Hello and welcome to the Ingevity fourth quarter and full year 2023 earnings call. My name is Alex and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star followed by one on your telephone keypad. I hand it over to your host, John Nypaver, to begin. Please go ahead. Thank you, Alex. Good morning and welcome to Ingevity's fourth quarter and full year 2023 earnings call. Early this morning we posted a presentation on our investor site that you can use to follow today's discussion. It can be found on ir.ingevity.com under events and presentations. Also, throughout this call we may refer to non-GAAP financial measures, which are intended to supplement, not substitute for, comparable GAAP measures. Definitions of these non-GAAP financial measures and reconciliations to comparable GAAP measures are included in our earnings release. We may also make forward-looking statements regarding future events and future financial performance of the company during this call, and we caution you that these statements are just projections and actual results or events may differ materially from those projections as further described in our earnings release. Our agenda is on slide three. Our speakers today are John Fortson, our President and CEO, and Mary Hall, our CFO. Our business leads, Ed Woodcock, President of Performance Materials, Rich White, President of Performance Chemicals, and Steve Hulme, President of Advanced Polymer Technologies, are available for questions and comments. John will start us off with some highlights for the year. Mary will follow with a review of our consolidated financial performance and the business segment results for the fourth quarter and full year. John will then provide closing comments and our 2024 guidance. Our prepared comments will focus on full year results, but we are happy to take questions on the quarter during the Q&A portion of the call. With that, over to you, John. Thanks, John, and hello, everyone. On slide four you can see what the highlights are of Ingevity's 2023. In a challenging year, our most profitable businesses performed incredibly well. As you all know, the broader industrial markets experienced a major downturn last year and we were not immune. We have also been grappling with unprecedented CTO raw inflation in our Performance Chemicals segment. Despite all that, we accomplished a lot last year. Performance Materials posted their highest sales and EBITDA ever. Global auto production is getting closer to pre-2020 levels, with a good part of that growth a result of China and other Asian countries exporting more vehicles. Another growth driver is the increased production of hybrid automobiles and more fuel-efficient internal combustion engines. Consumers around the world are showing an increased preference for these options. Even though the engines in these vehicles are smaller than traditional ICE engines, we get similar value for our content in hybrids and more fuel-efficient ICE engines as we do in traditional ICE engines because of the value our technology brings to the evaporative emissions solution. Advanced Polymer Technologies, which we reported as its own segment in 2023, was impacted by the industrial slowdown. Their traditional end markets, what we refer to as old economy when speaking about APT, are industrial in nature and volume was down across the board. But Steve's focus is on new economy markets, which are end markets that present exciting growth opportunities where the sustainable nature of caprolactone technology has added value. This includes markets such as high-tech paint protective film on autos, where Capa provides durability, and food packaging, where Capa is used to improve flexibility and, more importantly, improve the biodegradability of the package in multiple environments. That biodegradable quality is also being recognized by more and more apparel companies as a solution for sustainable fabrics to help address landfill issues and microplastics that come from synthetic fibers. While these markets are small today, they are growing very rapidly and will play a big part of the future of this business. Importantly, the team revamped their cost structure in a way that we believe will allow them to sustainably maintain EBITDA margins in the mid-20% over time. Pavement Technologies also had a terrific year with record sales. Since we have now fully integrated the road markings business we acquired in 2022, we have renamed the pavement business line to Road Technologies. This name change better describes our expanded product reach. Road Technologies benefited from increased pricing and sales not only in the US but in other regions around the globe. We are excited about what our integrated offering can provide to customers. With the backdrop of 2023 of a global industrial demand slowdown and unprecedented CTO costs, the Industrial Specialties business had a tough 2023. As a result, we accelerated the repositioning of our Performance Chemicals segment, which included the conversion of our Crossett, Arkansas plant to run 100% on non-CTO oleo feedstocks, and announced the closure of our DeRidder, Louisiana, Performance Chemicals site. As an update, the DeRidder refinery ceased operations on 4 February. With this refinery shutdown and the conversion of our Crossett site, we have taken approximately 300,000 tons of CTO refining capacity offline, which represents roughly 30% of total U.S. refining capacity. We took these actions to focus our people and capital on higher growth, less cyclical end markets. In a few moments, I'll share our guidance for 2024. But to set the stage, we expect strong performance in Performance Materials and Road Technologies within Performance Chemicals. As we mentioned last quarter, we will sell excess CTO at a loss, and we will be presenting our results and guidance in a way that reflects our core operations while giving transparency to the excess CTO impact. We took decisive actions in 2023 and believe the company will begin to see the benefits this year. With that, I'll turn it over to Mary. Thanks, John, and good morning all. Please turn to slide five. As John mentioned in 2023, we accelerated the implementation of our strategy to diversify our Performance Chemicals feedstocks and reposition the segment for profitable growth. These actions resulted in after-tax charges of $120 million in Q4 and $138 million for full year 2023. These charges drove a GAAP net loss for Q4 of $117 million and a full year net loss of $5 million. We'll discuss our results on a non-GAAP basis for the remainder of our presentation and prepared remarks. Please refer to our earnings release for reconciliations of these non-GAAP financial measures to their most comparable GAAP financial measures. Full year sales were up slightly as increased global automotive production and the addition of the road markings business drove growth in Performance Materials and Road Technologies, respectively. This was largely offset by sharp volume declines in APT and the Industrial Specialties business line due to the global industrial slowdown, which continued throughout the year. Adjusted gross profit of approximately $560 million was lower by 12%, primarily due to the higher CTO costs we discussed throughout the year. This, combined with lower volumes and the negative impact on plant utilization rates, resulted in a 500 basis points drop in adjusted gross margin to 33.1%. Adjusted SG&A improved by 14% due to the cost savings actions taken during the year and lower variable comp. These cost savings actions are expected to result in annual savings beginning in 2024 of $65-$75 million. Adjusted EBITDA for the year was down 12% to $396.8 million, with an adjusted EBITDA margin of 23.5%, down about 360 basis points from full year 2022, as the gross margin compression of 500 basis points was partially offset with the cost savings. Diluted adjusted EPS for the year of $3.94 is lower than the prior year due primarily to the gross profit decline and higher interest expense due primarily to a full year of acquisition-related borrowing costs associated with the Ozark acquisition in Q4 of 2022. We expect our 2024 tax rate to be similar to 2023, between 22% and 24%. Let's turn to slide six. In the top left chart, you can see how the price increases in Performance Chemicals drove revenue up despite declining volume as Performance Chemicals continue to be our largest segment with approximately $900 million in revenue, resulting in a negative mix impact on the EBITDA margins. Going forward, as we complete the repositioning of Performance Chemicals, the portfolio mix becomes more balanced with Performance Chemicals and Performance Materials revenues similar in size, and the portfolio margin profile will be improved. Our free cash flow was a healthy $95 million, but was down about $76 million from 2022. The drop is primarily due to the gross margin compression as we were unable to pass through approximately $100 million of increased CTO costs. In response, we successfully focused on improving working capital and constraining capital spend. Our leverage did tick up year-over-year despite some debt reduction as EBITDA was pressured by the CTO costs and lackluster industrial demand environment. We are in compliance with all of our bank covenants and have significant cushion. Turning to slide seven, you'll find results for Performance Materials. As John mentioned in his opening remarks, 2023 was a record year for the segment for both revenue and EBITDA. Full year revenue was up 7% to $586 million due primarily to increased pricing of automotive products in addition to improved volumes as global auto production increased. We saw our volumes increase in Asia as the region began exporting more autos, and volumes up in North America as well where auto production was at its highest levels since pre-2020. Full-year EBITDA was up 14% to $286.6 million on the favorable product mix shift to our more profitable automotive end markets, year-over-year price increases, and lower SG&A. We saw higher input costs in the segment during 2023, primarily from elevated raw material prices, but we are seeing some improvement in these costs as we enter 2024. EBITDA margin for the year was 48.9%, matching the segment's highest full-year EBITDA margin ever. We believe the trends we saw in 2023 driving these strong results for Performance Materials will continue to be a tailwind for this segment. For example, we saw global auto production increase over 8% from 2022 to 2023, but that just gets us back to what we consider more normal levels. Auto production is typically a slow and steady growth engine and as more hybrids are adopted versus all battery electric vehicles, Ingevity's addressable market in auto should continue to grow. In addition to these macro trends, we believe the value of our technology, the value our technology brings to emissions control, will enable us to maintain this pricing leverage that we showed in 2023. And finally, as auto production continues to grow, our product mix moves increasingly from the lower margin filtration markets to higher margin auto, which helps support the expectation that mid- to upper-40s% EBITDA margins will continue. We believe all these factors are in play for many years to come. Turning to slide eight, revenue for the year in advanced polymer technologies was down 17% due to lower volumes attributed to global market weakness in many of the segments and markets. This was most acutely felt in Asia, where we saw competitors offering substitute products at bargain prices in response to the soft market. Our team was able to hold price for most of the year, and that, coupled with lower input costs, resulted in full year EBITDA of $44.5 million, up 11%, and an EBITDA margin of 21.8%, up 550 basis points from last year. Volume in this segment was hit hard by customers ongoing destocking in 2023, and we're cautiously optimistic that the destocking is complete based on order patterns we are seeing early in 2024. While we aren't ready yet to call a trend, we do believe the second half of the year will be stronger than the first half. In addition, as we've discussed before, Steve's team is focused on advancing the adoption of caprolactone technology in higher growth areas, as John mentioned. You hear us mention bioplastics a lot because we're very excited about our growth prospects in this area. We're seeing the use of bioplastics grow in key end markets where we already participate, such as consumer packaging, ag-chem, and apparel. Growth rates are strong, albeit off of a low base, but the base continues to broaden. The growth in these end markets, combined with the improved margin profile already in place, should deliver good year-over-year growth in 2024. Now, please turn to slide nine for Performance Chemicals results. Full year revenue was up 3% to $902.1 million as technology adoption drove higher sales in our legacy pavement business, plus we had the addition of the road markings business. The increase in Road Technologies offset a 16% decline in Industrial Specialties, which was challenged by an extended slowdown in cyclical industrial markets like adhesives and inks. This segment's performance was very end market specific. For example, we were able to increase price during the year on many of our TOFA-based products, which go into our higher margin, higher growth end markets like road technologies. But our rosin-based end markets, such as adhesives and inks, are more price sensitive, and we chose to make some price concessions toward the end of the year to reduce inventories. We expect this pressure to continue in the first half of 2024, as we will talk more about in our guidance. Going forward, due to the repositioning of the segment, we will have significantly less exposure to rosin-based end markets, and we are expanding our product offerings in legacy TOFA end markets to include products made from other oleo oils. This will allow us to optimize raw material streams while also developing new end markets for us with oleo-based products. Segment EBITDA for the year was down 59% to $65.7 million, compared to $160.4 million last year. This roughly $100 million delta is primarily the result of increased CTO costs. The graph in the bottom right corner shows how our CTO spend doubled in 2023 despite significantly less volume purchased. Our commercial team was able to recover a significant portion of the cost increase through price, but the remainder hit the bottom line. As John noted, with the closure of DeRidder and the changes at Crossett, we've taken approximately 30% of total U.S. CTO refining capacity offline. So now our contracted CTO exceeds our needs, and we are selling the excess CTO into the market. In Q4 of 2023, we executed our first resales for a net loss of $22 million. These excess CTO resales are non-core to our business and are excluded from sales and adjusted EBITDA. We are reporting the net effect of the sales, in this case a loss, on our GAAP income statement in the line item other income (expense), net, and we will provide this transparency every quarter as we execute resales. We continue to expect to incur cash losses of approximately $30-$80 million in 2024 related to excess CTO resales, and this is reflected in our free cash flow guidance. And now I'll turn the call back to John for an update on guidance and closing comments. Thanks, Mary. Our guidance for 2024 is for sales of between $1.4 and $1.55 billion, and adjusted EBITDA between $365 and $390 million. The midpoints of $1.475 billion and $377 million for revenue and EBITDA reflect a balanced approach to next year. Ingevity, as a result of a lot of effort across the company, is positioned for success. Both the Performance Materials segment and the Road Technologies business should continue to experience strong momentum and growth. The PM business is benefiting from both consumer preference for hybrids over all-electric vehicles in the current market, and challenges to EV infrastructure both in terms of production but also in recharging. As it maximizes the opportunity in its legacy markets, the segment continues to advance its carbon use in both battery technology and other applications as it manages the auto industry transition. Road Technologies continues to benefit from increased spending on roads in the U.S. and around the world, and is gaining share versus other more traditional technologies. The cost structure at APT is improved to a point where they can maintain industry-leading margins. Despite weak volumes in the back half of 2023, we expect APT volumes to increase sequentially each quarter in 2024. This will be a transitional year for Industrial Specialties. While most of the charges associated with the closure of DeRidder are in restructuring charges, there remains $10-$15 million of unwind costs that we expect to incur in 2024 that are included in our guidance. In addition, we have made great progress in the conversion of our Crossett site to run non-CTO oleo-based raw materials. But as we ramp up those efforts, which has included building out a commercial team and working with customers to test products, we expect we'll have $15-$25 million of costs associated with that ramp-up this year. We mentioned taking a significant portion of CTO refining capacity offline, which we believe will result in lower prices over time and that the price we pay for CTO will fall in the back half of this year due to the lag in our contract pricing. We have conservative assumptions for CTO pricing in our forecast, and to the extent we do better, we should benefit. All these are good setups for the year. However, there are a number of broader economic points of interest that we are monitoring. The global economic outlook remains weaker than we would like, and this will be an election year. These two items impact our industrial end markets and affect our Industrial Specialties business and APT. As we have described, the CTO market remains dynamic. If necessary, we will take additional repositioning steps to drive increased profitability. We will be very disciplined in cash management as we move through the year and are minimizing capital expenditures and other allocation strategies while we pay down debt to our more normalized historical levels. As you all know, we do not provide quarterly guidance, but given the environment, we, like most of our chemical company peers, expect a weaker first quarter with strength improving sequentially each quarter over the course of 2024. First quarter, like our fourth, suffers from the seasonality of the paving business, which operates primarily in the second and third quarters. Also, the Chinese New Year falls in the first quarter, and this always impacts auto production and industrial markets in that country. We expect after Q1 to see sequential improvements across our business lines. As I mentioned at the start of this page, we are excited for 2024. Our largest and most profitable businesses are set up for a good year. The transition in performance chemicals is happening, and we are looking forward as 2024 gets underway. With that, I'll turn it over for questions. Thank you. As a reminder, if you'd like to ask a question, you can press star followed by one on your telephone keypad. Our first question for today comes from Vincent Anderson of Stifel. Your line is now open. Please go ahead. Yeah, thanks. Good morning, everyone. John, thanks for pointing out some of those discrete items on Industrial Specialties. But maybe just to go back to Crossett, you were planning, I think, to be, call it, break even by the middle of the year, and then you also have some incremental ramp-up costs, related to commercialization. Can you just maybe marry those two things, especially compared to what kind of drag it was on earnings in 2023? We were trying to be very responsive to your flash note from last night, Vincent. So, listen, our transition is well underway. We remain committed to this. You know, it's a question of sort of optimization of the production footprint, relative to how the demand ramps up, right? I mean, you know, the oleochemical markets writ large are suffering like the broader industrial markets. So, you know, they are challenged as well. And while a number of those companies operate privately, but we, you know, we are in this industry and we can see the implications of that, but it will recover. And, you know, we, we want to be there as it ramps back up, right? You know, I would also tell you that, you know, the certification process and the build-out of the commercial side just takes time. There are a number of regulatory hoops that we have to kind of jump through. And, you know, you, you submit this stuff, and you have to wait for the review. So, we're pushing forward with all those things. We're really pleased, particularly with the substitution effects that we've been able to take in pavement, our legacy sort of pavement businesses. That team has done a terrific job, finding ways to affect those substitutions. It will be a big part of that story as these approvals come through. To a lesser extent, I also think the work that's going on in the oleo side of the business, our legacy oilfield products also have some opportunities. But I, you know, I, I do think that in this current environment, we will struggle to meet our previously stated objective of profitability this year. It is possible, but in this environment, I think it's going to be challenged, which is why we tried to lay that out very discreetly in our prepared comments. Okay. No, that's, that's helpful. And maybe just staying on that, that point, you know, you made a pretty big hire, at least in the fatty acids world, a pretty big hire with Rebecca Belmer. But that would seem to indicate that you're looking at those more consumer-focused, product groups maybe sooner than you were communicating. Is that a fair interpretation? Yeah. So, I mean, look, our strategy really is not that different from what was laid out last year, right? So, you know, we're really attacking on, on two fronts, right? One is substitution in our legacy markets, right? So as the CTO has inflated, and, and it is true that CTO costs are coming down, but by historical standards, they're going to be elevated, right? They're still going to remain very elevated. So we need to be able to offer to our legacy customers products that, that make sense and that are, you know, competitive substitutes to what is sort of going to be the new pricing dynamic for our legacy crude tall oil products. So that, that's one thrust. And, and there's a lot of work going on by our existing teams to try and affect that. We made some hires, including Rebecca, and she's a great, woman. She was actually here yesterday, in the building, in this room, but as we did some meetings. But, you know, we also want to use our work in these new, chemistries for us to enter new markets that are less cyclical, less industrial-oriented, have better margin profiles. And that's really around personal care and, you know, food and nutrition, right? So, you know, we've made hires. It's going to take a little while, as I said, for these things to sort of pay off, if you will. But in this environment, it's a little more challenging. We probably do have some opportunities operationally to take some costs and sort of lower our production overheads as we try to manage through the year. But it doesn't change the overall story, right? So, you know, this is the area where we're focused when we think that there's real opportunities for Ingevity. All right. Great. And then I just had one quick one, and then I'll turn it over. But if I remember correctly, didn't you have some equipment down in DeRidder that had been converted over to work with the caprolactone business? And if that's correct, what is the plan for that capacity? Yeah. So we're looking at it still, Vincent, right? You know, at some point, we're going to need to expand that polyol capacity. So whether we move this equipment or build it out in Asia or somewhere else in the U.S., these are all options that we're looking at. The good news is that, you know, the reactor's there. You know, we're just trying to figure out where the right place is and what that right situation. It's also possible that someone else who might operate DeRidder, we could use it. I don't want to overpromise on that, but we're looking at all the options. Okay. All right. Thank you very much. Thank you. Our next question comes from Jon Tanwanteng of CJS Securities. Your line is now open. Please go ahead. Hi. Thanks for taking my question. The first one was, I was wondering what your underlying assumption is in 2024 in the, in the guidance, for the carbon business compared to auto sales or, or maybe PHEV or, or hybrid sales and your, your assumptions for content per vehicle. Hey, Jon. This is Ed. You know, we, we think, obviously, there's some second-guessing going with the, with the Biden administration on, the adoption of battery electric vehicles. What we're seeing, though, is a definite consumer preference for, hybrids versus battery electric vehicles. In the U.S., you know, for every 1 BEV that is sold, there is 1.3 hybrids being sold. So a preference there. And then similarly in Europe, Europe, for every 1 BEV that's been registered, there's 2.2 hybrids being registered. So, you know, I think they're going to continue. The OEMs are going to continue to drive electric vehicles, but the consumers are shifting more towards hybrids and plug-in hybrids as a whole. And we do have relatively good content on those vehicles, and we'll continue to be supplying carbon to those markets. Yeah. Let me just, Jon, add on to that to give you some granularity because I know what you're trying to do is sort of build out your forecast, right? You know, I, I think it's important to focus on the ratios that Ed just gave you, right? Because there's no shortage of forecasts out there calling EV penetration and, you know, but you have to really dig in because, you know, different people categorize EVs different ways. There's partial hybrids. There's full hybrids. There's plug-in hybrids. So you have to really look at all those different forecasts, take a view on what you think that looks like, and then just sort of temper that with really the ratio that that Ed just said, which is consumer preference. Our personal view is that the sale of hybrids and ICE engines is going to come in better than the broader forecasts as of today. And I don't want to name names. You can pick. There's a lot of them out there from the banks to the research houses or what have you. The other thing you need to understand, which you made reference to today, is that the content we have on these hybrids is, you know, at or comparable to what we have with ICE. If you really want to be conservative, I would pick sort of the midpoints of our guidance lower, recognizing that we'll raise prices, etc., over time to manage some of that, right? So, that's probably the best way we can help you kind of navigate. But we expect next year to have continued growth and momentum in that business. And it's really not only the production of automobiles continuing to recover globally, but it's this mix shift that Ed's referring to as consumer preference move towards hybrids. Got it. That, that's helpful. I was also wondering, if you could provide a little more clarity on the AFA expectations, the alternative oleo feedstocks. Are the costs higher than you expected to ramp that business, or is the volume expectation lower, just because of the macro, or is it a combination of both that's causing you to? It's the latter. The costs are actually in I mean, the cost equations to this get tough to see in our financials because some of it is in restructuring from years past. Some of it was in the transition costs of, of I mean, the, the absolute cost position of the, the site, etc., has improved to the tune of close to 30%-40%, right? It's just getting the takeoff because of the situation in the broader environment means that we're probably going to bear some of those for, you know, a little bit longer than we would like. Got it. And then one final one from me. Just with regards to covenants, which quarter do you expect to be the tightest, under your current bank agreements, as you look forward? Is it Q1 because of just the seasonality, or is there something else going on with CTO resales and any other costs of closing? No, it's Q2. It's Q2, Jon, because of the way the EBITDA, four-quarter EBITDA flows. And remember, it's looking backwards, right? So Q1 will probably be our sort of weakest quarter, if you will, because of the things we described. And that's not unusual. It's been that way for a long time here at this company. But the sort of measurement, to Mary's point, looks back, right? So it'll show up in the Q2. But I also we want to be very clear. We feel like we have lots of headroom well, we know we have lots of headroom in our bank covenants and the way that the ratios work in the actual bank deal. So we do not consider ourselves to have any liquidity risks whatsoever. Understood. Thank you. I'll jump back in queue. Thank you. Our next question comes from Mike Sison of Wells Fargo. Your line is now open. Please go ahead. Hey, guys. Good morning. So for Performance Chemicals in 2024, if you exclude the $30 million-$80 million in cash losses that you noted, what should the underlying business sort of look like in terms of either, you know, EBITDA margin, you know, growth? Just, you know, if we can peel away the issues with CTO, you know, how does the remaining businesses sort of perform this year? So, so again, in the guidance, if you take those midpoints, just for example, you get to that, a mid-20s EBITDA margin, versus the 23.5 where we landed in 2023. She's talking on the consolidated line. Right. Right. So, I mean, look, if you if you were to dissect or peel back the onion to kind of figure it out, right, the, you know, the, the Performance Materials business is going to have margins like they always do. It's the upper 40s on PM. We said mid-20s, you know, low to mid-20s. And the, and the APT. So you can kind of impute that the, the margin profile of the PC business is going to remain depressed, and probably not that different from, you know, where it was this year, right? You know, but, but I also want to be clear. It's on a lower sales number, right, because we are not operating DeRidder, right? But I think as the year progresses, you're going to see that margin profile of that business improve, at, you know, partially for macro reasons, but also as a result of some of the restructuring that we've done and the impacts that that's going to have on the business, right? Right. Okay. And then, you know, you sort of noted that there could be a slower ramp-up in end market sales for the oleo-based products. Is there upside to that, meaning, you know, can you maybe walk us through what your teams are doing to maybe accelerate, you know, some of the new specifications there and how you're going at trying to convert folks more into this product line versus the others? Look, we're moving, as I mentioned, Mike. Look, set aside the macroeconomic environment, which is slowing demand, and it's just across all oleochemistry. So it's not unique to what we're trying to offer, right? We are moving as fast as we can with these development processes, right? So we have sent multiple samples to all of our key customers. I met with the EPA several weeks ago in person in D.C. We are moving this process along as quickly as possible, but you don't just flip a switch, particularly when you're talking about industrial customers that, you know, have never executed a transition like this, right? So, you know, these are not products that have a long history of being made, right? We're having to go in and do the reformulations and then get the approvals both from the customers and from a regulatory perspective. That, unfortunately, just takes some time. To the extent we're able to accelerate those processes, then we're going to benefit from that. To the extent the macroeconomy improves, we're going to benefit from that. We put the commercial team in place. The commercial team is now built out and in place and, again, driving that activity, which will help accelerate our efforts once that underlying environment improves. You know, the other thing I would say, Mike, is, look, we, we have hopefully demonstrated a history to, to everyone that we're not just going to sit back and wait on this to happen. To the extent there are not substantive changes or the environment erodes further, we will take changes operationally and continue to restructure accordingly to do what we have to do. I don't, we're not sitting here in February in a position to, you know, opine. No one has a crystal ball, but we're ready to execute on a lot of different options depending on how things play out. Right. Great. And then just quick follow-up on Advanced Polymer Technologies. You know, volumes have been pretty weak for quite some time. So when do you think you will see or could see an inflection point there? I know a lot of it's destocking, and some companies have said it's kind of subsided for different end markets and stuff. So, do you see potential for that business to turn around? Well, listen, it's in that business. It's a function of price and volume, right? And, you know, it's a function of whether they can substitute primarily to sort of an alternate material, right? Our volumes were hit pretty significantly in the last part of last year, but we held prices, right? And ultimately, we held those prices, and we repositioned the cost structure of the business. Its EBITDA actually grew quite dramatically as a result of that and got back to the margin levels that we expect them to be at. Going forward, we're going to manage that business volume and price relationship to ensure that the margin profile stays in that zip code. Now, it is, as you know, like a lot of our businesses, kind of lumpy on quarters, so you can't expect every quarter to it moves around. But the goal for the year is to have margins comparable to, to what they had this year. We can drive volumes by reducing price, but we want to have that balance, right, to make sure that we maintain the margin profile. I, my personal view is I think volumes will pick up starting in Q2. When I look at the backlog and the order book and conversations with our colleagues in Warrington, I, I think that starting in Q2, you're going to see it begin to kind of pick up. I, I do think that business has a seasonality to it, which we've noticed over the last few years, that is sometimes lost. And I think it's been amplified by sort of the broader economic environment and that people kind of and I hate to use this much abused word, destock or take down inventory levels in the end of the year. Then they kind of wait a little while to see what the environment's going to be like, and then they start buying again, right? And that's just the economic environment that we're in today. I think just, just to add a comment to that too, I mean, Steve's business is very global. And as I mentioned in my comments, Asia in particular, his, his business was quite hard hit by, the weakness in Asia. And again, when that picks up, we should see some recovery. We'll see a recovery in his business. Got it. Thank you. Thank you. Our next question comes from Daniel Rizzo of Jefferies. Your line is now open. Please go ahead. Good morning. Thank you for taking my question. In Performance Materials, I mean, given the strength of your margins, I was wondering if they can still go a lot higher given what you're seeing in demand from hybrid or just mix or how we should think about it over the next three to five years if it's just going to be continuously kind of trending upwards or if we're near peak. Well, look, man, it's a great business that is very well executed, right? I think we've demonstrated that we have a history of trying to maximize and drive profitability in that business, right? And we will continue to do so. You know, directionally, I think if you were to look back over the last seven or eight years, its margins have actually improved. Not every year, but sort of, you know, it continues to kind of go up and to the right. That's a function of, you know, the quality of this business, right? So we're always looking for ways to, you know, maximize the return on it. And I think we're managing it pretty well. It's, listen, as you guys know, there's lots of puts and takes, right? I mean, you know, the OEMs are trying to juggle a lot on their plate right now, right? They're trying to manage this transition. So they've got, you know, these EVs, and those have a whole new cost structure and supply chain or what have you, but they're still making money on their larger trucks and SUVs. And so there's just a lot at work in all this. And we're working as hard as we can. I think we've demonstrated through thick and thin, good times and bad, COVID, non-COVID, that this is a high-quality business. As with regards to next year and the next few years, we think that this business is going to continue to do very well, because it's being driven now by consumer preference. And we think hybrids offer a great intermediate step as a part of this transition, and we are direct beneficiaries from that. So with the demand for hybrid, is there a particular region where the consumers is into it more, like, I don't know, North America or China where it's really driving growth and one where maybe it's lagging on a regional basis? I was just wondering what the geographic mix was. To some extent, Dan, it's global, right? I mean, I think it's really interesting. Again, you have to kind of peel back the onion. I don't like naming tons of names and getting way into this, but a lot there are a lot of companies that are viewed as what I would call Tesla alternatives, which is Tesla's obviously an all-electric vehicle, that actually sell a lot of hybrids, right? I would tell you that, you know, when I look at North America and China, which are the two markets that we really obviously focus on because of their size, hybrids are where people are going. You can see it again in the ratios that I think I would just keep calling your attention back to the ratios that Ed laid out. We almost put that in our prepared remarks because it's pretty important when you think about what consumer demand and, and look, again, we know there's an EV transition, and this transition is underway, and there's a lot going on. But, you know, there is a consumer buying pattern that plays a big role in this when it comes to absolute sales and what OEMs produce. Okay. Okay. Thank you very much. Thank you. As a reminder, if you'd like to ask a question, that's star followed by one on your telephone keypad. Our next question comes from Jonathan Tanwanteng of CJS Securities. Your line is now open. Please go ahead. Hi. Thanks, John. Just for my follow-up and following on that hybrid comment, I mean, it's great that hybrids and ICE engines are seeing a little longer lifetime or hold than, I guess, others had expected. But does that reduce the urgency or push out the expectations for your alternative carbon efforts, and especially as it pertains to Nexeon and the battery investments there? It's listen, it's not going to change, Jon, our overall strategy, right? We intend to be a participant in the auto industry selling activated carbon. And we want to get ourselves to a point where we are to some extent agnostic as to consumer choice, right, because we want to provide what our customers need, and their needs are driven by what consumers do, right? So we have ample capacity and ample capability to service hybrid needs while concurrently work on our other initiatives, predominantly or the one that has the most public focus right now is Nexeon. But that's not the only one we're looking at, right? So we're, we're looking at other things as well, but we, we are going to be a participant and help the auto OEMs affect this transition. Got it. Thank you. And then, could you, just remind us what the competitive dynamics in APT are like in Asia, just how, how is the competitor there, you know, derives its, its product and kind of what, what, what happens when, you know, the, the macro improves? Yeah. So, you know, there are four producers of caprolactones, two of whom BASF and Daicel predominantly sell captive. They do sell excess monomer into the marketplace. And then there's also a Chinese company called Juren that sells, into the marketplace as well, right? So, you know, on, on one level, we actually like having a depth one of caprolactone's historical problems with adoption has been the scarcity of its supply, right? So a lot of large chemical formulators have been skittish or somewhat apprehensive about formulating with caprolactones because there just wasn't a whole lot of it out there. And frankly, there was one source that was sort of non-captive or being sold predominantly to third parties, and that was in Warrington, and we own it now, right? So we think this actually bodes well for the broader market, because we think that, you know, people, who will people will uptake or be more prone, more likely to adapt the technology once they know there's a lot of it, right? Like ourselves, everyone who is selling in China and in Asia writ large is suffering from the broader economic environment over there, right? So it's not unique to us. We can see it in everybody else's numbers too. We are optimistic that, you know, that economy will begin to improve and pick up, but we just got to be patient on that. Understood. And then finally for me, I was wondering if you could break out how much revenue you expect to generate in Q1 and Q2 from the lines of business that were closed and kind of what the tail looks like as you sell off this inventory that's being discounted. Yeah. We don't look, we don't really guide by quarter, right? But I think you can look at our numbers and directionally, you know, understand that DeRidder was a couple hundred million-dollar business, right, you know, approaching $300 million in peak cycle and, you know, lower than that and softer periods, right? So that should give you some sense. It also did not have the seasonality because it was not selling to pavement, right? But it has been running at relatively reduced rates for the last year or two, last year anyway. So just keep that in mind as you think your way through it. Look, I want to be also clear because we're talking a lot about Q1. You know, we have factored that into our guidance for the year, right? So there's nothing here that is untoward or unanticipated. We just want to be very clear with everyone, just like we've always been, about the Industrial Specialties business in particular as it moves through this period, that there's some challenges in that business. It will get better, particularly for PC as the pavement season gets going, right? It's going to look a lot like, you know, what happened last year in the sense of that Q4 is going to be somewhat, I think Q1 will be a little bit better than Q4, but it's going to be a challenge for them, right? And then it should kind of get a little bit better, right? The other thing I would tell you though, as we think about the year, you know, we've made, as I mentioned in my remarks, some pretty conservative assumptions around the price of CTO, right? So the price of CTO really ran up on us. And from a year-on-year perspective, it's going to look elevated this year, but it's going to come down, we expect, over the course of the year, particularly in the back half, right? So, you know, I think you got to think your way through as you do the calendarization, all the puts and takes of that, right? And Jon, if I could add, maybe you missed the comment, but John Fortson did call out in the guidance discussion that with respect to the unwind of the commercial part of that operation in DeRidder and exiting certain product lines, we quantified that as roughly $10-$15 million of unwind cost, and expect most of that in the first half of the year related to those, you know, selling of the inventory and exiting certain commercial contract, commercial agreements, etc. So I think that might be the number you're looking for in your modeling. Got it. And is that incremental to the cost you detailed last quarter? No. That is, well, it's in our guidance. Okay. Fair enough. Thanks, guys. Appreciate it. Thank you. At this time, we currently have no further questions. So I'll hand back to John Nypaver for any further remarks. Okay. Thanks, Alex. That concludes our call today. Thank you for your interest in Ingevity, and we'll talk to you again next quarter. Thank you for joining today's call. 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