Arch Resources, Inc.

The conference will begin shortly. To raise your hand during Q&A, you can dial star 1 1. Good morning, and thank you for standing by. Welcome to the Arch Resources third quarter earnings conference call. At this time, all participants are in a listen-only mode. And 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. That's star 1 1. And you will then hear an automated message advising you that your hand is raised. Please be advised that today's conference is being recorded. And I would like to now hand the conference over to your first speaker today, Dex Sloan, Senior Vice President, Strategy at Arch Resources. Please go ahead.

Good morning from St. Louis, and thanks for joining us today. Before we begin, let me remind you that certain statements made during this call, including statements relating to our expected future business and financial performance, may be considered forward-looking statements according to the Private Securities Litigation Reform Act. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. These uncertainties, which are described in more detail in the annual and quarterly reports that we file with the SEC, may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required by law. I'd also like to remind you that you can find a reconciliation of the non-GAAP financial measures that we plan to discuss this morning at the end of our press release, a copy of which we have posted in the investor section of our website at archrsc.com. Also participating on this morning's call will be Paul Lang, our CEO, John Drexler, our COO, and Matt Gilgham, our CFO. After formal remarks, we'll be happy to take questions. With that, I'll now turn the call over to Paul. Paul?

Thanks, Nick, and good morning, everyone. We appreciate your interest in ARCH and are glad you could join us on the call this morning. I'm pleased the ARCH team delivered a strong operating performance in Q3, generating a total of $454 million in operating cash flow while managing through rail disruptions in the West, isolated geologic challenges, and inflation-related cost pressures. We view this record-setting achievement as clear evidence of one of ARCH's most significant strengths, our substantial cash-generating capabilities. In addition, our record cash flow performance served to showcase yet another one of ARCH's core strengths, our powerful and value-creating capital return programs. As you know, the Board relaunched the Capital Return Program in February after a two-year hiatus during the build-out of Lear South, and it now stands as the centerpiece of our value proposition. ARCH's Capital Return Program is governed by a simple but carefully considered allocation formula that calls for the return to shareholders of 50% of the discretionary cash flow via a dividend and the deployment of the remaining 50% principally through share repurchases and or the settlement of potentially dilutive securities. With a $454 million in operating cash flow netted against just $41 million in capital spending, we generated a total of $413 million in discretionary cash flow during the quarter. That level of cash generation translates quite clearly into strong value-driving returns for our shareholders, when we run through our capital return formula. In keeping with the tenets of this formula, the Board has just declared a dividend of $206.4 million, or $10.75 per share, payable on December 15th. Complementing this dividend, we also expect to deploy a significant amount of cash associated with the other 50% of our capital return program in Q4. And while we've delineated several options for the use of this second 50%, we continue to view share repurchases as an attractive investment opportunity as well as an effective means of returning capital. In addition to the progress we've made in generating discretionary cash in Q3, we also made great progress during the quarter in deploying discretionary cash while simultaneously managing our liquidity in a prudent fashion. During the third quarter, ARCH deployed approximately $76.8 million to repurchase nearly 429,000 shares, or approximately 2.3% of our shares outstanding at June 30th. Along with this, we used cash to settle an incremental portion of our convertible debt, thus avoiding an additional 101,000 shares of dilution. In short, we've already delivered in a significant way on the value-creating potential of the capital return program that was put in place just eight months ago. As we look ahead, we expect to continue that momentum through ongoing returns, as well as our sharp focus on generating additional discretionary cash and to continually recharge the program. While the capital return program is the culmination of carefully crafted multi-year strategy, It is worthwhile to recap the team's significant efforts so far in 2022 that got us to this point. In sum, since the start of the year, we've generated more than a billion dollars in operating cash flows. We've fortified the balance sheet through the reduction of $427 million, or 71% of our total indebtedness, contributed $110 million to our industry-first thermal mine reclamation fund, which brought it up to its targeted level of $130 million and grown our net cash position by $588 million, giving us a $323 million net cash position at the end of the quarter. In turn, these efforts have afforded us the ability to deploy a total of $678 million inclusive of the December dividend under our capital return program which, again, was just rolled out in February. This is a great deal of progress in a short period of time and a strong indication that we're committed to delivering on our clear, consistent, and actionable plan for value creation. Before turning the call over to John, I'd like to spend a few minutes talking about the current market dynamics, starting with our core coking coal business. Even after the step down from historic levels achieved earlier in the year, cooking coal prices remain at constructive and profitable levels. This is impressive given the recessionary pressures that continue to build around the world, and more impressive still when you consider the knock-on effect these pressures have had on global steel production, which is down around 4%. We believe this resilience of the metallurgical markets is largely attributable to the profound underinvestment in coking coal supply in recent years. Despite strong coking coal prices for the better part of the last six years, global coking coal supply in the major producing regions continues to languish. In Australia, which is the source of over 50% of the seaborne metallurgical supply, coking coal exports are down nearly 7% year to date, even when compared to last year's already weakened levels. In the United States and Canada, exports are up modestly versus 2021, but continue to dramatically lag pre-pandemic levels. At the same time, the outlook for Russian supply continues to dim in face of import bans in many countries, logistical challenges, and an increasingly negative investment climate. While cooking coal markets have come under pressure, global thermal markets remain at near historic highs. Importantly, These strong market dynamics are helping to buttress coking coal prices while simultaneously creating attractive seaborne opportunities for Arches' legacy thermal products. The price for thermal coal out of Australia currently stands at nearly $387 per metric ton, and the price for thermal coal into northern Europe stands at nearly $269 per metric ton. Arches sold over 200,000 tons of coking coal to thermal customers, for delivery in the fourth quarter of 2022, and we're actively exploring other such opportunities where it makes sense. On the legacy thermal side of the business, ARCH has continued to deliver on its dual objectives of driving forward with an accelerated reclamation plan while simultaneously harvesting cash from these assets. By employing this logical wind-down strategy, We believe we're delivering the greatest long-term value for our shareholders, while at the same time providing an appropriate transition period for all of our stakeholders, including our employees, our customers, and the communities in which we operate. A major part of this responsible approach is our industry-first cash thermal mine reclamation fund, which ensures there'll be an appropriate level of funding on hand complete final reclamation work at these operations when the time comes to shut them down. Following this strategy, ARCH's legacy thermal operations delivered $97 million in segment level adjusted EBITDA during the third quarter, while expending less than $5 million in capital. That brings the total amount of EBITDA generated by the thermal segment over the past six years to just under $1.2 billion while investing only $123 million of capital. While that's an impressive figure, we believe the stage is set for more of the same in Q4. What's more, given our significant book of contracted domestic thermal business and continued strength in metallurgical thermal pricing, we're becoming increasingly optimistic about our ability to replicate this year's strong thermal segment contribution again in 2023. In closing, let me reiterate that 2022 has been a period of great ongoing progress at ARCH. Even with the typical mining challenges noted earlier, our expanded and upgraded coking coal portfolio continues to generate robust levels of cash. In addition, we believe the medium-term outlook for significant and complementary contributions from our de-risk legacy thermal segment continues to strengthen as well. In short, We believe the stage is set for continued success, ongoing value creation, and most significantly, substantial shareholder returns. With that, I'll now turn the call over to John Drexler for some additional comments on our Q3 operating performance. John?