MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
Management's discussion and analysis of Ingevity Corporation's ("Ingevity," "the company," "we," "us," or "our") financial condition and results of operations ("MD&A") is provided as a supplement to the Condensed Consolidated Financial Statements and related notes included elsewhere herein to help provide an understanding of our financial condition, changes in financial condition and results of our operations. The following discussion should be read in conjunction with Ingevity's consolidated financial statements as of and for the year ended December 31, 2025, filed on February 26, 2026, with the Securities and Exchange Commission ("SEC") as part of the company's Annual Reporting on Form 10-K ("2025 Annual Report") and the unaudited interim Condensed Consolidated Financial Statements and notes to the unaudited interim Condensed Consolidated Financial Statements, which are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").
All references to notes (herein referred to as "Note") in this section refer to the notes accompanying the Condensed Consolidated Financial Statements included in Item 1 within this Form 10-Q.
Investors are cautioned that the forward-looking statements contained in this section and other parts of this Quarterly Report on Form 10-Q involve both risk and uncertainty. Several important factors could cause actual results to differ materially from those anticipated by these statements. Many of these statements are macroeconomic in nature and are, therefore, beyond the control of management. See "Cautionary Statements About Forward-Looking Statements" below and at the beginning of our 2025 Annual Report.
Unless otherwise indicated, the information in MD&A refers only to our continuing operations. See Note 1 and 16 for more information.
Cautionary Statements Regarding Forward-Looking Statements
This section and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements, within the meaning of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995 that reflect our current expectations, beliefs, plans or forecasts with respect to, among other things, future events and financial performance. Forward-looking statements are often characterized by words or phrases such as "may," "will," "could," "should," "would," "anticipate," "estimate," "expect," "outlook," "project," "intend," "plan," "believe," "target," "prospects," "potential," and "forecast," and other words, terms and phrases of similar meaning. Forward-looking statements involve estimates, expectations, projections, goals, forecasts, assumptions, risks and uncertainties. We caution readers that a forward-looking statement is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statement. Such risks and uncertainties include, among others, those discussed in Part I, Item 1A. Risk Factors of our 2025 Annual Report, as well as in our unaudited Condensed Consolidated Financial Statements, related notes, and the other information appearing elsewhere in this report and our other filings with the SEC. We do not intend, and undertake no obligation, to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. In addition to any such risks, uncertainties and other factors discussed elsewhere herein, risks, uncertainties and other factors that could cause or contribute to actual results differing materially from those expressed or implied by the forward-looking statements include, but are not limited to the following:
•our review of strategic alternatives for the Advanced Polymer Technologies ("APT") segment may not result in a transaction;
•any transaction we enter into, including the sale of our road markings product line and our North Charleston crude tall oil ("CTO") refinery assets and the majority of the Performance Chemicals industrial specialties product line, may not yield the expected results or benefits;
•if the review of strategic alternatives for APT results in a transaction, we may be adversely impacted if we are unable to adjust our costs and operating structure to reflect the requirements of the business after giving effect to such transaction;
•we may be adversely affected by general global economic, geopolitical, and financial conditions beyond our control, including inflation, the Russia-Ukraine war, and the conflict in the Middle East;
•leadership transitions within our organization;
•we are exposed to risks related to our international sales and operations, including recent changes in tariffs and trade policies;
•adverse conditions in the automotive market have and may continue to negatively impact demand for our automotive carbon products;
•if more stringent air quality standards worldwide are not adopted, our growth could be impacted;
•we face competition from substitute products, new technologies, and new or emerging competitors;
•we may be adversely affected by a decrease in government infrastructure spending;
•adverse conditions in cyclical end markets may continue to adversely affect demand for our products;
•lack of access to raw materials upon which we depend would impact our ability to produce our products;
•the inability to make or effectively integrate future acquisitions and other investments may negatively affect our results;
•we are dependent upon third parties for the provision of certain critical operating services at several of our plants;
•we may be adversely affected by disruptions in our supply chain;
•the occurrence of natural disasters and extreme weather or other unanticipated problems such as labor difficulties (including work stoppages), equipment failure, or unscheduled maintenance and repair, which could result in operational disruptions of varied duration;
•we are dependent upon attracting and retaining key personnel;
•we are dependent on certain large customers;
•from time to time, we are and may be engaged in legal actions associated with our intellectual property rights;
•if we are unable to protect our intellectual property and other proprietary information, we may lose significant competitive advantage;
•information technology security breaches and other disruptions;
•government policies and regulations, including, but not limited to, those affecting the environment, climate change, tax policies, tariffs, the chemicals industry and subsidies or incentives that may impact key raw materials or products may adversely affect financial results; and
•losses due to lawsuits arising out of environmental damage or personal injuries associated with chemical or other manufacturing processes.
Overview
Ingevity Corporation provides products and technologies that purify, protect, and enhance the world around us. Through a diverse team of talented and experienced people, we develop, manufacture, and bring to market solutions that are largely renewably sourced and help customers solve complex problems while making the world more sustainable. Our products are used in a variety of demanding applications, including automotive gasoline vapor emissions control systems, food, water and chemical filtration, asphalt paving, agrochemical dispersants, bioplastics, coatings, elastomers, and paint for road markings. We operate in three reportable segments: Performance Materials, Performance Chemicals and Advanced Polymer Technologies.
Recent Developments and Updates
Legal Proceedings
On July 19, 2018, we filed suit against BASF Corporation ("BASF") in the United States District Court for the District of Delaware (the "Delaware Proceeding") alleging BASF infringed Ingevity's patent covering canister systems used in the control of automotive gasoline vapor emissions (U.S. Patent No. RE38,844) (the "844 Patent"). On February 14, 2019, BASF asserted counterclaims against us in the Delaware Proceeding, alleging two claims for violations of U.S. antitrust law (one for exclusive dealing and the other for tying) as well as a claim for tortious interference with an alleged prospective business relationship between BASF and a BASF customer (the "BASF Counterclaims"). The BASF Counterclaims relate to our enforcement of the 844 Patent and our entry into several supply agreements with customers of its fuel vapor canister honeycombs. The U.S. District Court dismissed our patent infringement claims on November 18, 2020, and the case proceeded to trial on the BASF Counterclaims in September 2021.
On September 15, 2021, a jury in the Delaware Proceeding issued a verdict in favor of BASF on the BASF Counterclaims and awarded BASF damages of approximately $28.3 million, which trebled under U.S. antitrust law to approximately $85.0 million. On May 18, 2023, the court in the Delaware Proceeding entered judgment on the jury's verdict, which commenced the post-trial briefing stage. On February 13, 2024, the court in the Delaware Proceeding denied BASF's motion for pre-judgment interest on its tortious interference claim as well as our motion seeking judgment as a matter of law, or a new trial in the alternative. In addition, BASF indicated it would seek attorneys' fees and costs in amounts that they would allege and have to demonstrate at a future date.
On March 13, 2024, we appealed the verdict as well as the U.S. District Court's November 2020 dismissal of our patent infringement claims against BASF to the U.S. Federal Circuit Court of Appeals. On February 11, 2026, the U.S. Federal Circuit Court of Appeals ruled against Ingevity on our appeal and we decided to no longer pursue any further appeals. On March 13, 2026, we entered into an agreement with BASF, providing for the payment of: (1) the judgment, plus post-judgment interest, in the amount of $97.0 million and (2) $16.2 million to resolve BASF's claim for attorneys' fees and costs, and made such payments on April 1, 2026. The Delaware Proceeding, including all appeals and counterclaims, is now complete.
The full amount of the settlement of $113.2 million is accrued in "Accrued expenses" on the condensed consolidated balance sheet as of March 31, 2026 and the $16.2 million charge taken during the quarter was included within "Other (income) expense, net" on the condensed consolidated statements of operations for the quarter ended March 31, 2026.
Road Markings Product Line Disposition
On April 15, 2026, we completed the sale of our road markings product line to PPG Industries Inc. for $65 million, subject to customary adjustments for working capital, indebtedness and transaction expenses (the "Disposition").
The Disposition does not meet the accounting criteria to be classified as assets held for sale as of March 31, 2026, nor does the transaction represent a strategic shift in the Company's future operations and financial results requiring presentation as a discontinued operation.
Revolving Credit Facility
On March 26, 2026, we entered into a Second Amendment and Restatement Agreement (the "Amendment"), which amends and restates our existing credit agreement, dated as of June 23, 2022.
Among other things, the Amendment decreased the aggregate amount of the commitments thereunder from $1 billion to $750 million, and extended the maturity date of our revolving credit facility by five years to March 31, 2031, however, if more than $250 million principal amount of the Company's senior unsecured notes due 2028 remain outstanding on the date that is 91 days prior to their stated maturity, the maturity of the revolving credit facility will automatically accelerate to such earlier date. Borrowings under the revolving credit facility bear interest at a rate per annum equal to, at our option, either (a) the applicable term benchmark rate, subject to a 0.00% floor, or (b) a base rate, in each case, plus an applicable margin of 1.00% to 1.75% for term benchmark loans and 0.00% to 0.75% for base rate loans. The Amendment contains certain customary affirmative and negative covenants, representations and warranties and events of default (subject in certain cases to customary grace and cure periods).
Fees of $4.0 million were incurred to secure the Amendment. These fees have been deferred and will be amortized over the term of the facility.
Performance Chemicals Repositioning and Industrial Specialties Divestiture
On September 3, 2025, Ingevity entered into a sales agreement to sell substantially all of the assets, rights, and liabilities associated with the industrial specialties product line and the CTO refinery, (collectively, the "Divestiture"). Upon execution of the sales agreement, the industrial specialties product line and the CTO refinery included in the Divestiture met the criteria for classification as discontinued operations. As such, the results of operations of the Divestiture have been reclassified and presented as discontinued operations for all periods presented. The sale was completed on January 1, 2026.
We received all-cash proceeds of $93.1 million, inclusive of traditional working capital adjustments, and recorded a gain of $55.6 million within "(Gain) loss on sale of business" within discontinued operations. See Note 16 for more information.
Results of Operations
| Three Months Ended March 31, | |||||||||||
| In millions | 2026 | 2025 | |||||||||
| Net sales | $ | 258.0 | $ | 247.9 | |||||||
| Cost of sales | 141.6 | 136.0 | |||||||||
| Gross profit | 116.4 | 111.9 | |||||||||
| Selling, general, and administrative expenses | 40.7 | 41.9 | |||||||||
| Research and technical expenses | 6.7 | 7.0 | |||||||||
| Restructuring and other (income) charges, net | 0.5 | 1.9 | |||||||||
| Other (income) expense, net | 22.4 | 4.1 | |||||||||
| Interest expense, net | 15.9 | 19.4 | |||||||||
| Income (loss) from continuing operations before income taxes | 30.2 | 37.6 | |||||||||
| Provision (benefit) for income taxes on continuing operations | 6.8 | 8.5 | |||||||||
| Net income (loss) from continuing operations | 23.4 | 29.1 | |||||||||
| Income (loss) from discontinued operations, net of income taxes | 36.4 | (8.6) | |||||||||
| Net income (loss) | $ | 59.8 | $ | 20.5 | |||||||
Q1 2026 Performance Summary
Net sales increased four percent from the prior year driven by price increases in the Performance Materials reportable segment and pavement technologies product line and favorable foreign exchange.
Net sales
The table below shows the 2026 Net sales and variances from 2025:
| Change vs. prior year | |||||||||||||||||||||||||||||
| In millions | Prior year Net sales | Volume | Price/Mix | Currency effect | Current year Net sales | ||||||||||||||||||||||||
Three months ended March 31, 2026 vs. 2025 | $ | 247.9 | 0.4 | 6.5 | 3.2 | $ | 258.0 | ||||||||||||||||||||||
Three Months Ended March 31, 2026 vs 2025
The Net sales increase of $10.1 million in 2026 was driven by favorable pricing and sales mix of $6.5 million (three percent), favorable foreign currency exchange of $3.2 million (one percent), and a volume increase of $0.4 million (zero percent).
Gross Profit
Three Months Ended March 31, 2026 vs. 2025
Gross profit increase of $4.5 million in 2026 was driven by favorable pricing and sales mix of $6.5 million, favorable sales volume of $2.2 million, and LIFO impacts of $0.7 million. This increase was partially offset by increased manufacturing costs of $4.7 million, and unfavorable foreign currency exchange of $0.2 million.
Selling, general and administrative expenses
Three Months Ended March 31, 2026 vs. 2025
SG&A was $40.7 million (16 percent of Net sales) and $41.9 million (17 percent of Net sales) for the three months ended March 31, 2026 and 2025, respectively. Overall, SG&A decreased by $1.2 million (three percent), driven by decreased intangible amortization expense of $2.3 million, and decreased spending on commercial activities of $0.4 million, partially offset by increased variable incentive compensation of $1.5 million.
Research and technical expenses
Three Months Ended March 31, 2026 vs. 2025
Research and technical expenses as a percentage of Net sales was 2.6 percent and 2.8 percent for the three months ended March 31, 2026 and 2025, respectively. Research and technical expenses as a percentage of Net sales decreased due to higher sales. Overall, Research and technical expenses decreased by $0.3 million, compared to the prior year, primarily driven by a decrease within our Performance Materials reportable segment.
Restructuring and other (income) charges, net
Three Months Ended March 31, 2026 vs. 2025
| Three Months Ended March 31, | |||||||||||
| In millions | 2026 | 2025 | |||||||||
| Work force reductions and other | $ | (0.3) | $ | 1.2 | |||||||
| Performance Chemicals repositioning | 0.8 | 0.7 | |||||||||
| Restructuring charges | $ | 0.5 | $ | 1.9 | |||||||
| Other (income) charges, net | $ | - | $ | - | |||||||
Restructuring and other (income) charges, net (1) | $ | 0.5 | $ | 1.9 | |||||||
_______________ | |||||||||||
(1) See Note 11 for more information. | |||||||||||
Other (income) expense, net
Three Months Ended March 31, 2026 vs. 2025
_______________
| Three Months Ended March 31, | |||||||||||
| In millions | 2026 | 2025 | |||||||||
| Foreign currency transaction (gain) loss | $ | - | $ | (1.4) | |||||||
Litigation charge (1) | 16.2 | - | |||||||||
Impairment of license agreement (2) | 2.8 | - | |||||||||
Proxy contest charges (2) | - | 7.9 | |||||||||
Portfolio realignment costs (2) | 3.2 | - | |||||||||
| Other (income) expense, net | 0.2 | (2.4) | |||||||||
| Total Other (income) expense, net | $ | 22.4 | $ | 4.1 | |||||||
(1) See Note 13 for more information.
(2) See Note 14 for more information.
Interest expense, net
Three Months Ended March 31, 2026 vs. 2025
| Three Months Ended March 31, | |||||||||||
| In millions | 2026 | 2025 | |||||||||
Accounts receivable securitization (1) | $ | 0.5 | $ | 0.7 | |||||||
Finance lease obligations (1) | 1.8 | 1.8 | |||||||||
Interest rate swap (2) | 0.1 | (0.2) | |||||||||
Litigation related interest expense (3) | 1.9 | 1.3 | |||||||||
Revolving Credit Facility and other lines of credit (1) | 7.2 | 11.4 | |||||||||
Senior notes (1) | 5.6 | 5.6 | |||||||||
| Other interest (income) expense, net | (1.2) | (1.2) | |||||||||
| Total Interest expense, net | $ | 15.9 | $ | 19.4 | |||||||
_______________
(1) See Note 9 for more information.
(2) See Note 8 for more information.
(3) See Note 13 for more information.
Provision (benefit) for income taxes on continuing operations
Three Months Ended March 31, 2026 vs. 2025
For the three months ended March 31, 2026 and 2025, our effective tax rate was 22.5 percent and 22.6 percent, respectively. Excluding discrete items, the effective rate was 26.0 percent compared to 21.9 percent in the three months ended March 31, 2026 and 2025, respectively. See Note 12 for more information.
Income (loss) from discontinued operations, net of income taxes
Three Months Ended March 31, 2026 vs. 2025
Income (loss) from discontinued operations, net of income taxes was $36.4 million and $(8.6) million for the three months ended March 31, 2026 and 2025, respectively. Increase was driven by the gain on sale. See Note 16 for more information.
Segment Operating Results
In addition to the information discussed above, the following sections discuss the results of operations for Ingevity's reportable segments. Our segments are (i) Performance Materials, (ii) Performance Chemicals and (iii) Advanced Polymer Technologies. Segment Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") is the primary measure used by the company's chief operating decision maker to evaluate the performance of and allocate resources among our reportable segments. Segment EBITDA is defined as segment net sales less segment operating expenses (segment operating expenses consist of costs of sales, selling, general and administrative expenses, research and technical expenses, other (income) expense, net, excluding depreciation and amortization). We have excluded the following items from segment EBITDA: interest expense associated with corporate debt facilities, interest income, income taxes, depreciation, amortization, restructuring and other income (charges), net, goodwill impairment charges, acquisition and other-related income (costs), gain (loss) on strategic investments, impairment of license agreement, proxy contest charges, portfolio realignment costs, pension and postretirement settlement and curtailment income (charges), net, litigation charge, indirect costs allocated to Divestiture, and Corporate and other costs.
In general, the accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies in the Annual Consolidated Financial Statements included in our 2025 Annual Report.
Performance Materials
Q1 2026 Performance Summary
Performance Materials Net sales increased six percent compared to the prior year quarter driven by annual pricing actions and a favorable mix as a shift in consumer preferences from battery electric vehicles to hybrids continued. Segment EBITDA was up 10 percent to $92.0 million driven by improved price and mix, higher volume, and higher plant utilization in the quarter to build inventory ahead of planned outages in the second quarter, which more than offset higher SG&A and other expenses. Segment EBITDA margin improved 230 basis point to 59.2% compared to 56.9% in the prior year.
| In millions | Three Months Ended March 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| Total Performance Materials - Net sales | $ | 155.4 | $ | 146.8 | |||||||
| Segment EBITDA | $ | 92.0 | $ | 83.5 | |||||||
Net Sales Comparison of Three Months Ended March 31, 2026 and March 31, 2025:
| Change vs. prior year | |||||||||||||||||||||||||||||
In millions | Prior year Net sales | Volume | Price/Mix | Currency effect | Current year Net sales | ||||||||||||||||||||||||
Three months ended March 31, 2026 vs. 2025 | $ | 146.8 | 2.8 | 5.2 | 0.6 | $ | 155.4 | ||||||||||||||||||||||
Three Months Ended March 31, 2026 vs. 2025
Segment net sales. The increase of $8.6 million in 2026 was driven by favorable pricing and sales mix of $5.2 million (four percent), volume growth of $2.8 million (two percent), and favorable foreign currency exchange of $0.6 million (zero percent).
Segment EBITDA. The increase of $8.5 million in 2026 was driven by decreased manufacturing costs of $5.3 million, favorable pricing and sales mix of $5.2 million, and volume growth of $2.9 million. The increase was partially offset by unfavorable foreign currency exchange and other charges of $3.3 million, and increased SG&A and research and technical expenses of $1.6 million.
Performance Chemicals
Q1 2026 Performance Summary
Performance Chemicals Net sales, which include the road markings product line divested on April 15, 2026, were $58.3 million, similar to the prior year. Pavement Technologies sales were flat, as improvements in price and mix were offset by lower volumes. Sales in Road Markings declined 10 percent, driven by continued competitive pressure impacting volumes, while pricing remained stable. Segment EBITDA of $0.6 million declined $5.2 million from the prior year driven primarily by lower plant utilization in Road Markings compared to the first quarter of 2025. Segment EBITDA margin was 1.0% compared to 9.8% in the prior year.
| Three Months Ended March 31, | |||||||||||
| In millions | 2026 | 2025 | |||||||||
| Total Performance Chemicals - Net sales | $ | 58.3 | $ | 58.9 | |||||||
| Pavement Technologies product line | 49.7 | 49.4 | |||||||||
| Road Markings product line | 8.6 | 9.5 | |||||||||
| Segment EBITDA | $ | 0.6 | $ | 5.8 | |||||||
Net Sales Comparison of Three Months Ended March 31, 2026 and March 31, 2025:
| Change vs. prior year | |||||||||||||||||||||||||||||
In millions | Prior year Net sales | Volume | Price/Mix | Currency effect | Current year Net sales | ||||||||||||||||||||||||
Three months ended March 31, 2026 vs. 2025 | $ | 58.9 | (2.9) | 1.8 | 0.5 | $ | 58.3 | ||||||||||||||||||||||
| Pavement Technologies product line | 49.4 | (2.0) | 1.8 | 0.5 | 49.7 | ||||||||||||||||||||||||
| Road Markings product line | 9.5 | (0.9) | - | - | 8.6 | ||||||||||||||||||||||||
Three Months Ended March 31, 2026 vs. 2025
Segment net sales. The decrease of $0.6 million in 2026 was driven by a volume decline of $2.9 million (five percent), as a result of a decrease in pavement technologies ($2.0 million) and road markings ($0.9 million), partially offset by favorable pricing and sales mix of $1.8 million (three percent), driven by pavement technologies ($1.8 million), and favorable foreign currency exchange of $0.5 million (one percent).
Segment EBITDA. The decrease of $5.2 million in 2026 was driven by increased manufacturing costs of $5.4 million, a volume decline of $0.9 million, increased SG&A expenses of $0.4 million, and unfavorable foreign currency exchange and other charges of $0.3 million. The decrease was partially offset by favorable pricing and sales mix of $1.8 million.
Advanced Polymer Technologies
Q1 2026 Performance Summary
Advanced Polymer Technologies Net sales of $44.3 million increased five percent as favorable foreign exchange and higher volume more than offset decline in price due to unfavorable mix. Segment EBITDA for the quarter was $7.6 million compared to $13.6 million in the prior year due primarily to an inventory build in the first quarter of 2025, in anticipation of a material planned outage in the second quarter of 2025. Segment EBITDA margin was 17.2% compared to 32.2% in the prior year.
| In millions | Three Months Ended March 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| Total Advanced Polymer Technologies - Net sales | $ | 44.3 | $ | 42.2 | |||||||
| Segment EBITDA | $ | 7.6 | $ | 13.6 | |||||||
Net Sales Comparison of Three Months Ended March 31, 2026 and March 31, 2025:
| Change vs. prior year | |||||||||||||||||||||||||||||
In millions | Prior year Net sales | Volume | Price/Mix | Currency effect | Current year Net sales | ||||||||||||||||||||||||
Three months ended March 31, 2026 vs. 2025 | $ | 42.2 | 0.5 | (0.5) | 2.1 | $ | 44.3 | ||||||||||||||||||||||
Three Months Ended March 31, 2026 vs. 2025
Segment net sales. The increase of $2.1 million in 2026 was driven by favorable foreign currency exchange of $2.1 million (five percent), volume growth of $0.5 million (one percent), partially offset by unfavorable pricing and sales mix of $0.5 million (one percent).
Segment EBITDA. The decrease of $6.0 million in 2026 was driven by increased manufacturing costs of $6.0 million, unfavorable pricing and sales mix of $0.5 million, and unfavorable foreign currency exchange and other charges of $0.2 million. The decrease was partially offset by lower SG&A of $0.5 million, and volume growth of $0.2 million.
Use of Non-GAAP Financial Measures - Adjusted EBITDA from continuing operations
Ingevity has presented the financial measure, Adjusted EBITDA from continuing operations, defined below, which has not been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and has provided a reconciliation to net income, the most directly comparable financial measure calculated in accordance with GAAP. This measure is not meant to be considered in isolation nor as a substitute for the most directly comparable financial measure calculated in accordance with GAAP. Adjusted EBITDA from continuing operations is utilized by management as a measure of profitability.
We believe this non-GAAP financial measure provides management as well as investors, potential investors, securities analysts, and others with useful information to evaluate the performance of the business, because such measure, when viewed together with our financial results computed in accordance with GAAP, provides a more complete understanding of the factors and trends affecting our historical financial performance and projected future results. We believe this measure is useful because it excludes the effects of financing and investment activities as well as non-operating activities.
Adjusted EBITDA from continuing operations is defined as net income (loss) from continuing operations plus interest expense, net, provision (benefit) for income taxes, depreciation, amortization, restructuring and other (income) charges, net, goodwill impairment charges, acquisition and other-related (income) costs, litigation charge, (gain) loss on strategic investments, impairment of license agreement, proxy contest charges, portfolio realignment costs, and pension and postretirement settlement and curtailment (income) charges, net.
This non-GAAP measure is not intended to replace the presentation of financial results in accordance with GAAP and investors should consider the limitations associated with this non-GAAP measure, including the potential lack of comparability of this measure from one company to another. A reconciliation is set forth within this section.
Reconciliation of Net Income (Loss) from Continuing Operations (GAAP) to Adjusted EBITDA from Continuing Operations (Non-GAAP) | |||||||||||
| Three Months Ended March 31, | |||||||||||
| In millions | 2026 | 2025 | |||||||||
Net income (loss) from continuing operations (GAAP) | $ | 23.4 | $ | 29.1 | |||||||
| Interest expense, net | 15.9 | 19.4 | |||||||||
| Provision (benefit) for income taxes on continuing operations | 6.8 | 8.5 | |||||||||
Depreciation and amortization (1) | 22.7 | 24.5 | |||||||||
Restructuring and other (income) charges, net (2) | 0.5 | 1.9 | |||||||||
Litigation charge (3) | 16.2 | - | |||||||||
Impairment of license agreement (1) | 2.8 | - | |||||||||
Proxy contest charges (4) | - | 7.9 | |||||||||
Portfolio realignment costs (5) | 3.2 | - | |||||||||
Adjusted EBITDA from continuing operations (Non-GAAP) | $ | 91.5 | $ | 91.3 | |||||||
_______________
(1) Refer to Note 14 for more information.
(2) We regularly perform strategic reviews and assess the return on our operations, which sometimes results in a plan to restructure the business. These costs are excluded from our reportable segment results and for the purposes of calculating our non-GAAP financial performance measures. Refer to Note 11 for more information.
(3) Refer to Note 13 for more information.
(4) Charges represent legal and other professional service fees as well as incremental proxy solicitation costs related to a proxy contest.
(5) Charges represent professional service fees related to a review of the company's portfolio.
Adjusted EBITDA from continuing operations
Three Months Ended March 31, 2026 vs. 2025
Adjusted EBITDA from continuing operations is the sum of the EBITDA of all reportable segments, less the indirect costs allocated to Divestiture, and Corporate and other costs, and as such, the factors that impacted adjusted EBITDA from continuing operations period to period are the same factors that affected earnings discussed in the Results of Operations and Segment Operating Results sections included within this MD&A.
Current Full Year Company Outlook vs. Prior Year
We are reaffirming our previously disclosed outlook, excluding the contributions from the divested road markings product line beginning April 15, 2026. Our outlook includes a full year of operating results for the Advanced Polymer Technologies reportable segment. Our outlook excludes the divested industrial specialties product line, as the sale closed on January 1, 2026.
Net sales are expected to be between $1.05 billion and $1.15 billion for 2026. We expect Net sales in our Performance Materials reportable segment to grow low-single digits as increased pricing on select products partially offsets forecasted decline in global automotive production for ICE powertrains compared to the prior year. We expect Net sales in our Performance Chemicals reportable segment, excluding the divested road markings product line beginning April 15, 2026, to grow mid-single digits through continued adoption of our warm mix asphalt products. For our Advanced Polymer Technologies reportable segment, we expect Net sales to grow low-single digits, reflecting a mild recovery in industrial end markets.
Adjusted EBITDA is expected to be between $370 million and $395 million for 2026. We expect our Performance Materials reportable segment to maintain segment EBITDA margins consistent with 2025, as revenue growth is partially offset by selective growth opportunities. In our Performance Chemicals reportable segment, we expect segment EBITDA margins in the high-teens. The segment is expected to benefit from revenue growth but will be burdened by indirect costs from the divested industrial specialties and road markings product lines. We anticipate that our Advanced Polymer Technologies reportable segment EBITDA will improve versus prior year as volume growth is partially offset by defensive pricing actions to maintain segment EBITDA margins of around 20 percent. Corporate and Other costs are expected to be consistent with 2025.
The divestitures of the industrial specialties and road markings product lines resulted in indirect costs of between $19 million and $21 million. We expect to eliminate at least $15 million of these indirect costs over the course of 2026, with the full run rate of those savings achieved in 2027. We expect to be burdened by approximately $12 million to $18 million of indirect costs from the divested industrial specialties and road markings product lines in 2026, the majority of which will be absorbed by our Performance Chemicals reportable segment.
Our effective tax rate is expected to be between 22 to 24 percent. We expect to recognize between $90 million and $95 million of depreciation and amortization, adjusted for the divested road marking product line, in 2026.
A reconciliation of net income from continuing operations, to adjusted EBITDA from continuing operations, as projected for 2026 is not provided. Ingevity does not forecast net income as it cannot, without unreasonable effort, estimate or predict with certainty various components of net income. These components, net of tax, include further restructuring and other income (charges), net; additional acquisition and other-related income (costs); additional pension and postretirement settlement and curtailment (income) charges; and revisions due to legislative tax rate changes. Additionally, discrete tax items could drive variability in our projected effective tax rate. All of these components could significantly impact such financial measures. Further, in the future, other items with similar characteristics to those currently included in adjusted EBITDA from continuing operations, that have a similar impact on comparability of periods, and which are not known at this time, may exist and impact adjusted EBITDA from continuing operations.
Liquidity and Capital Resources
The primary source of liquidity for our business is the cash flow provided by operating activities. We expect our cash flow provided by operations combined with cash on hand and available capacity under our revolving credit facility to be sufficient to fund our planned operations and meet our interest and other contractual obligations for at least the next twelve months. As of March 31, 2026, our undrawn capacity under our revolving credit facility was $223.0 million. Over the next twelve months, we expect to fund the following: debt principal repayments, interest payments, capital expenditures, income tax payments, purchases pursuant to our stock repurchase program (and related excise tax payments), restructuring activities, and $113.2 million associated with the BASF litigation settlement, as further described in Note 13. In addition, we may also evaluate and consider strategic investments, joint ventures, or other transactions to create stockholder value and enhance financial performance. In connection with such transactions, or to fund other anticipated uses of cash, we may modify our existing revolving credit facility, redeem all or part of our outstanding senior notes, seek additional debt financing, issue equity securities, or some combination thereof.
Cash and cash equivalents totaled $95.4 million at March 31, 2026. We continuously monitor deposit concentrations and the credit quality of the financial institutions that hold our cash and cash equivalents, as well as the credit quality of our insurance providers, customers, and key suppliers.
Due to the global nature of our operations, a portion of our cash is held outside the U.S. The cash and cash equivalents balance at March 31, 2026, included $88.3 million held by our foreign subsidiaries. Cash and earnings of our foreign subsidiaries are generally used to finance our foreign operations and their capital expenditures. At December 31, 2025, we determined that the earnings of some of our subsidiaries are no longer permanently reinvested due to global volatility. We believe that our foreign holdings of cash will not have a material adverse impact on our U.S. liquidity. If these earnings were distributed, such amounts could be subject to U.S. federal income tax at the statutory rate less the available foreign tax credits, if any, and could potentially be subject to withholding taxes in the various jurisdictions. The potential tax implications of the repatriation of unremitted earnings are driven by facts at the time of distribution, therefore, it is not practicable to estimate the income tax liabilities that might be incurred if such cash and earnings were repatriated to the U.S. Refer to Note 12 for more information.
Debt and Finance Lease Obligations
Refer to Note 9 for a summary of our outstanding debt obligations and revolving credit facility.
Other Potential Liquidity Needs
Share Repurchases
On July 25, 2022, our Board of Directors authorized the repurchase of up to $500.0 million of our common stock (the "2022 Authorization"), and rescinded the prior outstanding repurchase authorization with respect to the shares that remained unused under the prior authorization. Shares under the 2022 Authorization may be purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of market prevailing conditions and other factors, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act.
During the three months ended March 31, 2026, we repurchased $52.3 million, inclusive of $0.4 million in excise tax, in common stock, representing 774,189 shares of our common stock at a weighted average cost per share of $67.10. At March 31, 2026, $245.6 million remained unused under the 2022 Authorization.
During the three months ended March 31, 2025, we repurchased no common stock.
Capital Expenditures
Projected 2026 capital expenditures are $40-60 million. We have no material commitments associated with these projected capital expenditures as of March 31, 2026.
Cash flow comparison of the Three Months Ended March 31, 2026 and 2025
| Three Months Ended March 31, | |||||||||||
| In millions | 2026 | 2025 | |||||||||
| Net cash provided by (used in) operating activities | $ | (2.0) | $ | 25.4 | |||||||
| Net cash provided by (used in) investing activities | 106.3 | (11.5) | |||||||||
| Net cash provided by (used in) financing activities | (61.8) | (11.0) | |||||||||
Cash flows provided by (used in) operating activities
Cash used in operating activities, inclusive of continuing and discontinued operations, consists of net income (loss) adjusted for non-cash items including the cash impact from changes in operating assets and liabilities (i.e., working capital) totaled $2.0 million for the three months ended March 31, 2026, which was inclusive of a $55.6 million gain related to the sale of the industrial specialties product line.
Cash used in operating activities for the three months ended March 31, 2026, was driven by a net increase in trade working capital of $33.9 million (including accounts receivable, inventory, and accounts payable), a decrease in CTO resale cash inflows of $6.2 million, and increased employee compensation payments of $5.1 million. Partially offsetting these cash outflows was increased cash earnings of $9.4 million, lower cash interest paid of $3.5 million, decreased spending on restructuring initiatives of $3.0 million, and lower cash taxes paid of $1.9 million.
Cash flows provided by (used in) investing activities
Cash provided by investing activities, inclusive of continuing and discontinued operations, in the three months ended March 31, 2026 was $106.3 million and was primarily driven by cash proceeds of $93.1 million related to the sale of the industrial specialties product line, cash proceeds from our restricted investment of $24.7 million, offset primarily by capital expenditures of $10.3 million. In the three months ended March 31, 2026 and 2025, capital spending included the base maintenance capital supporting ongoing operations, and growth and cost improvement spending.
| Capital expenditure categories | Three Months Ended March 31, | ||||||||||
| In millions | 2026 | 2025 | |||||||||
| Maintenance | $ | 6.4 | $ | 6.0 | |||||||
| Safety, health and environment | 2.5 | 2.6 | |||||||||
| Growth and cost improvement | 1.4 | 1.4 | |||||||||
| Total capital expenditures | $ | 10.3 | $ | 10.0 | |||||||
Cash flows provided by (used in) financing activities
Cash used in financing activities, inclusive of continuing and discontinued operations, in the three months ended March 31, 2026, was $61.8 million and was primarily due to repurchases of common stock of $52.3 million, tax payments related to withholdings on vested equity awards of $4.3 million, and debt issuance costs of $4.0 million.
Cash used in financing activities in the three months ended March 31, 2025 was $11.0 million and was primarily due to proceeds from our revolving credit facility and other borrowings of $92.3 million, partially offset by payments on our revolving credit facility and other borrowings of $100.3 million.
New Accounting Guidance
Refer to Note 2 for a full description of recent accounting pronouncements including the respective expected dates of adoption and expected effects on our Condensed Consolidated Financial Statements.
Critical Accounting Policies and Estimates
Our Condensed Consolidated Financial Statements are prepared in conformity with GAAP. The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We have described our accounting policies in Note 2 to our consolidated financial statements included in our 2025 Annual Report. We have reviewed these accounting policies, identifying those that we believe to be critical to the preparation and understanding of our financial statements. Critical accounting policies are central to our presentation of results of operations and financial condition and require management to make estimates and judgments on certain matters. We base our estimates and judgments on historical experience, current conditions and other reasonable factors. For a description of our critical accounting policies and estimates, refer to Part II, Item 7, Critical Accounting Policies and Estimates in our 2025 Annual Report. Our critical accounting policies have not substantially changed from those described in the 2025 Annual Report.