Executive Summary / Key Takeaways

• Ecovyst operates a resilient, cash-generative business model centered on essential sulfuric acid services (recycling and virgin acid) and specialty catalysts, underpinned by long-term contracts and differentiated technology.
• The Ecoservices segment, the company's largest, benefits from high refinery utilization, favorable alkylate economics, and increasing demand in mining, supported by contractual pricing and operational efficiency improvements from reliability initiatives.
• While the Advanced Materials Catalysts segment faces near-term headwinds in sustainable fuels and emission control due to market conditions and regulatory delays, strength in hydrocracking catalysts and growth in advanced silicas (polyethylene, biocatalysis, advanced recycling) provide balance and future upside.
• Ecovyst maintains a strong balance sheet and liquidity position, enhanced by recent debt refinancing and amendments, enabling a flexible capital allocation strategy focused on funding organic growth projects, pursuing bolt-on M&A (like the Cornerstone acquisition), deleveraging towards a 2.0x-2.5x target, and opportunistic share repurchases.
• Management reaffirmed its full-year 2025 Adjusted EBITDA guidance range of $238 million to $258 million, anticipating stronger performance in the second half driven by Ecoservices seasonality and catalyst order timing, while actively working to mitigate risks from macroeconomic uncertainty and tariffs.

A Foundation of Resilience and Strategic Evolution

Ecovyst Inc. (NYSE:ECVT) stands as a leading integrated provider of advanced materials, specialty catalysts, and critical sulfuric acid services. Operating through two distinct yet complementary segments – Ecoservices and Advanced Materials Catalysts – the company has built a business model designed for resilience, supported by strategically located manufacturing facilities and a focus on products and services that contribute to environmental sustainability. The company's journey has been marked by significant strategic moves, including the formation of the Zeolyst International joint venture in 1988, which expanded its focus beyond its initial hydrocracking catalyst roots into diverse applications, and the transformative 2016 combination of PQ Holdings and Eco Services Operations, which shaped its current dual-segment structure. More recently, Ecovyst has sharpened its strategic focus on enhancing reliability, pursuing organic and inorganic growth, and capitalizing on emerging market trends, all while prioritizing shareholder value.

At the heart of Ecovyst's offering lies its technological differentiation. In the Advanced Materials Catalysts segment, the Zeolyst Joint Venture is a key innovator in specialty zeolites, critical components in catalysts for sustainable fuels, NOx removal from diesel emissions, and various refining and petrochemical processes. While specific quantitative metrics on the performance advantage of Zeolyst's zeolites over alternatives are not detailed, management emphasizes their role in enabling high-performing catalysts. Similarly, the Advanced Silicas business provides finished silica catalysts and supports for high-performing plastics and sustainable chemistry. The Chem32 ex-situ catalyst activation service within Ecoservices offers customers unique benefits, including effectiveness in sulfiding catalysts and HSE risk mitigation compared to in-situ methods.

Ecovyst is actively investing in and developing new technologies. The OPO Infiniti family of catalysts from the Zeolyst Joint Venture, for instance, has demonstrated the ability to significantly reduce the thermal intensity and improve the quality of pyrolysis oil in advanced recycling processes. In emerging areas, the company is engaged in biocatalysis applications, leveraging its advanced silicas as supports, with many initiatives in pilot and scale-up stages. An equity investment in Pajarito Powders in 2024 provided access to technologies for green hydrogen and fuel cells, aligning with the company's strategy to participate in the hydrogen economy. These R&D efforts and investments are aimed at positioning Ecovyst for future growth in markets driven by sustainability trends, such as the forecasted 14% CAGR for the global enzyme market through 2030 and the anticipated sixfold increase in the value of carbon capture utilization and storage by 2030. The "so what" for investors is that these technological capabilities and forward-looking investments are intended to build competitive moats, open new revenue streams, and enhance the company's long-term growth profile beyond its foundational businesses.

Navigating the Competitive Currents

Ecovyst operates within a competitive landscape populated by both large, diversified chemical companies and more specialized players. Key publicly traded competitors in overlapping segments include Albemarle Corporation (ALB), Honeywell International Inc. (HON), and Johnson Matthey Plc (JMAT).

In the catalyst space, particularly for refining and emissions control, Ecovyst competes with the catalyst divisions of ALB and HON (UOP). While ALB and HON possess greater scale, broader portfolios, and larger R&D budgets, Ecovyst aims to differentiate through specialized expertise and cost efficiency in its niche areas. For example, Ecovyst's zeolite-based catalysts are highlighted for their performance benefits, and its customized catalyst approach in Advanced Silicas has enabled it to win business on key polyethylene expansion projects, particularly in cost-advantaged regions like the U.S. and Middle East. Against JMAT, a significant player in emissions control and chemical catalysts, Ecovyst's focus on emerging areas like sustainable aviation fuel and advanced recycling positions it in potentially higher-growth niches, although JMAT also has initiatives in clean technologies like hydrogen.

Ecovyst's Ecoservices segment, with its focus on sulfuric acid recycling and virgin acid production, faces competition from other regional sulfuric acid producers and companies offering alternative waste handling services. However, Ecovyst's strategically located network of facilities in North America and its long-term, often take-or-pay, contracts with refining customers provide a significant competitive advantage in the regeneration market. The quality and robustness of its network also position it as a preferred supplier for virgin sulfuric acid in key industrial and mining applications. The recent acquisition of Cornerstone Chemical's sulfuric acid assets is a strategic move to further strengthen its position in the critical Gulf Coast market, adding capacity and enhancing its network's ability to serve growing demand and improve operational flexibility.

While direct, quantifiable comparisons of market share across all specific product lines are not available, management commentary suggests Ecovyst holds leading positions in its core sulfuric acid services and specialty zeolite markets. The company's ability to pass through raw material and other costs through contractual mechanisms, particularly in Ecoservices, provides a degree of insulation from commodity price volatility compared to competitors with less favorable contract structures or higher reliance on spot markets. However, the company acknowledges facing substantial competition and the risk of alternative technologies or changes in customer products reducing demand, underscoring the need for continuous innovation and strategic adaptation.

Performance Reflecting Operational Realities and Market Dynamics

Ecovyst's recent financial performance reflects the interplay of stable core businesses, investments in growth, and exposure to volatile end markets and operational factors like planned maintenance.

For the first quarter of 2025, Ecovyst reported sales of $162.2 million, a modest increase from $160.5 million in Q1 2024. This growth was primarily driven by higher average selling prices in Ecoservices, including the pass-through of higher sulfur costs, which offset lower sales volume in the segment due to planned maintenance turnarounds at both company and customer facilities. The Advanced Materials Catalysts segment saw sales increase slightly to $19.1 million, primarily due to favorable timing of niche custom catalyst orders, although advanced silicas sales for polyethylene were lower as customers pulled orders into the prior quarter.

Gross profit in Q1 2025 decreased significantly to $25.6 million from $39.2 million in Q1 2024. This decline was mainly attributed to increased manufacturing costs stemming from higher turnaround expenses, inflation, and lower sales volume. Operating loss for the quarter was $0.9 million, a decrease from operating income of $13.9 million in the prior year period, reflecting the lower gross profit and higher other operating expenses (driven by transaction costs), partially offset by lower SG&A.

A notable positive in Q1 2025 was the significant increase in Equity in net income from affiliated companies, rising to $8.9 million from $2.1 million in Q1 2024. This was driven by higher earnings from the Zeolyst Joint Venture, primarily due to favorable timing and higher sales volume of hydrocracking and specialty catalysts.

Adjusted EBITDA, a key performance metric for management, was $39.0 million in Q1 2025, down from $45.5 million in Q1 2024. The Ecoservices segment's Adjusted EBITDA decreased to $28.5 million from $41.5 million, primarily due to higher manufacturing costs associated with planned turnarounds, timing of fixed cost absorption, inflation, and unfavorable net pricing. Conversely, the Advanced Materials Catalysts segment's Adjusted EBITDA increased substantially to $17.5 million from $11.1 million, driven by the higher sales volume within the Zeolyst Joint Venture.

Looking back at full-year 2024, Ecovyst reported GAAP sales of $704.5 million and a net loss of $6.7 million, compared to sales of $691.1 million and net income of $71.2 million in 2023. Adjusted EBITDA for 2024 was $238 million, down from $260 million in 2023, primarily reflecting lower sales volume in the Zeolyst Joint Venture, particularly in sustainable fuels and emission control applications.

Financially, Ecovyst maintains a solid liquidity position. As of March 31, 2025, the company held $127.5 million in cash and cash equivalents and had $73.6 million available under its ABL Facility, totaling $201.1 million in available liquidity. Total debt stood at $868.6 million, resulting in a net debt of $741.1 million. The company's net debt leverage ratio was 3.2 times at the end of Q1 2025, slightly up from 3.0 times at the end of 2024, reflecting the lower trailing twelve-month Adjusted EBITDA. Management remains committed to deleveraging towards its target range of 2.0x to 2.5x, supported by expected strong cash generation.

Recent debt amendments, including the repricing and extension of the term loan and the extension of the ABL facility, have strengthened the balance sheet and enhanced financial flexibility.

Outlook and Strategic Trajectory

Ecovyst's outlook for 2025 reflects a blend of cautious optimism regarding core business stability and growth in specific niches, tempered by macroeconomic uncertainties and segment-specific headwinds.

For the full year 2025, management reaffirmed its Adjusted EBITDA guidance range of $238 million to $258 million. This guidance anticipates growth compared to 2024, driven by expected improvements in both segments. GAAP sales are projected to be between $785 million and $845 million, an increase from 2024, partly due to the pass-through of higher expected sulfur costs. Excluding this pass-through effect, base sales growth is expected in the mid-single digits. Total sales, including the company's 50% share of Zeolyst JV sales (projected at $115 million to $130 million), could range from $870 million to $945 million.

Segment-wise, Ecoservices Adjusted EBITDA is expected to be up on a mid-single-digit percentage basis, within a range of $204 million to $220 million. This growth is anticipated from favorable contract pricing and higher volume, particularly in regeneration services (driven by high refinery utilization and summer driving season demand) and virgin sulfuric acid (benefiting from increased mining and battery demand in the second half). However, Q1 2025 was impacted by heavy turnaround activity, leading to a projected sequential increase in Q2 2025 Adjusted EBITDA to $47 million to $53 million as turnaround activity subsides and seasonality favors regeneration services.

The Advanced Materials Catalysts segment's Adjusted EBITDA is projected to be in the range of $65 million to $71 million, also up on a mid-single-digit percentage basis. This is supported by expected sales growth in advanced silicas (polyethylene, biocatalysis) and a stronger year for hydrocracking catalyst sales within the Zeolyst JV, which has a strong order book and potential for upside that could offset softer sales in advanced silicas due to tariff uncertainty. However, sales of catalysts for sustainable fuels are expected to be flat to slightly up, and emission control catalyst sales are projected to be moderately down. The segment's earnings are expected to be weighted towards the second half, with Q2 2025 Adjusted EBITDA projected lower at $6 million to $10 million due to sales timing shifts that benefited Q1.

Capital expenditures are anticipated to be $80 million to $90 million in 2025, reflecting investments in the Kansas City polyethylene catalyst expansion (expected completion late 2024) and the Chem32 expansion, both aimed at supporting future growth. Adjusted free cash flow for 2025 is projected to be $60 million to $80 million, expected to be stronger in the latter half of the year after higher CapEx and lower JV dividends in Q1. Interest expense is forecast at $47 million to $53 million, benefiting from interest rate caps and recent debt repricing.

Strategic initiatives continue to unfold. The acquisition of Cornerstone's sulfuric acid assets, completed in May 2025 for $35 million cash, is expected to enhance the Ecoservices network, though its earnings contribution is not anticipated to be meaningful in 2025 due to integration costs and potential facility upgrades, with a more material impact expected from 2026. The strategic review of the Advanced Materials and Catalyst segment is ongoing and expected to conclude around mid-2025, aimed at maximizing shareholder value for that business. Furthermore, management views opportunistic share repurchases as a value-enhancing use of capital given the perceived disconnect in valuation, planning to allocate up to $30 million in Q2 2025 from the remaining $229.6 million authorization, independent of the strategic review outcome.

Risks and Considerations

While Ecovyst presents a compelling investment case built on resilient core businesses, strategic growth initiatives, and strong cash generation, investors must consider several key risks. The company operates in a competitive and rapidly changing environment, exposed to general economic conditions and potential downturns that could impact demand across its end markets, particularly in industrial applications and polyethylene, where tariff uncertainty adds a layer of risk.

Specific segments face distinct challenges. The sustainable fuels market is subject to volatility from factors like RINs values and feedstock costs, which have negatively impacted near-term demand for catalyst materials and could continue to do so over the next 12-18 months. The emission control catalyst market is affected by macroeconomic conditions and regulatory timelines (e.g., Euro 7 delays), leading to subdued demand. Operational risks include potential disruptions from supply chain constraints or environmental, health, and safety incidents, although the company emphasizes its investments in stewardship and reliability.

Financial risks include the company's substantial level of indebtedness, although management believes its cash generation and recent debt amendments mitigate concerns and is actively working towards a lower leverage target. Fluctuations in exchange rates could also adversely affect financial results, given the company's international operations. Finally, the company has identified a material weakness in internal control over financial reporting related to the accounting of its Zeolyst Joint Venture, which could result in misstatements if not remediated effectively.

Conclusion

Ecovyst's investment narrative is one of a fundamentally resilient business leveraging its core strengths in essential sulfuric acid services and specialty catalysts to navigate a dynamic global market. The Ecoservices segment provides a stable, contractually underpinned foundation with positive demand trends in key areas like regeneration and mining, further enhanced by strategic acquisitions and operational improvements. While the Advanced Materials Catalysts segment faces near-term pressures in certain end markets, its exposure to growth areas like polyethylene, biocatalysis, and advanced recycling, coupled with strength in hydrocracking catalysts, positions it for future upside.

Underpinning this outlook is a commitment to strong cash generation, which fuels a flexible capital allocation strategy aimed at reinforcing the business through targeted organic investments and complementary M&A, while also returning value to shareholders through opportunistic share repurchases and deleveraging the balance sheet. Management's reaffirmed 2025 guidance reflects confidence in the company's ability to deliver growth despite external uncertainties, banking on the inherent resilience of its core operations, the timing of catalyst orders, and the benefits of ongoing strategic initiatives. For investors, Ecovyst represents an opportunity to invest in a company with defensible market positions, a focus on sustainability-linked growth, and a clear path to enhance value, provided it successfully executes its strategic plan and manages the risks inherent in its end markets and operational complexities.