Ecovyst Inc.

Good morning. My name is Madison and I will be your conference operator today. Welcome to the ECOVIST second quarter 2024 earnings call and webcast. Please note, today's call is being recorded and should run approximately one hour. Currently, all participants have been placed in a listen-only mode to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If you want to remove yourself from the queue, please press star 2. When posing your question, we ask that you please pick up your handset to allow for optimal sound quality. Lastly, if you should need operator assistance, please press star zero. I would now like to hand to the conference over to Gene Shields, Director of Investor Relations. Please go ahead.

Gene Shields Thank you, operator. Good morning and welcome to ECOVIST second quarter 2024 earnings call. With me on the call this morning are Kurt Bidding, ECOVIST Chief Executive Officer, and Mike Feehan, ECOVIS Chief Financial Officer. Following our prepared remarks this morning, we'll take your questions. Please note that some of the information shared today is forward-looking information, including information about the company's financial and operating performance, strategies, our anticipated end-use demand trends, and our 2024 financial outlook. This information is subject to risks and uncertainties that could cause the actual results and the implementation of the company's plans to vary materially. Any forward-looking information shared today speaks only as of this date. These risks are discussed in the company's filings with the SEC. Reconciliations of non-GAAP financial measures mentioned in today's call with their corresponding GAAP measures can be found in our earnings release and in the presentation materials posted on the investor section of our website I'll now turn the call over to Curt Fitting.

Thank you, Gene, and good morning. Overall, we are pleased with our results for the second quarter of 2024. We delivered financial results above our forecast, and we made solid progress on a number of strategic initiatives. During the quarter, we continued to see strong demand for regeneration services supported by high refinery utilization and favorable economics for alkaloids. with regeneration volume up compared to the second quarter of 2023. Sales volume was also up for virgin sulfuric acid and treatment services compared to the year-ago quarter. And in our advanced materials and catalyst segment, sales of advanced silicates increased compared to the second quarter of 2023 on higher sales of chemical catalysts. However, during the quarter, we saw lower sales of catalyst materials used in the production of sustainable fuels and emission control applications. All in, for the second quarter, we delivered adjusted EBITDA of $57 million. In terms of the continued strategic positioning of EcoVist, it was a very successful quarter. By the end of May, we had completed the four turnarounds planned for eco-services in the first half of the year. The work also progressed for our polyethylene catalyst production capacity expansion at our Kansas City site. Reflecting our balanced approach to capital allocation, during the quarter we also repurchased 552,000 shares of Ecoviz common stock for a total cost of $5 million. In addition, as we announced last week, our work during the quarter culminated in an equity investment in Pajarito Powders, a company with expertise in supports and catalysts for green hydrogen and fuel cells. This transaction is consistent with our stated strategy of leveraging our material science capabilities as we continue to position Ecoviz for growth in emerging markets. Through this investment, we gain access to and support for scaling technologies that we believe will position us to support and participate in future growth of hydrogen economy, as we believe hydrogen produced through electrolysis can be widely used as a low-carbon fuel for heavy-duty transportation and industrial applications. Lastly, during the quarter, we strengthened our balance sheet through an amendment and extension of our term loan facility, which reduced the interest rate spread and extended the maturity of the facility until June of 2031. As we turn to slide six, I'll discuss our near-term demand outlook. In Ecoservices, we anticipate a favorable demand forecast for regeneration, treatment services, and catalyst activation throughout the remainder of the year. We anticipate that regeneration will continue to experience strong demand driven by persistent high refinery utilization rates and healthy alkaline margins. Our treatment services segment is expected to continue to experience high volumes as it serves as a sustainable waste management solution for numerous chemical producers along the Gulf Coast. And despite anticipating a dip in utilization rates among renewable diesel manufacturers, we are observing a rising need for ex-situ catalyst activation, which is expected to contribute to a buoyant outlook for Chem 32 in the latter half of the year. For virgin sulfuric acid, we expect continued positive demand for mining with copper demand sustained by continued expansion of copper mining projects in North America and borates demonstrating a normalization of inventories and stable demand. And even though the nylon industry's rebound remains subdued, we anticipate a year-over-year increase in virgin sulfuric acid sales for the nylon end use in 2024. For the remainder of our virgin sulfuric acid sales, which supports a wide range of industrial end uses, including chloralkali and chemicals, water treatment, paper and packaging, and spot sales into various end uses, we have adopted a more conservative view of demand and pricing for the second half of 2024. Turning to advanced materials and catalysts. In advanced silicose, Global polyethylene demand is expected to be up 2% to 3% in 2024. However, the demand outlook continues to vary by geography. In North America, demand is positive, with operating rates expected to approach 90% supported by exports. Producers in North America and in the Middle East, where we have sales concentration, continue to have a cost advantage with lower energy and feedstock costs. and we expect these geographies to benefit disproportionately as global polyethylene demand recovers. However, projections for Europe reflect flat demand with lower operating rates of approximately 80%, and in Asia, operating rates also continue in the low 80% range with subdued demand and new capacity continuing to come online. Overall, we continue to expect our sales of polyethylene catalysts and supports to be up in 2024 relative to 2023, but the magnitude of the increase remains dependent upon global demand conditions as well as customer sourcing and inventory decisions. For the Zeolus joint venture, we now see weaker demand for catalyst materials used in sustainable fuel production and emission control application, and this has led us to revise our sales expectations for these end uses in the second half of this year. As a reminder, we provide catalyst materials that are used in the de-waxing phase of renewable diesel production, and these catalyst material sales are primarily made to the licensors of sustainable fuels production technology. Market conditions and customer sentiment evolved rapidly over the course of the second quarter, and this is leading to our revised outlook for sales into renewable diesel production. Specifically, the pricing and value for renewable identification numbers, or RINs, which are a key incentive for renewable diesel producers, declined significantly. RIN credits traded above $1.50 for several years, contributing positively to the overall economics for renewable diesel production, particularly for smaller producers. However, with the development of an imbalance between renewable diesel production and demand, value of RINs credits has decreased significantly, recently falling below 50 cents. With the lower pricing for RINs credits and with increased feedstock costs and higher overall costs due to inflation, many producers are reevaluating production economics. As a result, there has been a slowdown in new capacity additions, and with lower near-term operating rates, we expect catalyst light to be extended, pushing out sales associated with periodic catalyst change-outs. Longer term, we continue to believe the leading technologies offered by our zealous joint venture position us well to participate in the future growth opportunities for sustainable fuel production. While near-term economics for renewable diesel are challenged, we believe that demand for our catalyst materials will improve as producers retrofit the renewable diesel processes and add new units to produce sustainable aviation fuels, where demand is expected to triple by 2030 due to both governmental mandates and carbon reduction targets set by the airlines. We have also revised our expectations for sales of our catalyst used in emission control applications for the balance of the year. Economic conditions in the EU, the UK, and in the US, including the effects of inflation and higher interest rates, have adversely impacted purchasing activity for heavy duty diesel vehicles. For the month of May, sales of Class 8 trucks in the U.S. were down 18% compared to May of 2023, with May 2024 representing the 10th consecutive month of sales declines for Class 8 vehicles. Year to date, sales of these heavy-duty vehicles in the U.S. are down 15%. In addition, although Euro 7 legislation was previously expected to go into effect in 2025, the EU has softened NOx reduction requirements and has delayed the implementation of Euro 7 for heavy-duty vehicles for four years, significantly impacting vehicle sales in 2024. Given the delay in both the implementation of Euro 7 and the need for compliance with more stringent emission requirements, there is little incentive to upgrade truck fleets now, and this is having an adverse impact on our catalyst material sales for emission control applications for the balance of 2024. For sales of hydrocracking catalysts, we continue to see good demand, which led to a strong first half and expect a similarly strong second half for 2024. However, as we discussed in our first quarter earnings call, with 2023 representing a peak year in the replacement cycle for hydrocracking catalysts, we expect overall sales of hydrocracking catalysts in 2024 to be below peak levels in 2023. And as we look into the future, we still have a positive outlook for catalyst sales in advanced recycling technologies. We expect sales to grow over the next few years. We are aligned with key players in the industry and expect a dozen advanced recycling plants to be built and commissioned in the next few years. I'll now turn the call over to Mike for a more detailed discussion of our financial results for the second quarter.