Ecovyst Inc. (NYSE:ECVT) Q1 2022 Results Conference Call April 28, 2022 5:00 PM ET
Mike Feehan - Chief Financial Officer
Kurt Bitting - Chief Executive Officer
Tom Schneberger - President
Conference Call Participants
John McNulty - BMO Capital Markets
Aleksey Yefremov - KeyBanc
David Begleiter - Deutsche Bank
Angel Castillo - Morgan Stanley
David Silver - CL King
Hamed Khorsand - BWS Financial
Kevin Grundy - Jefferies
Good morning. My name is Catherine, and I will be your conference operator today. Welcome to the Ecovyst First Quarter 2022 Earnings Call and Webcast. Please note today's call is being recorded and should run approximately one hour. Currently, all participants have been placed in a listen-only mode to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. [Operator Instructions]
I would now like to hand the conference over to Mike Feehan, Chief Financial Officer. Please go ahead.
Thank you, Catherine. Welcome, everyone, and thank you for joining us for our first quarter 2022 earnings call. I would first like to introduce Kurt Bitting, our new CEO, who will be joining me today. In addition, Tom Schneberger, our new President of Ecovyst, will also be joining us and available during our Q&A session should any questions need to be directed his way. We will start today with formal remarks, then followed by a Q&A session.
Please note that some of the information shared today is forward-looking information, including information about the Company's financial and operating performance, strategies, our anticipated end-use demand trends and our 2022 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 on today's call with their corresponding GAAP measures can be found in our earnings release and presentation materials posted on the Investors section of our website at www.ecovyst.com.
Now I'd like to turn the call over to Kurt.
Thank you, Mike, and thank you to everyone joining us today. First, I'd like to say how excited I am to be taking the reins as CEO of Ecovyst. I have been with the Ecoservices business for more than 15 years, serving in several capacities, most recently as President of the business, but I had never been more confident in the growth potential of this company than I am today. Ecovyst provides products and services critical for the production of clean fuels, polymers and the growing technologies that will aid in decarbonization efforts. We are uniquely positioned to play an important role in the green energy transition and to help our customers achieve their own sustainability goals.
As you have seen in today's press release, the Ecovyst Board has decided to make a leadership change to accelerate the growth of the Company. This includes my promotion to Chief Executive Officer and the promotion of Tom Schneberger to President. In addition, Kevin Fogarty has joined the Board as a Nonexecutive Chairman. We are happy to welcome Kevin to the team, and we are fortunate to be able to draw on his vast experience in the chemical industry following his retirement from Kraton. I also want to thank Belgacem Chariag for his past three years of leadership.
The year has kicked off on a positive note. The end markets we supply have demonstrated resilience and growth during this period of inflation and geopolitical conflict. As you know, we are a critical supplier for the production of transportation fuels and many industrial applications. But we are also uniquely positioned to support sustainability trends. In fact, we provide critical materials and services that support sustainability enabling technologies, including sulfuric acid supply into mining for metals and minerals production essential to electrification as well as catalysts and activation services used for renewable fuels production.
I am very proud of the Ecovyst team's ability to deliver strong sales and adjusted EBITDA this quarter, following closely on the heels of our stellar financial performance in 2021. The confidence we have in our growth momentum gives us the flexibility to continue to pursue accretive bolt-on acquisitions similar to the addition of Chem32, while returning value to our shareholders through the share buyback program we have announced. Mike will elaborate on our capital allocation strategy in a few minutes.
I would like to highlight several key financial, operational and safety metrics that we track closely. Our strong performance this quarter on all fronts is a testament to the team as well as the key strategic partners that we have built, our long-term customer contracts for critical products and services and our robust production and logistical operations that allow us to reliably deliver our solutions to our valuable customers. We continue to outpace industry growth rates and peers as evidenced in our Q1 2022 results, with year-over-year gains of 34% in sales, 40% growth in adjusted EBITDA and a strong 74% cash conversion ratio.
Profitability also increased amid inflationary pressures as we were able to pass through rising raw material, freight and energy cost to customers. The growth trends of our products are expected to continue through the remainder of the year and into 2023.
With the need for sustainable solutions front of mind for many investors, customers and employees, we continue to invest in technology that supports and advances these trends, with 85% of our research and development focused on sustainable solutions. We value the health and safety of our colleagues above all else. Our safety record has shown consistent improvement year-over-year, but our work in this area is not complete, and we remain committed to continuous safety improvement.
There is a lot of concern around the current inflationary and geopolitical environment. I want to take a moment to highlight how well Ecovyst is performing through this period of volatility. First, Ecovyst has had success in more than offsetting the inflationary pressures in raw materials and transportation as a result of contractual cost pass-throughs and price increases to our customers.
From a demand standpoint, many of our customers are located in the U.S., particularly on the Gulf Coast, and their advantage to access to energy and raw materials has allowed them to benefit from a strong global pool for their refined products and petrochemicals, which rely on supply from eco services and catalyst technologies. And finally, because of order timing and transportation issues, primarily in catalyst technologies, we have built up an order backlog that we will fulfill in the coming months, which gives us confidence for the remainder of the year.
Moving to a discussion of our industry demand drivers. I would, again, like to highlight that Ecovyst supplies numerous customer segments that have proven critical in today's geopolitical environment, including clean fuels, industrial and polymers. This alignment, along with our support of sustainable technologies, has enabled us to deliver strong results.
The recent geopolitical events have created the strong need for exports of additional refined products from the U.S. The return of U.S. gasoline demand, coupled with the global demand for U.S. gasoline exports, has led to healthy refining margins and increased refinery utilization in the U.S., which is projected to increase by 5% in 2022. This has continued to benefit regeneration, which supports alkylation, one of the highest value processes in a refinery.
On the industrial side, we see strong sentiment continuing for the materials that are used in the automotive industry, such as lightweight vehicle parts, fuel-efficient, low-rolling resistance tires and lead acid batteries. Mining sector growth remained strong as the supply of metals and minerals is critical for the production of electric vehicles and green energy infrastructure such as solar and wind.
Renewable fuels demand continues to grow in the high double digits year-on-year as government policies push to reduce emissions in heavy-duty transport and aviation fuel. As a reminder, the expanding production of renewable fuels benefits both catalyst technologies and our Chem32 catalyst activation business because renewable catalysts generally require more frequent catalyst bed change-outs. We are well prepared to handle increasing customer needs in the coming quarters as the renewable sector continues to expand.
Polyethylene continues to play an expanding role for Ecovyst as well as the global economy. We had strong growth through the pandemic. With the current geopolitical uncertainties, demand for polyethylene remains strong, similar to what we experienced during the pandemic.
In traditional fuels, where hydrocracking units are operating at high production rates, our sales of HCC catalyst materials increased by more than 90% versus prior year. The strong refinery utilization also resulted in orders placed for niche custom catalysts in line with our expectations. Our development of novel catalyst for sustainable solutions continues to progress. with the receipt of orders for manufacturing trial quantities of catalysts for novel biomaterials.
Our exposure to both established and developing segments of our customer base gives us confidence in our growth momentum through 2030.
Transitioning to sustainability. On our previous quarterly call, we talked about our sustainable solutions in three key areas: clean air by reducing sulfur and nitrogen oxide emissions in heavy-duty transport; plastic circularity, enabling the reuse of lightweight durable plastics; and renewables to transform biomass into fuel and other materials.
The pool for our renewable solutions is strong. In fact, our sales to renewable fuels tripled in 2021 and represent more than 10% of sales at our Catalyst Technologies business. We expect further growth in 2022. We will continue to partner with our customers in providing innovative solutions to industry problems that will transform our world in the coming decades.
I will now turn the call over to Mike for a review of our Q1 2022 results.
Thank you, Kurt. As mentioned during our fourth quarter earnings call in late February, we expected the strong sales and adjusted EBITDA growth that we experienced in 2021 to continue into the first quarter. Today, I'm pleased to report that we delivered in line with those expectations. During the quarter, total sales, including our 50% share of ZI, increased 34% year-over-year, with adjusted EBITDA increasing by 40%. Demand for regeneration services and virgin sulfuric acid in our Ecoservices business led the way, along with strong demand for polyethylene catalysts in our Catalyst Technologies segment.
We continue to implement price increases, which more than offset higher variable costs such as sulfur, natural gas and freight, allowing strong earnings growth to continue despite cost pressures. Adjusted EBITDA margins increased 120 basis points to 28.4%.
Moving to the next slide, we'll take a look at the key components of our earnings growth in the quarter. Adjusted EBITDA increased $17 million to $59 million on two key drivers. First, strong demand in various product lines led to higher volumes. Second, our business fundamentals have allowed us to raise prices to offset the impact of inflation on input costs, creating a positive price to cost dynamic. In Ecoservices, changes in sulfur costs are passed through in price on a dollar-for-dollar basis. As other cost change, including labor, natural gas and freight, contractual index provisions offer price protection, further shielding this against inflation.
Moving to our Ecoservices results. Sales increased $54 million, or 54%, driven by higher regeneration services and virgin sulfuric acid volume and increased pricing to cover higher input costs, including the pass-through of $21 million of higher sulfur costs. Adjusted EBITDA increased $16 million, or 50%, on the drop-through of favorable pricing and higher volume as well as the impact from the Chem32 acquisition. Earnings growth of 50% in this segment was exceptionally strong. However, margins were negatively impacted by 510 basis points related to the pass-through of higher sulfur costs. Adjusting for the impact of the higher sulfur cost pass-throughs, adjusted EBITDA margins for Ecoservices would have been just over 37%.
In our Catalyst Technologies business, silica catalyst sales were down slightly, while sales in our Zeolyst joint venture were flat with the prior year. While demand for polyethylene catalyst continues to remain strong, we experienced delayed shipments and an impact from the timing of niche custom catalyst sales. Within the Zeolyst joint venture, sales growth in both hydrocracking catalyst and niche custom catalysts were offset by order timing within the year for our pressure product catalysts.
Adjusted EBITDA of $17 million decreased $1.5 million with reduced margins on lower volumes due to order timing and shipping delays and higher production cost. Given the strong demand environment across our key markets, we expect improved performance in the second quarter.
On this next slide, we are reiterating our guidance for nearly all of our metrics as we continue to benefit from the strong growth momentum experienced by our key demand drivers. With the recent spike in sulfur costs, we're increasing our GAAP sales guidance by $80 million from a range of $730 million to $750 million to a range of $810 million to $830 million. This leads to our expectation that sulfur costs will be higher by approximately $140 million year-over-year.
As a reminder, this contractual pass-through of higher sulfur cost does not impact our adjusted EBITDA, but would have a negative impact on adjusted EBITDA margins. We are reiterating our adjusted EBITDA guidance, which is expected to be up 16% at the midpoint of our range compared to the prior year, and our adjusted free cash flow expected to improve 30% year-over-year.
With respect to the second quarter of 2022, we anticipate continued sales and adjusted EBITDA growth in both businesses. Earnings are expected to be up compared to the prior year and the first quarter of 2022, but slightly lower than the fourth quarter of 2021 in both businesses. On the top line, Ecoservices sales in the second quarter are expected to continue to increase related to the pass-through of higher estimated sulfur costs and other input costs.
Shifting to our financial position. Ecovyst's strong cash generation continues to drive the reduction in leverage and increase in available liquidity. Since the recent sale of our Performance Chemicals segment in August of 2021, we have reduced our leverage by more than half of a turn and are now just above 3x. During the same time frame, available liquidity, which we define as cash on hand plus the availability under our revolving credit facility, has increased 24% to more than $200 million. This strong financial position allows us the flexibility to provide our updated capital allocation strategy on the next slide.
With our strong cash generation and lower leverage position, Ecovyst is positioned to increase shareholder value through return of capital and opportunistic bolt-on acquisitions. We will continue to use cash from operations to support organic growth initiatives, then look for opportunities to target accretive and strategic M&A with a focus on sustainable technologies, aligning our goals to create a more sustainable future.
This flexibility allows the Company to return capital to shareholders, including negotiated transactions with our sponsors, while keeping our leverage level in an appropriate range. We expect to use our available cash on hand and free cash flow generated from operations to fund the program. This strategy represents an attractive use of our cash as part of our balanced approach to capital allocation.
With that, I'll turn the call back to Kurt for some closing remarks.
Thanks, Mike. In summary, our business has delivered great results in the first quarter. We have long-term customer contracts that help to protect against inflation. Our North American customer base appears to be well positioned to manage through the current geopolitical situation. And we have the demonstrated ability to generate strong cash flow. This, along with a strong balance sheet, gives us the confidence in our new capital allocation strategy, including our newly approved stock buyback program, which we believe will increase shareholder value. We expect to have a strong second quarter and keep the positive momentum for the rest of the year.
I'd like to reiterate that I am truly honored to be taking on the CEO role at Ecovyst at such an exciting time for the Company. I also want to take the opportunity to thank all of our dedicated Ecovyst employees who deliver these outstanding results. They are intently focused on continuing to serve our long-term customers as well as developing the solutions that will enable low-carbon technologies and green infrastructure in the future. In the coming weeks and months, I look forward to hitting the road to meet many of you who are on this call. Thank you for your time and interest in our great company.
This concludes our prepared remarks, and we will now open it up for Q&A.
[Operator Instructions] We'll take our first question today from John McNulty with BMO Capital Markets.
Congratulations on the new role, Kurt. So I guess my first question really is to that. I think, look, it's great to see you kind of in the seat at this point. I guess when you think about what changes you may bring as a leader to Ecovyst, I guess how should we be thinking about what those might be? Is it more of a capital allocation change or shift in direction? Is it strategic in some of the businesses? I guess, how would you characterize it?
Yes. Thanks, John. As President of Ecoservices, I really heavily participated in the development of our current strategic plan. And as you know, Ecovyst plays a key role in the production of clean fuels and sustainable technologies. And really, our portfolio, our technology assets and the really great, highly capable team we have are really well positioned to capture the growth in those sustainability trends. So we like -- we're going to continue to look at our organic opportunities, which we have a rich pipeline, as well as bolt-on M&A opportunities.
Got it. Fair enough. And then maybe just a question with regard to the capital allocation strategy. I guess can you help us to frame your comfort with leverage and what you think kind of the right leverage level would be given that you do have -- you have a large buyback program in place, but it's over a four-year period. So I guess, how should we be thinking about leverage levels and the velocity at which you might enact that share repurchase program?
John, it's Mike. I'll answer that one. So great question. And what we were able to do is we have a long-term financial plan where we have a very strong free cash flow profile over the next three to four years. We've been demonstrating over the past several years our ability to generate cash flow. We've reduced our leverage about half a turn every year. Just in the last six months, from the end of the third quarter, we've reduced leverage over 0.5 a turn. We're down at the three -- just over three now. So we're starting to get into that sweet spot where we have a lot of flexibility and knowing the cash on hand that we have today, the available liquidity that we have under our credit facility and the ability of free cash flow generation in the future that will be very adequately set to do a few things.
One, first, take any excess cash that we have and reinvest it back in the Company through growth projects. As Kurt mentioned, we do have a pipeline of great organic growth opportunities. Then we'll look to see what do we want to do next, whether it continues with another bolt-on acquisition like a Chem32, something that's accretive or strategic or has the right technology. And then we also have this new buyback program. So we're very comfortable with our plan, our forecast and what we'll be able to do to support this program.
I was just saying the follow-up, that leverage position that you asked, I mean, your base question, we're going to be comfortable with the leverage in the 3s, right? That's where we'll be comfortable with.
Good luck. Congratulations on the new position.
Our next question comes from Aleksey Yefremov with KeyBanc.
Congratulations on new roles for everyone. Just if I may follow up on this buyback question. Is it kind of safe to assume that if you're not making bolt-on acquisitions, that majority of your free cash flow in any given year going forward would be kind of dedicated to buybacks?
Yes, Aleksey, it's Mike. Yes, I think the plan is if you just look at kind of the mechanics behind our capital allocation strategy, like I said, any initial cash from operations, we're going to try to reinvest in -- that first dollar goes back into organic growth opportunities. And if there isn't anything from a bolt-on acquisition on the horizon, we would look to do this buyback program and see how the most accretive use of the cash is, right? So we're looking to figure out how the best use of our cash to increase shareholder value and believe that that's the best opportunity for us at the moment.
And just on the results, it sounded like there were some delayed shipments in various areas in Qi. Any thoughts on whether you'll catch up on those in Q2? And so -- and if so, what's the approximate size in terms of EBITDA or sales for those shipments?
Yes, Aleksey, so it's Mike. I mean, the first one, I mean, we're very happy with our results, right? Our EBITDA was up 40% year-over-year. We did see some order timing and shipping delays in the Catalyst business. As you know from past calls, our hydrocracking catalyst does have some potential shift between months, and we did see that go from March to April. So all those shipments that we have planned are out the door and already sold. So that's going to just be a movement from Q2 -- Q1 into Q2.
There were some shipping delays, supply chain challenges that created an order backlog, but that backlog is set to unwind over the next several months. So we're very comfortable with our plan, and as I mentioned, we're reiterating our guidance for the full year. We think that the demand drivers that we've been seeing great tailwinds over the last several months and into this year is really going to take us to meet our goals for the end of the year.
We'll go next to David Begleiter with Deutsche Bank.
Kurt, congratulations on the new role. Kurt, going back to leverage, if you thought we were heading into a period of slower growth or even a recession, would you look to take down your leverage below 3x?
Yes. Yes. So this is Mike, David. So yes, I mean, if leverage can -- if we can get leverage down below 3x, that's the goal, that's our intention. But we also know that we have this buyback program that we'll use some of that cash over time. And again, we'll keep it in the time -- the sweet spot, say, of in the 3s, 3x lever.
And David, thank you for the comments. I'd also like to add, our business is really highly consistent if you look at the consistent cash flows that's generated over the course of the year, over the course of time. So we're really comfortable with the program's flexibility and it's really -- in terms of the portfolio of the business being able to maintain that program.
Got it. And Kurt, I think you mentioned maybe that growth has lagged in certain areas of the business. Where has that been, in your view, most pronounced? And what plans do you have to perhaps accelerate that growth going forward? .
We're really excited about the growth in -- certainly in all the aspects of the business. There's some that, particularly in the areas that focus on sustainable technologies and green infrastructure, that are probably growing faster than the others. One of them is renewable fuels comes to mind. We mentioned on the -- earlier on the call how much growth there's been in that since -- into 2019. It's really -- we kind of have a double investment in there right now, right, with our catalyst technologies, which are making great innovations and great progress in that area as well as our recent investment in Chem32, which does a lot of catalyst activation in that space.
But beyond that, there's other things. We're exposed to other green technologies elsewhere in Ecoservices business. We mentioned mining, which obviously metals and minerals are going to play a huge part in green infrastructure going forward. And our position in the market there is fantastic, where our plants are and our ability to service those customers. Polyethylene demand continues to grow very strongly, right? I mean, with all the lightweighting and use for plastic, single-use, all that is very positive for polyethylene.
We'll go now to Angel Castillo with Morgan Stanley.
Congratulations on the new role, Kurt. I was wondering if you could give us a little bit more color as to what you're seeing in some of these -- you mentioned good demand in the kind of packaging, but also in MMA and some of the other kind of more niche areas of your kind of Catalyst business, and just more color there would be helpful.
Yes. The -- I'm going to actually pass that question to Tom Schneberger, who runs our Catalyst Technologies business.
Angel, thanks for the question. In terms of polyethylene, we're seeing polyethylene as a clear choice as the material -- preferred material in packaging and films as we saw even during the COVID downturn consistent mid-single-digit growth overall for polyethylene. And because they're trying to get to circular plastic, polyethylene is being used more so with the intent to recycle. But also we're starting to see recovery as the refineries start to increase rates and the HCC catalyst change-out as well as niche custom catalyst change-outs start to pick up again as we expected. So we've got good tailwinds, not only in polyethylene, but in some other areas in our business as well.
That's very helpful. And then I don't know if you mentioned this, but -- so you have a very good pass-through on raw materials. Anything on the logistics or supply chain side that you would highlight or that has maybe stood out as maybe an issue or something that you're working through as well?
No. We've had -- on how we pass through, the businesses do a really good job of passing through transportation costs. In a lot of cases, prepaid and ad-type situations with customers or customers are paying the freight directly. So we have a really high pass-through component on transportation. So no issues there.
Next question comes from David Silver with CL King.
Congratulations. So I had a couple of questions. First, on the capital allocation strategy. There's a paragraph in today's release where I think Kurt is quoted as saying, you're supportive of increasing the float and the liquidity for the stock. And then -- and while you were also talking about the accelerated buyback program. Could you maybe talk about the balance, how do you strike that balance between maybe directing more of your cash flow into repurchases while maintaining, I think, what I would characterize as like a hard-fought increase in your float and your trading liquidity that's been achieved over the last year or so? How do you balance those twin goals?
David, it's Mike. So from our strategy with the capital allocation, I mean there's a couple of different mechanisms to use with the buyback program. Our initial usage will probably be geared more towards directed programs with -- in conjunction with our sponsor selling down such that we are not going to reduce the float. It would actually help increase as they do sell downs and we participate. And then down the road, we would have more open market traditional buyback programs that we would decide whether that's the optimal use of cash at the time given all the market dynamics and the power. So we're actually helping reducing the overhang and helping increase the float over this program.
Okay. I'd like to maybe ask Kurt a question about the sulfur market, not so much Ecoservices but sulfur. And with this release, you put a -- meaningfully increased your revenue guidance, but it was solely due to the assumed increase in the pass-through cost of sulfur. And I'm not doing it now, but I have followed the fertilizer industry for quite a while. And I think, Kurt, if you go back to your early days with Ecoservices, you said 15 years plus, I think you were there the last time the sulfur market kind of froze up. I believe it was April of 2008, there was no clearing transactions done. It's my opinion that the sulfur market is going to get as tight or tighter this time around, I could make the case.
The demand side for fertilizer is going to outpace the supply side for fuel -- from fuels for quite a few quarters, maybe a couple of years. I know everything in your business works fine when the supply/demand balance is within normal ranges. But Kurt, do you have any sense that this market is going to get as tight or tighter than it was when normal business transactions were kind of disrupted back in 2008 or so? Or how do you think about that? And how is Ecoservices prepared to continue operating or even exploit the unusual tightness that seems to be building in global sulfur?
Thanks for the question, David. I always appreciate questions on sulfur because not a lot of people talk about it, and I've got a lot of experience in that area. So yes, I was around for the last run-up in 2008. So clearly, what's -- you're spot on. What's driving it right now is heavy fertilizer demand. There was a lot of refinery capacity that went down during the COVID period and then a winter storm, and it took a lot of sulfur inventory off. We're really well positioned to ride through that for a couple of reasons.
One, a lot of our regeneration customers are actually our sulfur suppliers. So we're in very close proximity to them. We have long-term agreements with them. We have lots of multiple suppliers, and we're probably better positioned than maybe some others that are hundreds of miles away from their sulfur source or something like that. And we do have obviously -- our virgin acid business has a very high degree of pass-through on sulfur, where 90-plus percent of the contracts where it's just automatic or it's passing whatever the sulfur change is through to the customers. And the other remaining percentage really is just on more of a 30-day or quarterly basis where we move the price with sulfur.
But I would also say on -- just speaking on the pricing as well as pricing in the market has also been good because the demand has been very high. There's been supply disruptions there as well. So we've been able to even increase our prices above and beyond what the sulfur change has happened. So I hope that answers your question.
Yes. If you wouldn't mind, I totally agree with your comment earlier. There's not a lot of people who talk about sulfur. But if I could just -- if you could indulge me for just one more question on that. But under your standard supply -- under your standard contracts where sulfur handling and whatnot for your customers, is -- are there restrictions or are they outs, outed -- I'm doing a terrible job. Are there aspects of the contract that allow you to allow customers not to, let's say, take their normal asset volumes, assuming that they would have to be responsible for the high pass-through costs?
And in those instances where maybe your customers kind of choose not to take their contracted volumes or minimize it, I mean, what kind of flexibility do you have to turn to other markets? I mean, how much flexibility do you have in those contracts, assuming we're at kind of market extremes, like, in my opinion, I think we're heading towards?
Well, I would say most of our customer agreements, the overwhelming majority of them are 100% requirements agreements, so we match what their requirements are. But I would also state that there is a very healthy opportunity to sell excess sulfuric acid elsewhere if our customers aren't taking it because, again, the market, the supply is, I would say, has been impacted with numerous things, so the supply is not great. And demand really across all sectors for sulfuric acid here in North America is strong. You've got, again, mining, which is heavily linked to the green infrastructure that I talked about before with copper and different minerals drawing a lot of sulfuric. A lot of the industrial segments, things like polyethylene or PVC, lead acid batteries, really everything is a strong pull on it right now. So there's lots of opportunities to place sulfuric acid if one would need to do that.
We'll go now to Hamed Khorsand with BWS Financial.
I just want to get an understanding of why now, as far as the management change, the Board additions, what's the inflection point that you're seeing in the business that requires these changes?
Hamed, this is Kurt. Well, the change was a decision that the Board took. But really, I'd just like to say that we're delighted -- I'm delighted to have the opportunity to lead this great company. We've got a great portfolio of businesses that are -- we're really looking at are highly aligned to the sustainability trends that are going to play a critical role supplying services and materials really to make clean transportation fuels and other green technologies. I would like to highlight, we have a really highly experienced executive leadership team that we really have confidence in going forward and executing the strategic plan that we've laid out and really delivering, at the end of the day, delivering strong shareholder value.
Okay. And then the other question I had was on the renewable fuel side. Is the ramp and -- matter for you if it's the feedstock being soybean oil or you're really agnostic to it?
Yes. I think -- from our standpoint, we're agnostic probably to the feedstock, the type of feedstock. The -- there's clearly -- as renewable fuels is picking up pace, not only with greenfield sites, but converted refineries, and where that benefits our business is those renewable fuels plants tend to use a lot more catalyst. It has to get changed out a lot more, which benefits not only the sale of new catalysts into the units, but our Chem32 business, which activates the catalyst before it goes in. So we're pretty much agnostic to what the feedstock is. But clearly, it's a real high growth area.
[Operator Instructions] We'll go next to Laurence Alexander with Jefferies.
This is Kevin on for Laurence Alexander. You mentioned that a strong order backlog could drive momentum going forward. And I guess I was just wondering if you could share to what degree the order backlog was growing and maybe to what degree is the supply chain issues are contributing to that. So any detail there would be helpful.
Yes. Sure, Kevin, it's Mike. The order backlog was really a result of some of the supply chain challenges that we saw in the last few months, but it's starting to already unwind, and we're expecting that to come back over the next couple of months. So it's more of just a timing aspect as anything else.
We have no further questions in queue at this time. This does conclude the Ecovyst first quarter 2022 earnings call and webcast. Thank you for your participation and you may disconnect at any time.