Thank you. Yesterday, we released our financial results for the quarter ending March 31, 2022. The earnings release and this presentation can be found on our company's website. During this call, we will make forward-looking statements, which include predictions and projections about future events. These statements are based on current expectations and assumptions that come with risks and uncertainties that may cause actual results to differ significantly from what we anticipate. A detailed account of these risks and uncertainties can be found in Innospec's 10-K, 10-Q, and other filings with the SEC. Please visit the SEC website or Innospec's website for these and other documents. Today, we will also reference some non-GAAP financial measures. A reconciliation to the most closely related GAAP financial measures is included in our earnings release on our website. Non-GAAP financial measures should not be viewed as replacements for those prepared according to GAAP. They are provided for additional context to help investors better understand the company’s performance and the effects of various items and events on financial results. Joining us today from Innospec are Patrick Williams, President and Chief Executive Officer, and Ian Cleminson, Executive Vice President and Chief Financial Officer. Now, I will hand it over to you, Patrick.

Thank you, David, and welcome, everyone, to Innospec's First Quarter 2022 Conference Call. I am very pleased to report another set of strong results for Innospec. Improvements in all businesses drove a 39% increase in revenues and a 57% increase in operating income over last year. Gross margins improved significantly over the sequential quarter and were in line with the prior year and our expectations. Despite continued inflationary pressure, end market demand remains strong. The benefits of our products are increasingly important in the current high-cost supply constrained environment that we expect will persist through the year. We will continue to work closely with our customers to responsibly manage any additional required price actions. Performance Chemicals delivered a 38% increase in operating income over a very strong comparative quarter last year. We are moving quickly to increase capacity in order to keep up with strong demand across all our product lines. The additional capacity can be used for multiple products and is supported by multiyear contracts. Personal Care now represents over 75% of Performance Chemicals operating income. Complementing Personal Care, we have a diverse pipeline of growth opportunities in our other end markets which include Home Care, mining, agriculture and construction. Fuel Specialties delivered a 49% increase in operating income over the prior year as additional pricing actions took effect and volumes increased. Sequential gross margins recovered significantly. However, we expect gross margins to remain on the lower end of our target range until inflation moderates. As inflation slows, we expect lagging price action to catch up to cost and drive further gross margin improvement. Our outlook is for slow long-term growth in global consumption of diesel, jet and marine fuel, both in fossil and renewable forms. We see increasing opportunities for our technologies to lower emissions while enhancing performance in these end markets. In Oilfield Services, operating income was approximately double that of last year and sales continued to grow sequentially in the quarter. However, shipment delays led to a sequential quarter decline in operating income. As we move through 2022, we believe markets will further improve as oil prices remain high and activity rates increase. Our expectations for gradual improvement in the profitability of our oilfield business. 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.

Thanks, Patrick. Turning to Slide 7 in the presentation. The company's total revenues for the first quarter were $472.4 million, a 39% increase from $339.6 million a year ago. Overall gross margin decreased slightly by 0.2 percentage points from last year to 29.5%. EBITDA for the quarter was $59 million, compared to $41.4 million last year, and net income for the quarter was $36.5 million compared to $23.4 million a year ago. Our GAAP earnings per share were $1.46, including special items, the net effect of which decreased our first quarter earnings by $0.07 per share. A year ago, we reported GAAP earnings per share of $0.94, which included the negative impact from special items of $0.12 per share. Excluding special items in both years, our adjusted EPS for the quarter was $1.53 compared to $1.06 a year ago. Turning to Slide 8. Revenues in Performance Chemicals for the first quarter were $167.1 million, up 33% from last year's $125.9 million. Volumes grew 7% with a positive price mix of 32%, offsetting an adverse currency impact of 6%. Gross margins of 24.4% were down slightly by 0.5 percentage points compared to 24.9% in the same quarter in 2021. Operating income increased 38% from last year to $25.3 million. Moving on to Slide 9. Revenues in Fuel Specialties for the first quarter were $191.8 million, 38% higher than the $139.3 million reported a year ago. Volumes grew by 23%, and there was a positive price mix effect of 21%, offsetting a negative currency impact of 6%. Fuel Specialties gross margins of 31.6% were 0.6 percentage points below the same quarter last year. Operating income increased 49% from last year to $35.5 million. Moving on to Slide 10. Revenues in Oilfield Services for the quarter were $113.5 million, up 53% from $74.4 million in the first quarter last year. Gross margins of 33.3% were up 0.4 percentage points on last year's 32.9%. Operating income of $2.5 million was a $1.3 million improvement from $1.2 million a year ago. Turning to Slide 11. Corporate costs for the quarter were $19 million compared with $15.1 million a year ago, due mainly to higher personnel-related expenses driven by increased share-based compensation accruals. The effective tax rate for the quarter was 24.3% compared to 24% a year ago. Moving on to Slide 12. Due to a strong sequential sales growth, cash generation for the quarter was impacted by an increase in working capital, which resulted in an operating cash outflow of $29 million before capital expenditures of $8.4 million. As of March 31, 2022, Innospec had $105.6 million in cash and cash equivalents and no debt. And now I will turn it back over to Patrick for some final comments.

Thanks, Ian. We are mindful of the uncertainty around continued inflation, rising interest rates, the Ukraine war, China lockdowns and other factors that could impact global economic growth. We are cautiously optimistic that as inflation moderates, our margins will benefit further. Regardless of any near-term economic volatility, we believe the sustainability trends that many of our technologies directly address provide us with a strong platform for sustained growth over the medium to long-term. With the support of our strong balance sheet, we continue to deliver on our record of returning value to shareholders while maintaining flexibility to pursue M&A. This quarter, we commenced share repurchases under our previously announced $50 million share buyback facility and our Board has approved an 11% increase in our semi-annual dividend to $0.63 per share. Now I will turn the call over to the operator, and Ian and I will take your questions.

The first question is from Mike Harrison from Seaport Research. Please go ahead. Your line is open.

Hi. Good morning.

Good morning, Mike.

Good morning, Mike.

Congrats on a nice start to the year. I wanted to start out with a question on the Fuel Specialties. The volume growth there was fairly impressive. Can you give us some numbers around what happened with volumes sequentially? And maybe provide some color on how much of that volume strength was related to further recovery in diesel, how much was better jet fuel demand? And I guess, were there any new products or nonfuel applications that help to drive some of that growth?

Yes, we’ve experienced notable growth, with year-over-year volume up about 23% from Q1 last year. Additionally, we have seen some sequential expansion from Q4. Our diesel additives have largely returned to pre-COVID levels, particularly in the Americas, where we experienced strong growth in the first quarter, especially in diesel additives and coal flow. The Q1 numbers were affected by colder weather, and we have had a favorable cold season that is concluding now. Overall, growth has been solid across all areas, except for aviation, which is still approximately 20% to 25% below year-over-year levels for jet travel. However, we are gaining momentum from Q4 into Q1 and have good demand heading into the second quarter, even as the winter season comes to an end.

All right. Thanks for that. And then over on the Performance Chemicals side, we are definitely seeing a lot of inflation everywhere, and there are some concerns that inflation could be creating some pressure on consumer demand, potentially leading to some trading down in the Personal Care space. Can you break down your Performance Chemicals business? And how much of that goes into mainstream or more value-oriented products as opposed to higher end, more expensive products? And are you currently seeing any change in consumer demand within that Personal Care space or hearing about potential changes from your customers?

Yes, Mike, it's Patrick. It's pretty well balanced. We are on the high end with our sulfate-free product lines and our natural product lines, but as well in some of our areas like Home Care and Personal Care, we are also in the mid-markets. We are seeing a slight slowdown mostly in Home Care in the European markets. But for the most part, Personal Care globally still remains strong, and our further outlook through Q2 still remains strong from the order patterns that we’ve seen so far. It's just going to be something that we're going to have to really watch carefully and work with our customers on either; a, new technologies, product technologies and pricing models that not only fit us, but the consumer. And to date, we've done a really good job as a group in doing that with our customers and our end users. So we are still confident in Q2. But as you've said just in the call, we're just going to have to watch it very carefully as we get to the end of Q2.

All right. Great. And then a quick one on the share repurchase. Any thoughts on the timing of additional share repurchase activity? I would think that given your strong balance sheet, maybe this is an area of capital allocation where you could afford to get a little bit more aggressive?

Yes, Mike, this is Ian. So at the moment, we are doing a fairly low-level buyback consistently throughout the month. You'll see us do a little bit more in Q2 just because we've completed the full quarter. And right now, we are just going to sit and watch the share price. And if we think there's an opportunity to step in, in a larger way and take advantage of a lot more value in the market, we will do that. But for the time being, our expectation is that we will be nice and steady throughout the quarter at a fairly low level, and we will continue that throughout the year.

Yes. I think Mike, just to add to that, it's Patrick. When we originally put out the buyback, it was to be opportunistic in the market, but number one was to prevent dilution. And so we've done that, and we're going to continue to do that and be opportunistic in the market when we see fit. The other is, as you can see, we've increased our dividend again, which we've done that between 10% to 12% as a whole throughout the year, and we will continue to do that as we see fit. And the others, if you look at the balance sheet, we want to have a lot of dry powder for our $70 million growth that we previously announced in Personal Care as well as the M&A activity that we've been discussing in the marketplace. So I think we're very well-balanced right now. And obviously, as the markets perceive and as we move forward, we will look at our balance sheet and see what we want to do, if anything, to change things up. But right now, we feel very comfortable where we are.

All right. And then my last question, in terms of the strong start to the year, I was hoping that you could give us a sense of whether we should expect continued sequential improvement in earnings. Can you, perhaps, talk about some of the puts and takes that maybe could impact the cadence of earnings as we go through the rest of this year?

Yes. I will take the first go at that, Mike. I don't think we see sequential improvement, and this is really due to the points I noted earlier on in our Fuel Specialties business, it is seasonal. We tend to have a much stronger Q4 and Q1 with our winter products. And we are coming out of that seasonality now. So Q2 and Q3 do tend to be a little bit more subdued in terms of revenue and operating income. Our expectations for Performance Chemicals are that they will continue to perform close to the level they performed in the first quarter. There may well be a little bit more pressure on gross margins given some of the comments that Patrick made around Home Care. And then in the Oilfield, we expect that business to get back to sequential improvements in Q2 and beyond. When you wrap all that together, our expectations for Q2 is that earnings will be down on the first quarter, but will still be strong compared to the second quarter of last year.

Great. Thank you very much.

Thank you.

Thanks, Mike.

Thank you for your question. The next question from Jon Tanwanteng from CJS Securities. Please go ahead.

Hi. Good morning. Thanks for taking my questions, and really nice quarter there. It's really impressive in this environment.

Thanks, Jon.

Thank you, Jon.

My first question is, what happened in the Oilfield business. Kind of help me understand what were the logistics and shipment problems you had and where do margins go from here?

Yes. There was a product that was supposed to go into the South American market, but it was delayed at the border. It should be released in the second quarter of this year. The issue was mainly due to shipping and transportation delays, which caused the holdup during the quarter.

Okay, got it. And was that a shipment at a revenue for you? Or was that something that just only on the cost side?

A little bit of both. It held back our revenues, Jon, but we also had to incur additional costs for those delays, which we've taken in the quarter.

Okay, great. I was wondering if you could comment on the jet fuel market, where it is relative to where it was pre-pandemic and kind of what your expectations are if it gets back to 80% or 90% of what it used to be and kind of what the impact would be on the fuel business.

Yes, it's still slightly off due to international travel. Domestic travel in the Americas is strong, and we're beginning to see improvements in domestic travel in Europe. However, Asia remains inactive. I believe that once Asia rebounds and international travel returns, it will likely reach levels similar to 2019. We don't expect to see a significant drop; it has come back quite significantly. As Asia reopens, I anticipate further improvements.

Okay. Any sense of what the improvement would be if we get close to those levels just in terms of the profitability?

Yes, it's certainly going to help our gross margins, Jon, because it's a high-value product for us. It's not a particularly great big revenue change, which is a higher-margin business for us. So it's that little bit of cream on top of the cake, should we say.

And then lastly, just the cash flow expectations going forward, I know the buyback going on amid some working capital expansion. What should we be thinking throughout the rest of the year? And if that kind of normalizes out.

Yes. I think really a lot of it depends on the inflationary environment, Jon. If we continue to see inflation increase, then obviously, we've got to fund that through our working capital through inventory receivables and payables. So we could continue to see a drag on cash there. And if our business continues to expand again, that will pull down our cash flow. So things being normalized, if inflation moderates and flattens out, then you'll start to see cash tumbling back into the business. So it's a little bit early to say that yet. I think Q2 may see positive cash flow as Fuel Specialties moderate off the strong winter period, but we are still growing in Performance Chemicals and Oilfields. So that aligned with our strong dividend play and our buybacks. It might be that we are neutral on cash in the second quarter. And as we move into the back half of the year with moderate or moderation in inflation, that's when you'll start to see much more positive cash flow.

Yes. I think, Jon, just to add to that, you've seen volume growth in the businesses, and a lot of that is because we've had to carry longer inventories due to supply constraints and inventory and shipping constraints. And because we’ve done that, we’ve been able to supply our customers. and that's enabled us to pick up new customers who've had supply problems from our competition. And that goes in all 3 of the business segments. So we will continue to do that to meet customer expectations and requirements. And as Ian said, it could just pull back some of that cash as that goes forward.

Understood. Thanks. If I could slip in one more, Patrick. Did you mention the M&A environment on what you're seeing out there and the likelihood of that you can closing in the near-term?

Yes. I mean it slowed down a little bit. We do see some compression in multiples. I think you're going to see another interest rate hike, which we've already seen. I think that's going to slow things down a little bit as well. Things are starting to come back into an area that makes us look even a little harder. I think that we’ve expanded our horizons and are looking at fuel specialties businesses. But our primary focus is still personal care, home care, in our Ag and adjacent markets in the performance chemicals business, but there's a lot out there. There's a lot out there in oilfield, which does not interest us. But if you go into our core businesses, that look at M&A growth, we're starting to see a little bit of compression, and I would hope we will get something done sometime this year.

Okay, great. Thanks Patrick. Thanks, Ian Cleminson.

Thank you.

Thank you for your question. The next question is David Silver from CL King. Please go ahead.

Yes, hi. Good morning.

Good morning, David.

I would like to ask about the impact of currency on your reported results. I may have missed it, but I didn't see much commentary or detail on that. Considering your significant exposure in Europe, was this the case where your strong sales growth faced meaningful foreign currency headwinds? It would be helpful to understand the effect on revenue and operating income. Thank you.

Sure, Jon. Earlier, we discussed the impacts of volume price mix and exchange rates on our businesses. In Fuel Specialties and Performance Chemicals, we faced a negative impact of 6 percentage points in Q1 this year compared to Q1 last year. However, we managed to overcome this challenge through strong volume growth and a positive price mix. Both Fuel Specialties and Performance Chemicals benefit from a natural hedge against our European euro and sterling costs. We have structured the business to offset these costs with local currency raw material purchases and local currency overhead and SG&A expenses. We often mention this at the sales level, but by the time we reach operating income, we are naturally hedged, resulting in minimal impact.

Thank you for that. I had a question about the diesel fuel markets, specifically regarding the unusual tightness in that market compared to others like gasoline. I'm curious about what you're observing in relation to the diesel market's ability to respond to pricing changes and whether you anticipate this affecting your additive volumes in the future.

Yes. What we've seen is that diesel demand has come back to pre-COVID levels. And so the expectations at the refinery level was to not see demand come back as quick as it did. So when you say there's a tightness, there is a little bit of a tightness at the refinery level because of the fact that diesel demand came back so fast. And so they will catch back up. It should not be an issue moving forward. So we see no effect on our field additives business whatsoever.

Okay, great. And this is just more of a broader question. But when I look at your Fuel Specialties and Specialty Performance Chemicals sales growth, and especially, if I look at it on a sequential basis, I mean, it does seem like there's a step change in volume growth there that I didn't have it in my model. But it almost feels like there are some share gains or some new wins, new customers that have been added to the mix, maybe starting January 1. Could you comment on maybe have you been able to capture some market share within some of your important product lines that is showing up starting this quarter?

Yes, I think it's a little bit of both. I mean, demand from diesel has come back up significantly, so that's helped out. And additionally, as you just alluded to in your question, is that we have picked up customer demand as well, new customers. And so it's been a little bit of both that we benefited from. And I think we will continue to see that through the year, at least through the second quarter. The third and fourth quarter is kind of the unknown for everybody in all of our businesses, but I think through the second quarter, we will still see a nice rebound in Fuel Specialties as we did in Q1.

Just to add to that, David. In Performance Chemicals, as you know, we've targeted high single-digit volume growth, and that's exactly what we delivered in the first quarter, and some of that is built around our capacity expansions. We brought more capacity online in the first quarter. We've got more scheduled for middle of the year and then late part of this year and early next year. And that's all designed to help that sequential volume growth and that year-over-year volume growth as well.

Ian, you kind of read my mind there because my next question was just going to be an update on that 2-year $70 million build-out. So I was wondering if there were some tranches or some elements of that, that had been completed and put into service and you're saying that was a factor on Performance Chemicals in the first quarter, right?

Yes. Yes, we brought volume capacity online early part of the quarter. We’ve got some more plant in the middle of the year and then later this year or the back end of this year as well. It's a difficult environment right now with steel supply and raw material supply and availability of engineering people and all the rest of it, but nonetheless, we were on track for those that core Personal Care volume to be built out and to deliver that high single-digit volume growth in Performance Chemicals.

Okay. Thank you. And then the last question, I admit this is pretty unfair. But I was wondering, Patrick, I mean, this has to do with geopolitics in Europe, right? And I think last night or this morning, there's another layer of sanctions that are going to be put into place on Russia. And as a result, Russian oil shipments, I guess, will be reduced dramatically further. But just in general, Patrick, taking advantage of your broad perspective. When you see these different sanctions going into place and the necessary rerouting or new supply lines created. I mean do you feel that this is a process that’s going to proceed smoothly. In other words, will the refineries be able to receive the crude input and other inputs kind of on a normal basis? Or do you see any potential for meaningful disruptions as supply lines adjust to the political realities. It could be global, but I mean I'm thinking particularly in Europe based on the headlines. Thank you.

Yes. Currently, as mentioned in the call, there are ongoing changes in the sanctions and regulatory environment regarding Russia. The global sentiment is shifting towards reducing reliance on hydrocarbons from Russia. This will have two main effects: it will continue to drive inflation and impact oil and natural gas prices. We don't anticipate any refineries being significantly affected by the halt in Russian crude imports, so that doesn't raise a red flag. The major concern is that the three large oil companies have exited Russia, which will pressure Russia to push more volumes to China and India. We expect oil and natural gas prices to remain relatively stable throughout the year, with possible fluctuations of $10 to $15 a barrel, but the market remains uncertain. Regarding refineries, there won't be widespread impacts; they can adapt to processing either heavy or light crude, but pricing will be a critical factor. Over time, I believe the industry and consumers will adjust to these changes.

Okay, great. One last question regarding the increase in working capital this quarter. Would you consider this increase to be more reactive, meaning it stems from customers being unable to accept your finished goods? Or is it more strategic and proactive, where you are intentionally adding some raw materials as a safeguard against potential outages or shortages in the future? Understanding the balance between the offensive and defensive, or strategic and reactive aspects of this notable working capital increase would be helpful.

Yes. Sure, David. It's Ian. I mean part of the building working capital is on the back of a really strong quarter. You've seen the volume growth, and you've seen the price inflation working itself through. So there's a large element is that our demand is up, and we are just operating at a higher level. So and that’s great working capital to have. What we’ve also done, like we did in Q4, and we spoke about it then, and we spoke about it a little bit earlier, is that we’ve also taken some strategic decisions to hold more finished goods inventory and some more raw materials given all the disruption that we’ve seen in the times in the supply chain and also in the transportation globally. So a little bit is defensive and a little bit is because of our strong performance in the quarter.

Okay, great. That’s it for me. Thank you very much.

Thanks, David.

Thanks, David.

Thank you for your question. The next question from Chris Shaw from Monness, Crespi. Please go ahead.

Hi. Good morning, gentlemen. How are you doing?

Good morning, Chris. How are you?

How are you?

Good. All through the course, congratulating another great quarter.

Thank you.

Well done. Do you think there was any pull-forward? Some companies have mentioned that customers were eager to build up their inventories. Is there any extra ordering happening as a precautionary measure or because people are concerned about supplies later in the year? Have you noticed any trends in your businesses regarding early ordering?

No, we really haven't seen that and it is a little bit more difficult to do a pull forward due to the fact of the tightness in the raw material market anyway. So we really have not seen that. It's been a fairly normal pattern to us due to the fact that we've got a pretty good look at what the contracts are and the volumes are over a pre and post-COVID year. So we haven't seen it. And I think a lot of companies, even if you did a pull forward would be difficult just due to the supply tightness.

Got it. Clearly, you're making significant progress with pricing, which has positively impacted margins. Considering your established presence in the Fuel Specialties business, how sustainable do you believe that pricing will be in comparison to Performance Chemicals? I expect the dynamics may vary between the two segments over the long term.

Yes. Typically, in our contracts, you have that 3 to 6-month lag going up and down. And so when you're in a flying inflationary market like we are now where prices are literally changing by the hour, by the day, you can get cut, you can get contracted margins real quick, especially in your longer-term contracts. So the opposite is if we do see some flattening of raw materials and inflation starting to pull back a little bit, we think we could see a boost in margins on the way back down. And that’s typically historically how it's been and we will just have to watch that and monitor it closely. But historically, within our company, that's really what we’ve seen. Now we haven't seen this big of a ride, this drastic, this quick, but we've done a really good job as you can see, managing that, and it's just, again, managing those expectations on the way down as well.

Is it the same for Performance Chemicals or Personal Care specifically?

Absolutely.

Okay, got it.

Yes.

That’s all I have. Thanks a lot.

Thank you, Chris. Appreciate it.

Thank you for your question. There are no further questions at the moment.

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 second quarter 2022 results in August. Have a great day.