-leading position and proven high-quality solutions that provide a compelling value proposition for both automotive and filtration customers. Moving on to Performance Chemicals on slide eight.

The combined Performance Chemicals results presented here include both continuing and discontinued operations, which means results from the divested Industrial Specialties product line are in the numbers. A reconciliation of Performance Chemicals results on a continuing operations basis to the total segment results is provided on this slide. As you will note, the sales of the previously reported Roe Technologies product line have been split into Pavement Technologies and Road Markings, which together represent Performance Chemicals continuing operations segment. Since we have initiated the sales process for Road Markings, we are now presenting its sales separately. Upon completion of that process, the segment will be renamed from Performance Chemicals to Pavement Technologies.

Total segment sales declined primarily due to the execution of the repositioning actions of the Industrial Specialties product line. Pavement Technologies 2025 sales remained flat to 2024, as volume growth in the NAFTA region was largely offset by lower infrastructure spend in South America. Pavement Technologies also benefited from pricing and favorable mix shift. While adverse wet weather impacted results in 2025, demand shifted into the second half, and a combination of good weather and our season-extending technology enabled many projects to be completed within the year. Road Markings continued to experience price pressure from competition, although volumes grew slightly.

Total segment EBITDA increased by $45 million over prior year, driven by the successful execution of our PC repositioning actions, which have resulted in lower overall raw material costs, improved logistics costs, and a more efficient manufacturing footprint. These actions helped to improve Industrial Specialties EBITDA by $40 million year over year. Performance Chemicals continuing EBITDA, which includes Pavement Technologies and Road Markings, increased by $7 million, or 12%, supported by improved pricing, favorable mix, and lower raw material costs, partially offset by volume declines and higher SG&A. As a result, combined segment EBITDA margin expanded to 13.5%, up from 4% last year. Please turn to slide nine.

During 2025, APT faced headwinds from the indirect impact of tariffs and continued weak end-market demand, primarily in automotive, footwear, and industrial end markets. In addition, competitive dynamics in China continued to pressure sales, most notably in the paint protective film markets. As a result, sales declined 15%, and segment EBITDA was 18% lower year over year due to volume declines that more than offset improved operating efficiency. Despite these pressures, we held pricing and maintained a stable mix. The team remained focused on operational discipline, which drove more reliable plant production and reduced operating costs. These efforts, combined with favorable foreign exchange, enabled a strong EBITDA margin of 20%. Overall, 2025 was a great year.

Our focus on execution generated solid earnings driven by operational improvements and footprint optimization despite weak end-market demand, tariff uncertainties, and supply chain disruptions. We generated robust free cash flow, which enabled us to meaningfully reduce leverage and resume returning cash to investors via share buyback. Looking ahead, we expect to reach and maintain our target leverage ratio of 2.0x to 2.5x this year and complete $300 million of share repurchases through 2027. I will now turn the call back to Dave to share additional color on guidance for 2026.

David H. Li: Thanks, Phil. Turning to slide 10. Please note that the 2026 guidance includes a full year of APT and Road Markings, but excludes the divested Industrial Specialties product line. Sales processes for both APT and Road Markings are underway, and we are encouraged by the interest shown in both. We will provide updates as they advance and revise our outlook accordingly. We expect 2026 adjusted EPS to be in the range of $4.08 to $5.20 in a year where we do not expect meaningful recovery in the global economy. Sales are expected to be between $1.1 billion and $1.2 billion and adjusted EBITDA between $380 million and $400 million.

Performance Materials sales are expected to grow low single digits supported by price increases in automotive while delivering margins consistent with 2025. Sales in Performance Chemicals, including Road Markings, are expected to grow mid single digits with EBITDA margins in the mid-teens reflecting our strong industry leadership and strategic advocacy efforts. In APT, we expect flat to low single-digit growth with margins around 20% as recent commercial and productivity actions offset competitive pressures and weak end-market demand. CapEx should be consistent with 2025 and be in the range of $40 million to $60 million. We expect to generate free cash flow of $225 million to $250 million.

This amount does not include $95 million in pretax litigation-related payments to BASF in the second quarter. We plan to use the free cash flow to continue buying back shares in line with our prior guidance of $300 million through 2027. So far in the first quarter, we have repurchased almost $20 million worth of shares. Additionally, we plan to reduce and maintain net leverage within our long-term target range of 2.0x to 2.5x in 2026. In 2025, we focused on stabilizing the business and optimizing our portfolio. That translated to total shareholder return of 45%, highest amongst our specialty chemicals peers and top quartile among the Russell 2000 materials companies.

We enter 2026 with good momentum, and we will continue to execute the portfolio strategy, drive performance in our core businesses, and build Ingevity Corporation into a premier specialty materials company. With that, we will now open for questions.

Operator: Thank you. Of course, if you would like to ask a question on today's call, please press star followed by one on your telephone keypads now. Our first question comes from John McNulty of BMO. John, your line is open. Please go ahead.

John Patrick McNulty: Good morning. Thanks for taking my question. Maybe we can start out. Just can you give us an update as to the progress you may be seeing regarding the potential asset sales? And I guess somewhat related to that, on the $300 million of buybacks that you expect to do between now and 2027, does that come regardless of the asset sales? Is it dependent on the asset sales? It looks like it generates really solid free cash anyway, but I guess if you could help us to put that into context, that would be helpful.

David H. Li: Yeah. Thanks. I will provide an update on the process; Phil will talk to the cash flow. We are very encouraged, obviously, with the cash flow generation of the business. So for both processes for APT and Road Markings, they continue to progress. We are encouraged by the interest shown in both assets. Obviously, we are going to be focused on value, and we continue to expect that we will announce something before the end of the year. And so things continue to progress. We will obviously also update our guidance as things go along, but we are seeing good interest for both assets, and we will be focused on value.

Phillip Platt: Yeah, and with respect to the share buybacks and the proceeds, John, as Dave mentioned during the prepared remarks, the outlook does not include any of the proceeds associated with the APT or the Road Markings potential sales. So we would expect to continue to execute those buybacks, $300 million over the next two years. And the way you could think about it is take a ratable cadence throughout the year is how we are thinking about it in our guide.

John Patrick McNulty: Got it. Okay. Fair enough. And then maybe just as a follow-up, on the $15 million of stranded costs that you expect to exit by the end of the year, can you help us to think about how much of that is pretty much locked in stone at this point? And also maybe how to think about the cadence as that flows throughout the year; is it pretty much even each quarter, or is it lumpier? How should we be thinking about that?

David H. Li: Phil, why do you not take that one?

Phillip Platt: Yeah. So we, as we said, we definitely have clear line of sight to eliminate that $15 million by the end of the year. I think the way to look at it is it is going to be accumulating throughout the year, more so in the back end of the year than the front end of the year. Some of those costs are tied up in the TSA that we expect to hopefully wrap up midyear. So that is how you can think about the cadence throughout the year.

John Patrick McNulty: Got it. Thanks very much for the color.

Phillip Platt: Thanks, John.

Operator: Thank you. Our next question comes from Jonathan E. Tanwanteng of CJS. Jonathan, your line is open. Please go ahead.

Lee Jagoda: Hey, good morning. It is actually Lee Jagoda for John. So I guess, David, can we start on the Performance Materials business and maybe talk through some of your assumptions on the auto production volume side, and if you can get into some geographic commentary, that would be helpful. And then, also, in terms of just the seasonal cadence given some of the headwinds we have seen in the U.S. coming out of Q4 into Q1, that would be helpful.

David H. Li: Sure. So just as we think about the guidance that we just provided, what we comprehended from an auto backdrop is stable, not predicting any very strong recovery. But if you pull back and think about what the auto industry has faced, in 2025 it has been remarkably resilient. And Phil had some comments in the prepared remarks about the tariff uncertainty and supply chain challenges, but overall, we see it as a very resilient market.

And if you also think about the recent trend, especially in North America, where you have seen the pace of EV adoption really slow down, and I think there was just an announcement today by Stellantis of really leaning into some of their more ICE-efficient hybrid product lines, and you have seen similar remarks by Ford. So especially in the key North American market where we have, obviously, the largest portion of our business, we see a positive trend there. But just to be clear, for 2026, what we have baked in is a pretty stable environment.

And then talking about the fourth quarter that we just reported, we did see some of those supply chain challenges, whether it was the aluminum fire affecting Ford F-150—they have been pretty public about how they think about that and that production delay—or Honda with the chip shortages. I think they are still working through those, and our assumption and understanding is that production and demand would be made up this year; Ford mentioned more second-half based. But we think of it as a pretty stable environment with potentially some upside if those supply chain issues abate, as well as in the backdrop of this reduced EV adoption trend that we are seeing in North America.

Lee Jagoda: Great. And then, I know at the investor event you talked about the ability or the want to grow outside of automotive in Performance Materials in a margin-accretive fashion. Is any of those new products, new programs assumed in guidance? And from a bigger picture standpoint, how long should we expect it to take to start to see some of the progress that you are making in the reported results?

David H. Li: Yes. Thanks, Lee. What I think you are referring to is our focus in the near term on filtration, and we are definitely encouraged by what we see there. Our focus is on the higher-value applications in filtration. We are already participating in a pretty significant way; we sell millions of pounds of our activated carbon into the filtration markets, and the opportunity is just to optimize that volume into the higher-value applications. We are definitely in the discovery process, thinking about where we have technical capabilities. Early on, we have identified water as an area of focus, but also pharma and food and beverage.

If we think about where we have technical advantage over other activated carbons, it is about the speed of the separation that we are able to provide, the selectivity—we are good at taking out large molecules, good at taking out flavor and odor. There is also a mouth feel to some of our technical competence. So we are definitely in the discovery process, but we are encouraged, and we have seen some good support from some of those end markets. So stay tuned. The filtration aspect is built into our guidance, but it is a pretty small base right now. We expect it to expand over the next couple of years.

And then farther out, we have talked about our interest to expand into energy solutions. Those are investments like Nexeon and CHASM. Those are not reflected in our next two-year financial outlooks, but we are also encouraged by our participation in those areas.

Lee Jagoda: I appreciate the color. I will hop back in the queue.

Operator: Thank you. Our next question comes from Daniel Rizzo of Jefferies. Daniel, your line is open. Please proceed with your question.

Daniel Rizzo: Hey, guys. Thanks for taking my question. So if we think about the three different segments as they are now, how should we think about peak or mid-cycle margins for both the new Road Markings business or the new Pavement business and APT once recovery occurs? And in Performance Materials, are we at peak or maybe even a little bit below the peak of what we would expect, particularly given the moves you expect to make over the next couple of years?

David H. Li: Yeah, Dan, let me start, and then maybe Phil can provide some more color. So for the three segments, Performance Materials in the 50s is a good place to be, so I would assume somewhere north of 50% for Performance Materials. For Performance Chemicals, when and if we transact Road Markings, we would expect some uplift to the margins there. In our investor update, we said the higher teens, or 18%—that continues to be our expectation. APT has been in the 20s before.

I think it is a very healthy, profitable business for us, and, obviously, assuming we do not transact, we would see some upside there as well as we go into some higher-value applications, but assume low to mid-20s for that business. Phil, why do you not provide some more color?

Phillip Platt: Dave, I think you pretty much covered it all. The only thing I would add is, in the guide for Performance Chemicals for the full year, we are guiding mid-teens, as Dave mentioned. That is a composition of both the businesses, Pavement Technologies as well as Road Markings. Obviously, Road Markings is a lower-margin business and currently diluting some of those margins. But also embedded in that are some of these stranded costs that are carried over into this year. As Dave just mentioned, looking farther out in 2027, we would expect that segment, Pavement Technologies by itself, to put up around 18% margins.

Daniel Rizzo: Okay. And then with the sale of Industrial Specialties and the new Pavement and Road Markings business, can we expect all the EBITDA for those two segments, or I would say almost all, in the second and third quarters, just given the weather-related aspect of those businesses?

Phillip Platt: Yeah, Dan. That is actually a great question. We have always talked about the Performance Chemicals segment as being very seasonal—Q2, Q3. It was muted in prior years by the Industrial Specialties business, which was pretty steady across all four quarters of the calendar year. Now that Industrial Specialties is gone from that portfolio, you will be able to see the numbers in the 10-K when we release that later today, but about 90% of the annual EBITDA for that business is going to be recognized in Q2 and Q3, and 75% of the sales will be in Q2 and Q3. So it will become more prominent from a seasonality perspective.

Daniel Rizzo: Okay. Thank you very much.

Operator: Thank you. As a final reminder, if you would like to ask a question, please press star followed by one. Our next question comes from Michael Joseph Sison of Wells Fargo. Mike, your line is open. Please go ahead.

Michael Joseph Sison: Hey, good morning. Nice quarter and outlook. Could you remind me for Performance Materials—I recall the fact that you used wood to create your activated carbon gives you a pretty big edge in the auto side. Does that sort of technology or base help you in the other areas and maybe more chemistry-wise? Why would that help you get a more premium area in other areas like water treatment and such?

David H. Li: Yeah. Thanks, Mike. We are definitely early in that process of identifying where we are actually adding value. Just to remind, this is a business area—filtration—that we have been participating in for many years. The opportunity now is to spend more time with those end customers and understand your question: where we are actually differentiated and adding value. We have, in many areas, identified that this hardwood-based activated carbon, the way we engineer it, has unique separation properties that are valued by our customers. In certain applications, we understand that our activated carbon is combined with a lower grade activated carbon because we are able to provide that key separation technology.

Again, early on, but the sectors that we are going to be focused on are water, pharma, and food and beverage. Those we think we have technical advantage on. Again, this is also a benefit of having that simplified portfolio—having the ability to focus more resources in these high-potential growth areas is something that we are excited to do, and expect to hear more from us in the future.

Michael Joseph Sison: Got it. And then could you remind us of any major regulation over the next couple of years, even a decade, that could generate some growth for Performance Materials? I think China may be going to a Tier 3 at some point. And maybe any other areas. And then just the mix of the outlook when you talk to customers. Hybrids have been good. Any thoughts on more of that versus EVs or anything else?

David H. Li: Sure. I mentioned in the first question North America—we feel really good about that, and that is our core market, especially in the backdrop of this reduced EV adoption, which we think will continue for the foreseeable future. You mentioned regulation. The next most significant piece of regulation will likely be China 7, so that is China moving to essentially a Tier 3. Our teams are working closely with the folks in China. We continue to expect that to be adopted towards the end of the 2020s, so 2028, 2029.

You could see some buildup of inventory ahead of that, but that would be a pretty significant upgrade and more stringent emissions requirements that would require things like honeycombs, which would be good for Ingevity Corporation. Another region to pay close attention to is India. India is a growing and mobilizing population, and they also have a pretty significant pollution issue. They also have very hot summers there, and so they are going to need to do something from an emission standard perspective. We are also working closely with them in terms of the emissions regulatory bodies there and would expect to see something there. They are earlier on in their journey of emissions requirements.

I mentioned North America, but recently there have been some changes by the administration—things like the Endangerment Act. We actually think that is going to be a positive for Ingevity Corporation because, without getting into too much detail, in the previous regulations that have now been taken away, for an automaker to be in compliance, essentially a larger and larger portion of their mix would have to be EV. Now, with those gone away, it really clears the runway for more fuel-efficient ICE and hybrid parts of their portfolio, and you see them leaning into that. So the North American backdrop also seems to be very promising for us as we look forward.

Michael Joseph Sison: And one quick last one. For Pavement Technologies, are there opportunities for acquisitions? Your balance sheet is in pretty good shape to maybe add that as some growth over time. Maybe talk about some regions that could be a good area for you, or are there other technologies or product lines that would fit well?

David H. Li: Yeah. We love the technologies that we have. We see a lot of runway for growth, especially with Evotherm, so converting that mix asphalt to a warm mix with significant value and technology advantages for our customers. Never say never, but I think we have been pretty public that for the next at least couple of years, acquisitions are not going to be a priority for us. Instead, we really want to focus on generating that cash flow and reducing the leverage on the balance sheet as well as buying back shares. Thank you. Thanks, Mike.

Operator: Thank you. We have no further questions registered on today's call. I will now hand back over to David Li for any closing or final comments.

David H. Li: Thanks. As we wrap up, I would like to remind our investors that New Ingevity is a simplified, more predictable, and extremely profitable specialty materials company. The company is highly cash generative, and we are committed to returning cash to investors. Our focus in 2026 will be the continued execution of our commercial and operating strategies so that we can deliver growth year over year on every metric from sales to EPS. Lastly, as we close the call, I would like to again thank and congratulate Mary Hall, our outgoing CFO, on reaching this milestone in her career.

This will be her last earnings call with us, and we are grateful for her years of service and contributions at Ingevity Corporation. Thanks to everyone for their interest. And with that, Charlie, you can close the call.

Operator: Thank you. Ladies and gentlemen, this does conclude today's call. Thank you so much for joining. You may now disconnect your lines.

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