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Ecovyst Inc. (ECVT)·Q1 2020 Earnings Summary

Executive Summary

  • Sales of $361.6M (+0.7% YoY, +2.3% cc) and Adjusted EBITDA of $103.1M (+2.1% YoY; margin 26.2%) reflected minimal COVID-19 impact in Q1 and volume strength in Catalysts and Performance Materials .
  • GAAP diluted EPS was $0.00 (vs. $0.02 YoY), while Adjusted diluted EPS was $0.16 (vs. $0.13 YoY); liquidity stood at $236.3M including $107.7M cash .
  • Company withdrew full-year 2020 guidance except lowering Adjusted FCF to $130–$150M (from $155–$175M) and targeting mid-20% Adjusted EBITDA margin; Q2 outlook guides sales (ex-Zeolyst JV) to $360–$375M and Adjusted EBITDA to $95–$105M with margins slightly below mid-20% on lower volumes and mix .
  • Stock-relevant catalysts: demand recovery tied to miles driven for Refining Services, resilient highway safety in Performance Materials, robust polyethylene catalysts demand, and visibility into Q2 ranges; debt repricing enhanced flexibility (term loan to Feb-2027; ABL to Mar-2025 and upsized by $50M) .

What Went Well and What Went Wrong

What Went Well

  • “Solid start to the year” with volume growth in three of four segments; Catalysts strength from continued polyolefin demand and MMA timing; Performance Materials highway safety benefited from favorable weather .
  • Operations remained largely uninterrupted as essential business; only minor production and logistics delays, with contingency sourcing in place .
  • Liquidity reinforced: $236.3M total availability, $107.7M cash; debt maturities extended (term loan to 2027; ABL to 2025) and revolver upsized; no material leverage covenants .

What Went Wrong

  • Refining Services sales down 4.8% YoY due to pass-through of lower sulfur pricing; Adjusted EBITDA down 6.3% on higher raw material usage and production costs .
  • Performance Chemicals sales down 3.4% YoY (–1.1% cc), pressured by weaker detergents/personal care demand in Latin America; Adjusted EBITDA down 5.2% (–2.8% cc) .
  • Adjusted Free Cash Flow was –$19.4M in Q1 (timing of receivables and Zeolyst dividends); full-year Adjusted FCF guide cut to $130–$150M .

Financial Results

Consolidated Results vs. Prior Periods and Year-over-Year

MetricQ1 2019Q3 2019Q4 2019Q1 2020
Revenue ($USD Millions)$359.2 $423.8 $352.4 $361.6
Diluted EPS (GAAP, $)$0.02 $0.20 $0.14 $0.00
Adjusted Diluted EPS (Non-GAAP, $)$0.13 $0.36 $0.13 $0.16
Adjusted EBITDA ($USD Millions)$101.0 $137.7 $103.1 $103.1
Adjusted EBITDA Margin (%)26.0% 28.8% 25.8% 26.2%

Segment Breakdown (Sales, Adjusted EBITDA, Margin)

SegmentQ1 2019 Sales ($MM)Q1 2020 Sales ($MM)Q1 2019 Adj. EBITDA ($MM)Q1 2020 Adj. EBITDA ($MM)Q1 2019 Margin (%)Q1 2020 Margin (%)
Refining Services$105.8 $100.7 $39.7 $37.2 37.5% 36.9%
Silica Catalysts$15.9 $24.9 ————
Catalysts (incl. Zeolyst JV)——$18.1 $22.7 40.0% 39.7%
Performance Materials$61.1 $65.5 $10.5 $13.5 17.2% 20.6%
Performance Chemicals$180.5 $174.3 $42.7 $40.5 23.7% 23.2%
Total$359.2 $361.6 $111.0 $113.8 26.0% 26.2%

Note: Zeolyst JV sales were $29.5M in Q1’19 and $32.3M in Q1’20; margins for Catalysts and total include 50% of Zeolyst JV sales in denominator per company methodology .

KPIs and Cash/Liquidity

KPIQ4 2019Q1 2020
Liquidity ($MM)—$236.3
Cash and Cash Equivalents ($MM)$72.3 $107.7
Total Debt Outstanding ($MM)$1,907.0 (LT $1,899.2 + current $7.8) $1,996.8
Net Cash Provided by Operating Activities ($MM)$85.8 (Q4) $4.5 (Q1)
Capital Expenditures ($MM)$35.9 (Q4) $28.1 (Q1)
Adjusted Free Cash Flow ($MM)$67.6 (Q4) –$19.4 (Q1)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
SalesFY 2020$1,595–$1,625M Withdrawn Withdrawn
Adjusted EBITDAFY 2020$470–$480M Withdrawn Withdrawn
Adjusted Diluted EPSFY 2020~$0.85–$1.02 Withdrawn Withdrawn
Adjusted Free Cash FlowFY 2020$155–$175M $130–$150M Lowered
Adjusted EBITDA MarginFY 2020N/AMid-20% Maintained target level
Sales (ex-Zeolyst JV)Q2 2020N/A$360–$375M New short-term outlook
Adjusted EBITDAQ2 2020N/A$95–$105M; margins slightly below mid-20% New short-term outlook
CapexH1 2020N/A–$15M vs prior plan Reduced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2019, Q4 2019)Current Period (Q1 2020)Trend
Operational continuity amid disruptionsNot a focus in Q3/Q4 releasesEssential operations continued; minor shutdown/logistics delays; contingency sourcing Stable operations despite pandemic
Macro/oil/refining utilizationQ4: Catalysts strong; no specific macro Refining Services materially impacted by fewer miles driven; high gasoline inventories; refineries curtailed ~30% Negative near-term; recovery tied to mobility
Performance Chemicals demandQ3/Q4: weakness in silicates; lower volumes Down YoY; sequential rebound vs Q4 on restocking; expect continued weakness in industrial silicates; Latin America demand weak Mixed: sequential improvement then pressure
Catalysts (PE, MMA, Zeolyst)Q3/Q4: strong hydrocracking/emission control; MMA acceleration Robust PE catalyst demand; MMA pulled into Q1; Zeolyst firm orders; potential H2 delays in hydrocracking/specialty due to lower utilization Solid H1; uncertain H2 timing
Highway safety (Performance Materials)Q4: lower EGM; pricing helped 47 states continuing striping; early start on favorable weather; resilient demand Resilient/stable
Portfolio optimization/asset monetizationQ4: announced transformation program Continuing monetization; Performance Chemicals program delayed 1–2 quarters; target $10–$15M annualized EBITDA benefit Ongoing; timeline extended

Management Commentary

  • “We had a solid start to the year, delivering volume growth from three of our four business segments led by North America highway safety in Performance Materials and continued polyolefin growth in Catalysts.” — Belgacem Chariag, CEO .
  • “Our business and manufacturing facilities meet the criteria for an essential business… PQ did not experience a material impact on its business operations to date.” — Belgacem Chariag .
  • “We ended the quarter with available liquidity of $236 million… extended the maturities and lowered the interest rates of our term loan and ABL… upsized the ABL by $50 million.” — Michael Crews, CFO .
  • “We are withdrawing all annual guidance except for adjusted EBITDA margin and adjusted free cash flow… Q2 adjusted EBITDA $95–$105 million; sales ex-Zeolyst $360–$375 million.” — Michael Crews .

Q&A Highlights

  • Margin drivers in Q2: Refining Services volume down ~25% on miles driven; Performance Chemicals down ~15%; Catalysts unfavorable absorption high-single-digit headwind (inventory sell-through) .
  • Refining Services recovery mechanics: take-or-pay covers ~60–70% of cost components on >85% of regeneration; margins cushioned; volumes recover with higher production rates as mobility returns .
  • Incentive comp headwind likely removed given lower earnings trajectory; focus on discretionary cost cuts and capital deferrals to sustain margins .
  • Working capital/cash: prelim ~$10M inventory reduction benefit; year-over-year cash interest savings ~ $7M; deleveraging later in year as seasonal cash generation materializes .
  • Catalysts absorption: Q1 saw >$5M unfavorable absorption; similar dynamic expected in Q2 due to selling out of inventory versus building last year (magnifies YoY) .
  • MMA cadence ~1–2.5 years; recent demand strength, potential longer-term capacity addition by a key customer around 2025 (North America) .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 2020 EPS and revenue was unavailable in this session due to data access limits; as a result, explicit vs-consensus comparisons could not be provided. Values would normally be retrieved from S&P Global and used to assess beats/misses.

Key Takeaways for Investors

  • Q1 execution solid with minimal COVID-19 operational impact; Catalysts and Performance Materials offset sulfur pricing headwinds in Refining Services .
  • Refining Services is the principal near-term risk factor; watch mobility/miles driven and refinery utilization to gauge volume recovery and margin trajectory (take-or-pay cushions margins) .
  • Performance Materials highway safety remains resilient; favorable weather pulled forward demand and supports margin expansion on mix and raw material tailwinds .
  • Catalysts outlook firm for H1, with potential H2 timing delays in hydrocracking/specialty; PE catalysts demand robust with structural share gains and packaging tailwinds .
  • Liquidity and capital structure improved via refinancing and revolver upsizing; Q2 ranges provide near-term visibility and a bar for intra-quarter revisions .
  • Performance Chemicals transformation proceeding but delayed 1–2 quarters; target $10–$15M annualized EBITDA uplift remains intact—monitor 2021 run-rate progress .
  • Tactical focus: monitor Q2 delivery vs $95–$105M Adjusted EBITDA and $360–$375M sales ex-Zeolyst JV; execution on capex cuts (–$15M H1) and asset monetizations supports FCF within $130–$150M .