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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-38221
Ecovyst Inc.
Delaware 81-3406833
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
 
300 Lindenwood Drive 
Malvern, Pennsylvania
19355
(Address of principal executive offices) (Zip Code)
(484)
617-1200
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading symbolName of each exchange on which registered
Common stock, par value $0.01 per shareECVTNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐   No  ☒
The number of shares of common stock outstanding as of May 2, 2023 was 120,161,142.
1

Ecovyst Inc.

INDEX—FORM 10-Q
March 31, 2023

2

PART IFINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS (UNAUDITED)

ECOVYST INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts)
(unaudited)

 
Three months ended
March 31,
20232022
Sales$160,874 $179,714 
Cost of goods sold124,381 131,979 
Gross profit36,493 47,735 
Selling, general and administrative expenses21,119 23,536 
Other operating expense, net6,716 7,763 
Operating income8,658 16,436 
Equity in net (income) from affiliated companies(223)(5,749)
Interest expense, net9,832 8,450 
Other (income) expense, net(427)140 
(Loss) income before income taxes(524)13,595 
Provision for income taxes947 5,720 
Net (loss) income attributable to Ecovyst Inc.$(1,471)$7,875 
Net (loss) income per share:
Basic (loss) income per share$(0.01)$0.06 
Diluted (loss) income per share$(0.01)$0.06 
Weighted average shares outstanding:
Basic122,178,867 137,684,773 
Diluted122,178,867 138,749,065 
See accompanying notes to condensed consolidated financial statements.

3

ECOVYST INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)

 
Three months ended
March 31,
20232022
Net (loss) income attributable to Ecovyst Inc.$(1,471)$7,875 
Other comprehensive income (loss), net of tax:
Pension and postretirement benefits(24)(39)
Net (loss) gain from hedging activities(7,920)13,722 
Foreign currency translation2,185 (2,305)
Total other comprehensive (loss) income(5,759)11,378 
Comprehensive (loss) income attributable to Ecovyst Inc.$(7,230)$19,253 
See accompanying notes to condensed consolidated financial statements.

4

ECOVYST INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)

March 31,
2023
December 31,
2022
ASSETS
Cash and cash equivalents$61,619 $110,920 
Accounts receivable, net66,609 74,758 
Inventories, net45,828 44,362 
Derivative assets15,996 18,510 
Prepaid and other current assets31,301 19,154 
Total current assets221,353 267,704 
Investments in affiliated companies437,172 436,013 
Property, plant and equipment, net583,703 584,889 
Goodwill403,762 403,163 
Other intangible assets, net126,739 129,932 
Right-of-use lease assets27,575 28,265 
Other long-term assets29,745 34,587 
Total assets$1,830,049 $1,884,553 
LIABILITIES
Current maturities of long-term debt$9,000 $9,000 
Accounts payable34,130 40,019 
Operating lease liabilities—current8,070 8,155 
Accrued liabilities57,770 72,229 
Total current liabilities108,970 129,403 
Long-term debt, excluding current portion864,128 865,870 
Deferred income taxes136,591 136,184 
Operating lease liabilities—noncurrent19,440 20,021 
Other long-term liabilities26,769 25,846 
Total liabilities1,155,898 1,177,324 
Commitments and contingencies (Note 15)
EQUITY
Common stock ($0.01 par); authorized shares 450,000,000; issued shares 140,604,563 and 139,571,272 on March 31, 2023 and December 31, 2022, respectively; outstanding shares 120,124,260 and 122,186,238 on March 31, 2023 and December 31, 2022, respectively
1,406 1,396 
Preferred stock ($0.01 par); authorized shares 50,000,000; no shares issued or outstanding on March 31, 2023 and December 31, 2022
— — 
Additional paid-in capital1,096,333 1,091,475 
Accumulated deficit(243,481)(242,010)
Treasury stock, at cost; shares 20,480,303 and 17,385,034 on March 31, 2023 and December 31, 2022, respectively
(180,340)(149,624)
Accumulated other comprehensive income233 5,992 
Total equity674,151 707,229 
Total liabilities and equity$1,830,049 $1,884,553 
See accompanying notes to condensed consolidated financial statements.
5

ECOVYST INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)


Common
stock
Additional
paid-in
capital
(Accumulated deficit)Treasury
stock, at
cost 
Accumulated
other
comprehensive
income
Total
Balance, December 31, 2022$1,396 $1,091,475 $(242,010)$(149,624)$5,992 $707,229 
Net loss— — (1,471)— — (1,471)
Other comprehensive loss— — — — (5,759)(5,759)
Repurchases of common shares— — — (29,850)— (29,850)
Tax withholdings on equity award vesting— — — (866)— (866)
Stock compensation expense — 4,756 — — — 4,756 
Shares issued under equity incentive plan, net of forfeitures10 102 — — — 112 
Balance, March 31, 2023$1,406 $1,096,333 $(243,481)$(180,340)$233 $674,151 
Common
stock
Additional
paid-in
capital
(Accumulated deficit)Treasury
stock, at
cost 
Accumulated
other
comprehensive
income (loss)
Total 
Balance, December 31, 2021$1,378 $1,073,409 $(315,707)$(12,551)$(5,792)$740,737 
Net income— — 7,875 — — 7,875 
Other comprehensive income— — — — 11,378 11,378 
Tax withholdings on equity award vesting— — — (332)— (332)
Stock compensation expense — 5,946 — — — 5,946 
Shares issued under equity incentive plan, net of forfeitures18 — — — 27 
Balance, March 31, 2022$1,396 $1,079,364 $(307,832)$(12,883)$5,586 $765,631 
See accompanying notes to condensed consolidated financial statements.
6

ECOVYST INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three months ended
March 31,
20232022
Cash flows from operating activities:
Net (loss) income attributable to Ecovyst Inc.$(1,471)$7,875 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation16,692 16,011 
Amortization3,505 3,535 
Amortization of deferred financing costs and original issue discount508 497 
Foreign currency exchange (gain) loss(437)647 
Pension and postretirement healthcare benefit(553)
Deferred income tax provision2,790 9,341 
Net loss on asset disposals1,178 133 
Stock compensation4,068 7,294 
Equity in net income from affiliated companies(223)(5,749)
Dividends received from affiliated companies— 15,000 
Other, net(3,783)(6,841)
Working capital changes that provided (used) cash:
Receivables8,364 (10,386)
Inventories(1,323)(1,034)
Prepaids and other current assets(9,732)(3,590)
Accounts payable(1,946)2,154 
Accrued liabilities(14,084)(27,911)
Net cash provided by operating activities4,114 6,423 
Cash flows from investing activities:
Purchases of property, plant and equipment(18,698)(10,750)
Payments for business divestiture, net of cash— (3,744)
Other, net— 81 
Net cash used in investing activities(18,698)(14,413)
Cash flows from financing activities:
Repayments of long-term debt(2,250)(2,250)
Repurchases of common shares(29,850)— 
Tax withholdings on equity award vesting(866)(332)
Repayment of financing obligation(701)— 
Other, net97 27 
Net cash used in financing activities(33,570)(2,555)
Effect of exchange rate changes on cash and cash equivalents(1,147)(596)
Net change in cash and cash equivalents(49,301)(11,141)
Cash and cash equivalents at beginning of period110,920 140,889 
Cash and cash equivalents at end of period$61,619 $129,748 
For supplemental cash flow disclosures, see Note 19.
See accompanying notes to condensed consolidated financial statements.
7


ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)

1. Background and Basis of Presentation:
Description of Business
Ecovyst Inc. and subsidiaries (the “Company” or “Ecovyst”) is a leading integrated and innovative global provider of specialty catalysts and services. The Company supports customers globally through its strategically located network of manufacturing facilities. The Company believes that its products, which are predominantly inorganic, and services contribute to improving the sustainability of the environment.
The Company has two uniquely positioned specialty businesses: Ecoservices provides sulfuric acid recycling to the North American refining industry for the production of alkylate and provides on-purpose virgin sulfuric acid for water treatment, mining and industrial applications; and Catalyst Technologies provides finished silica catalysts and catalyst supports necessary to produce high strength and high stiffness plastics and, through the Zeolyst Joint Venture, supplies zeolites used for catalysts that help produce renewable fuels, remove nitrogen oxides from diesel engine emissions as well as sulfur from fuels during the refining process.
The Company’s regeneration services product group, which is a part of the Company’s Ecoservices segment, typically experiences seasonal fluctuations as a result of higher demand for gasoline products in the summer months and lower demand in the winter months. These demand fluctuations result in higher sales and working capital requirements in the second and third quarters.
Basis of Presentation
The condensed consolidated financial statements included herein are unaudited. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations for interim reporting. In the opinion of management, all adjustments of a normal and recurring nature necessary to state fairly the financial position and results of operations have been included. The results of operations are not necessarily indicative of the expected results for the full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
2. New Accounting Standards:
Recently Adopted Accounting Standards
In March 2020 and January 2021, the Financial Accounting Standards Board (“FASB”) issued guidance to address certain accounting consequences from the anticipated transition from the use of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The new guidance contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance is optional and may be elected over time as reference rate reform activities occur. The time period through which the practical expedients provided in the guidance is available was set to expire on December 31, 2022, but was extended through December 31, 2024 by the FASB in December 2022. During the year ended December 31, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index of the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. In February 2023, the Company amended the 2021 Term Loan Facility, the ABL Facility and all existing interest rate caps agreements to replace LIBOR with a secured overnight financing rate (“SOFR”) as the benchmark interest rate. See Notes 11 and 12 to these condensed consolidated financial statements for additional information. The Company utilized the practical expedients under the guidance with respect to the transition of its debt facilities and interest rate hedging arrangements to SOFR, with no impact to its condensed consolidated financial statements.
In October 2021, the FASB issued guidance that requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with revenue recognition guidance. Under current GAAP, contract assets and contract liabilities acquired in a business combination are recorded by the acquirer at fair value. The new guidance creates an exception to the general recognition and measurement principles related to business combinations, and is expected to result in the acquirer recognizing contract assets and liabilities at the same amounts recorded by the acquiree. The new guidance is effective for business combinations occurring during fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company adopted the new guidance effective January 1, 2023 as required, and will apply the guidance prospectively to business combinations that occur after the adoption date.
8


ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
3. Revenue from Contracts with Customers:
Disaggregated Revenue
The Company’s primary means of disaggregating revenues is by reportable segments, which can be found in Note 16 to these condensed consolidated financial statements.
The Company’s portfolio of products is integrated into a variety of end uses, which are described in the table below.
Key End UsesKey Products
Clean fuels, emission control & other• Refining hydrocracking catalysts
• Emission control catalysts
• Catalysts used in production of renewable fuels
• Catalyst activation
• Aluminum sulfate solution
• Ammonium bisulfite solution
Polymers & engineered plastics• Catalysts for high-density polyethylene and chemicals syntheses
• Antiblocks for film packaging
• Niche custom catalyst
Regeneration and treatment services• Sulfuric acid regeneration services
• Treatment services
Industrial, mining & automotive• Sulfur derivatives for industrial production
• Sulfuric acid for mining
• Sulfuric derivatives for nylon production
The following tables disaggregate the Company’s sales, by segment and end uses, for the three months ended March 31, 2023 and 2022, respectively:
Three months ended March 31, 2023
Ecoservices
Catalyst Technologies(2)
Total
Clean fuels, emission control & other$4,740 $— $4,740 
Polymers & engineered plastics— 23,134 23,134 
Regeneration and treatment services(1)
88,344 — 88,344 
Industrial, mining & automotive44,656 — 44,656 
Total segment sales$137,740 $23,134 $160,874 
Three months ended March 31, 2022
Ecoservices
Catalyst Technologies(2)
Total
Clean fuels, emission control & other$7,096 $— $7,096 
Polymers & engineered plastics— 25,654 25,654 
Regeneration and treatment services(1)
73,973 — 73,973 
Industrial, mining & automotive72,991 — 72,991 
Total segment sales$154,060 $25,654 $179,714 
(1)As described in Note 1 to these condensed consolidated financial statements, the Company experiences seasonal sales fluctuations to customers in the regeneration services product group.
(2)Excludes the Company’s proportionate share of sales from the Zeolyst International and Zeolyst C.V. joint ventures (collectively, the “Zeolyst Joint Venture”) accounted for using the equity method (see Note 9 to these condensed consolidated financial statements for further information).
9


ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
4. Fair Value Measurements:
Fair values are based on quoted market prices when available. When market prices are not available, fair values are generally estimated using discounted cash flow analyses, incorporating current market inputs for similar financial instruments with comparable terms and credit quality. In instances where there is little or no market activity for the same or similar instruments, the Company estimates fair values using methods, models and assumptions that management believes a hypothetical market participant would use to determine a current transaction price. These valuation techniques involve some level of management estimation and judgment that becomes significant with increasingly complex instruments or pricing models. Where appropriate, adjustments are included to reflect the risk inherent in a particular methodology, model or input used.
The Company’s financial assets and liabilities carried at fair value have been classified based upon a fair value hierarchy. The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). The classification of an asset or a liability is based on the lowest level input that is significant to its measurement. For example, a Level 3 fair value measurement may include inputs that are both observable (Levels 1 and 2) and unobservable (Level 3). The levels of the fair value hierarchy are as follows:
Level 1—Values are unadjusted quoted prices for identical assets and liabilities in active markets accessible at the measurement date. Active markets provide pricing data for trades occurring at least weekly and include exchanges and dealer markets.
Level 2—Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument. Such inputs include market interest rates and volatilities, spreads and yield curves.
Level 3—Certain inputs are unobservable (supported by little or no market activity) and significant to the fair value measurement. Unobservable inputs reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date.
The following tables present information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
March 31,
2023
Quoted Prices in
Active Markets
(Level 1) 
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Derivative assets:
Interest rate caps (Note 12)$26,512 $— $26,512 $— 
Derivative liabilities:
Interest rate caps (Note 12)$3,815 $— $3,815 $— 
December 31,
2022
Quoted Prices in
Active Markets
(Level 1) 
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Derivative assets:
Interest rate caps (Note 12)$34,374 $— $34,374 $— 
Derivative liabilities:
Interest rate caps (Note 12)$2,071 $— $2,071 $— 

10


ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
Derivative contracts
Derivative assets and liabilities can be exchange-traded or traded over-the-counter (“OTC”). The Company generally values exchange-traded derivatives using models that calibrate to market transactions and eliminate timing differences between the closing price of the exchange-traded derivatives and their underlying instruments. OTC derivatives are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, model calibration to market transactions, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. When models are used, the selection of a particular model to value an OTC derivative depends on the contractual terms of, and specific risks inherent in, the instrument as well as the availability of pricing information in the market. The Company generally uses similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices and rates, forward curves, measures of volatility, and correlations of such inputs. For OTC derivatives that trade in liquid markets, such as forward contracts, swaps and options, model inputs can generally be corroborated by observable market data by correlation or other means, and model selection does not involve significant management judgment.
As of March 31, 2023, the Company had interest rate caps that were fair valued using Level 2 inputs. In addition, the Company applies a credit valuation adjustment to reflect credit risk which is calculated based on credit default swaps. To the extent that the Company’s net exposure under a specific master agreement is an asset, the Company utilizes the counterparty’s default swap rate. If the net exposure under a specific master agreement is a liability, the Company utilizes a default swap rate comparable to Ecovyst. The credit valuation adjustment is added to the discounted fair value to reflect the exit price that a market participant would be willing to receive to assume the Company’s liabilities or that a market participant would be willing to pay for the Company’s assets.
5. Stockholders' Equity:
Accumulated Other Comprehensive Income (Loss)
The following table presents the tax effects of each component of other comprehensive (loss) income for the three months ended March 31, 2023 and 2022, respectively:
Three months ended March 31,
20232022
Pre-tax
amount
Tax benefit/
(expense)
After-tax amountPre-tax
amount
Tax benefit/
(expense)
After-tax amount
Defined benefit and other postretirement plans:
Amortization of net loss$(1)$— $(1)$$— $
Amortization of prior service credit(31)(23)(53)13 (40)
Benefit plans, net(32)(24)(52)13 (39)
Net (loss) gain from hedging activities(10,303)2,383 (7,920)18,296 (4,574)13,722 
Foreign currency translation2,185 — 2,185 (2,305)— (2,305)
Other comprehensive (loss) income$(8,150)$2,391 $(5,759)$15,939 $(4,561)$11,378 

11


ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
The following table presents the changes in accumulated other comprehensive income, net of tax, by component for the three months ended March 31, 2023 and 2022, respectively:
Defined benefit
and other
postretirement
plans 
Net gain (loss)
from hedging
activities
Foreign
currency
translation 
Total 
December 31, 2022$12,132 $26,636 $(32,776)$5,992 
Other comprehensive (loss) income before reclassifications(48)(7,394)2,185 (5,257)
Amounts reclassified from accumulated other comprehensive income(1)
24 (526)— (502)
Net current period other comprehensive (loss) income(24)(7,920)2,185 (5,759)
March 31, 2023$12,108 $18,716 $(30,591)$233 
December 31, 2021$11,072 $2,254 $(19,118)$(5,792)
Other comprehensive income (loss) before reclassifications(78)13,208 (2,305)10,825 
Amounts reclassified from accumulated other comprehensive income(1)
39 514 — 553 
Net current period other comprehensive (loss) income(39)13,722 (2,305)11,378 
March 31, 2022$11,033 $15,976 $(21,423)$5,586 
(1)See the following table for details about these reclassifications. Amounts in parentheses indicate debits.
The following table presents the reclassifications out of accumulated other comprehensive income for the three months ended March 31, 2023 and 2022, respectively:
Details about Accumulated Other Comprehensive
Income Components
Amounts Reclassified from Accumulated Other
Comprehensive Income(1)
Affected Line Item where
Income is Presented
Three months ended
March 31,
20232022
Amortization of defined benefit and other postretirement items:
Prior service credit$(31)$(53)
Other expense(2)
Actuarial gains(1)
Other (expense) income(2)
(32)(52)Total before tax
13 Tax benefit
$(24)$(39)Net of tax
Gains and losses on cash flow hedges:
Interest rate caps$698 $(683)Interest expense
(172)169 Tax (expense) benefit
$526 $(514)Net of tax
Total reclassifications for the period$502 $(553)Net of tax
(1)Amounts in parentheses indicate debits to profit/loss.
(2)These accumulated other comprehensive income (loss) components are components of net periodic pension and other postretirement cost (see Note 14 to these condensed consolidated financial statements for additional details).
12


ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
Treasury Stock Repurchases
2022 Stock Repurchase Program
On April 27, 2022, the Board approved a stock repurchase program that permits the Company to purchase up to $450,000 of the Company’s common stock over the four-year period from the date of approval. Under the plan, the Company can repurchase shares from time to time for cash in open market transactions or in privately negotiated transactions in accordance with applicable federal securities laws. The Company will determine the timing and the amount of any repurchases based on its evaluation of market conditions, share price and other factors.
During the three months ended March 31, 2023, 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 underwriter at a price of $9.95 per share concurrently with the closing of the offering, for a total of $29,850.
As of March 31, 2023, $283,448 was available for additional share repurchases under the program.
Tax Withholdings on Equity Award Vesting
In connection with the vesting of restricted stock awards, restricted stock units and performance stock units, shares of common stock may be delivered to the Company by employees to satisfy withholding tax obligations at the instruction of the employee award holders. These transactions, when they occur, are accounted for as stock repurchases by the Company, with the shares returned to treasury stock at a cost representing the payment by the Company of the tax obligations on behalf of the employees in lieu of shares for the vesting unit. There were 95,269 and 32,058 shares delivered to the Company to cover tax payments for the three months ended March 31, 2023 and 2022, respectively and the fair value of those shares withheld were $866 and $332 for the three months ended March 31, 2023 and 2022, respectively.
6. Goodwill:
The change in the carrying amount of goodwill for the three months ended March 31, 2023 is summarized as follows:
 EcoservicesCatalyst TechnologiesTotal
Balance as of December 31, 2022$326,589 $76,574 $403,163 
Foreign exchange impact— 599 599 
Balance as of March 31, 2023$326,589 $77,173 $403,762 
  
7. Other Operating Expense, Net:
A summary of other operating expense, net is as follows:
Three months ended
March 31,
20232022
Amortization expense$2,637 $2,656 
Transaction and other related costs1,434 4,281 
Restructuring, integration and business optimization costs1,023 382 
Net loss on asset disposals1,178 133 
Other, net444 311 
$6,716 $7,763 

13


ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
8. Inventories, Net:
Inventories, net are classified and valued as follows:
March 31,
2023
December 31,
2022
Finished products and work in process$41,803 $39,909 
Raw materials4,025 4,453 
$45,828 $44,362 
Valued at lower of cost or market:
LIFO basis$25,647 $25,258 
Valued at lower of cost and net realizable value:
FIFO or average cost basis20,181 19,104 
$45,828 $44,362 
9. Investments in Affiliated Companies:
The Company accounts for investments in affiliated companies under the equity method. Affiliated companies accounted for on the equity basis as of March 31, 2023 are as follows:
CompanyCountryPercent
Ownership
Zeolyst InternationalUSA50%
Zeolyst C.V.Netherlands50%
Following is summarized information of the combined investments(1):
Three months ended
March 31,
20232022
Sales$55,897 $66,683 
Gross profit10,110 23,584 
Operating income2,399 14,636 
Net income3,647 14,698 
(1)Summarized information of the combined investments is presented at 100%; the Company’s share of the net assets and net income of affiliates is calculated based on the percent ownership specified in the table above.
The Company’s investments in affiliated companies balance as of March 31, 2023 and December 31, 2022 includes net purchase accounting fair value adjustments of $229,416 and $231,017, respectively, related to a prior business combination, consisting primarily of goodwill and intangible assets such as customer relationships, technical know-how and trade names. Consolidated equity in net income from affiliates is net of $1,601 and $1,601 of amortization expense related to purchase accounting fair value adjustments for the three months ended March 31, 2023 and 2022, respectively.
14


ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
10. Property, Plant and Equipment:
A summary of property, plant and equipment, at cost, and related accumulated depreciation is as follows:
March 31,
2023
December 31,
2022
Land $96,739 $96,659 
Buildings and improvements81,473 82,061 
Machinery and equipment 754,529 751,145 
Construction in progress 69,134 56,448 
1,001,875 986,313 
Less: accumulated depreciation (418,172)(401,424)
$583,703 $584,889 
Depreciation expense was $16,692 and $16,011 for the three months ended March 31, 2023 and 2022, respectively.
11. Long-term Debt:
The summary of long-term debt is as follows:
March 31,
2023
December 31,
2022
Senior Secured Term Loan Facility due June 2028 (the "2021 Term Loan Facility")$884,250 $886,500 
ABL Facility— — 
Total debt884,250 886,500 
Original issue discount(7,152)(7,472)
Deferred financing costs(3,970)(4,158)
Total debt, net of original issue discount and deferred financing costs873,128 874,870 
Less: current portion(9,000)(9,000)
Total long-term debt, excluding current portion$864,128 $865,870 
In February 2023, the Company amended the 2021 Term Loan Facility to replace LIBOR with SOFR as the benchmark interest rate. Following this amendment, the 2021 Term Loan Facility bears interest at an adjusted term SOFR, which includes a credit spread adjustment of 10 basis points (with a 0.50% minimum floor) plus 2.75% per annum (or, depending on the Company’s first lien net leverage ratio, 2.50%). The interest rate on the 2021 Term Loan Facility was 7.325% as of March 31, 2023.
Also in February 2023, the Company amended its senior secured asset-based revolving credit facility (the “ABL Facility”) to replace LIBOR with SOFR as the benchmark interest rate. Following this amendment, the borrowings under the ABL Facility bear interest at a rate equal to an adjusted term SOFR rate or the base rate, which includes a credit spread adjustment of 10 basis points, plus a margin of between 1.25% to 1.75% or 0.25% to 0.75%, respectively. The interest rate on the ABL Facility was 8.50% as of March 31, 2023.
Fair Value of Debt
The fair value of a financial instrument is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. As of March 31, 2023 and December 31, 2022, the fair value of the senior secured term loan facility was $876,513 and $870,986, respectively. The fair value is classified as Level 2 based upon the fair value hierarchy (see Note 4 to these condensed consolidated financial statements for further information on fair value measurements).
15


ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
12. Financial Instruments:
The Company uses interest rate related derivative instruments to manage its exposure to changes in interest rates on its variable-rate debt instruments. The Company does not speculate using derivative instruments.
By using derivative financial instruments to hedge exposures to changes in interest rates, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is an asset, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is a liability, the Company owes the counterparty and therefore, the Company is not exposed to the counterparty’s credit risk in those circumstances. The Company minimizes counterparty credit risk in derivative instruments by entering into transactions with high quality counterparties. The derivative instruments entered into by the Company do not contain credit-risk-related contingent features.
Market risk is the adverse effect on the value of a derivative instrument that results from a change in interest rates. The market risk associated with the Company’s derivative instruments is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.
Use of Derivative Financial Instruments to Manage Interest Rate Risk. The Company is exposed to fluctuations in interest rates on its senior secured credit facilities. Changes in interest rates will not affect the market value of such debt but will affect the Company’s interest payments over the term of the loans. Likewise, an increase in interest rates could have a material impact on the Company’s condensed consolidated statements of cash flows. The Company hedges the interest rate fluctuations on debt obligations through interest rate cap agreements. The Company records these agreements at fair value as assets or liabilities in its condensed consolidated balance sheets. As the derivatives are designated and qualify as cash flow hedges, the gains or losses on the interest rate cap agreements are recorded in stockholders’ equity as a component of other comprehensive income, net of tax. Reclassifications of the gains and losses on the interest rate cap agreements into earnings are recorded as part of interest expense in the condensed consolidated statements of income as the Company makes its interest payments on the hedged portion of its senior secured credit facilities. Fair value is determined based on estimated amounts that would be received or paid to terminate the contracts at the reporting date based on quoted market prices.
In November 2018, the Company entered into an interest rate cap agreement to mitigate interest volatility from July 2020 through July 2022, with a cap rate of 3.50% on $500,000 of notional variable-rate debt and a $3,380 premium annuitized during the effective period. In February 2020, the Company restructured this agreement to lower the interest cap rate to 2.50% with an incremental $130 premium annuitized during the effective period. In March 2020, the Company again amended such interest rate cap agreement to lower the cap rate to 0.84% for an additional $900 premium annuitized during the effective period. The term and notional amount remained unchanged, with a total cumulative annuitized premium on the $500,000 of notional variable-rate debt of $4,410.
In July 2020, the Company entered into an additional interest rate cap agreement to mitigate interest rate volatility from September 2020 to August 2023, with a cap rate of 1.00% on $400,000 of notional variable-rate debt and a $416 premium annuitized during the effective period. The cap rate in effect at March 31, 2023 was 1.00%.
In January 2022, the Company entered into two new forward starting interest rate cap agreements, with a cap rate of 1.00% on $250,000 of notional variable-rate debt each and a $9,953 of total premium annuitized during the effective period. The term for one interest rate cap is August 2022 through October 2024 and the term for the other interest rate cap is September 2023 through October 2025. The cap rate for the interest rate cap in effect at March 31, 2023 was 1.00%.
In November 2022, the Company entered into a new forward starting interest rate cap agreement to mitigate interest rate volatility from August 2023 through July 2024, with a cap rate of 1.00% on $150,000 of notional variable-rate debt and mitigate interest rate volatility from August 2024 through July 2026, with a cap rate of 1.00% on $175,000 of notional variable-rate debt. The $150,000 of notional variable-debt has $5,372 premium annuitized during the effective period and the $175,000 of notional variable-rate debt has $12,445 premium annuitized during the effective period.
In February 2023, the Company amended all interest rate cap agreements to replace LIBOR with SOFR as the benchmark interest rate, with all other terms of the agreements remaining the same. This amendment changed the previously annuitized premiums on the existing interest rate cap agreements. This resulted in a reduction in the premium annuitized on the $400,000 of notional variable-debt of $172, a reduction in the premium annuitized on the $250,000 of notional variable-debt of $2,022, a reduction in the premium annuitized on the $150,000 of notional variable-debt of $281 and a reduction in the premium annuitized on the $175,000 of notional variable-debt of $651.
16


ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
In May 2023, the Company entered into two new forward starting interest rate cap agreements to mitigate interest rate volatility from November 2024 through October 2025, with a cap rate of 1.00% on $200,000 of notional variable-rate debt and mitigate interest rate volatility from November 2025 through October 2026, with a cap rate of 1.00% on $450,000 of notional variable-rate debt. The $200,000 of notional variable-debt has $4,258 premium annuitized during the effective period and the $450,000 of notional variable-rate debt has $9,555 premium annuitized during the effective period.
The fair values of derivative instruments held as of March 31, 2023 and December 31, 2022, respectively are shown below:

Balance sheet locationMarch 31,
2023
December 31,
2022
Derivative assets
Derivatives designated as cash flow hedges:
Interest rate capsPrepaid and other current assets$15,996 $18,510 
Interest rate capsOther long-term assets10,516 15,864 
Total derivative assets$26,512 $34,374 
Derivative liabilities
Derivatives designated as cash flow hedges:
Interest rate capsOther long-term liabilities3,815 2,071 
Total derivative liabilities$3,815 $2,071 

The following table shows the effect of the Company’s derivative instruments designated as cash flow hedges on AOCI for the three months ended March 31, 2023 and 2022, respectively:
Three months ended March 31,
20232022
Location of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) recognized in OCI on derivativesAmount of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) recognized in OCI on derivativesAmount of gain (loss) reclassified from AOCI into income
Interest rate capsInterest (expense) income$(9,605)$698 $17,612 $(683)

The following table shows the effect of the Company’s cash flow hedge accounting on the condensed consolidated statements of income for the three months ended March 31, 2023 and 2022, respectively:
Three months ended March 31,
20232022
Total amounts of income and expense line items presented in the statement of income in which the effects of cash flow hedges are recorded in interest (expense) income$(9,832)$(8,450)
The effects of cash flow hedging:
Gain (loss) on cash flow hedging relationships:
Interest contracts:
Amount of gain (loss) reclassified from AOCI into income698 (683)

The amount of unrealized losses in AOCI related to the Company’s cash flow hedges that is expected to be reclassified to the condensed consolidated statement of income over the next twelve months is $7,652 as of March 31, 2023.
17


ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
13. Income Taxes:
The effective income tax rate for the three months ended March 31, 2023 was (180.7)% compared to 42.1% for the three months ended March 31, 2022. The Company’s effective income tax rate has fluctuated primarily due to the discrete impact related to a shortfall of stock compensation tax deduction which outweighed the tax benefit from the pre-tax loss during the quarter.
The difference between the U.S. federal statutory income tax rate and the Company’s effective income tax rate for the three months ended March 31, 2023 was mainly due to state and local taxes, a discrete shortfall tax expense related to stock compensation and a discrete tax expense associated with the recording of accrued penalties and interest associated with historical uncertain tax positions.
The difference between the U.S. federal statutory income tax rate and the Company’s effective income tax rate for the three months ended March 31, 2022 was mainly due to state and local taxes, a discrete shortfall tax expense related to stock compensation and a discrete tax expense associated with the Employee Retention Credit.
14. Benefit Plans:
The following tables present the components of net periodic expense (benefit) for the Company-sponsored defined benefit pension and postretirement plans, which cover certain employees and retirees located in the U.S.
Defined Benefit Pension Plans
Three months ended
March 31,
20232022
Interest cost$871 $604 
Expected return on plan assets(837)(1,110)
Net periodic expense (benefit)$34 $(506)
Other Postretirement Benefit Plan
Three months ended
March 31,
20232022
Interest cost$$
Amortization of prior service credit(31)(53)
Amortization of net loss(1)
Net periodic benefit$(26)$(48)
15. Commitments and Contingent Liabilities:
There is a risk of environmental impact in the Company’s manufacturing operations. The Company’s environmental policies and practices are designed to comply with existing laws and regulations and to minimize the possibility of significant environmental impact. The Company is also subject to various other lawsuits and claims with respect to matters such as governmental regulations, labor and other actions arising out of the normal course of business. All claims that are probable and reasonably estimable have been accrued for in the Company’s condensed consolidated financial statements. When these matters are ultimately concluded and determined, the Company believes that there will be no material adverse effect on its consolidated financial position, results of operations or liquidity.
18


ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
16. Reportable Segments:
Summarized financial information for the Company’s reportable segments is shown in the following table:
Three months ended
March 31,
20232022
Sales:
Ecoservices$137,740 $154,060 
Catalyst Technologies(1)
23,134 25,654 
Total$160,874 $179,714 
Adjusted EBITDA:(2)
Ecoservices$36,787 $49,341 
Catalyst Technologies(3)
12,989 16,975 
Adjusted EBITDA from reportable segments$49,776 $66,316 
(1)Excludes the Company’s proportionate share of sales from the Zeolyst International and Zeolyst C.V. joint ventures (collectively, the “Zeolyst Joint Venture”) accounted for using the equity method (see Note 9 to these condensed consolidated financial statements for further information). The proportionate share of sales excluded is $22,074 and $28,977 for the three months ended March 31, 2023 and 2022, respectively.
(2)The Company defines Adjusted EBITDA as EBITDA adjusted for certain items as noted in the reconciliation below. Management evaluates the performance of its segments and allocates resources based on several factors, of which the primary measure is Adjusted EBITDA. Adjusted EBITDA should not be considered as an alternative to net income as an indicator of the Company’s operating performance. Adjusted EBITDA as defined by the Company may not be comparable with EBITDA or Adjusted EBITDA as defined by other companies.
(3)The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $5,436 for the three months ended March 31, 2023, which includes $226 of equity in net income plus $1,601 of amortization of investment in affiliate step-up and $3,609 of joint venture depreciation, amortization and interest.
The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $11,474 for the three months ended March 31, 2022, which includes $5,787 of equity in net income plus $1,601 of amortization of investment in affiliate step-up and $4,087 of joint venture depreciation, amortization and interest.
19


ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
A reconciliation of (loss) income before income taxes to Adjusted EBITDA is as follows:
Three months ended
March 31,
20232022
Reconciliation of (loss) income before income taxes to Adjusted EBITDA
(Loss) income before income taxes$(524)$13,595 
Interest expense, net9,832 8,450 
Depreciation and amortization20,197 19,546 
Unallocated corporate expenses6,926 7,076 
Joint venture depreciation, amortization and interest3,609 4,087 
Amortization of investment in affiliate step-up1,601 1,601 
Net loss on asset disposals1,178 133 
Foreign exchange (gain) loss(738)647 
LIFO expense1,399 245 
Transaction and other related costs1,434 4,281 
Equity-based compensation4,068 7,294 
Restructuring, integration and business optimization expenses1,023 382 
Other(229)(1,021)
Adjusted EBITDA from reportable segments$49,776 $66,316 
17. Stock-Based Compensation:
The Company has an equity incentive plan under which it grants common stock awards to employees, directors and affiliates of the Company. At March 31, 2023, 9,158,811 shares of common stock were available for issuance under the plan. The Company settles these awards through the issuance of new shares.
Restricted Stock Units and Performance Stock Units
Restricted Stock Units
During the three months ended March 31, 2023, the Company granted 1,104,690 restricted stock units under its equity incentive plan. Each restricted stock unit provides the recipient with the right to receive a share of common stock subject to graded vesting terms based on service, which for the awards granted during the three months ended March 31, 2023, generally requires approximately one year of service for members of the Company’s board of directors and approximately three years of service for employees. The value of the restricted stock units granted during the three months ended March 31, 2023 was based on the average of the high and low trading prices of the Company’s common stock on the NYSE on the preceding trading day, in accordance with the Company’s policy for valuing such awards. Compensation expense related to the restricted stock units is recognized on a straight-line basis over the respective vesting period.
Performance Stock Units
2023 Grants
During the three months ended March 31, 2023, the Company granted 703,440 performance stock units (at target) under its equity incentive plan. The performance stock units granted during the three months ended March 31, 2023 provide the recipients with the right to receive shares of common stock dependent on the achievement of a total shareholder return (“TSR”) goal, and are generally subject to the provision of service through the vesting date of the award. The performance period for the TSR goal is measured based on a three-year performance period from January 1, 2023 through December 31, 2025. The TSR goal is based on the Company’s actual TSR percentage increase over the performance period. Depending on the Company’s performance relative to the TSR goal, each performance stock unit award recipient is eligible to receive a percentage of the target number of shares granted to the recipient, ranging from zero to 200%. The performance stock units, to the extent earned, will vest on the date the Compensation Committee of the Company’s Board of Directors (“Compensation Committee”) certifies the achievement of the performance metric for the three-year period ending December 31, 2025, which will occur subsequent to the end of the performance period and after the Company files its annual consolidated financial statements for the year ending December 31, 2025.
20


ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
The TSR goal is considered a market condition as opposed to a vesting condition. Because a market condition is not considered a vesting condition, it is reflected in the grant date fair value of the award and the associated compensation cost based on the fair value of the award is recognized over the performance period, regardless of whether the Company actually achieves the market condition or the level of achievement, as long as service is provided by the recipient. The Company used a Monte Carlo simulation to estimate the $12.28 weighted average fair value of the awards granted during the three months ended March 31, 2023, with the following weighted average assumptions:
Expected dividend yield— %
Risk-free interest rate3.80 %
Expected volatility48.82 %
Expected term (in years)2.96
2020 Grants
During the three months ended March 31, 2023, the Compensation Committee certified the achievement of the performance metrics for the three-year period ended December 31, 2022, related to the performance stock units (“PSUs”) granted during the year ended December 31, 2020. Fifty percent of the target number of such PSUs could be earned depending on performance against a Company-specific financial performance target, and 50% of the target number of such PSUs could be earned depending on performance against a TSR goal, subject to the provision of service through the vesting date of the awards. The Company-specific financial performance target and the TSR goal were measured independently of each other, and each PSU award recipient was eligible to earn a percentage of the target number of shares granted to the recipient, ranging from zero to 200%. The awards vested during the three months ended March 31, 2023 as follows: 53.3% of target with respect to the portion of the PSU award subject to the Company-specific financial measure, and 56.0% of target with respect to the portion of the PSU award subject to the TSR goal.
Award Activity
The following table summarizes the activity for the Company’s restricted stock units and performance stock units for the three months ended March 31, 2023:
Restricted Stock UnitsPerformance Stock Units
Number of
Units
Weighted Average Grant Date Fair Value (per share)Number of
Units
Weighted Average Grant Date Fair Value (per share)
Nonvested as of December 31, 20222,464,718 $11.73 639,532 (1)$16.32 
Granted1,104,690 $9.85 703,440 $12.28 
Vested(821,901)$13.04 (200,204)$20.48 
Forfeited(160,316)$10.96 (183,864)$19.50 
Nonvested as of March 31, 20232,587,191 $10.55 958,904 (1)$11.87 
(1)    Based on target.
During the three months ended March 31, 2023, the Company also granted 5,081 restricted stock awards with a weighted average grant date fair value of $9.84 per share that immediately vested.
21


ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
Stock-Based Compensation Expense
For the three months ended March 31, 2023 and 2022, stock-based compensation expense for the Company was $4,068 and $7,294, respectively. The associated income tax benefit based on the applicable statutory rate recognized in the condensed consolidated statements of income for the three months ended March 31, 2023 and 2022 was $973 and $1,788, respectively.
Performance-based restricted stock awards and performance-based stock options would vest only on the achievement with respect to shares of our common stock of an average closing trading price equal or exceeding, in any ten trading-day period, the lowest amount which, when multiplied by the number of shares of our common stock then held by investment funds affiliated with CCMP Capital Advisors, LP (“CCMP”) and added to the aggregate net proceeds received by investment funds affiliated with CCMP with respect to their shares of capital stock of the Company, would yield a quotient of equal or greater than two when divided by the equity investment in the Company by investment funds affiliated with CCMP (such quotient, the “MOI Target”). On March 7, 2023, all of the outstanding performance-based stock options (284,956 options) and performance-based restricted shares (277,056 shares) that would vest upon the achievement of the MOI Target were canceled due to the failure of the MOI Target to be achieved upon the sale by investment funds affiliated with CCMP of all of their remaining shares of our common stock. No expense had previously been recognized for either the restricted stock awards or the stock options subject to this performance condition, as the condition was not achieved nor was previously considered probable of achievement.
As of March 31, 2023, unrecognized compensation cost was $19,668 for restricted stock units and $8,827 for performance stock units considered probable of vesting. The weighted-average period over which these costs are expected to be recognized at March 31, 2023 was 1.62 years for the restricted stock units and 2.62 years for the performance stock units.
18. Earnings per Share:
Basic earnings per share is calculated as income (loss) available to common stockholders, divided by the weighted average number of common shares outstanding during the period. The weighted average number of common shares outstanding during the period for the computation of basic earnings per share excludes restricted stock awards that have legally been issued but are nonvested during the period, as the sale of these shares is prohibited pending satisfaction of certain vesting conditions by the award recipients in order to earn the rights to the shares.
Diluted earnings per share is calculated as income (loss) available to common stockholders, divided by the weighted average number of common and potential common shares outstanding during the period, if dilutive. Potential common shares reflect (1) unvested restricted stock awards and restricted stock units with service vesting conditions, (2) performance stock units with vesting conditions considered probable of achievement and (3) options to purchase common stock, all of which have been included in the diluted earnings per share calculation using the treasury stock method.
The reconciliation from basic to diluted weighted average shares outstanding is as follows:
Three months ended
March 31,
20232022
Weighted average shares outstanding – Basic122,178,867 137,684,773 
Dilutive effect of unvested common shares and restricted stock units with service conditions, performance stock units considered probable of vesting and assumed stock option exercises and conversions— 1,064,292 
Weighted average shares outstanding – Diluted122,178,867 138,749,065 
22


ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
Basic and diluted (loss) income per share are calculated as follows:
Three months ended
March 31,
20232022
Numerator:
Net (loss) income attributable to Ecovyst Inc.$(1,471)$7,875 
Denominator:
Weighted average shares outstanding – Basic122,178,867 137,684,773 
Weighted average shares outstanding – Diluted122,178,867 138,749,065 
Net (loss) income per share:
Basic (loss) income per share$(0.01)$0.06 
Diluted (loss) income per share$(0.01)$0.06 
The table below presents the details of the Company’s weighted average equity-based awards outstanding during each respective period that were excluded from the calculation of diluted earnings per share:
Three months ended
March 31,
20232022
Restricted stock awards with performance only targets not achieved200,096 613,903 
Stock options with performance only targets not achieved208,968 326,689 
Anti-dilutive restricted stock units and performance stock units(1)
432,308 — 
Anti-dilutive stock options(1)
695,777 807,301 
(1)Does not include 1,044,098 of restricted stock units and performance stock units, and 352,771 of stock options, for the three months ended March 31, 2023 due to the net loss attributable to Ecovyst Inc. for the period.
Restricted stock awards and stock options with performance only vesting conditions were not included in the dilution calculation, as the performance targets have not been achieved nor were probable of achievement as of the end of the respective periods. These awards and stock options were canceled on March 7, 2023 (see Note 17 to these condensed consolidated financial statements for additional information). Certain stock options to purchase shares of common stock were excluded from the computation of diluted earnings per share for the respective periods because the options’ exercise price was greater than the average market price of the common shares. These stock options and anti-dilutive awards are not included in the dilution calculation, as their inclusion would have the effect of increasing diluted income per share or reducing diluted loss per share.
23


ECOVYST INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(unaudited)
19. Supplemental Cash Flow Information:
The following table presents supplemental cash flow information for the Company:
Three months ended
March 31,
20232022
Cash paid during the period for:
Income taxes, net of refunds$136 $10,662 
Interest15,185 8,363 
Non-cash investing activity:
Capital expenditures acquired on account but unpaid as of the period end650 4,674 
Right-of-use assets obtained in exchange for new lease liabilities (non-cash):
Operating leases1,621 2,955 
20. Subsequent Events:
In May 2023, the Company entered into two new forward starting interest rate cap agreements for $200,000 of notional variable-debt and $450,000 of notional variable-debt. See Note 12 to these condensed consolidated financial statements for additional details.
Other than this item, the Company has evaluated subsequent events since the balance sheet date and determined that there are no additional items to disclose.
24

ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Unless the context requires otherwise, references in this report to “Ecovyst,” “the company,” “we,” “us” or “our” refer to Ecovyst Inc. and its consolidated subsidiaries.
Forward-looking Statements
This periodic report on Form 10-Q (“Form 10-Q”) includes “forward-looking statements” that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should” and similar expressions are intended to identify these forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short- and long-term business operations and objectives, and financial needs. Examples of forward-looking statements include, but are not limited to, statements we make regarding demand trends, and/or Russia’s invasion of Ukraine and related economic effects on our operations and financial results and our liquidity, and our belief that our current level of operations, cash and cash equivalents, cash flow from operations and borrowings under our credit facilities and other lines of credit will provide us adequate cash to fund the working capital, capital expenditure, debt service and other requirements for our business for at least the next twelve months.
These forward-looking statements are subject to a number of risks, uncertainties and assumptions. Moreover, we operate in a very competitive and rapidly changing environment and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed herein may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
Some of the key factors that could cause actual results to differ from our expectations include the following risks related to our business:
as a global business, we are exposed to local business risks in different countries;
we are affected by general economic conditions and economic downturns;
exchange rate fluctuations could adversely affect our financial condition, results of operations and cash flows;
our international operations require us to comply with anti-corruption laws, trade and export controls and regulations of the U.S. government and various international jurisdictions in which we do business;
alternative technology or other changes in our customers’ products may reduce or eliminate the need for certain of our products;
our new product development and research and development efforts may not succeed and our competitors may develop more effective or successful products;
our substantial level of indebtedness could adversely affect our financial condition;
if we are unable to manage the current and future inflationary environment and to pass on increases in raw material prices, including natural gas, or labor costs to our customers or to retain or replace our key suppliers, our results of operations and cash flows may be negatively affected;
we face substantial competition in the industries in which we operate;
we are subject to the risk of loss resulting from non-payment or non-performance by our customers;
we rely on a limited number of customers for a meaningful portion of our business;
multi-year customer contracts in our Ecoservices segment are subject to potential early termination and such contracts may not be renewed at the end of their respective terms;
our quarterly results of operations are subject to fluctuations because demand for some of our products is seasonal;
our growth projects may result in significant expenditures before generating revenues, if any, which may materially and adversely affect our ability to implement our business strategy;
we may be liable to damages based on product liability claims brought against us or our customers for costs associated with recalls of our or our customers’ products;
25

we are subject to extensive environmental, health and safety regulations and face various risks associated with potential non-compliance or releases of hazardous materials;
existing and proposed regulations to address climate change by limiting greenhouse gas emissions may cause us to incur significant additional operating and capital expenses and may impact our business and results of operations;
production and distribution of our products could be disrupted for a variety of reasons, including as a result of supply chain constraints, and such disruptions could expose us to significant losses or liabilities;
the insurance that we maintain may not fully cover all potential exposures;
we could be subject to damages based on claims brought against us by our customers or lose customers as a result of the failure of our products to meet certain quality specifications;
our failure to protect our intellectual property and infringement on the intellectual property rights of third parties;
disruption, failure or cyber security breaches affecting or targeting computers and infrastructure used by us or our business partners may adversely impact our business and operations
the impact of the COVID-19 pandemic on the global economy and financial markets, as well as on our business and our suppliers, and the response of governments and of our company to the outbreak, including variants of the virus and associated containment, remediation and vaccination efforts; and
other factors set forth in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, as supplemented in “Item 1A, Risk Factors” in our quarterly report on Form 10-Q for the quarter ended March 31, 2023.
The forward-looking statements included herein are made only as of the date hereof. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Form 10-Q to conform these statements to actual results or to changes in our expectations.
Overview
We are a leading, integrated and innovative global provider of specialty catalysts and services. We believe that our products, which are predominantly inorganic, and services contribute to improving the sustainability of the environment.
We conduct operations through two reporting segments: (1) Ecoservices and (2) Catalyst Technologies (including our 50% interest in the Zeolyst Joint Venture).
Ecoservices: We are a leading provider of sulfuric acid recycling services to North American refineries for the production of alkylate, an essential gasoline component for lowering vapor pressure and increasing octane to meet stringent gasoline specifications and fuel efficiency standards. We are also a leading North American producer of on-purpose virgin sulfuric acid for water treatment, mining and industrial applications.
Catalyst Technologies: We are a global supplier of finished silica catalysts and catalyst supports necessary to produce high strength and high stiffness plastics used in packaging films, bottles, containers, and other molded applications. This segment includes our 50% interest in the Zeolyst Joint Venture, where we are a leading global supplier of zeolites used for catalysts that help produce renewable fuels, remove nitrogen oxides from diesel engine emissions as well as sulfur from fuels during the refining process.
Impact of Russia’s invasion of Ukraine on our Business and Results
We are continuing to monitor the developments in Russia and Ukraine, as well as the related economic sanctions and export controls imposed on certain industry sectors. Although the current conflict has created global economic and political uncertainties and affected certain supply chain disruptions, we do not believe we have significant exposure in those countries. We have no operations in Russia or Ukraine. We had no sales to customers in Ukraine or in Russia for the three months ended March 31, 2023. Sales to a customer in Russia were immaterial for the three months ended March 31, 2022. We also did not make any purchases from suppliers in Russia or Ukraine. As Russia’s invasion of Ukraine continues to unfold, we will continue to monitor compliance with sanctions imposed by the U.S. government and other countries.

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Impact of Winter Storm Elliott
Late in the fourth quarter of 2022, our Ecoservices business was adversely impacted by Winter Storm Elliott. The storm disrupted operations at a number of our facilities, impacting production and resulting in unplanned repair and maintenance costs and lower virgin sulfuric acid sales volume. While the storm had a modest impact on fourth quarter 2022 financial results, the production outages arising from Winter Storm Elliott limited our ability to produce inventory in advance of significant planned turnaround activity and to meet customer demand, resulting in constrained availability and lower sales of virgin sulfuric acid in the first quarter of 2023.
Stock Repurchase Program
On April 27, 2022, the Board approved a stock repurchase program that permits the Company to purchase up to $450,000 of the Company’s common stock over the four-year period from the date of approval. For the three months ended March 31, 2023, 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 underwriter at an average price of $9.95 per share concurrently with the closing of the offering, for a total of $29.9 million.
As of March 31, 2023, $283.4 million was available for additional share repurchases under the program.
Key Performance Indicators
Adjusted EBITDA and Adjusted Net Income
Adjusted EBITDA and adjusted net income are financial measures that are not prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and that we use to evaluate our operating performance, for business planning purposes and to measure our performance relative to that of our competitors. Adjusted EBITDA and adjusted net income are presented as key performance indicators as we believe these financial measures will enhance a prospective investor’s understanding of our results of operations and financial condition. EBITDA consists of net income (loss) attributable to continuing operations before interest, taxes, depreciation and amortization. Adjusted EBITDA consists of EBITDA adjusted for (i) non-operating income or expense, (ii) the impact of certain non-cash, nonrecurring or other items included in net income (loss) and EBITDA that we do not consider indicative of our ongoing operating performance, and (iii) depreciation, amortization and interest of our 50% share of the Zeolyst Joint Venture. Adjusted net income consists of net income (loss) attributable to Ecovyst Inc. adjusted for (i) non-operating income or expense and (ii) the impact of certain non-cash, nonrecurring or other items included in net income (loss) that we do not consider indicative of our ongoing operating performance. We believe that these non-GAAP financial measures provide investors with useful financial metrics to assess our operating performance from period-to-period by excluding certain items that we believe are not representative of our core business.
You should not consider adjusted EBITDA or adjusted net income in isolation or as alternatives to the presentation of our financial results in accordance with GAAP. The presentation of adjusted EBITDA and adjusted net income financial measures may differ from similar measures reported by other companies and may not be comparable to other similarly titled measures. In evaluating adjusted EBITDA and adjusted net income, you should be aware that we are likely to incur expenses similar to those eliminated in this presentation in the future and that certain of these items could be considered recurring in nature. Our presentation of adjusted EBITDA and adjusted net income should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items. Reconciliations of adjusted EBITDA and adjusted net income to GAAP net income (loss) are included in the results of operations discussion that follows for each of the respective periods.

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Key Factors and Trends Affecting Operating Results and Financial Condition
Sales
Overall, our Ecoservices and Catalyst Technologies segments continued to benefit from positive demand trends for our products and services in the industries we serve. Strong domestic and export demand for refined products continued to support high refinery utilization rates, while more stringent gasoline standards and growing demand for premium gasoline to power higher-compression and turbocharged engines continued to drive demand for alkylate and for our regeneration services. Global polyethylene demand remained positive, driven by the long-term growth in consumer demand for films and packaging, supporting sales of our silica-based catalysts, while increasing demand for renewable fuels and more stringent regulation is renewable fuels and polyethylene, and in emission control applications.
Sales in our Ecoservices and Catalyst Technologies segments are made on both a purchase order basis and pursuant to long-term contracts.
Our Catalyst Technologies segment may experience demand fluctuations based upon the timing of some of our customer’s fixed bed catalyst replacements.
Cost of Goods Sold
Cost of goods sold consists of variable product costs, fixed manufacturing expenses, depreciation expense and freight expenses. Variable product costs include all raw materials, energy and packaging costs that are directly related to the manufacturing process. Fixed manufacturing expenses include all plant employment costs, manufacturing overhead and periodic maintenance costs.
The primary raw materials for our Ecoservices segment include spent sulfuric acid, sulfur, acids, bases (including sodium hydroxide, or “caustic soda”), and certain metals. Spent sulfuric acid for our Ecoservices segment is supplied by customers. The primary raw materials used in the manufacture of products in our Catalyst Technologies segments include sodium silicate and cesium hydroxide.
Most of our Ecoservices contracts feature take-or-pay volume protection and/or quarterly price adjustments for commodity inputs, labor, the Chemical Engineering Index (U.S. chemical plant construction cost index) and natural gas. Over 80% of our Ecoservices segment sales for the year ended December 31, 2022 were under contracts featuring quarterly price adjustments. The price adjustments generally reflect actual costs for producing acid and tend to protect us from volatility in labor, fixed costs and raw material pricing. The take-or-pay volume protection allows us to cover fixed costs through intermittent, temporary production issues at customer refineries.
While natural gas is not a direct feedstock for any product, natural gas powered machinery and equipment are used to heat raw materials and create the chemical reactions necessary to produce end-products. We maintain multiple suppliers wherever possible and structure our customer contracts when possible to allow for the pass-through of raw material, labor and natural gas costs.
Joint Venture
We account for our investments in our equity joint ventures under the equity method. Our joint venture, the Zeolyst Joint Venture, manufactures high performance, specialty, zeolite-based catalysts, emission control, refining and petrochemical industries and other areas of the broader chemicals industry. Demand for the Zeolyst Joint Venture products fluctuates based upon the timing of our customer’s fixed bed catalyst replacements. We share proportionally in the management of our joint venture with the other parties to such joint venture.
Seasonality
Our regeneration services product group, which is a part of our Ecoservices segment, typically experiences seasonal fluctuations as a result of higher demand for gasoline products in the summer months and lower demand in the winter months. These demand fluctuations result in higher sales and working capital requirements in the second and third quarter.
Foreign Currency
As a global business, we are subject to the impact of gains and losses on currency translations, which occur when the financial statements of foreign operations are translated into U.S. dollars. We operate in various geographies with approximately 6% of our sales for the three months ended March 31, 2023 and for the year ended December 31, 2022 in currencies other than the U.S. dollar. Because our consolidated financial results are reported in U.S. dollars, sales or earnings generated in currencies other than the U.S. dollar can result in a significant increase or decrease in the amount of those sales and earnings when translated to U.S. dollars. The foreign currency to which we have the most significant exchange rate exposure is the British pound.
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Results of Operations
Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022
Highlights
The following is a summary of our financial performance for the three months ended March 31, 2023 compared with the three months ended March 31, 2022.
Sales
Sales decreased $18.8 million to $160.9 million. The decrease in sales was primarily due to lower sales volume, partially offset by favorable average selling price.
Gross Profit
Gross profit decreased $11.2 million to $36.5 million. The decrease in gross profit was primarily due to lower sales volume and higher manufacturing costs.
Operating Income
Operating income decreased by $7.8 million to $8.7 million. The decrease in operating income was due to a decrease in sales and gross profit.
Equity in Net Income of Affiliated Companies
Equity in net income of affiliated companies for the three months ended March 31, 2023 was $0.2 million, compared with $5.7 million for the three months ended March 31, 2022. The decrease of $5.5 million was due to lower sales volume driven by timing of customer orders from the Zeolyst Joint Venture during the three months ended March 31, 2023.

The following is our unaudited condensed consolidated statements of income and a summary of financial results for the three months ended March 31, 2023 and 2022:
Three months ended
March 31,
Change
20232022$%
(in millions, except percentages)
Sales$160.9 $179.7 $(18.8)(10.5)%
Cost of goods sold124.4 132.0 (7.6)(5.8)%
Gross profit36.5 47.7 (11.2)(23.5)%
Gross profit margin 22.7 %26.6 %
Selling, general and administrative expenses21.1 23.5 (2.4)(10.2)%
Other operating expense, net6.7 7.7 (1.0)(13.0)%
Operating income8.7 16.5 (7.8)(47.3)%
Operating income margin 5.4 %9.1 %
Equity in net (income) from affiliated companies(0.2)(5.7)5.5 (96.5)%
Interest expense, net9.9 8.5 1.4 16.5 %
Other (income) expense, net(0.4)0.1 (0.5)(500.0)%
(Loss) income before income taxes and noncontrolling interest(0.6)13.6 (14.2)(104.4)%
Provision for income taxes0.9 5.7 (4.8)(84.2)%
Effective tax rate (180.7)%42.1 %
Net (loss) income attributable to Ecovyst Inc$(1.5)$7.9 $(9.4)(119.0)%
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Sales
Three months ended
March 31,
Change
20232022$%
Sales:(in millions, except percentages)
Ecoservices$137.8 $154.0 $(16.2)(10.5)%
Catalyst Technologies23.1 25.7 (2.6)(10.1)%
Total sales$160.9 $179.7 $(18.8)(10.5)%

Ecoservices: Sales in Ecoservices for the three months ended March 31, 2023 were $137.8 million, a decrease of $16.2 million, or 10.5%, compared to sales of $154.0 million for the three months ended March 31, 2022. The decrease in sales reflects lower sales volume of $26.4 million, partially offset by higher average selling pricing of $10.2 million after the pass-through of sulfur costs of approximately $5.2 million.
Sales volume was lower primarily due to lower virgin sulfuric acid sales associated with the adverse impact of Winter Storm Elliott and extended maintenance turnaround activity at one of our facilities, limit our ability to produce inventory in advance of significant planned turnaround activity to meet customer demand during the three months ended March 31, 2023. Higher average selling prices were driven by favorable pricing in regeneration services, including the pass-through of higher freight, labor, and energy indexed costs partially offset by lower pass-through of sulfur costs in virgin sulfuric acid of $5.2 million.
Catalyst Technologies: Sales in Catalyst Technologies for the three months ended March 31, 2023 were $23.1 million, a decrease of $2.6 million, or 10.1%, compared to sales of $25.7 million for the three months ended March 31, 2022. The decrease in sales was due to lower sales volume of $3.6 million and the unfavorable effects of foreign currency of $0.9 million, partially offset by higher average selling prices of $1.9 million.
The decrease in sales volume was primarily driven by lower polyethylene catalysts sales during the three months ended March 31, 2023, driven in part by the economic sanctions associated with the developments in Russia and Ukraine. Higher average selling prices during the three months ended March 31, 2023 was driven by implemented price increases.
Gross Profit
Gross profit for the three months ended March 31, 2023 was $36.5 million, a decrease of $11.2 million, or 23.5%, compared with $47.7 million for the three months ended March 31, 2022. The decrease in gross profit reflects a $11.0 million contribution associated with lower sales volumes and higher manufacturing costs of $12.3 million, partially offset by higher average selling prices of $12.1 million.
The decrease in gross profit was driven by lower sales volume in the Ecoservices business, offset by favorable pricing and pass-through of higher variable costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended March 31, 2023 was $21.1 million, a decrease of $2.4 million as compared to $23.5 million for the three months ended March 31, 2022. The decrease in selling, general and administrative expenses was mainly due to a decrease in stock-based compensation expense of $3.2 million due to fewer awards granted, lower dividend equivalents, and lower expense for the three months ended March 31, 2023.
Other Operating Expense, Net
Other operating expense, net for the three months ended March 31, 2023 was $6.7 million, a decrease of $1.0 million, compared with $7.7 million for the three months ended March 31, 2022. The decrease in other operating expense, net was mainly driven by a decrease of $2.8 million in transactions costs, primarily associated with the sale of the Performance Chemicals business, offset by an increase in net losses on asset disposals of $1.0 million, primarily related to costs associated with Winter Storm Elliott.
Equity in Net Income of Affiliated Companies
Equity in net income of affiliated companies for the three months ended March 31, 2023 was $0.2 million, compared to $5.7 million for the three months ended March 31, 2022. The decrease was primarily due to lower earnings from the Zeolyst Joint Venture largely due to the comparative timing of customer orders for hydrocracking and specialty catalysts sales during the three months ended March 31, 2023.
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Interest Expense, Net
Interest expense, net for the three months ended March 31, 2023 was $9.9 million, an increase of $1.4 million, as compared with $8.5 million for the three months ended March 31, 2022. The increase in interest expense, net was primarily due to rising interest rates, partially offset by lower debt principal outstanding and the benefits associated with our interest rate caps.
Other (Income) Expense, Net
Other income, net for the three months ended March 31, 2023 was $0.4 million, a decrease of $0.5 million, as compared to other expense, net of $0.1 million for the three months ended March 31, 2022. The change in other (income) expense, net primarily consisted of foreign currency exchange gains of $1.1 million related to the non-permanent intercompany debt denominated in local currency and translated to the U.S. dollar. This was offset by net periodic pension benefit of $0.6 million for the defined benefit pension and postretirement plans for the three months ended March 31, 2022.
Provision for Income Taxes
The provision for income taxes for the three months ended March 31, 2023 was $0.9 million compared to a $5.7 million for the three months ended March 31, 2022. The effective income tax rate for the three months ended March 31, 2023 was (180.7)% compared to 42.1% for the three months ended March 31, 2022.
The Company’s effective income tax rate fluctuated primarily due to the discrete impact related to a shortfall of stock compensation tax deduction which outweighed the tax benefit from the pre-tax loss during the quarter.
The difference between the U.S. federal statutory income tax rate and the Company’s effective income tax rate for the three months ended March 31, 2023 was mainly due to state and local taxes, a discrete shortfall tax expense related to stock compensation and a discrete tax expense associated with the recording of accrued penalties and interest associated with historical uncertain tax positions.
Net (Loss) income Attributable to Ecovyst
For the foregoing reasons, net loss attributable to Ecovyst was $1.5 million for the three months ended March 31, 2023 compared to net income of $7.9 million for the three months ended March 31, 2022.
Adjusted EBITDA
Summarized Adjusted EBITDA information is shown below in the following table:
Three months ended
March 31,
Change
20232022$%
(in millions, except percentages)
Adjusted EBITDA:(1)
Ecoservices$36.8 $49.3 $(12.5)(25.4)%
Catalyst Technologies(2)
13.0 17.0 (4.0)(23.5)%
Unallocated corporate expenses(6.9)(7.1)0.2 (2.8)%
Total$42.9 $59.2 $(16.3)(27.5)%
(1)We define Adjusted EBITDA as EBITDA adjusted for certain items as noted in the reconciliation below. Our management evaluates the performance of our segments and allocates resources based primarily on Adjusted EBITDA. Adjusted EBITDA does not represent cash flow for periods presented and should not be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flows as a source of liquidity. Adjusted EBITDA may not be comparable with EBITDA or Adjusted EBITDA as defined by other companies.
(2)The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $5.4 million for the three months ended March 31, 2023, which includes $0.2 million of equity in net income, excluding $1.6 million of amortization of investment in affiliate step-up plus $3.6 million of joint venture depreciation, amortization and interest.
The Adjusted EBITDA from the Zeolyst Joint Venture included in the Catalyst Technologies segment is $11.5 million for the three months ended March 31, 2022, which includes $5.8 million of equity in net income, excluding $1.6 million of amortization of investment in affiliate step-up plus $4.1 million of joint venture depreciation, amortization and interest.

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Ecoservices: Adjusted EBITDA for the three months ended March 31, 2023 was $36.8 million, a decrease of $12.5 million, or 25.4%, compared with $49.3 million for the three months ended March 31, 2022. The decrease in Adjusted EBITDA was primarily a result of lower virgin sulfuric acid sales volume related to Winter Storm Elliott and the extended maintenance turnaround activity, higher unplanned repair and maintenance costs and costs associated with planned turnaround activity, partially offset by higher pricing for regeneration services.
Catalyst Technologies: Adjusted EBITDA for the three months ended March 31, 2023 was $13.0 million, a decrease of $4.0 million, or 23.5%, compared with $17.0 million for the three months ended March 31, 2022. The decrease in Adjusted EBITDA was due to lower volume on timing of customer orders, partially offset by continued strong pricing and favorable product mix.
A reconciliation of net (loss) income to Ecovyst Inc. to Adjusted EBITDA is as follows:
Three months ended
March 31,
20232022
(in millions)
Reconciliation of net (loss) income attributable to Ecovyst Inc. to Adjusted EBITDA
Net (loss) income attributable to Ecovyst Inc.$(1.5)$7.9 
Provision for income taxes0.9 5.7 
Interest expense, net9.9 8.5 
Depreciation and amortization20.2 19.5 
EBITDA29.5 41.6 
Joint venture depreciation, amortization and interest(a)
3.6 4.1 
Amortization of investment in affiliate step-up(b)
1.6 1.6 
Net loss on asset disposals(c)
1.2 0.1 
Foreign currency exchange (gain) loss(d)
(0.7)0.6 
LIFO expense(e)
1.4 0.2 
Transaction and other related costs(f)
1.4 4.3 
Equity-based compensation4.1 7.3 
Restructuring, integration and business optimization expenses(g)
1.0 0.4 
Other(h)
(0.2)(1.0)
Adjusted EBITDA$42.9 $59.2 
(a)We use Adjusted EBITDA as a performance measure to evaluate our financial results. Because our Catalyst Technologies segment includes our 50% interest in the Zeolyst Joint Venture, we include an adjustment for our 50% proportionate share of depreciation, amortization and interest expense of the Zeolyst Joint Venture.
(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 fixed assets and 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 U.S. dollars.
(e)Represents non-cash adjustments to the Company’s LIFO reserves for certain inventories in the U.S. that are valued using the LIFO method, which we believe provides a means of comparison to other companies that may not use the same basis of accounting for inventories.
(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.
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(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).
Adjusted Net Income
Summarized adjusted net income information is shown below in the following table:
Three months ended March 31,
20232022
Pre-tax amountTax expense (benefit)After-tax amountPre-tax amountTax expense (benefit)After-tax amount
(in millions)
Reconciliation of net (loss) income attributable to Ecovyst Inc. to Adjusted Net Income(1)(2)
Net (loss) income attributable to Ecovyst Inc.$(0.6)$0.9 $(1.5)$13.6 $5.7 $7.9 
Amortization of investment in affiliate step-up(b)
1.6 0.4 1.2 1.6 0.4 1.2 
Net loss on asset disposals(c)
1.2 0.3 0.9 0.1 — 0.1 
Foreign currency exchange (gain) loss(d)
(0.7)(0.1)(0.6)0.6 0.1 0.5 
LIFO expense(e)
1.4 0.4 1.0 0.2 0.1 0.1 
Transaction and other related costs(f)
1.4 0.4 1.0 4.3 1.0 3.3 
Equity-based compensation(3)
4.1 (0.1)4.2 7.3 (0.3)7.6 
Restructuring, integration and business optimization expenses(g)
1.0 0.1 0.9 0.4 0.1 0.3 
Other(h)
(0.2)0.1 (0.3)(1.0)(0.3)(0.7)
Adjusted Net Income$9.2 $2.4 $6.8 $27.1 $6.8 $20.3 
(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)Refer to the Adjusted EBITDA notes above for more information with respect to each adjustment.
(3)Includes tax adjustments for the shortfall in stock compensation.
The adjustments to net income attributable to Ecovyst Inc. are shown net of applicable tax rates of 25.6% and 24.7% for the three months ended March 31, 2023 and 2022, respectively, except for the foreign currency exchange (gain) loss and equity-based compensation. The tax effect on equity-based compensation is derived by removing the tax effect of any equity-based compensation expense disallowed as a result of its inclusion within IRC Sec. 162m, and adding the tax effect of equity-based stock compensation shortfall recorded as a discrete item. The tax effect of the foreign currency exchange (gain) loss is derived from tax effecting the actual year to date foreign currency exchange (gain) loss by the respective local country statutory rates which is recorded as a discrete item.
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 Financial Condition, Liquidity and Capital Resources
Our primary sources of liquidity consist of cash flows from operations, existing cash balances as well as funds available under our asset based lending revolving credit facility (“ABL Facility”). We expect that ongoing requirements for debt service and capital expenditures will be funded from these sources of funds. Our primary liquidity requirements include funding working capital requirements (primarily inventory and accounts receivable, net of accounts payable and other accrued liabilities), debt service requirements and capital expenditures. Our capital expenditures include both maintenance of business, which include spending on maintenance and health, safety and environmental initiatives as well as growth, which includes spending to drive organic sales growth and cost savings initiatives.
We believe that our existing cash, cash equivalents and cash flows from operations, combined with availability under our asset based lending revolving credit facility, will be sufficient to meet our presently anticipated future cash needs for at least the next twelve months. We may also pursue strategic acquisition or divestiture opportunities, which may impact our future cash requirements. We may, from time to time, increase borrowings under our asset based lending revolving credit facility to meet our future cash needs. As of March 31, 2023, we had cash and cash equivalents of $61.6 million and availability of $57.3 million under our asset based lending revolving credit facility, after giving effect to $4.1 million of outstanding letters of credit, for a total available liquidity of $118.9 million. We did not have any revolving credit facility borrowings as of March 31, 2023. As of March 31, 2023, we were in compliance with all covenants under our debt agreements.
Our ABL Facility has one financial covenant with two ratios to maintain. The first ratio compares the total ABL availability against a threshold: the greater of 10% of the line cap (which is defined as the lesser of our revolving loan commitments and the value of our assets) or $20.0 million. The greater of this threshold cannot be greater than the total availability of the ABL Facility. The second ratio compares the ABL Facility availability of the U.S. revolving credit facility against a $15.0 million threshold. As of March 31, 2023, we were in compliance with the financial covenant under the ABL Facility.
The 2021 Term Loan Facility and the ABL Facility contain various restrictive covenants. Each limits the ability of the Company and its restricted subsidiaries to incur certain indebtedness or liens, merge, consolidate or liquidate, dispose of certain property, make investments or declare or pay dividends, make optional payments, modify certain debt instruments, enter into certain transactions with affiliates, enter into certain sales and leasebacks, and certain other non-financial restrictive covenants. During such time, the Company is required to maintain a fixed-charge coverage ratio of at least 1.0 to 1.0. The Company was in compliance with all debt covenants under the 2021 Term Loan Facility and the ABL Facility as of March 31, 2023.
Included in our cash and cash equivalents balance as of March 31, 2023 was $19.6 million of cash and cash equivalents in foreign jurisdictions. Depending on foreign cash balances, we have certain flexibility to repatriate funds should the need arise. Should the need arise, we would repatriate the funds in the most tax efficient manner from those subsidiaries. Repatriation of foreign cash is generally not subject to U.S. federal income taxes at the time of cash distribution. However, foreign earnings may still be taxed for state income tax purposes, as well as subject to certain foreign withholding tax obligations, when cash amounts are distributed back to the U.S.
Our liquidity requirements include interest payments related to our debt structure. As reported, our cash interest paid for the three months ended March 31, 2023 and 2022 was approximately $15.2 million and $8.4 million, respectively. Before any impact of hedges, a one percent change in assumed interest rates for our variable interest credit facilities would have an annual impact of approximately $8.8 million on interest expense.
We hedge the interest rate fluctuations on debt obligations through interest rate cap agreements. As of March 31, 2023, we had a $400.0 million of notional variable-rate debt with a cap rate of 1.00% through August 2023, a $250.0 million of notional variable-rate debt with a cap rate of 1.00% through October 2024, a $250.0 million of notional variable-rate debt with a cap rate of 1.00% through October 2025, a $150.0 million of notional variable-rate debt with a cap rate of 1.00% through July 2026, a $200.0 million of notional variable-rate debt with a cap rate of 1.00% through October 2025, and a $450.0 million of notional variable-rate debt with a cap rate of 1.00% through October 2026.
The Company’s off-balance sheet arrangements include $4.1 million of outstanding letters of credit on our ABL Facility as of March 31, 2023.
34

Cash Flow
Three months ended
March 31,
20232022
(in millions)
Net cash provided by (used in):
Operating activities$4.1 $6.4 
Investing activities(18.7)(14.4)
Financing activities(33.6)(2.6)
Effect of exchange rate changes on cash and cash equivalents(1.1)(0.6)
Net change in cash and cash equivalents(49.3)(11.2)
Cash and cash equivalents at beginning of period110.9 140.9 
Cash and cash equivalents at end of period$61.6 $129.7 
Three months ended
March 31,
20232022
(in millions)
Net income$(1.5)$7.9 
Non-cash and non-working capital related activities(1)
28.2