Enviri Corporation

Good morning, my name is Danielle and I will be your conference facilitator. At this time, I would like to welcome everyone to the Inveri Corporation third 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 one on your telephone keypad. If you would like to withdraw your question, press star then 2 on your telephone keypad. Also, this telephone conference presentation and accompanying webcast made on behalf of Enviri Corporation are subject to copyright by Enviri Corporation and all rights are reserved. Please note this call is being recorded. No recordings or redistributions of this telephone conference by any other party are permitted without the express written consent of Enviri Corporation. Your participation indicates your agreement. I would now like to introduce Dave Martin of Enviri Corporation. Mr. Martin, you may begin your call.

Thank you, Danielle, and welcome to everyone joining us this morning. I'm Dave Martin, VP of Investor Relations for Enviri. With me today is Nick Grasperger, our Chairman and Chief Executive Officer, and Tom Vadeketh, our Senior Vice President and Chief Financial Officer. This morning, we will discuss our results for the third quarter. and our outlook for the remainder of the year. We'll then take your questions. Before our presentation, let me mention a few items. First, our quarterly earnings release and 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 and more recent 10-Qs. The company undertakes no obligation to revise or update any forward-looking statements. Lastly on this call, we will refer to adjusted financial results that are considered non-GAAP for SEC reporting purposes. A reconciliation to GAAP results is included included in our earnings release and the slide presentation. With that being said, I'll turn the call to Nick. Thanks.

Thank you, Dave, and good morning, everyone. Before we get into the results, I'd like to acknowledge our late colleague and friend, Mauro Curry, who is the president of our Harsco Environmental segment. We unexpectedly lost Mauro near the end of this past quarter. Mauro will be remembered for his energy and passion, and his commitment to our business and to our values. We are fortunate to have a strong team across HEE and at the executive level, and I will lead HEE until a new president is named, which we expect to be early next year. Turning to the quarter, I'll make a few comments on our Q3 results and on each of our three segments. and then provide an update on our strategic plan and our business portfolio as we focus on creating shareholder value. Our third quarter can be characterized by four developments. Number one, another record quarter for Clean Earth in terms of EBITDA and EBITDA margin. Second, with HE, a weakening of the global steel market due to the impact of excess capacity in China, and slower demand in many of our key geographies. Third, continued supply chain and operational challenges in our rail business. And fourth, the strengthening of our balance sheet through asset sales and the renewal and extensions of our revolver and other short-term credit facilities. Turning to clean earth, the business continues to exceed expectations and deliver double-digit earnings growth against challenging comparisons to last year. Adjusted EBITDA increased over 20% versus Q3 of last year, while the EBITDA margin improved 17.5%, an increase of over 300 basis points. Cash flow remains strong. Pricing, mix, and numerous projects aimed at improving efficiency are driving the business. In addition to these factors moving forward, Clean Earth should also benefit from volume growth linked to sustainability initiatives among customers and new markets such as PFAS. It will also benefit from upgraded and common IT systems and other technology-driven initiatives as part of our One Clean Earth program. Harsco Environmental has phased headwinds due to a weakening steel industry in most markets. Excess capacity and weaker demand in China, which accounts for 50% of global steel production, has led to a flood of exports from the country, which has put pressure on some of our customers in less protected markets. Over the past six months, we've seen a handful of steel mills we support either cease or reduce production. Eventually, we expect China to reduce capacity while other countries increase protections against cheap Chinese steel. A falling steel price premium outside of China should also ease this pressure, potentially in the near term. Overall, we continue to see our mix of customers and contracts as positive, and we do not expect this short-term disruption to have a meaningful effect on our three-year outlook for HE that we shared a few months ago at our analyst day. Parsco Rail continues to face operational challenges related primarily to the late deliveries from key vendors, global shipping disruptions, and some bottlenecks in our own manufacturing processes. Tom will touch on the steps we're taking to improve these operational issues. In addition, Hurricane Helene affected production and shipments at the end of the quarter from our primary manufacturing facility in Columbia, South Carolina. Overall, demand for our equipment, aftermarket parts, and services remains healthy in all markets outside of China. I'm pleased with the progress we continue to make in improving our balance sheet. We've exceeded our goal of generating 50 to 75 million of proceeds from asset sales, primarily non-core businesses. In addition, our sizable pension fund in the UK is now fully funded, and we don't believe further contributions will be needed. We've reached this milestone about a year earlier than expected. And finally, the amendment and extension of our short-term credit facilities was well supported by our bank group and further strengthens our liquidity and debt maturity profile. As discussed during our analyst day last June, the board and the management team are focused on taking actions that are in the best interest of Envire and all of our shareholders. This includes frequently evaluating all options to enhance shareholder value and narrow Envire's valuation gap. And we are open-minded with respect to how we achieve these goals. Based on our evaluations to date, our view, our well-informed view, is that the best course of action is to continue executing on our operational plan outlined a few months ago. We are confident that meaningful organic growth and margin improvement over the next two or three years will boost the value of both Harsco Environmental and Clean Earth, while allowing time to stabilize the rail business and better position that business for sale. We already have actions underway to support these initiatives and as a result, expect to yield EBITDA in excess of $400 million in 2027, with free cash flow of more than $150 million and net leverage of 2.5 times. This will also provide greater strategic flexibility and optionality for value creation in the future. We expect to steadily improve free cash flow each year. Cash flow generation has been reduced the past few years by the investments made in our rail business to execute three long-term contracts in Europe. This investment will decline next year, and then these contracts become a source of cash in the later half of 2026 and into 2027. In 2025, we expect free cash flow of between $40 and $60 million due to improved performance in rail, continued strong cash flow in HE and CE, and lower interest expense and pension contributions. I'll now turn the call over to Tom.