Rayonier Advanced Materials Inc.

Good morning, and welcome to the YM First Quarter 2026 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open to questions with instructions to follow at that time. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Daniel Bradley, Vice President of Investor Relations. Thank you. Mr. Bradley, you may begin.

Good morning and welcome to RIAM's first quarter 2026 earnings conference call. Joining me today is Marcus Multner, our CFO and Senior Vice President of Finance and a member of our interim office of the CEO. Last evening, we released our earnings report and accompanying presentation materials, which are available on our website at riam.com. These materials provide key insights into our financial performance and strategic direction. During today's discussion, we may make forward-looking statements subject to risk and uncertainties that could cause actual results to differ materially. These risks are outlined in our earnings release, SEC filings, and on slide two of the presentation. We will also reference certain non-GAAP financial measures to offer additional perspective on our operational performance. Reconciliations of the most comparable GAAP measures can be found in our presentation on slides 19 through 21. We appreciate your participation today and your ongoing interest in Ryan. I'm now going to call over to Marcus. Thanks, Daniel.

Good morning, everyone, and thank you for joining us. Before I turn to the quarter, I want to begin on slide four and address the announcements we made on April 20th. As disclosed, a formal review of strategic alternatives to maximize shareholder value has been initiated. and the company has engaged Morgan Stanley as financial advisor in connection with that review. At the same time, an interim office of the CEO has been established to provide continuity during the transition, and the search for a permanent CEO is underway. Importantly, the members of the interim office of the CEO bring more than 60 years of combined experience at Ryan & Tenbeck, which provides continuity and deep knowledge of the business. We remain focused on safety, reliable operations, serving our customers, executing our 2026 priorities, and improving value across the portfolio. That has not changed. With that in mind, the strategic review is appropriately broad. The alternatives under evaluation include but are not limited to continued execution of our standalone strategic plan, a strategic investment or partnership, that strengthens the business, a merger or other business combination, and the sale of part or all of the company. They may also include capital structure actions designed to improve financial flexibility, including potential debt refinancing or restructuring, covenant relief, or other collaboration with our lenders. Any path under consideration ultimately needs to be evaluated against the same core objectives. what best strengthens the company, improves financial flexibility, and maximizes shareholder value. As we said in the press release, we have not set a timetable for completion of the review, and we do not intend to provide updates unless and until disclosure is appropriate or required. So today my focus is where it should be, on execution, on the operating path forward, and on the actions that improve value under any outcome. Turning to slide five, the message is straightforward. Our 2026 priorities are unchanged. We have four operating priorities for the year. First, deliver positive free cash flow. Second, assert our leadership in CS. Third, drive year-over-year EBITDA improvement across every business. And lastly, exit 2026 with momentum. These priorities reflect both where we are today and what must happen next. We entered 2026 with negative free cash flow and elevated debt. So our task this year is clear. Strengthen the earnings profile of the business, improve cash generation, and build momentum quarter by quarter. The first quarter was an early step in that process. I will cover the detailed results on the next slide, but at a high level, the quarter was broadly consistent with the operating plan we laid out in March. as pricing, mix, and commercial actions to strengthen our leadership in CS continue to come together. Let's turn to slide six and the first quarter results. Adjusted EBITDA in the quarter was $8 million. High-purity cellulose generated $24 million of adjusted EBITDA, and we achieved a 17% increase in average CS sales price year over year, while CS volumes were lower and commodity mix was higher. and we executed our CS leadership actions. Paperboard and high-yield pulp were a negative $5 million, reflecting continued pressure from new third-party supply in paperboard and continued domestic oversupply of high-yield pulp in Asia. Corporate and other costs were $11 million for the quarter, with favorable foreign exchange rates compared to the prior year quarter, providing some offset. Importantly, we ended the quarter with total liquidity of 160 million, comprising 68 million of cash on hand, 88 million of availability under the AVL, and 4 million available under our factoring line in France. The quarter came in broadly in line to slightly ahead of the expectation embedded in our prior outlook. Although still below the level required to achieve our full year objectives, That outcome reflects continued execution of the commercial and operating initiatives required to strengthen our leadership in CS as the near-term benefit from those actions is building. The free cash flow bridge also makes an important point. Even with a weak first quarter, we generated $12 million of adjusted free cash flow. This reinforces that positive free cash flow in 2026 will come from a combination of better operating performance, improved mix, commercialization of new offerings, disciplined capital allocation, and balance sheet actions as needed. Turning to slide seven, our new product pipeline reflects how we are advancing growth through focused innovation and value added products across the portfolio. What is important here is that these opportunities are not dependent on any single product or end market. They are spread across multiple businesses, and in many cases, leverage assets, technical capabilities, and commercial positions we already have in place. The initiatives highlighted in green on the slide are the ones I want to focus on today, because they represent the most tangible near-term progress. In paperboard, We continue to gain traction in both freezer board and oil and grease resistant board, and we are targeting approximately 10,000 metric tons of annual sales in 2026 in each of these markets as commercialization and customer qualifications continue to advance. In high-yield pulp, we see a path to approximately 20,000 metric tons of annual sales in 2026 for softwood high-yield pulp rolls as we move into higher value absorbent end markets, while the wrapper product provides a near-term opportunity to support internal cost reduction and create a path to future external sales. In cellulose commodities, odor control fluff remains one of our more differentiated growth and margin accretive opportunities in the pipeline, which I will come back to on the next slide. The broader point is that this pipeline supports both near-term earnings improvement and longer-term portfolio value creation. The slide that follows highlights a few representative examples of how the value is being developed through targeted product innovation, sharper commercial focus, and a more dynamic operating approach. So turning to slide eight, this slide brings together three representative examples of how we are working to create value through more focused commercial execution, differentiated product development, and a more dynamic operating approach. First, in nitration-grade cellulose, what we have learned is that customers in qualification-intensive energetic applications are buying certainty, technical support, and disciplined specification control, not simply material that meets the basic spec. Rhein is well-positioned here because we are the only supplier with a multi-site sulfate and sulfite production footprint across North America and Europe. Our actions are focused on the highest priority conversion and qualification opportunities and on continuing to strengthen customer support, qualification continuity, and supply assurance in the applications where reliability matters most. Second, order control fluff is a different type of opportunity. but it reflects the same discipline. Adult incontinence is the fastest growing fluff segment, and there is a clear unmet need for immediate odor control. Our product offers a differentiated urine activated solution that can be used as a drop-in replacement in existing products. The commercial approach here is also deliberate. We are targeting brands directly in order to pull the solution through the value chain. Third, Dynamic asset allocation is the internal discipline that connects strategy to day-to-day execution. What we have found is that there are still barriers and bottlenecks that can be removed to raise production and improve mix, and that we have more flexibility than we have historically used to allocate capacity across our grade portfolio to maximize value. A good current example of this is in the fluff market, where pricing has strengthened. As those market conditions have improved, we have further prioritized volumes into fluff and other attractive softwood pulp markets to take advantage of that pricing environment. The broader point across all three examples is the same. We are becoming more targeted in how we deploy technical, commercial, and operating resources, and that is an important part of how we intend to improve the earnings quality of the business going forward. Let's turn to slide nine at the 2026 outlook. The core message on this slide is that 2026 remains a transition year, but one in which we are building leadership momentum and laying the foundation for a stronger 2027 and beyond. The first quarter came in broadly in line to slightly ahead of the near zero EBITDA level we had anticipated, as the benefit of our CS leadership initiative is building. So while the year still depends on sequential improvement from here, the underlying direction of the plan remains intact. The items on the right side of the slide reinforce that point. In the first quarter, average CS sales price increased 17% as our leadership actions continued to build. We are also advancing trade actions to support fair competition in Ryan's U.S. domestic markets. Across the CS value chain, we expect inventory conditions to become more favorable as we move into 2027, while CF supply demand conditions remain tight and continue to support disciplined pricing actions. We also expect to benefit from improving commodity pricing as supply and trade dynamics continue to normalize, with pricing currently forecasted to increase sequentially over the balance of 2026. Beyond the market backdrop, we continue to take actions within the business to improve the earnings and cash flow profile. That includes ongoing inflation mitigation work across the enterprise and continued progress on new product and grade-specific leadership initiatives that are expected to contribute incremental value in 2026 and beyond. Taken together, these actions are intended to build a stronger earnings base and improve cash generation over time. That said, our priorities for 2026 are unchanged. We continue to target positive free cash flow, assert our leadership in CS, drive year-over-year EBITDA improvement across every business, and exit the year with stronger momentum. We also remain focused on safer operations, strengthening our organization, and executing with greater precision and speed. In closing, I have confidence in the plan we are executing and in the team that is advancing it. Regardless of which plan is ultimately chosen, execution remains the anchor under any outcome. The initiatives we've discussed today are the right initiatives for the company. They strengthen our financial position, improve our commercial posture, increase operating discipline, and enhance the strategic value of our assets. The best way we can support the strategic review is to execute the initiatives in front of us, improve our earnings and free cash flow quarter by quarter, and continue building a stronger company. If we do that well, we will reinforce the business under any scenario and position Ryan for a stronger 2027 and beyond. With that, operator, please open the call for questions.