Alpha Metallurgical Resources, Inc.

Greetings and welcome to the Alpha Metallurgical Resources First Quarter 2023 Results Conference Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Emily O'Quinn, Senior Vice President, Investor Relations and Communications. You may begin.

Thank you, Rob, and good morning, everyone. Before we get started, let me remind you that during our prepared remarks, our comments regarding anticipated business and financial performance contain forward-looking statements, and actual results may differ materially from those discussed. For more information regarding forward-looking statements and some of the factors that can affect them, please refer to the company's first quarter 2023 earnings release and the associated SEC filings. Please also see those documents for information about our use of non-GAAP measures and their reconciliation to GAAP measures. Participating on the call today are Alpha's Chief Executive Officer, Andy Edson, and our President and Chief Operating Officer, Jason Whitehead. Also participating on the call are Todd Muncy, our Chief Financial Officer, and Dan Horn, our Chief Commercial Officer. And with that, I'll turn the call over to Andy.

Thanks, Emily. Good morning, everyone. We're pleased to report a very good first quarter performance today, marking steadfast progress toward our ambitious production goals for this calendar year. Our teams performed well, both from a production and sales standpoint within the quarter. In addition to the everyday excellence of our workforce that is shown in the results we'll discuss later, several particular alpha teams have been recognized with noteworthy accolades in recent weeks and months. In terms of safety performance on the national level, our Paramount Group won the Interstate Mining Compact Commission's 2023 Mine Safety and Health Training Industry Award for the Underground Division. At the state level in West Virginia, eight alpha properties won Home Safety Association Awards in 2022. Mammoth Processing, Marfork Processing, Black Castle Surface Mine, Kingston South Surface Mine, Workman Creek Surface Mine, Glen Allen Tunnel Mine, Cedar Grove No. 2 Mine, and Road Fork 52 Mine. I'm pleased to announce that the Home Safety Association also selected one of our operations vice presidents as the 2022 West Virginia Coal Safety Leader, an individual award recognizing excellence in safety achievements and records. Jimmy Wood, who leads ALPA's Midwest Virginia surface and Kingston region, was selected as the 2022 recipient of this prestigious award. We're very proud of Jimmy's hard work and dedication to safe production. Additionally, ALPA won four West Virginia Mountaineer Guardian Awards, for exceptional safety performance. These winning mines are Workman Creek, Cedar Grove No. 2, Kingston No. 2, and Road Fork 52. In March, the Paramount Mine Rescue Team competed in the Southeast Regional Mine Rescue Contest, where they took home top honors as the overall contest grand champions, as well as first place in the mine rescue overall, bench competition, and first aid. For outstanding environmental stewardship, Alpha was nationally recognized by the International Mining Compact Commission with our Deep Mine 26 in Virginia being selected as the winner of their National Mine Reclamation Award for 2023. On the state level, the Black King Mine won the West Virginia Coal Association's Underground Reclamation Award, while Workman Creek and Long Ridge Surface Mine won the organization's Drainage Control Award. We hold ourselves to a very high standard, and it's extremely gratifying to see the number of safety and environmental awards earned by the Alpha team. We're very proud of these efforts and strive every day to continue this good work. Along these lines, I'm also pleased to report that Alpha was recently named as one of the nation's most trustworthy companies by Newsweek Magazine. We rank number two in the materials and chemicals industry category, and the recognition is based on independent surveys collected from company stakeholders like employees, customers, and shareholders. Alpha's culture is built on operating safely and ethically, and we believe in teamwork and treating one another with respect. We also believe in being good neighbors in the communities where we live and work. It's an honor to be nationally recognized for this distinction, and it's a reflection of the quality of people we have across the entire organization. Before Todd and Jason get into the details of our financial and operational performance for Q1, I want to briefly comment on the recent trucking and manufacturing acquisitions we announced last quarter. Both have proven valuable to the organization so far, And while we anticipated that maximum manufacturing could expand our rebuild capabilities, the additional opportunities we've already discovered have far exceeded our expectations. We're testing out new concepts almost weekly, and the success so far indicates that we will be able to better control our own fate in regard to parts and supplies that have often proven difficult to find. This not only makes us more efficient, but it also helps eliminate some of the supply chain delays and availability hurdles we were experiencing before acquiring the manufacturing company. It's a similar story with Maxim Transportation, as the performance of the trucking operation has also been excellent. Looking ahead to the second quarter and the rest of the year in terms of a broader market outlook, we believe a number of geopolitical and global economic factors will continue to influence met coal pricing. With this uncertainty alongside the declining met coal indexes we witnessed in the last several weeks, we're focusing on controlling our internal processes to manage costs to the best of our ability. Customer commitments for the year are very strong, and at the midpoint of guidance, 94% of our metallurgical tonnage is already committed, with 43% committed but not yet priced. It's also important to remember that even after a substantial drop in recent weeks, met coal indexes were playing at historically strong levels. As is our standard, we intend to maintain our focus on safely producing coal Arrow Lobby is supplying it to our customers. As previously announced, Alpha's annual meeting of stockholders was held last week, and all directors standing for reelection were elected to serve another one-year term. I look forward to working with them all to keep Alpha moving forward, and I thank them for their leadership and service to the company. Speaking of the board, management continues to execute on the board's $1.2 billion share repurchase authorization, with more than $700 million returned to shareholders in the form of buybacks since the program's inception just 14 months ago. As we've stated before, we remain committed to share repurchases with our preferred capital return vehicle, and we expect to continue buying back shares provided market conditions and cash flow levels allow. With that, I'll turn it over to Todd for discussion of our first quarter financial results. Thanks, Andy. First quarter adjusted EBITDA was $354 million, up from our fourth quarter level of $248 million. We sold 3.9 million tons in the quarter, 3.7 million of which came from our MET segment and 200,000 tons from the all-leather category. Quarter-over-quarter realizations increased for the MET segment as a whole, with an average realization of $208.93 for the first quarter. compared to $186.29 the fourth quarter of 2022. Export met tons priced against Atlantic Indices and other pricing mechanisms in the first quarter realized $211.31 per ton, while export coal priced on Australian Indices realized $240.76. Realization for our metallurgical sales in the first quarter was a total weighted average of $213 and 21 cents per ton, an increase of roughly 12% against the prior quarter's $190.94 per ton. Realizations in the incidental thermal portion of the MET segment decreased quarter over quarter, coming in at $137.65 per ton in Q1 as compared to $146.24 in Q4, reflecting the lower thermal pricing for the period when the tons were sold. Similarly, first quarter realizations in the All Other category were $109.36, down from $126.10 per ton in the fourth quarter. This quarter-over-quarter drop in realization is also due to the declining pricing environment for thermal coal. Cost of coal sales within our MET segment decreased to $110.56 per ton, down from $112.97 per ton in the fourth quarter. Cost of coal sales in the all other category also decreased quarter over quarter to $74.69 per ton, down from $80.76 per ton in the fourth quarter of 2022. SG&A, excluding non-cash stock compensation and non-recurring items, decreased to $17.7 million in the first quarter, as compared to $19 million in the fourth quarter. Q1 CapEx was $74.2 million, up from $61 million in the fourth quarter of 2022. This increase includes some rollover expenditures from the previously mentioned prior year delays. Over the last few quarters, supply chain issues have contributed to some lumpiness in CapEx spending that we expect to continue throughout the remainder of the year. Moving to the balance sheet and cash flows, as of March 31st, 2023, we had $222.5 million in unrestricted cash, down from $301.9 million at the end of the fourth quarter. We had $93.1 million in unused availability on our ABL at the end of the quarter. Alpha had total liquidity of $315.6 million as of the end of March, which is net of the $145 million in share repurchases during the quarter. of which $136 million was pursuant to our share repurchase program and $9 million related to shares repurchased for taxes on equity awards. By comparison, total liquidity at the end of the fourth quarter was $441.1 million. Cash provided by operating activities decreased quarter over quarter to $177.4 million in Q1 as compared to $185 million in Q4. The first quarter operating cash flows were negatively impacted by an increase of $133.8 million in working capital. The primary drivers were higher accounts receivable and inventory balances, partially offset by accounts payable. As of March 31st, our ABL facility had no borrowings and $61.9 million of letters of credit outstanding, unchanged from the prior quarter. In terms of our committed position for 2023 sales, 51% of our metallurgical tonnage in our MET segment is committed and priced at the midpoint of guidance at an average price of $203.86. Another 43% of our 2023 MET tonnage at the midpoint is committed but not yet priced. The thermal byproduct portion of the MET segment is 75% committed and priced at an average price of $108.77. and we are fully committed in price for this year in our All Other category, with an average price of $88.74. We adjusted the tax rate guidance for the year to 12% to 17%, down from the previous range of 15% to 20%. All other guidance ranges remain the same as previously issued. Alpha's board has declared a quarterly cash dividend of 50 cents per share, an increase from the prior quarter's 44 cents per share, which will become payable on July 5th for holders of record as of June 15th. Pursuant to our share repurchase program, we repurchased 870,000 shares at a cost of $136 million in the first quarter of 2023. Since the beginning of the program through May 4th, 2023, we have spent approximately $715 million to acquire 4.8 million shares of common stock at an average price of $148.74 per share. The outstanding share count has been reduced by roughly 23% from the time the program began. As of May 4th, 2023, the number of common stock shares outstanding was approximately 14.4 million. I will now turn the call over to Jason for some details on operations. Thanks, Todd, and good morning, everyone. I'm pleased to report that the Alpha mines are operating very well so far in 2023, and Q1 was Alpha's highest production quarter in at least the last five years. Our captive mine production was nearly 4.4 million tons, and I'd also like to congratulate our Deep Mine 41 guys at McClure for setting their own personal record of 638,000 tons in the quarter. Based on Q1 MSHA data for the Central Appalachian Basin, Alpha Operations claimed five of the top nine producing coal complexes. Our Marfort complex took first place in the quarter, while our McClure and Bamil operations claimed third and fourth. We're always looking for opportunities to efficiently improve our output bringing on additional continuous miners in mines that are performing well. We've added our ninth continuous miner to our Road Fork 52 mine at Kepler, and at Mar Fork, our Panther Eagle has ramped from three to four continuous miners. We continue working on the development projects we've recently announced, like Rolling Thunder and Checkmate Paladin Deep Mines, to replace tonnage from locations that are mining out and aid in future capacity. We're making progress and nearly completing our prep plant enhancements as well. As a reminder, once fully implemented, these upgrades will allow us to recover additional coal in the washing process, yielding combined additional tonnage of roughly 160,000 tons per year at a very low incremental cost, all while increasing the rate of raw coal processing. We've also been pleased with the vertical integration of our Maxim Rebuild Division that we announced last quarter to address supply chain issues. Maxim Transportation, which includes more than 70 on-road coal trucks and several pieces of supporting equipment and the team members, is at nearly fully staffed levels as we continue to refine schedules and processes within this division we have seen increased cold flows to and from preparation plants and loadouts. Maxim Manufacturing has been a reliable supplier for gear cases, as we originally intended, but they've also proven capable of much more. In the first quarter, we tested out a number of additional equipment parts, successfully integrating the development of several other continuous minor parts into the pipeline. Bringing this work in-house has been a game changer for our rebuild and maintenance teams, allowing them to expand their calendar for the year and streamline the supply chain by eliminating many delays and reliability problems from various other third-party suppliers. I can't say enough about the employees involved in these efforts. They worked to integrate a manufacturing company into Alpha, while so far exceeding our expectations about the immediate and future usefulness of Maxim Manufacturing. Congratulations to all involved in these successful efforts. With that, I'll turn the call over to Dan for some additional information on the coal markets.