Executive Summary

Q3 FY2024 revenue was $544M (flat YoY), with adjusted EBITDA $139M (+5% YoY) and adjusted EBITDA margin 25.6%; GAAP diluted EPS from continuing ops was $0.60 and adjusted EPS excluding amortization was $1.49 .
Results landed at the lower end of management’s prior EBITDA outlook and below the revenue range due to weaker June demand and VP&D pharma share/pricing headwinds; Personal Care delivered one of its strongest quarters on record while Specialty Additives margins continued to recover .
Guidance was tightened/lowered: Q4 sales $530–$540M and adjusted EBITDA $130–$140M; FY2024 sales ~$2.1B and adjusted EBITDA $465–$475M (down from $2.150–$2.225B and $470–$500M prior) .
Street consensus (S&P Global) was unavailable at time of writing due to API limits; comparison vs estimates not provided. Company noted EBITDA at lower end of prior outlook and revenue below range .
Capital allocation remained supportive: $130M of buybacks in Q3 (1.3M shares) with $770M authorization remaining; dividend increased to $0.405/share in August 2024 .

What Went Well and What Went Wrong

What Went Well

Personal Care delivered 20% YoY sales growth to $175M and 46% YoY adjusted EBITDA growth to $51M, described by management as “one of the most profitable quarters for Personal Care over the last 5 years” .
Specialty Additives margins recovered to 25.3% adjusted EBITDA margin in Q3 (up ~2,000 bps since Q1), with sequential operational improvements and better plant absorption; management highlighted “810 bps” sequential margin improvement .
Strong free cash flow: operating cash flow was $128M and ongoing free cash flow was $112M; adjusted EBITDA largely converted to FCF and funded $130M buybacks .

What Went Wrong

Life Sciences VP&D pharma faced share loss and aggressive pricing (notably in Europe/China), driving an 11% YoY sales decline to $195M and an 18% YoY adjusted EBITDA decline to $59M; management sized the Q3 sales impact around $14M vs prior year .
June demand weakened and softness persisted into July; coatings demand in Asia and broader macro led to mixed regional recovery vs expectations (NA/EU below internal hopes; China slowed materially) .
Unallocated and other expense jumped to $151M due to a non-cash nutraceutical impairment and higher environmental reserve adjustments, depressing reported GAAP results despite solid underlying margins .

Financial Results

Consolidated Performance vs Prior Periods

Metric	Q3 2023	Q1 2024	Q2 2024	Q3 2024
Revenue ($M)	$546	$473	$575	$544
Adjusted EBITDA ($M)	$133	$70	$126	$139
Adjusted EBITDA Margin (%)	24.4%	14.8%	21.9%	25.6%
Diluted EPS - Continuing Ops ($)	$0.79	$0.54	$2.40	$0.60
Adjusted Diluted EPS excl amortization ($)	$1.23	$0.45	$1.27	$1.49
Gross Margin (%)	N/A	25.2%	32.9%	36.2%

Notes: Company stated Q3 adjusted EBITDA at lower end of prior range and revenue below outlook . Street estimates unavailable via S&P Global at time of writing.

Segment Breakdown (Q3 2024 vs Q3 2023)

Segment	Sales Q3 2023 ($M)	Sales Q3 2024 ($M)	Adj EBITDA Q3 2023 ($M)	Adj EBITDA Q3 2024 ($M)
Life Sciences	$219	$195	$72	$59
Personal Care	$146	$175	$35	$51
Specialty Additives	$152	$150	$29	$38
Intermediates	$43	$36	$16	$9

KPIs and Cash Metrics

KPI	Q3 2024	Reference
Cash from Operations ($M)	$128
Ongoing Free Cash Flow ($M)	$112
Operating Cash Flow Conversion (%)	2133%
Ongoing Free Cash Flow Conversion (%)	81%
Average Diluted Shares (M)	51
Shares Repurchased (Q3) (M)	1.3
Remaining Buyback Authorization ($M)	$770
Cash and Equivalents ($M)	$399
Net Debt ($M) / Leverage (x)	$926 / 2.3x

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($M)	Q3 FY2024	$560–$580	Actual $544	Below prior range
Adjusted EBITDA ($M)	Q3 FY2024	$138–$148	Actual $139	At low end
Revenue ($M)	Q4 FY2024	N/A	$530–$540	New set
Adjusted EBITDA ($M)	Q4 FY2024	N/A	$130–$140	New set
Revenue ($B)	FY2024	$2.150–$2.225	~$2.1	Lowered
Adjusted EBITDA ($M)	FY2024	$470–$500	$465–$475	Narrowed/lowered
Dividend	Q3 FY2024	Prior quarterly dividend	$0.405/share declared Aug 9, 2024	Increased

Management commentary: “Diminished sales trends experienced in June have continued into July… Overall end market demand growth is estimated to be flat-to-low single digits.”

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
VP&D pharma (share/pricing)	Normalization after competitor outage; low-mid single-digit long-term growth; emerging China pricing pressure	Largest headwind; ~$14M YoY sales impact; aggressive pricing; focus on share regain timing (quarterly/annual contracts)	Deteriorated vs plan; recovery actions underway
Specialty Additives margins	Q1: severe absorption drag; Q2: margin improvement, still below historical	Adjusted EBITDA margin ~25%; sequential improvement; volume growth mixed regionally; Asia competitive pressure	Improving margins; pricing pressure persists in Asia
Personal Care recovery	Q1 weak; Q2 broad-based volume improvement (APAC/Europe) and strong margins	One of strongest quarters on record; 20% sales growth; strong skin/hair; oral care timing impact	Strong recovery continues
Regional dynamics (China/NA/EU)	Q2: APAC/Europe improvement; normalization underway	NA/EU growth below expectations; China slowed significantly in coatings; mixed Asia demand	Softer than internal expectations
Pricing vs raws	Deflationary raws broadly offset pricing reductions; maintain margin balance	Pricing softer vs prior year; competitive dynamics in Asia/VP&D; raws deflation helps offset	Balanced overall; specific pressure points
Portfolio optimization (CMC/MC/HEC/Nutraceuticals)	Actions underway; expected margin/ROIC uplift; HEC productivity work	Q3 sales reduced ~$15M from optimization; expect ~$20M impact in Q4; nutraceuticals sale signed; Avoca restructuring steps	On track; near-term revenue impact; margin support

Management Commentary

CEO on Q3 setup: “While improving sales trends continued during most of the quarter, June was weaker-than-expected in Life Sciences and, to a lesser extent, Specialty Additives.”
CEO on margin quality: “In a muted demand environment, Ashland was disciplined with pricing and production while delivering high-quality margins… Personal Care recovery… sustained margin momentum in Specialty Additives…”
CFO on capital position: “Cash on hand of $399M… net debt $926M, ~2.3x leverage… $770M remaining under share repurchase authorization.”
Strategy/tone: “We are planning for a choppy demand environment… focused on controllables… strengthen competitive position in core technologies to drive share gains.”

Q&A Highlights

VP&D pharma impact and actions: Management quantified ~$14M YoY sales headwind in Q3; recovery depends on contract timing; balancing price vs volume to maintain healthy margins; competitor re-entry (BASF) and China exports intensified pricing aggression .
Specialty Additives bridge: Sequential operating income uplift driven primarily by higher volumes and absorption; price-cost dynamics secondary .
Outlook revision drivers: Slower-than-expected VP&D recovery and softer coatings demand growth; expect Q4 mid-single-digit organic volume growth (ex optimization volumes) .
Free cash flow conversion: Expect 50%–55% for FY2024; Q3 ongoing FCF $112M; continued balanced capital allocation .
Avoca portfolio action: Facility closure and personnel reduction at larger site; evaluating exit given structural changes in sclareolide and tolling markets .

Estimates Context

Wall Street consensus (S&P Global) was unavailable at time of writing due to API limit; therefore, explicit comparisons to Street estimates are not provided. Management noted Q3 adjusted EBITDA was at the lower end of its April 30 outlook and revenue below range, indicating a modest miss vs company guidance .
Given the updated FY guide (~$2.1B revenue; $465–$475M adjusted EBITDA), sell-side models are likely to revise down VP&D pharma contributions and coatings recovery pace .

Key Takeaways for Investors

Mix shift offset: Personal Care strength and Specialty Additives margin recovery mitigated Life Sciences VP&D headwinds, but Q3 revenue missed the prior range—near-term narrative hinges on VP&D share/pricing stabilization .
Guidance reset: FY2024 guide lowered; Q4 guide implies sustained mid-20s margins despite softer pricing and portfolio optimization revenue headwind—watch volume/absorption trajectory in H2 .
Structural actions: Nutraceuticals divestiture, CMC/MC optimization, and Avoca exit should support margin durability and ROIC, with management targeting EBITDA-neutral impact in FY2025 via stranded cost elimination .
Regional caution: China coatings and competitive dynamics (Asia) are key risk factors; NA/EU recovery slower than hoped—pricing discipline and raw-material deflation balance remain critical .
Capital returns: Strong FCF and buybacks continue ($130M in Q3; $770M remaining); dividend increased—supports total shareholder return while organic/globalize/innovate investments proceed .
Trading setup: Near-term catalysts include Q4 delivery vs tighter guide and VP&D contract progress; medium-term thesis levered to Specialty Additives margin normalization, Personal Care growth, and commercialization of new platforms (TVO, super wetters) .
Watch the why: Management is prioritizing healthy pricing and long-term share regain over immediate volume—expect staged recovery in VP&D as contracts roll and competitive pricing normalizes; monitor commentary on BASF/China and HEC productivity actions .

ASHLAND INC. (ASH)·Q3 2024 Earnings Summary