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Ecovyst Inc. (ECVT)·Q1 2022 Earnings Summary

Executive Summary

  • Q1 2022 delivered strong top-line and profitability: sales $179.7M (+41.9% YoY), net income $7.9M, diluted EPS $0.06; Adjusted EBITDA $59.2M (+40% YoY) and margin 28.4% (+120bps YoY, despite sulfur pass‑through headwind) .
  • Management raised FY 2022 GAAP sales guidance to $810–$830M (from $730–$750M) on higher sulfur cost pass‑throughs, while reaffirming Adjusted EBITDA ($260–$270M) and Adjusted FCF ($115–$125M); capex maintained at $55–$65M .
  • Initiated a new $450M four‑year share repurchase program and announced leadership changes (new CEO Kurt Bitting; Kevin Fogarty as non‑executive Chairman), providing clear capital return and governance catalysts .
  • Estimates comparison unavailable: S&P Global consensus data could not be retrieved for Q1 2022 due to API limits; thus no formal beat/miss assessment this quarter.

What Went Well and What Went Wrong

  • What Went Well

    • Ecoservices strength: sales $154.0M (+54% YoY), Adjusted EBITDA +49% YoY on strong regeneration and virgin sulfuric acid demand; pricing actions offset cost inflation .
    • Price/cost management: contractual pass‑throughs and targeted increases more than offset sulfur, natural gas, freight inflation; Adjusted EBITDA +$17M to $59M; margin expanded 120bps to 28.4% .
    • Strategic/capital catalysts: $450M buyback authorization; liquidity >$200M and net leverage ~3.1x support returns and bolt‑on M&A optionality .
    • Quote: “We are uniquely positioned to play an important role in the green energy transition” — CEO Kurt Bitting .

  • What Went Wrong

    • Catalyst Technologies softness: silica catalyst sales slightly down; Adjusted EBITDA fell $1.5M to $17M on delayed shipments, order timing and higher production costs .
    • Margin optics: sulfur pass‑throughs add ~$21M to sales in Ecoservices and compress margins (Ecoservices margin -510bps; total margin includes >400bps negative impact from sulfur pass‑through) .
    • Supply chain/backlog: shipping delays created backlog in Catalyst Technologies; management expects unwinding over “next several months” rather than immediate normalization .

Financial Results

MetricQ1 2021Q4 2021Q1 2022
Sales ($USD Millions)$126.6 $170.2 $179.7
Net Income – Continuing Ops ($USD Millions)$(2.7) $7.8 $7.9
Diluted EPS – Continuing Ops ($USD)$(0.02) $0.06 $0.06
Adjusted Diluted EPS ($USD)$0.04 $0.17 $0.15
Adjusted EBITDA ($USD Millions)$42.3 $63.2 $59.2
Adjusted EBITDA Margin (%)27.2% 30.6% 28.4%
Gross Profit ($USD Millions)$30.1 $54.5 $47.7

Segment Performance

Segment MetricQ1 2021Q4 2021Q1 2022
Ecoservices Sales ($MM)$100.2 $142.0 $154.0
Silica Catalysts Sales ($MM)$26.4 $28.2 $25.7
Zeolyst JV Sales – 50% Share ($MM)$29.0 $36.3 $29.0
Ecoservices Adjusted EBITDA ($MM)$33.0 $52.3 $49.3
Catalyst Technologies Adjusted EBITDA ($MM)$18.5 $23.4 $17.0

Key KPIs

KPIQ1 2021Q4 2021Q1 2022
Cash & Cash Equivalents ($MM)—$140.9 $129.7
Gross Debt/Total Debt ($MM)—$895.5 $893.3
Available Liquidity ($MM)——$207
Net Debt / Adjusted EBITDA (x)—3.3x 3.1x
Cash from Operations – Continuing Ops ($MM)$16.5 —$6.4
Adjusted Free Cash Flow ($MM)$2.7 —$9.2

Notes:

  • Ecoservices pass‑through of higher sulfur costs contributed ~$21M to Q1 sales; excludes impact on Adjusted EBITDA; compresses margins optics .
  • Non‑GAAP reconciliations detailed in exhibits; Adjusted EBITDA includes JV proportional adjustments and other items .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GAAP SalesFY 2022$730–$750M $810–$830M Raised (reflects higher sulfur pass‑through; +$80M)
Zeolyst JV Sales (50%)FY 2022$150–$160M $150–$160M Maintained
Adjusted EBITDAFY 2022$260–$270M $260–$270M Maintained
Adjusted Free Cash FlowFY 2022$115–$125M $115–$125M Maintained
Capital ExpendituresFY 2022$55–$65M $55–$65M Maintained
Share Repurchase Authorization4 years—$450M authorization Initiated

Management also indicated Q2 2022 earnings to be above Q1 2022 and prior year, but “slightly lower than Q4 2021,” with Ecoservices sales uplift from further pass‑throughs; qualitative quarterly cadence provided rather than numeric guidance .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’21 & Q4’21)Current Period (Q1’22)Trend
Supply chain/logisticsManaged hurricane/rail delays; price pass‑throughs offset logistics costs Shipping delays created backlog; backlog already unwinding; transportation costs largely passed through Improving/unwinding
Renewable fuelsGrowth area; facilities require 2–3x more catalyst change‑outs Sales to renewable fuels tripled in 2021; >10% of Catalyst Technologies sales; further growth expected in 2022 Accelerating
Polyethylene catalystsOutgrowing market; strong demand and share gains Strong demand; silica sales slightly lower due to delayed shipments/timing Strong demand, timing effects
Hydrocracking catalystsRecovery underway; peak late ’22/early ’23 HCC catalyst materials sales +>90% YoY; some shipments shifted from March to April Strength with timing shifts
Sulfur cost pass‑throughHeadwind to margins; expected moderation ~$21M Q1 pass‑through; FY sales raised to reflect +$140M higher sulfur; >400bps margin headwind optics Elevated, mitigated by pass‑throughs
Capital allocation/leverageFlexible balance sheet; bolt‑ons like Chem32; mid‑3x leverage New $450M buyback; leverage ~3.1x; comfortable with “the 3s” Increasing capital returns
Leadership/governance—New CEO and Chairman; expanded Board Transition; growth focus

Management Commentary

  • Strategic positioning: “Ecovyst provides products and services critical for the production of clean fuels, polymers and…the green energy transition…help our customers achieve their own sustainability goals” — CEO Kurt Bitting .
  • Q1 performance: “Year‑over‑year gains of 34% in sales, 40% growth in adjusted EBITDA and a strong 74% cash conversion ratio” — CEO .
  • Pricing vs inflation: “Price increases…more than offset higher variable costs such as sulfur, natural gas and freight…Adjusted EBITDA margins increased 120bps to 28.4%” — CFO .
  • Ecoservices dynamics: Sales +$54M; ~$21M sulfur pass‑through; margins pressured by 510bps; would be “just over 37%” absent sulfur pass‑through — CFO .
  • FY outlook change: “Increasing GAAP sales guidance by $80M…expect sulfur costs higher by approximately $140M YoY…reiterating Adjusted EBITDA guidance” — CFO .
  • Balance sheet and returns: Liquidity >$200M; leverage just above 3x; $450M buyback program authorized — CFO .

Q&A Highlights

  • Buybacks vs M&A: Initial cash prioritizes organic growth; if no bolt‑ons, majority of FCF can go to buybacks; comfortable leverage in “the 3s”; directed repurchases with sponsors to increase float, then open‑market later .
  • Backlog/shipping delays: Hydrocracking shipments moved from March to April; backlog created by supply chain issues expected to unwind “over the next several months”; guidance reiterated .
  • Transportation costs: High pass‑through component on transportation; minimal issues flagged .
  • Sulfur market tightness: Contracts largely 100% requirements; high pass‑through; ability to sell excess acid into strong markets (mining, industrial, batteries, PVC) if customers reduce take‑or‑pay volumes .
  • Renewable fuels feedstock: Company “agnostic” to feedstock (e.g., soybean oil vs other), with growth benefiting both new catalyst sales and Chem32 activation .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 2022 EPS and Revenue could not be retrieved due to SPGI daily request limits; therefore, we cannot assess beat/miss versus consensus this quarter.

Key Takeaways for Investors

  • Ecoservices drove the quarter; sulfuric acid demand across mining and industrial remained strong, while contractual pass‑throughs protected earnings despite inflation .
  • Catalyst Technologies faced timing and shipping delays; management expects backlog unwind and improvement in Q2; hydrocracking catalysts momentum is evident (+>90% YoY) .
  • FY 2022 GAAP sales guidance raised to $810–$830M on sulfur pass‑throughs; Adjusted EBITDA and FCF maintained, reinforcing earnings quality despite margin optics .
  • New $450M buyback over four years and comfort with ~3x leverage provide a near‑term shareholder return catalyst, alongside leadership refresh (CEO/Chairman) .
  • Liquidity ($207M) and net debt/EBITDA (~3.1x) support both returns and bolt‑on deals aligned to sustainable technologies (e.g., Chem32) .
  • Narrative to watch: sulfur market tightness (optical margin pressure), backlog unwinding pace in catalysts, and continued growth in renewable fuels and polyethylene catalysts .