Ecovyst Inc. (NYSE: ECVT) (“Ecovyst” or the “Company”), a
leading integrated and innovative global provider of specialty
catalysts and services, today reported results for the second
quarter ended June 30, 2023 and updated fiscal 2023 guidance.
Second Quarter 2023 Results & Highlights
- Sales of $184.1 million, compared to $225.2 million in the
second quarter of 2022, the reduction driven primarily by lower
pass-through of sulfur costs of approximately $32 million.
- Net income of $26.1 million, up 36% year-over-year, with a net
income margin of 14.2% and with diluted net income per share of
$0.22, up 57% year-over-year; Adjusted net income of $34.6 million,
up 15% year-over-year, with Adjusted diluted earnings per share of
$0.29, up 32% year-over-year.
- Adjusted EBITDA of $79.3 million, up 9% year-over-year, with an
Adjusted EBITDA margin of 34.7%.
- Profitability driven by strong pricing, favorable mix, and
higher sales of renewable fuels, emission control, and
hydrocracking catalysts, offsetting lower virgin sulfuric acid and
silica catalyst sales volume.
- In conjunction with a secondary offering, repurchased 4,000,000
shares at an average price of $10.88, for total cost of $43.5
million.
- Formalized a strategic cooperation with Valoregen for
development of advanced plastic recycling technologies utilizing
the Opal InfinityTM catalyst portfolio of the Zeolyst Joint
Venture.
- Updating 2023 guidance to reflect anticipated softening of
demand in select end uses and the impact of an unforeseen outage
and production restriction at one of our sites.
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.
“During the second quarter of 2023, high refinery utilization
continued to support demand for our regeneration services and we
benefited from higher net pricing for regeneration volume. In
addition, and as anticipated, we saw stronger sales for emission
control, hydrocracking and renewable fuel catalysts in our Catalyst
Technologies segment, which also continued to benefit from
previously implemented price increases,” said Kurt J. Bitting,
Ecovyst’s Chief Executive Officer. “Although unplanned operational
downtime at our Ecoservices’ Dominguez facility at the end of the
quarter limited sales volume and increased maintenance costs, we
delivered second quarter 2023 Adjusted EBITDA of $79 million, up
9%, compared to the second quarter of 2022, with an associated
margin of 34.7%, which was up 680 basis points compared to the
year-ago quarter,” added Bitting.
Second Quarter 2023 Results
Sales for the quarter ended June 30, 2023 were $184.1 million,
compared to $225.2 million in the second quarter of 2022. The
change was primarily driven by a $32 million impact associated with
the pass-through of lower average sulfur costs compared to the
second quarter of 2022. In addition, lower virgin sulfuric acid
sales volume resulting from an unplanned production outage at
Ecoservices’ Dominguez facility and lower silica catalyst sales
were partially offset by stronger pricing for regeneration services
and higher pricing within Catalyst Technologies. Within the Zeolyst
Joint Venture, sales were higher on increased sales of catalyst
used in the production of renewable fuels, emission control and
hydrocracking catalysts.
Net income was $26.1 million, compared to net income of $19.2
million in the second quarter of 2022, with a diluted net income
per share of $0.22. Adjusted net income was $34.6 million with an
Adjusted diluted earnings per share of $0.29. Adjusted EBITDA was
$79.3 million, up $6.4 million or 9%, compared to $72.9 million in
the second quarter of 2022, with the change reflecting higher
pricing and favorable mix, partially offset by lower sales volume,
higher unplanned repair and maintenance costs and higher costs
associated with product networking.
Review of Segment Results and Business Trends
Demand across most product categories, end-uses and customers
remained positive. Through the second quarter of 2023, high
refinery utilization continued to support activity in our
regeneration services business, and we anticipate high refinery
utilization to continue for the balance of 2023. In addition,
strong demand resulted in higher sales of catalyst used in the
production of renewable fuels, emission control and hydrocracking
catalysts during the second quarter, compared to the second quarter
of 2022, and we expect continued higher sales of hydrocracking
catalysts in the second half of 2023, compared to the first half of
the year. However, sales volumes in Ecoservices were impacted in
the second quarter of 2023, primarily by the unplanned production
downtime at the Dominguez site, and we expect the outages and
resulting production restriction to adversely impact sales and
maintenance costs in the third quarter of 2023.
In addition, late in the second quarter of 2023, we saw evidence
of weaker demand fundamentals in nylon and polyethylene end uses,
which we believe are more driven by cyclical, global demand trends.
For the second half of 2023, we believe these weaker demand
fundamentals will adversely impact sales of virgin sulfuric acid
into nylon production. In addition, we now expect lower sales of
polyethylene catalysts for the balance of 2023, driven by declining
global polyethylene demand and lower polyethylene production plant
operating rates.
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 of gasoline standards and increased demand for
higher-octane premium grade gasoline to power high compression,
more fuel efficient engines resulted in higher utilization for our
customers’ alkylation units. High U.S. refinery utilization in 2022
and through the first half of 2023 supported our customers’
production of alkylate and translated into strong demand for our
regeneration services. We expect refinery utilization to remain
high through the remainder of 2023. Sulfuric acid is a widely used
chemical and it plays a key role in producing a wide array of
materials, particularly those supporting green infrastructure.
While we expect our virgin sulfuric acid sales in 2023 to benefit
from mining activity for metals and minerals that provide
conductivity in low carbon technologies, as well as from demand in
a wide range of industrial applications, production downtime in the
second quarter limited sales of virgin sulfuric acid, and we expect
the production constraints to adversely impact virgin sulfuric acid
volume in the third quarter of 2023. Our catalyst activation
services provide for ex-situ sulfiding and pre-activation for
hydro-processing catalysts, with expected demand growth in both
traditional and renewable fuel production. We believe
sustainability trends will continue to favor our treatment services
business as customers seek the sustainability-focused waste
solutions offered by Ecoservices.
Sales were $158.1 million, compared to $193.0 million in the
second quarter of 2022. The change in sales reflects lower
pass-through of sulfur costs of approximately $32 million, and
lower virgin sulfuric acid sales volume resulting from production
constraints during the second quarter. These factors were partially
offset by higher average pricing for regeneration services.
Adjusted EBITDA was $60.1 million, compared to $60.0 million in the
second quarter of 2022. The nominal increase period-to-period was
largely attributable to higher pricing for regeneration services,
partially offset by lower virgin sulfuric acid sales volume and
higher unplanned repair and maintenance costs.
Catalyst Technologies
Our silica catalysts business supplies 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 we saw evidence of softer
global demand and lower operating rates for polyethylene producers,
which we believe will impact sales of polyethylene catalysts in 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 renewable fuels, petrochemicals, and
emission control systems for both on-road and non-road diesel
engines. Demand for traditional fuels remained positive and demand
for renewable fuels increased. We also supply niche custom
catalysts in the refining and petrochemical industries. We continue
to expect growth in demand for catalysts used in these
applications.
During the second quarter of 2023, silica catalysts sales were
$26.0 million, compared to $32.2 million in the second quarter of
2022, with the change reflecting lower sales of polyethylene
catalysts and the timing of event driven niche custom catalyst
orders used in the production of methyl methacrylate, partially
offset by higher average selling prices. Zeolyst Joint Venture
sales were $44.7 million, up 25%, compared to $35.9 million in the
second quarter of 2022. The increase in sales was due to the
comparative timing of customer orders for hydrocracking and
specialty catalysts sales and increased demand for catalysts used
in renewable fuel and emission control applications. Adjusted
EBITDA, which includes the Zeolyst Joint Venture, was $25.4
million, up $4.0 million or 19%, compared to $21.4 million in the
second quarter of 2022, with the change reflecting continued strong
pricing, favorable product mix and lower production costs.
Cash Flows and Balance Sheet
Cash flows from operating activities was $41.1 million for the
six months ended June 30, 2023, compared to $52.8 million for the
six months ended June 30, 2022. The decrease was driven by the
timing of dividends received from the Zeolyst Joint Venture. At
June 30, 2023, the Company had cash and cash equivalents of $29.2
million, total gross debt of $882.0 million and availability under
the ABL facility of $70.0 million, after giving effect to $4.0
million of outstanding letters of credit and no revolving credit
facility borrowings outstanding, for total available liquidity of
$99.2 million. The net debt to net income ratio was 12.7x as of
June 30, 2023 and the net debt leverage ratio was 3.2x as of June
30, 2023.
Updated 2023 Financial Outlook
“While our expectations for regeneration services demand and
sales of hydrocracking and other zeolite-based catalysts remains
positive for the second half of 2023, late in the second quarter we
began to see evidence of softer demand in end uses more linked to
global macroeconomic fundamentals, including lower demand
expectations and de-stocking from certain customers. These end uses
include nylon production, which is a significant outlet for our
virgin sulfuric acid, and polyethylene production, where global
demand operating rates have continued to decrease beyond our
forecast. In addition, the unplanned equipment outage and
production restriction at the Ecoservices’ Dominguez location late
in the second quarter continued into the third quarter, prior to
its resolution,” said Bitting.
“Given that we expect weaker demand in the nylon and
polyethylene end uses, and with the combined impact of both lost
sales volume and higher maintenance and repair costs primarily
associated with the unplanned equipment outage and production
restriction at the Ecoservices’ Dominguez site, we are making a
moderate revision to our full-year Adjusted EBITDA expectations to
a range of $260 million - $275 million,” Bitting said. “Despite the
current downcycle conditions in the global nylon and polyethylene
end uses, we believe our balanced portfolio of products provides us
with attractive future growth opportunities associated with
sustainable technologies. These include the potential expansion of
production of renewable fuels, low-carbon technologies driving
growth in the mining sector, and future growth opportunities, as
evidenced by our recently announced collaboration with Valoregen on
plastics recycling.”
Based upon business trends and conditions as of today, the
Company’s full year 2023 guidance is as follows:
- Sales of $685 million to $715 million1 (changed from $730
million to $760 million to reflect lower expected virgin sulfuric
acid volume and lower expected volume of polyethylene
catalysts)
- Sales of $155 million to $165 million for proportionate 50%
share of Zeolyst Joint Venture, which is excluded from GAAP sales
(increased from $145 million to $155 million)
- Adjusted EBITDA2 of $260 million to $275 million (change from
$285 million to $300 million)
- Adjusted Free Cash Flow2 of $100 million to $115 million
(change from $115 million to $130 million)
- Capital expenditures of $50 million to $60 million (change from
$60 million to $70 million)
- Interest expense of $45 million to $50 million (no change)
- Depreciation & amortization (no change)
- Ecovyst - $80 million to $90 million
- Zeolyst J.V. - $14 million to $16 million
1Sales outlook for 2023 assumes lower average sulfur prices,
compared to 2022, and lower projected pass-through of sulfur costs
of approximately $90 million.
2In 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. 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.
During the second quarter of 2023, in connection with a
secondary offering of the Company’s common stock in May 2023, the
Company repurchased 4,000,000 shares of its common stock sold in
the offering from the underwriter at a price of $10.88 per share
concurrently with the closing of the offering, for a total of $43.5
million.
For possible future repurchases, the actual timing, number, and
nature of 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 June
30, 2023, $239.9 million was available for additional share
repurchases under the program.
Conference Call and Webcast Details
On Thursday, August 3, 2023, Ecovyst management will review the
second 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 use the participant
code ECVTQ223.
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.
About Ecovyst Inc.
Ecovyst Inc. and subsidiaries is a leading integrated and
innovative global provider of 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 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 on-purpose virgin sulfuric acid for water treatment,
mining, and industrial applications; and Catalyst
Technologies provides finished silica catalysts and catalyst
supports necessary to produce high strength and high stiffness
plastics and, through its Zeolyst Joint Venture, supplies zeolites
used for catalysts that help produce renewable fuels, remove
nitrogen oxides from diesel engine emissions as well as sulfur from
fuels during the refining process. For more information, see our
website at https://www.ecovyst.com.
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 earnings per share, 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 2023
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 the
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.
ECOVYST INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(in millions, except share and
per share amounts)
Three months ended
June 30,
Six months ended
June 30,
2023
2022
% Change
2023
2022
% Change
Sales
$
184.1
$
225.2
(18.3
)%
$
345.0
$
404.9
(14.8
)%
Cost of goods sold
123.1
165.3
(25.5
)%
247.5
297.3
(16.8
)%
Gross profit
61.0
59.9
1.8
%
97.5
107.6
(9.4
)%
Selling, general and administrative
expenses
21.4
22.8
(6.1
)%
42.5
46.3
(8.2
)%
Other operating expense, net
6.3
9.7
(35.1
)%
13.0
17.4
(25.3
)%
Operating income
33.3
27.4
21.5
%
42.0
43.9
(4.3
)%
Equity in net (income) from affiliated
companies
(11.4
)
(8.5
)
34.1
%
(11.6
)
(14.3
)
(18.9
)%
Interest expense, net
9.2
8.9
3.4
%
19.0
17.3
9.8
%
Other expense, net
0.6
0.5
20.0
%
0.2
0.8
(75.0
)%
Income before income taxes
34.9
26.5
31.7
%
34.4
40.1
(14.2
)%
Provision for income taxes
8.8
7.3
20.5
%
9.7
13.0
(25.4
)%
Effective tax rate
25.2
%
27.5
%
28.3
%
32.4
%
Net income
$
26.1
$
19.2
35.9
%
$
24.7
$
27.1
(8.9
)%
Earnings per share:
Basic earnings per share
$
0.22
$
0.14
$
0.20
$
0.20
Diluted earnings per share
$
0.22
$
0.14
$
0.20
$
0.19
Weighted average shares outstanding:
Basic
118,651,402
138,035,764
120,335,414
137,876,185
Diluted
119,920,742
139,149,560
121,831,942
139,175,659
ECOVYST INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in millions, except share and
per share amounts)
June 30, 2023
December 31,
2022
ASSETS
Cash and cash equivalents
$
29.2
$
110.9
Accounts receivable, net
78.2
74.8
Inventories, net
47.6
44.4
Derivative assets
17.3
18.5
Prepaid and other current assets
24.9
19.1
Total current assets
197.2
267.7
Investments in affiliated companies
438.4
436.0
Property, plant and equipment, net
587.2
584.9
Goodwill
404.2
403.2
Other intangible assets, net
123.5
129.9
Right-of-use lease assets
29.6
28.3
Other long-term assets
33.9
34.6
Total assets
$
1,814.0
$
1,884.6
LIABILITIES
Current maturities of long-term debt
$
9.0
$
9.0
Accounts payable
34.6
40.0
Operating lease liabilities—current
9.1
8.2
Accrued liabilities
50.3
72.2
Total current liabilities
103.0
129.4
Long-term debt, excluding current
portion
862.4
865.9
Deferred income taxes
137.1
136.2
Operating lease liabilities—noncurrent
20.5
20.0
Other long-term liabilities
23.3
25.8
Total liabilities
1,146.3
1,177.3
Commitments and contingencies
EQUITY
Common stock ($0.01 par); authorized
shares 450,000,000; issued shares 140,744,045 and 139,571,272 on
June 30, 2023 and December 31, 2022, respectively; outstanding
shares 116,263,742 and 122,186,238 on June 30, 2023 and December
31, 2022, respectively
1.4
1.4
Preferred stock ($0.01 par); authorized
shares 50,000,000; no shares issued or outstanding on June 30, 2023
and December 31, 2022
—
—
Additional paid-in capital
1,101.3
1,091.5
Accumulated deficit
(217.4
)
(242.0
)
Treasury stock, at cost; shares 24,480,303
and 17,385,034 on June 30, 2023 and December 31, 2022,
respectively
(224.5
)
(149.6
)
Accumulated other comprehensive income
6.9
6.0
Total equity
667.7
707.3
Total liabilities and equity
$
1,814.0
$
1,884.6
ECOVYST INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
Six months ended
June 30,
2023
2022
Cash flows from operating activities:
(in millions)
Net income
$
24.7
$
27.1
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation
34.1
32.2
Amortization
7.0
7.1
Amortization of deferred financing costs
and original issue discount
1.0
1.0
Foreign currency exchange (gain) loss
(0.6
)
1.1
Deferred income tax provision
1.3
11.3
Net loss on asset disposals
2.3
0.7
Stock compensation
9.1
12.7
Equity in net income from affiliated
companies
(11.6
)
(14.3
)
Dividends received from affiliated
companies
10.0
30.0
Other, net
6.2
(4.4
)
Working capital changes that provided
(used) cash:
Receivables
(3.0
)
(33.2
)
Inventories
(3.0
)
(3.1
)
Prepaids and other current assets
(5.7
)
—
Accounts payable
(1.5
)
9.7
Accrued liabilities
(29.2
)
(25.1
)
Net cash provided by operating
activities
41.1
52.8
Cash flows from investing activities:
Purchases of property, plant and
equipment
(39.2
)
(25.8
)
Payments for business divestiture, net of
cash
—
(3.7
)
Other, net
—
—
Net cash used in investing activities
(39.2
)
(29.5
)
Cash flows from financing activities:
Draw down of revolving credit
facilities
14.5
—
Repayments of revolving credit
facilities
(14.5
)
—
Repayments of long-term debt
(4.5
)
(4.5
)
Repurchases of common shares
(73.4
)
(7.1
)
Tax withholdings on equity award
vesting
(0.9
)
(0.3
)
Repayment of financing obligation
(1.4
)
—
Other, net
0.3
—
Net cash used in financing activities
(79.9
)
(11.9
)
Effect of exchange rate changes on cash
and cash equivalents
(3.7
)
(1.1
)
Net change in cash and cash
equivalents
(81.7
)
10.3
Cash and cash equivalents at beginning of
period
110.9
140.9
Cash and cash equivalents at end of
period
$
29.2
$
151.2
Appendix Table A-1: Reconciliation of
Net Income to Adjusted EBITDA
Three months ended
June 30,
Six months ended
June 30,
2023
2022
2023
2022
(in millions)
Reconciliation of net income to
Adjusted EBITDA
Net income
$
26.1
$
19.2
$
24.7
$
27.1
Provision for income taxes
8.8
7.3
9.7
13.0
Interest expense, net
9.2
8.9
19.0
17.3
Depreciation and amortization
21.0
19.7
41.2
39.2
EBITDA
65.1
55.1
94.6
96.6
Joint venture depreciation, amortization
and interest(a)
3.2
4.0
6.8
8.1
Amortization of investment in affiliate
step-up(b)
1.6
1.6
3.2
3.2
Net loss on asset disposals(c)
1.1
0.6
2.3
0.7
Foreign currency exchange (gain)
loss(d)
(0.4
)
0.5
(1.1
)
1.1
LIFO expense(e)
1.1
0.2
2.5
0.4
Transaction and other related costs(f)
1.2
0.8
2.6
5.1
Equity-based compensation
5.0
5.4
9.1
12.7
Restructuring, integration and business
optimization expenses(g)
1.1
5.3
2.1
5.7
Other(h)
0.3
(0.6
)
0.1
(1.5
)
Adjusted EBITDA
$
79.3
$
72.9
$
122.2
$
132.1
Descriptions to Ecovyst Non-GAAP
Reconciliations
(a) We use Adjusted EBITDA as a performance measure
to evaluate our financial results. Because our Catalyst
Technologies segment includes our 50% interest in the Zeolyst Joint
Venture, we include an adjustment for our 50% proportionate share
of depreciation, amortization and interest expense of the Zeolyst
Joint Venture. (b) Represents the amortization of the fair
value adjustments associated with the equity affiliate investment
in the Zeolyst Joint Venture as a result of the combination of the
businesses of PQ Holdings Inc. and Ecoservices Operations LLC in
May 2016. We determined the fair value of the equity affiliate
investment and the fair value step-up was then attributed to the
underlying assets of the Zeolyst Joint Venture. Amortization is
primarily related to the fair value adjustments associated with
fixed assets and intangible assets, including customer
relationships and technical know-how. (c) When asset
disposals occur, we remove the impact of net gain/loss of the
disposed asset because such impact primarily reflects the non-cash
write-off of long-lived assets no longer in use. (d)
Reflects the exclusion of the foreign currency transaction gains
and losses in the statements of income related to the non-permanent
intercompany debt denominated in local currency translated to U.S.
dollars. (e) Represents non-cash adjustments to the
Company’s LIFO reserves for certain inventories in the U.S. that
are valued using the LIFO method, effectively reflecting the
results as if these inventories were valued using the FIFO method,
which we believe provides a means of comparison to other companies
that may not use the same basis of accounting for inventories. (f)
Relates to certain transaction costs, including debt
financing, due diligence and other costs related to transactions
that are completed, pending or abandoned, that we believe are not
representative of our ongoing business operations. (g)
Includes the impact of restructuring, integration and business
optimization expenses, which are incremental costs that are not
representative of our ongoing business operations. (h) Other
consists of adjustments for items that are not core to our ongoing
business operations. These adjustments include environmental
remediation and other legal costs, expenses for capital and
franchise taxes, and defined benefit pension and postretirement
plan (benefits) costs, for which our obligations are under plans
that are frozen. Also included in this amount are adjustments to
eliminate the benefit realized in cost of goods sold of the
allocation of a portion of the contract manufacturing payments
under the five-year agreement with the buyer of the Performance
Chemicals business to the financing obligation under the failed
sale-leaseback. Included in this line-item are rounding
discrepancies that may arise from rounding from dollars (in
thousands) to dollars (in millions).
Appendix Table A-2: Reconciliation of
Net Income and EPS to Adjusted Net Income and Adjusted
EPS(1)
Three months ended
June 30,
2023
2022
Pre-tax amount
Tax expense (benefit)
After-tax amount
Per share, basic
Per share, diluted
Pre-tax amount
Tax expense (benefit)
After-tax amount
Per share, basic
Per share, diluted
(in millions, except share and
per share amounts)
Net income
$
34.9
$
8.8
$
26.1
$
0.22
$
0.22
$
26.5
$
7.3
$
19.2
$
0.14
$
0.14
Amortization of investment in affiliate
step-up(b)
1.6
0.4
1.2
0.01
0.01
1.6
0.4
1.2
0.01
0.01
Net loss on asset disposals(c)
1.1
0.3
0.8
0.01
0.01
0.6
0.2
0.4
—
—
Foreign currency exchange (gain)
loss(d)
(0.4
)
(0.2
)
(0.2
)
—
—
0.5
0.1
0.4
—
—
LIFO expense(e)
1.1
0.3
0.8
0.01
0.01
0.2
—
0.2
—
—
Transaction and other related costs(f)
1.2
0.3
0.9
0.01
0.01
0.8
0.2
0.6
—
—
Equity-based compensation
5.0
1.0
4.0
0.03
0.03
5.4
0.7
4.7
0.03
0.03
Restructuring, integration and business
optimization expenses(g)
1.1
0.3
0.8
0.01
0.01
5.3
1.4
3.9
0.03
0.03
Other(h)
0.3
0.1
0.2
(0.01
)
(0.01
)
(0.6
)
(0.1
)
(0.5
)
0.01
0.01
Adjusted Net Income(1)
$
45.9
$
11.3
$
34.6
$
0.29
$
0.29
$
40.3
$
10.2
$
30.1
$
0.22
$
0.22
Weighted average shares outstanding
118,651,402
119,920,742
138,035,764
139,149,560
Six months ended
June 30,
2023
2022
Pre-tax amount
Tax expense (benefit)
After-tax amount
Per share, basic
Per share, diluted
Pre-tax amount
Tax expense (benefit)
After-tax amount
Per share, basic
Per share, diluted
(in millions, except share and
per share amounts)
Net income
$
34.4
$
9.7
$
24.7
$
0.20
$
0.20
$
40.1
$
13.0
$
27.1
$
0.20
$
0.19
Amortization of investment in affiliate
step-up(b)
3.2
0.8
2.4
0.02
0.02
3.2
0.8
2.4
0.02
0.02
Net loss on asset disposals(c)
2.3
0.6
1.7
0.01
0.01
0.7
0.2
0.5
—
—
Foreign currency exchange (gain)
loss(d)
(1.1
)
(0.2
)
(0.9
)
(0.01
)
(0.01
)
1.1
0.2
0.9
0.01
0.01
LIFO expense(e)
2.5
0.7
1.8
0.02
0.02
0.4
0.1
0.3
—
—
Transaction and other related costs(f)
2.6
0.7
1.9
0.02
0.02
5.1
1.2
3.9
0.03
0.03
Equity-based compensation
9.1
0.8
8.3
0.07
0.07
12.7
0.4
12.3
0.09
0.09
Restructuring, integration and business
optimization expenses(g)
2.1
0.6
1.5
0.01
0.01
5.7
1.5
4.2
0.03
0.03
Other(h)
0.1
—
0.1
0.01
—
(1.5
)
(0.4
)
(1.1
)
(0.01
)
(0.01
)
Adjusted Net Income(1)
$
55.2
$
13.7
$
41.5
$
0.35
$
0.34
$
67.5
$
17.0
$
50.5
$
0.37
$
0.36
Weighted average shares outstanding
120,335,414
121,831,942
137,876,185
139,175,659
See Appendix Table A-1 for Descriptions to Ecovyst Non-GAAP
Reconciliations in the table above.
(1)
We define adjusted net income as net income adjusted for
non-operating income or expense and the impact of certain non-cash
or other items that are included in net income that we do not
consider indicative of our ongoing operating performance. Adjusted
net income is presented as a key performance indicator as we
believe it will enhance a prospective investor’s understanding of
our results of operations and financial condition. Adjusted net
income may not be comparable with net income or adjusted net income
as defined by other companies. The adjustments to net income
are shown net of applicable tax rates of 26.2% and 26.0% for the
six months ended June 30, 2023 and 2022, respectively, except for
the foreign currency exchange (gain) loss and 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.
162m, and adding the tax effect of equity-based stock compensation
shortfall recorded as a discrete item. The tax effect of the
foreign currency exchange (gain) loss is derived from tax effecting
the actual year to date foreign currency exchange (gain) loss by
the respective local country statutory rates which is recorded as a
discrete item.
Appendix Table A-3: Sales and Adjusted
EBITDA by Business Segment
Three months ended
June 30,
Six months ended
June 30,
2023
2022
% Change
2023
2022
% Change
Sales:
Ecoservices
$
158.1
$
193.0
(18.1
)%
$
295.8
$
347.0
(14.8
)%
Silica Catalysts
26.0
32.2
(19.3
)%
49.2
57.9
(15.0
)%
Total sales
$
184.1
$
225.2
(18.3
)%
$
345.0
$
404.9
(14.8
)%
Zeolyst Joint Venture sales
$
44.7
$
35.9
24.5
%
$
66.8
$
64.9
2.9
%
Adjusted EBITDA:
Ecoservices
$
60.1
$
60.0
0.2
%
$
96.9
$
109.3
(11.3
)%
Catalyst Technologies
25.4
21.4
18.7
%
38.4
38.4
—
%
Unallocated corporate expenses
(6.2
)
(8.5
)
(27.1
)%
(13.1
)
(15.6
)
(16.0
)%
Total Adjusted EBITDA
$
79.3
$
72.9
8.8
%
$
122.2
$
132.1
(7.5
)%
Adjusted EBITDA Margin:
Ecoservices
38.0
%
31.1
%
32.8
%
31.5
%
Catalyst Technologies(1)
35.9
%
31.4
%
33.1
%
31.3
%
Total Adjusted EBITDA Margin(1)
34.7
%
27.9
%
29.7
%
28.1
%
(1)
Adjusted EBITDA margin calculation includes proportionate
50% share of sales from the Zeolyst Joint Venture.
Appendix Table A-4: Adjusted Free Cash
Flow
Six months ended
June 30,
2023
2022
(in millions)
Net cash provided by operating
activities
$
41.1
$
52.8
Less:
Purchases of property, plant and
equipment(1)
(39.2
)
(25.8
)
Free cash flow
$
1.9
$
27.0
Adjustments to free cash flow:
Cash paid for costs related to segment
disposals
—
14.1
Adjusted free cash flow(2)
$
1.9
$
41.1
Net cash used in investing
activities(3)
$
(39.2
)
$
(29.5
)
Net cash used in financing activities
$
(79.9
)
$
(11.9
)
(1)
Excludes the Company’s proportionate 50% share of capital
expenditures from the Zeolyst Joint Venture.
(2)
We define adjusted free cash flow as net cash provided by
operating activities less purchases of property, plant and
equipment, adjusted for cash flows that are unusual in nature
and/or infrequent in occurrence that neither relate to our core
business nor reflect the liquidity of our underlying business.
Historically these adjustments include proceeds from the sale of
assets, net interest proceeds on swaps designated as net investment
hedges, the cash paid for segment disposals and cash paid for debt
financing costs included in cash from operating activities.
Adjusted free cash flow is a non-GAAP financial measure that we
believe will enhance a prospective investor’s understanding of our
ability to generate additional cash from operations and is an
important financial measure for use in evaluating our financial
performance. Our presentation of adjusted free cash flow is not
intended to replace, and should not be considered superior to, the
presentation of our net cash provided by operating activities
determined in accordance with GAAP. Additionally, our definition of
adjusted free cash flow is limited, in that it does not represent
residual cash flows available for discretionary expenditures, due
to the fact that the measure does not deduct the payments required
for debt service and other contractual obligations or payments made
for business acquisitions. Therefore, we believe it is important to
view adjusted free cash flow as a measure that provides
supplemental information to our consolidated statements of cash
flows. You should not consider adjusted free cash flow in isolation
or as an alternative to the presentation of our financial results
in accordance with GAAP. The presentation of adjusted free cash
flow may differ from similar measures reported by other companies
and may not be comparable to other similarly titled measures.
(3)
Net cash used in investing activities includes purchases of
property, plant and equipment, which is also included in our
computation of adjusted free cash flow.
Appendix Table A-5: Net Debt Leverage
Ratio
June 30, 2023
June 30, 2022
(in millions, except
ratios)
Total debt
$
882.0
$
891.0
Less:
Cash and cash equivalents
29.2
151.2
Net debt
$
852.8
$
739.8
Trailing twelve months(1):
Net income
67.4
39.6
Adjusted EBITDA(2)
266.8
264.7
Net debt to net income ratio
12.7 x
18.7 x
Net debt leverage ratio
3.2 x
2.8 x
___________________
(1)
Calculated on a continuing
operations basis.
(2)
Refer to Appendix Table A-1:
Reconciliation of Net Income to Adjusted EBITDA for the
reconciliation to the most comparable GAAP financial measure.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230803360570/en/
Investor Contact: Gene Shiels (484) 617-1225
gene.shiels@ecovyst.com
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