Ecovyst (US:ECVT)2025-05-02 20:00PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for Q1 2025 report a net loss of $3.6 million, a decrease from $1.2 million net income in Q1 2024, driven by lower gross profit, with total assets at $1.79 billion and operating cash flow at $10.3 million Condensed Consolidated Statements of (Loss) Income Q1 2025 saw a net loss of $3.6 million ($0.03 per share) compared to $1.2 million net income in Q1 2024, primarily due to a decrease in gross profit from $39.2 million to $25.6 million Condensed Consolidated Statements of (Loss) Income (in thousands) | | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Sales | $162,197 | $160,537 | | Gross profit | $25,615 | $39,223 | | Operating (loss) income | $(912) | $13,953 | | Net (loss) income | $(3,597) | $1,221 | | Diluted (loss) income per share | $(0.03) | $0.01 | Condensed Consolidated Balance Sheets As of March 31, 2025, total assets slightly decreased to $1.787 billion from $1.802 billion, with total liabilities at $1.088 billion and cash at $127.5 million Balance Sheet Highlights (in thousands) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $291,963 | $303,714 | | Total assets | $1,786,922 | $1,802,321 | | Total current liabilities | $104,033 | $115,126 | | Total liabilities | $1,088,238 | $1,101,861 | | Total equity | $698,684 | $700,460 | Condensed Consolidated Statements of Cash Flows Q1 2025 net cash from operations significantly decreased to $10.3 million from $36.5 million, with net cash used in investing at $24.3 million, resulting in an $18.5 million net decrease in cash Cash Flow Summary (in thousands) | | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $10,256 | $36,503 | | Net cash used in investing activities | $(24,253) | $(17,372) | | Net cash used in financing activities | $(4,451) | $(4,183) | | Net change in cash and cash equivalents | $(18,535) | $14,771 | Notes to Condensed Consolidated Financial Statements The notes detail business segments, revenue recognition, debt structure, and segment performance, highlighting the Zeolyst Joint Venture's growth, debt modification, and a pending asset acquisition - The company operates through two main segments: Ecoservices (sulfuric acid recycling and virgin sulfuric acid) and Advanced Materials & Catalysts (silica and zeolite catalysts)25 Disaggregated Revenue by Segment (Q1 2025, in thousands) | Segment | Sales | | :--- | :--- | | Ecoservices | $143,109 | | Advanced Materials & Catalysts | $19,088 | | Total | $162,197 | - In January 2025, the company amended its Term Loan Credit Agreement, reducing the applicable interest rate on SOFR term loans to Term SOFR plus 2.00%, resulting in a $960 thousand debt modification cost6869 - The Zeolyst Joint Venture, a 50% owned affiliate, showed significant growth, with sales increasing to $89.5 million in Q1 2025 from $56.9 million in Q1 202462 - Subsequent to the quarter end, the company entered an agreement to acquire sulfuric acid production assets for $35 million, expected to close in Q2 2025117 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q1 2025 sales growth to Ecoservices pricing, despite a 34.7% gross profit decline due to maintenance costs, with Adjusted EBITDA decreasing 14.5% to $38.9 million, while liquidity remains strong at $201.1 million Results of Operations Q1 2025 sales increased to $162.2 million, but gross profit fell by $13.6 million to $25.6 million, leading to an operating loss of $0.9 million, partially offset by $8.9 million in equity income Financial Performance Summary (in millions) | | Q1 2025 | Q1 2024 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Sales | $162.2 | $160.5 | $1.7 | 1.1% | | Gross Profit | $25.6 | $39.2 | $(13.6) | (34.7)% | | Operating (Loss) Income | $(0.9) | $13.9 | $(14.8) | (106.5)% | | Equity in net income | $8.9 | $2.1 | $6.8 | 323.8% | | Net (Loss) Income | $(3.6) | $1.2 | $(4.8) | NM | - Ecoservices sales increased 1.1% to $143.1 million, driven by higher average selling prices from the pass-through of higher sulfur costs, offset by lower sales volume due to maintenance turnarounds147148 - Equity in net income from affiliated companies, primarily the Zeolyst Joint Venture, increased by $6.8 million due to higher sales volume of hydrocracking and specialty catalysts146154 Adjusted EBITDA Total Adjusted EBITDA decreased 14.5% to $38.9 million in Q1 2025, with Ecoservices' EBITDA falling 31.3% to $28.5 million, partially offset by a 57.7% increase in Advanced Materials & Catalysts' EBITDA to $17.5 million Adjusted EBITDA by Segment (in millions) | Segment | Q1 2025 | Q1 2024 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Ecoservices | $28.5 | $41.5 | $(13.0) | (31.3)% | | Advanced Materials & Catalysts | $17.5 | $11.1 | $6.4 | 57.7% | | Unallocated corporate expenses | $(7.1) | $(7.1) | $— | —% | | Total | $38.9 | $45.5 | $(6.6) | (14.5)% | - The decrease in Ecoservices' Adjusted EBITDA was driven by approximately $8 million in higher manufacturing costs from planned maintenance, $3 million from lower volume, and $2 million from unfavorable net pricing164 - The increase in Advanced Materials & Catalysts' Adjusted EBITDA was primarily due to higher sales volume within the Zeolyst Joint Venture165 Financial Condition, Liquidity and Capital Resources The company maintains sufficient liquidity for the next twelve months, with $201.1 million available as of March 31, 2025, and total debt at $868.6 million, while Q1 capital expenditures increased to $20.4 million - As of March 31, 2025, the company had total available liquidity of $201.1 million, with no borrowings under its ABL revolving credit facility170 Debt Summary (in millions) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total debt | $868.6 | $870.8 | | Less: Cash and cash equivalents | $127.5 | $146.0 | | Net Debt | $741.1 | $724.8 | - Capital expenditures increased to $20.4 million in Q1 2025 from $14.4 million in Q1 2024, driven by higher maintenance spending ($16.6 million) and growth projects ($3.8 million)184 Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes occurred in the company's market risk exposures, which include foreign currency, interest rate, and credit risks, managed through non-speculative derivative instruments - There have been no material changes in the company's primary market risks, which include foreign currency exchange, interest rate, and credit risk191 - The company utilizes financial instruments for hedging purposes only, not for speculation, to mitigate underlying economic exposures190 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of March 31, 2025, due to a material weakness in accounting for the Zeolyst Joint Venture, with a remediation plan underway - Management concluded that disclosure controls and procedures were not effective as of March 31, 2025193 - A material weakness related to the controls over the accounting of the Zeolyst Joint Venture, identified as of December 31, 2024, continues to exist196 - The company is developing a remediation plan to design and implement appropriate controls to address the material weakness197 PART II OTHER INFORMATION Item 1. Legal Proceedings The company believes no pending legal proceedings are likely to have a material adverse effect on its business - The company states that it does not believe any currently pending litigation will have a material adverse effect on its business199 Item 1A. Risk Factors No material changes have occurred from the risk factors described in the Annual Report on Form 10-K - No material changes have occurred from the risk factors described in the Annual Report on Form 10-K200 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase common stock in Q1 2025, with $229.6 million remaining available under its repurchase program - No common stock was repurchased during Q1 2025201 - As of March 31, 2025, $229.6 million was still available for share repurchases under the authorized program201 Item 5. Other Information No directors or executive officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during Q1 2025 - No directors or executive officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement in Q1 2025202 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including credit agreement amendments and CEO/CFO certifications