Good morning. My name is Madison, and I will be your conference operator today. Welcome to Ecovyst's First Quarter 2024 Earnings Call and Webcast. Please note today's call is being recorded and should run approximately 1 hour. I would now like to hand the conference over to Gene Shiels, Director of Investor Relations. Please go ahead.

Thank you, operator. Good morning, and welcome to the Ecovyst First Quarter 2024 Earnings Call. With me on the call this morning are Kurt Bitting, Ecovyst's Chief Executive Officer; and Michael Feehan, Ecovyst's Chief Financial Officer. Following our prepared remarks, we'll take your questions. Please note that some of the information shared today is forward-looking information, including information about the company's financial and operating performance, strategies, our anticipated end-use, demand trends, and our 2024 financial outlook. This information is subject to risks and uncertainties that could cause the actual results and implementation of the company's plans to vary materially. Any forward-looking information shared today speaks only as of this date. These risks are discussed in the company's filings with the SEC. Reconciliations of non-GAAP financial measures mentioned in today's call with their corresponding GAAP measures can be found in our earnings release and in presentation materials posted on the Investors section of our website at ecovyst.com. I'll now turn the call over to Kurt Bitting. Kurt?

Thank you, Gene, and good morning. Ecovyst delivered solid results for the first quarter of 2024. Continued strong demand for regeneration services and higher sales of virgin sulfuric acid drove the favorable results in Ecoservices. Sales within the Zeolyst joint venture were up on higher sales of catalysts used in sustainable fuel production and sales growth in customized catalyst applications. However, sales in advanced silicas were lower due to lower sales of polyethylene catalyst supports, which more than offset stronger sales in finished polyethylene catalysts. As a result, we delivered first-quarter adjusted EBITDA of $45.5 million, up 6% compared to the first quarter of 2023. Cash generation in the first quarter was particularly strong, reflecting the timing of dividends received from the Zeolyst joint venture that were deferred in the fourth quarter due to the timing of working capital needs within the joint venture. This favorable cash generation, along with higher adjusted EBITDA provided for further reduction in our net debt leverage ratio to 2.9x at the end of the first quarter, down from 3x at the end of last year. Overall, I'm pleased with our achievements in the first quarter. Our first quarter financial performance provides a good start to the year. We successfully completed 2 turnarounds in our Ecoservices segment during the quarter while maintaining a very favorable safety performance. In addition, we continue to execute on our long-term strategic plan, positioning Ecovyst for continued growth in the future. As we turn to slide 6, I'll provide an update on our near-term demand outlook. Starting with Ecoservices, for our Regeneration Services business, the outlook remains positive. We believe that the North American refining climate remains favorable with rising vehicle miles traveled, refining utilization rates expected to remain in the 90% range, and increasing margins for various products. And for our Gulf Coast refining customers, the lack of availability of Russian refined products in the global market is creating additional demand for U.S. refined product exports. For virgin sulfuric acid, we see balanced conditions and expect sales volume to be up in 2024. Mining demand remained strong with continued demand strength expected to be driven by global copper demand and ongoing expansion of projects in North America. We continue to expect improvement this year for virgin sulfuric acid sales into the nylon end-use. Industrial demand remains a mixed bag with relative stability in many end uses, including lead acid batteries, chlor-alkali, and water treatment. While we continue to see some price weakness for spot and short-dated contracts as compared to 2023, we did not see a significant deterioration in overall demand conditions for industrial markets in the first quarter. For our Chem32 business, we continue to see high utilization and strong customer interest with continued growth in sustainable fuel production capacity being a contributing factor. Turning to Advanced Materials and Catalysts, for advanced silicas, global demand growth for polyethylene is expected to be up 2% to 3% this year, led by North America, where producers continue to benefit from favorable feedstock costs. Sales for the Advanced Silicas segment fell short of our expectations in the first quarter, where higher sales of finished polyethylene catalysts were offset by lower sales of polyethylene catalyst supports associated with customer order timing and limited destocking. Overall, we expect improved global demand conditions to benefit our sales of advanced silicas used to produce polyethylene, particularly in the second half of the year. We remain very optimistic about the long-term outlook for sales of catalysts using the production of sustainable fuels. In 2024, North American capacity for renewable diesel and sustainable aviation fuel is expected to grow by over 70%, supported by attractive production incentives for U.S.-based producers. With the EU mandating blending targets, EU renewable diesel and SAF capacity is expected to grow by 26% in 2024. Customer and prospective customer engagement in sustainable fuels remains high. We already have trial sales of catalysts for alcohol to jet SAF production technologies, and we expect activity to increase with a number of start-ups slated for next year. For hydrocracking catalysts, the growth in global diesel demand is a positive factor. Market conditions in the U.S. remain favorable with diesel inventories below historic averages. The hydrocracking catalyst market remains competitive, but we believe we have a differentiated offering with our MAC technology. Order timing for hydrocracking catalyst sales remains a function of change-out activity, which makes the timing of sales difficult to predict with absolute certainty. While we expect a positive year for hydrocracking sales in 2024, we will not repeat the peak level of sales in 2023. Based upon our current expectations for sales timing, we anticipate a stronger second half for 2024. Sales of emission control catalysts, we are seeing a softer demand outlook for 2024. Increased borrowing costs are impacting purchase activity for new vehicles. While not commercial on a large scale yet, we continue to work with key players in the advanced recycling industry, where our catalyst technologies can provide a meaningful reduction in energy intensity for thermal pyrolysis. We expect growth in recycling activity to increase in the next 2 years with 12 advanced recycling plants for plastic waste expected to be commissioned in 2024. I'll now turn the call over to Mike for a more detailed discussion of our financial results for the first quarter.

Thank you, Kurt. Ecovyst sales for the first quarter of 2024, including our proportionate 50% share of sales from the Zeolyst joint venture, were $184 million, slightly higher than the first quarter of 2023. Ecoservices sales were up 3%, reflecting higher sales volume in virgin sulfuric acid and regeneration services. However, Advanced Materials and Catalyst sales were down as lower sales of advanced silicas used for the production of polyethylene were only partially offset by higher sales from the Zeolyst joint venture. Adjusted EBITDA for the first quarter was $45.5 million, up 6%, driven primarily by the contribution from higher sales volume. The adjusted EBITDA margin for the first quarter was 24.7%, up 130 basis points over the prior year. Turning to the next slide, I will discuss the primary components of the change in adjusted EBITDA compared to the first quarter of last year. Looking at the major drivers of the change in adjusted EBITDA, the higher sales volume provided a pull-through benefit of approximately $10 million. However, while aggregate pricing, including the $5 million sulfur pass-through effect, was down $16 million period-over-period, the lower pricing resulted from the pass-through of $17 million in lower variable costs, which included lower sulfur, natural gas, electricity, and other variable costs. Overall, the net impact resulted in a positive price-to-cost ratio for the quarter. The balance of the change in adjusted EBITDA is comprised of a number of factors, including approximately $3 million of higher planned turnaround costs, higher fixed manufacturing costs associated with our reliability initiative, costs attributed to winter storm Heather, and inflation in our labor costs. As we transition to our segment results, I'll start with the highlights for Ecoservices. Sales for the first quarter of 2024 were $142 million, up 3% on higher sales volume for virgin sulfuric acid and regeneration services, primarily reflecting recovery from the prior year's lower sales volume that was adversely impacted by winter storm Elliott and the extended turnaround. The sales increase was partially offset by the pass-through effect of lower sulfur prices of $5 million as well as the pass-through effect of other variable costs such as natural gas and electricity. First quarter 2024 adjusted EBITDA for Ecoservices of $41.5 million was up 13%, with the benefit of higher sales volume, partially offset by the higher turnaround costs, higher fixed manufacturing costs, and costs associated with the winter storm. Overall, it was a positive quarter for Ecoservices and a solid start to the year with adjusted EBITDA up 13% and the associated margins of 29%, up 260 basis points from the first quarter of 2023. For Advanced Materials and Catalyst, first-quarter sales, including our 50% proportionate share of Zeolyst joint venture sales, were $42 million, down $3 million. Sales for the Zeolyst joint venture were up 6%, driven by higher sales of catalysts used in sustainable fuel production and sales growth in customized catalyst applications. However, sales for advanced silicas decreased year-over-year due to lower sales volume of advanced silicas used for the production of polyethylene. While sales of finished catalysts used to produce polyethylene were up, sales of polyethylene catalyst supports were lower due to customer order timing and limited destocking. For the full year, we continue to expect higher sales of advanced silicas used for the production of polyethylene compared to 2023 with an expected stronger second half of the year compared to the first half. Adjusted EBITDA for Advanced Materials and Catalyst was $11 million compared to $13 million in the year-ago quarter with higher sales volume and favorable mix in the Zeolyst joint venture offset by the lower sales in advanced silicas. Turning to cash and leverage on the next slide, cash generation in the first quarter of 2024 was particularly strong, benefiting from the dividends received from the Zeolyst joint venture that were deferred from the fourth quarter of 2023 due to the timing of working capital. As such, we ended the first quarter with cash of $103 million, including the $70 million of availability under our ABL facility. We ended the first quarter with total liquidity of $173 million. In light of the strong cash generation and higher adjusted EBITDA, we ended the first quarter with a net debt leverage ratio of 2.9x, down from 3.0x at the end of the year. At this time, we remain on target to generate free cash flow for this year of $85 million to $105 million. In terms of capital allocation, we expect to continue to maintain a balanced strategy. From an overall balance sheet perspective, we have one tranche of debt maturing in 2028. We have capped our interest exposure on approximately 75% of our outstanding debt out to the third quarter of 2026, and our weighted average cost of debt is expected to be approximately 5.5% during 2024. As it relates to our guidance, the full-year outlook that we provided in our fourth quarter earnings call in late February remains unchanged with GAAP sales of $715 million to $755 million, sales for the Zeolyst joint venture of $145 million to $165 million, and consolidated adjusted EBITDA of $255 million to $275 million. As is our usual practice, the guidance ranges for specific modeling line items are included in today's earnings press release and in the earnings presentation. In terms of directional guidance for the second quarter, on a consolidated basis, we expect second quarter 2024 adjusted EBITDA to be between $50 million and $55 million. For Ecoservices, we expect adjusted EBITDA for the second quarter to be down compared to the prior year in a range of between $48 million and $52 million. While we expect sales volume to be higher in the second quarter compared to the prior year, higher fixed costs, including an increase in the number of turnarounds and the related costs, along with an unfavorable net pricing impact, is expected to drive lower earnings for the quarter. The unfavorable net pricing is expected to reflect the timing and the contractual pass-through of certain costs, including energy and other index costs. For Advanced Materials and Catalysts, we expect the second quarter 2024 adjusted EBITDA to be sequentially flat to the first quarter of 2024, with a range of between $10 million and $12 million. The results are expected to be lower than the prior year's second quarter, driven by lower sales of advanced silicas used for polyethylene production, unfavorable product and customer mix, and the unfavorable impact of fixed cost absorption on inventory period-over-period. And we continue to expect corporate costs to be between $7 million and $8 million per quarter. I will now hand the call back to Kurt for some closing remarks.

Thank you, Mike. As we move into the second quarter, we will continue to build upon the positive financial results we delivered in the first quarter. With the expectation of improved global polyethylene demand and higher sales of virgin sulfuric acid into the nylon end-use, the demand outlook across our portfolio remains positive for 2024. Ecoservices will have conducted 4 of its 5 major turnarounds in the first half of 2024, which will position the business to deliver virgin sulfuric acid and regeneration volumes in the second half of the year. We expect stronger demand fundamentals in the second half of the year, particularly for sales of polyethylene catalysts and for the timing of hydrocracking catalyst sales. As such, our previous guidance for 2024 remains unchanged. However, we will seek to leverage opportunities for incremental growth as they arise. Moreover, we believe favorable cash generation in 2024 will continue to support a balanced capital allocation strategy. Before we move to the Q&A session, I do want to comment on a recent development regarding our Houston site. The United Steelworkers Union represents a number of maintenance and operation employees at our Houston site. Unfortunately, despite our good faith efforts to reach a labor agreement with the union, the union workers went on strike on April 10. I am happy to report that we reached a tentative agreement with the union on a new 3-year contract. The Houston Plants Union ratified the new contract earlier this week, and our valued colleagues fully returned to work on May 1. During the course of the strike, operations at the Houston site continued allowing us to service our customers. Thank you for your interest in Ecovyst. And at this time, I will ask the operator to open the line for questions.

We will now take our first question from John McNulty at BMO Capital Markets.

When I consider your outlook for the various segments in 2024, it seems that some aspects, like the PVC outlook, mining recovery, and refining utilization rates, appear to be a bit more optimistic, yet you've mostly kept your guidance unchanged. Are there any negative factors we should be aware of, or is it simply too early in the year to make any definitive statements? How should I approach this?

Thanks for the question, John. I would say we're still early in the year. As we mentioned on the call, we're in the first five months of the year and we plan to conduct four of our five maintenance outages, which positions us well to meet what we believe is strong demand from the regeneration segment. We're pleased with the virgin acid performance and expect to see increased virgin acid volumes year-over-year, alongside a recovery in the nylon segment while mining remains robust. For polyethylene, we anticipate stronger results in the second half of the year, which aligns with our previous expectations. Overall, we feel positive about our current standing and are satisfied with our results in the first quarter, but there is still time left in the year, and we remain optimistic about our position.

And then you spoke through the prepared remarks around a pushout in terms of timing around the polyethylene catalyst side. I guess can you help us to quantify that and think about the timing of when you expect that to roll in? It sounds like it may not necessarily all be 2Q or may be pushed out into the back half of the year?

For the first quarter, our finished polyethylene catalyst sales increased compared to last year. However, we experienced shortfalls in polyethylene catalyst supports, which are intermediates purchased by either coproducers in the catalyst industries or polyethylene producers who then add their own metals. This segment accounts for about one-quarter to one-third of our polyethylene catalyst sales. There were some timing issues, including base shipping and the timing of when orders reached customers, as well as limited destocking in this area. Nevertheless, we anticipate that both finished catalysts and supports will improve in the second half of the year and will show year-over-year growth.

Just to stay with PE catalyst, could you just step back and tell us where do you think you are in this PE catalyst cycle for yourselves? In the back half of this year, would you be at a normal run rate? Or is there still more recovery as you go into next year, maybe not looking for precise growth next year, but some idea of where you are in that cycle?

Thanks for the question, Aleksey. We generally anticipate 2% to 3% growth in the global polyethylene market this year. However, different regions are performing differently. In North America and the Middle East, where feedstock costs are lower, some producers are exceeding that growth rate. On the other hand, regions like China and Europe are experiencing sluggish growth. Overall, we do see growth of around 2% to 3% this year. Historically, by capturing market share and gaining a significant portion of new builds and business, we have been able to double the market growth rate. We are optimistic about the future of polyethylene, which is clearly recovering from last year. We expect the momentum of this recovery to increase in the second half of the year.

And shifting to the merchant acid market, I mean you talked about some pricing headwinds in the second quarter. What is the net price headwind that you expect for the entire year either in dollars or percentage of price or any other metric?

Yes, Aleksey, thanks for the question. This is Mike. For the second quarter, we don’t have any concerns about our overall base pricing. We did experience some challenges with the virgin sulfuric acid pricing model due to certain spot sales we mentioned earlier and some shorter-term contractual pricing. The net pricing impact we discussed for the second quarter primarily stems from the pass-through nature of some contracts and the timing of when costs are incurred compared to when they're passed through, which results in a quarterly lag. Significant variances can be amplified by variable costs and volatility. We anticipate this impact in the second quarter, but it should stabilize for the rest of the year mainly due to the timing of pass-through contracts. Therefore, we do not expect to see this continue into Q3 and Q4.

Maybe just on the Kansas City expansion that you referenced in the release, I guess, how big is that in terms of a percentage basis of your capacity? And are the long-term commitments you referenced linked to the latest wave of PE capacity additions? And is there anything baked in for the larger capacity additions you see in 2026 and 2027? Are you expecting there? Or is the time line a bit closer to the first production?

Thanks for the question, Patrick. Regarding the Kansas City expansion, we have indicated that it represents a 50% increase in our polyethylene capacity at that site. While we have other production facilities worldwide, the Kansas City increase is about a 50% boost. This expansion is connected to contractual obligations with customers involved in the current wave of new builds globally. Although I can't disclose the names of the customers, we have already secured these volumes from clients who are expanding their polyethylene catalysts or production and require these catalysts. As for the timing, we expect the expansion to be completed by the end of 2025, which will help us meet the demand anticipated in late 2026, 2027, and 2028.

Got it. And can you help size the growth that you've seen in renewable fuels catalysts in the first quarter and into 2024? How big is that business today? And what sort of growth rates are you forecasting into 2025 and beyond?

Yes. So thanks for the question. The growth rates that we see there are linked to the market, right? There's definitely a strong market push that are talking about significant growth rates. That business represents a little more than probably 10-plus percent of our overall sales from our AMAC group. We've talked about this during our Investor Day where the growth of that will be, call it, 20-plus percent over time. Obviously, that shifts quarter-on-quarter, year-on-year, but we definitely see some extremely good strength in that business as we continue to ramp it up and win new businesses.

Yes. The situation, Patrick, is that we have focused a lot on what we refer to as sustainable fuels, primarily renewable diesel so far. Looking ahead to 2025 and 2026, we anticipate that Sustainable Aviation Fuel (SAF) technology will begin to be adopted by airlines as it gains approval. This will contribute to further success for our sustainable fuels business.

Do you have any rough metrics for the revenue opportunity in dollars per ton if there are expansions in copper mining capacity and if refineries shift from gasoline and diesel production to chemical production, which would likely increase catalyst demand? Additionally, can you provide insights on your sensitivity to SAF and help us understand what the total addressable markets might be on a dollar per ton basis? Are we discussing $5, hundreds of dollars, or thousands?

I can provide some insights regarding the usage of sulfuric acid. In copper solvent extraction electro-winning, which involves copper leaching, the process consumes between 3 to 5 tons of sulfuric acid for every ton of copper produced. This gives a good indication of the potential growth for sulfuric acid in copper mining. Additionally, in lithium production, the use can be as high as 20 tons of sulfuric acid, with different metals having varying ratios. In our regeneration business, our customer base, which is about two-thirds situated in the Gulf Coast, has significant scale, and we expect their business models will increasingly lead them toward exporting refined products over time. As for our West Coast refineries, the products they generate are highly valuable in the California market due to the state's gasoline specifications. These factors provide a good benchmark for understanding acid usage and the related dynamics you've mentioned.

And then just the opportunity for catalyst?

We anticipate that the demand for polyethylene catalysts will continue to grow in the range of 3%. We supply a significant amount of catalysts to both the Middle East and North American markets, where we are witnessing ongoing expansions and announced plans to capitalize on low feedstock and natural gas costs. One of the reasons we decided to expand in Kansas City was to fulfill customer commitments and meet this long-term growth in demand, benefiting from lower feedstock costs in both the U.S. and the Middle East.

So I just wanted to understand the level of conversation you're having with customers looking out for the rest of the year that gives you confidence that the rest of the year is not at risk, given where Q1 and potentially Q2 ends up falling.

Thank you for the question, Hamed. When we examine the major end-use customers, the products we supply are crucial. We are often the sole source for many of our customers, which allows us to gain valuable insights into their forecasts. Some products, such as catalysts and sulfuric acid, require longer production times, and sulfuric acid regeneration is experiencing high utilization nationwide. As a result, customers tend to be open with us about their forecasts. Regarding regeneration, as mentioned earlier, we are currently seeing strong margins for octane and refined products, and we expect this demand to continue throughout the year. Exports have increased due to global dynamics and the competitive advantage of U.S. refining capacity. Although we were uncertain about virgin sulfuric acid in the previous call, pricing has now stabilized, and we anticipate year-over-year growth in nylon end-use sales. The mining sector remains strong, with metal prices having increased over the past three to six months. There are still some uncertainties in virgin acid for specific industrial applications, but overall, the situation has stabilized well. In terms of polyethylene catalysts, we are seeing year-over-year growth, and we expect this trend to gain momentum in the latter half of the year. For hydrocracking, we now have better visibility on orders as we approach the end of the year, and these longer lead-time catalyst items are becoming clearer.

Okay. And then could you just quantify what kind of impact you're expecting in Q2 as far as the downtime is considered?

Well, we have 2 planned turnarounds for the quarter, which was one more than we had in Q2 of last year. But the downtime itself will be very similar to Q1, right? So we executed 2 maintenance turnarounds in this Q1 2024 this year. So it will be similar to Q1, slightly more than it was Q2 of last year. But we're happy with where we're set up really because those turnarounds will all be complete really by the end of May, which leaves us with 80% of our turnaround activity completed for the year and with a decent volume outlook for the remainder of the year.

It appears that we have no further questions at this time. I will now turn the program back over to our presenters for any additional or closing remarks.

Thank you, Madison. Thank you to all of our participants this morning for your interest in Ecovyst and your thoughtful questions. With that, we'll conclude our call.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.