HIGHLIGHTS: (comparisons versus prior year period)

• Ingevity delivers strong second quarter results driven by higher volumes and supported by price increases across both segments
• Net sales of $358.4 million up 32.4%
• Net income of $44.3 million rose 119.3%; net income margin of 12.4%, up 490 basis points
• Adjusted EBITDA of $117.7 million rose 75.1%; adjusted EBITDA margin of 32.8%, up 800 basis points
• Operating cash flow of $65.8 million drove free cash flow up 23.6% to $41.9 million
• Company increases full year 2021 guidance to sales between $1.320 billion and $1.360 billion and adjusted EBITDA between $425 million and $440 million

The results and guidance in this release include non-GAAP financial measures. Refer to the section entitled “Use of non-GAAP financial measures” within this release.

Ingevity Corporation (NYSE:NGVT) today reported its second quarter 2021 financial results.

Second quarter net sales of $358.4 million rose 32.4% versus the prior year second quarter. Net income of $44.3 million increased 119.3% and net income margin of 12.4% rose from 7.5% in the prior year. Second quarter diluted earnings per share (EPS) were $1.10 compared to $0.49 in the prior year period. Operating cash flow of $65.8 million drove free cash flow that was up 23.6% to $41.9 million.

Adjusted earnings of $62.3 million rose 138.7% versus the prior year quarter. Diluted adjusted EPS were $1.55, which exclude, net of tax, $0.09 related to restructuring, acquisition and other charges, net, and $0.36 related to certain discrete tax items recognized during the quarter. This compares to diluted adjusted EPS of $0.63 in the prior year quarter. Adjusted EBITDA of $117.7 million rose 75.1% versus the second quarter 2020. Adjusted EBITDA margin of 32.8% rose 800 basis points from the prior year’s second quarter.

“Our strong second quarter financial results were driven by higher volumes and were supported by price increases across both segments,” said John Fortson, president and CEO. “In Performance Materials, automotive-based activated carbon sales were up sharply compared to the second quarter of 2020 that was affected by industry shutdowns in North America and Europe, even though this quarter’s results were tempered by the ongoing negative impact of the global microchip shortage. In Performance Chemicals, we saw significant growth across all businesses.

“Our second quarter adjusted EBITDA and adjusted EBITDA margin both rebounded strongly from second quarter last year,” continued Fortson, “and our healthy free cash flow allowed us to reduce our net debt ratio while repurchasing $29 million of shares in the quarter.”

Performance Materials

Second quarter 2021 sales in the Performance Materials segment were $126.0 million, up 49.3% versus the second quarter of 2020. Segment adjusted EBITDA was $61.3 million, up 163.1% versus the prior year period that was heavily impacted by pandemic-related production outages. Segment EBITDA margin increased substantially over the prior year to 48.7%, affected slightly by a scheduled maintenance outage at Ingevity’s Covington, Virginia, facility.

“Our sales of activated carbon products used in gasoline vapor emissions control systems were strong even while the microchip shortage continues to impact automotive production on a global scale,” said Fortson. “In the second quarter, China light vehicle production declined 4.9% versus the prior year quarter and U.S. light vehicle inventories as of the end of June were down 2.5 million vehicles compared to June 2019’s pre-pandemic levels.”

Performance Chemicals

Second quarter 2021 sales in the Performance Chemicals segment were $232.4 million, up 24.8% versus the second quarter 2020. Segment adjusted EBITDA was $56.4 million, up 28.5% versus the prior year quarter due to higher volume and prices and increased plant throughput. This was partially offset by elevated costs for raw materials, logistics and SG&A. Segment EBITDA margin increased 70 basis points to 24.3%.

“In Performance Chemicals, sales in Engineered Polymers and Industrial Specialties rose significantly versus the prior year quarter and revenue from paving applications continued to deliver strong growth,” said Fortson. “We also saw healthy demand for sustainable products across the segment.”

Demand for Engineered Polymers products continues to recover from lower 2020 pandemic levels and quarterly sales were up 41.1% versus the prior year quarter due to increased volume for all product lines across the globe, particularly in Europe, and markedly higher demand in automotive, footwear and apparel and industrial equipment applications. Sales rose 32.4% in Industrial Specialties applications due to strengthening lubricants, adhesives and dispersants markets. The business also implemented further price increases for tall oil rosin and tall oil fatty acid products. Sales to Pavement Technologies applications were almost 6% higher than the prior year quarter that was only slightly impacted by COVID-19. The business reached record levels in the second quarter and first half of 2021 driven by continued adoption of the company’s cold recycling technology.

Revised Guidance

Ingevity has increased its full year 2021 guidance from sales between $1.275 billion and $1.325 billion to sales between $1.320 billion to $1.360 billion, and from adjusted EBITDA between $410 million and $430 million to adjusted EBITDA between $425 million to $440 million.

“Our increased guidance reflects our solid performance in the first half of the year and the continued robust demand for our products,” said Fortson. “Despite what we expect will be ongoing transportation and logistics headwinds, raw materials inflation and automotive sector input disruptions, we are confident in our team’s ability to deliver strong performance in the second half of the year.”

Ingevity: Purify, Protect and Enhance

Ingevity provides products and technologies that purify, protect, and enhance the world around us. Through a team of talented and experienced people, we develop, manufacture and bring to market solutions that help customers solve complex problems and make the world more sustainable. We operate in two reporting segments: Performance Chemicals, which includes specialty chemicals and engineered polymers; and Performance Materials, which includes high-performance activated carbon. These products are used in a variety of demanding applications, including asphalt paving, oil exploration and production, agrochemicals, adhesives, lubricants, publication inks, coatings, elastomers, bioplastics and automotive components that reduce gasoline vapor emissions. Headquartered in North Charleston, South Carolina, Ingevity operates from 25 locations around the world and employs approximately 1,850 people. The company is traded on the New York Stock Exchange (NYSE: NGVT). For more information visit www.ingevity.com.

Additional Information

The company will host a live webcast on Thursday, July 29, 2021, at 10 a.m. (Eastern) to discuss second quarter 2021 fiscal results. The webcast can be accessed through the investors section of Ingevity’s website, or via this link: Ingevity Q2 2021 earnings webcast. You may also listen to the conference call by dialing 877-407-2991 (inside the U.S.) or 201-389-0925 (outside the U.S.), at least 10 minutes prior to the start of the event. Information on how to access the webcast and conference call, along with a slide deck containing other relevant financial and statistical information, will be posted to the investors section of Ingevity’s website prior to the call. For those unable to join the live event, a replay of the webcast will be available beginning at approximately 2 p.m. (Eastern) on July 29, 2021, through August 26, 2021: Ingevity Q2 2021 earnings webcast replay.

Use of non-GAAP financial measures: This presentation includes certain non‐GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures. Reconciliations of non‐GAAP financial measures to GAAP financial measures are provided within the Appendix to this presentation. Investors are urged to consider carefully the comparable GAAP measures and the reconciliations to those measures provided.

Cautionary statements about forward-looking statements: This press release contains “forward-looking statements” within the meaning of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements generally include the words “will,” “plans,” “intends,” “targets,” “expects,” “outlook,” or similar expressions. Forward-looking statements may include, without limitation, expected financial positions, results of operations and cash flows; financing plans; business strategies and expectations; operating plans; impact of COVID-19; capital and other expenditures; competitive positions; growth opportunities for existing products; benefits from new technology and cost-reduction initiatives, plans and objectives; markets for securities and expected future repurchases of shares, including statements about the manner, amount and timing of repurchases. Actual results could differ materially from the views expressed. Factors that could cause actual results to materially differ from those contained in the forward-looking statements, or that could cause other forward-looking statements to prove incorrect, include, without limitation, adverse effects from the COVID-19 pandemic; adverse effects of general economic and financial conditions; risks related to international sales and operations; impacts of currency exchange rates and currency devaluation; compliance with U.S. and foreign regulations concerning our operations; changes in trade policy, including the imposition of tariffs; adverse conditions in the global automotive market or adoption of alternative and new technologies; competition from producers of alternative products and new technologies, and new or emerging competitors; competition from infringing intellectual property activity; worldwide air quality standards; a decrease in government infrastructure spending; the impact of adverse conditions in cyclical end markets on demand for engineered polymers products; declining volumes and downward pricing in the printing inks market; the limited supply of or lack of access to sufficient crude tall oil; a prolonged period of low energy prices; the impact of the United Kingdom’s withdrawal from the European Union; exposure to unknown or understated liabilities from the acquisition of the Perstorp Holding AB’s Capa® caprolactone business; the provision of services by third parties at several facilities; supply chain disruptions; natural disasters, such as hurricanes, winter or tropical storms, earthquakes, tornados, floods, fires; other unanticipated problems such as labor difficulties, equipment failure or unscheduled maintenance and repair; attracting and retaining key personnel; protection of intellectual property and proprietary information; information technology security breaches and other disruptions; complications with designing and implementing our new enterprise resource planning system; government policies and regulations, including, but not limited to, those affecting the environment, climate change, tax policies, tariffs and the chemicals industry; and lawsuits arising out of environmental damage or personal injuries associated with chemical or other manufacturing processes, and the other factors detailed from time to time in the reports we file with the SEC, including those described under "Risk Factors" in our Annual Report on Form 10-K, our Form 10-Q for the quarter ended March 31, 2021, and other periodic filings. These forward-looking statements speak only as of the date of this press release. Ingevity assumes no obligation to provide any revisions to, or update, any projections and forward-looking statements contained in this press release.

Ingevity Corporation

Non-GAAP Financial Measures

Ingevity has presented certain financial measures, defined below, which have not been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and has provided a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP on the following pages. These financial measures are not meant to be considered in isolation or as a substitute for the most directly comparable financial measure calculated in accordance with GAAP. Investors should consider the limitations associated with these non-GAAP measures, including the potential lack of comparability of these measures from one company to another.

We believe these non-GAAP financial measures provide management as well as investors, potential investors, securities analysts and others with useful information to evaluate the performance of the business, because such measures, when viewed together with our financial results computed in accordance with GAAP, provide a more complete understanding of the factors and trends affecting our historical financial performance and projected future results.

Ingevity uses the following non-GAAP measures:

Adjusted earnings (loss) is defined as net income (loss) plus restructuring and other (income) charges, net, acquisition and other-related costs, pension and postretirement settlement and curtailment (income) charges and the income tax expense (benefit) on those items, less the provision (benefit) from certain discrete tax items.

Diluted adjusted earnings (loss) per share is defined as diluted earnings (loss) per common share plus restructuring and other (income) charges, net per share, acquisition and other-related costs per share, pension and postretirement settlement and curtailment (income) charges per share and the income tax expense (benefit) per share on those items, less the per share tax provision (benefit) from certain discrete tax items per share.

Adjusted EBITDA is defined as net income (loss) plus interest expense, net, provision (benefit) for income taxes, depreciation, amortization, restructuring and other (income) charges, net, acquisition and other-related costs, and pension and postretirement settlement and curtailment (income) charges, net.

Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Net sales.

Free Cash Flow is defined as the sum of cash provided by (used in) the following items: operating activities less capital expenditures.

Net Debt is defined as the sum of notes payable, short-term debt, current maturities of long-term debt and long-term debt less the sum of cash and cash equivalents, restricted cash associated with our New Market Tax Credit financing arrangement, and restricted investment.

Net Debt Ratio is defined as Net Debt divided by last twelve months Adjusted EBITDA, inclusive of acquisition-related pro forma adjustments.

Ingevity also uses the above financial measures as the primary measures of profitability used by managers of the business. In addition, Ingevity believes Adjusted EBITDA and Adjusted EBITDA Margin are useful measures because they exclude the effects of financing and investment activities as well as non-operating activities.

GAAP Reconciliation of 2021 Adjusted EBITDA Guidance

A reconciliation of net income to adjusted EBITDA as projected for 2021 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 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, that have a similar impact on comparability of periods, and which are not known at this time, may exist and impact adjusted EBITDA.

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