Ecovyst Inc (ECVT) 2024 Q3 法說會逐字稿

Good morning. My name is Jim and I will be your conference operator today. Welcome to the Ecovyst third quarter, 2024 earnings call and webcast.

(Operator instructions) . I would now like to turn the conference over to Gene Shiels, Director of Investor Relations. Please go ahead, sir.

Thank you, Jim. Good morning and welcome to Ecovyst third quarter. 2024 earnings call. With me on the call this morning is Kurt Bitting, Ecovyst's Chief Executive Officer; and Mike Feehan, Ecovyst's Chief Financial Officer. Following our prepared remarks. This morning. 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 are anticipated in use demand trends and our 2024 financial outlook.

This information is subject to risks and uncertainties that could cause the actual results and the implementation of the company's plans to vary materially. Any forward-looking information shared today speaks only as of this date.

These risks are discussed in the company's filings with the SEC. Reconciliations of non-GAAP financial measures mentioned in this morning's call with their corresponding GAAP measures can be found in our earnings release and in the presentation materials posted in the investors section of our website at ecovyst.com, I'll now turn the call over to Kurt Bitting.

Thank you Gene and Good morning against the backdrop of a challenging macroeconomic environment Ecovyst third quarter. Financial results were in line with our overall expectations.

Our Eco Services segment continued to exhibit resilience with positive demand fundamentals contributing to another quarter of solid performance, during the quarter, higher refinery utilization and attractive algoet economics continued to support demand in our regeneration services business where contractual pricing increases contributed positively to the segment profitability in the quarter.

Although demand remains soft in certain industrial end uses third quarter sales volume for virgin sulfuric acid increased compared to the prior year. We also continued to see strong demand in our 1032 catalyst activation business with volume. Also up year over year in our advanced silicas business sales of silicas used in the production of polyethylene increased in the third quarter and we remain on track for polyethylene catalyst sales to be up in 2024 compared to 2023 within the Zeolyst joint venture sales of hydrocracking catalysts were up in the third quarter.

However, sales of specialty catalysts in the third quarter were lower than we had initially expected due to timing as we saw some sales slip from the third quarter into the fourth quarter due to minor logistical delays, cash generation remained positive in the quarter providing for a modest reduction in our net debt leverage ratio.

As we turn to slide 6, I'll provide an update on our near term demand outlook for Eco Services. We believe the outlook remains positive taking into account planned seasonal turnaround activity for our refining customers for the balance of the year. We expect stable activity for our regeneration services business.

Looking forward, we continue to expect that high refinery utilization and favorable outlet economics will continue to benefit demand for regeneration services particularly from our customers who operate some of the largest scale refineries in the Western Hemisphere.

Ecovyst regeneration contracts offer substantial earnings stability due to their long term nature cost, pass through mechanisms and capacity reservation fees, turning to virgin sulfuric acid. Although we remain cautious about the potential for near term weakness in the industrial demand to adversely impact sales, particularly for spot sales and sales under short dated contracts.

We continue to believe the long term outlook for virgin sulfuric acid remains very positive as one of the most widely used chemicals, sulfuric acid plays a critical role in a wide range of industrial and petrochemical applications and processes, Eco Services quality and robust network continues to make us a preferred supplier to leaders in a wide range of industrial applications including mining and the production of nylon intermediates.

1032 and treatment services provide our customers with unique and high value services and we maintain a positive demand outlook for both segments for 1032 catalyst activation. We expect demand to remain strong through 2024 and we are seeing high levels of interest in activation services well into 2025 as we have discussed previously, we are taking steps to significantly expand our capacity at the orange Texas site to serve the growing demand. We see for exit you catalyst activation, turning to advanced materials and catalysts for Sales of polyethylene. Catalyst and catalyst supports the weak global economy continues to constrain growth in global polyethylene demand.

However, we remained aligned with major producers both in the cost advantage us and Middle East. We remain positive on the long-term sales outlook for our polyethylene catalyst. Given how our customized catalyst approach has enabled us to win at the key expansion project in the US and Middle East.

We expect sales growth for the full year as well as into 2025 and beyond to be supported by the ongoing expansion of polyethylene catalyst production capacity at our Kansas city site which is on track for completion. By the end of next year, the expansion is backed by firm customer commitments for expansion projects that are expected to ramp in 2026 and 2027.

In addition, we continue to leverage our research and development capabilities to expand our advanced silicas portfolio for high growth biocatalysis applications. Customers continue to qualify our products for fruit processing applications with very positive feedback and we expect these qualifications to translate into additional sales in 2025 for the Zeolyst Joint Venture.

We continue to expect that 2024 will be a strong year for the sales of hydrocracking catalysts. Although we do not expect to repeat the peak sales levels we saw in 2023 in terms of longer term growth expectations, we continue to believe our mock technology is gaining market share as it offers refineries, valuable production flexibility for our sales of catalyst materials into sustainable fuel production.

There has not been a significant change in market dynamics from the view that we shared with you in early August. We see the current low value for rins and the adverse impact of inflation on construction costs continuing to weigh on near term project. Economics for incremental renewable diesel capacity, absent improved producer economics in the short term, we continue to expect weak demand conditions for catalyst material sales into renewable diesel over the next 12 to 18 months.

In the long term, we maintain that the introduction of sustainable aviation fuel is the only viable near term solution for airlines to achieve decarbonization. We expect that sustainable aviation fuel will begin to ramp up at the end of 2025 and the beginning of 2026 we believe our zeolite technologies for both dewaxing materials and Oliver catalysts are well positioned as key enablers for the industry for sales of emission control catalyst.

Our outlook has also not changed materially since August, global sales for heavy duty diesel vehicles remain depressed due to the weak macro and economic environment and high interest rates. In addition, the deferral and implementation of more stringent emission requirements under Euro seven has been delayed and this is another contributing factor to the weak vehicle sales.

Lastly, we remained aligned with key players developing advanced recycling technologies, working towards customer plant trials with a solid technology offering. We believe we are well positioned for future growth. I'll now turn the call over to Mike Feehan for a more detailed discussion on our financial results for the third quarter.

Thank you Kurt.

Sales for the third quarter including our proportionate. 50% share of sales from the Zeolyst Joint Venture were $210 million. Unchanged. Compared. To the prior year, Eco Services. Sales were. Up. Approximately 4% largely driven by high higher volume of virgin sulfuric acid and favorable contractual pricing for regeneration services.

Sales for advanced silicas decreased. Modestly as the benefit of higher sales volume for polyethylene catalyst and catalyst supports was offset, By the comparative timing of event-driven niche custom catalyst sales.

Sales for the Zeolyst Joint Venture were lower as higher sales of Hydrocracking catalysts were more than offset by a decrease in sales of catalyst materials, used in the production of sustainable fuels and emission control applications. Third Quarter adjusted EBITDA was $60 million compared to $68 million in the prior year. With the decrease, primarily driven by the lower sales within the Zeolyst Joint Venture, offsetting the higher earnings from Eco Services and advanced Silicas.

Moving to the next slide. I'll highlight the major components of the change in adjusted EBITDA as we anticipated and discussed in our second Quarter earnings call the unfavorable period-over-period net pricing impact in the second Quarter associated with the contractual passthrough of energy and other index costs within, Eco Services is behind us.

The price to variable cost ratio in the third quarter was positive with net pricing. Accounting for approximately $3 million driven largely by strong contractual price increases for regeneration services.

However. The lower sales volume of high margin catalysts used in the production of sustainable. Fuels drove a less favorable sales mix within the Zeolyst Joint Venture impacting adjusted EBITDA in the year over year period. Comparison the balance of the change in the just EBITDA relates to higher costs, Including higher planned manufacturing and maintenance spending within. Eco Services costs associated with our reliability initiatives, as well as other costs including certain employee related costs.

I'll now cover the highlights of our segment results starting with Eco Services. Third quarter sales for Eco Services was $154 Million Up 4%. Drivers of the increase include higher sales volume for virgin sulfuric acid and favorable contractual pricing for regeneration services.

Higher comparative volume for our 1032 catalyst activation business was also a contributing factor. Third quarter adjusted [Eva for ecoservices] was Up.

Modestly compared to the prior year as the higher volume and increased pricing was largely offset by higher manufacturing costs associated with inflation, increased planned maintenance costs and costs related to our reliability initiatives which have resulted in a marked increase in operational efficiency.

As we've previously discussed, we expect the improved operational Efficiency of our reliability program to translate into enhanced capacity and ability to serve growth and demand for our products and services.

Moving to advanced materials and catalyst. Third quarter sales for advanced silicas was $25 Million. A slight decrease compared to the prior year. The modest decrease reflects higher sales volume for catalyst using polyethylene production offset by the timing associated with sales of niche. Custom catalysts. Our proportionate. 50% share of sales from the Zeolyst Joint Venture was $31 million down compared to the prior year as higher sales of hydrocracking catalysts were offset by the lower sales of catalyst materials used in the production of sustainable fuels and emission control applications.

Third quarter, Adjusted EBITDA. For the advanced materials and catalyst segment was $11 million compared to $16 million in the prior year driven by the lower sales volume within the Joint Venture.

As we moved to cash and leverage. The third quarter was another quarter of favorable cash generation. For the first nine months of the year adjusted free cash flow was nearly $60 million compared to $20 million in the prior year. Primarily driven by the timing of dividends from the Zeolyst Joint Venture and favorable changes in working capital.

We ended the third quarter with approximately $123 million of cash and our available liquidity was $188 million including availability under our ABL facility. Our net debt leverage ratio at quarter end was 3.2 times down from 3.3 times as of the end of the second quarter based upon our expectations for cash generation for the remainder of the year and excluding any discretionary uses of cash, we expect to end the year with a net leverage ratio of approximately three times as a reminder, our target net leverage ratio is between 2 to 2.5 times.

I'll now turn to our outlook for the fourth quarter and full year 2024.

As Kurt noted our third quarter, financial results were in line with our expectations. And while Adjusted EBITDA for the third quarter felt toward the lower end of our guidance range, this was largely due to the timing associated with specialty catalyst orders within the Zeolyst Joint Venture.

With some sales shifting from the third quarter into October for the full year 2024. We are. Maintaining our previous guidance ranges for GAAP sales of $700 million to $740 million. Sales for a proportion of 50% share of the Zeolyst Joint Venture of $115 million to $135 million and for Adjusted EBITDA of $230 million $245 million, as we have previously discussed, the sales of certain products within. Advanced materials and catalyst segment can be lumpy as they are often large event-driven sales. Single orders of these catalyst sales can be large and the timing of when the revenue is recognized can be relevant to specific, Quarterly results.

The range takes into account the lumpiness of our sales in advanced materials and catalysts and acknowledges a range of outcomes in our virgin sulfuric acid and polyethylene business. Given the current industrial demand outlook. In terms of the specific outlook for the fourth quarter, we see continued Stability in our Eco Services business as such our expectations for the full year, Adjusted EBITDA for the Eco Services segment.

Remain in the range we provided in our second quarter earnings call which was $195 to $205 million, and this would imply. Fourth quarter Adjusted EBITDA of approximately $54 million at the midpoint. Of the guidance range. Last quarter we also provided a full year range for our advanced. Materials and catalyst segment of $65 million to $70 million.

Prior guidance incorporated our. Expectations for timing of certain niche custom catalysts sales with heavy weighting in the fourth quarter. Implying. fourth quarter. Adjusted EBITDA . Over the segment in the $30 million range. However, in light of continued uncertainty around the sales of catalysts used in the production of sustainable fuels and emission control applications and the timing of certain. Catalyst sales full year results for advanced materials and catalysts could be slightly below our target. However, this would be largely all set on a consolidated adjusted basis by favorability and corporate costs.

I will now hand the call back to Kurt. For some closing. Remarks.

Thank you, Mike. I want to make a few comments on our safety and sustainability efforts. The responsible stewardship of our facilities and products is a core value at [obvi] during the past two years. Ecovyst has made significant investments in time and resources across our safety and environmental programs. These investments along with the superb efforts of all of our EcoVadis colleagues has resulted in top quartile safety performance and our platinum EcoVadis sustainability rating for 2024. I am confident that Ecovyst's hyper focus on stewardship will continue to yield outstanding safety and environmental performance which helps us retain a strong connection to our strategic plan and stakeholders.

Finally, as we look to deliver on our financial commitments for 2024 our capital allocation focus remains on positioning EcoVadis for differential growth in the future and delivering value for our shareholders. As such. We are continuing to implement the strategic plan we outlined last year in our investment day, we continue to see compelling opportunities across our businesses to strengthen our portfolio and improve the resiliency of our earnings.

Consequently, we are investing to capture these organic and inorganic growth opportunities. We are currently investing in the expansion of our polyethylene catalyst production capacity at our Kansas City site and the expansion of our catalyst activation capacity within 1032. Both projects remain on budget and on target to support expected future growth and demand.

In addition, the reliability initiatives within our Eco Services segment that we outlined in our investor day last year have already resulted in significant increases in our operational efficiency.

As we have discussed, we expect these initiatives will provide for overall improvement in plant operating rates and therefore expanded capacity to serve expected growth and demand for both virgin sulfuric acid and for regeneration services.

We also remain interested in inorganic growth opportunities that would closely complement our existing businesses, provide attractive synergies, enhance our capacity and capabilities and increase our earnings resiliency and growth profile.

Eco visibility to generate cash provides long term investment potential in both organic and inorganic opportunities.

As Mike mentioned earlier, a primary goal of our current capital allocation strategy is to reduce our net leverage ratio to a target range of 2 to 2.5 times, thereby enhancing our balance sheet flexibility to capture future growth opportunities.

In summary, we remain intently focused on growth and value creation for our shareholders. We see compelling opportunities across our portfolio and we believe the strategic plan we have outlined will allow us to deliver on our growth expectations.

Thank you. And at this time, I will ask the operator to open the line for questions.

(Operator instructions) . We'll hear first from Patrick Cunningham Citi.

Yes. Hi, good morning. Just curious on your early thoughts for 2025, both from an end market standpoint. And then you mentioned a lot of things in terms of items in your control, whether it's benefits from the reliability program capacity additions, and potentially some addbacks from, maintenance costs you incurred in 2024. So maybe just, both in terms of the market setup as well as, items in your control.

Yeah, thanks. Thanks Patrick. I think, we're not really guiding here for 2025. But as we look at the, the overall landscape, Eco Services continues to, operate, in terms of our regeneration services at a high utilization rate. So, we know we expect volumes to remain strong there as well as we, contracts roll off and we reprice them. We expect the continued pricing power in, in that segment, virgin sulfuric acid.

While there has been some pockets of weakness in in certain industrial segments on balance, it's operating really as we expected. And globally the reported virgin sulfuric acid prices have risen here in the last six months. And we would hope and think that continues on in into 2025 and for advanced materials and catalysts really, we continue to offer really high value products to our customers that, deliver, the delivered really customized, polyethylene solutions for some of the largest producers and we expect, that will continue to be the case going forward.

Got it. And then, four quarter is very helpful, it does imply somewhat of a healthy step up. But I think, called out the catalyst or order timing being the biggest part of that. Is there anything else in terms of, flow through of, of price/cost and eco services, being a big component, potentially offsetting some seasonality there just wondering why we're sort of flat in a seasonally weaker period on the Eco Services side.

Yeah, Patrick, I for, for the ecoservices, traditionally, what. We see is the first quarter. And the fourth quarter usually being a little lighter than the 2nd and 3rd. So actually, having a call, it an implied guidance range of 54, I think that's a 10% increase compared to the prior year, right. So, I think that the balance for the fourth quarter for Eco Services is going to be relatively.

In line with our, with our expectations and on the AM and C business, we do expect polyethylene to be up, year over year as we've talked about in the past and hydrocracking, was a big component in the fourth quarter of last year. But that will be. Largely. Offset by, the polyethylene, increase year over year. Along with some of the other, custom catalysts and niche custom catalyst sales that we expect to see. In the fourth quarter.

Great. Thank you so much. I'll talk to them.

David Begleiter Deutsche Bank. Your line is open.

Thank you. Good morning. Curt and Mike on the leverage. Do you expect to be at your leverage target by the end of '25?

Yeah, David, I, we're, we are expecting as we said to have a good cash generation this year. Right? So, our, our free cash flow guidance has a midpoint of $80 million which would be an increase compared to the prior year. And then we do expect to end the year around the three times leverage. We're not giving specific guidance into next year. But in the past, I would say that we've talked about being able to delever about a half a turn a year. So, our target range of 2 to 2.5 times would be certainly within, within the range if we continue down that path and generate a good amount of free cash flow each year.

Very good. And just in Q3, what was the impact from hurricane Beryl in the quarter?

Yeah, the, the impact was a few million dollars. So, it did impact. The results, but not quite as materially as some of the other hurricanes and weather events that we've seen in the past particularly in early 2023.

And just less. You're thinking about the bridge of '25 beyond barrel, any of the one off impact you could call out that would help bridge to a growth next year.

Yeah, the one other thing, I mean, Kurt talked a little bit about the end markets and the drivers of growth. The other thing we talked about this year having a higher step up in some of the cost and ecoservices, particularly around the reliability program and the higher turnaround costs. So that would have been a bit of a step up and you wouldn't see that same increase going into next year. But at the same time, we do continue to maintain, higher cost in that business, for reliability and turnaround as inflation and, keeping our maintenance cost.

At a relatively appropriate level for future growth of that business. And as we talked about that reliability program does help add capacity. So it will help support the growth of that business, for many years out.

Is that also a few million dollar impact in terms of this year versus next year?

Yeah, I think when we gave the original guidance for '23 going into '24 we talked about, a roughly $5million to $10 million change right? So, you wouldn't see that same, that same change going into next year.

Thank you.

Our next question comes from Aleksey Yefremov KeyBanc Capital Markets.

Thanks. Good morning, everyone. I just wanted to stand the subject of a reliability program and clarify. So, I think you mentioned that you're happy with how this reliability program is performing thus far. And you see the benefits are, are these benefits more in the potential capacity when in improves? Because if I just look at either the eye, it's sort of hard to see it right now. You can explain.

Thanks. for the question, Alexia. I think the, the reliability efforts have really, it's an enhancement year over year from last year of 2023. And it has enabled us this year. I mean, we believe that we're going to be up year over year on our virgin sulfuric acid sales, so it's benefited us there. But there's still work to be done. I mean, it's a multiyear initiative where we're using, we have additional reliability team, we've improved our, our maintenance schedules.

We've also are using automation to conduct reliability models so that the combination of, of those efforts, across a multiyear period will we, we believe will to incremental sulfuric acid capacity which allows us to, take advantage of those high operating leverage and, produce additional EBITDA. So, we believe you'll see that, as time goes on, you'll see that incremental capacity that, comes from the reliability program, we meet up with the higher virgin sulfuric acid demand that we see long term.

Yeah, thanks for this explanation. Kurt. And I guess next year again, based on what you said in the prior two questions, I, I'm assuming you would expect Eco Services pricing to be up. If you could confirm if that's the case and also if that price increase would be higher than the increase in cost excluding the pass through.

Yeah, I, and like that's a good question. I mean, we're not providing, real specific guidance for next year. But I would say that, as we've talked before, the pricing mechanism within ecoservices, is quite strong with the long-term nature of some of the contracts, the ability to reset the base price, when those contracts run out. So we'll continue to see that and part of our growth story in that business is both, volumetric growth as well as pricing so, we do expect next year and over the coming years as part of our long term strategy to continue to see growth both on the volume and pricing side.

Okay, thanks a lot.

John McNulty BMO Capital Markets. Please go ahead with your question.

Yeah, thanks for taking my question. So, on the catalyst for sustain sustainable fuels, obviously, things have taken a step back. Are there things you can do from a belt tightening perspective that you're considering at this point because it does sound like, this is something that may not recover in the next year, may not recover in the next couple of years based on at least some of your commentary. So, I guess, can you help us to think about maybe some of the leverage you can pull to help with the profitability around that particular part of the platform.

Hey John, thanks. for the question. And I think, as it just really as we said on the call our position on sustainable fuels hasn't changed and we still don't view that as a, 12 to 18 month type of timeline on recovery just because of the supply demand imbalance that currently exists in the marketplace there. I would point you to in Q2 and in Q3, we did do cost reductions at our advanced materials and catalyst facilities, right, where we address cost that, particularly at the North American level. But we're limited in what we can do there because a lot of the assets are fungible with other catalyst products that are non-renewable, right, that they're all making similar intermediate. So, we've already taken a pretty strong approach to that in Q2 and Q3 which, is starting to roll through.

Got it fair enough. And then I guess just a question on, on cash and leverage. So, your leverage is improving, you've got, you're not at the targets that you want to get to. But your cash balance on the balance sheet is actually getting pretty chunky at this point at an over $125 million and it looks like it should go up even more in four quarter. So, I guess, can you speak to the use of that cash? And also, if you see M&A opportunities starting to materialize, I think a lot of assets were off the market for a while, but it does seem like in some areas we're starting to see them come back. Do you see a pipeline getting more full in your mind or is that not something you're really considering at this point just given the leverage?

Sure. That's a good question, John, I think the, in the past, we've maintained a pretty flexible capital allocation strategy and this has included, share repurchasing while we've delivered. And we've maintained leverage as a as a key priority, but as outlined, in our investor day and I think what we said today on the call, we're going to focus on our capital allocation really on growth and maintaining that balance sheet flexibility to fund that growth. And we really view that's the best way to deliver long term shareholder value. So, we've got really good organic growth opportunities that we want to continue to fund. And we also, to your point, we do remain interested in inorganic growth opportunities that I would say are more Bolton in nature and would complement the existing business, really adding resilience and strengthening our future growth potential in terms of their availability. I mean, clearly it was a very slow, I would say over the last, 12 to 18 months, I anecdotally, I think it is the activity will likely pick up and again, I think we remain interested in organic opportunities where they're bolt on in nature and highly complementary to our, our, our business model.

Got it. Thanks very much for the call.

Our next question will come from Alex, excuse me, Laurence Alexander at Jefferies'.

Hey, good morning. This is [Kevin on for Lawrence]. I guess my first question is, I guess I'm trying to get more sense of demand, sensitivity to rate drops. I'm just kind of curious to see if I guess how, you expect maybe demand to turn, let's say if rates drop 100 basis points or so in 2025. And I guess I'm just curious to see if you're seeing any signs of green shoots yet.

Sure. I think, in terms of rate cuts, I mean, that's the most of our customers that we service are, I would say, especially in terms of refining and petrochemical are already very advantaged up on a global basis from an energy standpoint, which is probably more impactful to them than the rate cuts themselves. And our other customers that are producing other chemicals or intermediates or materials are generally selling on a global basis and are also a cost advantage in terms of what we see in demand, we do this year our virgin sulfuric acid sales will be up year over year, one of the segments that we talk about nylon, we believe will be up year over year, albeit not, it's certainly not a banner year in nylon.

It's still on a historically lower end level. But yet up year over year, mining remains strong. If you've seen metals and other materials components, maintain high pricing and high demand. So, from a from a demand standpoint, I think in general, refining remains very robust with high utilization rates. Output is always again considered liquid gold within the refining industry and always has a very strong demand push behind it. And in terms of virgin sulfuric acid, we talked about some industrial segments weakness, but it's a very diverse product. And there's lots of areas where there is a very big demand in terms of catalyst.

Our advanced materials and catalyst. We've already spoken with the Renewable fuels segment. But polyethylene demand growth is still projected to be 2% to 3% per year. We're aligned with the major producing cost advantage areas in terms of the US and, and Gulf coast and our hydrocracking sales, which are we're happy with this year, albeit it's not a peak cycle year that we had in 2023. We are gaining share in that space with our new mock technology.

Okay. Thank you. And then my second question, I was wondering if you could talk a little bit about, I guess how you think about the revenue opportunity over the next say five years or so for staff?

Sure. I mean, [staff is, our view on staff] is it's, a highly attractive market for both producers and the supply chain partners. And it really the only viable means to decarbonize airline travel, right? So we believe that our do I technology where, whether it's the dewaxing materials or the glimmer catalysts that we have are really well positioned to enable that, that industry in terms of the timing as we see it, we expect, pilot scale sales really towards the end of 2025. And then that's starting to ramp in 2026 as certain mandates become effective in particularly in the EU which will have a 2% mandate in 2026. And we expect whether mandated, just a consumer driven SAF demand to come into play here in the US and beyond in 2026 and, through 2030.

All right. Thank you.

(Operator instructions), we'll hear from Hamed Khorsand at BWS Financial.

Hi, good morning. My first question was, what's the level of conversation you're having with the refinery customers? Given that they're publicly talking about, crack spreads declining and their utilization rates, just hugging the 90% line right now.

Sure. Good morning. I mean, I think we have very, we're very on the refining side for Eco Services has very, I'd say close relationships with the refining customers and in many cases, data feeds, to their actually consumption of the sulfuric acid and in terms of their alkylation units and how they're running, alkaline remains very valuable in terms of its position in the gasoline pool.

So even as you see things like overall utilization rates may ticking down, particularly some of that's related to maintenance or crack beds dropping, generally they will want to lean into their alkylation units even harder because it's an area of significant profitability for them. So, our, outlook on alkylation is it, and it has, it's been for, since I've been involved with this business, remains strong because it's, the favorability, the favorability of output demand and the economics that surround it, are unchanged.

Okay. And then you've had some lots of really onetime issues last year and [this year, exing] out the Zeolyst Joint Venture is 2022 a good baseline to compare for 2025.

Yeah, I mean, it's, every year has a different challenges in it, right? And 2022 had some favorability in some cases, timing items and others, right? So, we've talked before about the hydrocracking and peak years in 2023 it was lower in 2022. But then there was also a different dynamic with sustainable fuels. We also had some favorable pricing that was really driven by some of the indexation that we've talked about in the past and the Eco Services that we wouldn't see, going forward. So, there's a combination of a few things, Hamed. It's, a bit of a mixed bag.

Got it. All right. Thank you.

And we have no further questions in the queue at this time. This does conclude the Ecovyst third quarter, 2024 earnings call and webcast. Thank you for your participation and you may disconnect at any time.