Ecovyst Inc. 10-Q

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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Sales $ 179,175 $ 173,326 $ 522,532 $ 518,310 Cost of goods sold 124,472 120,142 374,943 367,662 Gross profit 54,703 53,184 147,589 150,648 Selling, general and administrative expenses 19,950 16,945 64,260 59,460 Other operating expense, net 3,212 4,310 9,987 17,288 Operating income 31,541 31,929 73,342 73,900 Equity in net (income) from affiliated companies 922 ( 4,708 ) ( 2,543 ) ( 16,305 ) Interest expense, net 11,305 11,811 37,609 30,812 Debt extinguishment costs — — 4,560 — Other expense, net 566 361 1,193 543 Income before income taxes 18,748 24,465 32,523 58,850 Provision for income taxes 4,497 7,891 8,756 17,625 Net income $ 14,251 $ 16,574 $ 23,767 $ 41,225 Net income per share: Basic income per share $ 0.12 $ 0.14 $ 0.20 $ 0.35 Diluted income per share $ 0.12 $ 0.14 $ 0.20 $ 0.34 Weighted average shares outstanding: Basic 116,490,634 116,446,085 116,786,759 119,042,161 Diluted 117,187,054 117,374,347 117,425,254 120,417,132 See accompanying notes to condensed consolidated financial statements. 3 Table of Contents ECOVYST INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) (unaudited) Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Net income $ 14,251 $ 16,574 $ 23,767 $ 41,225 Other comprehensive income (loss), net of tax: Pension and postretirement benefits 3 ( 213 ) 527 228 Net (loss) gain from hedging activities ( 11,654 ) 1,128 ( 8,865 ) ( 1,393 ) Foreign currency translation 6,403 ( 3,112 ) 4,040 ( 99 ) Total other comprehensive loss ( 5,248 ) ( 2,197 ) ( 4,298 ) ( 1,264 ) Comprehensive income $ 9,003 $ 14,377 $ 19,469 $ 39,961 See accompanying notes to condensed consolidated financial statements. 4 Table of Contents ECOVYST INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) (unaudited) September 30, 2024 December 31, 2023 ASSETS Cash and cash equivalents $ 123,474 $ 88,365 Accounts receivable, net 74,023 81,314 Inventories, net 53,709 45,115 Derivative assets 6,192 13,419 Prepaid and other current assets 26,131 17,774 Total current assets 283,529 245,987 Investments in affiliated companies 410,400 440,198 Property, plant and equipment, net 571,721 576,904 Goodwill 405,792 404,470 Other intangible assets, net 106,588 116,550 Right-of-use lease assets 25,686 24,281 Other long-term assets 36,315 29,361 Total assets $ 1,840,031 $ 1,837,751 LIABILITIES Current maturities of long-term debt $ 8,730 $ 9,000 Accounts payable 33,389 40,195 Operating lease liabilities—current 7,982 8,193 Accrued liabilities 61,713 61,693 Total current liabilities 111,814 119,081 Long-term debt, excluding current portion 853,942 858,946 Deferred income taxes 108,541 115,791 Operating lease liabilities—noncurrent 17,582 16,030 Other long-term liabilities 18,782 22,439 Total liabilities 1,110,661 1,132,287 Commitments and contingencies (Note 15) EQUITY Common stock ($ 0.01 par); authorized shares 450,000,000 ; issued shares 140,872,846 and 140,744,045 on September 30, 2024 and December 31, 2023, respectively; outstanding shares 116,509,803 and 116,116,895 on September 30, 2024 and December 31, 2023, respectively 1,409 1,407 Preferred stock ($ 0.01 par); authorized shares 50,000,000 ; no shares issued or outstanding on September 30, 2024 and December 31, 2023 — — Additional paid-in capital 1,103,361 1,102,581 Accumulated deficit ( 147,089 ) ( 170,856 ) Treasury stock, at cost; shares 24,363,043 and 24,627,150 on September 30, 2024 and December 31, 2023, respectively ( 223,055 ) ( 226,710 ) Accumulated other comprehensive loss ( 5,256 ) ( 958 ) Total equity 729,370 705,464 Total liabilities and equity $ 1,840,031 $ 1,837,751 See accompanying notes to condensed consolidated financial statements. 5 Table of Contents 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 (loss) Total Balance, December 31, 2023 $ 1,407 $ 1,102,581 $ ( 170,856 ) $ ( 226,710 ) $ ( 958 ) $ 705,464 Net income — — 1,221 — — 1,221 Other comprehensive income — — — — 2,174 2,174 Tax withholdings on equity award vesting — — — ( 1,218 ) — ( 1,218 ) Stock compensation expense — 3,674 — — — 3,674 Shares issued under equity incentive plan, net of forfeitures 2 ( 9,290 ) — 9,329 — 41 Balance, March 31, 2024 $ 1,409 $ 1,096,965 $ ( 169,635 ) $ ( 218,599 ) $ 1,216 $ 711,356 Net income — — 8,295 — — 8,295 Other comprehensive loss — — — — ( 1,224 ) ( 1,224 ) Repurchases of common shares — — — ( 5,010 ) — ( 5,010 ) Stock compensation expense — 3,827 — — — 3,827 Shares issued under equity incentive plan, net of forfeitures — ( 43 ) — 82 — 39 Balance, June 30, 2024 $ 1,409 $ 1,100,749 $ ( 161,340 ) $ ( 223,527 ) $ ( 8 ) $ 717,283 Net income — — 14,251 — — 14,251 Other comprehensive loss — — — — ( 5,248 ) ( 5,248 ) Stock compensation expense — 2,952 — — — 2,952 Shares issued under equity incentive plan, net of forfeitures — ( 340 ) — 472 — 132 Balance, September 30, 2024 $ 1,409 $ 1,103,361 $ ( 147,089 ) $ ( 223,055 ) $ ( 5,256 ) $ 729,370 6 Table of Contents 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 forfeitures 10 102 — — — 112 Balance, March 31, 2023 $ 1,406 $ 1,096,333 $ ( 243,481 ) $ ( 180,340 ) $ 233 $ 674,151 Net income — — 26,122 — — 26,122 Other comprehensive income — — — — 6,692 6,692 Repurchases of common shares — — — ( 43,524 ) — ( 43,524 ) Excise tax on repurchases of common shares — — — ( 630 ) — ( 630 ) Stock compensation expense — 4,739 — — — 4,739 Shares issued under equity incentive plan, net of forfeitures 1 213 — — — 214 Balance, June 30, 2023 $ 1,407 $ 1,101,285 $ ( 217,359 ) $ ( 224,494 ) $ 6,925 $ 667,764 Net income — — 16,574 — — 16,574 Other comprehensive loss — — — — ( 2,197 ) ( 2,197 ) Repurchases of common shares — — — ( 5,344 ) — ( 5,344 ) Tax withholdings on equity award vesting — — — ( 2,506 ) — ( 2,506 ) Excise tax on repurchases of common shares — — — ( 8 ) — ( 8 ) Stock compensation expense — 3,392 — — — 3,392 Shares issued under equity incentive plan, net of forfeitures — ( 5,461 ) — 5,642 — 181 Balance, September 30, 2023 $ 1,407 $ 1,099,216 $ ( 200,785 ) $ ( 226,710 ) $ 4,728 $ 677,856 See accompanying notes to condensed consolidated financial statements. 7 Table of Contents ECOVYST INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Nine months ended September 30, 2024 2023 Cash flows from operating activities: Net income $ 23,767 $ 41,225 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 56,225 51,920 Amortization 10,559 10,536 Amortization of deferred financing costs and original issue discount 1,320 1,548 Debt extinguishment costs 90 — Foreign currency exchange loss (gain) 531 ( 41 ) Deferred income tax benefit ( 4,450 ) ( 1,011 ) Net loss on asset disposals 832 3,326 Stock compensation 10,460 12,547 Equity in net income from affiliated companies ( 2,543 ) ( 16,305 ) Dividends received from affiliated companies 33,000 10,000 Other, net ( 7,859 ) ( 5,270 ) Working capital changes that provided (used) cash: Receivables 7,588 ( 8,939 ) Inventories ( 7,404 ) ( 3,909 ) Prepaids and other current assets ( 8,266 ) 856 Accounts payable ( 5,806 ) ( 3,694 ) Accrued liabilities ( 1,649 ) ( 19,383 ) Net cash provided by operating activities 106,395 73,406 Cash flows from investing activities: Purchases of property, plant and equipment ( 51,725 ) ( 53,642 ) Investment in non-marketable equity securities ( 4,500 ) — Net cash used in investing activities ( 56,225 ) ( 53,642 ) Cash flows from financing activities: Draw down of revolving credit facilities — 14,500 Repayments of revolving credit facilities — ( 14,500 ) Issuance of long-term debt, net of original issue discount and financing fees 870,817 — Repayments of long-term debt ( 877,500 ) ( 6,750 ) Repurchases of common shares ( 5,010 ) ( 78,717 ) Tax withholdings on equity award vesting ( 1,218 ) ( 3,372 ) Repayment of financing obligation ( 2,354 ) ( 2,087 ) Other, net 153 457 Net cash used in financing activities ( 15,112 ) ( 90,469 ) Effect of exchange rate changes on cash and cash equivalents 51 ( 1,898 ) Net change in cash and cash equivalents 35,109 ( 72,603 ) Cash and cash equivalents at beginning of period 88,365 110,920 Cash and cash equivalents at end of period $ 123,474 $ 38,317 For supplemental cash flow disclosures, see Note 20. See accompanying notes to condensed consolidated financial statements. 8 Table of Contents 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 advanced materials, specialty catalysts and services. The Company supports customers globally through its strategically located network of manufacturing facilities. The Company believes that its products 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 high quality and high strength virgin sulfuric acid for industrial and mining applications. Ecoservices also provides chemical waste handling and treatment services, as well as ex-situ catalyst activation services for the refining and petrochemical industry. Advanced Materials & Catalysts, through its Advanced Silicas business, provides finished silica catalysts, catalyst supports and functionalized silicas necessary to produce high performing plastics and to enable sustainable chemistry, and through the Zeolyst Joint Venture, innovates and supplies specialty zeolites used in catalysts that support the production of sustainable fuels, remove nitrogen oxides from diesel engine emissions and that are broadly applied in refining and petrochemical processes. 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, 2023. 2. New Accounting Standards: Accounting Standards Not Yet Adopted In November 2023, the Financial Accounting Standards Board (“FASB”) issued guidance to improve the disclosures related to public business entities reportable segments. This new guidance requires entities to provide information regarding significant segment expenses, especially those segment expenses that are regularly reported to the Company’s chief operating decision maker (“CODM,” or the Company’s Chief Executive Officer). The guidance also require public entities to disclose the nature, type and amounts of other segment items by reportable segment. Public business entities will also have to report all annual disclosures about segments profits or losses that are required by ASC 280 on an interim basis, including the significant segment expenses and other segment items. The new guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The disclosure will be implemented as required for the fiscal year ended December 31, 2024. The Company is currently evaluating the impact of this guidance and expects to include additional disclosures. The Company does not believe that the new guidance will have a material impact on its balance sheets or statements of income. In December 2023, FASB issued guidance to improve disclosures related to incomes taxes. This new guidance requires public business entities to disaggregate information on the effective tax rate reconciliation and income taxes paid to provide greater transparency. Public business entities will be required to provide additional information in specified categories related to effective tax rate reconciliation in tabular form and provide income taxes paid by jurisdictions, with further disaggregation needed if amounts exceed 5% of the total. The new guidance is effective for fiscal years beginning after December 15, 2024. The disclosure will be implemented as required for the fiscal year ended December 31, 2025. The Company is currently evaluating the impact of this guidance. 9 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) In October 2023, FASB issued guidance to amend either presentation or disclosure requirements related to fourteen subtopics in the FASB Accounting Standards Codification that are currently in the SEC Regulation S-X or Regulation S-K. The new guidance was issued in response to the SEC’s ruling on disclosure simplification. For entities subject to existing SEC disclosure requirements, the effective date of each amendment of the topics will be the date that the SEC removes the related disclosure from Regulation S-X or Regulation S-K. The guidance must be applied prospectively, with no early adoption permitted for entities subject to those existing SEC disclosures. The Company is currently evaluating the impact of the new guidance as it pertains to the fourteen subtopics that would impact the business and will apply prospectively once in effect. In August 2023, the FASB issued guidance for entities that meet the definition of a joint venture or a corporate joint venture, to adopt a new basis of accounting upon the formation of the joint venture. The new guidance requires the initial measurement of contributed net assets and liabilities at fair value on the formation date, recognition of goodwill for the difference between the fair value of the joint venture’s equity and net assets, and disclosures about the nature and financial impact of the transaction. The new guidance requires prospective application and is effective for all joint ventures that are formed on or after January 1, 2025, with early adoption permitted. Joint ventures that formed before January 1, 2025 may elect to retrospectively apply the new guidance. The Company will apply the guidance to any new joint ventures formed after the effective date. 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 17 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 Uses Key Products Clean fuels, emission control & other • Refining hydrocracking catalysts • Emission control catalysts • Catalyst supports used in production of sustainable fuels such as renewable diesel • Catalysts used in production of sustainable aviation fuels • Catalyst activation • Aluminum sulfate solution • Ammonium bisulfite solution Polyethylene, polymers & engineered plastics • Catalysts and catalyst supports for high-density polyethylene and chemicals syntheses • Antiblock for film packaging • Catalyst for advanced recycling Regeneration and treatment services • Sulfuric acid regeneration services • Hazardous waste treatment services Industrial, mining & automotive • Virgin sulfuric acid for mining • Virgin sulfuric derivatives for industrial production • Virgin sulfuric derivatives for nylon production 10 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) The following tables disaggregate the Company’s sales, by segment and end uses, for the three and nine months ended September 30, 2024 and 2023, respectively: Three months ended September 30, 2024 Ecoservices Advanced Materials & Catalysts (2) Total Clean fuels, emission control & other $ 9,539 $ — $ 9,539 Polyethylene, polymers & engineered plastics — 25,308 25,308 Regeneration and treatment services (1) 91,037 — 91,037 Industrial, mining & automotive 53,291 — 53,291 Total segment sales $ 153,867 $ 25,308 $ 179,175 Three months ended September 30, 2023 Ecoservices Advanced Materials & Catalysts (2) Total Clean fuels, emission control & other $ 8,393 $ — $ 8,393 Polyethylene, polymers & engineered plastics — 25,697 25,697 Regeneration and treatment services (1) 87,692 — 87,692 Industrial, mining & automotive 51,544 — 51,544 Total segment sales $ 147,629 $ 25,697 $ 173,326 Nine months ended September 30, 2024 Ecoservices Advanced Materials & Catalyst (2) Total Clean fuels, emission control & other $ 25,542 $ — $ 25,542 Polyethylene, polymers & engineered plastics — 73,104 73,104 Regeneration and treatment services (1) 269,721 — 269,721 Industrial, mining & automotive 154,165 — 154,165 Total segment sales $ 449,428 $ 73,104 $ 522,532 Nine months ended September 30, 2023 Ecoservices Advanced Materials & Catalyst (2) Total Clean fuels, emission control & other $ 21,559 $ — $ 21,559 Polyethylene, polymers & engineered plastics — 74,877 74,877 Regeneration and treatment services (1) 274,529 — 274,529 Industrial, mining & automotive 147,345 — 147,345 Total segment sales $ 443,433 $ 74,877 $ 518,310 (1) As described in Note 1 to these condensed consolidated financial statements, the Company experiences seasonal s ales 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). 11 Table of Contents 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. Fair value on a recurring basis The following tables present information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. September 30, 2024 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) $ 7,005 $ — $ 7,005 $ — Derivative liabilities: Interest rate caps (Note 12) $ 3,279 $ — $ 3,279 $ — December 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) $ 19,021 $ — $ 19,021 $ — Derivative liabilities: Interest rate caps (Note 12) $ 2,496 $ — $ 2,496 $ — 12 Table of Contents 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 September 30, 2024, th e Company had interest rate c aps th at 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. Fair value on a non-recurring basis Non-marketable equity securities The Company’s non-marketable equity securities consist of an investment in a privately-held company without readily determinable market values. Non-marketable equity securities are accounted for using the measurement alternative, defined as cost less impairment, if any, plus or minus adjustments from observable price changes for identical or similar securities of the same issuer. Adjustments to fair value or impairments, if any, are recorded in the condensed consolidated statements of income. On July 24, 2024, the Company paid $ 4,500 for a minority equity investment in Pajarito Powder LLC (“Pajarito”), an innovative materials science company that focuses on supports and catalysts required for the manufacture and operation of electrolyzers and fuel cells. The investment is recorded in other long-term assets in the condensed consolidated balance sheet and within cash flows from investing activities in the condensed consolidated statements of cash flows. As of September 30, 2024, the carrying value in Pajarito was $ 4,500 . There were no remeasurement events or recognized gains or losses for the three and nine months ended September 30, 2024, respectively. 13 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) 5. Stockholders' Equity: Accumulated Other Comprehensive Income (Loss) The following tables present the tax effects of each component of other comprehensive loss for the three and nine months ended September 30, 2024 and 2023, respectively: Three months ended September 30, 2024 2023 Pre-tax amount Tax benefit/ (expense) After-tax amount Pre-tax amount Tax benefit/ (expense) After-tax amount Defined benefit and other postretirement plans: Net gain (loss) $ 11 $ ( 3 ) $ 8 $ ( 253 ) $ 63 $ ( 190 ) Net prior service cost ( 7 ) 2 ( 5 ) ( 31 ) 8 ( 23 ) Benefit plans, net 4 ( 1 ) 3 ( 284 ) 71 ( 213 ) Net (loss) gain from hedging activities ( 15,539 ) 3,885 ( 11,654 ) 1,247 ( 119 ) 1,128 Foreign currency translation 6,403 — 6,403 ( 3,112 ) — ( 3,112 ) Other comprehensive loss $ ( 9,132 ) $ 3,884 $ ( 5,248 ) $ ( 2,149 ) $ ( 48 ) $ ( 2,197 ) Nine months ended September 30, 2024 2023 Pre-tax amount Tax benefit/ (expense) After-tax amount Pre-tax amount Tax benefit/ (expense) After-tax amount Defined benefit and other postretirement plans: Net gain $ 724 $ ( 181 ) $ 543 $ 398 $ ( 99 ) $ 299 Net prior service cost ( 22 ) 6 ( 16 ) ( 94 ) 23 ( 71 ) Benefit plans, net 702 ( 175 ) 527 304 ( 76 ) 228 Net loss from hedging activities ( 11,820 ) 2,955 ( 8,865 ) ( 1,998 ) 605 ( 1,393 ) Foreign currency translation 4,040 — 4,040 ( 99 ) — ( 99 ) Other comprehensive loss $ ( 7,078 ) $ 2,780 $ ( 4,298 ) $ ( 1,793 ) $ 529 $ ( 1,264 ) 14 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) The following tables present the changes in accumulated other comprehensive income (loss), net of tax, by component for the nine months ended September 30, 2024 and 2023, respectively: Defined benefit and other postretirement plans Net gain (loss) from hedging activities Foreign currency translation Total December 31, 2023 $ 612 $ 12,546 $ ( 14,116 ) $ ( 958 ) Other comprehensive income before reclassifications 549 1,657 4,040 6,246 Amounts reclassified from accumulated other comprehensive loss (1) ( 22 ) ( 10,522 ) — ( 10,544 ) Net current period other comprehensive income (loss) 527 ( 8,865 ) 4,040 ( 4,298 ) September 30, 2024 $ 1,139 $ 3,681 $ ( 10,076 ) $ ( 5,256 ) December 31, 2022 $ ( 508 ) $ 24,672 $ ( 18,172 ) $ 5,992 Other comprehensive income (loss) before reclassifications 207 12,057 ( 99 ) 12,165 Amounts reclassified from accumulated other comprehensive income (loss) (1) 21 ( 13,450 ) — ( 13,429 ) Net current period other comprehensive income (loss) 228 ( 1,393 ) ( 99 ) ( 1,264 ) September 30, 2023 $ ( 280 ) $ 23,279 $ ( 18,271 ) $ 4,728 (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 (loss) for the three and nine months ended September 30, 2024 and 2023, respectively: Details about Accumulated Other Comprehensive Income Components Amounts reclassified from Accumulated Other Comprehensive Loss (Income) (1) Affected line item where Income is presented Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Amortization of defined benefit and other postretirement items: Net loss $ — $ 21 $ 7 $ 48 Other (expense) income (2) Net prior service cost (credit) 7 ( 31 ) 22 ( 94 ) Other (expense) income (2) 7 ( 10 ) 29 ( 46 ) Total before tax ( 2 ) 7 ( 7 ) 25 Tax (expense) benefit $ 5 $ ( 3 ) $ 22 $ ( 21 ) Net of tax Gains and losses on cash flow hedges: Interest rate caps $ 4,711 $ 6,048 $ 14,029 $ 17,933 Interest income (expense) ( 1,177 ) ( 1,511 ) ( 3,507 ) ( 4,483 ) Tax expense $ 3,534 $ 4,537 $ 10,522 $ 13,450 Net of tax Total reclassifications for the period $ 3,539 $ 4,534 $ 10,544 $ 13,429 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). 15 Table of Contents 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 authorized 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 is permitted to repurchase shares from time to time for cash in open market transactions or in privately negotiated transactions with an equity sponsor in accordance with applicable federal securities laws, with the Company determining the timing and the amount of any repurchases based on its evaluation of market conditions, share price and other factors. During the nine months ended September 30, 2024, the Company repurchased 552,081 shares on the open market at an average price of $ 9.05 per share, for a total of $ 4,998 , excluding brokerage commissions and accrued excise tax. As of September 30, 2024, $ 229,594 was available for share repurchases under the program. During the nine months ended September 30, 2024, the Company did not need to accrue excise tax related to these repurchases, net of shares issued under the Company’s equity incentive program (see Note 18 to these condensed consolidated financial statements). During the nine m onths ended September 30, 2023, the Company repurchased 541,494 shares on the open market at an average price of $ 9.85 per share, for a total of $ 5,333 , excluding brokerage commissions and accrued excise tax. Additionally, in connection with secondary offerings of the Company’s common stock by an equity sponsor in March and May 2023, the Company repurchased 7,000,000 shares of its common stock sold in the offerings from the underwriters at a weighted average price of $ 10.48 per share concurrently with the closing of the offerings, for a total of $ 73,374 , excluding accrued excise tax . During the nine months ended September 30, 2023 , the Company accrued excise tax of $ 638 related to these repurchases, net of shares issued under the Company’s equity incentive program. This amount was included in accrued liabilities in the condensed consolidated balance sheet and is treated by the Company as a cost of the treasury stock transactions in equity. Tax Withholdings on Equity Award Vesting In connection with the vesting of restricted stock awards (“RSA” or “RSAs”), restricted stock units (“RSU” or “RSUs”) and performance stock units (“PSU” or “PSUs”), 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 128,801 and 315,635 shares delivered to the Company to cover tax payments for the nine months ended September 30, 2024 and 2023, respectively and the fair value of those shares withheld were $ 1,218 and $ 3,372 for the nine months ended September 30, 2024 and 2023, respectively. 6. Goodwill: The change in the carrying amount of goodwill for the nine months ended September 30, 2024 is summarized as follows: Ecoservices Advanced Materials & Catalysts Total Balance as of December 31, 2023 $ 326,589 $ 77,881 $ 404,470 Foreign exchange impact — 1,322 1,322 Balance as of September 30, 2024 $ 326,589 $ 79,203 $ 405,792 The Company completes its annual goodwill and indefinite-lived intangible assets impairment test during the fourth quarter of each year, or more frequently if triggering events indicate a possible impairment. The Company determined the fair value of its reporting units using both a market approach and an income, or discounted cash flow, approach. As of October 1, 2023, the date of the Company’s most recent quantitative assessments, the fair values of each of the Company’s reporting units and the fair values of the Company’s indefinite-lived trade names and trademarks exceeded their respective carrying values. During the nine months ended September 30, 2024, the Company did not identify any events or circumstances that would more likely than not reduce the fair value of the Company's reporting units below their respective carrying values. 16 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) Although the estimated fair value of the Advanced Materials & Catalysts reporting unit exceeded its carrying value on October 1, 2023 by over 30 %, the Company has experienced unfavorable effects on current operations resulting from certain macroeconomic and industry factors in specific end uses during the nine months ended September 30, 2024. Prolonged unfavorable effects could adversely impact the estimated fair value of the Advanced Materials & Catalysts reporting unit in future periods and may result in impairment charges. 7. Other Operating Expense, Net: A summary of other operating expense, net is as follows: Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Amortization expense $ 2,650 $ 2,645 $ 7,939 $ 7,924 Transaction and other related costs — 187 198 2,811 Restructuring, integration and business optimization costs 535 310 920 2,438 Net loss on asset disposals 218 1,020 832 3,326 Other, net ( 191 ) 148 98 789 $ 3,212 $ 4,310 $ 9,987 $ 17,288 8. Inventories, Net: Inventories, net are classified and valued as follows: September 30, 2024 December 31, 2023 Finished products and work in process $ 50,400 $ 41,658 Raw materials 3,309 3,457 $ 53,709 $ 45,115 Valued at lower of cost or market: LIFO basis $ 31,463 $ 24,815 Valued at lower of cost and net realizable value: FIFO or average cost basis 22,246 20,300 $ 53,709 $ 45,115 17 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) 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 September 30, 2024 are as follows: Company Country Percent ownership Zeolyst International USA 50 % Zeolyst C.V. Netherlands 50 % Following is summarized information of the combined investments (1) : Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Sales $ 76,568 $ 81,115 $ 204,073 $ 236,200 Gross profit 9,200 22,205 43,129 66,776 Operating (loss) income ( 1,608 ) 12,414 10,976 39,916 Net (loss) income ( 623 ) 12,617 11,387 42,189 (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 September 30, 2024 and December 31, 2023 includes net purchase accounting fair value adjustments of $ 221,463 and $ 224,614 , 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 $ 610 and $ 3,151 of amortization expense related to purchase accounting fair value adjustments for the three and nine months ended September 30, 2024, respectively. Consolidated equity in net income from affiliates is net of $ 1,601 and $ 4,802 of amortization expense related to purchase accounting fair value adjustments for the three and nine months ended September 30, 2023, respectively. The Company had receivables due from affiliates of $ 2,802 and $ 3,231 as of September 30, 2024 and December 31, 2023, respectively, which were included in prepaid and other current assets in the condensed consolidated balance sheets. The Company had payables to affiliates of $ 2,939 and $ 1,351 as of September 30, 2024 and December 31, 2023 respectively, which were included in accrued liabilities in the condensed consolidated balance sheets. Receivables and payables due from/to affiliates are generally non-trade. The Company had no sales to affiliates for the three months ended September 30, 2024 and 2023, respectively and sales to affiliates of $ 2,110 and $ 2,457 for the nine months ended September 30, 2024 and 2023, respectively. There were no purchases from affiliates for the three and nine months ended September 30, 2024, respectively and purchases from affiliates were $ 236 for the three and nine months ended September 30, 2023, respectively. 18 Table of Contents 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: September 30, 2024 December 31, 2023 Land $ 97,413 $ 96,833 Buildings and improvements 92,078 84,860 Machinery and equipment 865,112 820,509 Construction in progress 39,715 42,000 1,094,318 1,044,202 Less: accumulated depreciation ( 522,597 ) ( 467,298 ) $ 571,721 $ 576,904 Depreciation expense was $ 19,702 and $ 56,225 for the three and nine months ended September 30, 2024, respectively. Depreciation expense was $ 17,773 and $ 51,920 for the three and nine months ended September 30, 2023, respectively. 11. Long-term Debt: The summary of long-term debt is as follows: September 30, 2024 December 31, 2023 2024 Term Loan Facility $ 873,000 $ 877,500 ABL Facility — — Total debt 873,000 877,500 Original issue discount ( 7,432 ) ( 6,162 ) Deferred financing costs ( 2,896 ) ( 3,392 ) Total debt, net of original issue discount and deferred financing costs 862,672 867,946 Less: current portion ( 8,730 ) ( 9,000 ) Total long-term debt, excluding current portion $ 853,942 $ 858,946 Term Loan Facility In June 2024, the Company amended its Term Loan Credit Agreement dated as of June 9, 2021 to, among other things, (a) reduce the interest rate applicable to all outstanding Secured Overnight Financing Rate (“SOFR”) term loans to term SOFR plus 2.25 % per annum from a maximum of adjusted term SOFR plus 2.75 % per annum, (b) reduce the interest rate applicable to all outstanding base rate term loans to the alternate base rate plus 1.25 % per annum from a maximum of the alternate base rate plus 1.75 % per annum and (c) extend the maturity date of all outstanding term loans to June 12, 2031 (the amended term loans, the “2024 Term Loan Facility”). As a result of the amendment, there is no longer a credit spread adjustment of 10 basis points. The interest rate on the 2024 Term Loan Facility was 7.50 % as of September 30, 2024. Debt extinguishment costs resulting from Term Loan amendments The Company evaluated the terms of the amendment in accordance with ASC 470-50 Debt - Modification and Extinguishment and determined that the amendment was primarily a modification of debt. As a result, the Company recorded $ 4,471 of third-party financing costs as debt extinguishment costs in the condensed consolidated income statement for the nine months ended September 30, 2024 and capitalized $ 2,183 of original issued discount within long-term debt, excluding current portion in the condensed consolidated balance sheets as of September 30, 2024. In addition, previously unamortized deferred financing costs of $ 30 and original issue discount of $ 59 associated with the previous outstanding debt were written off as debt extinguishment costs for the nine months ended September 30, 2024. 19 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) ABL Facility The borrowings under the senior secured asset-based lending revolving credit facility (“ABL Facility”) bear interest at a rate equal to an adjusted term SOFR, which includes a credit spread adjustment of 10 basis points or the base rate 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 8.25 % as of September 30, 2024. 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 September 30, 2024 and December 31, 2023, the fair value of the Company’s term loan facility was $ 867,544 and $ 876,403 , 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). 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 the 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. The following table provides a summary of the Company’s interest rate cap agreements: Financial instrument Number of instruments In effect as of September 30, 2024 Current notional amount of instruments in effect Annuitized premium of instruments in effect Cap rate in effect for all agreements at September 30, 2024 Interest rate cap 5 3 $ 675,000 $ 24,817 1.00 % The current notional amounts of the three interest rate cap agreements in effect at September 30, 2024 are $ 250,000 , $ 250,000 and $ 175,000 . The Company entered into a $ 250,000 interest rate cap to mitigate interest rate volatility from August 2022 to October 2024, a $ 250,000 interest rate cap agreement to mitigate interest rate volatility from September 2023 to October 2025 and a $ 175,000 interest rate cap agreement to mitigate interest rate volatility from August 2024 to July 2026. The Company had a $ 150,000 interest rate cap agreement to mitigate interest rate volatility from August 2023 to July 2024. The Company also entered into two forward starting interest rate cap agreements to mitigate interest volatility from November 2024 to October 2026 and July 2026 to July 2028. 20 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) In February 2023, the Company amended all existing 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. The fair values of derivative instruments held as of September 30, 2024 and December 31, 2023, respectively are shown below: Balance sheet location September 30, 2024 December 31, 2023 Derivative assets Derivatives designated as cash flow hedges: Interest rate caps Prepaid and other current assets $ 6,192 $ 13,419 Interest rate caps Other long-term assets 813 5,602 Total derivative assets $ 7,005 $ 19,021 Derivative liabilities Derivatives designated as cash flow hedges: Interest rate caps Accrued liabilities $ 528 $ — Interest rate caps Other long-term liabilities 2,751 2,496 Total derivative liabilities $ 3,279 $ 2,496 The following tables show the effect of the Company’s derivative instruments designated as cash flow hedges on AOCI for the three and nine months ended September 30, 2024 and 2023, respectively: Three months ended September 30, 2024 2023 Location of gain (loss) reclassified from AOCI into income Amount of gain (loss) recognized in OCI on derivatives Amount of gain (loss) reclassified from AOCI into income Amount of gain (loss) recognized in OCI on derivatives Amount of gain (loss) reclassified from AOCI into income Interest rate caps Interest (expense) income $ ( 10,828 ) $ ( 4,711 ) $ 7,294 $ ( 6,048 ) Nine months ended September 30, 2024 2023 Location of gain (loss) reclassified from AOCI into income Amount of gain (loss) recognized in OCI on derivatives Amount of gain (loss) reclassified from AOCI into income Amount of gain (loss) recognized in OCI on derivatives Amount of gain (loss) reclassified from AOCI into income Interest rate caps Interest (expense) income $ 2,209 $ ( 14,029 ) $ 15,935 $ ( 17,933 ) 21 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) The following table shows the effect of the Company’s cash flow hedge accounting on the condensed consolidated statements of income for the three and nine months ended September 30, 2024 and 2023, respectively: Location and amount of gain (loss) recognized in income on cash flow hedging relationships Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 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 $ ( 11,305 ) $ ( 11,811 ) $ ( 37,609 ) $ ( 30,812 ) The effects of cash flow hedging: Gain (loss) on cash flow hedging relationships: Interest contracts: Amount reclassified from AOCI into income 4,711 6,048 14,029 17,933 The amount of net unrealized gains 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 $ 5,456 as of September 30, 2024. 13. Income Taxes: The effective income tax rate for the three months ended September 30, 2024 was 24.0 %, compared to 32.3 % for the three months ended September 30, 2023. The effective income tax rate for the nine months ended September 30, 2024 was 26.9 %, compared to 29.9 % for the nine months ended September 30, 2023. The Company’s effective income tax rates for the three and nine months ended September 30, 2024 and 2023, respectively, fluctuated primarily due to a reduced discrete tax impact relative to pre-tax book income. The discrete tax items relate to a stock compensation shortfall, tax expense associated with the recording of accrued penalties and interest on historical uncertain tax positions and a tax benefit related to state tax refunds associated with prior tax years recorded during the current quarter. The difference between the U.S. federal statutory income tax rate and the Company’s effective income tax rate for the nine months ended September 30, 2024 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 on 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 nine months ended September 30, 2023 was mainly due to state and local taxes, a discrete shortfall tax expense related to stock compensation, a discrete tax expense associated with the recording of accrued penalties and interest associated with historical uncertain tax positions and a discrete tax benefit connected to state and local tax law changes. During the fourth quarter of 2024, the Company expects to recognize $ 8,023 of previously net unrecognized tax benefits, excluding interest and penalties, primarily due to the expiration of statutes of limitations during October 2024. 14. Benefit Plans: The following tables present the components of net periodic (benefit) expense 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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Interest cost $ 807 $ 863 $ 2,421 $ 2,590 Expected return on plan assets ( 837 ) ( 826 ) ( 2,511 ) ( 2,479 ) Settlement loss (gain) — 22 ( 6 ) 50 Net periodic (benefit) expense $ ( 30 ) $ 59 $ ( 96 ) $ 161 22 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) Other Postretirement Benefit Plan Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Interest cost $ 6 $ 6 $ 18 $ 18 Amortization of prior service credit ( 7 ) ( 31 ) ( 22 ) ( 94 ) Amortization of net gain — ( 1 ) ( 1 ) ( 2 ) Net periodic benefit $ ( 1 ) $ ( 26 ) $ ( 5 ) $ ( 78 ) All components of net periodic (benefit) expense other than service cost are presented within other expense (income), net in the Company’s condensed consolidated statements of income. 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 condensed consolidated financial position, results of operations or liquidity. 16. Related Party Transactions: The Company maintains certain policies and procedures for the review, approval and ratification of related party transactions to ensure that all transactions with selected parties are fair, reasonable and in the Company’s best interests. All significant relationships and transactions are separately identified by management if they meet the definition of a related party or a related party transaction. Related party transactions include transactions that occurred during the year, or are currently proposed, in which the Company was or will be a participant, and for which any related person had or will have a direct or indirect material interest. All related party transactions are reviewed, approved and documented by the appropriate level of the Company’s management in accordance with these policies and procedures. Joint Venture Agreement The Company entered into a joint venture agreement (the “ZI Partnership Agreement”) in 1988 with Shell Catalysts & Technologies, an affiliate of Royal Dutch Shell plc, to form Zeolyst International, a 50/50 joint venture partnership (the “Partnership”). Under the terms of the ZI Partnership Agreement, the Partnership leases certain land used in its Kansas City production facilities from Ecovyst. This lease, which has been recorded as an operating lease, provided for rental payments to the Company of $ 77 and $ 232 for the three and nine months ended September 30, 2024 and 2023, respectively. The terms of this lease are evergreen as long as the ZI Partnership Agreement is in place. The Partnership had no sales to the Company for the three and nine months ended September 30, 2024, respectively and sales to the Company were $ 236 for the three and nine months ended September 30, 2023, respectively. The Partnership purchases certain raw materials from the Company and was charged for various manufacturing costs incurred at the Company’s Kansas City production facility. The amount of these costs charged to the Partnership were $ 3,553 and $ 13,637 for the three and nine months ended September 30, 2024, respectively and $ 4,266 and $ 15,135 for the three and nine months ended September 30, 2023, respectively. Certain administrative, marketing, engineering, management-related and research and development services are provided to the Partnership by the Company. The Partnership was charged $ 4,132 and $ 13,032 for the three and nine months ended September 30, 2024, respectively and $ 3,625 and $ 10,877 for the three and nine months ended September 30, 2023, respectively, for these services. In addition, the Partnership was charged certain product demonstration costs of $ 379 and $ 974 for the three and nine months ended September 30, 2024, respectively and $ 490 and $ 1,418 for the three and nine months ended September 30, 2023, respectively. These charges to the Partnership are recorded as reductions in either cost of goods sold or selling, general and administrative expenses in the condensed consolidated statements of income, depending on the nature of the expenditures. 23 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) The Company had an accounts receivable from the Partnership of $ 2,791 and $ 3,164 as of September 30, 2024 and December 31, 2023, respectively. Accounts payable to the Partnership was immaterial as of September 30, 2024. There were no accounts payable with the Partnership as of December 31, 2023. 17. Reportable Segments: Summarized financial information for the Company’s reportable segments is shown in the following table: Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Sales: Ecoservices $ 153,867 $ 147,629 $ 449,428 $ 443,433 Advanced Materials & Catalysts (1) 25,308 25,697 73,104 74,877 Total $ 179,175 $ 173,326 $ 522,532 $ 518,310 Adjusted EBITDA: (2) Ecoservices $ 55,098 $ 54,674 $ 146,301 $ 151,598 Advanced Materials & Catalysts (3) 10,929 16,360 36,775 54,718 Adjusted EBITDA from reportable segments $ 66,027 $ 71,034 $ 183,076 $ 206,316 (1) Excludes the Company’s proportionate share of sales from 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 $ 30,908 and $ 83,413 for the three and nine months ended September 30, 2024, respectively. The proportionate share of sales excluded is $ 36,958 and $ 103,721 for the three and nine months ended September 30, 2023, 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 for the Company’s Advanced Materials & Catalysts segment includes the Company’s 50 % portion of the Adjusted EBITDA from the Zeolyst Joint Venture. For the three months ended September 30, 2024, the Adjusted EBITDA from the Zeolyst Joint Venture included in the Advanced Materials & Catalysts segment was $ 3,281 , which includes $ 922 of equity in net loss plus $ 610 of amortization of investment in affiliate step-up and $ 3,593 of joint venture depreciation, amortization and interest. For the nine months ended September 30, 2024, the Adjusted EBITDA from the Zeolyst Joint Venture included in the Advanced Materials & Catalysts segment was $ 15,767 , which includes $ 2,543 of equity in net income plus $ 3,151 of amortization of investment in affiliate step-up and $ 10,073 of joint venture depreciation, amortization and interest. For the three months ended September 30, 2023, the Adjusted EBITDA from the Zeolyst Joint Venture included in the Advanced Materials & Catalysts segment was $ 9,640 , which includes $ 4,748 of equity in net income plus $ 1,601 of amortization of investment in affiliate step-up and $ 3,291 of joint venture depreciation, amortization and interest. For the nine months ended September 30, 2023, the Adjusted EBITDA from the Zeolyst Joint Venture included in the Advanced Materials & Catalysts segment was $ 31,270 , which includes $ 16,356 of equity in net income plus $ 4,802 of amortization of investment in affiliate step-up and $ 10,112 of joint venture depreciation, amortization and interest. 24 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) A reconciliation of income before income taxes to Adjusted EBITDA is as follows: Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Reconciliation of income before income taxes to Adjusted EBITDA from reportable segments Income before income taxes $ 18,748 $ 24,465 $ 32,523 $ 58,850 Interest expense, net 11,305 11,811 37,609 30,812 Depreciation and amortization 23,227 21,290 66,784 62,456 Unallocated corporate expenses 6,224 3,163 20,836 16,243 Joint venture depreciation, amortization and interest 3,593 3,292 10,073 10,112 Amortization of investment in affiliate step-up 610 1,601 3,151 4,802 Debt extinguishment costs — — 4,560 — Net loss on asset disposals 218 1,020 832 3,326 Foreign exchange (gain) loss ( 1 ) 774 78 ( 362 ) LIFO (benefit) expense ( 552 ) — ( 3,223 ) 2,510 Transaction and other related costs — 187 198 2,811 Equity-based compensation 2,952 3,477 10,460 12,547 Restructuring, integration and business optimization expenses 535 310 920 2,438 Other ( 832 ) ( 356 ) ( 1,725 ) ( 229 ) Adjusted EBITDA from reportable segments $ 66,027 $ 71,034 $ 183,076 $ 206,316 Capital expenditures for the Company’s reportable segments are shown in the following table: Nine months ended September 30, 2024 2023 Capital expenditures: Ecoservices $ 42,107 $ 44,033 Advanced Materials & Catalysts (1) 7,824 3,631 Corporate (2) 1,794 5,978 Capital expenditures per the condensed consolidated statements of cash flows $ 51,725 $ 53,642 (1) Excludes the Company’s proportionate share of capital expenditures from the Zeolyst Joint Venture. (2) Includes corporate capital expenditures, the cash impact from changes in capital expenditures in accounts payable and capitalized interest. 25 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) 18. 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 September 30, 2024, 8,081,073 shares of common stock were available for issuance under the plan. The Company settles these awards through the issuance of treasury shares under its equity incentive plan. RSU During the nine months ended September 30, 2024, the Company granted 1,126,166 RSUs under its equity incentive plan. Each RSU 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 nine months ended September 30, 2024, 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 RSUs granted during the nine months ended September 30, 2024 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 RSUs is recognized on a straight-line basis over the respective vesting period. PSU 2024 Grants During the nine months ended September 30, 2024, the Company granted 535,629 PSUs (at target) under its equity incentive plan. The PSUs granted during the nine months ended September 30, 2024 provide the recipients with the right to receive shares of common stock dependent on 50 % of a Company-specific financial performance target and 50 % on the relative increase in the total shareholder return (“TSR”) goal (“the Performance measures”). The Performance measures are measured independently of each other, but achievement of both metrics is measured on the same three-year performance period from January 1, 2024 through December 31, 2026 (“Performance period”). Depending on the Company’s performance relative to the Performance measures, each PSU award recipient is eligible to receive a percentage of the target number of shares granted to the recipient, ranging from zero to 200 %. The PSUs, 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 measures for the Performance period, 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, 2026. Achievement of the Company-specific financial performance target is measured based on the actual three-year cumulative results across the Performance period. The TSR goal is based on the Company’s actual TSR performance against companies in the S&P 1500 Specialty Chemicals Index over the Performance period. The TSR goal, which determines how much of the 50 % of the PSUs granted during 2024 may be earned, 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 $ 11.64 weighted average fair value of the awards granted, subject to the TSR goal during the nine months ended September 30, 2024, with the following weighted average assumptions: Expected dividend yield — % Risk-free interest rate 4.09 % Expected volatility 39.45 % Expected term (in years) 2.95 26 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) 2021 Grants In February 2024, the Compensation Committee certified the achievement of the performance metrics for the three-year period ended December 31, 2023, related to the PSUs granted during the year ended December 31, 2021. The PSUs granted during the year ended December 31, 2021 provide the recipients with the right to receive shares of common stock dependent on the achievement of a TSR goal and are generally subject to the provision of service through the vesting date of the award. The TSR goal was based on the Company’s actual TSR percentage increase over the performance period. The awards vested during the nine months ended September 30, 2024 with no percentage of the TSR goal earned. Award Activity The following table summarizes the activity for the Company’s RSUs and PSUs for the nine months ended September 30, 2024: Restricted Stock Units Performance 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, 2023 1,962,828 $ 10.55 959,217 (1) $ 11.84 Granted 1,126,166 $ 8.84 535,629 $ 10.23 Vested ( 1,000,288 ) $ 11.10 — $ — Forfeited ( 108,833 ) $ 9.27 ( 141,437 ) $ 12.82 Nonvested as of September 30, 2024 1,979,873 $ 9.37 1,353,409 (1) $ 11.10 (1) Based on target. During the nine months ended September 30, 2024, the Company also granted 4,540 of RSAs with a weighted average grant date fair value of $ 8.81 per share that immediately vested. Cash proceeds received by the Company from the exercise of stock options were not material for the nine months ended September 30, 2024. Stock-Based Compensation Expense For the three months ended September 30, 2024 and 2023, stock-based compensation expense for the Company was $ 2,952 and $ 3,477 , 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 September 30, 2024 and 2023 was $ 724 and $ 826 , respectively. For the nine months ended September 30, 2024 and 2023, stock-based compensation expense for the Company was $ 10,460 and $ 12,547 , respectively. The associated income tax benefit based on the applicable statutory rate recognized in the condensed consolidated statements of income for the nine months ended September 30, 2024 and 2023 was $ 2,565 and $ 2,980 , respectively. As of September 30, 2024, unrecognized compensation cost of $ 11,283 for RSUs and $ 6,341 for PSUs are considered probable of vesting and the weighted-average period over which these costs are expected to be recognized at September 30, 2024 was 1.71 years for the RSUs and 1.77 years for the PSUs. 27 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) 19. Earnings per Share: Basic earnings per share is calculated as income 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 RSAs 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 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 RSAs and RSUs with service vesting conditions, (2) PSUs 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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Weighted average shares outstanding – Basic 116,490,634 116,446,085 116,786,759 119,042,161 Dilutive effect of unvested common shares and RSUs with service conditions, PSUs considered probable of vesting and assumed stock option exercises and conversions 696,420 928,262 638,495 1,374,971 Weighted average shares outstanding – Diluted 117,187,054 117,374,347 117,425,254 120,417,132 Basic and diluted income per share are calculated as follows: Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Numerator: Net income $ 14,251 $ 16,574 $ 23,767 $ 41,225 Denominator: Weighted average shares outstanding – Basic 116,490,634 116,446,085 116,786,759 119,042,161 Weighted average shares outstanding – Diluted 117,187,054 117,374,347 117,425,254 120,417,132 Net income per share: Basic income per share $ 0.12 $ 0.14 $ 0.20 $ 0.35 Diluted income per share $ 0.12 $ 0.14 $ 0.20 $ 0.34 28 Table of Contents ECOVYST INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) (unaudited) 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 September 30, Nine months ended September 30, 2024 2023 2024 2023 RSAs with performance only targets not achieved — — — 65,966 Stock options with performance only targets not achieved — — — 68,890 Anti-dilutive RSUs and PSUs 920,355 — 419,315 — Anti-dilutive stock options 367,100 454,461 367,100 556,114 RSAs 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 18 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. 20. Supplemental Cash Flow Information: The following table presents supplemental cash flow information for the Company: Nine months ended September 30, 2024 2023 Cash paid during the period for: Income taxes, net of refunds $ 20,832 $ 19,019 Interest (1) 36,982 28,466 Non-cash investing activity: Capital expenditures acquired on account but unpaid as of the period end 2,358 589 Non-cash financing activity: Accrued excise tax on share repurchases (Note 5) — 638 Right-of-use assets obtained in exchange for new lease liabilities (non-cash): Operating leases 8,166 8,048 (1) Cash paid for interest is shown net of capitalized interest and includes the cash received or paid on the Company’s interest rate cap agreements designated as cash flow hedges for the periods presented (see Note 12 to these condensed consolidated financial statements for details). 21. Subsequent Events: T he Company has evaluated subsequent events since the balance sheet date and determined that there are no additional items to disclose. 29 Table of Contents