Ecovyst (ECVT) - 2022 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements (Unaudited) Ecovyst Inc.'s unaudited condensed consolidated financial statements for Q1 2022 reflect a significant turnaround to net income, driven by increased sales and gross profit Condensed Consolidated Statements of Income Ecovyst reported $7.9 million net income from continuing operations in Q1 2022, a significant improvement from a $2.7 million net loss in Q1 2021, driven by increased sales and gross profit Condensed Consolidated Statements of Income (in thousands, except per share data) | Metric | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Sales | $179,714 | $126,624 | | Gross Profit | $47,735 | $30,119 | | Operating Income | $16,436 | $2,482 | | Net Income (Loss) from Continuing Operations | $7,875 | $(2,748) | | Net Income (Loss) Attributable to Ecovyst Inc. | $7,875 | $(92,635) | | Diluted Income (Loss) per Share - Continuing Operations | $0.06 | $(0.02) | | Diluted Income (Loss) per Share | $0.06 | $(0.68) | Condensed Consolidated Balance Sheets As of March 31, 2022, total assets were $1.935 billion, total liabilities decreased to $1.170 billion, and total equity increased to $765.6 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $302,298 | $291,669 | | Total Assets | $1,935,248 | $1,931,219 | | Total Current Liabilities | $113,074 | $145,081 | | Total Liabilities | $1,169,617 | $1,190,482 | | Total Equity | $765,631 | $740,737 | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities was $6.4 million in Q1 2022, a decrease from $17.4 million in Q1 2021, while investing activities used $14.4 million Cash Flow Summary (in thousands) | Cash Flow Activity | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $6,423 | $17,423 | | Net cash used in investing activities | $(14,413) | $(76,569) | | Net cash used in financing activities | $(2,555) | $(1,978) | | Net change in cash, cash equivalents and restricted cash | $(11,141) | $(63,832) | Notes to Condensed Consolidated Financial Statements Detailed notes explain Ecovyst's business structure, divestitures, disaggregated revenue, a new stock repurchase program, and segment performance metrics - The company operates through two main businesses: Ecoservices (sulfuric acid recycling and virgin sulfuric acid) and Catalyst Technologies (silica catalysts and supports, plus a 50% joint venture in zeolites)[26] - The sale of the Performance Chemicals business was completed on August 1, 2021. In Q1 2022, the company made a final adjustment payment of $3.7 million to the buyer[32] Disaggregated Sales by End Use (in thousands) | End Use | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Industrial & process chemicals | $32,854 | $16,947 | | Fuels & emission control | $71,658 | $55,192 | | Packaging & engineered plastics | $50,133 | $37,024 | | Natural resources | $25,069 | $17,461 | | Total segment sales | $179,714 | $126,624 | - On April 27, 2022, the Board approved a new stock repurchase program to purchase up to $450 million of common stock over four years[57][113] Segment Performance (in thousands) | Metric | Segment | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | :--- | | Sales | Ecoservices | $154,060 | $100,222 | | | Catalyst Technologies | $25,654 | $26,402 | | Adjusted EBITDA | Ecoservices | $49,341 | $33,002 | | | Catalyst Technologies | $16,975 | $18,469 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022 financial results, highlighting significant sales and gross profit growth driven by Ecoservices, sufficient liquidity, and a new stock repurchase program Results of Operations Q1 2022 sales increased by $53.1 million to $179.7 million, primarily driven by Ecoservices' growth, while gross profit and operating income also significantly improved Financial Performance Summary (in millions) | Metric | Q1 2022 | Q1 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Sales | $179.7 | $126.6 | $53.1 | 41.9% | | Gross Profit | $47.7 | $30.1 | $17.6 | 58.5% | | Operating Income | $16.5 | $2.5 | $14.0 | 560.0% | | Net Income (loss) from continuing ops | $7.9 | $(2.7) | $10.6 | (392.6)% | - Ecoservices sales increased by $53.8 million (53.7%) due to higher average selling prices ($37.3 million) and increased sales volumes ($16.5 million), including the pass-through of $21.3 million in higher sulfur costs[137] - Catalyst Technologies sales decreased by $0.7 million (2.7%) due to delayed shipments and timing of custom catalyst sales, partially offset by higher polyethylene catalyst sales[137] Adjusted EBITDA by Segment (in millions) | Segment | Q1 2022 | Q1 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Ecoservices | $49.3 | $33.0 | $16.3 | 49.4% | | Catalyst Technologies | $17.0 | $18.5 | $(1.5) | (8.1)% | | Total Adjusted EBITDA | $59.2 | $42.3 | $16.9 | 40.0% | Financial Condition, Liquidity and Capital Resources As of March 31, 2022, total available liquidity was $206.5 million, with total debt at $893.2 million, deemed sufficient for the next 12 months - As of March 31, 2022, the company had total available liquidity of $206.5 million, with no borrowings under its revolving credit facility[158] Cash Flow Summary - Continuing Operations (in millions) | Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $6.4 | $16.5 | | Net cash used in investing activities | $(14.4) | $(54.6) | | Net cash used in financing activities | $(2.6) | $(1.5) | - Total debt was $893.2 million as of March 31, 2022. Net debt was $763.5 million, including cash of $129.7 million[165] Capital Expenditures (in millions) | Type | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Maintenance | $7.0 | $9.2 | | Growth | $2.1 | $2.6 | | Total | $9.1 | $11.8 | Quantitative and Qualitative Disclosures About Market Risk No material changes occurred in the company's market risk exposures, including foreign currency, interest rate, commodity, and credit risks, since the last Annual Report on Form 10-K - There have been no material changes in foreign exchange risk, interest rate risk, commodity risk, or credit risk from the company's most recent Annual Report on Form 10-K[171] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting - Management concluded that as of March 31, 2022, the company's disclosure controls and procedures were effective at a reasonable assurance level[172] - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2022, that materially affected, or are reasonably likely to materially affect, internal controls[173] PART II OTHER INFORMATION Legal Proceedings The company is subject to various legal claims but believes no pending litigation will have a material adverse effect on its business - The company is not aware of any pending litigation that is likely to have a material adverse effect on its business[175] Risk Factors This section updates risk factors, highlighting international operations compliance risks with anti-corruption laws, economic sanctions, and the impact of the Russia-Ukraine conflict - The company's international operations are subject to U.S. and foreign anti-corruption laws (e.g., FCPA), economic sanctions, and export controls, and failure to comply could result in significant liabilities[176] - The invasion of Ukraine by Russia and the resulting sanctions could disrupt or adversely impact the company's business, supply chain, partners, or customers[176] Exhibits This section lists exhibits filed with the 10-Q, including a General Release, CEO/CFO certifications, and financial data in Inline XBRL format - The report includes CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act[181] - Financial statements and notes are provided in Inline XBRL format as part of the exhibits[181] Signatures The report was signed and authorized by Michael Feehan, Vice President and Chief Financial Officer, on May 3, 2022 - The Form 10-Q was signed and authorized by Michael Feehan, Vice President and Chief Financial Officer, on May 3, 2022[186]