Radius Recycling, Inc.

Good day and thank you for standing by. Welcome to the Radius Recycling's fourth quarter 2024 earnings release call and webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded Now I turn the conference over to your first speaker today, Michael Bennett, Investor Relations. Please go ahead.

Thank you, Victor, and good morning. I'm Michael Bennett, the company's Vice President of Investor Relations. I'm happy to welcome you to Radius Recycling's earnings presentation for the fourth quarter of fiscal 2024. In addition to today's audio comments, we've issued our press release and posted a set of slides, both of which you can access on our website, at radiusrecycling.com. Before we start, let me call your attention to the detailed safe harbor statement on slide two, which is also included in our press release and in the company's Form 10-K, which will be filed later today. As we note on slide two, we may make forward-looking statements on our call today, such as our statements about our targets, volume growth, and margins. Our actual results may differ materially from those projected in our forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statement is contained in slide 2, as well as our press release of today and our Form 10-K. Please note that we will be discussing some non-GAAP measures during our presentation today. We've included a reconciliation of those metrics to GAAP in the appendix to our slide presentation. Now, let me turn the call over to Tamara Lundgren, our Chairman and Chief Executive Officer.

Thank you, Michael. Good morning, everyone, and welcome to our fourth quarter earnings call. I am joined today by our Senior Vice President and Chief Financial Officer, Stefano Guggini. I'll start this morning's discussion with an overview of our fiscal 24 fourth quarter, a review of market conditions, and an update on the strategic actions we have underway to address current industry dynamics and create long-term value through the cycle. Stefano will then cover the quarterly financial and operating results in more detail. I'll wrap up, and then we'll take your questions. Before turning to the next slide, I'd like to take a moment to recognize our employees for delivering another year of improved safety performance. In fiscal 24, we achieved a 16% year-over-year reduction in our total case incident rate, and almost 90% of our facilities had no lost time incidents. Our year-over-year improvement reflects the commitment of all our employees to continuous improvement through actions like enhanced training and increased communications and reengineering practices and processes to reduce operating risk. While we still have work to do to achieve our goal of zero injuries, these results reflect our team's unwavering commitment to safety and their dedication to creating a safe work environment and a sustainable safety culture. So now let's turn to slide four to review our fourth quarter highlights. While the long-term trends for recycled metals are strong, market conditions remained challenging during the fourth quarter, with tight scrap availability and softer global steel demand creating significant headwinds. Our Q4 results were significantly impacted by the ongoing stickiness in scrap purchase costs, leading to margin compression in our financial results. However, by focusing on actions within our control, lowering our costs, operating efficiently, and executing on our strategic priorities, our team was able to mitigate some of these headwinds and deliver strong, sequential quarterly improvements in both our operating and our financial results. We nearly doubled our adjusted EBITDA to $17 million. We successfully increased non-ferrous sales volumes by 13%, Ferris sales volumes by 12% and finished steel sales volumes by 11% due in part to contributions from our metal recovery technology investments, new commercial initiatives, and growth in our recycling services platform. We delivered substantially the full quarterly run rate benefits from our cost savings and productivity improvement program announced earlier this year. And we generated positive operating cash flow and returned capital to our shareholders through our 122nd consecutive quarterly dividend. Looking forward, we expect continued reductions in U.S. interest rates to benefit consumer manufacturing and construction activity, which in turn should lead to improved scrap supply flows and increased demand for finished steel. The long-term demand for recycled metals is supported by structural deficits for nonferrous metals such as copper, the increased demand from manufacturers to maximize their use of recycled materials, and the growth in electric arc furnace steelmaking capacity, which uses ferrous scrap as its primary raw material. Our strategic initiatives, focused on metal recovery technologies, volume growth, and expansion of our 3PR services, are strongly aligned with these secular growth trends. Let's turn now to slide five for a deeper dive into market conditions. During most of our fiscal year, both finished steel and recycled ferrous metal prices softened. The decline in domestic steel prices was underpinned by both the continuing contraction in U.S. manufacturing, which is reflected in manufacturing PMI remaining in contraction for 22 out of the last 23 months, and imports. The Ferris price declines during the year were largely due to both the dampening effect of elevated levels of Chinese steel exports, which reached multi-year highs, and lower global manufacturing levels. Non-Ferris prices reflected strong global demand, particularly for copper, with prices ending the year higher than where they started. Average prices for copper, aluminum, and other non-Ferris products were up approximately 10% year over year, with copper reaching multi-year highs for a brief period in late spring. Prices of PGM metals were the exception, down year-over-year by almost 10% due primarily to subdued auto production. From a supply flow perspective, compared to pre-pandemic levels, auto production remains low and financing costs for new and used cars are still comparatively high, both of which have contributed to the average age of vehicles reaching their highest level on record, resulting in lower scrappage rates of end-of-life vehicles. We expect that continued reductions in U.S. interest rates, along with the spending associated with the U.S. infrastructure bills, will be major catalysts leading to higher manufacturing, construction, and consumer activity, and higher scrap flows. Let's turn now to slide six for an update on our strategic priorities and the longer-term outlook for recycled metals. Our strategic priorities are directly aligned with the long-term trends we just reviewed and can be summarized as follows. First, our cost reduction and productivity program. This quarter we achieved substantially the full quarterly run rate of benefits associated with our $70 million annual cost reduction and productivity improvement plan which we announced earlier this fiscal year. As part of our continued focus on optimizing production efficiencies, we anticipate achieving new benefits in fiscal 25 through the monetization of certain discrete real estate assets in locations where we can both substantially consolidate or reposition our business activity and unlock the associated real estate value. Second are investments in advanced metal recovery technologies. This is a multi-site, multi-year investment program focused on increasing the recovery of non-ferrous metals from our shredding process and creating product optionality by enabling us to create furnace-ready products based on demand and price. In fiscal 24, we achieved nearly a quarter of the anticipated annual benefits. The majority of the returns from these investments should come through our results in fiscal 25. We estimate these investments should return over $40 million in annual EBITDA after full deployment. Third, our trademarked 3PR Service and Solutions business line. Our 3PR service offering enables our customers to increase their recycling rates, reduce material going to landfills, lower their carbon footprint, and provide enhanced sustainability reporting. This is an asset-light business, typically with multi-year contracts, that can provide a counterbalance to our more cyclical core recycling operations. and is highly aligned with secular growth trends. Reflecting steady growth, our 3PR business line is now contributing over 10% to our recycled metals volumes. And fourth, increasing our volumes. Despite the tight supply environment, we increased our sales of recycled metals in fiscal 24 compared to fiscal 23. Our focus on commercial initiatives to increase our organic ferrous and non-ferrous volumes gives us the opportunity to create operating leverage using the 1 million tons of capacity that we currently have available. We are also investing in digital tools at our pick and pull franchise to capture previously untapped sources of car flows and related revenue streams, which are especially important as new auto production remains below pre-pandemic levels and demand for salvaged auto parts remains solid. While benefits from these initiatives are already contributing to our financial performance, Their full positive effect on our operating margins is currently being masked by the impact of the headwinds we've been experiencing. As these abate, we expect the benefits of our actions to become much more visible in our margins and EBITDA and to provide a substantial boost to future financial results. So now, let me turn the presentation over to Stefano.