Ecovyst Inc. 2026 Q2 Earnings Call

Good morning and welcome to Ecovyst's second quarter 2026 earnings call. With me on the call this morning are Kurt Bitting, Ecovyst Chief Executive Officer, and Mike Feehan, Ecovyst 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 alkylate economics contributed to growth in sales volume for regenerated sulfuric acid. 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 Waggaman, 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 30th, 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 in end uses we already serve, and is accretive from day one. Slide five lays out that playbook. The disposition of our Advanced Materials & Catalysts 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.

Ecoservices 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 Chem32 in 2021, a leading provider of ex situ catalyst activation using sulfur-based sulfiding technology. The second was Waggaman in May of 2025, which added capital-efficient incremental capacity sited in our Gulf Coast network. Waggaman 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 alkylate 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 Ecovyst. 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 Waggaman 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 Waggaman, accounted for nearly $7 million, partially offset by higher fixed manufacturing costs, including Waggaman'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 two to 2.5 times target range. Turning to the next slide, our capital allocation over the past 15 months reflects the same discipline Kurt described: $83 million of stock repurchases, $472 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, de-levered, 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.