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.

Thank you. At this time, we will open the floor for questions. If you'd like to ask a question, you may press star 1 on your telephone now. To remove yourself from the queue, you may press star 2. Again, that is star 1 to ask a question. And we'll take our first question from John McNulty with BMO Capital Markets. Please go ahead. Your line is open.

Yeah, good morning. Thanks for taking my question. Congrats on a really solid start to the year.

So I wanted to dig into, you know, a lot of things both in the virgin acid markets and kind of scarcity around sulfuric acid, at least on a global basis, maybe a little less so in the U.S. And then also the strength of U.S. refining, which I know you were looking for things to be better. It seems like now that may be even greater in terms of how that industry is reacting to kind of what's gone on in the Middle East. So I guess, can you help us just think about how your expectations have changed and how that's woven into the guide. Because I guess I'm a little surprised with a couple things being reasonably better that you weren't quite ready to necessarily raise at least the upper end of the guide. So can you help us to think about that a little bit? Yeah, John, thanks for the question. I think the first way we would look at that is There were some things that did change positively for us during the quarter, certainly compared to the guidance that we had provided. We saw some strength in regen, some positivity on the virgin pricing, but that is a little bit more based on timing. As we talked about, we expect to get some of that timing back in the fourth quarter. That regen strength is clearly a tailwind for us. But we also are tempered with some of the other potential macroeconomic items that are going on. So we still want to continue to keep our guide relatively to where we were. We did raise the bottom end of it, so our midpoint is up to 187.5. But we believe that there is strength in the numbers of what we've seen, but want to be tempered with what we're expecting for the rest of the year.

Okay, fair enough, and understand it's a little bit of a fluid situation. Maybe just speaking to Calabrian, I guess, can you give us some color as to how that business has grown over the past few years and kind of what the longer-term growth outlook is for that business?

Yeah, sure. Thanks for the question, John. I mean, going back, you know, Calabrian's been in its current form really since, you know, the 1980s and has had the site in Port Natchez. They built a site in 2017 up in Timmins, Ontario, which is primarily used to service the mining sector up in Canada. So a lot of the growth in the Calabrian segment has been, you know, one from the mining, you know, and that backstops gold, which obviously – Gold mining at current gold prices has been very healthy, so their business has grown from that. There's also been some growth in terms of some of their pharma, food, and I'd say other industrial applications. So when we look at that business, you know, it's probably a GDP to GDP plus type, you know, growth rate with some of the things moving forward. faster than others, like we think in mining and industrials. Again, they're the only on-purpose North American producer of sulfur dioxide. They're the only producer of metabisulfite in North America. So they have a really nice position. They have a great technology that's proprietary, that's completely different than how it's produced by the competitors. So we're real happy with the acquisition, and we appreciate confident in its future potential.

Thanks very much for the caller.

Thank you. We'll take the next question from Patrick Cunningham with Citigroup. Please go ahead. Your line is open.

Hi, everyone. This is Rachel Leong for Patrick. So, adjusted EZL margins were meaningfully stronger than we expected this quarter, driven by higher values and incremental pricing of bugs. and manufacturing costs. So as we look to the balance of the year, how should we think about the net price cost dynamics?

Thank you for the question. Yeah, the margins were favorable. Obviously, as we've talked in the past, the pass-through of the sulfur cost is relatively neutral to EBITDA, so it does lower the margins. But we did see some positivity around overall pricing and volume that dropped straight through the bottom line. So that did provide us with that higher margin. The price-to-cost ratio, the positive number that we discussed during the quarter, we expect that to continue throughout the year. We do see positive cost-to-cost price and cost ratio, that's been a consistent view for us over the last several quarters where we are making more money from an EBITDA on a per ton basis, you know, comparatively. So while the margin percent will look lower because of the software price through, the earnings is actually positive. So we expect that to continue throughout the rest of the year.

Great. Thank you so much. Maybe could you provide more detail on the contract structure and the level of visibility you have into forward sales and earnings?

Yeah. So, the business is similar, I would say, to the general construct of the eco-services asset business where there are long-term agreements. There's certainly long-term, you know, customers with, you know, with food ship contracts. blue chip users, whether it's in mining, industrials, pharma, food, and so forth, the contracts are also have a high pass-through component similar you know because it is a sulfur-based chemistry so you know salt passing sulfur is obviously uh passing through sulfur is very important and they have a similar dynamic to uh the eco services business and in terms of visibility you know the um you know again the customers tend to be very steady off take it's a you know the products that they purchase from calabrian are very important to their process there's generally a very good visibility in terms of the forecasting and the readability of the volume and so forth.

Thanks so much.

Thank you. We'll take our next question from Morris Alexander with Jefferies. Please go ahead. Your line is open.

Good morning. This is Dan Rizwan for Lawrence. Thanks for taking my questions. So just looking at prices and kind of the structural change, oil owners now expect a 5% or so structural risk premium for oil due to what's going on in the Middle East. Do you expect a similar structural reset in sulfur prices over the long term that will flow through to your business, or should we view the sulfur spike as a net negative because it hurts industrial volumes?

Yeah, for our business, I mean, you know, sulfur is at really all-time highs right now. And it was the run-up in sulfur had actually started well before the conflict started. And a lot of that is due to, you know, simply the need for the sulfur molecule for sulfuric acid for things, you know, to produce copper and other metals and so forth. So there, you know, we do feel that, you know, there's a definite demand for sulfur out there, which will lead to higher prices. I do think right now we're in an extremely high situation just given the geopolitical, you know, conflict that's going on right now but long term you know we continue to have the ability to pass through sulfur to our customers our customers as opposed to like a fertilizer industry which you know is very heavily dependent on a commoditized you know monetized market and sulfur impacts demand there a lot. Ours not so much. Our customers tend to, you know, sulfuric acid tends to be only a very small component of their overall cost and their process. So while it's not, you know, it's not great that sulfur prices go up on them, however, it ends up being a very small component, so we're able to pass it through.

Thanks. That's actually very helpful. And then just thinking about the most recent acquisition, as we think about synergies, I mean, I guess it's mostly logistical, like supply synergies as opposed to production and revenue. Is that how we should think about it? You said you're going to quantify it later, too, I think you said, right?

Yeah, I mean, when we look at the synergies, there's certainly some cost-based synergies. When you look at – we're obviously – we're both involved in sulfur chemistry, so there's going to be procurement. There's obviously – we have a large – supply and manufacturing infrastructure that there should be some synergies with, especially with the Port Neches site, which sits kind of right in the middle of our Gulf Coast footprint. But we also see revenue synergy upside as well, just given the ability to – leverage our sales forces across, again, those sulfur products, right, one of which we already sell, sodium bisulfite. So we really see, you know, a nice mixture of both cost and revenue synergies there, and it's really stemming out of the fact that we're both in sulfur chemistry and, you know, the products are very closely related. Thank you very much.

Thank you. We'll take our next question from Hamed Korsans with VSW.

Good morning. So first off, on the acquisition, you were talking about potentially selling sulfuric acid into Canadian mining. Would these be relationships that Calibrium brings to the table?

Yeah, so, hi, Ahmed, how are you? So, they would be selling sulfur dioxide to Canadian mines, and so, yes, these would be new mining relationships, you know, where, you know, Ecovist's mining relationships are primarily focused in, you know, I would say the southwestern part of the U.S.

Okay, and then on the refinery side, is the increase in activity

utilization is that more about the current environment or does that have to do with more of a normalization given where q4 was the answer is yes so there's uh it's both coming into this year you know and we had guided on our on the previous call that we had expected a you know a healthy refinery utilization this year a lot of that due to the fact that there's way less planned and, you know, hopefully unplanned maintenance outages in the U.S. refining complex. So, utilization was expected to be high. I would say the current conflict that's going on has certainly added a tailwind to that, right? So, obviously, margins are, you know, are high right now for not only just oil but for refined products and there's certainly US refineries can take advantage of that. I do think there is some tailwind with that there. In terms of how that applies to us, the alkylation units that we service with the regeneration, those were always expected to run at very high rates coming into this year and really all years as long as there's not maintenance going on. You know, they don't really have the ability to flex up, you know, a tremendous amount given the margin climate, but I would say that the current environment certainly provides a tailwind for everything to run as hard as it can.

Okay, great. Thank you.

Thank you. And as a quick reminder, if you'd like to ask a question, you may press star 1 now. At this time, I'd like to thank everybody for joining today's events. You may now disconnect.