Verso Corporation

Good morning and welcome to Verso Corporation's third quarter 2021 earnings conference call. All participants are in listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. If you would like to ask a question during the question and answer session, please press star then 1 on a touchtone phone. You will hear a tone to confirm that you have entered the list. If you decide you want to withdraw your question, please press star then 2 to remove yourself from the list. If you should need assistance during the conference, please signal an operator by pressing the star key followed by 0 on your touchtone phone. Please note this conference is being recorded. A replay of this call will be available on the investor page of Verso's website after 11 a.m. ET today. At this time, I'd like to turn the presentation over to Verso's Vice President and Treasurer, Tim Nussbaum. Please go ahead.

Thank you and good morning. The third quarter 2021 financial results for Verso Corporation were announced this morning before the market opened. The earnings released as well as a set of slides to which we refer to during the call are available in the investor section of Verso's website, www.VersoCo.com. Joining me on the call today are Randy Nebel, Versus President and Chief Executive Officer, and Brian Cullen, Chief Financial Officer. I'd like to remind everyone that in the course of the call, in order to give you a better understanding of our performance, we'll be making certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions or estimates prove incorrect, actual results may vary materially, for management's expectations. If you would like further information regarding the various risks and uncertainties associated with our business, please refer to our SEC filings, which are posted on our website, VersaCo.com, under the investor tab. In addition, during today's call, we will discuss certain non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information is not to be considered in isolation, or as a substitute for results prepared in accordance with GAAP and reconciliations to comparable GAAP measures are available in our earnings release. Finally, on July 14th, we announced that we had an unsolicited proposal from Atlas Holdings. As you may have seen since our last call, the special committee communicated to Atlas that the previously disclosed $20 per share all cash offer was insufficient and we entered into a confidentiality agreement with them to allow exchange of additional information to facilitate ongoing discussions. The special committee is diligently continuing its work to thoroughly review and evaluate the ATLAS proposal and alternatives thereto. There can be no assurance that any negotiations between Verso and ATLAS will take place following the exchange of additional information or that any transaction with ATLAS or any other party will occur or be consummated. We do not intend to comment on or disclose further developments regarding the Special Committee's evaluation unless and until we deem further disclosure as appropriate or required. At this point, I'd like to hand the presentation over to Randy Niebel.

Thank you, Tim, and good morning, everyone. Turning to slide four, I would like to provide an overview of how we are positioning VRSO to continue to deliver improved performance over the past couple years Verso made a strategic decision to streamline its business and create a more focused, simpler, and stronger Verso. Our focus is on safety, environmental stewardship, superior customer service, improving operations, and our most valued asset, our people. Turning to slide five, our more focused operation has begun to move Verso to a more competitive platform. Verso's Escanaba mill produces 700,000 tons of graphic and specialty papers. Escanaba is focused on reducing its cost and better serving Verso's customers. Verso's Quinnisec mill has a capacity of around 430,000 tons of graphic papers and about 240,000 tons of market pulp. Verso is making targeted capital investments here to reduce costs, expand product offerings, and maximize pulp production. Verso's Wisconsin Rapids is a converting facility with about 200,000 tons of sheeting capacity. Wisconsin Rapids is transforming to being a customer-focused sheeting operation with seven sheeters and an improved cost structure. Finally, Verso owns Consolidated Water Power Company, a regulated utility with five hydroelectric facilities producing approximately 200,000 megawatt hours of electricity. QIPCO, as we call it, sells the energy it produces together with purchases from local utilities to the paper mills and some homes. Turning to slide six, sustainability is a high priority for Verso and our customers. We have made good progress. For example, We are using wood fiber from sustainably managed forests and over 65% of our onsite energy generation at Verso Mills is from carbon neutral biomass. We are also partnering with key organizations that are setting the standards for the industry. Verso is focused on continuing to reduce its carbon footprint by improving the thermal efficiency of our facilities. Turning now to slide seven. Let's get into the results. During the third quarter, Verso continued its improvement trend. Employee safety is a core value at Verso. We continue to deliver very good safety performance and will always strive to have no injuries. Revenue grew both year over year and sequentially to $339 million. Diluted earnings per share was $1.96. up from 47 cents in Q2, and a loss of 92 cents in the same quarter last year. Adjusted EBITDA was $67 million, up 29% versus the second quarter, with an adjusted EBITDA margin of 19.8%. These results were delivered despite a planned outage at our Escanaba mill and inflationary headwinds of about $19 million. Operational cash was $71 million, up $14 million versus the second quarter, resulting in $166 million in cash. These strong results enabled Verso to return $14 million in value to shareholders through quarterly dividends and share repurchases. Turning to slide eight, revenue grew 11% over last year and 3% over the previous quarter. Market demand continues to be strong with North America coded free sheet operating rates at 105%. Order rates and price realization continue to be solid across Verso's product portfolio. Verso will continue to build on our customer strategy to provide superior service and products. The capital investments Verso is making in its processes will improve quality and service, while expanding Verso's product portfolio and reducing costs. Turning now to slide nine. While up slightly versus the previous quarter, industry capacity is down about 15% versus the prior year. North American capacity reflects the impact of paper machine closures and conversions in 2020. As previously mentioned, we removed the Wisconsin Rapids capacity as of July 2020, which represented over 400,000 annual tons of coated free sheets. Imports, while up slightly versus the previous quarter, are about 10% lower than the previous 10-year average. Container availability, increased freight cost, and supply chain delays still remain a challenge. Verso continues to offer a more predictable and efficient platform to service the domestic market. Turning to slide 10, strong price realization and improved operating cost have yielded an adjusted EBITDA margin of 19.8%, up 400 basis points versus last quarter. As Verso continues to become more focused, simple, and a stronger company, There will be opportunities to improve on this results. I am very proud of the progress that the Verso team has made. Even with this progress, there is still a lot of work to be done, and Verso will continue to focus on improving operational performance and customer service across the company. I will now turn the call over to Brian for a review of the financials. Brian?