Texas Roadhouse earnings missed by $0.05, revenue topped estimates
Innospec Inc. reported its second-quarter 2025 earnings with a mixed performance. The company posted an earnings per share (EPS) of $1.26, slightly surpassing the forecast of $1.24, resulting in a 1.61% surprise. However, revenue came in at $439.7 million, just below the anticipated $440.7 million, leading to a 0.23% shortfall. Despite the minor EPS beat, the company’s stock fell by 5.87% to $80.73, reflecting investor concerns over revenue and margin pressures. According to InvestingPro analysis, the stock appears undervalued at current levels, with analysts maintaining a strong buy consensus and a price target of $115.
Key Takeaways
- Innospec’s EPS slightly exceeded expectations, but revenue fell short.
- The stock declined by nearly 6% post-earnings.
- Performance Chemicals saw revenue growth but suffered margin declines.
- The company maintains a strong cash position with no debt.
- Overall gross margins decreased, impacting investor sentiment.
Company Performance
Innospec’s overall performance in Q2 2025 showed a complex picture. The company reported total revenues of $439.7 million, marking a 1% year-over-year increase. However, the gross margin fell by 1.2 percentage points to 28%, indicating cost pressures. Adjusted EBITDA also declined from $54.1 million to $49.1 million, while net income decreased from $31.2 million to $23.5 million. Despite these challenges, the company remains debt-free with $266.6 million in cash.
Financial Highlights
- Revenue: $439.7 million, up 1% YoY
- EPS: $1.26, down from $1.39 YoY
- Gross margin: 28%, down 1.2 percentage points
- Adjusted EBITDA: $49.1 million, down from $54.1 million
- Net income: $23.5 million, down from $31.2 million
Earnings vs. Forecast
Innospec’s EPS of $1.26 exceeded the forecast of $1.24, providing a 1.61% surprise. However, revenue of $439.7 million fell short of the $440.7 million forecast, missing by 0.23%. This mixed result reflects a slight positive on earnings but a concern on revenue generation.
Market Reaction
Following the earnings release, Innospec’s stock fell by 5.87% to $80.73. This decline highlights investor concerns over the revenue miss and margin pressures, despite a minor EPS beat. The stock is currently trading near its 52-week low of $77.58, having declined about 31% over the past year. InvestingPro data shows the stock trades with historically low price volatility, making the recent decline particularly noteworthy. A comprehensive Pro Research Report analyzing these patterns is available for subscribers.
Outlook & Guidance
Looking ahead, Innospec expects Performance Chemicals to recover over the next quarter, while Fuel Specialties margins are likely to remain at the high end of the 30-34% range. The company anticipates potential mergers and acquisitions and a dividend increase in the latter half of the year. With a strong balance sheet showing more cash than debt and a track record of 14 consecutive years of dividend payments, the company appears well-positioned for these strategic initiatives. Discover more detailed analysis and forward-looking metrics with a InvestingPro subscription.
Executive Commentary
CEO Patrick Williams emphasized, "Our immediate priority is margin improvement in Performance Chemicals and Oilfield Services." He also noted, "We have a long way to go. There is a minor shift in the market, but it’s not the market that’s causing this. We need to take care of this internally."
Risks and Challenges
- Margin pressures in Performance Chemicals and Oilfield Services.
- Revenue shortfall raises concerns about growth sustainability.
- Geopolitical tensions and tariff discussions impacting consumer choices.
- Rising oleochemical raw material costs.
- Suspension of Latin American operations may affect regional growth.
Q&A
During the earnings call, analysts focused on the challenges in Performance Chemicals’ margins and the strength of Fuel Specialties’ margins. The uncertainty in the Latin American market and capital allocation strategy were also addressed, highlighting areas of concern and strategic focus for the company.
Full transcript - Innospec Inc (IOSP) Q2 2025:
Conference Operator: Good day, and thank you for standing by. Welcome to the Innospec’s Second Quarter twenty twenty five Earnings Release Conference Call and Webcast. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. Please note that today’s conference is being recorded.
I would now like to hand the conference over to your first speaker, David Jones, General Counsel and Chief Compliance Officer. Please go ahead.
David Jones, General Counsel and Chief Compliance Officer, Innospec: Thank you. Welcome to Innospec’s second quarter earnings call. This is David Jones, and I’m Innospec’s General Counsel and Chief Compliance Officer. The earnings release for the quarter and this presentation are posted on the company’s website. During this call, we will make forward looking statements, which are predictions about future events.
These statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ from the anticipated results implied by such forward looking statements. These risks and uncertainties are detailed in Innospec’s 10 ks, 10 Qs and other filings with the SEC. Please see the SEC site and Innospec’s site for these and related documents. In today’s presentation, we have also included non GAAP financial measures. A reconciliation to those 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 compared in accordance with GAAP. They are included to aid investor understanding of the company’s performance in addition to the impact of these items and events had on financial results. With me today from Medispec are Patrick Williams, President and Chief Executive Officer and Ian Cleminson, Executive Vice President and Chief Financial Officer. And with that, I’ll turn
Patrick Williams, President and Chief Executive Officer, Innospec: it over to you, Patrick. Thank you, David, and welcome everyone to Innospec’s second quarter twenty twenty five conference call. This was a good quarter for Innospec. Our balanced portfolio benefited from strong growth in fuel specialties operating income, which offset lower results in Performance Chemicals and Oilfield Services. Performance Chemicals delivered strong high single digit sales growth, but gross margins remained below our expectations.
We are focused on delivering sequential gross margin improvement and operating growth in the second half of the year. This is a priority for the business and we are cautiously optimistic that we can achieve these results through a broad range of opportunities that have been identified and actioned by the team. Fuel Specialties had another strong quarter. Operating income grew by double digits and margins expanded. The business benefited from good performance across all regions and end markets including non fuel applications.
Our outlook continues to be for steady performance in this business with focus on operating income growth and margin improvement. Oilfield Services operating income improved on a sequential basis due to our focus on margin improvement as discussed last quarter. Our medium term operating income margin target is above 10% and our teams will continue to drive sales, technology and cost management actions to meet these objectives. We remain focused on delivering further operating income and margin improvement through the second half of this year. Our outlook does not anticipate any resumption of Latin America activity for the remainder of the year.
Now I’ll turn the call over to Ian Clemson, who will view our financial results in more detail. Then I will return with some concluding comments. After that, Ian and I
Ian Cleminson, Executive Vice President and Chief Financial Officer, Innospec: will take your questions. Ian? Thanks, Patrick. Turning to slide seven in the presentation. The company’s total revenues for the second quarter were 439,700,000.0 a 1% increase from $435,000,000 a year ago.
Overall gross margin decreased by 1.2 percentage points from last year to 28%. Adjusted EBITDA for the quarter was $49,100,000 compared to $54,100,000 last year, and net income for the quarter was $23,500,000 compared to $31,200,000 a year ago. Our GAAP earnings per share were $0.94 including special items, the net effect of which decreased our second quarter earnings by $0.32 per share. A year ago, we reported GAAP earnings per share of $1.24 which included a negative impact from special items of $0.15 per share. Excluding special items in both years, our adjusted EPS for the quarter was $1.26 compared to $1.39 a year ago.
Turning to slide eight, revenues in Performance Chemicals for the second quarter were $173,800,000 up 9% from last year’s $160,100,000 Volumes grew 4%, driven by lower margin products, with a positive price mix of 2% and a positive currency impact of 3%. Gross margins of 17.5% decreased 5.1 percentage points compared to the same quarter in 2024, due to lower sales pricing and a weaker sales mix. Operating income of $14,300,000 decreased 33% from $21,200,000 last year. Moving on to slide nine, revenues in Fuel Specialties for the second quarter were $165,100,000 down 1% from the $166,600,000 reported a year ago. Volumes were down 7%, with price mix up 4% and a positive currency impact of 2%.
Fuel Specialties gross margins of 38.1% were 3.5 percentage points above the same quarter last year, benefiting from a stronger sales mix and disciplined pricing. Operating income of $35,400,000 was up 16% from $30,400,000 a year ago. Moving on to slide 10, revenues in Oilfield Services for the quarter were $101,000,000 down 7% from $108,300,000 in the second quarter last year. Gross margins of 29.6% decreased one percentage point from last year on a weaker sales mix. Operating income of $6,200,000 improved sequentially, helped by cost control measures, but decreased 15% from $7,300,000 one year ago.
Turning to slide 11, corporate costs for the quarter of $20,900,000 compared with $17,600,000 a year ago, and included a $2,300,000 legacy environmental provision. The effective tax rate for the quarter was 26.3% compared to 28.6% a year ago, benefiting from the geographical location of profits. Moving on to slide 12, cash from operating activities was $9,300,000 before capital expenditures of $16,200,000 In the second quarter, we bought back almost 90,000 shares at a cost of $8,200,000 and paid a semi annual dividend of $20,800,000 As of June 30, Innospec had $266,600,000 in cash and cash equivalents and no debt. And now I’ll turn it back over to Patrick for some final comments.
Patrick Williams, President and Chief Executive Officer, Innospec: Thanks Ian. Our immediate priority is margin improvement in Performance Chemicals and Oilfield Services. These improvements are expected to come from sales, cost actions, new technology and other opportunities across all regions and end markets. Fuel Specialties has delivered strong results year to date and is expected to remain steady. Overall, our balanced portfolio is well positioned for growth and improved margins as our business teams deliver on these objectives.
This quarter we paid our semi annual dividend of $84 per share and repurchased 8,200,000.0 shares. With over $266,000,000 in net cash, we have significant balance sheet flexibility for further organic investment, complementary M and A and shareholder returns through dividend growth and buybacks. Now I will turn the call over to the operator. And Ian and I will take your questions.
Conference Operator: Thank you, We are now going to proceed with our first question. And the questions come from the line of Mike Harrison from Seaport Research Partners. Please ask your question.
Mike Harrison, Analyst, Seaport Research Partners: Hi, good morning.
David Jones, General Counsel and Chief Compliance Officer, Innospec: Good morning Mike. Had
Mike Harrison, Analyst, Seaport Research Partners: a handful of questions here on the Performance Chemicals business. First of all, you noted that you were seeing higher volumes of some lower margin products and that mix was a drag on margin. Can you give us a little more color on what those products were? And is this something you guys are doing internally? Or is this more of a customer shift or trading down?
And I guess the end question is, do you expect that trend of weaker mix to continue into the second half or was it more isolated in the second quarter?
Patrick Williams, President and Chief Executive Officer, Innospec: I think there’s a little bit of hesitancy in the market, Mike. I think that with all the tariff talk and geopolitics going on, there’s been a little bit of a consumer shift to a lower commoditized product. We don’t give actual products out on the phone calls. But that’s what we’ve generally seen in the markets. And additionally, when you start looking at the recovery in pricing, there’s always a lag going up.
As oil chemicals go up, the lag going up takes considerable time. You get the benefit as raw materials come up on the back end. But right now we’re still climbing that ladder. I think for us as a company it sits on us that we need to control pricing a little better. And that is going to be our focus in Q3 not only from procurement but pricing to the customers.
So we’ve got a long way to go. There is a minor shift in the market but it’s not the market that’s causing this. We need to take care of this internally.
Mike Harrison, Analyst, Seaport Research Partners: All right. So you mentioned oleochemicals there and we’ve heard that there’s kind of a spike going on in those raw material costs. Is that the bigger driver then that we need to be thinking about and that the key to margin improvement in the second half is more of a pricing versus raw material cost issue?
Patrick Williams, President and Chief Executive Officer, Innospec: Yeah, I’d probably say that’s the bigger driver at this point. I think the other drivers are things internally that we need to do a better job of and we’re on top of it. I think you’re going to see unfortunately a little bit of that lag in Q3. I don’t see us coming out of this until the OLEOs come off a little bit, but it’s or until we get to the spike of the the height of the increase, which I think you’ll see in probably Q4.
Mike Harrison, Analyst, Seaport Research Partners: All right. Thanks for that. And then I guess on the more positive side, the strength that you saw in Fuel Specialties margin was pretty impressive, maybe almost seemed a little bit unusual. Can you help us understand what drove that strong gross margin performance in Fuel Specialties? And what aspects of that strength could be sustainable going forward?
Patrick Williams, President and Chief Executive Officer, Innospec: Yes. I mean, it’s quite frankly, it’s price discipline. It’s product mix. It’s non fuel applications. They’ve done a really good job in moving this business forward in a market that’s somewhat stagnant.
And I think the non fuel applications have been a big benefit. And as I said earlier, disciplined pricing. We’ve got great technology. We’ve got great people. That’s a very high margin for this business.
And it’s going to be tough to sustain that in Q3, Q4. I do see that coming off a bit, but I do think we’ll still stay at the high end of what we usually when we say that 30% to 34% of margin, think we’ll still stay on that high end, but should come up a little bit probably in Q3.
Mike Harrison, Analyst, Seaport Research Partners: All right. Thank you. And then I guess just kind of bringing it all together as we’re trying to think about what earnings could look like in the third quarter. It sounds like Performance Chemicals and Oilfield should both show a little bit of sequential improvement from Q2 earnings levels. Maybe Fuel Specialties comes off a little bit and net net, Q3 should look pretty similar to Q2.
Any other color around earnings guidance is always helpful. Thanks.
Patrick Williams, President and Chief Executive Officer, Innospec: Yes, Mike, I think what you’ll see is fuel specialties maybe coming off a little bit, not much. I think you’ll see old field services probably about the same as it was this quarter, could have a chance to go up. But I don’t think you’re going to see Performance Chemicals go up at all. I think we have a full quarter fix things before we get back to those normalized run rates in Q4.
Mike Harrison, Analyst, Seaport Research Partners: All right. Very helpful. Thank you.
David Jones, General Counsel and Chief Compliance Officer, Innospec: Thank you.
Conference Operator: We are now going to proceed with our next question. And the questions come from the line of John Tanwanteng from CJS. Please ask your question.
John Tanwanteng, Analyst, CJS: Hi, good morning. Thank you for taking my questions. Patrick, I was just wondering if you could help us understand the state of progress in diversifying your oilfield customer base. And if there’s any update and I know you didn’t include your guidance, but if there’s any update on the LatAm customer and if they may come back at some point in the future?
Patrick Williams, President and Chief Executive Officer, Innospec: Yes, don’t see it happening this year. I mean, everybody has seen what’s going on with that customer. Let’s just call it out specific to Mexico. They’re trying to float $10,000,000,000 of bonds. They’ve got some real big issues internally that they have to overcome and payment issues as well.
But there’s no doubt that crude oil drives their revenue base in Mexico. So they’re kind of caught right now. I don’t see any orders coming through in Q3. There’s a lot of talk going on, but we don’t see anything in Q3 and potentially Q4. I do, John, think they will come back.
It’s just a function of timing. And we’re risk adverse when it comes to payment terms. They have to be able to pay for us to ship product. And that’s kind of where we sit right now. So in answering the rest of your question, think the oilfield has done a better job diversifying in other countries.
Middle East you’re seeing growth. I think you’re seeing good growth in DRA and other areas. But the Latin American customer is going to take some time.
John Tanwanteng, Analyst, CJS: Okay, great. Thank you. And just to rehash the fuel specialties margin question, you mentioned a number of drivers to get you that really impressive 38 level in Q2. Which specifically is not repeating in Q3 that maybe gets you back to the normal range that you’re in, even if it’s at the high end?
Ian Cleminson, Executive Vice President and Chief Financial Officer, Innospec: Yes, it’s really product mix, John. We landed some real nice sales mix this quarter. That will come off a little bit in Q3. And along with the solid pricing discipline the business has got, our expectations are that we’ll be at the high end of that 32,000,000 to 34,000,000 range that we normally quote. That’s the normalized business going into Q3.
And as we head into Q4, again, dependent on sales mix, we’ll stay within that range, maybe come off a little bit from 34%. But let’s say we’ll update you on the next call, but certainly Q3 will be at the high end of the normalized range.
John Tanwanteng, Analyst, CJS: Okay, great. And then any update on capital allocation? I know you bought back some shares in the quarter, which traditionally you’ve done opportunistically, but not very a very heavy component of your capital allocation plan. Just wondering if there’s any changes that are going on, obviously the stock has been lower, but if there’s any M and A updates or other things you’d like to do?
Patrick Williams, President and Chief Executive Officer, Innospec: Why don’t you start and then I’ll add to it.
Ian Cleminson, Executive Vice President and Chief Financial Officer, Innospec: Sure. On capital allocation side, John, you’ve seen us in the market with the buybacks. And we have been a little bit opportunistic there. We’ve got a £50,000,000 authority, and we’re chewing our way through that. But we’re just looking at the market carefully.
We don’t want chase the market down, and we don’t want to chase the market up. But we’ll set the opportunities as and when they arise. The focus really for us is on the sort of longer term shareholder value, and that comes out the dividend and that comes out the business performance. So the dividend, we’ve increased 10% in the first half of the year. You’ll likely see us do that again in the second half of the year.
We think we’ve got the cash flow and we’ve got the cash reserves to do that. So no real changes on the capital allocation from that respect. M and A, I’ll pass that over to Patrick.
Patrick Williams, President and Chief Executive Officer, Innospec: Yes, we’re still looking at M and A. I would probably tell you nothing in Q3 until I get this margin issue fixed in Performance Chemicals. But we will always look, we will continue to look. There are some things coming on the market at the end of this year that have some excitement. But again, we’re not looking till I get these margins approved and fixed in Performance Chemicals and I guarantee it will be fixed.
John Tanwanteng, Analyst, CJS: Great. Thank you.
Conference Operator: We are now going to take our next question and the questions come from the line of John Tanwanteng from CJS. Please ask your question. Hello, John. Your line is open.
John Tanwanteng, Analyst, CJS: Hi, Ian. Just a quick follow-up, if possible. I know you mentioned that the geographic mix is a little bit better from a tax perspective. Any thoughts on that going forward and for the rest of the year?
Ian Cleminson, Executive Vice President and Chief Financial Officer, Innospec: Yeah, I think sort of 26% is probably the right number, John. Obviously, things can change as the business evolves. But right now, that’s our sort of full year estimate.
John Tanwanteng, Analyst, CJS: Okay, great. Thank you.
Ian Cleminson, Executive Vice President and Chief Financial Officer, Innospec: No problem.
Conference Operator: We have no further questions at this time. I will hand back to Patrick Williams for closing remarks.
Patrick Williams, President and Chief Executive Officer, Innospec: Thank you all for joining us today and thanks to all our shareholders, customers and Innospec employees for your interest and support. 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 third quarter twenty twenty five results in November. Have a great day.
Conference 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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