Innospec (IOSP) Q4 2025 Earnings Call Transcript

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DATE

Wednesday, Feb. 18, 2026 at 9 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Patrick Williams
• Executive Vice President and Chief Financial Officer — Ian Cleminson
• General Counsel and Chief Compliance Officer — David Jones

TAKEAWAYS

• Total Revenues -- $455.6 million for the quarter, down 2% compared to $466.8 million in the prior year period.
• Gross Margin -- 28% for the quarter, a decrease of 1.2 percentage points from last year.
• Adjusted EBITDA -- $55.7 million for the quarter compared to $56.6 million previously.
• Net Income -- $47.4 million in the quarter versus a net loss of $70.4 million last year, which had included the UK pension scheme buyout.
• GAAP Earnings Per Share (EPS) -- $1.91 for the quarter, with special items boosting earnings by $0.41 per share; prior year was a loss of $2.80 per share, including a negative $4.22 per share from special items.
• Adjusted EPS -- $1.50 for the quarter, compared to $1.41 previously, excluding special items in both years.
• Performance Chemicals Revenue -- $168.4 million in the quarter, flat with last year; 7% volume decrease offset by a 3% positive price/mix and a 4% favorable currency impact.
• Performance Chemicals Gross Margin -- 18.1%, down 4.6 percentage points from last year's 22.7%, attributed to higher costs and weaker product mix.
• Performance Chemicals Operating Income -- $17.7 million, a 14% decline from $20.6 million in the prior year quarter.
• Fuel Specialties Revenue -- $194.1 million, up 1% from $191.8 million last year; 8% volume growth, offset by a 10% adverse price/mix and a 3% positive currency effect.
• Fuel Specialties Gross Margin -- 34.7%, up 0.3 percentage points from last year, due to improved sales mix and disciplined pricing.
• Fuel Specialties Operating Income -- $37.2 million, increasing 7% from $34.9 million previously.
• Oilfield Services Revenue -- $93.1 million, down 12% from $105.8 million last year.
• Oilfield Services Gross Margin -- 31.9%, up 1.8 percentage points from the prior year.
• Oilfield Services Operating Income -- $8.2 million, a 9% increase from $7.5 million last year.
• Corporate Costs -- $16 million for the quarter, down $4.6 million year over year, driven by lower personnel-related costs.
• Dividend -- Total annual dividend of $1.71 per share, representing a 10% increase over the prior year.
• Share Repurchases -- 247,000 shares were repurchased during the year, at a cost of $22.2 million; no repurchases occurred in the fourth quarter.
• Cash Flow from Operations -- $61.4 million in the quarter, before $20.5 million in capital expenditures.
• Cash and Debt Position -- $292.5 million in cash and cash equivalents as of year-end, with no debt outstanding.
• 2026 Tax Rate Guidance -- Management expects a full-year effective tax rate of approximately 26%.

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RISKS

• Patrick Williams and Ian Cleminson both stated that a "historic winter storm" in late January will negatively impact Performance Chemicals and Oilfield Services operating income in the first quarter, with Ian Cleminson quantifying the impact as Performance Chemicals operating income being $5 million-$6 million below expectations and Oilfield Services operating income $2 million below expectations in Q1 2026.
• Ian Cleminson specified, "Performance Chemicals, because it is production based, we have lost that production time. We will not be able to make that back up, and it is going to take us a quarter or two for the reasons Patrick was explaining—some of the additional efficiencies that we are going to be looking for on that site. We will not be able to make up that volume of production. Those sales and those costs will be lost to us," indicating permanent loss of first quarter volumes and margin.

SUMMARY

Management highlighted consistent margin expansion in Fuel Specialties, with record revenue and near-record operating profit for the segment attributed to new technologies and a richer product mix. In Performance Chemicals, although margin actions and new product initiatives are underway, first quarter results will be materially and permanently reduced due to weather-related plant closures, with full recovery in lost production not anticipated. Oilfield Services delivered improved operating income despite lower sales, supported by a richer mix and lower overhead, and management expects mid- to high-single-digit revenue growth for the segment in 2026, pending continued momentum in the Middle East and new technology ramp-up.

• Patrick Williams indicated Oilfield Services mix will shift toward the Middle East and drag reduction agent (DRA) products, with the "DRA expansion" expected to start ramping in volume during 2026.
• Management noted that for Performance Chemicals, "consumer trends right now, they are trading down to lower-price commoditized type products," contributing to weaker product mix and margin pressure, but expects margin rebuilding progress to become evident by the third and fourth quarters of 2026.
• Ian Cleminson disclosed a deferred tax benefit from an internal reorganization that "will be about $600,000 a year for the next 15 years in cash taxes," impacting tax expense below the operating income line.
• Patrick Williams confirmed that for Oilfield Services in Latin America, "Our outlook does not assume any resumption of Mexico sales in 2026," but the company will consider new opportunities if payment arrangements improve.
• Patrick Williams stated the company has "significant balance sheet flexibility for dividend growth, buybacks, organic investment, and M&A," following the year-end net cash position above $292 million with no debt.

INDUSTRY GLOSSARY

• DRA (Drag Reduction Agent): Chemicals used in oil pipelines or production processes to reduce friction, increasing flow efficiency and lowering operational costs.
• ULSD (Ultra-Low Sulfur Diesel): A regulatory-driven cleaner diesel fuel specification requiring significantly reduced sulfur content, spurring additive demand during adoption cycles.
• GDI (Gasoline Direct Injection): Automotive engine technology requiring specialized fuel additives to address particulate and deposit control challenges.

Full Conference Call Transcript

David Jones: Thank you. Welcome to Innospec Inc.'s fourth quarter and full year earnings call. This is David Jones. I am Innospec Inc.'s General Counsel and Chief Compliance Officer. The earnings release and this presentation are posted on the company's website. During this call, we will make forward-looking statements, which are projections about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainty that can cause actual results to differ materially from the anticipated results implied by such forward-looking statements. The risks and uncertainties are detailed in Innospec Inc.'s 10-Ks, 10-Qs, and other filings with the SEC. Please see the SEC site and innospec.com for these and related documents.

In today's presentation, we have 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 or superior to those prepared in accordance with GAAP. They are included as additional items to aid investor understanding of the company's performance and adjust to the impact these items and events had on financial results. With me today from Innospec Inc. are Patrick Williams, President and Chief Executive Officer, and Ian Cleminson, Executive Vice President and Chief Financial Officer. I will now turn the call over to Patrick Williams.

Patrick Williams: Thank you, David. Welcome everyone to Innospec Inc.'s fourth quarter 2025 conference call. This was a good quarter for Innospec Inc. with continued strong operating income growth and margin expansion in Fuel Specialties combined with improving results in Performance Chemicals and Oilfield Services. In Performance Chemicals, margin improvement actions and lower overheads drove strong sequential operating income growth. We continue to execute on price-cost management, manufacturing efficiencies, and new product commercialization actions over the short to medium term. New products include the continued expansion of our industry-leading sulfate- and 1,4-dioxane-free personal and home care portfolio. Additionally, we are accelerating our growth in new technologies for agriculture, mining, construction, and other diversified industrial markets.

We expect these combined efforts to drive further growth in 2026. In Fuel Specialties, sales growth and margin expansion drove a 7% increase in operating income over the prior year. As expected, the business has continued to deliver consistently strong results and has a diverse pipeline of fuel additives. Oilfield Services operating income improved on a richer sales mix and lower overheads. Sales were down on reduced activity in U.S. completions and the Middle East. We remain focused on delivering operating income growth in 2026 as Middle East activity returns and our recent DRA expansion takes effect. In parallel, we will continue to focus on margin improvement. Our outlook does not assume any resumption of Mexico sales in 2026.

Regarding our outlook for 2026, results in Performance Chemicals and Oilfield Services will be negatively impacted by the historic winter storm which occurred in late January. Despite this, we are optimistic that we will drive full-year improvements in both businesses in 2026. I will now 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?

Ian Cleminson: Thanks, Patrick. Turning to slide seven in the presentation. The company's total revenues for the fourth quarter were $455.6 million, a decrease of 2% from the $466.8 million reported a year ago. Overall gross margin decreased by 1.2 percentage points from last year to 28%. Adjusted EBITDA for the quarter was $55.7 million compared to $56.6 million last year. Net income for the quarter was $47.4 million compared to a net loss of $70.4 million recorded last year, which was driven by the buyout of the U.K. pension scheme. Our GAAP earnings per share were $1.91, including special items, the net effect of which increased our fourth quarter earnings by $0.41 per share.

A year ago, we reported a GAAP loss per share of $2.80, which included a negative impact from special items of $4.22. Excluding special items in both years, our adjusted EPS for the quarter was $1.50 compared to $1.41 a year ago. For the full year, total revenues of $1.8 billion decreased 4% from 2024. Adjusted EBITDA for the year was $203 million compared to $225.2 million in 2024, and net income for 2025 was $116.6 million compared to the prior year net income of $35.6 million. Our full-year GAAP earnings per share were $4.67 including special items, which decreased our full-year earnings by $0.60 per share.

In 2024, reported GAAP earnings of $1.42 per share included the negative impact from special items of $4.50. Excluding special items in both years, our adjusted EPS for 2025 was $5.27 compared to $5.92 a year ago. Turning to slide eight, revenues in Performance Chemicals of $168.4 million were flat with the fourth quarter of last year. Volumes reduced by 7%, offset by a positive price/mix of 3% and favorable currency impact of 4%. Gross margins of 18.1% decreased 4.6 percentage points compared to 22.7% in the same quarter in 2024 due to higher costs and a weaker product mix. Operating income of $17.7 million decreased 14% from $20.6 million last year.

As expected, our fourth quarter results improved sequentially over the third quarter, as improvement actions took effect. Fourth quarter gross margins of 18.1% improved three percentage points compared to the third quarter and operating income of $17.7 million almost doubled from the $9.2 million recorded in the third quarter last year. For the full year, revenues of $681.4 million were up 4% from last year's $653.7 million and operating income decreased by 26% to $61 million. Moving on to slide nine, revenues in Fuel Specialties for the fourth quarter were $194.1 million, up 1% from the $191.8 million reported a year ago. Volumes were up 8% with an adverse price/mix of 10% and a positive currency impact of 3%.

Fuel Specialties gross margins of 34.7% were 0.3 percentage points above the same quarter last year, benefiting from a stronger sales mix and disciplined pricing. Operating income of $37.2 million was up 7% from $34.9 million a year ago. For the full year, revenues were unchanged at $701.5 million and operating income increased 12% to $144.8 million. Moving on to slide 10. Revenues in Oilfield Services for the quarter were $93.1 million, down 12% from $105.8 million in the fourth quarter last year. Gross margins of 31.9% increased 1.8 percentage points from last year's 30.1%. Operating income of $8.2 million increased 9% from $7.5 million one year ago.

For the full year, revenues of $395.1 million were down 19% from last year's $490.6 million and operating income decreased 40% to $23.3 million. Turn to slide 11. Corporate costs for the quarter of $16 million decreased by $4.6 million from a year ago, driven by lower personnel-related costs. The full-year adjusted effective tax rate for the quarter was 24.1% compared to 26.4% in the same period last year due to the geographical mix of taxable profits. For 2026, we expect the full-year effective tax rate to be around 26%. Moving on to slide 12. Cash flow from operating activities was $61.4 million before capital expenditures of $20.5 million.

In the quarter, we paid the previously announced semiannual dividend of $0.87 per share. This brought the total dividend for the full year to $1.71 per share, a 10% increase over 2024. There were no share repurchases in the quarter, and for the full year, we have repurchased a total of 247,000 shares at a cost of $22.2 million. For the full year, cash from operations after capital expenditures was $63.9 million compared to $122.7 million in 2024. As of December 31, Innospec Inc. had $292.5 million in cash and cash equivalents and no debt. I will now turn it back over to Patrick for some final comments. Patrick?

Patrick Williams: Thanks, Ian. Entering 2026, our focus is unchanged. We will continue to deliver exceptional innovation, value, and service to our global customers across all our end markets. We will also continue to prioritize margin and operating income improvements in Performance Chemicals and Oilfield Services. In addition, we expect Fuel Specialties to continue to deliver consistent results. Operating cash generation was excellent in the quarter, and our net cash position closed at over $292 million after making our semiannual dividend payment of $21.6 million. We continue to have significant balance sheet flexibility for dividend growth, buybacks, organic investment, and M&A. I will now turn the call over to the operator, and Ian and I will take your questions.

Operator: Thank you. Once again, please press 1-1 and wait for your name to be announced. We will now open for questions. We are now going to proceed with our first question. The questions come from the line of Jonathan E. Tanwanteng from CJS Securities.

Jonathan E. Tanwanteng: Hi, guys. Good morning, and thank you for taking my questions. Really nice job on the mix and margin there. I was wondering if you could go a little bit into the oilfield business and how you see the mix evolving there, especially in the coming quarters as you continue to diversify that business?

Patrick Williams: Yes, Jonathan, let me start with that one. We are really pleased with the progress that we have seen in the oilfield business in Q4. We were with the team yesterday, and I have to say we are really encouraged by the activity levels that are going on, the creativity, the focus on technology. As we head into 2026, we are going to take a little tap on the brakes because of the weather impacts in Q1. But beyond that, our DRA expansion is coming online, and we are starting to ramp up volumes there. Spreading the customer base and improving the profitability and the gross margins in that business is critical for us.

Also, the Middle East remains a real hotspot for us. We can see lots of opportunities there advancing technologies and a real opportunity for us to grow the business above-average rates in the region. Outside of that, we have had a tough time in the U.S., but we have lots of opportunities with new technologies and new ways of going to market starting to happen. So when we wrap all that together, we do feel confident that we will be able to outpace what we did in 2025.

The mix will be a little bit more towards the Middle East and DRA, and we feel that we can improve the profitability of the core businesses in production and stimulation as well.

Jonathan E. Tanwanteng: Okay. Great. You mentioned the impact of weather a couple times. I would guess that less people driving, maybe there are some snarls with production, but I would also expect that there is probably an offsetting impact from cold flow. Could you just quantify what you think the impact is going to be this quarter from cold weather and winter storms?

Patrick Williams: Yes. I will let Ian take the financial portion of the negative effects, but in Oilfield Services, it was production activity. People could not get to the well sites, could not deliver product. There was a multitude of issues. If you look at North Carolina, it was an extreme snow and ice event where our plants are located. Probably the biggest ice event in a century in that area. So we did have a lot of planned downtime, could not get raw materials in. Then, obviously, Jonathan, when you start the plant back up, you are going to have a lot of issues, and that is what we have done.

In conjunction with that, being that we have had these issues with cold weather that hit us, we have also decided at the same time to really work on the plant inefficiencies to make the plant more efficient, get better yields, better product quality, work on some of the manufacturing processes that we probably would have done at some point in time. So we are going to go ahead and do it all since we had plant issues and had the cold weather issue. Just knock it all out at once.

Patrick Williams: So I would not say it is a blessing in disguise by any means because I think we would have had a really strong first quarter. We would have backed up the fourth quarter with another strong quarter. But it is something that has to be done. It is an event that was unexpected. We will get it fixed. It will not happen again because we will prepare for it. But we will also make that plant in much better condition and move forward for growth.

Ian Cleminson: Yes. Just to add to that, Jonathan, you roll that into our expectations for Q1. Within the Oilfield Services business, we are probably going to be posting operating income round about $5 million to $6 million. That is probably a couple of million below where we would like to have been, and that is for the reasons Patrick explained. In Performance Chemicals, it is a bigger impact because we have obviously got quite a large manufacturing footprint down there, which was closed for an extended period, and there has been some damage to the site as well. So it is going to take a little time for us to build that back up.

So we are expecting the Performance Chemicals Q1 operating income to be close to $10 million to $11 million. Again, that is probably $5 million to $6 million below where we would have liked to have been. So it is quite a significant impact from the weather in Q1 in both of those businesses.

Jonathan E. Tanwanteng: Got it. And just to follow up on that, do you expect to make that up in the following quarters for the whole year, or is that something that gets lost as you look at all of 2026?

Ian Cleminson: It is slightly different in both businesses. The Oilfield Services business potentially could make up some of that, Jonathan, but it is going to be a tough ask for them because their customers have closed down. If they come back strong, we may make up some of it. Performance Chemicals, because it is production based, we have lost that production time. We will not be able to make that back up, and it is going to take us a quarter or two for the reasons Patrick was explaining—some of the additional efficiencies that we are going to be looking for on that site. We will not be able to make up that volume of production.

Those sales and those costs will be lost to us. What we do expect is as we exit Q2, the Q3 numbers will be showing much stronger benefits of the changes that we are making and a much stronger benefit from the direction and the discipline the business is driving into customer contracts, pricing, and general efficiencies.

Patrick Williams: It is just unfortunate timing, Jonathan. Our expectations were rolling into a nice Q4 to roll into a really strong 2026, and we are just going to take advantage of it now that it did happen. We are going to make it even better coming out of Q2.

Jonathan E. Tanwanteng: Got it. Thank you. I will jump back in queue.

Patrick Williams: Thanks, Jonathan.

Operator: We are now going to proceed with our next question. The next questions come from the line of Michael Joseph Harrison from Seaport Research Partners. Please ask your question.

Patrick Williams: Hi. Good morning, Mike. Good morning, Mike. I had just a couple of questions on Performance Chemicals business. Can you talk a little bit about what drove the volume decline that you saw in Q4? I assume that was not weather related. Was that the customers taking inventory down or what else is going on there? And then, in terms of the pricing actions you need to take in order to cover the higher cost of oleochemicals and maybe other raw material inputs, are those prices in place where you need them to be, or are there going to be some additional actions that may contribute to better price versus raw material cost margin contribution as we get into 2026?

Patrick Williams: We will hit your questions by both of us. To start with Q4 volumes, Mike, a lot of it was just uncertainty in the marketplace. Tariffs in general have put a down tone on any kind of inventory build. I think that was part of it. Typically, Q4 is a little slower in the business by nature. But overall, if you look at the quality of business that we have moving into the year, we felt very strong. We have done a lot of price action around margins and around raw materials. A lot of our national contracts, international contracts, multinationals have price mechanisms built into the contract.

So we had to go back and make sure we are following those guidelines that are set forth in the contracts. In other areas where we saw price spikes around oleos, etc., we have finally gotten out in front of those. Therefore, you saw the margin increase. I do think over time, probably more towards the middle of this year, you will start to see us even get ahead of that. But because of the weather event that we had, I think first quarter is going to affect us a little bit and a little bit into Q2. Overall, we are heading in the right direction with margins. The volume is there. The sales are there. The revenue is there.

The business is there. We are increasing our output on new products in the portfolio, which is going to build upon throughout the year as well. Those are higher-margin products too.

Patrick Williams: If you look at the overall business, I would say it is not a negative. It is a positive. I think it is the weather event that is going to affect us upfront. But we are starting to really manage these processes the way they should have been. Additionally to that, the pipeline is full of new products, which will benefit us moving forward.

Patrick Williams: I think that probably covered all of it. Yeah.

Michael Joseph Harrison: Alright. Thanks for that. And then a couple on Oilfield Services. I am just curious. 2025 was a year when you saw some further declines in revenue. Obviously, you did not see any recovery from the Latin American customer, but as you are starting to think about what top-line growth could look like next year, it sounds like you are really encouraged by what you are seeing in the Middle East. Some contribution from DRAs. Is it your view that, as we think about the entire year, we could see maybe mid- to high-single-digit type of top-line growth?

And then the second piece of that question is, as we are talking about Latin America, is it possible that we see any business opportunities start to show up in Venezuela?

Patrick Williams: Yes. Good questions. I do think you are going to start seeing that probably between 5% to 7% revenue growth in Oilfield Services. Oilfield Services needs consolidation in the marketplace, at least in North America. There is also a need for technology. As Ian alluded to earlier in the conversation, there has been a big emphasis and a big push to bring new technologies to the marketplace that really this market has not seen in quite some time. I do think that we are on the edge of that happening. As you said, I think the Middle East will start to really pull its weight in Q2, Q3, Q4. It is not just with Saudi Aramco.

It is in the general market area, the regional area of the Middle East. In regards to Latin America, I do think we are going to start seeing sales in Mexico again. It is a function of how we are going to get paid. We are not going to sell products for free, but we do know they need the technology. We know our technology works. It is proven. So I do think Mexico, at some point in time, we will see something, not to the magnitude we have had in the past. In regards to Venezuela, it is a very heavy crude. We know that crude up there very well.

Chevron has operated in that region for quite some time. As soon as you start getting some political stability in that area, and you start seeing international investment primarily from the U.S., that is definitely an open market for Oilfield Services where I think we can make a big difference. There are a lot of positives there. We have to extract those, and the market has to come our way. It is up to our team to really push the envelope and make it happen.

Michael Joseph Harrison: One of the special items that you called out in the quarter referred to the tax impact from an internal reorganization. I was wondering if you could explain what that reorganization entails and what impacts that could have on the P&L going forward.

Ian Cleminson: Yes. I will take that one, Mike. It was a reorganization we did over a year ago at the top end of the organization just to simplify the structure and allow us to move cash overseas into the U.S. in a much more tax-efficient way. There was a deferred tax impact to that reorganization that has a 15-year benefit to tax. It will be about $600,000 a year for the next 15 years in cash taxes, Mike. So it is all below operating income. There is no business benefit.

But it does simplify our operations, the way we are able to move cash around, the way we are able to file tax returns in the U.S., and it gives us a little bit of benefit to the tax line as well.

Michael Joseph Harrison: Alright. Last one for me is just on corporate cost. They were quite a bit lower in Q4. I was just curious. Was that some incentive comps that were lower or what drove that? And if you can give any kind of an outlook or guidance for corporate costs in the first quarter and for 2026, that would be very helpful. Thank you.

Ian Cleminson: Yes. You are spot on, Mike, with personnel-related costs. As we look forward into 2026, that sort of $20 million per quarter, $80 million for the full year, that is the level that we are expecting for 2026.

Patrick Williams: Thanks, Mike. Thank you.

Operator: We are now going to proceed with our next question. The questions come from the line of David Silver from Freedom Capital Markets. Please ask your question.

Patrick Williams: Yes. Hi. Good morning.

David Silver: Morning, David.

Patrick Williams: Morning.

David Silver: I would like to start with a question or two on Fuel Specialties. Firstly, on the quarter, if I am not mistaken, my model goes back about 10 years or so. I believe the revenues in the quarter were your highest ever, and your operating profit, $37 million, was, I think, your second highest ever. The business is functioning pretty well, and I know that your view is that it is a very stable business, low single-digit grower from year to year. But it does seem like you are operating the business a little bit differently. What led to the record revenue and near-record operating profit this quarter?

Did you have some incremental success with new products or just a richer mix overall? Maybe some thoughts about that and why that strength on an annual basis could not continue into 2026.

Patrick Williams: Yes, David. They have really done a good job in that business. I think you are spot on. It was a record revenue. It was very close to a record operating income. A lot of it was product mix, but a lot of it is outside of even fuels. They have done a good job expanding their portfolio, getting out there with new technologies, making sure that we have the right costing in place, making sure that we are staying up on innovation. It was a good overall effort globally by all parts. It is a business that is typically a 2% to 3% growth business. Occasionally, we see those spikes like when you went to ULSD.

We had the big spike. You are starting to see some regulatory movement. You are starting to see GDI take effect in some aftermarkets in Europe with our marine business. All the businesses that we have been talking about for quite some time are starting to come along as expected. The group who manages that division have really stepped it up, and you have to give them credit. It has always been our stable business. It is light on CapEx. It has great free cash flow. We will continue to push it there. It is also an area we would love to acquire into if we found something that was worth purchasing. The team deserves it. They have built it.

They are ready for it. We just have to find the right thing to buy.

Patrick Williams: Overall, great job. I do expect them to have another strong, consistent year.

David Silver: You poached, with that M&A comment, one of my questions for the follow-up. Next question. I wanted to switch over to Performance Chemicals and come at it a little bit different. Revenue-wise, I think it was a record or near-record year. There are a number of issues involving the lower operating profit year over year. In general, there is a lot of chatter about the strained middle-income consumer. I noted it is two or three quarters in a row where you cited a weaker mix within Performance Chemicals. Is trading down an issue that you are seeing? Are your customers indicating that is a bigger part of their business with you?

More to the point, this business has been a mid- to high-single-digit grower over the longer term. Is that still your thinking for next year, or whether it is due to mix or other factors, the growth potential might be a little slower over the medium term?

Patrick Williams: If you look at consumer trends right now, they are trading down to lower-price commoditized type products. We have definitely seen that. That ebbs and flows. Once you take market uncertainty out and people see more spending capabilities in their pockets, they will go out and start spending more on high-end products. We have seen that push down to more commoditized products. That is typical in markets like this where there is uncertainty or coming out of inflationary markets. For us, it is the continuance on innovation and to get better manufacturing processes and efficiencies so that we can better prepare for that commoditized market where we are making better margins than we have today.

That is something we are doing at some of our plants right now, which will benefit us towards the latter part of the year. Consumer trends have sent us that way. The way I look at growth in that area is flat this year. Then you will start seeing it spike back up probably towards the latter part of this year, but I would probably hold it flat.

David Silver: Okay. Last one for me. I did want to go to your concluding remarks in your earnings release, and in particular, you cited in Performance Chemicals and Oilfield, you said new technology commercialization and other opportunities for 2026. On the new technology commercialization, you have focused on some of your functional surfactant products for mining and agrochemical and whatnot. Are those the recent commercialization products you are talking about, maybe expanding the rollout there? Or is there another new crop of product introductions we should be thinking about? Qualitatively, could you point us to where those might be?

Patrick Williams: These are a series of products—let us talk Performance Chemicals specifically. They are a series of products that go in multiple applications. They are not mass markets where you are going into a multibillion-dollar industry and capturing $200 to $300 million of this. They are more specialized. We will typically launch two, three, or four of these throughout the year, which is a nice build upon our business and, over time, will start increasing that margin. As I said earlier, you will start seeing the impact of those probably more in the Q3, Q4 range.

There is a nice pipeline of products that will be hitting the market throughout the year, but it is a buildup over time where you start seeing the big changes in margin profile and in revenue. It is the same in Oilfield Services. We have a lot of creativity in the group. They are coming together and bringing new ideas and creativity to market. Sometimes it is not necessarily just products. It could be market approach. There is a lot of different reality going on. We have to be different than other people, whether it is technology or service or any kind of innovation that is attached to both. That is where we are pushing our group.

That is why we feel confident that we will overcome the barriers that we have in Q1 and Q2—manufacturing barriers. We will overcome those in Q3, Q4 by all the things that we have going on internally with the organization.

David Silver: Okay. Great. Thank you very much.

Operator: Thank you. We have no further questions at this time, so I will hand back to the President and CEO, Patrick Williams, for closing remarks.

Patrick Williams: Thank you for joining us today, and thanks to all our shareholders and Innospec Inc. employees for your interest and support. If you have any further questions about Innospec Inc. or matters discussed today, please give us a call. We look forward to meeting with you again to discuss our first quarter 2026 results in May. Have a great day.

Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you and have a great day.

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