Arch Resources, Inc.

Good morning and welcome to the ARCH Resources third quarter 2023 earnings conference call. All participants will be in a 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. Please note this event is being recorded. I would now like to turn the conference over to Dex Sloan, 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 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 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 during the third quarter, the ARCH team continued to drive forward with our simple, consistent, and actionable plan for long-term value creation and growth. During the quarter just ended, the ARCH team achieved an adjusted EBITDA of $126.3 million, generated $86.5 million of discretionary cash flow, invested $28.2 million to repurchase nearly 216,000 shares, and finally declared a quarterly cash dividend of $21.6 million, or $1.13 per share. In short, Q3 served to underscore, yet again, the value driving of ARCH's capital return program, which we view as the centerpiece of our value proposition. Since February 2022, we've deployed more than $1.2 billion through the program, including the reduction of the equivalent of 4.3 million shares in the form of common stock and convertible note repurchases, plus the issuance of nearly $662 million in dividends inclusive of the payment to be made to shareholders in December. When combined with phase one of the program during the 2017 through 2019 time period, we've now returned more than $2.1 billion to shareholders. We view the central tenet of the capital return program to be the commitment to effectively return 100 percent of our discretionary cash flow to shareholders, a commitment that is foundational to the program structure. In contrast, we view the program's capital allocation model, which is to say the precise manner in which the capital is returned, to be flexible and dynamic. Indeed, the Board evaluates the capital allocation model on a more or less continual basis, as it endeavors to ensure that capital is returned to shareholders in the most optimal way. Recently, and as a function of that ongoing evaluation process, the Board concluded that an adjustment to the capital allocation model made sense at this time. As a result, the Board decided to ratchet down the relative weighting of dividends while at the same time preserving a meaningful cash balance that can be diverted towards share repurchases during periods of market weakness. It's important to highlight here that the Board continues to view a significant dividend as the integral component of ARCH's long-term capital return strategy. We believe that the return of cash is a clear, direct, an unambiguous way to reward shareholders for their continuing support and confidence. But at present, we believe that directing a larger percentage of our discretionary cash flow to share repurchases makes sense given ARCH's ongoing progress on its key strategic objectives, the company's promising long-term outlook, and the ongoing evolution of the preferences of ARCH's shareholders. Turning now to the market dynamics, we've seen a significant strengthening in global coal markets in recent months, despite continuing weaknesses in the macro environment. Let's start with global cooking coal markets, where high-volume coal, ARCH's principal product, is being assessed at $277 per metric ton off the east coast of the United States, which is a strong price level when compared to historical averages. What's more interesting in our view in that coking coal prices continue to trade at these elevated levels, despite relatively weak steel market dynamics. As an indication of this weakness, global output of hot metal, the end use of the vast majority of Arches coking coal, is down roughly 1% year-to-date, following the decline of nearly 10% in 2022. Counterbalancing that weak demand environment to a large degree are continuing constraints in metallurgical coal supply. Year-to-date, coking coal exports from Australia, the largest supplier of metallurgical coal to seaborne market, are undershooting the already weak 2022 levels by roughly 5 million tons and heading to an over 35 million ton or almost 20% decrease from their high water mark in 2016. Meanwhile, exports for the United States and Canada, the other major sources of high-quality coking coal supply to the seaborne market, remain relatively range-bound despite persistently strong pricing in recent years. As we've noted repeatedly, the global investment in new and existing mine capacity has been extremely muted the last several years due to increasing development costs, mining regulatory pressures, and a host of other ESG-related concerns, and we see no evidence of that changing in the near future. Indeed, we suspect that even a modest improvement and global macroeconomic conditions could drive additional supply tightness well into the future. As for the seaborne thermal coal markets, we see a similar dynamic, with lackluster demand being counterbalanced by years of undersupply. While our thermal assets are effectively sold out at fixed prices for 2023, we expect current thermal market dynamics and pricing levels, should they persist, to support substantial margins on our thermal export volumes in 2024 and beyond. Looking ahead, we remain sharply focused on delivering operational excellence consistently, quarter after quarter and year after year, capitalizing on what we expect to be constructive seaborne coal markets well into the future, maintaining and augmenting our already strong financial position continue to reward shareholders for their support and confidence through our capital return program, and advancing our industry-leading sustainability practices. Through these substantial and ongoing efforts, we're laying a strong and durable foundation for growth and long-term value creation, as well as setting the stage for ongoing improvements in our mid-cycle free cash flow generation. I'll now turn the call over to John Drexler for further discussion of our operational performance in Q3. John?