We are a leading integrated and innovative global provider of specialty catalysts and services. We believe that our products, which are predominantly inorganic, and services contribute to improving the sustainability of the environment.

We conduct operations through two reporting segments: (1) Ecoservices and (2) Catalyst Technologies (including our 50% interest in the Zeolyst Joint Venture).

In 2022, we served global customers across many end uses and, as of December 31, 2022, operated out of ten strategically located manufacturing facilities.

Impact of Russia's Invasion of Ukraine on our Business and Results

Adjusted EBITDA and Adjusted Net Income

Key Factors and Trends Affecting Operating Results and Financial Condition

Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021

The following is a summary of our financial performance for the year ended December 31, 2022 compared with the year ended December 31, 2021.

Sales increased $209.0 million to $820.2 million. The increase in sales was primarily due to higher average selling prices, including the favorable pass-through of sulfur pricing and higher sales volumes, and increased demands for our products and services.

Operating income increased $49.8 million to $104.4 million. The increase in operating income was primarily due to an increase in gross profit and lower selling, general and administrative expenses, partially offset by higher other operating expenses.

Equity in Net Income from Affiliated Companies

Equity in net income of affiliated companies for the years ended December 31, 2022 and 2021 was $27.7 million.

The following is our consolidated statement of income and a summary of financial results for the years ended December 31, 2022 and 2021.

The increase in sales volume was attributable to the continued strong customer demand for polyethylene catalysts and higher sales of niche custom catalysts.

Selling, General and Administrative Expenses

Equity in Net Income from Affiliated Companies

Debt extinguishment costs for the year ended December 31, 2021 was $26.9 million.

Net Income (Loss) Attributable to Ecovyst Inc.

(c)When asset disposals occur, we remove the impact of net gain/loss of the disposed asset because such impact primarily reflects the non-cash write-off of long-lived assets no longer in use.

(d)Reflects the exclusion of the foreign currency transaction gains and losses in the statements of income related to the non-permanent intercompany debt denominated in local currency translated to U.S. dollars.

(f)Relates to certain transaction costs, including debt financing, due diligence and other costs related to transactions that are completed, pending or abandoned, that we believe are not representative of our ongoing business operations.

(2)Refer to the Adjusted EBITDA notes above for more information with respect to each adjustment.

(3)Represents intra-period allocation rules related to a change in the UK legislature, which increased the UK corporate rate as well as an uncertain tax position related to a foreign entity.

The adjustments to net income attributable to Ecovyst Inc. are shown net of each applicable statutory tax rates.

Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020

The following is a summary of our financial performance for the year ended December 31, 2021 compared with the year ended December 31, 2020.

Equity in Net Income from Affiliated Companies

The following is our consolidated statement of income and a summary of financial results for the years ended December 31, 2021 and 2020.

The increase in volumes was due to continued strong customer demand for polyethylene catalysts.

Selling, General and Administrative Expenses

Equity in Net Income of Affiliated Companies

Debt extinguishment costs for the years ended December 31, 2021 and 2020 were $26.9 million and $25.0 million, respectively.

On December 14, 2020, we completed the sale of our Performance Materials business which triggered an obligation to provide partial payment under our existing senior secured term loan facilities. As a result of the required payments, previous unamortized deferred financing costs of $2.7 million and original issue discount of $5.8 million were written off as debt extinguishment costs.

Provision (Benefit) for Income Taxes

Net Loss Attributable to Ecovyst Inc.

(c)When asset disposals occur, we remove the impact of net gain/loss of the disposed asset because such impact primarily reflects the non-cash write-off of long-lived assets no longer in use.

(d)Reflects the exclusion of the foreign currency transaction gains and losses in the statements of income related to the non-permanent intercompany debt denominated in local currency translated to U.S. dollars.

$ 1.8 $ 2.2 $ (52.1) $ 54.3 Amortization of investment in affiliate step-up(b)

(2)Refer to the Adjusted EBITDA notes above for more information with respect to each adjustment.

(3)Represents intraperiod allocation rules related to a change in the UK legislature, which increased the UK corporate rate as well as an uncertain tax position related to a foreign entity.

The adjustments to net income attributable to Ecovyst Inc. are shown net of each applicable statutory tax rates.

Financial Condition, Liquidity and Capital Resources

Over the course of the next twelve months and beyond, we anticipate making significant cash payments for known contractual and other obligations, including:

Principal and interest on long-term debt

Continuing Operations Working capital changes that provided (used) cash: Receivables

The following discussions related to our cash flows are presented on a continuing operations basis, which excludes the cash flows from our former Performance Chemicals and Performance Materials businesses, which are accounted for as discontinued operations.

Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021

Net cash used in financing activities was $148.1 million for the year ended December 31, 2022, compared to $963.1 million used during the year ended December 31, 2021. During the year ended December 31, 2021, as a result of the sale of the Performance Chemicals business, net cash used in financing activities was driven by $542.9 million in net repayments of our debt and revolving credit facility and a dividend payment of $3.20 per common share, which resulted in a cash outflow of $435.6 million.

Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020

Total debt, net of original issue discount and deferred financing costs

On May 4, 2016, we entered a $200.0 million senior secured ABL facility, which provided for $200.0 million in revolving credit commitment (the "ABL Facility").

On June 9, 2021, we amended the ABL Facility to decrease the aggregate amount of revolving loan commitments available to $100.0 million, consisting of $90.0 million in U.S. commitments and $10.0 million in European commitments and extended the maturity date to August 2, 2026.

2020 Term Loan Facility - Repaid in 2021

2018 Term Loan Facility - Repaid in 2021

5.75% Senior Unsecured Notes due 2025 - Redeemed in 2021

Maintenance capital expenditures $ 46.9 $ 42.8 $ 36.0 Growth capital expenditures

We paid an immaterial amount in cash contributions into our defined benefit pension plans and other postretirement plans in December 31, 2022 and 2021, respectively and $3.3 million in 2020. The net periodic pension and postretirement expense was $1.0 million, $0.3 million, and $0.4 million for those same periods, respectively.

As of December 31, 2022 and 2021, our pension plans and other post-retirement benefit plans were underfunded by $6.7 million and $4.2 million, respectively.

We had $4.0 million and $17.5 million of outstanding letters of credit on our revolver facility as of December 31, 2022 and 2021, respectively.

Critical Accounting Policies and Estimates

We identify a contract when an agreement with a customer creates legally enforceable rights and obligations, which occurs when a contract has been approved by both parties, the parties are committed to perform their respective obligations, each party's rights and payment terms are clearly identified, commercial substance exists and it is probable that we will collect the consideration to which we are entitled.

assessments in 2022 and 2021, we bypassed the option to perform the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test for each of our reporting units. The quantitative test identifies both the potential existence of impairment and the amount of impairment loss.

For further information see Note 16 Goodwill and Other Intangible Assets.

See Note 3 to our consolidated financial statements for a discussion of recently issued accounting standards and their effect on us.

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