Ecovyst Inc. Q3 FY2025 earnings call

• Sold advanced materials and catalysts segment to Technip Energies for $556 million, expected net proceeds ~$530 million, plan to use $450 - $500 million to reduce long-term debt.
• Amended stock repurchase plan, repurchased $5.5 million in Q3, intend to repurchase up to $20 million in Q4 2025, with further repurchases in 2026.
• Third quarter adjusted EBITDA up 18% due to favorable contractual pricing for regeneration services and higher virgin sulfuric acid sales, but regeneration volume impacted by customer outages.
• Demand trends: favorable outlook for regeneration services due to alkylate economics; strong demand in mining for virgin sulfuric acid driven by copper demand, onshoring, and critical mineral processing; stability with modest growth expected in nylon-related sulfuric acid end use; industrial applications demand growth in line with GDP.
• Waggaman sulfuric acid plant has positive effect on network, with expansion projects underway.

For the continuing operations, third quarter sales were $205 million, up $51 million or 33%. Adjusted EBITDA was $58 million, up 18%. The ecoservices segment saw top line sales growth driven by price and volume. Price variance was from favorable contractual pricing for regeneration services. Volume growth was strong in virgin sulfuric acid due to mining activity and new Waggaman assets, but offset by lower regeneration services from customer downtime. Segment adjusted EBITDA for ecoservices was $64 million, up 15%. Mining accounts for 20% to 25% of virgin sulfuric acid sales, nylon-related end uses also 20% to 25%, and ~10% is under contract with refining customers as makeup acid.

• 2025 full year adjusted EBITDA from continuing operations expected ~$170 million, free cash flow range $75 - $85 million. Sales expected $700 - $740 million including ~$70 million sulfur cost pass-through. Corporate costs ~$30 million.
• 2026 expected increased regeneration volume on less customer turnarounds and contractual pricing, higher virgin sulfuric acid volume from mining and Waggaman assets. CapEx expected higher in 2026. Interest expense in 2026 expected lower than 2025. Effective tax rate mid-20% range in both years.

• Customer unplanned and extended downtime impacted regeneration volume in third quarter.
• Inflation and transportation costs led to increase in other costs.
• Uncertainty around debt repayment and resulting net debt leverage ratio.

Q: Regarding cash deployment, are there specific projects on hold that can now be pursued and how to balance capital deployment into growth vs buybacks?

A: There's excitement around mining-related end segments, with storage and logistics expansion in Houston underway and investments at Waggaman. Prioritize value creation for shareholders, investing in organic opportunities and doing share repurchases when shares are undervalued.

Q: Color on pricing impact for next year and how Waggaman integration is progressing?

A: Regeneration contracts reprice typically. Virgin sulfuric acid pricing affected by sulfur prices, strong mining demand, and Waggaman contracts rolling off and repricing. Waggaman integration has both contract repricing and positive network effects, with a turnaround planned at end of Q1 2026.

Q: Thoughts on debt reduction and long-term leverage target?

A: After debt paydown, net debt leverage ratio will be below 1.5x, but target of 2 - 2.5x is still relevant, with leverage ebbing and flowing based on capital allocation strategies.

Q: Outlook for nylon demand into 2026?

A: Moderate recovery in 2025, expected status quo in 2026, but long-term fundamentals for nylon are strong.

Q: Clarity from customers on unexpected downtimes and inventory management?

A: Customers try to avoid unplanned outages but sometimes have mechanical issues leading to quick planning of downtime. Ramped up virgin sulfuric acid volume and manage inventories accordingly. Refinery outages have longer cycles than 2 years.

Q: Updated perspective on mining CapEx cycle in US and impact on sulfuric acid?

A: Near-term, mining projects in copper space require significant sulfuric acid, with expansions at Houston and Waggaman to meet demand. Long-term, more significant mining projects will drive sulfuric acid demand, and sulfuric acid price is expected to rise over time.