Arch Resources, Inc.

Good day and welcome to the ARCH Resources, Inc. first quarter 2023 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Dec Salone, Senior Vice President of Strategy. 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've 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 Gilgium, our CFO. After our formal remarks, we'll be happy to take questions. With that, I'll now turn the call over to Paul. Paul?

Thanks, Dick, 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 to report that the ARCH team has again demonstrated operational excellence in our core metallurgical segment in the first quarter while delivering strong, value-driving financial results across the entire enterprise. Overall, ARCH generated an adjusted EBITDA of $277.3 million during the period, driven by significant quarter-over-quarter improvements in the average selling price, unit cost, and cash margin achieved by our cooking coal operations. In short, the team continued to press ahead on all fronts with our simple, clear, and actionable plan for long-term success and value creation. During the quarter, the ARCH team showcased the company's expanded cash-generating capabilities, by achieving more than a 31% sequential increase in the average cash margin for our core metallurgical , delivering an 8% sequential increase in adjusted EBITDA, and generating almost $96 million in discretionary cash flow, despite a nearly $170 million build in working capital. We drove forward with our intense and ongoing efforts to streamline and strengthen our balance sheet by retiring our remaining convertible securities reducing our already modest indebtedness by an incremental $27 million, or 15%, and maintaining a net cash positive position of $71 million. And finally, we generated significant value for our shareholders through our robust and precisely structured capital return program, declaring a quarterly dividend of $47.8 million, or $2.45 per share, and deploying $77 million to sell the last of our convertible securities and repurchase shares, thus avoiding dilution of approximately 554,000 shares. It's worth pausing here to reflect more on this last item, our capital return program, given the tremendous progress we've made since its relaunching in February last year. Since that relaunch, just a period of over 12 months, ARCH has deployed more than a billion dollars through their program, consisting of dividend payments of more than $571 million, inclusive of the just announced June dividend, and share repurchases, along with convertible security settlements of more than $444 million. I might add that through these share repurchases and convertible security settlements, we've avoided an aggregate dilution of 3.5 million shares. Viewed over even a longer time horizon, ARCH has now deployed more than $1.8 billion through our capital return program over the course of the past six years, demonstrating our cash-generating capabilities as well as our strong commitment to rewarding our shareholders. As we've stated repeatedly, we believe our capital return program has proven to be tremendously effective in driving shareholder value, and view the capital allocation model as appropriate durable, and well-aligned with shareholder interests and preferences. As a result, we fully expect this program to remain the centerpiece of our value proposition for the foreseeable future. Before turning the conversation over to John for additional color on the operations, I'd like to take a moment to discuss the dynamics we're seeing in the global cooking coal markets. As you are no doubt aware, seaborne cooking coal prices have retraced significantly in recent months. due largely, in our view, to global macroeconomic concerns. Since early March, the price of high-ballet coking coal loaded in a vessel on the U.S. East Coast has declined about 25%, from $328 to $247 per metric ton. While that is a significant pullback, clearly, it's important to point out here that ARCH's low-cost mines still generate a healthy cash margin even at today's step-down prices, which illustrates again the value of being in the lowest quartile of the cost curve. What's particularly interesting about the pullback in seaborne and cocaine prices is that we continue to see many constructive indicators in the marketplace. For instance, global steel prices continue to trade at levels around 50% above their November lows. Moreover, the vast majority of the blast furnace capacity idled in Europe last year in the face of weak steel demand, around 25 million tons by our count, has now restarted. And lead times for new orders of finished steel are twice what they were just a few months ago. At the same time, poking coal supplies remain constrained after years of underinvestment, and the situation has been exacerbated by increasing regulatory pressures in all jurisdictions. This combination of circumstances is particularly evident in Australia, where cocaine coal exports declined by more than 9 million tons in 2022 versus the already depressed level of 2021, and have fallen an incremental 15% on a year-over-year basis during the first two months of 2023. Meanwhile, exports from the United States and Canada, the next two major sources of high-quality seed-borne cocaine coal, were only marginally higher in 2022 than 2021, but continued to significantly undershoot pre-pandemic levels, despite the sustained period of historically strong pricing that has prevailed in recent years. Finally, Russia, the other large supplier to the seaborne Coca-Cola market, remained a significant question mark in the face of continuing hostilities in Ukraine, which in turn created various challenges, to move in these products due to credit considerations and logistics. While most of the Russian volume continues to find a home in global markets, we believe that mounting cost pressures, an increasingly difficult business climate, and heavy discounts for the products could make it difficult to maintain this dynamic indefinitely. Given these supply constraints, as well as our substantial and ongoing increases in steel demand and blast furnaces, capacity expansions across Southeast Asia. We remain constructive on hot metal output in the intermediate as well as the longer term. In summary, we continue to be sharply focused on our strategy for value creation over the long haul. In recent quarters, we've expanded and strengthened our world-class coking coal portfolio, extended the global reach of our high-quality coking coal products, restored our balance sheet to a net positive cash position, greatly simplified our capital structure, and extended our industry-leading ESG performance. We believe this progress across every facet of our business sets the stage for continued success, strong discretionary cash generation, and robust capital returns in the future. With that, I'll now hand the call over to John Drexler for some further thoughts on our operational performance. John?