Enviri Corporation

Good morning, my name is Danielle and I will be a conference facilitator. At this time, I would like to welcome everyone to the Envire Corporation second 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, please press star then two. Today's conference is being recorded and this telephone conference presentation and accompanying webcast made on behalf of Enviry are subject to copyright by Enviry Corporation and all rights are reserved. No recordings or redistributions of this telephone conference by any other party are permitted without express written consent of Enviry. Your participation indicates your agreement. I would now like to turn the call over to Dave Martin of EnviroCorporation. Mr. Martin, you may begin your call.

Thank you, Danielle, and welcome to everyone joining this morning. With me today is Nick Grasberger, our Chairman and Chief Executive Officer, and Tom Vadekith, our Senior Vice President and Chief Financial Officer. This morning, we will discuss our results for the second quarter and our outlook for the year. We will also discuss briefly our announcement this morning related to the evaluation of strategic alternatives. We'll then take your questions. We ask that you keep your questions focused on earnings, operations, and the outlook, as there is limited additional information we can provide on strategic alternatives at this time. 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 materially 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 10-Q. 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 our earnings release today, as well as the slide presentation. With that being said, I'll turn the floor to Nick.

Thank you, Dave, and good morning, everyone. Before we dive into our Q2 results, I would like to take a moment to discuss the announcement that we made this morning about our review of strategic alternatives. As you would expect, the board and our management team are continuously focused on evaluating options and taking actions that are in the best interest of Enviry and its shareholders. In this context, we continue to believe there is a significant and persistent gap between our market valuation and the sum of the parts value of the company. Over the past several years, we've created a portfolio of valuable businesses focused on delivering compelling solutions to our customers. Clean Earth is an especially valuable business and an attractive and consolidating industry, while Harsco Environmental is a market leader with unmatched service capabilities and a strong earnings and cash flow profile. We are also continuing to take actions to stabilize rail, building on the improvements that we've made there. We're confident that executing our operating plan will continue to create value over time. With that said, we believe there may be alternatives to unlock this value sooner, and we think now is the right time to initiate a formal evaluation of our business portfolio and strategic options with the assistance of our advisors. This evaluation will consider a wide range of alternatives, including a tax-efficient sale or separation of the Clean Earth business, along with a continued execution of the company's business plan. This process will also consider, amongst other things, the capitalization needs for our businesses in the future. I am proud of what our teams have accomplished, and I am excited about the opportunities this process may present for our company and its employees. We expect that this evaluation will take some time given the complexity of our business. I also hope you appreciate that we do not intend to disclose further details or developments on the evaluation process until the company determines that disclosure is appropriate or required. Now let me turn to our second quarter earnings, starting with our environmental segments, which performed quite well in the quarter despite some unique and short-term external challenges. Tom will cover our financial results in more detail shortly. Clean Earth's revenue and earnings grew single digits, and its margin reached 16.3%. The Clean Earth team achieved these results despite weather-related pressures, a weaker business mix in soil and dredge, and a temporary rise in disposal costs. CE continues to perform remarkably well overall, and the team is executing against its priorities by investing in new service capabilities and building a strong business pipeline. CE's ongoing project to implement a common IT platform is also on track, with further productivity benefits anticipated next year from the completion of this project. Turning to Harsco Environmental, the business is managing well through persistent softness in the global steel market by managing its costs and flexing capital expenditures, among other actions, while maintaining industry-leading service levels. We have experienced a modest uptick in volumes in the U.S. of late due to added trade protections, but this benefit has been offset elsewhere. Overall, volumes are flat and more trade actions are needed, particularly in Europe, to deal with excess steelmaking capacity in China. With that said, recent U.S. dollar weakness is a positive, and we expect HE's results to improve considerably in the second half of the year, much of which will be driven by internal initiatives. New sites will benefit us more in the coming quarters, as will improvements at a few underperforming locations. Moving to Harsco Rail, Demand for standard equipment and parts has slowed considerably since the end of Q1. Orders from U.S. customers, as well as those from China, have paused in recent months. Demand from key customers elsewhere, including in Canada and Mexico, is also very weak. We attribute this softness to economic and global trade uncertainty, with the related impacts appearing more pronounced in our niche segment of maintenance-of-way. We expect these impacts to be temporary and are confident in our market position. We may benefit from the finalization of US trade agreements, but we would not expect to accrue any related benefits until next year at this point. As a result, we have reduced our outlook for the year and our rail leadership team is increasingly focused on internal initiatives to help offset these impacts. Supply chain and factory improvements are ongoing and we're focused on lowering rail's overhead. The team also continues to advance and reduce our risk on the large ETO contracts. Last quarter, we announced an amendment to our Deutsche Bahn contract and we are still engaged in discussions with Network Rail. Several other smaller ETO contracts have been completed and the remainder will be finished next year. As we've said in the past, the cash flow in our rail business will change materially over the next few years as these and the larger ETO contracts are completed. Overall, we expect continued economic uncertainty to result in weaker demand that will cause pressure for Envira in the short term. And as I mentioned, we've lowered our outlook for the year to reflect this. However, our environmental businesses continue to perform well, and we expect business performance to strengthen for each of our segments in the coming quarters. Looking further ahead, our optimism regarding the earnings and cash flow potential for our company is unchanged. And the same is true with respect to the intrinsic value we see in our business. We look forward to progressing the evaluation of our strategic alternatives, and we'll update you on that process when appropriate. I will now turn the call over to Tom.