NACCO Industries, Inc.

Good morning, ladies and gentlemen, and welcome to the NACO Industries 2024 fourth quarter and full year earnings conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, March 6, 2025. I would now like to turn the conference over to Christina Kometko,

investor relations please go ahead thank you good morning everyone and welcome to our 2024 fourth quarter and full year earnings call and webcast thank you for joining us this morning i'm christina kmetko and i'm responsible for investor relations at natco joining me today are jc butler president and chief executive officer and elizabeth loveman senior vice president and controller Yesterday, we published our 2024 fourth quarter and full year results and filed our 10-K. This information is available on our website. Our remarks that follow, including answers to your questions, contain forward-looking statements. These statements are subject to several risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements made here today. These risks include, among others, matters that we've described in our earnings release, 10-K and other SEC filings. We may not update these forward-looking statements until our next quarterly earnings conference call. We'll also be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures can be found in our earnings release and on our website. With the formalities out of the way, I'll turn the call over to JC for some opening remarks. JC.

Thank you, Christy, and good morning, everyone. We delivered solid fourth quarter results, which represented a strong finish to a successful year. For those who follow us closely, you will recall that last year I noted that all the unfavorable comparisons we experienced throughout what was a challenging 2023 should turn favorable in 2024. Well, I'm pleased to say that is exactly what happened. Our company delivered robust 2024 fourth quarter net income of $7.6 million and full year net income of $33.7 million. Fourth quarter adjusted EBITDA of $9 million increased almost 27% over fourth quarter 2023 and full year adjusted EBITDA of $59.4 million increased 116% year over year. Before I provide more color on the year, I want to recognize our outstanding employees. I'm extremely proud of the way these talented, dedicated, and motivated individuals continue to deliver success. These are the folks who produced our significantly improved 2024 results. They continue to find new and innovative ways to support our customers while working to implement our grow and diversify strategies. I want to thank each of them for the hard work and many contributions that they put forth to strengthen us today and to secure new opportunities for our future. I am honored each and every day to work alongside such an amazing team. Our strong 2024 performance was led by our coal mining segment where segment adjusted EBITDA more than quadrupled from 2023. North American mining delivered a 35% increase in segment adjusted EBITDA and minerals management generated a 21% increase in segment-adjusted EBITDA. Much of the coal mining segment's improvement occurred at Mississippi Lignite Mining Company. While this mine dealt with its customers' plant running with only one boiler for more than half the year, business interruption insurance income of $13.6 million received in the third quarter helped offset the reduction in customer demand. Despite lower revenues at Mississippi Lignite Mining Company due to reduced customer demand, the Red Hills mine operated more efficiently in 2024 than a year ago when it was finalizing the move to a new mine area and contending with difficult mining conditions. Those challenges are now behind us. Earnings at our unconsolidated coal mining operations also improved, with an increase in earnings at both Coteau and Falkirk. Specifically, Falkirk experienced increased customer demand and a higher per ton management fee beginning in June 2024 when the temporary price concessions associated with Rainbow Energy's acquisition of Coal Creek Station ended. We're encouraged that evolving policy frameworks seem to be creating a more favorable regulatory environment for the fossil fuel industry moving forward, and demand for dependable electricity is projected to outpace supply. These developments are expected to further support coal as an essential part of the energy mix in the United States for the foreseeable future. Shifting to North American mining, this segment continues to benefit from progress on operational and strategic projects that have improved profitability and will continue to do so. In addition to the segment adjusted EBITDA improvement, full year operating profit of $5.8 million was up 72% compared with 2023. However, North American mining experienced lower profitability in the second half of 2024 compared with the first half. This decline was due in part to an overall reduction in demand, partly attributable to the ongoing effects of three hurricanes in Florida in the second half of the year. We expect North American mining to generate increasing levels of operating profit and EBITDA over time as benefits from new and extended contracts add to the profitability of existing contracts. During 2024, North American mining executed two new contracts and amended an existing contract, all of which are expected to deliver net present value of after-tax cash flows of approximately $20 million over contract terms which range from six to 20 years. Wrapping up my North American mining comments, let me mention Sawtooth Mining, which is the exclusive contract mining miner for Lithium America's Thacker Pass Lithium project in Northern Nevada. Lithium America continues to make progress on the Thacker Pass project, and we continue to support the project by assisting with certain construction services as they ramp up work to build the lithium processing plant. In the fourth quarter of 2024, we and Lithium Americas agreed to expand the scope of our work to include transportation of clay tailings once lithium production commences. This expansion of work comes with an expected increase in our income from this long-term project. Phase one production is estimated to begin in late 2027. At Minerals Management, The 2024 adjusted EBITDA improvement was primarily due to a $4.5 million gain on sale of assets. Excluding the gain, Minerals Management's 2024 earnings were comparable to 2023. We are very pleased with the work done by the Catapult Mineral Partners team, which manages this segment. They have greatly expanded our portfolio of mineral interests so that we are now more diversified in terms of our oil and gas mix. We work with a wider range of operators. We have a greater geographic footprint, and we own interest in various stages of mineral development, ranging from producing wells to undeveloped mineral interests. This expansion continued in the fourth quarter of 2024 when minerals management invested an additional $15.7 million in a company that holds non-operated working interests in oil and natural gas assets in the Kansas and Oklahoma portions of the Hugaton Basin. This investment is expected to be accretive to future earnings. While we continue to budget up to $20 million annually to expand our portfolio and provide long-term stable cash flow generation, our business model allows flexibility regarding the cadence and type of investment based on available opportunities that we believe will result in significant long-term value and increasing profitability. We believe that this expansion and diversification program has us well positioned to generate increasing levels of operating profit and EBITDA well into the future. Finally, moving to mitigation resources of North America, I'm pleased to note that this The business contributed positively to operating profit and EBITDA during the 2024 fourth quarter and is expected to achieve full-year operating profit in 2025 based on current expectations for the business. Our expectations were bolstered in January when the team secured a restoration project in Kentucky that is expected to be accretive to earnings beginning in 2026. We believe Navigation Resources is on track to increase profitability over time. Overall, I'm excited about our business trajectory. I'm optimistic about the future and I'm pleased with the way all of these businesses continue to advance their strategies. I believe 2025 is a pivotal year for our company as our legacy businesses stabilize and our new businesses gain traction. We are proud of what we have accomplished thus far and have confidence in our journey. We love our story and intend to increase our level of shareholder engagement in the coming year. Look for more information about that in the months to come. With that, I'll turn the call back over to Christy to cover our quarterly results and outlook.