Greetings and welcome to Ingevity Third Quarter Earnings Call and Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like turn the conference over to your host, Dan Gallagher, Vice President of Investor Relations. Please go ahead.

Thank you, Barack. Good morning, everyone. Welcome to Ingevity’s third quarter 2019 earnings conference call. Earlier this morning, we posted a presentation on the Investors section of our website. If you haven’t already done so, I’d encourage you to download this file, so you can follow along on the call. You can find it by visiting ir.ingevity.com under Events and Presentations. For participants who are logged into our webcast, the slides should be visible in the online viewing pane and also available to download. On Slide number 2 of that deck, you’ll see our disclaimer that today’s earnings call may contain forward-looking statements. Relevant factors that could cause actual results to differ materially from these forward-looking statements are contained in our earnings release and in our SEC filings, including our Form 10-K and our most recent Form 10-Q. Ingevity undertakes no obligation to publicly release any revision to these projections and forward-looking statements made during the call or to update them to reflect events or circumstances occurring after the date of the call. 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 financial measures are included in our earnings release and can be found on the Investor Relations section of our website. Our agenda is on Slide number 3. With me today are Michael Wilson, President and CEO and John Fortson, Executive Vice President and CFO. First, Michael will comment on the highlights of the quarter and review the performance of our two segments. John will discuss our current financial status and our revised guidance for the year. Then Michael will make some closing remarks before we open the line for questions. Mike Smith, President of Performance Chemicals; and Ed Woodcock, President of Performance Materials, will join the call for Q&A. With that, I’ll turn it over to Michael.

Thanks, Dan and good morning, everyone. Thank you for joining us this morning. We appreciate your interest in Ingevity. If you’ll turn to Slide number 4, you’ll note some highlights for the quarter. In the face of challenging macroeconomic headwinds, we delivered a strong third quarter performance in line with our expectations. Overall, revenues in the third quarter were $360 million, up approximately 16% when compared to the previous year’s quarter. Our Performance Chemicals segment was broadly impacted by the global industrial slowdown. Offsetting this, we had the benefit of additional revenue and earnings from our acquired Engineered Polymers product line formed through the acquisition of the Capa caprolactone business of Perstorp Holding AB. At the same time, we saw very strong growth in shipments of our Performance Materials segment’s automotive products, accelerating significantly by a step change in orders in China as automakers increased compliance with national China 6 regulatory standards. With respect to earnings, we realized strong drop through as we posted a 26% increase in adjusted EBITDA on 16% increase in revenues. Adjusted EBITDA were $114 million, up $23 million from the previous year’s quarter. And for the third consecutive quarter, we achieved an adjusted EBITDA margin of 30% or more up 260 basis points versus the prior year. Our SG&A costs, net of IP litigation expenses, were down 6.1%. And for the quarter, we generated outstanding free cash flow of $97 million, up 40% versus last year’s quarter. This reduced our leverage and brought our net debt to adjusted EBITDA down to 2.9 times. If you turn to Slide number 5, you will see the third quarter results for Performance Chemicals. As mentioned, sales in most areas of Performance Chemicals segment were negatively impacted by weak market conditions, especially in Europe and Asia. Segment sales in…

Thank you, Michael. Good morning, everyone. We’ve made a few adjustments to the following pages from our previous template. As usual, I will provide some additional color on our third quarter results, review our capital structure and discuss our revised guidance for the year, before turning the call back to Michael for some closing remarks. Turning to Page 7, as Michael has covered the revenue and EBITDA of the company and its segments, I will begin at the SG&A line on the income statement. SG&A up from last year by approximately 18%, primarily reflecting the additional costs, both cash and non-cash, associated with the Capa caprolactone acquisition, as well as increased legal expenses related to the defense of our intellectual property. However, this number is effectively flat on a percentage of sales basis. We are now estimating litigation expenses of around $15 million for the full year. We did spend a bit above this trend over the past quarter due to higher activity associated with various litigation proceedings. Our core SG&A, excluding litigation expenses of $4.4 million and amortization of $6.9 million, included in SG&A from the acquisitions, was actually down 3.3%, reflecting our continued focus on cost discipline across the company. Net interest expense for the quarter was $12.1 million, as a result of the increased debt associated with the Capa acquisition. The provision for income taxes on adjusted earnings was $18.2 million for the quarter. Our adjusted tax rate for the quarter was 22.6% and for the nine months year-to-date it was 22.3%. Our estimated cash tax rate is 8.4%. Diluted adjusted earnings per share were $1.46, up 27% from the quarter a year ago. We did buy back 40,000 shares in August at an average price of $77.72. Approximately $389 million remain available for repurchases under our…

Thanks, John. Since we will not provide forward guidance for 2020 until our fourth quarter earnings call in February, given the current business environment, I thought I’d take this opportunity to provide some preliminary, more general perspectives on next year. Sitting here today, global macroeconomic conditions, particularly in industrial production and outside of the U.S. remain challenging and the timing of any improvement is uncertain. Consequently, we are taking a conservative view in our 2020 planning, ensuring that we are placing sufficient focus on both cost control and growth, as well as a premium on execution. We expect to deliver strong performance again in our Performance Materials segment based on continued regulatory driven growth in China, North America and other regions of the world. Relatively speaking, growth should be the fastest in the first two quarters of the year as automakers complete the transition to 100% compliance with China 6. As we have previously communicated, we would also expect continued margin accretion in the segment, due to volume and mix benefits will continue to be tempered by the higher litigation costs. However, we expect performance across the Performance Chemicals segment to be mixed. Engineered Polymers should post solid year-over-year growth as monomer markets stabilize, the use of derivatives grow in targeted applications and with all transition related revenue impacts behind us. We also anticipate the sales to pavement technologies customers will return to more normalized growth, again led by North America and the continued adoption of our innovative Evotherm warm-mix asphalt technology. On the other hand, the outlook for oilfield drilling and production activity will be softer in the absence of some recovery in crude oil prices. This view should be consistent with what you are hearing from major oilfield players. And finally, sales to industrial specialties end use markets are going to remain challenged at least for a few more quarters as rosin markets remain weak and as we transition out of the European distribution arrangement we have previously disclosed. Our free cash flow will be stronger next year due to higher operating earnings and lower capital requirements. Our near term focus remains on delevering our balance sheet to targeted ranges. In sum, we believe that the diversity of our portfolio, combined with strong execution, will enable us to deliver solid revenue and earnings growth in 2020, albeit less robustly than in years past. I appreciate the work and efforts of our 1,750 employees worldwide. They are a distinct competitive advantage for us. We continue to be very strongly in the long-term potential for our company. We hope you share our enthusiasm for Ingevity. At this point, operator, we’ll open up the call to questions.

Yes. Thanks for taking my question. With regard to the expensive China inventory that you were working through the system, it sounds like a lot of that is pretty much done. How should we be thinking about the margin lift that you should be getting into the fourth quarter? I know, originally you were expecting it to be a big lift in 2020, but do we get that a bit earlier, given that it sounds like you’re largely through this?

Hey John. It’s Michael Wilson. As we said, we’ve worked through the vast majority of that inventory. So it’s almost done. That is going to be beneficial, but if you look at the things that I pointed out in terms of higher costs that impacted us in the third quarter, the excess legal spending, outages and consuming that inventory, I said that was in total of $5 million, and $3.5 million of that was litigation. So it was a relatively small impact for the quarter. It will benefit us, but I think rather than focus on what the lift is going to be in 4Q, I would just take you back to what we said previously that, on a full year basis, we expect margins in the segment to be marginally higher than they were in 2018 on a full year basis.

Got it. Fair enough. And then when we think about the pressure that you’re seeing from Chinese gum rosin, I guess now the turpentine prices have really tanked, how are you thinking about how this plays out say beyond the next few quarters, but as you kind of look to the back half and next year?

Well, it’s my view that gum rosin prices will begin to recover a few quarters out and that’s based upon sort of, that they were down from Q2 to Q3, maybe as much as 20%, but if you look at them over the last quarter, they are really kind of flat and bumping along, I think a lot of what has happened to gum rosin was due to the aberration that happened in the gum turpentine. As we know, we saw gum turpentine spike to all times highs because of the shortage of synthetic or hydro-based turpentine. That shortage has now been resolved and we’ve seen gum turpentine prices – don’t hold me to the exact numbers, fall from something like $5,500 a metric ton to under $2,400 a metric ton. So I think with the incentive now away from producing gum rosin in order to get turpentine, we will see the supply/demand balance work itself out. It’s hard for me to know exactly how much inventory is out there, but we’re also now through the fall harvest season in gum rosin. So I expect over a few quarters we’ll get back to a balance supply/demand position and it would be my expectation that we should get some lift in those gum rosin prices.

Okay. And then maybe just one last question. With regard to the longer term, you had indicated you thought environmental standards were going to continue to tighten. I guess any thoughts on timing in terms of Europe and China? I mean Europe is even below China in terms of the gasoline vapor emissions standards and China is still below the U.S. I guess. Any thoughts as to when we might get an update on some of these regulatory requirements?

It’s really just hard to predict, John. We know that both the EU and China are working on what the next iteration of these regulatory standards are going to be. We know that from the work that we do with them. So I think that aside, we do know that the next thing that’s likely coming is Brazil which is moving to essentially a Tier 2 U.S. type standard beginning over the next couple of years and transitioning through 2025. I just don’t want to get out predicting stuff that’s not in the public domain and known, but I would reiterate that we have confidence that we will see further raising of the regulatory bar in those countries and we continue to believe as that happens, remember, you still got 50% of the world's vehicles today that are on 1970s U.S. standard. We’ll begin to see global harmonization for the other half of those worldwide vehicles.

Great, thanks very much with the color.

The next question is from Ian Zaffino of Oppenheimer & Company. Please go ahead.

Hi, great, thank you. Why don’t you just touch on the litigation on the material side? I guess my understanding of the product has always been, it's more about process know-how. But I guess maybe there is a lot more IP than we had thought. And how do you think about just your defense of that and IP versus process know-how? Thanks.

So this is Michael. We have both patents and we have process know-how that we consider a trade secret, but specifically the litigation is regarding infringement activities by two competitors that are associated with the patents that we have around our solution for the EPA Tier 3 LEV III solution. So this is the use of evaporative emissions canister in conjunction with a bleed device which is our honeycomb scrubbers. And what the patent teaches is the use of those two items in conjunction to get that last bit of emissions to drive emissions to a near zero basis. So it's not a competition of matter patent or an application's patent, but it's a systems patent on that technology. So that patent runs through March of 2022 and that's what we are defending. I'll remind everyone that we also had a new patent issued in August of 2017 that we feel is going to cover a significant portion of future gasoline vehicle engine design. So we have that out there. The primary trade secret technology we have is not on the honeycombs, but is what we would call our BAX 1500 or 15 BWC carbon pellets that are now widely used in Tier 2 and Tier 3 type applications. Those products have been off patent for more than a decade. But the ability to reproduce those by competitive process is very challenging. Again, because we have a relatively unique process most activated carbons beginning with coal and being thermally activated, we're starting with hardwood sawdust raw material and chemically activating that. Totally different process and at the end of the day on a microscopic level you get a totally different product.

Okay. So these are actually products for vehicles that will be making their way into the U.S. and Canada, as opposed to vehicles that are going to be used and sold in China, correct?

Yes, the Tier 3 LEV III standard today is only a U.S. and Canada standard.

Right, and the lawsuit surrounding the vehicles that are coming into the U. S. right now.

Yes, anything that’s infringing that patent for vehicles coming into the U.S. are produced in the U.S. Again, there's two different cases. One case is more specifically rated around the honeycomb component, that’s BASF. The MAHLE case is more around the importation of infringing carbons in a canister design that again teaches our patent.

Okay, great. Thank you very much.

The next question is from Jim Sheehan of SunTrust Robinson Humphrey. Please go ahead.

Good morning. So your net leverage has come down ahead of schedule thus far in 2019. Can you comment on what you think leverage might be in 2020 and whether you can achieve your targets early then as well?

Yes, good question, John.

Yes, no, I mean, listen we believe that by the middle of next year we will be within the stated targets we’ve always had two, 2.5 times.

Thank you. And then, going back to the patent infringement stuff is there any update on the lawsuits themselves? Have you had any favorable news to report?

I think just first in terms of the law suites themselves, there's really been no substantive activity. We do have a case that will be heard in the fourth quarter that's in front of the International Trade Commission. This is around the one that's around the importation of infringing carbons. We would expect perhaps to get a preliminary opinion on that as early as January, but not to be fully resolved until say the May timeframe of next year. The second case, which is the BASF case, is scheduled for court and a hearing in August of 2020. The MAHLE federal court case has been stayed pending the outcome of the ITC case. So I would say that there is no substantive updates regarding the litigation itself. I would say with regard to activity on both BASF and MAHLE have attempted to have the patent overturned through the U.S. patent offices. What's called the IPR process or Inter Partes Review it’s an accelerated process to allow someone who's a objector to challenge the patent. BASF’s plea for that was refused. They appealed it, it was refused again. And MAHLE’s action with the U.S. Trademark Office also which was substantially the same as BASF was also refused. So, that's about the most significant thing I have.

Very helpful. And finally on your adsorbed natural gas longer term opportunity, can you talk about any progress you're seeing there and when might that product be commercialized?

Yes, the pilot program that we previously announced with SoCalGas in California is underway. So we're waiting to get some of the data back from them in terms of their use and how the vehicles performed on the road for them with regard to emissions, and fuel economy, et cetera. So remaining sided about that. In addition, we've been continuing to work to put other pilots in place. And we have, I think, three that you'll probably be seeing announcements on sometime either later this quarter or early in 2020.

Thank you.

I think in terms of commercial revenues, Jim we're still out a couple of years at least, so.

Thank you very much.

The next question is from Mike Sison of Wells Fargo. Please go ahead.

Hey guys, nice quarter.

Thanks Mike.

In terms of Performance Materials it looks like the first half next year is going to be pretty strong and margins are going to continue to expand. How is your capacity? Is it at some point you need to add more capacity as you get through next year?

No, we're in good shape Mike. Mostly all the capacity additions that we need for the demand we're projecting over the foreseeable future we've got capacity in place with a project that we're completing as we speak at our Covington facility in Virginia. So that's one of the reasons that cash generation should step up again next year is because our demands for capital should be reduced.

Great. And then in engineered polymers, when you think about where you are going to end up pro forma for the full year you're going to be down obviously. How much down performing do you think you are going to be and how much of that is coming from sort of the derivatized demand in the monomer side? And then as you look into 2020 how much of the growth can you generate year-over-year from just moving to more derivatized growth? And I guess what's the leverage if demand gets better for that business?

Yes, I think Mike, first of all the vast majority of the year-over-year declines in the monomer area. I don't have the numbers directly in front of me, but it’s probably accounting for 60% to 70% of the declines is probably a monomer versus the downstream products. And I may be understating that a little bit. I think in terms of the year-over-year comparisons, the worst comparison is behind us, which was Q3. I think the year-over-year comparison will improve as we move to sequentially into Q4. I mean, first of all, comp is lower so that that makes it easier. But I think also we'll have – we don't have this recurring $3.5 million hit that we had in Q3. So both of those things should play to the favor of the ability to deliver a better performance and sequential growth. And then I think as we roll into 2020, I don't want to get specific about the growth, but we do expect that business will show solid growth at the revenue line year-over-year in 2020 versus 2019. Based on the things that I talked about stabilization in monomer, new derivatives application and not having these one-time revenue impacts related to the transaction.

Right. And then just a quick follow-up on a monomer side is it significantly over supplied and why do you think it could stabilize as you head into next year?

I'm going to let Mike Smith take that.

Well I wouldn't say that it is significantly oversupplied. I think that a pretty significant impact, as we've mentioned previously, is we had a competitor that last year was not running and they got their sites back up and running. And when they did, they went out starting – beginning of this year and through the second and third quarter to regain that share. And I think what we've seen now is more of a stabilization in the monomer market that we have experienced and that project that to continue next year.

So Mike, I think, the other thing just to point out is, I mean, clearly there's a weakness of demand. And I do think it's more of a demand issue than a supply issue. We also have to recognize that our two major competitors, Daicel and BASF. BASF has internal demand for caprolactones. And because of the macro environment their internal demand is less than it typically would be if they would use that as a raw material for other products. So that internal demand is down as well as external demand and the same is true for Daicell. They have a more similar manufacturing process to ours, but they can take and direct the peracetic acid that they're producing to different value chains. And because there's less demand in the other value chain currently they have more of this product available to put into the merchant market. So an improvement in the macro environment, not just for caprolactones but for all these other products and in market applications will lift everything up. So, that's what we're waiting to see and we see here today. We don't see improvement in the macro for the balance of the year at a minimum.

Got it. Thank you.

The next question is from Jon Tanwanteng of CJS Securities. Please go ahead.

Good morning gentlemen. Thank you for taking my questions. First, can you break out the components of the changes with the guidance? If I use the midpoint, that's a $40 million reduction in revenue, but only $5 million in EBITDA, or kind of a 12.5% decremental margin. How does that reconcile? Is it just mix, are your carbon expectations higher than they were before? Just a little bit more of the chemicals little margin stuff going away.

Well, that's right. Look it’s at the higher level the materials business is outperforming. How we saw things in the chemical business is coming in wider. But there is definitely a mix improvement even in the chemicals business, partially because of capital but also, when you look at sort of the relative decline pavement is the strongest performer of the businesses, so you get that lift.

Okay, great. And then how much did you increase your litigation expenses expectations by?

Well, I think at the end of the second quarter we’re sort of ranging $10 million to $15 million. We're now saying it's at the high end of that range. And as John pointed out in Q3, we probably had a spin rate that was a little bit above that just as we prepare for this ITC case in this quarter. But again we're sort of pointing to $15 million on a full year basis.

Yes, it is lumpy quarter-by-quarter, John and difficult to predict.

Okay, great. And then finally, was there a time and component to the strength in carbon materials? Did any region specifically China, buying more materials than they actually building cars? Just trying to get a sense of if that a $130 million that you did in Q3 holds up or even improved in Q4 given your comments on the increasing penetration?

Well, as we pointed out in the prepared remarks, I mean, vehicle production in China is down through, I think, September or August by 13%. So if you kind of annualize that you're talking about production down more than 2.5 million vehicles from the 2018 rate. So we don't expect that increasing. We don't think that inventory is being built of anything. I think we’ve worked hard to sell off China 5 vehicle inventory. So we don't really see that as an issue. But what we did say, is look, I mean, they had to be at a 60% compliance rate. At least what they committed to by the beginning of the third quarter. What we're saying is that we believe that across the third quarter, they average closer to 70% compliance. So they're a little bit ahead of that. And in my comments, I also said that by the time we get to year end, we expect they are going to be at a closer to an 80% compliance. So I think you have to factor that into your model.

Okay, great. Thank you.

The next question is from Chris Kapsch of Loop Capital Markets. Please go ahead.

Yes, good morning. One question about, your comments looking to 2020 about prospects in the oilfield technologies market, and look I guess there's not much visibility and so I get that. But in this scenario where rig counts start down again and/or linear feet drilled might be down, or maybe efficiencies are higher if there's less demand for derivatized TOFA I'm just curious how you guys might sort of pivot? In response to that, would you be more inclined to throttle back your CTO refining rates to produce just less TOFA or would you just derivatized less of it for that particular application and sell more tokens to the market? Do you have a sense for how you might approach that scenario? The implications might be with the cost of the network.

Yes, the short answer is that, we run rosins. So we're running to rosin demand and TOFA – we either sell in derivatized or underivatized, but where we derivatized the vast majority of the rosin, we're probably only derivatizing 40% to 45% of the TOFA. So if there is not demand for those products in oilfield, we'll either move them to other applications or we would sell it is underivatized TOFA. There are markets out there for TOFA.

Okay. So you'd be more inclined to – got it. It's helpful.

Yes I think it’s more general comment, not specific to TOFA, but we are going to run our operations to demand. We’re going to be sure supply matches demand. We're not doing anything else.

Fair enough. And then don't want to beat the IP litigation to death. But it was interesting to hear you make the comments there. And I think it's important that the Inter Partes Review was rejected not once, but twice. My understanding of that, and obviously not an IP attorney, but the case that they must have tried to make was that there was some prior art and that that would be the basis for invalidating your patent and good to hear that. That's absolutely not the case. I thought you guys kind of invented this application so hard to imagine that there was prior art and that nuanced application. But, I think the fact that – and I'm talking about the BASF one, you’re not hearing until August, is that suggest that you guys were not successful in getting a preliminary injunction from them sampling their sort of meet-to I guess a mousetrap. Thank you.

Yes that preliminary injunction ruling came a couple of quarters ago Chris. That was a very high hurdle on that. So, there were low expectations regarding that. So, the hearing has been scheduled and unfortunate from our perspective is that court cases are so backlogged and they schedule it where they have. To your earlier point, we fully agree about the patent office's actions to refuse to hear the complaint to overturn the patent. I would say in addition to that the other thing you have to keep in mind is that we've had additional patents issued during the same period of time, the August, 2017 one and divisionals to that patent. So I think that also speaks to the strength of the prior art. The fact that the patent office continues to grant us other patents in divisionals.

And just to be clear for the August trial, the goal there is to get an injunction and them from them sampling your product prior to your patent expiration at this point. Is that right?

My objective is to get them to quit any infringing activity to respect the patent, and hopefully to recover my cost and damages if there are any.

Thank you.

The next question is from Paretosh Misra of Berenberg Capital Markets. Please go ahead.

Thanks. Good morning. Question, on you're a feedstock cost. So how does the pulp and paper market affect your business? Because pulp prices have been fairly weak and if they stay weak next year, how do you think it might change your cost side next year?

We're really disconnected from the cost of pulp. Obviously the production of pulp and supply of pulp matters because the amount of CTO that's produced is directly related to the amount of pulping that goes on, particularly for softwood pulp in the Southeastern U.S. So, if you think about what's happened this year, demand has been down or supply been down, some capacity on the pumping side has been taken off. So that's resulted in less CTO available in the marketplace. I would probably say low-to-mid – mid-to-high single digits on a percentage basis. So that can have the impact of tightening supply demand for CTO and a secondary impact on prices for CTO. But, our prices really are market dates on the availability of CTO and/or index to energy in the case of our G-P supply agreement.

I see. And then the follow-up on your oilfield business, so if the rig count is falling, are there any other levers that you can pull to offset that, like increase market penetration or a looking for newer markets outside the U.S.?

Yes, we put more emphasis on production if drilling in particular is down. And we've talked about in prior quarters we're working hard to diversify the business geographically, specifically the new business we developed in the Mid-East. I think that we're actually going to get some benefits from that in Q4, whether we're able to carry that over into 2020, we have to see. But we do think it's important we continue to globalize that base of business. And the best thing you can do is to continue to bring innovation to our products that improve efficacy for our customers as well. Just to win our share of the business.

Got it. That's all I had. Thank you.

[Operator Instructions] Our next question is from Dan Rizzo of Jefferies. Please go ahead.

Hey guys, just one quick question. I understand you have a different process to produce activated carbon, but what safe codes are in place to stop Chinese competitors from stealing or replicating that process? I mean, is it just based on how the wherewithal or what?

Again it's a very challenging thing to do. You would have to recognize there will be substantial capital investments required to develop that process. I mean, the first thing you have to do is to develop a process at the laboratory scale, prove that you can do it, then you've got to make the capital investments. Then if you're successful with that and you're talking about multi year timeframe, this is a business where you've got to go when the business sort of vehicle platform by vehicle platform. So, we start doing the math on the investment required and the timing, and sort of the time value return. It's hard to get there to be honest with you.

Okay. Well thanks for that. And then you mentioned looking for different geographies for oil and gas – for oil drilling. Is it using gas at all, or can it be used in gas, or is that an area you're already in?

We're agnostic in drilling oil and gas we're using both. As long as it's sort of deep drilling complicated where there's high temperatures involved where they use an oil-based mud, that favors our products.

Thank you very much.

We, have a follow-up question from John McNulty of BMO Capital Markets. Please go ahead.

Yes, thanks. Just two quick ones on the cap assets. Last quarter you would have expected this quarter to see a sequential lift up and you didn't, is it strictly the inventory blip that you saw and that wasn't necessarily expected is that the right way to think about it?

It is John. And I wasn't going to say that because I didn't want to make excuses. But if it hadn't been for the $3.5 million, we would have had that sequential uplift. Thanks for bringing that up.

Okay. No, absolutely. And then I guess as a follow-up to that, when you think – given your confidence about the Capa business picking up in 2020, I guess, what gets you there? Is it just that you've seen the derivatized products being trialed with new potential customers? Are you making certain bets on end markets recovering? I guess what gives you the confidence that you get that incremental pickup?

It's mostly the new business on the derivatized side and the fact that we have had some revenue impacts, since we've owned the business in 2019 that we won't have next year. That, I think, to a degree artificially to play the revenues in this year and all that goes away. But I also expect this monomer situation is going to work itself out. And look, I think, it's a good business, with good markets that the macro is going to recover and that's going to turn to some point. So, I think we would have to have some patience for that. But we continue to have a great confidence in what the team is doing there, and the backlog of projects, and the new product development pipeline and the things that we see coming, whether it's bio-plastics, medical applications, aerospace, et cetera.

Great, thanks very much for the color.

There are no additional questions at this time. I'd like to turn the call back over to Michael Wilson for closing remarks.

Terrific. Thank you everyone for your time and interest this morning. We remain very positive about our long-term business outlook and we look forward to talking with you again next quarter. Have a great day.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.