Rayonier Advanced Materials Inc.

Thank you and good morning. Welcome again to RIAM's first quarter 2023 earnings conference call and webcast. Joining me on today's call are Delisle Blomquist, our President and Chief Executive Officer, and Marcus Moultner, our Chief Financial Officer and Senior Vice President of Finance. Our earnings release and presentation materials were issued last evening and are available on our website at RIAM.com. I'd like to remind you that in today's presentation, we will include forward-looking statements made pursuant to the safe harbor provisions of federal securities laws. Our earnings release as well as our filings with the SEC list some of the factors which may cause actual results to differ materially from the forward-looking statements we may make. They are also referenced on slides two and three of our presentation material. Today's presentation will also reference certain non-GAAP financial measures as noted on slide four of our presentation. We believe non-GAAP measures should provide useful information for management and investors, but non-GAAP measures should not be considered an alternative to GAAP measures. A reconciliation of these measures to their most directly comparable GAAP financial measures are included on slides 17 through 25 of our presentation. I'll now turn the call over to Delisle.

Thank you, Mickey, and good morning. I will start this call with a review of the financial highlights from the quarter. before turning the call to Marcus to provide additional details on each business segment and provide an update on our capital structure and liquidity. After Marcus's update, I will provide an update on our key 2023 initiatives and guidance before opening up the call for questions. Let's now turn to slide five. We started 2023 with continued positive momentum on revenue, EBITDA, and cash flow. Revenue increased $115 million or 33% from prior year to $467 million, driven by solid price increases across all our products and overall stronger volumes driven by improved operational productivity. Adjusted EBITDA increased $31 million or 155% versus prior year to $51 million as the price and volume increases more than offset the higher costs. The largest EBITDA gain from prior year was led by our high purity cellulose segment, which delivered $44 million of adjusted EBITDA of $28 million, or 175% from prior year. Paperboard delivered another solid quarter with $13 million of EBITDA, and high yield pulp contributed an additional $8 million of EBITDA as we realized higher prices in the quarter. Corporate expenses increased $8 million from last year, due to $14 million from a prior year period gain of the sale of our green first shares. By delivering on these positive results, we remain on track to deliver our $200 to $215 million of EBITDA for the full year, and we are increasing our free cash flow guidance to $40 to $65 million. Now I'd like to turn the meeting over to Marcus to take us through the financial details for the quarter.

Thank you, Delisle. Starting with the high purity cellulose segment on slide six, sales for the quarter increased 93 million, or 33% to 374 million, driven by an 8% increase in sales prices, including an 18% increase in CS prices. Sales volumes increased 27% to 265,000 metric tons due to improved production, a higher mix of commodity sales, and enhanced customer contract terms. Sales for the quarter also included $23 million of biomaterial sales, primarily from green energy and lignin. EBITDA for the segment improved $28 million to $44 million. The impact of higher prices and volumes was partially offset by higher chemical and logistics costs, along with the impact of annual maintenance expenses in the prior year. Turning to slide 7, paper board segment sales grew $5 million, an 18% increase in sales prices due to demand for packaging grades which was partially offset by a 7% decline in sales volumes as a result of sales time. EBITDA for the segment grew 30% or $3 million to $13 million as the higher sales prices more than offset the lower volumes and increased costs for chemicals and purchased pulp. Turning to the high yield pulp segment on slide eight, sales increased by 20 million from prior year, reflecting a 39% increase in external sales prices and a 43% increase in sales volumes due to stronger demand and improved logistics. Cost increases were primarily related to higher chemicals and logistics. EBITDA for the segment improved $8 million as compared to breakeven in the prior year. Turning to slide 9, on a consolidated basis, operating income for the first quarter improved $33 million to $17 million. Sales price improvements across each segment and volume increases in HPC and high-yield pulp more than offset $59 million of higher costs for chemicals, purchased pulp, and logistics expense along with the impact of annual maintenance expense in the prior year. EBITDA margins for the quarter were nearly 11%, which is up over 500 basis points from the first quarter of 2022, and essentially flat to the prior quarter. Turning to slide 10, net debt declined to $683 million, a reduction of $72 million from the same period in 2022. We continued to repay debt, including $5 million of senior unsecured notes in the first quarter and $10 million of senior secured notes in April. As we continue to repay debt, we are still preserving strong liquidity. Liquidity ended the quarter at $276 million, including $169 million of cash. We recently purchased trade credit insurance, which will increase liquidity by an additional $36 million. This excess liquidity provides flexibility for upcoming refinancing activities. Given our recent focus on increased maintenance capex to improve reliability, we are now capturing the benefits of the improved production. As a result, we are lowering our capex outlook for 2023 to a range of 100 to 105 million, down from approximately 110 million in our original guidance. While we were able to reduce our maintenance capex, we still expect to invest 30 to 35 million of strategic capital, primarily focused on high return projects, which will provide immediate and incremental benefits to the business. Net leverage ended the quarter at 3.3 times, an improvement of 0.7 times in the quarter and ahead of our initial expectations. With lower debt and improving credit metrics, We expect to refinance our 5.5% senior unsecured notes, which mature in June of 2024 at acceptable terms in the coming quarter. We recently engaged Goldman Sachs to help advise us on the best structure for our refinancing, including high yield notes, syndicated loans, and privately placed loans. Our existing cash balances and expected free cash flow will allow us to further reduce gross debt and minimize the impact of higher interest expense. With that, I'd like to turn the call back over to Delisle.