Enviri Corporation

with the business delivering revenue and EBITDA growth despite the favorable impact of the Stericycle settlement in Q2 of 2023, making for a difficult comparison. CE reached record profitability in Q2, with its highest ever EBITDA of $38 million and highest ever margins of 16%. This earnings performance was driven by both price and volumes, as well as lower operating costs and efficiency initiatives. As anticipated, volumes were mixed, as CE faced a very difficult comparison quarter in 2023 that included strong project-related volumes. Healthcare, retail, and soil dredge volumes were higher this year versus the 2023 quarter, and this growth was offset elsewhere, mainly due to lower project work. Hazardous materials revenues totaled $195 million, while soil dredge revenues reached $41 million for the quarter. Now please turn to slide 7 and our rail business. Rail revenues totaled $81 million and adjusted EBITDA totaled $7 million in the second quarter. This EBITDA total excludes forward loss adjustment of $9 million related to our three large ETO contracts in Europe. As we've said before, these contracts are long-term in nature with some equipment deliveries lasting through 2027. We are continuing to work to stabilize these projects, and as we saw in Q2, we could occasionally see additional charges as we fine-tune our cost estimates to complete the projects. We're also making good progress with our contract negotiations with our customers. As we have done in the past, we will be excluding both the charges from additional forward loss provisions, as well as any favorable impact from contract negotiations from adjusted EBITDA. Excluding the impact of these three contracts, RAILS Q2 adjusted earnings were the highest in a few years, with the year-on-year growth in earnings coming from higher base equipment and services demand. The decline in revenues versus the prior year quarter was driven by the favored favorable forward loss adjustment from our ETO contracts in the UK in Q2 of 2023. While we're excluding the impact of these adjustments from EBITDA, they cannot be excluded from revenues. These adjustments negatively impact the revenue comparison by approximately $15 million versus the 2023 quarter. Now let me turn to our updated 2024 outlook on slide eight. Envira's full-year adjusted EBITDA is now expected to be within a range of $327 to $340 million. Our midpoint is unchanged from May guidance and continues to point to year-over-year growth of approximately 9%. Also, relative to our May guidance, our better-than-expected Q2 results are offset by FX translation impacts in HE for the balance of the year. Otherwise, our outlook is largely intact. Our detailed segment outlook can be found in the appendix of the presentation. This EBITDA range now translates to adjusted per share guidance of between 7 cents and a loss of 9 cents. And we're still targeting adjusted free cash flow of $10 to $30 million. The cash flow upside in Q2 was largely timing-related, and our outlook for the year remains unchanged. This outlook reflects the collection of some overdue receivables from a customer in China. There is some risk with the timing of these collections, which is reflected in the relatively wide cash flow guidance range. Let me move on to slide 9 now with our third quarter guidance. Q3 adjusted EBITDA is expected to range from $85 million to $92 million. Harsco Environmental EBITDA is anticipated to be similar to Q3 2023, with the benefit from higher prices and volumes being offset by FX translation impacts and the sale of our performance business in April. Clean Earth EBITDA is expected to be above the prior year quarter. Here, higher prices and cost improvements are expected to drive the earnings growth. And rail EBITDA is projected to increase year-on-year due to higher standard equipment and technology demand. Lastly, on Q3, I'd note that free cash flow in Q3 is anticipated to weaken from Q2 due to some of the timing benefits we saw in Q2. Finally, on our balance sheet, we've made considerable progress to reduce our covenant leverage, and getting to below four times is an important milestone. This remains a key priority for us, and we will continue to review opportunities for additional asset sales this year. And as communicated at our recent analyst day, our goal is to get to below three times in the coming years. Thanks, and I'll now hand the call back to the operator for Q&A.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star, then 2. At this time, we will pause momentarily to assemble our roster.

The first question comes from Adith Shresha with Stifel.