Ecovyst Reports Fourth Quarter and Full Year 2023 Results
- Sales for Ecovyst Inc. in 2023 were $691.1 million, a decrease from $820.2 million in 2022 due to lower sulfur costs and sales volume impact.
- Net income from continuing operations was $71.2 million in 2023, with a net income margin of 10.3% and diluted income per share of $0.60.
- Adjusted EBITDA for 2023 was $259.9 million, with a margin of 30.7%.
- Ecovyst achieved a Platinum sustainability rating from EcoVadis, placing it in the top one percent of companies rated in its peer group.
- For 2024, the company expects sales of $715 million to $755 million and Adjusted EBITDA of $255 million to $275 million.
- Sales declined in 2023 due to lower sulfur costs and sales volume impact.
- Net income margin decreased from 2022 to 2023.
- Adjusted EBITDA margin was lower in 2023 compared to the previous year.
- Lower sales volume affected financial results in 2023.
Insights
The reported financial results by Ecovyst Inc. demonstrate a contraction in sales from $820.2 million in 2022 to $691.1 million in 2023, which is a significant reduction. This decline is attributed to the pass-through of lower sulfur costs and decreased sales volume, exacerbated by Winter Storm Elliott and reduced demand in specific market segments such as nylon intermediates and polyethylene catalysts. Despite these challenges, the company maintained a net income margin of 10.3% and an Adjusted EBITDA margin of 30.7%, indicating effective cost management and operational efficiency.
The share repurchase program, with the buyback of over 7.5 million shares, signals management's confidence in the intrinsic value of the company and its commitment to delivering shareholder value. However, the net debt to net income ratio of 11.1x and a net debt leverage ratio of 3.0x suggest a relatively high level of indebtedness, which could be a concern for potential investors, especially in a rising interest rate environment.
Looking forward, the company's strategic focus on clean-burning and sustainable fuels, advanced recycling technologies and low-carbon technologies aligns with global sustainability trends and could position Ecovyst for long-term growth. The planned expansions and investments in strategic projects, such as the silica catalyst production capacity and the Chem32 facility, are poised to enhance performance and support future growth.
Ecovyst's financial performance, particularly the Adjusted EBITDA of $259.9 million, suggests resilience in the face of external challenges such as market volatility and natural disasters. The Adjusted EBITDA margin of 30.7% is a robust indicator of the company's profitability, especially when compared to industry norms. However, the decrease in sales and the year-over-year decline in Adjusted EBITDA from $276.8 million in 2022 to $259.9 million in 2023 could raise concerns about the company's growth trajectory and pricing power in its markets.
The company's capital allocation strategy, as evidenced by its share repurchase program and the Adjusted Free Cash Flow of $72.3 million, reflects a balanced approach towards returning value to shareholders and maintaining financial flexibility. Investors should note the company's guidance for 2024, which includes projected sales growth and capital expenditures of $70 million to $80 million, indicating ongoing investments in the business's core operations.
Ecovyst's forward-looking statements about the expected demand for their products and services in 2024, particularly in the Ecoservices segment, provide optimism for potential revenue stability. However, the cautious stance on the hydrocracking catalysts segment could imply variability in performance within the Advanced Materials & Catalysts segment.
Ecovyst's focus on the Ecoservices and Advanced Materials & Catalysts segments after divesting other business units shows a strategic pivot towards areas with higher growth potential in sustainable markets. The company's role in producing virgin sulfuric acid and catalysts for cleaner-burning fuels and advanced recycling technologies is significant, given the global shift towards sustainable practices and the need for materials that support this transition.
The mention of a Platinum sustainability rating from EcoVadis is noteworthy, as it places Ecovyst within the top echelon of its peers in terms of sustainability practices, which could be a differentiating factor in attracting customers and investors who prioritize environmental, social and governance (ESG) criteria.
Understanding the impact of Winter Storm Elliott and the extended maintenance activity on the company's supply chain and production capabilities is crucial. These events highlight the importance of operational resilience in the chemical industry, where external factors can significantly disrupt production and supply. Ecovyst's ability to mitigate these impacts through contractual pass-through mechanisms and targeted price increases reflects strategic risk management.
Full Year 2023 Results & Highlights
- Sales of
$691.1 million $820.2 million $86 million - Net income from continuing operations of
$71.2 million 10.3% , with diluted income per share of$0.60 - Adjusted net income of
$89.8 million $0.75 - Adjusted EBITDA of
$259.9 million 30.7% . - Full year net cash from operations of
$137.6 million $72.3 million - Full year share repurchases of 7,541,494 shares or
$78.7 million - Achieved a Platinum sustainability rating from EcoVadis, placing Ecovyst in the top one percent of all companies rated in our peer group
Fourth Quarter 2023 Results & Highlights
- Sales of
$172.8 million $182.8 million $9 million - Net income from continuing operations of
$30.0 million 17.4% , with diluted income per share of$0.26 - Adjusted net income of
$26.1 million $0.22 - Adjusted EBITDA of
$69.8 million 0.9% period-over-period with an Adjusted EBITDA margin of30.9% .
Ecovyst results reflect continuing operations for the Ecoservices and Advanced Materials & Catalysts businesses, renamed from Refining Services and Catalysts Technologies, respectively. Financial results are on a continuing operations basis, which excludes the Performance Materials and Performance Chemicals businesses due to the divestitures from all quarterly and year-to-date results presented, unless otherwise indicated.
Financial results and outlook include non-GAAP financial measures. These non-GAAP measures are more fully described and are reconciled from the respective measures determined under GAAP in "Presentation of Non-GAAP Financial Measures" and the attached appendix.
"Despite the ongoing uncertainty in the macro-economic environment, stability in demand fundamentals for both our Ecoservices and Advanced Materials & Catalysts segments, in combination with Ecovyst's diverse end use exposures, contributed to our solid financial results for the fourth quarter of 2023. Ecovyst's Adjusted EBITDA of
Fourth Quarter and Full Year 2023 Results
For the year, sales were
Sales for the quarter ended December 31, 2023 were
Review of Segment Results and Business Trends
While demand across the majority of product categories and end uses remained positive in 2023, during the second half of the year we saw weaker demand for sales of virgin sulfuric acid into the production of nylon intermediates and for sales of polyethylene catalysts, resulting from weaker global demand fundamentals and the impact of destocking. Our contractual pass-through mechanisms and targeted price increases served to mitigate the adverse impacts of inflationary pressures in 2023, including higher costs for energy, logistics, labor and other raw materials.
Ecoservices
Our regeneration services support the production of alkylate, a high value gasoline component critical for meeting stringent gasoline standards and for producing premium grade gasoline. Tightening gasoline standards and increasing demand for higher-octane premium fuels used in high compression, more fuel-efficient engines resulted in higher utilization for our customers' alkylation units. High
Fourth quarter 2023 sales for Ecoservices were
For the year, sales were
Advanced Materials & Catalysts
Our Advanced Silicas are critical catalyst components for the production of high-density polyethylene, a high-strength and high-stiffness plastic used in bottles, containers, and molded applications and linear low-density polyethylene used predominately for films. While we expect long-term demand for polyethylene films and packaging to remain positive, late in the second quarter of 2023 we saw evidence of softer global demand and lower operating rates for polyethylene producers, which resulted in lower sales of polyethylene catalysts during the second half of 2023. Through the Zeolyst Joint Venture, we also supply specialty catalysts to customers for use in the production of both traditional and sustainable fuels, petrochemicals, and emission control systems for both on-road and non-road diesel engines. While demand for traditional fuels has remained positive, demand for sustainable fuels has increased, supporting higher sales of catalysts used in sustainable fuel production.
During the fourth quarter of 2023, Advanced Silicas sales were
For the year, Advanced Silicas sales were
Cash Flows and Balance Sheet
Cash flows from operating activities was
2024 Financial Outlook
Full year 2024 guidance is as follows:
- Sales of
$715 million $755 million - Sales of
$145 million $165 million 50% share of Zeolyst Joint Venture, which is excluded from GAAP Sales - Adjusted EBITDA1 of
$255 million $275 million - Adjusted Free Cash Flow1 of
$85 million $105 million - Capital expenditures of
$70 million $80 million - Interest expense of
$45 million $55 million - Depreciation & Amortization
- Ecovyst -
$85 million $95 million - Zeolyst J.V. -
$12 million $14 million
- Ecovyst -
- Effective tax rate in the mid
20% range
"We believe that our regeneration services business will experience another solid year in 2024, which will be somewhat offset by a timing related off-cycle year for hydrocracking catalysts. We are also cautious about the continuing uncertain economic conditions moderating demand recovery for virgin sulfuric acid and polyethylene catalysts. Ecovyst is firmly committed to executing the strategy that we presented at our November 2023 investor day that we believe will deliver long-term value for our shareholders. We believe our strong cash generation and deep customer relationships will enable us to advance our positions in emerging technologies that support areas of significant growth potential including sustainable fuels, advanced plastics recycling, bio-catalysis, and carbon capture. At the same time, Ecovyst also plans to continue supporting the growth of its core businesses such as regeneration services and hydrocracking catalysts, while participating in the positive longer-term growth trends supporting demand for virgin sulfuric acid and polyethylene catalysts," said Bitting.
1In reliance upon the unreasonable efforts exemption provided under Item 10(e)(1)(i)(B) of Regulation S-K, the Company is not able to provide a reconciliation of its non-GAAP financial guidance to the corresponding GAAP measures without unreasonable effort because of the inherent difficulty in forecasting and quantifying certain amounts necessary for such a reconciliation such as certain non-cash, nonrecurring or other items that are included in net income and EBITDA as well as the related tax impacts of these items and asset dispositions / acquisitions and changes in foreign currency exchange rates that are included in cash flow, due to the uncertainty and variability of the nature and amount of these future charges and costs. Because this information is uncertain, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.
Stock Repurchase Authorization
In April 2022, the Company's Board of Directors approved a stock repurchase program authorizing the repurchase of up to
In connection with a secondary offering of the Company's common stock in March 2023, the Company repurchased 3,000,000 shares of its common stock sold in the offering from the underwriters at a price of
In connection with a secondary offering in May 2023, the Company repurchased 4,000,000 shares of its common stock sold in the offering from the underwriters at a price of
During the third quarter of 2023, the Company repurchased 541,494 shares of its common stock on the open market at an average price of
Future repurchases may also be conducted through negotiated transactions with an equity sponsor, open market repurchases or other means, including through Rule 10b-18 trading plans or through the use of other techniques such as accelerated share repurchases. For possible future repurchases, the actual timing, number and nature of the shares repurchased will depend on a variety of factors, including stock price, trading volume and general business and market conditions The repurchase program does not obligate the Company to acquire any number of shares in any specific period, or at all, and the repurchase program may be amended, suspended or discontinued at any time at the Company's discretion. As of December 31, 2023,
Conference Call and Webcast Details
On Wednesday, February 28, 2024, Ecovyst management will review the fourth quarter results during a conference call and audio-only webcast scheduled for 11:00 a.m. Eastern Time.
Conference Call: Investors may listen to the conference call live via telephone by dialing 1 (800) 267-6316 (domestic) or
1 (203) 518-9848 (international) and using the participant code ECVTQ423.
Webcast: An audio-only live webcast of the conference call and presentation materials can be accessed at https://investor.ecovyst.com. A replay of the conference call/webcast will be made available at https://investor.ecovyst.com/events-presentations.
Investor Contact:
Gene Shiels
(484) 617-1225
gene.shiels@ecovyst.com
About Ecovyst Inc.
Ecovyst Inc. and subsidiaries is a leading integrated and innovative global provider of advanced materials, specialty catalysts and services. We support customers globally through our strategically located network of manufacturing facilities. We believe that our products, which are predominantly inorganic, and our services contribute to improving the sustainability of the environment.
We have two uniquely positioned specialty businesses: Ecoservices provides sulfuric acid recycling to the North American refining industry for the production of alkylate and provides high quality and high strength virgin sulfuric acid for industrial and mining applications. Ecoservices also provides chemical waste handling and treatment services, as well as ex-situ catalyst activation services for the refining and petrochemical industry. Advanced Materials & Catalysts provides finished silica catalysts, catalyst supports and functionalized silicas necessary to produce high performing plastics and to enable sustainable chemistry, and through its Zeolyst Joint Venture, innovates and supplies specialty zeolites used in catalysts that support the production of sustainable fuels, remove nitrogen oxides from diesel engine emissions, and that are broadly applied in refining and petrochemical processes.
Presentation of Non-GAAP Financial Measures
In addition to the results provided in accordance with
Zeolyst Joint Venture
The Company's zeolite catalysts product group operates through its Zeolyst Joint Venture, which is accounted for as an equity method investment in accordance with GAAP. The presentation of the Zeolyst Joint Venture's sales represents
Note on Forward-Looking Statements
Some of the information contained in this press release constitutes "forward-looking statements." Forward-looking statements can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects," "projects" and similar references to future periods. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Examples of forward-looking statements include, but are not limited to, statements regarding our future results of operations, financial condition, liquidity, prospects, growth, strategies, capital allocation program (including the stock repurchase program), product and service offerings, expected demand trends and our 2024 financial outlook. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, regional, national or global political, economic, business, competitive, market and regulatory conditions, including tariffs and trade disputes, currency exchange rates, the effects of inflation and other factors, including those described in the sections titled "Risk Factors" and "Management's Discussion & Analysis of Financial Condition and Results of Operations" in our filings with the SEC, which are available on the SEC's website at www.sec.gov. These forward-looking statements speak only as of the date of this release. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable law.
ECOVYST INC. AND SUBSIDIARIES | ||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||
(in millions, except share and per share amounts) | ||||||||||||
Three months ended December 31, | % | Years ended December 31, | % | |||||||||
2023 | 2022 | Change | 2023 | 2022 | Change | |||||||
Sales | $ 172.8 | $ 182.8 | (5.5) % | $ 691.1 | $ 820.2 | (15.7) % | ||||||
Cost of goods sold | 125.5 | 133.3 | (5.9) % | 493.2 | 595.5 | (17.2) % | ||||||
Gross profit | 47.3 | 49.5 | (4.4) % | 197.9 | 224.7 | (11.9) % | ||||||
Selling, general and administrative expenses | 19.7 | 17.5 | 12.6 % | 79.2 | 85.3 | (7.2) % | ||||||
Other operating expense, net | 4.8 | 9.9 | (51.5) % | 22.0 | 35.0 | (37.1) % | ||||||
Operating income | 22.8 | 22.1 | 3.2 % | 96.7 | 104.4 | (7.4) % | ||||||
Equity in net (income) from affiliated companies | (14.3) | (10.3) | 38.8 % | (30.6) | (27.7) | 10.5 % | ||||||
Interest expense, net | 13.9 | 10.3 | 35.0 % | 44.7 | 37.2 | 20.2 % | ||||||
Other (income) expense, net | — | (2.3) | (100.0) % | 0.6 | 0.2 | 200.0 % | ||||||
Income before income taxes and noncontrolling interest | 23.2 | 24.4 | (4.9) % | 82.0 | 94.7 | (13.4) % | ||||||
(Benefit) provision for income taxes | (6.8) | 2.9 | (334.5) % | 10.8 | 24.9 | (56.6) % | ||||||
Effective tax rate | (29.3) % | 11.9 % | (346.6) % | 13.2 % | 26.3 % | |||||||
Net income from continuing operations | 30.0 | 21.5 | 39.5 % | 71.2 | 69.8 | 2.0 % | ||||||
Net income from discontinued operations, net of tax | — | 3.9 | (100.0) % | — | 3.9 | (100.0) % | ||||||
Net income | $ 30.0 | $ 25.4 | 18.1 % | $ 71.2 | $ 73.7 | (3.4) % | ||||||
Income from continuing operations attributable to Ecovyst Inc. | 30.0 | 21.5 | 71.2 | 69.8 | ||||||||
Income from discontinued operations attributable to Ecovyst Inc. | — | 3.9 | — | 3.9 | ||||||||
Net income | 30.0 | 25.4 | 71.2 | 73.7 | ||||||||
Earnings per share: | ||||||||||||
Basic income per share - continuing operations | $ 0.26 | $ 0.17 | $ 0.60 | $ 0.52 | ||||||||
Diluted income per share - continuing operations | $ 0.26 | $ 0.17 | $ 0.60 | $ 0.52 | ||||||||
Weighted average shares outstanding: | ||||||||||||
Basic | 116,116,895 | 125,962,111 | 118,367,214 | 133,601,322 | ||||||||
Diluted | 117,190,747 | 127,538,343 | 119,487,709 | 135,088,172 | ||||||||
ECOVYST INC. AND SUBSIDIARIES | |||
CONSOLIDATED BALANCE SHEETS | |||
(in millions, except share and per share amounts) | |||
December 31, | December 31, | ||
ASSETS | |||
Cash and cash equivalents | $ 88.4 | $ 110.9 | |
Accounts receivables, net | 81.3 | 74.8 | |
Inventories, net | 45.1 | 44.4 | |
Derivative assets | 13.4 | 18.5 | |
Prepaid and other current assets | 17.8 | 19.1 | |
Total current assets | 246.0 | 267.7 | |
Investments in affiliated companies | 440.2 | 436.0 | |
Property, plant and equipment, net | 576.9 | 584.9 | |
Goodwill | 404.5 | 403.2 | |
Other intangible assets, net | 116.6 | 129.9 | |
Right-of-use lease assets | 24.3 | 28.3 | |
Other long-term assets | 29.3 | 34.6 | |
Total assets | $ 1,837.8 | $ 1,884.6 | |
LIABILITIES | |||
Current maturities of long-term debt | $ 9.0 | $ 9.0 | |
Accounts payable | 40.2 | 40.0 | |
Operating lease liabilities—current | 8.2 | 8.2 | |
Accrued liabilities | 61.7 | 72.2 | |
Total current liabilities | 119.1 | 129.4 | |
Long-term debt, excluding current portion | 858.9 | 865.9 | |
Deferred income taxes | 115.8 | 136.2 | |
Operating lease liabilities—noncurrent | 16.0 | 20.0 | |
Other long-term liabilities | 22.5 | 25.8 | |
Total liabilities | 1,132.3 | 1,177.3 | |
Commitments and contingencies | |||
EQUITY | |||
Common stock ( | 1.4 | 1.4 | |
Preferred stock ( | — | — | |
Additional paid-in capital | 1,102.6 | 1,091.5 | |
Accumulated deficit | (170.9) | (242.0) | |
Treasury stock, at cost; shares 24,627,150 and 17,385,034 on December 31, 2023 and 2022, respectively | (226.7) | (149.6) | |
Accumulated other comprehensive (income) loss | (0.9) | 6.0 | |
Total equity | 705.5 | 707.3 | |
Total liabilities and equity | $ 1,837.8 | $ 1,884.6 | |
ECOVYST INC. AND SUBSIDIARIES | ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
Years ended December 31, | ||||
2023 | 2022 | |||
Cash flows from operating activities: | (in millions) | |||
Net income | $ 71.2 | $ 73.7 | ||
Net income from discontinued operations | — | (3.9) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||
Depreciation | 70.6 | 65.1 | ||
Amortization | 14.0 | 14.0 | ||
Amortization of deferred financing costs and original issue discount | 2.1 | 2.0 | ||
Foreign currency exchange (gain) loss | (0.6) | 1.0 | ||
Deferred income tax provision (benefit) | (17.1) | 1.7 | ||
Net loss on asset disposals | 4.1 | 3.6 | ||
Stock compensation | 16.0 | 20.6 | ||
Equity in net income from affiliated companies | (30.6) | (27.7) | ||
Dividends received from affiliated companies | 28.0 | 35.0 | ||
Other, net | 0.6 | (2.7) | ||
Working capital changes that provided (used) cash, excluding the effect of acquisitions and dispositions: | ||||
Receivables | (6.1) | 5.5 | ||
Inventories | (1.4) | 9.9 | ||
Prepaids and other current assets | (1.0) | — | ||
Accounts payable | 2.4 | (10.1) | ||
Accrued liabilities | (14.6) | (7.4) | ||
Net cash provided by operating activities, continuing operations | 137.6 | 180.3 | ||
Net cash provided by operating activities, discontinued operations | — | 6.3 | ||
Net cash provided by operating activities | 137.6 | 186.6 | ||
Cash flows from investing activities: | ||||
Purchases of property, plant and equipment | (65.3) | (58.9) | ||
Payments for business divestiture, net of cash | — | (3.7) | ||
Business combinations, net of cash acquired | — | (0.5) | ||
Other, net | — | 0.1 | ||
Net cash used in investing activities, continuing operations | (65.3) | (63.0) | ||
Cash flows from financing activities: | ||||
Draw down of revolving credit facilities | 14.5 | — | ||
Repayments of revolving credit facilities | (14.5) | — | ||
Repayments of long-term debt | (9.0) | (9.0) | ||
Repurchases of common shares | (78.7) | (136.7) | ||
Tax withholdings on equity award vesting | (3.4) | (0.3) | ||
Repayments of finance lease obligations | (2.8) | (2.7) | ||
Other | 0.4 | 0.6 | ||
Net cash used in financing activities, continuing operations | (93.5) | (148.1) | ||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (1.3) | (5.5) | ||
Net change in cash, cash equivalents and restricted cash | (22.5) | (30.0) | ||
Cash, cash equivalents and restricted cash at beginning of period | 110.9 | 140.9 | ||
Cash, cash equivalents and restricted cash at end of period | $ 88.4 | $ 110.9 | ||
Appendix Table A-1: Reconciliation of Net Income to Adjusted EBITDA | ||||||||
Three months ended December 31, | Years ended December 31, | |||||||
2023 | 2022 | 2023 | 2022 | |||||
(in millions) | ||||||||
Reconciliation of net income to Adjusted EBITDA | ||||||||
Net income from continuing operations | $ 30.0 | $ 21.5 | $ 71.2 | $ 69.8 | ||||
(Benefit) provision for income taxes | (6.8) | 2.9 | 10.8 | 24.9 | ||||
Interest expense, net | 13.9 | 10.3 | 44.7 | 37.2 | ||||
Depreciation and amortization | 22.1 | 20.4 | 84.6 | 79.2 | ||||
EBITDA | 59.2 | 55.1 | 211.3 | 211.1 | ||||
Joint venture depreciation, amortization and interest(a) | 3.3 | 4.0 | 13.4 | 16.0 | ||||
Amortization of investment in affiliate step-up(b) | 1.6 | 1.6 | 6.4 | 6.4 | ||||
Net loss on asset disposals(c) | 0.8 | 2.4 | 4.1 | 3.6 | ||||
Foreign currency exchange (gain) loss(d) | (0.9) | (0.8) | (1.3) | 1.4 | ||||
LIFO expense (benefit)(e) | 1.0 | (0.2) | 3.5 | (0.2) | ||||
Transaction and other related costs(f) | 0.2 | 0.1 | 3.0 | 7.0 | ||||
Equity-based compensation | 3.4 | 3.2 | 16.0 | 20.6 | ||||
Restructuring, integration and business optimization expenses(g) | 0.3 | 5.2 | 2.7 | 11.6 | ||||
Other(h) | 0.9 | (1.4) | 0.8 | (0.7) | ||||
Adjusted EBITDA | $ 69.8 | $ 69.2 | $ 259.9 | $ 276.8 | ||||
Descriptions to Ecovyst Non-GAAP Reconciliations
(a) | We use Adjusted EBITDA as a performance measure to evaluate our financial results. Because our Advanced Materials & Catalysts segment includes our |
(b) | Represents the amortization of the fair value adjustments associated with the equity affiliate investment in the Zeolyst Joint Venture as a result of the combination of the businesses of PQ Holdings Inc. and Eco Services Operations LLC in May 2016. We determined the fair value of the equity affiliate investment and the fair value step-up was then attributed to the underlying assets of the Zeolyst Joint Venture. Amortization is primarily related to the fair value adjustments associated with intangible assets, including customer relationships and technical know-how. |
(c) | When asset disposals occur, we remove the impact of net gain/loss of the disposed asset because such impact primarily reflects the non-cash write-off of long-lived assets no longer in use. |
(d) | Reflects the exclusion of the foreign currency transaction gains and losses in the statements of income related to the non-permanent intercompany debt denominated in local currency translated to |
(e) | Represents non-cash adjustments to the Company's LIFO reserves for certain inventories in the |
(f) | Relates to certain transaction costs, including debt financing, due diligence and other costs related to transactions that are completed, pending or abandoned, that we believe are not representative of our ongoing business operations. |
(g) | Includes the impact of restructuring, integration and business optimization expenses which are incremental costs that are not representative of our ongoing business operations. |
(h) | Other consists of adjustments for items that are not core to our ongoing business operations. These adjustments include environmental remediation and other legal costs, expenses for capital and franchise taxes, and defined benefit pension and postretirement plan (benefits) costs, for which our obligations are under plans that are frozen. Also included in this amount are adjustments to eliminate the benefit realized in cost of goods sold of the allocation of a portion of the contract manufacturing payments under the five-year agreement with the buyer of the Performance Chemicals business to the financing obligation under the failed sale-leaseback. Included in this line-item are rounding discrepancies that may arise from rounding from dollars (in thousands) to dollars (in millions). |
Appendix Table A-2: Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS(1) | |||||||||||
Three months ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
Pre-tax | Tax | After- | Per share, | Per share, | Pre-tax | Tax | After- | Per share, | Per share, | ||
(in millions, except share and per share amounts) | |||||||||||
Net income from continuing operations | $ 23.2 | $ (6.8) | $ 30.0 | $ 0.26 | $ 0.26 | $ 24.4 | $ 2.9 | $ 21.5 | $ 0.17 | $ 0.17 | |
Amortization of investment in affiliate step-up(b) | 1.6 | 0.3 | 1.3 | 0.01 | 0.01 | 1.6 | 0.2 | 1.4 | 0.01 | 0.01 | |
Net loss on asset disposals(c) | 0.8 | 0.1 | 0.7 | 0.01 | 0.01 | 2.4 | 0.5 | 1.9 | 0.02 | 0.02 | |
Foreign currency exchange gain(d) | (0.9) | (0.2) | (0.7) | (0.01) | (0.01) | (0.8) | (0.1) | (0.7) | (0.01) | (0.01) | |
LIFO expense (benefit)(e) | 1.0 | 0.2 | 0.8 | 0.01 | 0.01 | (0.2) | (0.1) | (0.1) | — | — | |
Transaction and other related costs(f) | 0.2 | — | 0.2 | — | — | 0.1 | (0.6) | 0.7 | 0.01 | 0.01 | |
Equity-based compensation | 3.4 | 0.3 | 3.1 | 0.03 | 0.03 | 3.2 | (0.7) | 3.9 | 0.03 | 0.03 | |
Restructuring, integration and business optimization expenses(g) | 0.3 | 0.1 | 0.2 | — | — | 5.2 | 0.9 | 4.3 | 0.03 | 0.03 | |
Other(h) | 0.9 | 0.2 | 0.7 | — | — | (1.4) | (0.3) | (1.1) | (0.01) | (0.01) | |
Adjusted Net Income, including Impact of valuation allowance release | 30.5 | (5.8) | 36.3 | 0.31 | 0.31 | 34.5 | 2.7 | 31.8 | 0.25 | 0.25 | |
Impact of valuation allowance release(2) | — | 10.2 | (10.2) | (0.09) | (0.09) | — | — | — | — | — | |
Adjusted Net Income(1) | $ 30.5 | $ 4.4 | $ 26.1 | $ 0.22 | $ 0.22 | $ 34.5 | $ 2.7 | $ 31.8 | $ 0.25 | $ 0.25 | |
Weighted average shares outstanding | 116,116,895 | 117,190,747 | 125,962,111 | 127,538,343 | |||||||
Years ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
Pre-tax | Tax | After- | Per share, | Per share, | Pre-tax | Tax | After- | Per share, | Per share, | ||
(in millions, except share and per share amounts) | |||||||||||
Net income from continuing operations | $ 82.0 | $ 10.8 | $ 71.2 | $ 0.60 | $ 0.60 | $ 94.7 | $ 24.9 | $ 69.8 | $ 0.52 | $ 0.52 | |
Amortization of investment in affiliate step-up(b) | 6.4 | 1.6 | 4.8 | 0.04 | 0.04 | 6.4 | 1.5 | 4.9 | 0.04 | 0.04 | |
Net loss on asset disposals(c) | 4.1 | 1.0 | 3.1 | 0.03 | 0.03 | 3.6 | 0.9 | 2.7 | 0.02 | 0.02 | |
Foreign currency exchange (gain) loss(d) | (1.3) | (0.3) | (1.0) | (0.01) | (0.01) | 1.4 | 0.4 | 1.0 | 0.01 | 0.01 | |
LIFO expense (benefit)(e) | 3.5 | 0.9 | 2.6 | 0.02 | 0.02 | (0.2) | (0.1) | (0.1) | — | — | |
Transaction and other related costs(f) | 3.0 | 0.8 | 2.2 | 0.02 | 0.02 | 7.0 | 1.1 | 5.9 | 0.04 | 0.04 | |
Equity-based compensation | 16.0 | 1.5 | 14.5 | 0.12 | 0.12 | 20.6 | (0.1) | 20.7 | 0.15 | 0.15 | |
Restructuring, integration and business optimization expenses(g) | 2.7 | 0.7 | 2.0 | 0.02 | 0.02 | 11.6 | 2.8 | 8.8 | 0.07 | 0.07 | |
Other(h) | 0.8 | 0.2 | 0.6 | 0.01 | — | (0.7) | (0.2) | (0.5) | — | (0.01) | |
Adjusted Net Income, including Impact of valuation allowance release | 117.2 | 17.2 | 100.0 | 0.85 | 0.84 | 144.4 | 31.2 | 113.2 | 0.85 | 0.84 | |
Impact of valuation allowance release(2) | — | 10.2 | (10.2) | (0.09) | (0.09) | — | — | — | — | — | |
Adjusted Net Income(1) | $ 117.2 | $ 27.4 | $ 89.8 | $ 0.76 | $ 0.75 | $ 144.4 | $ 31.2 | $ 113.2 | $ 0.85 | $ 0.84 | |
Weighted average shares outstanding | 118,367,214 | 119,487,709 | 133,601,322 | 135,088,172 | |||||||
See Appendix Table A-1 for Descriptions to Ecovyst Non-GAAP Reconciliations in the table above. | |
(1) | We define adjusted net income as net income attributable to Ecovyst adjusted for non-operating income or expense and the impact of certain non-cash or other items that are included in net income that we do not consider indicative of our ongoing operating performance. Adjusted net income is presented as a key performance indicator as we believe it will enhance a prospective investor's understanding of our results of operations and financial condition. Adjusted net income may not be comparable with net income or adjusted net income as defined by other companies. |
(2) | Represents the tax impact of the state tax credit valuation allowance release. Item is not expected to be recurring. |
The adjustments to net income attributable to Ecovyst Inc. are shown net of each applicable statutory tax rates of
Appendix Table A-3: Sales and Adjusted EBITDA by Business Segment | ||||||||||||
Three months ended December 31, | Years ended December 31, | |||||||||||
2023 | 2022 | % Change | 2023 | 2022 | % Change | |||||||
Sales: | ||||||||||||
Ecoservices | $ 141.4 | $ 159.8 | (11.5) % | $ 584.8 | $ 702.5 | (16.8) % | ||||||
Advanced Silicas | 31.4 | 23.0 | 36.5 % | 106.3 | 117.7 | (9.7) % | ||||||
Total sales | $ 172.8 | $ 182.8 | (5.5) % | $ 691.1 | $ 820.2 | (15.7) % | ||||||
Zeolyst Joint Venture sales | $ 52.8 | $ 39.9 | 32.3 % | $ 156.5 | $ 132.6 | 18.0 % | ||||||
Adjusted EBITDA: | ||||||||||||
Ecoservices | $ 48.4 | $ 54.4 | (11.0) % | $ 200.0 | $ 227.8 | (12.2) % | ||||||
Advanced Materials & Catalysts | 27.2 | 20.3 | 34.0 % | 81.9 | 78.0 | 5.0 % | ||||||
Unallocated corporate expenses | (5.8) | (5.5) | 5.5 % | (22.0) | (29.0) | (24.1) % | ||||||
Total Adjusted EBITDA | $ 69.8 | $ 69.2 | 0.9 % | $ 259.9 | $ 276.8 | (6.1) % | ||||||
Adjusted EBITDA Margin: | ||||||||||||
Ecoservices | 34.2 % | 34.0 % | 34.2 % | 32.4 % | ||||||||
Advanced Materials & Catalysts(1) | 32.3 % | 32.3 % | 31.2 % | 31.2 % | ||||||||
Total Adjusted EBITDA Margin(1) | 30.9 % | 31.1 % | 30.7 % | 29.0 % | ||||||||
(1) | Adjusted EBITDA margin calculation includes proportionate |
Appendix Table A-4: Adjusted Free Cash Flow | ||||
Years ended December 31, | ||||
2023 | 2022 | |||
(in millions) | ||||
Net cash provided by operating activities, continuing operations | $ 137.6 | $ 180.3 | ||
Net cash (used in) provided by operating activities, discontinued operations | — | 6.3 | ||
Net cash provided by operating activities | 137.6 | 186.6 | ||
Less: | ||||
Purchases of property, plant and equipment(1) | (65.3) | (58.9) | ||
Free cash flow | 72.3 | 127.7 | ||
Adjustments to free cash flow: | ||||
Cash paid for costs related to segment disposals | — | 18.1 | ||
Adjusted free cash flow(2) | $ 72.3 | $ 145.8 | ||
Net cash provided by investing activities(3) | $ (65.3) | $ (63.0) | ||
Net cash used in financing activities | $ (93.5) | $ (148.1) | ||
(1) | Excludes the Company's proportionate |
(2) | We define Adjusted free cash flow as net cash provided by operating activities less purchases of property, plant and equipment, Adjusted for cash flows that are unusual in nature and/or infrequent in occurrence that neither relate to our core business nor reflect the liquidity of our underlying business. Historically these adjustments include proceeds from the sale of assets, net interest proceeds on swaps designated as net investment hedges, the cash paid for segment disposals and cash paid for debt financing costs included in cash from operating activities. Adjusted free cash flow is a non-GAAP financial measure that we believe will enhance a prospective investor's understanding of our ability to generate additional cash from operations and is an important financial measure for use in evaluating our financial performance. Our presentation of Adjusted free cash flow is not intended to replace, and should not be considered superior to, the presentation of our net cash provided by operating activities determined in accordance with GAAP. Additionally, our definition of Adjusted free cash flow is limited, in that it does not represent residual cash flows available for discretionary expenditures, due to the fact that the measure does not deduct the payments required for debt service and other contractual obligations or payments made for business acquisitions. Therefore, we believe it is important to view Adjusted free cash flow as a measure that provides supplemental information to our consolidated statements of cash flows. You should not consider Adjusted free cash flow in isolation or as an alternative to the presentation of our financial results in accordance with GAAP. The presentation of Adjusted free cash flow may differ from similar measures reported by other companies and may not be comparable to other similarly titled measures. |
(3) | Net cash used in investing activities includes purchases of property, plant and equipment, which is also included in our computation of Adjusted free cash flow. |
Appendix Table A-5: Net Debt Leverage Ratio | |||
December 31, | |||
2023 | 2022 | ||
(in millions, except ratios) | |||
Total debt | $ 877.5 | $ 886.5 | |
Less: | |||
Cash and cash equivalents | 88.4 | 110.9 | |
Net debt | $ 789.1 | $ 775.6 | |
Trailing twelve months(1): | |||
Net Income | 71.2 | 69.8 | |
Adjusted EBITDA(2) | 259.9 | 276.8 | |
Net Debt to Net Income Ratio | 11.1 x | 11.1 x | |
Net Debt Leverage Ratio | 3.0 x | 2.8 x | |
(1) | Calculated on a continuing operations basis. |
(2) | Refer to Appendix Table A-1: Reconciliation of Net Income to Adjusted EBITDA for the reconciliation to the most comparable GAAP financial measure. |
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SOURCE Ecovyst Inc.
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