Ecovyst Inc.

Good morning. My name is Stephanie, and I'll be your conference operator today. Welcome to the ECOBIS First Quarter 2026 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 the listen-only mode to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question at that time, please press star 1 on your telephone keypad. I'd like to now hand the call over to Gene Shields, Director of Investor Relations. Please go ahead.

Thank you, Operator. Good morning and welcome to ECOVIST's first quarter 2026 earnings call. With me on the call this morning are Kirk Benning, ECOVIST's Chief Executive Officer, and Mike Thiem, ECOVIST's Chief Financial Officer. Following our prepared remarks, 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 2026 financial outlook. This information is subject to risks and uncertainties that could cause the actual results in 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 in the investor section of our website. I'll now hand the call over to Kurt. Thank you, Gene, and good morning.

Good morning. Consistent with the positive outlook for 2026 that we shared in our fourth quarter earnings call in late February, our first quarter results provide an excellent start to the year with strong growth in both our regeneration services business and for virgin sulfuric acid. Sales for regeneration services were up on a double-digit percentage basis compared to the first quarter of 2025. reflecting high refinery utilization, favorable output economics, and lower planned customer downtime compared to the year-ago quarter. First quarter sales for virgin sulfuric acid were also up significantly, benefiting from increased mining demand and the contribution from the Wagamon sulfuric acid assets that we acquired last May. As a result of the strong volume growth and positive pricing in the quarter, we reported adjusted EBITDA of $40 million, which is up 87% compared to the first quarter of 2025. During the quarter, we also maintained our focus on the implementation of our long-term strategic plan to accelerate growth and enhance value for our stockholders. During the first quarter, we repurchased approximately $36 million worth of our outstanding shares, And with regard to the pursuit of inorganic growth opportunities, our efforts over the course of the first quarter led us to last Friday's announcement that we had reached an agreement to acquire the Calabrian sulfur dioxide and sulfur derivatives business from Ineos Enterprises in a transaction that will broaden our portfolio and further position Ecovist for attractive growth in end uses we currently serve. such as mining and water treatment, and new end uses, including pharma and food processing. As we move to the next two slides, I want to provide a brief overview of the Calabrian business and highlight the details and strategic merits of this transaction. What makes the Calabrian acquisition so compelling is how closely the business aligns with ECOBIS, strategically, operationally, and commercially. The combination directly leverages our core competencies in sulfur chemistry and extends our platform into highly complementary adjacent chemistries. Just as Ecovist is a leading provider of virgin sulfuric acid and sulfuric acid regeneration services, Calabrian is a leading provider of sulfur dioxide and sulfur-based derivatives. It is the sole on-purpose producer of sulfur dioxide in North America, with a significant supply share, a leading producer of sodium bisulfite alongside Ecovist, a leading producer of sodium thiosulfate, and the sole North American producer of sodium metabisulfite. These products are critical inputs into a range of attractive end uses that overlap meaningfully with the markets we serve today, reinforcing the natural fit between the two businesses. Looking at a rough breakdown of Calabrian's 2025 sales, nearly a third of sales were to the mining sector, where we had well-established and long-standing relationships. Roughly a quarter of Calabrian's 2025 sales were in water treatment, a market that we currently participate in with our virgin sulfuric acid, sodium bisulfite, and aluminum sulfate sales. Approximately 15% of sales were into specialty chemical applications and the balance of 2025 sales included sales into food preservatives and other applications. Similar to Ecovist, Calabrian has long-standing customer relationships with blue chip customers, significant long-term contracts, and sales visibility. In terms of the strategic fit with Ecovist, I'll first say that Calabrian has a seasoned and engaged management team, and we look forward to leveraging their expertise and enthusiasm as we move forward on a combined basis. Equally as important, Calabrian provides us with a very attractive opportunity to expand our reach and product offering in sulfur-related chemistries while leveraging our existing supply chain and manufacturing infrastructure. In doing so, it provides an opportunity to diversify our sales mix and increase our penetration into high-growth industries such as mining, water treatment, pharma, and food processing. Calabrian has two manufacturing locations. Port Natchez in Texas, situated in the middle of our existing Gulf Coast infrastructure, and the Timmins site in Ontario, Canada, which we expect to broaden our exposure to Canada's growing mining sector. Given our existing footprint in the Gulf Coast region, the acquisition provides opportunities to leverage our existing supply chain and manufacturing infrastructure. Finally, the financial profile is equally compelling. Calabrian brings attractive growth prospects, strong margins, and a track record of high cash conversion. On a trailing 12-month adjusted EBITDA of approximately $24 million, the $190 million purchase price represents a multiple of approximately eight times, stepping down to roughly seven times as we capture synergies over the next three years. The transaction is expected to close by the end of the second quarter. We plan to fund the acquisition through cash on hand and a new debt offering with specific allocation to be determined as we move towards closing. At this time, we expect that our pro forma net debt leverage ratio at close of the transaction will be approximately two times. Before I hand the call over to Mike to review the details of our first quarter, I want to comment on our expectations for near-term demand trends and our confidence in the longer-term outlook for EcoVist. While the geopolitical and global macroeconomic environment remains dynamic, our outlook remains very positive. As a leading provider of products and services that are essential to our North American-based customers, we expect demand trends to remain favorable, underpinning our growth expectations for 2026. We see U.S. refinery utilization remaining high in 2026 with far less planned and unplanned customer downtime than we experienced in 2025. As such, we continue to expect higher volume for our regeneration services in 2026 with favorable contract pricing. We also expect volumetric growth for virgin sulfuric acid in 2026, with increased sales into mining and a full year of contribution from the wagon and sulfuric acid assets we acquired last year. Sales into the nylon end use are expected to be generally in line with 2025, and we anticipate relative stability across the broader range of industrial applications. Looking beyond 2026, we believe the long-term outlook remains extremely favorable. We expect that high refinery utilization will continue to support demand for our regeneration services business. And for virgin sulfuric acid, We believe we are positioned for growth with sales into mining applications benefiting from multi-year expansion projects, growth in industrial applications associated with onshoring, and the prospect for continued sales recovery in the nylon end use. I'll now turn the call over to Mike, who will review our financial results. Thank you, Kurt, and good morning. We are very pleased with our results for the first quarter and believe that we are off to a great start to the year. A stable demand and favorable pricing helped deliver solid results in the first quarter. Our sales were up 50% compared to the first quarter of last year. Higher sales volume for both virgin sulfuric acid and regeneration services, as well as positive pricing, translated into adjusted EBITDA of $40 million, up $19 million compared to the prior year first quarter and ahead of our previously provided guidance range. Our favorable earnings compared to our guidance range were driven by higher than expected volume in pricing. We realized stronger than expected volume in regeneration services and to a lesser extent treatment services compared to our original expectations. With a significant spike in cost of sulfur, we also realized a temporary benefit associated with the timing between when we incur the cost of our sulfur purchases and when we pass through those costs to our customers. Adjusted free cash flow for the first quarter was $4 million. Our net debt leverage ratio at quarter end was 1.2 times unchanged from year end, and our available liquidity remained strong at $237 million as of March 31st. As we look at the first quarter financial results on the next slide, sales were $215 million, up $72 million. Excluding the $33 million impact of higher sulfur costs, pass-through and price, sales were up nearly 27%. Regeneration services volume was driven by less customer downtime compared to the first quarter of 2025. Sales volume for virgin sulfuric acid was also higher year over year, reflecting the contribution of the Wagamon sulfuric acid assets acquired in May of 2025 and higher overall demand, including into nylon and mining applications. Average selling prices were higher driven by virgin sulfuric acid pricing and favorable contract pricing for regenerated sulfuric acid. Adjusted EBITDA of $40 million was up $19 million, or 87%, driven by higher sales volume and favorable pricing, partially offset by higher manufacturing costs driven by higher turnaround costs, the impact of general inflation, and increased transportation costs. Favorable price-to-cost ratio at the contribution margin level remains evident in our first quarter, as illustrated in the adjusted EBITDA bridge shown on the following slide. As previously mentioned, the pass-through effect of higher sulfur costs on sales was approximately $33 million, with the pass-through having no material impact on adjusted EBITDA. Excluding the sulfur pass-through, the price-to-cost uplift in the first quarter was approximately $11 million, largely driven by the net price impact including favorable variable costs. Higher sales volume, including the contribution from the wagon and assets, accounting for nearly $15 million of the period-over-period increase in adjusted EBITDA. And this was partially offset by higher manufacturing costs, including the incremental cost of the acquired Wagamon assets, as well as higher SG&A and other costs. Turning to cash and debt on the next slide, adjusted free cash flow for the first quarter was $4 million, up compared to a use of cash of $13 million in the first quarter of 2025. The lower than average free cash flow for the first quarter reflects the normal cadence of cash generation, with the first quarter typically low primarily due to timing of working capital. During the quarter, we repurchased $36 million of our common stock at an average price of approximately $11 per share, and we have $146 million remaining under our existing authorizations. We ended the first quarter with a strong liquidity position of $237 million, a price of cash of $163 million, and availability under our ABL facility of $74 million. With net debt of $234 million a quarter end, our net debt leverage ratio was 1.2 times unchanged from December 31st. Turning to our 2026 outlook. Note that the guidance included in our materials and discussed on this call do not include any contributions from the recently announced Calabrian acquisition. Our previous guidance, provided in late February, anticipated higher sulfur costs in 2026. However, disruption associated with the Iran conflict has resulted in further increases in sulfur costs. We now expect the impact of higher sulfur costs passed through in price to be $30 million higher than previously guided, resulting in full year 2026 sales to be in the range of $890 to $970 million, up from our previously guided range of $860 to $940 million. With a strong start to the year and having one quarter under our belt, We are revising our adjusted EBITDA guidance by tightening the range, now expecting full-year 2026 adjusted EBITDA to fall in the range of $180 to $195 million. Similarly, we are tightening the range for adjusted free cash flow to be $40 to $55 million. While we are not changing our guidance due to the announced Calabrian acquisition, we do intend to finance a portion of the acquisition through a debt offering along with cash on hand. As a result, we would expect cash interest to increase an additional $4 to $5 million on a full year annual basis. As we move to the next slide, I'll provide directional guidance by quarter for the balance of the year. For the second quarter, we continue to expect higher year-over-year sales of regeneration services with favorable contractual pricing. We also continue to expect higher volume of virgin sulfuric acid driven by mining demand and the contribution of the acquired Wagamon assets along with stable pricing for virgin sulfuric acid. Turnaround costs are expected to be lower than in the year-ago quarter. As a result, we project second quarter 2026 adjusted EBITDA to be in the range of $50 to $55 million. For the third quarter, we continue to expect higher sales of regeneration services compared to the third quarter of 2025, and we currently project that virgin sulfuric acid volume will be slightly lower than the year-ago quarter, driven by the timing of our sales into nylon applications. With higher projected turnaround costs than in the third quarter of 2025, We expect third quarter 2026 adjusted EBITDA to be in the range of $50 to $55 million. Finally, for the fourth quarter, we continue to expect higher sales of regeneration services compared to the fourth quarter of 2025 with favorable contractual pricing. We are currently expecting lower virgin sulfuric acid volume than in the fourth quarter of 2025. We also are anticipating that sulfur costs will ease from the current historic highs. As a result, we expect that sulfuric acid pricing, excluding the pass-through effect, will be lower due to the overall customer mix and timing between when we incur the cost of our sulfur purchases and when we pass through these costs to our customers. Lastly, we expect higher turnaround costs compared to the fourth quarter of 2025. As such, We currently anticipate that the fourth quarter adjusted EBITDA will fall in the range of $40 to $45 million. I will now turn the call back to Kurt for some closing remarks. Thank you, Mike. We have had a great start to the year, and we are energized by the positive momentum we see as we move into the second quarter. While the global macroeconomic landscape continues to evolve, we believe EcoVis remains well-positioned to deliver on our objectives. Moreover, we are extremely pleased with our progress on strategic implementation as we maintain our focus on growth and on value creation for our stockholders. The disposition of our advanced materials and catalyst segment at year end was a transformational event that resulted in a strengthened balance sheet and a robust liquidity position that provides us with the resources and flexibility to execute on multiple capital allocation alternatives including the funding of organic growth projects, the pursuit of attractive inorganic growth opportunities, and the return of capital to our stockholders. During the first quarter, we returned $36 million in capital to our stockholders through share repurchases. And as previously indicated, to support organic growth this year, we are investing in the expansion of our Gulf Coast storage and logistics capabilities that will further enhance our ability to serve our customers' growing needs. And building upon last year's successes, we also expect further contributions and network optimization benefits from the acquisition of our Wagon Insight as we continue to leverage the site's capacity to meet the growing needs of our customers. With regard to our stated objective to pursue attractive inorganic growth opportunities, we are excited about the agreement that we have reached to acquire Calabrian, which will broaden our portfolio of sulfur products that we can offer to growing end uses. We look forward to the completion of the Calabrian acquisition and to providing you with updates on our ongoing progress as we move throughout the year. At this time, I will ask the operator to open the line for questions.