Company Announcements

ECOVYST INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except share and per share amounts)

Three months ended

September 30,

Nine months ended

September 30,

2024

2023

% Change

2024

2023

% Change

Sales

$       179.2

$       173.3

3.4 %

$       522.5

$       518.3

0.8 %

Cost of goods sold

124.5

120.1

3.7 %

374.9

367.7

2.0 %

Gross profit

54.7

53.2

2.8 %

147.6

150.6

(2.0) %

Selling, general and administrative expenses

20.0

16.9

18.3 %

64.3

59.5

8.1 %

Other operating expense, net

3.1

4.3

(27.9) %

9.9

17.2

(42.4) %

Operating income

31.6

32.0

(1.3) %

73.4

73.9

(0.7) %

Equity in net (income) from affiliated companies

0.9

(4.7)

(119.1) %

(2.5)

(16.3)

(84.7) %

Interest expense, net

11.3

11.8

(4.2) %

37.6

30.8

22.1 %

Debt extinguishment costs

—

—

— %

4.6

—

NM

Other expense, net

0.6

0.4

50.0 %

1.1

0.6

83.3 %

Income before income taxes

18.8

24.5

(23.3) %

32.6

58.8

(44.6) %

Provision for income taxes

4.5

7.9

(43.0) %

8.8

17.6

(50.0) %

Effective tax rate

24.0 %

32.3 %

26.9 %

29.9 %

Net income

$         14.3

$         16.6

(13.9) %

$         23.8

$         41.2

(42.2) %

Earnings per share:

Basic earnings per share

$         0.12

$         0.14

$         0.20

$         0.35

Diluted earnings per share

$         0.12

$         0.14

$         0.20

$         0.34

Weighted average shares outstanding:

Basic

116,490,634

116,446,085

116,786,759

119,042,161

Diluted

117,187,054

117,374,347

117,425,254

120,417,132

ECOVYST INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share amounts)

September 30,
2024

December 31,
2023

ASSETS

Cash and cash equivalents

$           123.5

$                  88.4

Accounts receivable, net

74.0

81.3

Inventories, net

53.7

45.1

Derivative assets

6.2

13.4

Prepaid and other current assets

26.1

17.8

Total current assets

283.5

246.0

Investments in affiliated companies

410.4

440.2

Property, plant and equipment, net

571.7

576.9

Goodwill

405.8

404.5

Other intangible assets, net

106.6

116.6

Right-of-use lease assets

25.7

24.3

Other long-term assets

36.3

29.4

Total assets

$        1,840.0

$             1,837.8

LIABILITIES

Current maturities of long-term debt

$               8.7

$                    9.0

Accounts payable

33.4

40.2

Operating lease liabilities—current

8.0

8.2

Accrued liabilities

61.7

61.7

Total current liabilities

111.8

119.1

Long-term debt, excluding current portion

853.9

858.9

Deferred income taxes

108.5

115.8

Operating lease liabilities—noncurrent

17.6

16.0

Other long-term liabilities

18.9

22.5

Total liabilities

1,110.7

1,132.3

Commitments and contingencies

EQUITY

Common stock ($0.01 par); authorized shares 450,000,000; issued shares 140,872,846 and 140,744,045 on September 30, 2024 and December 31, 2023, respectively; outstanding shares 116,509,803 and 116,116,895 on September 30, 2024 and December 31, 2023, respectively

1.4

1.4

Preferred stock ($0.01 par); authorized shares 50,000,000; no shares issued or outstanding on September 30, 2024 and December 31, 2023

—

—

Additional paid-in capital

1,103.4

1,102.6

Accumulated deficit

(147.1)

(170.9)

Treasury stock, at cost; shares 24,363,043 and 24,627,150 on September 30, 2024 and December 31, 2023, respectively

(223.1)

(226.7)

Accumulated other comprehensive loss

(5.3)

(0.9)

Total equity

729.3

705.5

Total liabilities and equity

$        1,840.0

$             1,837.8

ECOVYST INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended

September 30,

2024

2023

Cash flows from operating activities:

(in millions)

Net income

$        23.8

$        41.2

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation

56.2

51.9

Amortization

10.6

10.5

Amortization of deferred financing costs and original issue discount

1.3

1.5

Deferred income tax benefit

(4.5)

(1.0)

Net loss on asset disposals

0.8

3.3

Stock compensation

10.5

12.5

Equity in net income from affiliated companies

(2.5)

(16.3)

Dividends received from affiliated companies

33.0

10.0

Other, net

(7.3)

(5.2)

Working capital changes that provided (used) cash:

Receivables

7.6

(8.9)

Inventories

(7.4)

(3.9)

Prepaids and other current assets

(8.3)

0.9

Accounts payable

(5.8)

(3.7)

Accrued liabilities

(1.6)

(19.4)

Net cash provided by operating activities

106.4

73.4

Cash flows from investing activities:

Purchases of property, plant and equipment

(51.7)

(53.6)

Investment in non-marketable equity securities

(4.5)

—

Net cash used in investing activities

(56.2)

(53.6)

Cash flows from financing activities:

Draw down of revolving credit facilities

—

14.5

Repayments of revolving credit facilities

—

(14.5)

Issuance of long-term debt, net of original issue discount and financing fees

870.8

—

Repayments of long-term debt

(877.5)

(6.8)

Repurchases of common shares

(5.0)

(78.7)

Tax withholdings on equity award vesting

(1.2)

(3.4)

Repayment of financing obligation

(2.4)

(2.1)

Other, net

0.2

0.5

Net cash used in financing activities

(15.1)

(90.5)

Effect of exchange rate changes on cash and cash equivalents

—

(1.9)

Net change in cash and cash equivalents

35.1

(72.6)

Cash and cash equivalents at beginning of period

88.4

110.9

Cash and cash equivalents at end of period

$      123.5

$        38.3

Appendix Table A-1: Reconciliation of Net Income to Adjusted EBITDA

Three months ended

September 30,

Nine months ended

September 30,

2024

2023

2024

2023

(in millions)

Reconciliation of net income to Adjusted EBITDA

Net income

$             14.3

$             16.6

$             23.8

$             41.2

Provision for income taxes

4.5

7.9

8.8

17.6

Interest expense, net

11.3

11.8

37.6

30.8

Depreciation and amortization

23.2

21.3

66.8

62.5

EBITDA

53.3

57.6

137.0

152.1

Joint venture depreciation, amortization and interest^(a)

3.6

3.3

10.1

10.1

Amortization of investment in affiliate step-up^(b)

0.6

1.6

3.2

4.8

Debt extinguishment costs

—

—

4.6

—

Net loss on asset disposals^(c)

0.2

1.0

0.8

3.3

Foreign currency exchange loss (gain)^(d)

—

0.8

0.1

(0.4)

LIFO (benefit) expense^(e)

(0.6)

—

(3.2)

2.5

Transaction and other related costs^(f)

—

0.2

0.2

2.8

Equity-based compensation

3.0

3.5

10.5

12.6

Restructuring, integration and business optimization expenses^(g)

0.5

0.3

0.9

2.4

Other^(h)

(0.8)

(0.4)

(1.9)

(0.1)

Adjusted EBITDA

$             59.8

$             67.9

$           162.3

$           190.1

Descriptions to Ecovyst Non-GAAP Reconciliations

^(a)

We use Adjusted EBITDA as a performance measure to evaluate our financial results. Because our Advanced Materials & Catalysts 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 Eco Services 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 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 remeasurement effects of monetary assets and liabilities, including non-permanent intercompany debt, denominated in foreign currency.

^(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

September 30,

2024

2023

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

$   18.8

$       4.5

$      14.3

$           0.12

$         0.12

$   24.5

$       7.9

$       16.6

$         0.14

$          0.14

Amortization of investment in affiliate step-up^(b)

0.6

0.1

0.5

—

—

1.6

0.5

1.1

0.01

0.01

Net loss on asset disposals^(c)

0.2

0.1

0.1

—

—

1.0

0.3

0.7

0.01

0.01

Foreign currency exchange loss^(d)

—

—

—

—

—

0.8

0.2

0.6

0.01

0.01

LIFO benefit^(e)

(0.6)

(0.2)

(0.4)

—

—

—

—

—

—

—

Transaction and other related costs^(f)

—

—

—

—

—

0.2

0.1

0.1

—

—

Equity-based compensation

3.0

0.7

2.3

0.02

0.02

3.5

0.3

3.2

0.03

0.03

Restructuring, integration and business optimization expenses^(g)

0.5

0.1

0.4

—

—

0.3

0.1

0.2

—

—

Other^(h)

(0.8)

(0.1)

(0.7)

—

—

(0.4)

(0.1)

(0.3)

(0.01)

(0.01)

Adjusted Net Income⁽¹⁾

$   21.7

$       5.2

$      16.5

$           0.14

$         0.14

$   31.5

$       9.3

$       22.2

$         0.19

$          0.19

Weighted average shares outstanding

116,490,634

117,187,054

116,446,085

117,374,347

Nine months ended

September 30,

2024

2023

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

$   32.6

$       8.8

$      23.8

$           0.20

$         0.20

$   58.8

$     17.6

$       41.2

$         0.35

$          0.34

Amortization of investment in affiliate step-up^(b)

3.2

0.8

2.4

0.02

0.02

4.8

1.3

3.5

0.03

0.03

Debt extinguishment costs

4.6

1.2

3.4

0.03

0.03

—

—

—

—

—

Net loss on asset disposals^(c)

0.8

0.2

0.6

0.01

0.01

3.3

0.9

2.4

0.02

0.02

Foreign currency exchange loss (gain)^(d)

0.1

—

0.1

—

—

(0.4)

(0.1)

(0.3)

—

—

LIFO (benefit) expense^(e)

(3.2)

(0.8)

(2.4)

(0.02)

(0.02)

2.5

0.7

1.8

0.02

0.01

Transaction and other related costs^(f)

0.2

0.1

0.1

—

—

2.8

0.8

2.0

0.02

0.02

Equity-based compensation

10.5

2.1

8.4

0.07

0.07

12.6

1.1

11.5

0.10

0.10

Restructuring, integration and business optimization expenses^(g)

0.9

0.2

0.7

0.01

0.01

2.4

0.7

1.7

0.01

0.01

Other^(h)

(1.9)

(0.6)

(1.3)

(0.01)

(0.02)

(0.1)

—

(0.1)

(0.01)

—

Adjusted Net Income⁽¹⁾

$   47.8

$     12.0

$      35.8

$           0.31

$         0.30

$   86.7

$     23.0

$       63.7

$         0.54

$          0.53

Weighted average shares outstanding

116,786,759

117,425,254

119,042,161

120,417,132

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.

Appendix Table A-3: Sales and Adjusted EBITDA by Business Segment

Three months ended

September 30,

Nine months ended

September 30,

2024

2023

% Change

2024

2023

% Change

Sales:

Ecoservices

$     153.9

$     147.6

4.3 %

$     449.4

$     443.4

1.4 %

Advanced Silicas

25.3

25.7

(1.6) %

73.1

74.9

(2.4) %

Total sales

$     179.2

$     173.3

3.4 %

$     522.5

$     518.3

0.8 %

Zeolyst Joint Venture sales

$       30.9

$       37.0

(16.5) %

$       83.4

$     103.7

(19.6) %

Adjusted EBITDA:

Ecoservices

$       55.1

$       54.7

0.7 %

$     146.3

$     151.6

(3.5) %

Advanced Materials & Catalysts

10.9

16.4

(33.5) %

36.8

54.7

(32.7) %

Unallocated corporate expenses

(6.2)

(3.2)

(93.8) %

(20.8)

(16.2)

(28.4) %

Total Adjusted EBITDA

$       59.8

$       67.9

(11.9) %

$     162.3

$     190.1

(14.6) %

Adjusted EBITDA Margin:

Ecoservices

35.8 %

37.1 %

32.6 %

34.2 %

Advanced Materials & Catalysts⁽¹⁾

19.4 %

26.2 %

23.5 %

30.6 %

Total Adjusted EBITDA Margin⁽¹⁾

28.5 %

32.3 %

26.8 %

30.6 %

⁽¹⁾

Adjusted EBITDA Margin calculation includes proportionate 50% share of sales from the Zeolyst Joint Venture.

Appendix Table A-4: Adjusted Free Cash Flow

Nine months ended

September 30,

2024

2023

(in millions)

Net cash provided by operating activities

$        106.4

$          73.4

Less:

Purchases of property, plant and equipment⁽¹⁾

(51.7)

(53.6)

Free Cash Flow⁽²⁾

$          54.7

$          19.8

Adjustments to free cash flow:

Cash paid for debt financing costs included in cash from operating activities

4.6

—

Adjusted Free Cash Flow⁽²⁾

$          59.3

$          19.8

Net cash used in investing activities⁽³⁾  

$        (56.2)

$        (53.6)

Net cash used in financing activities  

$        (15.1)

$        (90.5)

⁽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

September 30, 2024

September 30, 2023

(in millions, except ratios)

Total debt

$                 873.0

$                  879.8

Less:

Cash and cash equivalents

123.5

38.3

Net debt

$                 749.5

$                  841.5

Trailing twelve months:

Net income

$                   53.8

$                    62.7

Adjusted EBITDA⁽¹⁾

$                 232.0

$                  259.3

Net Debt to Net Income ratio

                     13.9x

                      13.4x

Net Debt Leverage ratio

                       3.2x

                        3.2x

⁽¹⁾

Refer to Appendix Table A-1: Reconciliation of Net Income to Adjusted EBITDA for the reconciliation to the most comparable GAAP financial measure.