Hello, and welcome to today's Ingevity Third Quarter 2025 Earnings Call and Webcast. My name is Bailey, and I will be your moderator for today. [Operator Instructions] I'd now like to pass the conference over to John Nypaver. So please go ahead when you're ready.

Thank you, Bailey. Good morning, and welcome to Ingevity's Third Quarter 2025 Earnings Call. Earlier this morning, we posted a presentation on our investor site that you can use to follow today's discussion. It can be found on ir.ingevity.com under Events and Presentations. Also throughout this call, we may refer to non-GAAP financial measures, which are intended to supplement, not substitute for comparable GAAP measures. For example, we are presenting the pending divestiture of our Industrial Specialties business for the first time within discontinued operations. In the appendix to our slides, we provide details that reconcile the total operations. Definitions of these non-GAAP financial measures and reconciliations to comparable GAAP measures are included in our earnings release and are also in our most recent Form 10-K. We may also make forward-looking statements regarding future events and future financial performance of the company during this call, and we caution you that these statements are just projections and actual results or events may differ materially from those projections as further described in our earnings release. Our agenda is on Slide 3. Our speakers today are: David Li, our CEO; and Mary Dean Hall, our CFO. Dave will provide introductory comments. Mary will follow with a review of our consolidated financial performance and the business segment results for the quarter. Dave will then provide closing comments and discuss 2025 guidance. With that, over to you, Dave.

Thanks, John, and good morning, everyone. It was a highly productive quarter of strong execution for Ingevity. First, we achieved an important milestone in our strategic portfolio review with the announcement of the sale of our Industrial Specialties business for $110 million. We expect this transaction to close in early 2026 and will likely use the majority of the proceeds towards further debt reduction. Second, we were pleased with our business segment results. Performance Materials delivered another strong quarter within a dynamic global auto environment. Going forward, we are encouraged by the adoption of hybrids and fuel-efficient ICE platforms, which should drive demand for advanced Ingevity solutions and content. Road Technologies also had a great quarter, highlighted by record sales for our pavement business in North America. Finally, APT delivered strong margins as the team prioritized operational improvements against the backdrop of continued weak end market demand. Overall, these contributions reflect our team's disciplined execution as well as strategic repositioning actions, which drove best-in-class EBITDA margins of 33% reflecting our sixth consecutive quarter of year-over-year margin expansion. Strong cash flow generation and disciplined capital allocation enabled us to reduce debt, achieve our leverage target ahead of plan and return capital to shareholders through share repurchases. And third, I'm very excited to announce we hired Ruth Castillo to lead our Performance Materials business. Ruth is a strategic and experienced leader with a deep understanding of how to navigate complex businesses and unlock new growth opportunities. I look forward to her leadership in guiding Performance Materials into its next phase of profitable growth. Before I turn it over to Mary for more details on the financials, I'm pleased to share that we will host an Investor Update on December 8. This will be a virtual event where we'll share the results of the strategic portfolio review and provide an assessment on what we believe the company will look like over the next 2 years. More details on how to register for the event will be forthcoming. And now I'll turn it over to Mary.

Thanks, Dave, and good morning all. It's nice to have some good news to share in this unsettled economic environment. Our Q3 results reflected continued growth in adjusted EBITDA, margins and free cash flow despite pressure on the top line, affirming the resilience of our businesses and the successful execution of our repositioning actions in Performance Chemicals. As previously noted, with the announced sale of Industrial Specialties, we're now reporting the results of that business as discontinued operations, with the sale expected to close by early 2026. Given our close proximity to year-end and the full year guidance is based on total company performance, I'll focus my comments on total company results so that comparisons to prior periods are apples-to-apples. I'll provide more color on continuing and discontinued operations when we discuss the Performance Chemicals results. Please refer to Slide 5. Total company sales of $362 million in Q3 were down about 4% as increased sales in Performance Materials and Road Technologies were more than offset by decreases in Industrial Specialties and APT. Gross margin improved over 600 basis points, reflecting significantly lower raw material costs, primarily in Industrial Specialties and the successful execution of our repositioning actions. SG&A increased due primarily to higher variable compensation expense on improved business results. Adjusted earnings improved significantly, up almost 500 basis points to $56.3 million, driving adjusted EBITDA margin to 33.5%. Please turn to Slide 6. As a result of strong earnings and disciplined capital management, our free cash flow of $118 million enabled us to repurchase $25 million of shares in the quarter and accelerate deleveraging. We ended the quarter with net leverage of 2.7x, already beating our previous year-end target of 2.8x. We now expect net leverage to be approximately 2.6x by year-end. This does not include the benefit of…

Thanks, Mary. Please turn to Slide 10. We are very pleased with our third quarter results and are on track for a strong finish to the year. Our results reflect sustained execution, the durability of our business model and our leadership in the industries we serve. We are raising full year free cash flow guidance and now expect net leverage to be around 2.6x by year-end. We will continue to be disciplined in how we allocate capital and look forward to closing the sale of our Industrial Specialties business soon. Lastly, given the ongoing tariff uncertainty and slower industrial demand primarily impacting APT, we're adjusting our full year outlook to narrow the top end of our sales and EBITDA range. In closing, we look forward to hosting everyone virtually on December 8 for our investor update when we will provide the results of our strategic portfolio review and our expectations for the future. 0With that, I'll turn it over for questions.

[Operator Instructions] Our first question today comes from the line of Jon Tanwanteng from CJS Securities.

Nice job in the quarter. My first question is just regarding the full year outlook. I noticed that you're taking down the top line for APT, which makes sense. I was wondering if you could actually speak to the Performance Materials segment and to the publicized aluminum plant fires in North America, the chip shortages that are going on in China and just how that's impacting your outlook there and what's implied in the guidance and if you've accounted for that?

Yes. Thanks, Jon. Yes, with respect to those challenges you mentioned, obviously, if you zoom out, it's been a pretty dynamic year for the industry. I think it actually speaks to the resilience of the auto industry in general. I mean, we've been through tariffs, some macro uncertainty. And as you mentioned, some more recent supply chain challenges. And our results and outlook would reflect any impact from those. But I think overall, if you look at the results we've delivered for Performance Materials, it demonstrates the -- also the durability of our business, the continued leadership we have in that space. And I think quarter-over-quarter, we've continued to deliver strong results. But to answer your question, on those 2 supply chain challenges, our results and outlook do reflect any impact to those going forward.

Got it. That's helpful. And then just on the discontinued ops, you mentioned -- or I guess you gave metrics for what you expect from the year in the [ Inspect ] business. Could you kind of tell us what's implied in the Q4 just because we don't have the first half results in there and then you broke out the Q3 in terms of EBITDA contribution?

[Indiscernible] this is John. We do show full year for that discontinued ops. It should be easy for you to get to that, I would think. But we can talk offline if you need help on that.

Yes. And Jon, I kind of just in terms of sizing the business, on an annualized basis, think of it as about a kind of mid-single-digit EBITDA business. And so we've reported 3 quarters of it. So kind of extrapolating that out to the fourth quarter, I think, would make sense.

Our next question today comes from the line of Daniel Rizzo from Jefferies.

You mentioned working capital and free cash flow. I was just thinking -- wondering how we should think about working capital post the divestiture as maybe as a percent of sales or just how you plan to kind of manage that?

So you're really thinking looking forward into 2026, Dan?

Right. Well, just -- I mean, not for just 2026, but just how it changes at all once the business is divested.

Yes. Dan, this is Phil. I think if you look at our balance sheet, which is included in the press release schedules, we broke out the impact of the discontinued ops on the balance sheet and pulled them out as separate line items. So it will give you a really good clear indication for what we're thinking working capital looks like for the business going forward.

Okay. And then you mentioned that I think net debt-to-EBITDA is going to be about 2.7x at the end of the year. And then you get $110 million roughly from the sale. I mean, that's going to be used towards debt. So I guess my question is, what is the net debt-to-EBITDA target? Because that seems like you would be relatively low.

So Dan, just for clarity, we finished the quarter at 2.7x. And as a result of beating our year-end target already, we're reducing our target for year-end to 2.6. (sic) [ 2.6x ]

Right. And then in terms of use of proceeds, Dan, we mentioned or I mentioned in my comments, we'd likely use the majority of the proceeds when received to further pay down debt. I want to hold off a little bit because we'll also talk more about capital allocation as one of the major topics on December 8. But obviously, if you look at primary use of the proceeds as debt reduction, you can do that trajectory down. But we're really pleased with our achievements so far ahead of plan. We had targeted 2.8x or below by end of year. So we finished the quarter, as Mary mentioned, at 2.7x, and we think we've got a glide path to 2.6x without any proceeds -- use of proceeds to pay down further debt.

[Operator Instructions] We have no additional questions waiting at this time. So I'd like to pass the call back over to John Nypaver for any closing remarks.

Actually, Bailey, I believe someone is in the queue, if you wouldn't mind, double checking.

Perfect. Yes, we will take our next question, apologies, from John McNulty from BMO Capital Markets.

Yes. Sorry about the last second question there. So I guess I just wanted to understand Performance Materials a little bit better for the full year sales to be kind of flat to slightly down. I mean when we look at kind of the overall auto forecast out there, they're roughly in line with that. But I assume normally, you're getting some reasonable amount of price. So I guess, is it -- is there some negative mix that we should be thinking about on the auto builds that may be contributing to this type of a result? Or is pricing maybe more modest than it's been where maybe it's taken a little bit of a pause after the last few years? I guess, can you help us to think about that?

Yes, John. So as we mentioned earlier in the year, we've taken pricing as we typically do. I think there's -- when you look at the auto forecast as we do as well, they're calling for sort of flattish to slightly down. That's similar to our PM business. But in terms of the overall mix of those vehicles -- obviously, we've had a lot of volatility, for example, for EVs throughout the year. So when you look at the overall trend for automobiles may not reflect just ICE and hybrids. We think we have a very strong position in that market. Market continues to be healthy. Actually, still inventory levels are pretty low and the fleet remains pretty aged. So we're thinking that we're even not back to a healthy level of production. But given that, I think that's how sort of the math would shake out for us. It's just not taking into account the portion that's EVs. But Mary, what else would you add?

Yes. Maybe just another little point of clarity. focusing on North American production, which, as you know, John, is where we're most profitable, while the forecast has improved again, actually for the full year for North America, in particular, it's still down. So it's the latest forecast information we have is that even North America is still down a couple of percent year-over-year, albeit an improvement over the prior forecast. So I think that, in combination with some of the noise that we're also, as we mentioned, factoring in the fire at Ford, chip issues, et cetera, that are making noise in the supply chain system of automotive, we feel comfortable with our current guide.

Got it. Okay. Fair enough. So it sounds like it's really a mix thing more than anything else. And then I guess the other question is just any update on the Nexeon platform and that venture and how things may be going there?

Yes. So as we mentioned, with Nexeon, that's kind of a far out R&D type of initiative. We do expect their plant to be up and running in the next few months. As a reminder, that's not using our activated carbon for this first generation, but continues to be a strong partnership and an exciting space that we look forward to participating in with them.

Thank you. [Operator Instructions] As we have no additional questions waiting at this time, I would now like to pass it back over to John Nypaver for any closing remarks.

Thanks, Bailey. That concludes our call. Registration for the strategic portfolio update is now open on our investor website under Events. We will also issue a press release with more details later today. If there are any questions, please feel free to reach out to me directly. My contact information can be found in the earnings release and slide deck. Thank you for your interest in Ingevity.

This concludes today's call. Thank you all for your participation. You may now disconnect your lines.