Thank you. Welcome to Innospec's quarterly earnings call.

This is David Jones, and I'm Innospec's General Counsel and Chief Compliance Officer. The earnings release for the quarter and this presentation are posted on the company's website.

During this call, we will make forward-looking statements, which are predictions and projections about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from the anticipated results implied by such forward-looking statements.

The risks and uncertainties are detailed in Innospec's filings with the SEC. Please see the SEC site and Innospec's site for these and related documents.

In today's presentation, we've also included non-GAAP financial measures. A reconciliation to the most directly comparable GAAP financial measure is contained in the earnings release.

The non-GAAP financial measures should not be considered as a substitute for those prepared in accordance with GAAP. They are included as additional items to aid investor understanding of the company's performance in addition to the impact that these items and events had on financial results.

With me today from Innospec are Patrick Williams, President and Chief Executive Officer, and Ian Cleminson, Executive Vice President and Chief Financial Officer. With that, I turn it over to you, Patrick.

Thank you, David, and welcome, everyone, to Innospec's third quarter 2026 conference call. This was a strong quarter for Innospec, with all businesses delivering sales growth and operating income improvement.

Performance Chemicals sales growth and gross margin improvement drove an 84% operating income increase over last year. The North Carolina plant efficiency upgrades discussed last quarter are scheduled to be completed by year-end.

These upgrades will increase capacity, productivity, and yields on a wide range of existing personal care and other products. In parallel, we will continue to focus on commercializing new products to drive further margin and operating income improvement in the coming quarters.

Fuel Specialties had another strong quarter, delivering revenue and operating income growth with margins in our target range. Both volume and price/mix improved as the business has continued to manage well against raw material volatility.

We expect continued strong performance and seasonal demand in the coming quarters. Oilfield Services operating income grew 40% and operating margins expanded, driven by improved volumes from our recent DRA plant expansion.

Third quarter results were lower than expected on activity delays in our Middle East legacy business, along with elevated raw material costs. We expect sequential improvement in the fourth quarter.

Now I will turn the call over to Ian Cleminson, who will review our financial results in more detail. Then I will return with some concluding comments.

After that, Ian and I will take your questions. Ian?

Thanks, Patrick. Turning to slide 7 in the presentation, the company's total revenues for the third quarter were $473.6 million, a 7% increase from $441.9 million a year ago.

Overall gross margin increased by 0.9 percentage points from last year to 27.3%. Adjusted EBITDA for the quarter was $51.4 million compared to $44.2 million last year, and net income attributable to Innospec for the quarter was $31.8 million compared to $12.9 million a year ago.

Our GAAP earnings per share were $1.29, and there was no net impact of special items in the quarter. Last year, we reported GAAP earnings per share of 52 cents, which included a negative impact from special items of 60 cents per share.

Excluding special items in both years, our adjusted EPS for the quarter was $1.29 compared to $1.12 a year ago. Turning to slide 8, revenues in Performance Chemicals for the third quarter were $180.5 million, up 6% from last year's $170.8 million.

Volume reductions of 5% and a negative currency impact of 1% were offset by a positive price/mix of 12% driven by higher raw material pricing. Gross margins of 18.8% increased 3.7 percentage points compared to 15.1% in the same quarter in 2025.

Operating income of $16.9 million increased 84% from $9.2 million last year. We expect the fourth quarter results to be similar to this quarter, with the plant upgrades in North Carolina the key to unlocking growth in 2027.

Moving on to slide 9, revenues in Fuel Specialties for the third quarter were $180.7 million, up 5% from $172 million reported a year ago. Volumes were up 3% with price/mix up 2%.

Fuel Specialties gross margins of 31.5% decreased half a percentage point compared to 35.6% in the same quarter last year. Operating income of $35.6 million was up 1% from $35.3 million a year ago.

Moving on to slide 10, revenues in Oilfield Services for the quarter were $112.4 million, up 13% from the $99.1 million reported a year ago. Gross margins of 28.2% decreased 1.8 percentage points from last year's 30% on a weaker sales mix.

Operating income of $6.7 million increased 40% from $4.8 million 1 year ago. Turning to slide 11, corporate costs for the quarter were $18.6 million compared with $18.2 million a year ago.

The adjusted effective tax rate for the quarter was 24.7% compared to 22.7% last year. Moving on to slide 12, cash from operating activities was $17.4 million before capital expenditures of $15.6 million.

As of September the 30th, Innospec had $251.9 million in cash and cash equivalents and no debt. Now I'll turn it back over to Patrick for some final comments.

Patrick?

Thanks, Ian. Again this quarter, Innospec delivered strong sales and operating income growth with higher margins.

Performance Chemicals and Oilfield Services remain our key focus. We expect continued steady and strong results in Fuel Specialties.

Operating cash generation was positive in the quarter, and our net cash position remained at over $250 million. We continue to focus on driving increased operating cash flow in the coming quarters with better working capital efficiency.

We have significant balance sheet flexibility for organic investment, M&A, dividend growth, and buybacks. This quarter, our Board approved a further increase in our semiannual dividend to 94 cents per share, resulting in an annual dividend increase of 9%.

Now I will turn the call over to the operator, and Ian and I will take your questions.

Hi, good morning. Thank you for taking my questions.

I was wondering if you could quantify... Morning, Jon.

Good morning. I was wondering if you could quantify the impact in the oilfield business from delays in the Mideast, and I'm assuming that was pipeline attacks in Saudi, number one, in the quarter; and number two, how you expect that business to trend in Q4, assuming a recovery there and the underlying inflation dynamics.

Jon, it's Patrick. It wasn't necessarily impact in the DRA business.

More of the impact was on production and stim. It's just the fact of getting people out in the fields to work while you're having drones bombing over the top of you has been a very difficult situation for that whole area.

The key for us is really making sure that we're back on these rigs when they go back out and that we're servicing the way they need to be serviced. It was probably not a significant percentage, but big enough to make a difference in oilfield.

The hope is, and from what we're seeing, as long as we service the customers as we expect and we have the technology, is that we're starting to see some return to business in the fourth quarter, which should really help us out moving forward.

Got it. As we head into '27, could you just update us on the outlook for the segment in the coming year, especially as you have potential customers coming in from Latin America, and as the dynamic evolves from pipelines to maybe a reopening of the strait or some other condition change in the Mideast?

I'll work backwards. If we just stick with the Middle East for a minute, I think that with everything that's gone on in that area and other businesses that we're going after, our DRA should remain strong, even if the straits and we have settlements for the straits are removed and we move forward.

If you look at the general business, we're still waiting to see things move in Latin America, specific to Mexico. I think you've seen some announcements by President Sheinbaum about opening up, putting more money into petrochemicals and petrochemical facilities.

To do that, they've got to fix their crude issue. We're hoping at some time that that turns, but we have not had any sales into Mexico to date.

If we had the crystal ball, if all these things came into place, it would obviously look a lot different than it is today. We still see significant growth, sequential growth as well, moving forward in not only the fourth quarter, but in the quarters moving forward in 2027.

Great. Next for me, could you just update us on your expectations for cash and cash flow?

You've come down in your net cash balance over the past year, and recognizing you've returned a lot of cash to shareholders, great job there, but I was wondering if you had any thoughts on where your net cash balance is going to be over the coming year and how you expect spending priorities to change, if at all.

Let me take that one, Jon. It's Ian.

What we've seen so far year-to-date is quite a large investment in our working capital. That's expanded by about $80 million since the start of the year.

In the fourth quarter, we expect some of that to reverse. What's driven that is partly the expansion of the business and partly some of the inflation that we've seen coming through the supply chain in terms of raw materials and freight, and that's sort of worked itself through.

No doubt, we're probably carrying a little bit too much inventory. We can be a little bit tighter on some of our receivables.

We've got some work to do in the fourth quarter. Our view is that we will be much more cash generative in the fourth quarter, to the region of about $40 million to $50 million at the free cash flow level.

That takes care of this year. As we roll into next year, our expectation is that, on a stable background with raw materials relatively stable, we won't need the same level of working capital investment.

We would imagine that we'll be hitting closer to $55 million to $60 million of free cash flow next year, and that's based on a pretty similar level of capital expenditure, round about $60 million last year, and we expect about $60 million this year as well.

Great. Thank you, Ian.

No problem.

Hi, good morning.

Good morning, Mike.

Morning, Mike.

Apologies if I missed it, but a couple questions on personal care. It sounds like you're expecting the North Carolina plant upgrades to be complete by year-end.

I'm just wondering, has the timing moved later there? If so, what's causing the delays?

I guess the other piece of that question is, is there a requalification process that you need to go through with your customers, or should we see sales volumes kind of getting back to normal by Q1?

Mike, it's Patrick. The timing has been about what we expected.

The number one priority was to get the plants up and running so that we could provide products to our customers, and that's what we did. The secondary part of the plan was to make sure that we concluded and finished the efficiencies of the plant to make it better, better yields, providing more volume because you have better yields, et cetera, winterizing it, all the things that we had to do.

Number one priority was to get product to our customers. The timing of that is exactly what we thought, that we would complete all of this by the fourth quarter, and that should happen.

In regards to recapturing lost sales, it's going to take some time. We don't have to requalify, but it is going to take some time to go back and recapture some of that business.

That's why we do see sequential growth moving forward, but it's just not going to be that big spike; it's going to be a nice slow curve upwards. I think the other thing that we're focusing on, too, is the product mix that we put on that plant.

We don't want to just load it up with commodity products; we want new products, new technologies that require or we get higher margins from, and that's really the plan moving forward. It's a plan we've had in place, we're sticking to it, I think the strategy is working, and it should work moving forward in 2027.

All right, very helpful. Then my other question is on the Fuel Specialties business.

You guys have these contractual pricing pass-throughs. It looks like price was only up about 2% year-on-year despite what I assume was pretty meaningful raw material inflation.

I was just hoping you could talk a little bit about the timing of that pricing pass-through and how that's impacting the margins, either gross margin or operating margin, as you look at Fuel Specialties for Q3 and Q4.

Mike, it's Ian. I'll take that one.

We think the Fuel Specialties team have done a good job, actually. They've been battling against some really volatile raw material pricing and freight pricing as well.

We have managed the gross margins in that business really well. We are half a percentage point down year-over-year.

As we've got all the mechanisms in place as raw materials come through, and there's a little bit of a lag in there. The level we're at in the third quarter is the level we expect to be at in the fourth quarter.

We don't see much change there. We think the business has got a handle on it, and we're in control of all of that.

I take your point that the price/mix is not up that much, but certainly at the gross margin level and the gross profit dollars and the operating income level and the operating margin levels, we're happy with where the business is at.

Mike, just to add a little color to what Ian said, I started out with this business and ran this business for quite some time. We have seen these markets up and down.

We've seen high inflation, we've seen recessions, we've seen mega market movements, and it's never been these big run-ups on margins or big rundown on margins. It's always a very well-managed—and a lot of it's contracts—but it's a very well-managed margin business.

You're never going to see these big spikes in that business. It's just a very stable business, and we've seen that for as long as we've been in it.

All right, thanks very much.

Thanks, Mike.

Thank you.

Thank you all for joining us today, and thanks to all our shareholders, customers, and Innospec employees for your interest and support. If you have any further questions about Innospec or matters discussed today, please give us a call.

We look forward to meeting up with you again to discuss our fourth quarter 2026 results in February. Have a great day.