ECVT Ecovyst Inc

MALVERN, Pa., Feb. 28, 2024 /PRNewswire/ -- Ecovyst Inc. (NYSE:ECVT) ("Ecovyst" or the "Company"), a leading integrated and innovative global provider of advanced materials, specialty catalysts and services, today reported results for the fourth quarter and full year ended December 31, 2023.

Full Year 2023 Results & Highlights

• Sales of $691.1 million, compared to $820.2 million in 2022. The change is primarily due to the pass through of lower sulfur costs of $86 million, and lower sales volume. Sales volume was negatively impacted by Winter Storm Elliott, extended turnaround activity as well as lower end use demand and destocking in nylon intermediates for virgin sulfuric acid and polyethylene catalysts.
• Net income from continuing operations of $71.2 million. Net income margin of 10.3%, with diluted income per share of $0.60.
• Adjusted net income of $89.8 million, with Adjusted diluted income per share of $0.75.
• Adjusted EBITDA of $259.9 million, with an Adjusted EBITDA margin of 30.7%.
• Full year net cash from operations of $137.6 million, Adjusted Free Cash Flow of $72.3 million, with net debt to net income ratio of 11.1x, and a net debt leverage ratio of 3.0x.
• Full year share repurchases of 7,541,494 shares or $78.7 million. Excluding cash used for share repurchases in 2023, the net debt leverage ratio would have been 2.7x.
• Achieved a Platinum sustainability rating from EcoVadis, placing Ecovyst in the top one percent of all companies rated in our peer group

Fourth Quarter 2023 Results & Highlights

• Sales of $172.8 million, compared to $182.8 million in the fourth quarter of 2022, the decrease reflecting the price pass-through of lower sulfur costs of approximately $9 million.
• Net income from continuing operations of $30.0 million. Net income margin of 17.4%, with diluted income per share of $0.26.
• Adjusted net income of $26.1 million with Adjusted diluted income per share of $0.22.
• Adjusted EBITDA of $69.8 million, up 0.9% period-over-period with an Adjusted EBITDA margin of 30.9%.

Ecovyst results reflect continuing operations for the Ecoservices and Advanced Materials & Catalysts businesses, renamed from Refining Services and Catalysts Technologies, respectively. Financial results are on a continuing operations basis, which excludes the Performance Materials and Performance Chemicals businesses due to the divestitures from all quarterly and year-to-date results presented, unless otherwise indicated.

Financial results and outlook include non-GAAP financial measures. These non-GAAP measures are more fully described and are reconciled from the respective measures determined under GAAP in "Presentation of Non-GAAP Financial Measures" and the attached appendix.

"Despite the ongoing uncertainty in the macro-economic environment, stability in demand fundamentals for both our Ecoservices and Advanced Materials & Catalysts segments, in combination with Ecovyst's diverse end use exposures, contributed to our solid financial results for the fourth quarter of 2023. Ecovyst's Adjusted EBITDA of $70 million was up 1% compared to the fourth quarter of 2022, and cash generation remained favorable in the fourth quarter, providing for a reduction in our net debt leverage ratio to 3.0x at year-end," said Kurt J. Bitting, Ecovyst's Chief Executive Officer. "In 2023, we continued to advance our strategic objectives, positioning Ecovyst for growth as we continue to provide our customers with products and technologies that we believe are essential in meeting the increasing demand for cleaner-burning and sustainable fuels, advanced recycling technologies, and expansion of low-carbon technologies. Examples of key strategic projects in 2023 to support this growth include the previously announced planned expansion of silica catalyst production capacity at our Kansas City, Kansas facility, our first sales of Advanced Silicas for fast growing bio-catalysis applications, and the planned investments at our Chem32 facility which we anticipate will improve performance and enable future expansions."

Fourth Quarter and Full Year 2023 Results

For the year, sales were $691.1 million compared to $820.2 million in 2022. The year-over-year change was primarily a result of $86 million associated with the pass-through of lower sulfur costs. In addition, sales of virgin sulfuric acid were lower compared to the prior year, along with lower demand for polyethylene catalysts and the timing of niche custom catalyst sales. This was partially offset by higher average selling prices during the year. Net income from continuing operations was $71.2 million, with diluted income per share of $0.60. The increase in net income was driven by lower income taxes, partially offset by lower operating income and higher interest expense. Adjusted net income was $89.8 million with Adjusted diluted income per share of $0.75. Adjusted EBITDA was $259.9 million, compared to $276.8 million in 2022, the change driven primarily by lower sales volume.

Sales for the quarter ended December 31, 2023 were $172.8 million, compared to $182.8 million in the fourth quarter of 2022. The change was driven by $9.0 million associated with the pass-through of lower sulfur costs and lower pricing in regeneration services associated with the pass-through of lower natural gas and freight costs, partially offset by higher sales volume. Net income from continuing operations was $30.0 million, an increase of $8.5 million or 40% over the same period in 2022, with diluted income per share of $0.26. The increase in net income over the prior period was driven by higher operating income, additional equity in net income from affiliates and lower income taxes. Adjusted net income was $26.1 million with Adjusted diluted income per share of $0.22. Adjusted EBITDA was $69.8 million, an increase of $0.6 million or 0.9% over the same period in 2022, driven primarily by higher sales volume.

Review of Segment Results and Business Trends

While demand across the majority of product categories and end uses remained positive in 2023, during the second half of the year we saw weaker demand for sales of virgin sulfuric acid into the production of nylon intermediates and for sales of polyethylene catalysts, resulting from weaker global demand fundamentals and the impact of destocking. Our contractual pass-through mechanisms and targeted price increases served to mitigate the adverse impacts of inflationary pressures in 2023, including higher costs for energy, logistics, labor and other raw materials.

Ecoservices

Our regeneration services support the production of alkylate, a high value gasoline component critical for meeting stringent gasoline standards and for producing premium grade gasoline. Tightening gasoline standards and increasing demand for higher-octane premium fuels used in high compression, more fuel-efficient engines resulted in higher utilization for our customers' alkylation units. High U.S. refinery utilization throughout 2023 supported our customers' production of alkylate and translated into strong demand for our regeneration services. We expect refinery utilization to remain high into 2024. Ecoservices is a leading producer of virgin sulfuric acid, which is a widely used chemical that plays a key role in the production of a wide array of materials, particularly those supporting sustainable infrastructure. In 2024 we expect our virgin sulfuric acid sales to benefit from mining activity for metals and minerals that provide conductivity in low carbon technologies, and we anticipate a moderate recovery in the nylon intermediate applications that we serve. Our catalyst activation services provide for ex-situ sulfiding and pre-activation for hydro-processing catalysts, with expected demand growth in both traditional and sustainable fuel production. In addition, we believe sustainability trends will continue to translate into favorable demand for our treatment services business as customers seek the sustainability-focused waste solutions offered by Ecoservices.

Fourth quarter 2023 sales for Ecoservices were $141.4 million, compared to $159.8 million in the fourth quarter of 2022. The change in sales primarily reflects the pass-through of lower sulfur costs of $9 million and lower pricing in regeneration services associated with the pass-through of lower natural gas and freight costs. This was partially offset by higher demand for regeneration services as well as higher demand for virgin sulfuric acid, primarily for mining and spot sales, compared to the fourth quarter of 2022. Adjusted EBITDA was $48.4 million, compared to $54.4 million in the fourth quarter of 2022. The decrease reflects lower net pricing associated with lower raw material pass-through pricing, partially offset by higher sales volume.

For the year, sales were $584.8 million, compared to $702.5 million in 2022. Approximately $86 million of the change was associated with lower pricing associated with the pass-through of lower sulfur costs. The remainder of the change was driven by lower sales volume, primarily for virgin sulfuric acid, arising from the adverse impact of Winter Storm Elliott and the extended maintenance turnaround activity at our facilities, as well as lower end use demand for virgin sulfuric acid, primarily in the production of nylon intermediates. Favorable pricing continued to benefit Ecoservices, driven by higher contractual and index pricing within regeneration services, as well as the pass-through of higher freight costs. Adjusted EBITDA was $200.0 million, compared to $227.8 million in 2022. The decrease reflects lower sales volume for virgin sulfuric acid as well as higher unplanned repair and maintenance costs associated with production downtime at several of our manufacturing sites and the associated impact from Winter Storm Elliott, partially offset by favorable pricing.

Advanced Materials & Catalysts

Our Advanced Silicas are critical catalyst components for the production of high-density polyethylene, a high-strength and high-stiffness plastic used in bottles, containers, and molded applications and linear low-density polyethylene used predominately for films. While we expect long-term demand for polyethylene films and packaging to remain positive, late in the second quarter of 2023 we saw evidence of softer global demand and lower operating rates for polyethylene producers, which resulted in lower sales of polyethylene catalysts during the second half of 2023. Through the Zeolyst Joint Venture, we also supply specialty catalysts to customers for use in the production of both traditional and sustainable fuels, petrochemicals, and emission control systems for both on-road and non-road diesel engines. While demand for traditional fuels has remained positive, demand for sustainable fuels has increased, supporting higher sales of catalysts used in sustainable fuel production.

During the fourth quarter of 2023, Advanced Silicas sales were $31.4 million, up $8.4 million compared to the year-ago quarter, reflecting higher sales across all product lines, driven primarily by higher average selling prices and volume improvement in niche custom catalysts. Zeolyst Joint Venture sales of $52.8 million increased 32.3% over the prior-year quarter, largely driven by higher sales of hydrocracking catalysts. Adjusted EBITDA, which includes the 50% proportionate share of the Zeolyst Joint Venture, was $27.2 million up $6.9 million compared to the year-ago quarter, with the increase reflecting higher pricing and sales volume.

For the year, Advanced Silicas sales were $106.3 million, compared to $117.7 million in 2022. The change was driven by lower demand for polyethylene catalysts, and to a lesser extent the timing of niche custom catalyst sales, partially offset by higher prices resulting from implemented price increases.  Zeolyst Joint Venture sales of $156.5 million increased 18.0% compared to the prior year. The increase reflects higher sales for hydrocracking, sustainable fuel and emission control catalysts. Adjusted EBITDA of $81.9 million was up 5.0%, with the increase primarily due to higher average selling prices in both Advanced Silicas and the Zeolyst Joint Venture and higher sales volume within the Zeolyst Joint Venture, partially offset by lower sales volume within Advanced Silicas.

Cash Flows and Balance Sheet

Cash flows from operating activities was $137.6 million for the year ended December 31, 2023, compared to $186.6 million for the year ended December 31, 2022. The decrease was primarily driven by lower earnings, lower dividends from affiliates, higher cash taxes and cash interest, and unfavorable change in working capital. At December 31, 2023, the Company had cash and cash equivalents of $88.4 million, total gross debt of $877.5 million and availability under the ABL facility of $63.8 million, after giving effect to $4.0 million of outstanding letters of credit and no revolving credit facility borrowings, for total available liquidity of $152.2 million. As of December 31, 2023, the net debt to net income ratio was 11.1x  and the net debt leverage ratio was 3.0x.

2024 Financial Outlook

Full year 2024 guidance is as follows:

• Sales of $715 million to $755 million
• Sales of $145 million to $165 million for proportionate 50% share of Zeolyst Joint Venture, which is excluded from GAAP Sales
• Adjusted EBITDA¹ of $255 million to $275 million
• Adjusted Free Cash Flow¹ of $85 million to $105 million
• Capital expenditures of $70 million to $80 million
• Interest expense of $45 million to $55 million
• Depreciation & Amortization
  • Ecovyst - $85 million to $95 million
  • Zeolyst J.V. - $12 million to $14 million
• Effective tax rate in the mid 20% range

"We believe that our regeneration services business will experience another solid year in 2024, which will be somewhat offset by a timing related off-cycle year for hydrocracking catalysts. We are also cautious about the continuing uncertain economic conditions moderating demand recovery for virgin sulfuric acid and polyethylene catalysts. Ecovyst is firmly committed to executing the strategy that we presented at our November 2023 investor day that we believe will deliver long-term value for our shareholders. We believe our strong cash generation and deep customer relationships will enable us to advance our positions in emerging technologies that support areas of significant growth potential including sustainable fuels, advanced plastics recycling, bio-catalysis, and carbon capture. At the same time, Ecovyst also plans to continue supporting the growth of its core businesses such as regeneration services and hydrocracking catalysts, while participating in the positive longer-term growth trends supporting demand for virgin sulfuric acid and polyethylene catalysts," said Bitting.

¹In reliance upon the unreasonable efforts exemption provided under Item 10(e)(1)(i)(B) of Regulation S-K, the Company is not able to provide a reconciliation of its non-GAAP financial guidance to the corresponding GAAP measures without unreasonable effort because of the inherent difficulty in forecasting and quantifying certain amounts necessary for such a reconciliation such as certain non-cash, nonrecurring or other items that are included in net income and EBITDA as well as the related tax impacts of these items and asset dispositions / acquisitions and changes in foreign currency exchange rates that are included in cash flow, due to the uncertainty and variability of the nature and amount of these future charges and costs. Because this information is uncertain, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.

Stock Repurchase Authorization

In April 2022, the Company's Board of Directors approved a stock repurchase program authorizing the repurchase of up to $450 million of the Company's outstanding common stock over the next four years. To date, repurchases under the program have been funded using cash on hand and cash generated from operations, with repurchases conducted through negotiated transactions with the Company's equity sponsors, as well as through open market repurchases.

In connection with a secondary offering of the Company's common stock in March 2023, the Company repurchased 3,000,000 shares of its common stock sold in the offering from the underwriters at a price of $9.95 per share, for a total of $29.9 million.

In connection with a secondary offering in May 2023, the Company repurchased 4,000,000 shares of its common stock sold in the offering from the underwriters at a price of $10.88 per share, for a total of $43.5 million.

During the third quarter of 2023, the Company repurchased 541,494 shares of its common stock on the open market at an average price of $9.85 per share, for a total cost of $5.3 million.

Future repurchases may also be conducted through negotiated transactions with an equity sponsor, open market repurchases or other means, including through Rule 10b-18 trading plans or through the use of other techniques such as accelerated share repurchases. For possible future repurchases, the actual timing, number and nature of the shares repurchased will depend on a variety of factors, including stock price, trading volume and general business and market conditions The repurchase program does not obligate the Company to acquire any number of shares in any specific period, or at all, and the repurchase program may be amended, suspended or discontinued at any time at the Company's discretion. As of December 31, 2023, $234.6 million was available for additional share repurchases under the program.

Conference Call and Webcast Details

On Wednesday, February 28, 2024, Ecovyst management will review the fourth quarter results during a conference call and audio-only webcast scheduled for 11:00 a.m. Eastern Time.

Conference Call: Investors may listen to the conference call live via telephone by dialing 1 (800) 267-6316 (domestic) or
1 (203) 518-9848 (international) and using the participant code ECVTQ423.

Webcast: An audio-only live webcast of the conference call and presentation materials can be accessed at https://investor.ecovyst.com. A replay of the conference call/webcast will be made available at https://investor.ecovyst.com/events-presentations.

Investor Contact:
Gene Shiels
(484) 617-1225
gene.shiels@ecovyst.com

About Ecovyst Inc.

Ecovyst Inc. and subsidiaries is a leading integrated and innovative global provider of advanced materials, specialty catalysts and services. We support customers globally through our strategically located network of manufacturing facilities. We believe that our products, which are predominantly inorganic, and our services contribute to improving the sustainability of the environment.

We have two uniquely positioned specialty businesses: Ecoservices provides sulfuric acid recycling to the North American refining industry for the production of alkylate and provides high quality and high strength virgin sulfuric acid for industrial and mining applications. Ecoservices also provides chemical waste handling and treatment services, as well as ex-situ catalyst activation services for the refining and petrochemical industry. Advanced Materials & Catalysts provides finished silica catalysts, catalyst supports and functionalized silicas necessary to produce high performing plastics and to enable sustainable chemistry, and through its Zeolyst Joint Venture, innovates and supplies specialty zeolites used in catalysts that support the production of sustainable fuels, remove nitrogen oxides from diesel engine emissions, and that are broadly applied in refining and petrochemical processes.

Presentation of Non-GAAP Financial Measures

In addition to the results provided in accordance with U.S. generally accepted accounting principles ("GAAP") throughout this press release, the Company has provided non-GAAP financial measures — Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income, Adjusted free cash flow, Adjusted diluted income per share, net debt to net income ratio, and net debt leverage ratio (collectively, "Non-GAAP Financial Measures") — which present results on a basis adjusted for certain items. The Company uses these Non-GAAP Financial Measures for business planning purposes and in measuring its performance relative to that of its competitors. The Company believes that these Non-GAAP Financial Measures are useful financial metrics to assess its operating performance from period-to-period by excluding certain items that the Company believes are not representative of its core business. These Non-GAAP Financial Measures are not intended to replace, and should not be considered superior to, the presentation of the Company's financial results in accordance with GAAP. The use of the Non-GAAP Financial Measures terms may differ from similar measures reported by other companies and may not be comparable to other similarly titled measures. These Non-GAAP Financial Measures are reconciled from the respective measures under GAAP in the appendix below.

Zeolyst Joint Venture

The Company's zeolite catalysts product group operates through its Zeolyst Joint Venture, which is accounted for as an equity method investment in accordance with GAAP. The presentation of the Zeolyst Joint Venture's sales represents 50% of the sales of the Zeolyst Joint Venture. The Company does not record sales by the Zeolyst Joint Venture as revenue and such sales are not consolidated within the Company's results of operations. However, the Company's Adjusted EBITDA reflects the share of earnings of the Zeolyst Joint Venture that have been recorded as equity in net income from affiliated companies in the Company's consolidated statements of income for such periods and includes Zeolyst Joint Venture adjustments on a proportionate basis based on the Company's 50% ownership interest. Accordingly, the Company's Adjusted EBITDA margins are calculated including 50% of the sales of the Zeolyst Joint Venture for the relevant periods in the denominator.

Note on Forward-Looking Statements

Some of the information contained in this press release constitutes "forward-looking statements." Forward-looking statements can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects," "projects" and similar references to future periods. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Examples of forward-looking statements include, but are not limited to, statements regarding our future results of operations, financial condition, liquidity, prospects, growth, strategies, capital allocation program (including the stock repurchase program), product and service offerings, expected demand trends and our 2024 financial outlook. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, regional, national or global political, economic, business, competitive, market and regulatory conditions, including tariffs and trade disputes, currency exchange rates, the effects of inflation and other factors, including those described in the sections titled "Risk Factors" and "Management's Discussion & Analysis of Financial Condition and Results of Operations" in our filings with the SEC, which are available on the SEC's website at www.sec.gov. These forward-looking statements speak only as of the date of this release. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable law.

Descriptions to Ecovyst Non-GAAP Reconciliations

The adjustments to net income attributable to Ecovyst Inc. are shown net of each applicable statutory tax rates of 25.4% and 23.9% for the year ended December 31, 2023 and 2022, respectively, except for equity-based compensation. The tax effect on equity-based compensation is derived by removing the tax effect of any equity-based compensation expense disallowed as a result of its inclusion within IRC Sec. 162(m), and adding the tax effect of equity-based stock compensation shortfall recorded as a discrete item.

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SOURCE Ecovyst Inc.