Enviri Corporation

Good morning, everyone. My name is Jamie, and I'll be your conference facilitator. At this time, I would like to welcome everyone to the NVRE Corporation fourth quarter release conference call. All lines have been placed on mute to avoid 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 questions, you may press star and 2 using your telephone keypads. 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. 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, Jamie, and welcome to everyone joining us this morning. I do apologize for the technical issue this morning and appreciate your patience. I'm Dave Martin, VP of Investor Relations for Enviri. Again, with me today is Nick Grasberger, our Chairman and Chief Executive Officer of and Tom Vadeketh, our Senior Vice President and Chief Financial Officer. This morning, we will discuss our results for the fourth quarter of 2024 and our outlook for 2025. We'll then take your questions. Before our presentation, let me mention a few items. First, our 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 from these forward-looking statements. For a discussion of such risks and uncertainties, see the risk factors section in our most recent 10-K and as updated in our subsequent 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 in the earnings release as well as the slide presentation. With that being said, I'll turn the call to Nick.

Thank you, Dave, and good morning, everyone. We delivered a solid fourth quarter at Enviry driven by Clean Earth, which produced another quarter of record revenue EBITDA and cash flow. Harsco environmental performance was challenged by much weaker global steel production and a strong U.S. dollar, while Harsco Rails adjusted results were similar to those in Q4 of last year. For the full year 2024, some key highlights include Envire delivered the highest adjusted EBITDA in over 10 years, marked by an increase of 10% on an organic basis and 100 basis point lift in margins. Cash flow from Clean Earth and Horseshoe Environmental improved to a record of nearly 200 million. And importantly, we delivered better safety performance across the company. I'll share a bit more about each of our businesses, starting with Clean Earth. For the full year, Clean Earth delivered cash earnings, profit margins, and free cash flow that were each two times higher than at the time of acquisition a few years ago. We're entering 2025 with great momentum in this segment and expect a further double digit EBITDA improvement this year. Our strategic goal is to continue to shift our portfolio to align with Clean Earth's profile. of a specialty waste business with higher underlying growth rates and healthy cash flow conversion. To that end, since we fully integrated Clean Earth in 2021, the business's contribution to our consolidated EBITDA has grown from 25% to over 50% as of this year end. The contribution of Clean Earth's cash flow is even higher and has improved at a similar rate. Clean Earth has become a very valuable business in an attractive and consolidating industry. The significant increase in the value of Clean Earth has been driven not only by the much improved performance of the business, but also by the substantial expansion of industry valuation multiples. Our Clean Earth team has done a remarkable job improving the profile of the business through better pricing dynamics, productivity initiatives, as well as boosting customer service to industry-leading levels. Over the next few years, we expect that volume growth, benefits of a common IT platform, facility improvements, and more efficient disposal solutions will serve as Clean Earth's main growth drivers. Turning to Harsco Environmental, the business is managing well through the most challenging conditions the global steel industry has seen in many years. Beginning in the middle of 2024, low-priced Chinese steel began to flood export markets, most notably in Europe and Latin America. The drivers behind this are threefold. Low domestic steel prices in China, significant excess capacity in China, as well as weak trade barriers. In response to this market shift, many of our customers have reduced production, and a few have declared bankruptcy and closed operations. We have been through similar cycles before and we know how to manage it. While the reversal of this trend is difficult to predict, we are moving aggressively to mitigate its impact through lower capital spending, cost reduction, and other efficiency programs at our sites. Our operating leverage to the upside will be significant when the industry recovers. Given the extremely challenging backdrop, it's even more impressive how well our team is executing. If we exclude the impact of a strong US dollar and a few small divestitures had on the HE business, adjusted EBITDA in 2024 was essentially flat versus that of 2023. And we expect adjusted EBITDA in 2025 to be mostly unchanged on the same basis. HE's cash flow profile continues to improve. largely due to capital efficiency improvements as well as better equipment maintenance practices. Over the past few years, free cash flow in HE has been in the range of 75 to 90 million per annum compared to an average of 40 to 45 million per annum over the previous five years. We expect to maintain this level of free cash flow in 2025.