Harsco Corporation

Harsco Corporation first quarter release conference call. All lines have been placed on mute to avoid any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star and the number 1 on your telephone keypad. If you would like to withdraw your question, please press star, then 2 on your telephone keypad. Also, this telephone conference presentation and accompanying webcast made on behalf of Harsco Corporation are subject to copyright by Harsco Corporation and all rights are reserved. No recordings or redistributions of this telephone conference by any other party are permitted without the express written consent of Harsco Corporation. Your participation indicates your agreement. I would now like to introduce Dave Martin of Harsco Corporation. Mr. Martin, you may begin your call.

Thank you, Sarah, and welcome to everyone joining us this morning. I'm Dave Martin of Harsco. With me today is Nick Grasberger, our Chairman and Chief Executive Officer, and Pete Minan, Harsco's Senior Vice President and CFO. This morning, we will discuss our results for the first quarter of 2023 and our updated outlook for the year. We'll then take your questions. Before our presentation, however, let me mention a few items. First, our quarterly earnings release as well as a slide presentation for this call are available on our website. Second, we will make statements today that are considered forward-looking within the meaning of the federal securities laws. These statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties that may cause actual results to differ materially from those forward-looking statements. For a discussion of such risks and uncertainties, see the risk factors section in our most recent 10-K. The company undertakes no obligation to revise or update any forward-looking statements. Lastly, on this call, we may refer to adjusted financial results that are considered non-GAAP for SEC reporting purposes. A reconciliation to GAAP results is included in the earnings released today, as well as the slide presentation. With that said, I'll turn the call to Nick.

Thank you, Dave, and good morning, everyone. Our first quarter was stronger than we expected across both of our continuing segments, Harsco Environmental and Clean Earth, as well as in our rail business, which is a discontinued operation. The better performance is directly attributed to execution of pricing and cost initiatives, as well as certain commercial developments, more than it is to improve fundamentals in any of our end markets. Nonetheless, the external environment and our end markets generally appear stable at the moment, and we are lifting our outlook for the year. Of significance, both EBITDA and free cash flow have improved, so our leverage was below five times a quarter end, and the figure should decline to about four times at year end before the impact of asset sales. Our plan remains to initiate the sale of our rail business later this year. I'll provide a few comments on each of our segments. At Harsco Environmental, the team effectively managed the business in the face of lower steel production compared to last year at this time. Both the steel mill services business and the eco products business performed better in the quarter. Additional services not tied directly to steel production were higher, as were revenues from byproduct sales, especially in North America. and overhead costs continue to trend lower due to a series of focused initiatives. The steel production comparison should improve in the second half of the year, and we now expect full-year EBITDA and HE to be modestly above that of last year, with higher EBITDA margins and free cash flow generation approaching $100 million. We continue to limit growth capital and HE only to opportunities that provide a strong risk-adjusted return. Turning to Clean Earth, the segment delivered its third consecutive quarter of 12 percent or so EBITDA margins and improved free cash flow conversion. The step change in margins, which averaged 5 percent during the previous nine-month period, has been driven by higher pricing and mix, numerous cost reduction initiatives, and modest volume growth. We expect margins in Clean Earth to remain at or above this level for the remainder of the year, as we continue to progress towards our 15 percent EBITDA margin target. Free cash flow conversion has also improved significantly. On a full-year basis, we expect free cash flow conversion to grow from 55 percent last year to over 80 percent this year. Underlying this financial performance is much improved operational performance, namely service levels, logistics, safety, and labor efficiency. Overall, we feel the segment is back on track to delivering on the promise to create shareholder value from the acquisitions of Clean Earth and ESOL a few years ago. I'd like to welcome Jeff Beswick to Harsco, who joined us this week as the new president of Clean Earth. Jeff is a veteran of the hazardous waste industry, an exceptional leader. and he fits well with our culture and with our values. I would also like to thank Jim Bell for his successful leadership of Clean Earth over the past several months in an interim capacity. Developments in our rail business support a successful divestiture later this year. The standard equipment and aftermarket businesses remain healthy, and our forecast for this year is grounded in the highest level of order activity in a few years. We were also recently awarded a significant long-term contract in the UK to provide services. The reopening of a plant in Michigan is enhancing our ability to deliver on a large equipment contract in the UK while also providing capacity at our primary manufacturing facility in South Carolina to meet the growing demand of standard equipment. Overall EBITDA and cash flow will be much higher in our rail segment this year, and we believe the risks associated with fulfilling the handful of long-term contracts will be greatly diminished. In terms of corporate governance, I'd like to welcome Tim Laurien to our Board of Directors. Tim has been a leading banker to the waste and environmental services sectors for several decades and brings a great deal of industry knowledge along with his expertise on strategy, M&A, and the capital markets. Finally, I'd like to thank our employees for executing a remarkable lift in our performance over the past three quarters despite lackluster end markets. Our ability to raise prices to offset the impact of inflation has underscored the strength of the value propositions across our products and our services. And the success of our numerous programs aimed at improving efficiency and boosting cash flow clearly demonstrate the commitment, talent, and resiliency of our team. I'm now trying to call over to Pete.