Radius Recycling, Inc.

Good day, and thank you for standing by. Welcome to the Radius Recycling First Quarter 2025 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 this 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. I'd like to hand the conference over to your first speaker today, Michael Bennett, Investor Relations. Please go ahead.

Thank you, Marvin, 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 first quarter of fiscal 2025. 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-Q, which will be filed later today. As we note on slide two, we may make forward-looking statements on our call today. 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 two, as well as our press release of today and our Form 10-2. 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. She will host the call today with Stefano Guggini, our Chief Financial Officer.

Thank you, Michael. Good morning, everyone. and welcome to our fiscal 25 first quarter earnings call. On our call this morning, I'll review our quarterly results, the trends affecting our business, and progress on the strategic activities we have underway to address industry dynamics and create long-term value through the cycle. Stefano will then provide more detail on our financial performance, our capital investments, and our capital structure. I'll wrap up with some takeaways from our sustainability report that we issued in mid-December, and then we'll take your questions. But before we begin, I'd like to take a moment to express our support for those of you who are being impacted or who have family or friends who are being impacted by the wildfires in Southern California. Our thoughts and prayers are with you. Before turning to the next slide, I'd also like to take a moment to recognize our employees for their continued strong safety performance. After delivering safety results in fiscal 24 that were the second best in our company's history, this quarter the team achieved almost a 50% sequential reduction in our total case incident rate, and 97% of our sites experienced zero lost time injuries. These strong results reflect our team's engagement and commitment to creating a safe work environment and a sustainable safety culture. Let's turn now to slide four to review our first quarter highlights. While market conditions during the quarter were more challenging than a year ago, our year-over-year operating results remained stable. The difference between our adjusted EPS loss of $1.33 compared to a year ago was primarily due to an income tax detriment associated with our deferred tax assets. The contribution from our recycled metals business improved versus a year ago, driven by benefits realized from our cost reduction and productivity measures implemented in fiscal 24 and stronger non-ferrous demand, which offset the tight scrap environment and the softer global ferrous markets. The contribution from finished steel declined year over year due to weaker domestic steel conditions and a scheduled maintenance outage. Our steel mill utilization of 81%, while down sequentially, was still higher than the U.S. average of 75%, reflecting relatively stronger West Coast demand. We achieved nearly break-even operating cash flow during the quarter and returned capital to our shareholders through our 123rd consecutive quarterly dividend. The biggest headwind to our performance is the pressured U.S. manufacturing sector. which has been in recessionary territory for two years. The last time we saw such an extended manufacturing downturn was over 20 years ago. The outlook for a manufacturing recovery, however, is positive, with U.S. consumer and business confidence surging since November and a consensus across the political spectrum that revitalizing our manufacturing sector is critical for U.S. economic growth and national security. A recovery in the manufacturing sector should both ease the constrained scrap environment and drive more demand for ferrous and non-ferrous recycled metals. From a long-term perspective, the demand for recycled metals continues to have a strong upward bias underpinned by several structural trends. U.S. industrial reshoring, continued growth in EAF steelmaking production, maximizing the use of recycled metals in production processes, and the transition to metal-intensive low-carbon technologies. Importantly, our strategic initiatives focused on metal recovery technologies, volume growth, and expansion of our 3PR services are strongly aligned with these secular growth drivers. So let's turn to slide five for a deeper dive into market conditions. During the quarter, export prices for recycled ferrous metals decreased, driven by softer global steel demand, including the dampening effect from elevated levels of Chinese steel exports. In the last 12 months through November 2024, Chinese steel exports to countries in Asia, Central and South America, and Turkey have risen by approximately 25% versus a year ago, reducing steel manufacturing and associated fair scrap demand in these regions as a result. Domestic fair scrap prices during Q1 were relatively flat sequentially, but down significantly from a year ago. Finished steel prices also softened during the quarter as purchasers reduced inventory levels heading into the end of the year. While the construction markets were softer due to interest rate uncertainty and inflationary pressures on construction costs, the Dodge Momentum Index, which is a 12-month leading indicator of non-residential construction spending, is signaling strong growth. Moving to non-ferrous, Although average non-ferrous prices decrease sequentially, they remain up year over year on healthy global demand for copper and aluminum. One of the most significant drivers of change for our operating margins has been the reduced supply of recycled scrap metal. As the US manufacturing sector has gone through a cyclical downturn, our markets have experienced a tightening in the availability of end-of-life vehicles, obsolete white goods, manufacturing scrap, and scrapped from fewer construction and demolition projects. These constrained supply conditions have pressured purchase costs for raw materials, leading to margin compression. In addition, auto production that is still below pre-pandemic levels, together with financing costs for new and used cars that are still comparatively high, have contributed to the average age of vehicles on the road reaching their highest level on record. But while the weaker environment that we're in today presents challenges, we've experienced cyclical downturns and volatility before. And we've demonstrated our ability to navigate effectively through these periods by focusing on what we can control, including productivity, customer service, technology, and platform diversification. As market conditions recover, we are very well positioned to benefit from the expected increased demand for recycled metals associated with investments in infrastructure, industrial reshoring, growth in U.S. electric furnace filmmaking capacity, and the transition to metal-intensive, low-carbon technologies. So let's turn now to slide six for an update on our strategic priorities. Our strategic initiatives are strongly aligned with the secular growth trends I mentioned earlier and can be summarized as follows. our 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. 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. Second, our trademarked 3PR service and solutions business line. Our 3PR service and offering enables our customers to increase their recycling rates, reduce materials going to landfills, lower their carbon footprint, and provide enhanced sustainability reporting. This is an asset-light business, typically with multi-year contracts that provides a counterbalance to our more cyclical core recycling operations, and it's highly aligned with secular growth trends. Reflecting this steady growth, our 3PR business line contributed over 10 percent to our recycled metals volumes in fiscal 24. Third, our cost reduction and productivity program. In the first quarter, we achieved a 6% reduction in adjusted SG&A costs compared to the prior year, reflecting the cost savings initiatives we implemented during fiscal 24. Additionally, as part of our continued focus on optimizing production efficiencies, we expect in fiscal 25 to benefit from 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. We expect to close on two transactions in the second half of the year and raise net proceeds of approximately $35 million. Benefits from these initiatives are already contributing to our financial performance. And as the manufacturing sector improves and the global steel market returns to equilibrium, 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.