Ecovyst Inc.

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Good morning, everyone. My name is Beau, and I will be your conference operator today. Welcome to Ecovist's second 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 a listen-only mode to prevent any background noise. After the speaker's remarks, there will be a question and answer session. To register to ask a question at any time, please press star 1 on your telephone. If you would like to remove yourself from the queue, press star 2. I would now like to hand the conference over to Mr. Gene Shiels, Senior Director of Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning and welcome to ECOVIST's second quarter 2026 earnings call. With me on the call this morning are Kurt Bitting, ECOVIST's Chief Executive Officer, and Mike Feehan, ECOVIST's Chief Financial Officer. Following our prepared remarks this morning, we'll take your questions. Please note 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 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 this morning'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 turn the call over to Kurt.

Thank you, Gene, and good morning. We are very pleased with our second quarter results, which reflect continued progress against our financial objectives and clear execution of our long-term growth strategy. As anticipated, high refinery utilization and favorable outlet economics contributed to growth in sales volume for regenerated sulfuric acids. In addition, virgin sulfuric acid volume increased on a double-digit percentage basis compared to the year-ago quarter on positive demand and the contribution from Wagamon, acquired in May of last year. This volume growth, along with favorable net pricing, resulted in adjusted EBITDA of $53 million, solidly within our guidance range and up 27% compared to the second quarter of 2025. The quarter was also a milestone in strategic execution. On June 30, we closed the acquisition of the Calabrian sulfur dioxide and related derivatives business, the third bolt-on in a playbook we have now run three times, which is to identify essential sulfur chemistries adjacent to what we already do best, acquire them at capital-efficient valuations, and integrate them into a network that is uniquely built to provide superior products and services to our customers. Calabrian broadens our portfolio, deepens our position and end uses we already serve and is accretive from day one. Slide five lays out that playbook. The disposition of our advanced materials and catalyst segment in December simplified the portfolio and strengthened the balance sheet, giving us both the focus and the financial flexibility to build a platform of leading sulfur solutions. Eco Services has long been a leading provider of virgin and regenerated sulfuric acid, and it is that scale in sulfur chemistry that makes each step out possible. The first was Chem 32 in 2021. a leading provider of ex-situ catalyst activation using sulfur-based sulfiding technology. The second was Wagaman in May of 2025, which added capital efficient incremental capacity cited in our Gulf Coast network. Wagaman contributed to our double-digit virgin sulfuric acid volume growth this quarter, and we have delivered the network optimization we underwrote. Calabrian is the third step, and it follows the same logic. It brings significant end use and customer overlap with our legacy business while adding sulfur dioxide and derivative chemistries we did not previously offer. That is what makes this more than added capacity. It widens what we can sell to customers we already serve in applications where reliability of supply, not price alone, decides who wins the contract. Across our portfolio, we hold leadership positions in critical chemistries that are essential to our customers' operations. Positions that are uniquely built to provide superior products and services to our customers and that we intend to keep extending. On slide six, our demand expectations have not changed materially from our first quarter call. For sales of regenerated sulfuric acid, we are in the midst of the summer driving season and alkaline economics remain favorable. We expect refinery utilization to remain high and, for the second half, higher regenerated sulfuric acid volume with lower unplanned customer downtime than we experienced in 2025. For sales of virgin sulfuric acid overall, we expect relative stability for the balance of the year. We see continued demand growth in the mining sector driven by copper expansion projects tied to structural electrification. Calabrian gives us a second way to participate in that same growth. With Canadian gold mines running at full capacity, we expect its sulfur dioxide sales into mining to remain favorable. For sales into industrial applications, we continue to expect virgin sulfuric acid sales into the nylon end use to be relatively flat in 2026. Sulfur prices continue to increase, and while we did not see any material demand destruction in the second quarter associated with high sulfur prices, we remain cautious about the potential for weaker demand in some industrial applications. Based on experience, we expect today's elevated sulfur prices to eventually moderate. If customers begin to anticipate lower sulfur prices, we could see a temporary demand impact from destocking. Overall, long-term secular trends, mining expansion, and the onshoring of U.S. industrial activity are positives for EcoVist. And as a leading provider of products essential to our customers, we remain excited about the longer-term outlook across our businesses. I'll now turn the call over to Mike, who will review our financial results.

Thank you, Kurt, and good morning. Starting with our key highlights, Our second quarter sales of $250 million were up $74 million, reflecting the pass-through impact of higher sulfur costs, favorable net pricing, and strong demand for both regenerated sulfuric acid and virgin sulfuric acid. Adjusted EBITDA of $53 million was up 27% and solidly within our guidance range. Cash generation was positive in the quarter, and for the first half of 2026, adjusted free cash flow was $13 million. Considering the closing of the Calabrian acquisition at the end of the second quarter, funded through debt and cash on hand, we ended the quarter with a net debt leverage ratio of two times. On the following slide, excluding the $55 million sulfur pass-through, Sales were up nearly 11% reflecting higher regenerated and virgin sulfuric acid volume in part from the acquired wagon plant and favorable contractual pricing. Adjusted EBITDA was up $11 million driven by higher sales volume and favorable net pricing partially offset by higher manufacturing costs, general inflation, and higher transportation costs. The adjusted EBITDA bridge on the following slide shows a continued positive price to cost ratio at the contribution margin level. As previously mentioned, the pass-through effect of higher sulfur costs on sales was approximately $55 million, with the pass-through generally having no material impact on adjusted EBITDA. Excluding that pass-through, the price and variable cost combination contributed $9 million. largely from favorable contractual pricing for regenerated sulfuric acid, including the net price impact of higher index costs. Higher sales volume, including Wagamon, accounted for nearly $7 million, partially offset by higher fixed manufacturing costs, including Wagamon's incremental costs. Turning to the cash and leverage on the next slide, As noted, cash generation was positive in the second quarter, resulting in adjusted free cash flow for the first six months of 2026 of $13 million. As we have previously discussed, free cash flow generation this year will reflect higher capital expenditures associated with the expansion of our Gulf Coast storage and logistics network and the working capital impact of higher sulfur costs. We ended the quarter with available liquidity of $176 million, $88 million of cash, and $88 million of availability under our ABL. Because the funding of the Calabrian acquisition added $100 million of debt with no associated trailing 12-month EBITDA contribution, our net debt leverage ratio at quarter end was two times, up from 1.2 times at March 31st. It is worth noting that the two times leverage ratio carries the full acquisition debt against none of Calabrian's trailing 12-month EBITDA. We are currently at the low end of our 2 to 2.5 times target range. Turning to the next slide, our capital allocation over the past 15 months reflects the same discipline Kirk described, $83 million of stock repurchases, for $172 million of debt reduction, and two bolt-on acquisitions, aggregating $224 million. In addition, this year we have the flexibility to implement plans to organically invest approximately $20 million in the expansion of our Gulf Coast storage and logistics network. We executed buybacks, delevered, and made two acquisitions and still ended the quarter at the bottom of our target leverage range. Going forward, we expect to maintain that balance, weighing organic growth projects, additional bolt-on acquisitions, debt reduction, and stock repurchases, creating the most value for our stockholders. I'll now turn to the 2026 outlook and revised guidance. Our revised 2026 guidance reflects both our expectations for our legacy business and the expected contribution of the Calabrian business in the third and fourth quarters. Sulfur prices rose further in the second quarter and our second half outlook assumes they hold near current levels. On that basis, we now expect the full year pass-through effect of sulfur costs on sales to be approximately $220 million higher compared to the prior year, up from $155 million previously expected. Incorporating, Collabrian, we now expect full year 2026 sales of $1.02 to $1.06 billion, up from our prior guidance, which excluded Collabrian, of $890 to $970 million. Given our favorable first half results and our confidence in continued demand stability, We are raising the low end of our full-year adjusted EBITDA guidance range for the legacy business to $185 million, while maintaining the high end at $195 million. For Calabrian, we expect adjusted EBITDA in the second half of the year to be in the range of $10 to $12 million. Accordingly, we now expect EcoVist's full-year 2026 adjusted EBITDA to fall in the range of $195 to $207 million. We expect adjusted free cash flow to be in the range of $45 to $55 million, up from $40 to $55 million, with the increase reflecting the contribution from Calabrian partially offset by the impact of increased sulfur costs on working capital. While we funded a portion of the Calabrian acquisition through a $100 million add-on to our term loan, we have realized some additional interest savings, and as such, Our expectations for the full year interest expense remains unchanged at $18 to $22 million. Capital expenditures are now expected to be $85 to $95 million, up from $80 to $90 million, reflecting the Gulf Coast expansion and the addition of Calabrian. Depreciation and amortization is now estimated at $80 to $84 million. We expect our full year effective tax rate to remain in the mid 20% range. And finally, we expect adjusted net income to be in the range of $65 to $85 million with adjusted diluted net income per share of 58 to 72 cents per share. As we move to the next slide, I'll provide directional guidance for the third and fourth quarters. For the third quarter, we expect sales of regenerated sulfuric acid to be up compared to the third quarter of 2025. And although we expect third quarter volume to be up sequentially, we anticipate virgin sulfuric acid will be slightly lower than the year-ago quarter, reflecting fewer expected spot sales compared to the third quarter of 2025. With higher turnaround costs than the prior year, we expect third quarter . Fourth quarter expectations are similar. Higher regenerated sulfuric acid volume and lower virgin sulfuric acid volume than in the fourth quarter of 2025. Second half virgin volumes are expected to be lower than the last year because 2025 had a high amount of spot opportunities. and we did not have the turnarounds limiting our production. We believe sulfur prices may have reached a plateau and could begin to decrease later this year. We still expect sulfuric acid pricing, excluding the pass-through effect, to be lower in the fourth quarter on projected customer mix and on the timing difference between when we purchase sulfur and when we pass those costs through to customers. Regarding turnaround costs, You will note a change in the turnaround schedule compared to our view in the first quarter's earnings call, as one of the two turnarounds planned for the fourth quarter has now shifted into early 2027. Despite this timing shift, we still expect turnaround costs in the fourth quarter to be up compared to the year-ago quarter, as Q4 2025 did not have a quarter of 2026 We expect adjusted EBITDA, including Calabrian, to be between $48 and $55 million. I will hand the call back to Kurt for some closing remarks. Thank you, Mike.

We are encouraged by our progress through the first half of the year with results that position us well for the second half. Building on the strong performance of our legacy business and the expected contribution from Calabrian in the third and fourth quarters, We have increased our full year 2026 adjusted EBITDA guidance to a range of $195 million to $207 million. We are pleased to welcome the Calabrian team to EcoVist. One month in, integration is on plan and we are focused on executing the synergy actions we underwrote at signing and identifying the growth projects that Calabrian's asset base supports. For the remainder of the year, our focus will remain on execution. In addition to the integration of Calabrian, the Gulf Coast storage and logistics expansion is underway, which we expect will enhance our ability to serve growing virgin sulfuric acid demand. After funding the Calabrian acquisition, we ended the second quarter with a net debt leverage ratio of two times, within our long-term guidance range of two to two and a half times. As we continue to evaluate organic and inorganic growth opportunities, we believe our balance sheet and cash generation capability will continue to provide significant flexibility, and we will prioritize the options we believe create the best value for our stockholders. I will close on this. Our advantage is not any single asset or transaction. It is a network of essential sulfur chemistries embedded in our customers' operations. a position we have now extended three times without stretching the balance sheet. We intend to keep compounding it. At this time, I will ask the operator to open the line for questions.

Thank you, Mr. Bitting. Ladies and gentlemen, at this time, if you do have any questions or comments, please press star 1. Again, if you would like to remove yourself from the queue, you can do so by pressing star 2. We'll go first this morning to John McNulty with BMO Capital Markets.

Hi, this is Margarita Margulis on for John. Thanks for taking my question. Given the volatility in the sulfur and sulfuric acid markets, could you please speak to not only spot pricing, but since roughly 90% of your business is tied to longer term contracts, how should we think about where contracts come into later this year may reset? Thank you.

Thanks for the question. So, yes, spot sulfur and sulfuric prices are obviously up appreciably year over year. And as you pointed out, the lion's share of our business is really is under contract, right? We're anywhere from one to three year contracts for virgin sulfuric acid. And a portion of those roll off at the end of every year. So, you know, it would be our belief and expectation as those roll off, they should be negotiated as usual at more favorable pricing in terms if everything in terms of the market overall is in the same condition as it is today.

Great, thank you. And then I had another question on nylon markets. We have seen concerns about some weakness there. Could you speak to what you're seeing currently?

Yeah, for our area in Nylon, which is, again, really geographically focused on the Gulf Coast production, we went into this year believing it would be flattish for us. And as we sit here midway through the year, that's largely how it's playing out. So we maintain that outlook for the remainder of the year. Got it. Thank you.

Thank you. We'll go next now to Patrick Cunningham with Citi.

Hi, good morning. Thanks for taking my question. Now that the Calabrian transaction is closed, integration is underway, can you quantify or provide an update on targeted cost synergies, how we should be thinking about those in 2027, and sort of how soon you expect to leverage your existing sales force and customer base to accelerate some of the cross-selling you talked about in the past?

Yeah, sure. Well, thanks, Patrick. I mean, again, we're excited about Calabrian. Day one is completed. We've safely integrated the business with no customer disruptions. Leadership has been retained. We're happy with the demand it's tracking to our modeling, and we're really excited about, obviously, the future of growth in terms of the gold sector, particularly in Canada. And as we stated before, we expect to deliver both cost and revenue synergies, likely in the $3 million to $4 million range. So to put that in perspective, we stated that we purchased the business for around eight times and after the synergies are implemented, that'll step down to around seven times.

Understood. Very helpful. And then maybe just a question on the guidance. Correct me if I'm wrong. I think the underlying guidance rate excluding Calabrian is maybe a couple million higher in the second half. Is that exclusively coming from one less turnaround in 4Q or is there anything else that you'd call out in terms of incremental puts and takes?

Thanks for pointing that out. We're pleased with our results and outlook so far. We did tighten the guidance range now for the second consecutive quarter, which obviously implies an upward move on the midpoint. I would say that's a combination of just some cost items as well as Thank you so much.

Thank you. And just a quick reminder, ladies and gentlemen, Star 1 for any further questions today. We'll go next now to David Silver with Freedom Capital Markets.

Okay. Hi. Good morning. Thank you. I was just wondering, I think in your prepared remarks, you talked about Sulfur and sulfuric acid costs moderating, I think, towards the end of the year or a little bit beyond. Apologies if I missed it, but could you just kind of maybe discuss what your assumptions are for how that market might balance out?

Sure. Thanks, David. Welcome back. I think for sulfur, what we made the comment, I made the comment that we believe that sulfur is largely plateauing right now at its current levels here, at least where we purchase domestically in the U.S. International sulfur prices remain very elevated. U.S. prices have followed that upward. However, you start to see some fertilizer, which is obviously a huge user of the sulfur molecule, have announced some curtailments just based on fertilizer economics, sulfur economics, and so forth. However, despite those curtailments, mining demand for sulfur remains strong. So we just think the blend of those two dynamics going on with the curtailments in the fertilizer industry plus still demand strong from other sectors of the global economy, particularly in mining, is going to lead to a moderation of sulfur prices. We don't believe that the price really has much room to go up from here, but we could see some moderate decreases in the future, but we're not expecting a large handle down or anything like that.

Okay, and then, you know, thank you for that. And I mean, there is, as you pointed out, there is this spread, I guess, between the domestic contract price and maybe the international spot price. And with your enlarged and enhanced kind of sulfuric acid network, I mean, I am kind of scratching my head and I'm wondering if You know, there's maybe some flexibility within your system to maybe take advantage of that spread via, you know, maybe exports out of one or more of your Louisiana based facilities. But, you know, is there some flexibility in the system to, you know, consider that option, you know, on an opportunistic basis here?

Sure, and we have participated in exports in the past with sulfuric acid. And again, the Wagaman facility brought that capability to our portfolio last year when we acquired that business. So as you point out, domestic sulfur prices are lower than international prices, which creates a bit of an advantage for you know people producing sulfuric acid here in the U.S. but also for the people consuming sulfuric acid in the U.S. so it gives our you know our customers a leg up versus their international competition because their you know raw materials particularly on sulfur and energy and so forth tend to be cheaper and you know additionally I would point out probably the largest advantage our network has is the availability of sulfur and the fact that we have the high concentration in the Gulf Coast, which is where the lion's share of sulfur is produced in North America.

Okay, great. And then maybe last question for me, but in your remarks, you talked about the Calabrian acquisition being accretive from day one. and I just wanted to check that you know frequently when there's a new acquisition there are some upfront costs but should we think that Collabrian is going to be free cash flow positive in the first year of ownership as well or you know might there be some upfront costs to complete the integration the way you want?

Yeah, hey David, it's Mike. Thanks for the question. Yeah, we do believe the Calabrian acquisition is going to be cash flow positive for us. Certainly we guided an EBITDA number of, you know, somewhere between $10 and $12 million for the second half of the year. Of course, from a cash flow standpoint, there will be some additional taxes paid. We did take on $100 million of additional debt, which would increase our interest, but we also saw some cash interest savings across the portfolio, so we left our overall guidance unchanged. There is some capital that we will spend there, but the Calabrian business is less capital intensive than the legacy asset business. So that's going to be a very net positive for us. I will say that the Calabrian business overall has a slightly higher EBITDA margin percent than the legacy business. So again, it generates a higher level of free cash flow. It does represent roughly 10% of our overall business, but it's a very positive I appreciate you putting together all the moving parts there. That's what I was trying to figure out. Okay, thanks very much. That's all from me.

Thank you. And gentlemen, it appears we have no further questions this morning. So ladies and gentlemen, that will bring us to the conclusion of today's call. We'd like to thank you all so much for joining the ECOVIS second quarter earnings conference call and wish you all a great remainder of your day. Goodbye.