MALVERN, Pa.–(BUSINESS WIRE)–Ecovyst Inc. (NYSE:ECVT) announced the promotion of Kurt J. Bitting to Chief Executive Officer, the appointment of Kevin M. Fogarty as Chairman of the Board of Directors and the appointment of two additional independent directors. In addition, the Company is reporting results for the first quarter ended March 31, 2022 and affirming its 2022 guidance. Finally, Ecovyst is updating its capital allocation strategy to include a multi-year stock repurchase program.
First Quarter 2022 Results & Highlights
- Sales of $180 million, up 42%;
- Net income of $8 million with diluted income per share of $0.06; Adjusted net income of $20 million with Adjusted diluted EPS of $0.15;
- Adjusted EBITDA of $59 million, up 40% year-over-year;
- Adjusted EBITDA margin of 28%, up 120 basis points year-over-year (inclusive of 320 bps negative impact from sulfur cost pass through) as realized price continues to offset higher costs, demonstrating resilient profitability; and
- In January, entered into two new interest rate cap agreements with notional amounts of $250 million at 1.00%.
Ecovyst results reflect continuing operations for the Ecoservices and Catalyst Technologies businesses, renamed from Refining Services and Catalysts, respectively. Financial results are on a continuing operations basis, which exclude the Performance Materials and Performance Chemicals businesses due to the recent divestitures from all quarterly 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.
Announcement of New Chief Executive Officer and Chairman
The Board of Directors is pleased to appoint Kurt J. Bitting as CEO and a Director of Ecovyst as Belgacem Chariag has departed the Company and the Board. During Belgacem’s tenure, the Company made advancements, but the Board of Directors believes this leadership modernization will drive sustainable growth and shareholder value. In addition to the appointment of Mr. Bitting to the Board of Directors and to the CEO position, the Ecovyst Board of Directors is pleased to announce that Kevin M. Fogarty will join the Board as the new, non-executive Chairman. The Board of Directors also has promoted Tom Schneberger, currently the President of the Catalyst Technologies segment, to the position of President of Ecovyst.
“As part of our long-term succession planning, we have been observing Kurt Bitting’s outstanding performance over the years and are excited to promote him to Chief Executive Officer,” said Tim Walsh, a Managing Director at CCMP Capital and the Lead Independent Director at Ecovyst. “We believe that Kurt’s successful tenure as the leader of Ecoservices, combined with Kevin Fogarty’s track record of success at Kraton Corporation, positions Ecovyst well to continue generating long-term value for our shareholders.”
Mr. Bitting has had a long and successful career with Ecovyst, having joined its Ecoservices segment in 2006 when the division was part of Rhodia. He has been a Vice President and the President of Ecoservices since March 2019 and has helped to grow Ecoservices’ Adjusted EBITDA by more than 60% in the last seven years, including an increase of 13% in 2021. Prior to joining Ecoservices, Mr. Bitting held management positions at Kinder Morgan, Inc. and Sprint Corporation. He is also a former Company Commander in the U.S. Army’s 10th Mountain Division. He graduated from Villanova University with a B.S. in Business Administration and holds an M.B.A. from Rider University.
“I am honored to take the reins as CEO of Ecovyst, having helped build its Ecoservices business during the past 15 years into a high growth industry leader that it is today. We have an exceptional opportunity to help our customers meet the clean energy and plastics needs of the global economy and prepare for a sustainable future by leveraging Ecovyst’s outstanding team, technology and operational capabilities. I look forward to working alongside Kevin and Tom to continue executing on our strategic growth plan and creating value for our shareholders,” said Mr. Bitting.
“I am excited to work with Kurt, Tom and the entire team to support their continued success, as we seek to drive sustainable growth at Ecovyst. My experience creating customer and shareholder value in similar end markets gives me confidence that we can drive substantial value for Ecovyst shareholders,” said Mr. Fogarty.
First Quarter 2022 Results
For the quarter ended March 31, 2022, sales of $180 million increased 42% on higher demand for regeneration services, virgin sulfuric acid and polyethylene catalysts as well as higher pricing covering increased costs (inclusive of a 12% sales increase from the pass-through of higher sulfur costs). Net income was $8 million, an increase of 393%, or $11 million, with a diluted income per share of $0.06. Adjusted net income was $20 million with an Adjusted diluted EPS of $0.15. Adjusted EBITDA was $59 million, an increase of $17 million, or 40% driven by strong volumes and higher pricing that more than offset increased costs, such as sulfur, labor, energy and freight. Adjusted EBITDA margin of 28% increased 120 bps versus the prior year period primarily on the benefit of higher prices covering increased variable costs.
“Our strong first quarter results and business fundamentals are a few of the reasons I am excited to lead this company going forward,” said Mr. Bitting. “Ecovyst continues to develop solutions, products, and services that are vital to the successful adoption of sustainable technologies, such as renewable and clean fuels, electrification, lightweight materials, and circularity, which are being rapidly deployed across the globe to lower environmental impact.”
Review of Segment Results and Business Trends
We believe the macroeconomic recovery that gained momentum throughout 2021 and drove improved demand across most product categories, end-uses, and customers is continuing into 2022. Inflationary factors, including higher costs for sulfur, energy, logistics, and other raw materials, continued through the first quarter, but customer contractual pass through mechanisms and targeted price increases mitigated the cost pressures and preserved earnings in our businesses. While supply chain challenges driving supply availability and transportation bottlenecks generated short-term headwinds, the Company moderated some of the impact on its businesses through enhanced coordination and planning with customers and suppliers using our strategic network.
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 growing demand for premium grade gasoline to power fuel-efficient engines supported the high alkylation utilization results. Sulfuric acid is the most widely used commodity chemical and it plays a key role in producing a wide array of materials, particularly those supporting green infrastructure. Virgin sulfuric acid benefited from strong mining for metals and minerals that provide conductivity in low carbon technologies, as well as strong demand from numerous industrial segments producing construction, auto, and packaging materials. Sustainability trends continue to favor the treatment services business as customers seek the sustainability-focused waste solutions offered by Ecoservices.
Sales of $154 million rose 54% from the prior year. Sales increased on higher volumes of regeneration and virgin sulfuric acid, along with favorable pricing, including pass-through of higher sulfur cost of approximately $21 million. Adjusted EBITDA of $49 million increased 49%, as a result of higher volume, favorable pricing and the benefit of the Chem32 acquisition that closed in March 2021.
Catalyst Technologies
The preferential use of polyethylene in films and packaging continued to increase demand for polyethylene catalysts. Refineries are producing both traditional and renewable fuels at high rates in order to meet the global demand for energy. We expect growth in demand for catalysts in these units during 2022. Purchases of niche custom catalysts that were deferred during the lower operating rate environment resulting from the COVID-19 disruption began to return, as we had anticipated. Similar to other global businesses, shipping delays impacted the timing of sales as we fulfill our customers’ demands.
Silica catalysts sales of $26 million were slightly lower than prior year as higher polyethylene catalysts sales partially offset delayed shipments and the timing of niche custom catalyst sales. Price increases implemented in late 2021 and an energy surcharge program offset the impact of inflation on costs. Zeolyst JV sales of $29 million were flat with the prior year period as the increases in hydrocracking and niche custom catalysts sales were offset by delayed shipments and order timing within the year for our pressure product catalyst used in emission control and renewable fuels. Expected growth in renewables fuel catalysts remains unchanged for the full year and niche custom catalyst orders have gradually returned from pandemic lows. Catalysts Technologies Adjusted EBITDA of $17 million decreased $1.5 million on lower volume due to order timing and shipping delays as well as higher production costs, driving a reduction in Adjusted EBITDA margins.
Cash Flows and Balance Sheet
Consolidated cash flows from operating activities was $6 million, compared to $17 million for the same period in 2021. At March 31, 2022, the Company had total gross debt of $893.3 million and available liquidity of $207 million, including cash and cash equivalents of $129.7 million. The net debt to Adjusted EBITDA ratio was 3.1x as of March 31, 2022.
2022 Financial Outlook
The company is reiterating its 2022 guidance, though adjusting the top line sales to reflect the impact of higher sulfur cost passed through in price.
- Sales of $810 million to $8301 million (increased from $730 million to $750 million to reflect the pass-through of higher sulfur costs);
- Sales of $150 million to $160 million for proportionate 50% share of Zeolyst Joint Venture, which is excluded from GAAP Sales;
- Adjusted EBITDA of $260 million to $270 million, up 16% from 2021 at the mid-point of the range;
- Adjusted Free Cash Flow of $115 million to $125 million; and
- Capital Expenditures of $55 million to $65 million.
1Sales Outlook for 2022 includes approximately $140 million of higher sales vs. 2021 due to the pass through of increased sulfur costs, which negatively impact Adjusted EBITDA margin by more than 400 basis points, but do not negatively impact Adjusted EBITDA.
Capital Allocation Strategy Update
The Company’s Board of Directors has approved a new stock repurchase program authorizing the repurchase of up to $450 million of the Company’s outstanding common stock over the next four years. This new program is expected to be funded using cash on hand and cash generated from operations. Ecovyst primarily expects to conduct the repurchase program through negotiated transactions with Ecovyst’s equity sponsors, as well as through 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. 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 may be amended, suspended or discontinued at any time at the Company’s discretion.
“We are pleased to announce the initiation of a significant stock repurchase program, which is supported by our strong balance sheet and cash flow generation capability, and our confidence in our financial performance going forward,” said Ecovyst’s Chief Financial Officer Mike Feehan. “Although our capital allocation strategy will continue to prioritize organic and inorganic investments, our financial position provides us with the flexibility to return capital to shareholders, including negotiated transactions with our sponsors, while maintaining an appropriate leverage level.”
“Our business continues to perform well, and we remain confident in our ability to continue executing on our exciting growth initiatives in the coming years,” said Ecovyst’s Chief Executive Officer Kurt Bitting. “We are supportive of increased float and liquidity in our shares over time, and we also believe that buying back our stock represents an attractive use of cash as part of our balanced approach to capital allocation.”
Appointment of Additional Independent Directors
The Ecovyst Board of Directors announced today that, in addition to the appointment of Mr. Fogarty as Chairman, David A. Bradley and Bryan K. Brown also are joining the Board as independent directors.
Mr. Fogarty has had a long and distinguished career in the chemicals industry, most recently serving as the Chief Executive Officer and Board Member of Kraton Corporation from 2008 until March 2022. Mr. Fogarty led Kraton’s October 2009 IPO at $13.50 per share and helped lead the sale of Kraton to DL Holdings in March 2022 for $46.50 per share, or $2.6 billion. Since 2012, he has been a member of the Board of Directors of Glatfelter Corporation, and he also currently serves on the Board of Directors of the American Chemistry Council. Mr. Fogarty holds a B.S. in Engineering from Dalhousie University.
Mr. Bradley has extensive management and operational experience in the chemical industry, currently serving as President and Chief Executive Officer at SI Group, Inc. He was the Chief Executive Officer and President of Nexeo Solutions, Inc. from March 2011 until February 2019. Prior to working at Nexeo, Mr. Bradley was the Chief Operating Officer of Kraton Corporation. Mr. Bradley holds a B.S. degree in Chemical Engineering from the University of Louisville.
Mr. Brown is an accomplished business advisor of publicly traded companies, and he currently serves as a partner with Jones Day in their Capital Markets practice. Earlier in his career, he worked in the Division of Corporation Finance at the U.S. Securities and Exchange Commission. Mr. Brown enlisted in the U.S. Army Reserve in 1986, eventually serving the U.S. Army JAG Corps until he was honorably discharged at the rank of Captain in 2006. Mr. Brown holds a B.B.A. in Accounting from Sam Houston State University, and an M.B.A. in Finance and a Juris Doctorate from Tulane University.
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.
