Enviri (NVRI) 2 Nov 232023 Q3 Earnings call transcript

Good morning, and welcome to the Enviri Corporation Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Dave Martin for the rest of the conference. Please go ahead.

Thank you, Debbie, and welcome to everyone joining us. Enviri. of Martin Dave I'm With me Executive President Chairman Chief Grasberger, Chief is and Tom Nick Officer; Vice Officer. our Vadaketh, Financial and today our and Senior

quarter our This will outlook. results of XXXX for morning, and discuss the we updated our third

let presentation, a mention however, few Before me our things.

are First, release call presentation website. our for slide earnings on our this and available

our expectations laws. Second, meaning of the are we forward-looking These are certain uncertainties considered statements within risks will and statements. differ make actual that are statements from current based to subject may on federal those forward-looking and results today securities knowledge materially that and the to cause

obligation such our update any to For of risks a in uncertainties, forward-looking statement. Factors most see discussion The the XX-K. section no revise Risk recent or and undertakes company

Lastly, as slide in will call, considered results call for to SEC results to you. turn I'll financial earnings purposes. our to that we release is non-GAAP Nick. the adjusted the GAAP that Thank A presentation. well reconciliation With are reporting being said, included on this refer as

good has everyone. He very Thank in continue and look I who with well as public transformation. our working worked him Tom companies a seasoned morning, Tom we success. our Dave, I executive has welcome want both private culture and and to had you, considerable Enviri. and to is into fits forward to

So Tom, welcome.

his across his company we dedication and X Once again, the well are past our for the Pete's to him in I over years to Minan wish like to Pete company its would and thank shareholders. retirement. contributions countless,

our expectations. year And growth was once fifth again, quarter consecutive This EBITDA prior exceeded of quarter. against we the past double-digit quarter

outlook transformation. reducing also leverage and and next the result, raising full flow, squarely our remains completing for a year, As step our on boosting cash are the we focus in our our

we by year, $XXX Cash continuing Clean million Earth flow improve and and segments, expect over few the X Environmental next further will over years. from our growth this Harsco

and X much higher Nonetheless, another and turn challenge cash Our the impact by about been decline the least expense next to half the our to for has interest rates. decline year turn higher our Rail before leverage Rail leverage by at will this year of due segment expect we primarily flow accounting divestiture. in short-term

by cash The we've largest XX% pass growth, at quarter $XXX and XX% and Clean contributor disposal operational favorable from and projects reflect third to other margin the the volume Clean able mix effectiveness. up capital, points Clean revenue require this basis of improving driven strong Cash to relatively expansion flow fact flow quarter, Earth's Earth. we assets deleveraging gains, incurred been on at XX% over modest will costs. year this margin a Earth maintenance our pricing has and EBITDA. improved or inflation the These past of numerous in our approximate metrics EBITDA XXX year, million that last generation to have and been in aimed

Earth's Earth segment Clean million was financial acquisitions businesses. to year. respectable in X driven which combination This the acquisition have return earning focus cash third this a that time and million $XXX of on the growth from $XX us Clean flow, investment. grown over to our free of is full soon has year by strong our are We created our about of at complete the EBITDA

are for has and recent our for this considering multiples will business, continue the and created segment shareholder we that in confident value. to create our paid industry When the acquisitions tremendous outlook

operating improved new implementation reducing of operational SG&A in assets the platform several another from discipline, critical business common will unlocking installing include programs. next to build to team, value The leadership year other and improvement the efforts IT business. a milestone logistics, Our better pricing set a a be optimizing much of unique a

well steel to our business this Environmental is much capital higher considerably business cash working despite Similar of been year customers. weaker-than-expected be the has perform in capital-intensive with eco-products expectations. production due continues earnings in cash less to by services, to higher and HE Harsco outperforming expanding scope the flow performance. current improved contracts Clean will The successful Earth, and

is normalized impact operating to volumes of HE we leverage in high, forward least the the returning few to years. next steel levels and The production look over quite at

Turning to our Rail segment.

to the performance transaction is financial completed. this late quarter or diligence continue specific contracts Rail long-term year due support announce process with sale and European expect a derisk will to customers. We we in fourth by as anticipated work Strong year early the next to

our our total, a processed. Clean level able we record is year. encourage metrics. In of released report the and last you we enviri.com. to a highlights we reused performance or the recycled XX% taken And from Earth XX% the of report saw ESG in our to I weeks few In our Environmental ago. Harsco XXXX, the at in to of annual Enviri safety repurpose year. those slug to because measure or progress improvement of ourselves mission report Next, to deliver against waste XX and and a recycled XX% recycled prior Environmental and we the review compared solutions. report Harsco critical it waste The billion create pounds safety for environmental how company, is

we ahead optimistic. are Looking XXXX, to

say are turn of the in safe we and over call of profit year. And sale business our margin that noted, growth February, Rail to now Tom. I'll financial provide continued months. to the we As each in coming while next won't complete targeting it's XXXX formal we until expect to guidance

good Nick, morning, and Thanks, everyone.

business, Enviri lot company's I'm the mission completed Let part over transformation environmental I'm me its to pure-play with team into and by to speed. forward be and the a looking past up solutions helping looking know I'm to thrilled getting start saying the few forward I'm company. to the I of and excited purpose to by weeks, the a have getting about and team. I've learn Enviri enjoyed working to

its value is look well priorities leverage creation and drive operational free remains too, cash key to working me love our strategy to and strengthening defined flow Enviri's side, unchanged. generation as are our the and Reducing margins for boost CFO. paramount opportunities and forward and I with businesses growth.

revenues our to to operations let turn results turn compared the outlook $XXX continuing million. third EBITDA our increased both quarter. prior prior for million, from Please prior growth improvement volume by result and with up to driven Clean Harsco totaled Now Earth a X. me XX% quarter and for the Slide This quarter and represents year is Enviri's X% range. guidance QX. was $XX increase above in and year from pricing Environmental. The the Adjusted our

helped. The Lower driven in were also corporate in performance which spending of contributed volumes prior Clean each the cost couple to the stronger-than-anticipated mostly segments year and by business next slides. to results operating operating discuss quarter, of Earth. I'll as the strong mix as Relative growth, well our

share and quarter Special Oman, Free consisted and sale. Adjusted for was largely for $X.XX where $XX an receivables the in the contract quarter for flow a cash the halted our totaled in items per earnings production of customer for the is was HE provision mill million. quarter. reportedly $X.XX

capital Excluding increase spending This working million. flow well year-on-year the prior was improvement in free the $XX cash A/R as securitization cash higher quarter, driven benefit in lower year earnings. and by as was the capital

by the improvement continuing As $XXX from growth alluded earnings businesses, in Earth in million other million, by Nick underlying the business Clean period payments over year-to-date, free improvement significant from items, resulting driven million same of last the partially our period cash flow company offset increase together by interest cash during a over This and cash same generated working flow have in nearly was $XX to, HE the generated $XX smaller year, for and of $XX free the total last and capital. an improving million year.

towards to leverage continue to and our Please Lastly, at quarter and environmental X end segments. year-end. should net our X.Xx to Xx decreased trend at Slide turn

the higher year as year and volumes, cost to and partially compared positives improvement million, pricing increased including X% million These mainly quarter. initiatives. as incentive $XXX due well sites compensation. the EBITDA new from from up to HE Relative quarter. eco-products were Adjusted Segment prior revenues SG&A higher service the $XX reached with totaled quarter, offset benefited higher for prior by

lower HE's against quarter, offsetting production other in the in remain that EBITDA modestly XX% price year positive are customer low. the and improvements margin approached quarter. HE total, quite Overall, prior given our utilization these particularly performed, were In services locations operational are our rates headwinds. mill and at results view, steel

Earth. to turn please X Slide Next, discuss Clean to

second and the contributed care X/X XXXX, change volume quarter revenues Compared adjusted with quarter, EBITDA increased and the million. this totaled health X%. For just $XX to was led million, growth revenues $XXX over by industrial of underlying markets. Price of

Hazardous Materials X% $XX million, These revenues for increases while XX%, $XXX soil-dredge revenues of reached the and million represent figures quarter. respectively. totaled

quarter and the projects in the revenues benefits position. construction the XXXX, since first spending, quarterly of soil-dredge Our markets infrastructure in major relevant were reflecting of market highest our our strong

which XX% We the increase Clean continue more Earth's year-on-year EBITDA increased in year soil-dredge growth related booking to now margin Earth quarter. date. have XX% then reached adjusted in strong XX% to see and Clean

mix and the initiatives the quarter. comparable from efficiency price to favorable volumes, XXXX with addition In and business benefit internal compared cost

for our X XXXX And X just points revised slide. let please highlight to outlook. Now Slide on turn me this

of is First, within to be now range million. adjusted to $XXX full Enviri's a year expected $XXX EBITDA million

up Our is year-on-year. new midpoint XX%

cash flow in is capital our The year. million the our higher Second, that and $XX we flow HE. be for performance interest million cash our to expect working between change on attributable and $XX view now updated free in will midpoint free

there in with more HE pay. slow been China discussed good here. We we've in to certain in the customers third still As quarter, made is to progress but do past, China work the customers have

been result, some anticipated a into have receipts year. next pushed As

million fourth cost Environmental significantly on to is and will contribute growth. expected million. prior increase to guidance. $XX Let our quarter. XXXX. is quarter to Clean me is be volumes, conclude year price X adjusted EBITDA range the expected from expected Harsco with the improvements to $XX Higher QX QX to comparable Slide EBITDA versus to Earth EBITDA

fees. to incentive expenses higher and and by as offset price Here, improvements are expected be professional compensation higher well as operating

due by with lower mix. are business prior Sequentially, higher items. the to professional be the lastly, other projected to to seasonality results million in anticipated segments increase year and favorable are driven approximately $XX And various compensation, both less corporate be incentive and costs versus for QX fees

now Q&A. Thanks, the hand call the back I to will operator and for

Capital The from with Instructions] comes Markets. Street Brown Rob first [Operator Lake question

very you progress. made on had margin First Earth, good good and you've Clean improvement,

year next how on can an you improvement? to get of pieces update margin to you thinking can that. sort do wanted And your more Just are take on that get much what the further

were third margin highlighted And business has and grew Well, as we've few the waste since The for acquisition time higher Clean been X quarter. here And the Earth, mix soils X now, driving target some that. we years as had there a noted, XX%. than margins a we've XX% within the EBITDA really margin in business, bit points. let's hazardous say, the or favorable the differential is of

the is helping. So strong. And backlog that's quite certainly

that So previous continue anticipate discipline think we better into business efficiency our the opportunity I many that operational than it year. next And benefit continuing And as oriented somewhat been pricing in this year into years. we've will of learned next in and few has is would well. projects these

we'll the the Earth with our next this consistent think trends. February, from margin guidance is a for pleased new high we're clearly but Clean is plan So very And in XX% bit I and watermark the the EBITDA year what provide on beginning. expected with more

business. Okay. to the Great. then And switching environmental

You what that's and talked of do is growth. a on that you of... percent little going bit elaborate Could and that terms you can in see about of in kind terms of eco-product what how mix

So there are several components that. to

X somewhat the few businesses, a doing We which and portfolio, Reed year-over-year. eco-products adversely eco-products but that's, volume year. steel having eco-products part are within that particular, the businesses are XX% business say, our acquisition The HE, that business. business of years our part a HE business of prices have of by overall, is good in mill of Minerals and made part And to mill really nickel Altek are unrelated service few those also lower onward well ago we services. to flat let's nickel sales to of up of year-over-year, a is XX% within affected scrap very it's contained The slightly

Larry question Securities. next with Please The from is go Solow CJS ahead.

Welcome, Tom.

our weak industry actually been below production on customer not been of averages. production just grow you revenue growth to I sort price know production, still years below and quarter. question, like and it you of taking you First I've differences help has over sort of the sources environmental. Could of some this mentioned, your few sort kind anything there? the managed guess, year, steel of revenue is this out of But the speak to parse just X% it us catch-up, I but some part there? last of

Yes.

as some the on the online year-over-year of have price picking just the -- businesses with year, that this QX inflation increases again, as in new us we few we those to certainly eco-product have So year. half do for growing. a benefit well And compensated as for up in throughout are then year, new are the coming of we continues every and QX. boosting revenue in Price sites second be a that's contracts, theme,

very continuing on successful though services I So the to services that They we've think capital these of be I and capital tend those scope was to mentioned even down earlier to the the production so our intensive accretive less new other infrastructure clearly existing sites, on on basis, and returns that we steel that been sites. also sites. a have I guess site on the adding is factor on contracts the leverage

that's as so helping Larry. And well,

has gears has the which then been been of Okay. with think switching obviously it quarters, Great. a I of part but done well. wonderful lot And just you in Earth, turnaround Clean been business, last obviously, know performing much the bookings side. up, least to has wet so dredging the And several it I smaller guess the soil XX%. a I mentioned and at soils the not up in is that's on improvement were a

us full that and means break a Earth me the it -- that what Clean you how How that size move out to much help -- to not rise sales. high you eventually just give bookings Can to want the level, that specifically goes that XX% -- specifics. relative from if can of needle some in

the dredge So Clean of Earth and soils the business percent XX-or-so is revenues.

facilities. few of from for to as into infrastructure of recall We've these previous time volume it record begin and into flow levels of may backlog has. for our will You And to course, increase we've discussions waiting seen for projects XXXX over well. that past been quarters, some extend, some in that that the

pretty driving X broad-based really not it's starting. projects So or are X projects that improvement in this. It's a

than of is favorable because now. And margins is waste tend the in as X that component mix Earth. the within this or I segment soils business there's running noted, mix be on the And to that X a Clean the even points hazardous favorable higher business,

is Larry, David. And this

as tied XX% mostly Just wet. to a you you mentioned in one to opposed to point, growth soil dry clarify That is label them bookings. as

okay, -- Yes. side. more the be will That not dredging

some to you hazardous of it -- Okay. to getting that's that or the of I guys if just Or the I cement of of terms is that know side I you mistaken, side, -- too, kind goes appreciate right? actually through -- guys incinerators that. -- kilns, not the moving the And bit, is bottleneck a the -- on were that on and some little I'm some in that forward? bottlenecks there hurt that think is in I collection you stuff know

but us, certainly, much it's for that because challenge. challenge a it good been Larry, Yes, a less has question, of a is recently

we're forgoing of disposal lack really not So I capacity. would of say revenue because any

a to Feels Rail the you'll X like lastly, things quarters. which macro interest And you like issue, outside have the and business, are progressing, Okay. rates, things it sounds then on sale next like the confident within obviously. sound of X higher are the is

quarter. In I of long-term of derisking us know the you contracts, last updated the terms

I of update think X outstanding general? like Any in kind there were I just kind customers. or one felt of was issues X forward. separate there moving

Yes.

large diligence with have contract supply we doing takes a European think forward. but but with in So moving contracts the complex. those The second number noted recall, may same X and the we're successfully process on contracts, The the chains these of yes, -- had do is we long-term certainly complex. are the amended another. -- I in renegotiated And of and process you time we customer, we the they're quarter,

Trafalgar The Stifel. Adit with is [ next from ] question

is that more run on Just Just you we about are great. And the agreement Rail. are the EBITDA could pre-COVID a XQ Or 'XX at following maybe to final also expect place? would what in in now? up getting great mentioned levels up then Rail. at that the be buyers think about point, do talk performance rate from this Is potential that back holding I that because looking just back you you there

Sure. Yes.

in So I Rail business at it the there, that fourth quite to pre-COVID, we view the pre-COVID of you and contracts of where next quite clearly and levels. that see fourth in quarter. is core is the business be in look the outside back This strongest would long-term for a if not will approaching we've healthy, say it's the some was in the year core had time And today. the business backlog lot quarter

So core. good the about feel we quite

in complex. ago, noted long-term minute are large. As They're The I are supply very just contracts a complex. these chains Europe

contracts also to impact during the past supply You over of of can years. the you disruptions that chain, COVID, on imagine can imagine, couple the those inflation

side side is than process time, is. it our the on like, the conducting the and So diligence but takes on contracts on risks longer buyer it understanding what and of renegotiating these we'd

I help mentioned, the be we'll of which this a to to strong expect And late as And next we of will a I quarter, simply process. but so I don't think year, think deal matter question the there's fourth year, get early a again, if when.

related you leverage, of about I a X.X down to switching 'XX. think but talked gears, come I you expect in further And Great. guess, Rail, just it to still FY turn sort

'XX of So potentially of down you're Xx further Rail can X.X assuming So in potentially FY FY leverage? come turns? sort down it Does for debt that? you pay exits leverage sale. Are the X.Xx more down any how after 'XX sale? much come at Rail And exiting at

Yes.

certainly, rail of end be next be the event. think the Rail And expect well Xx we excluding do year. by a delevering divestiture, the I to the below impact transaction should we of

next deleveraging when February the put view impact, So Xx. have I specific turn number divestiture impact the plus plus year below next much a incremental X/X won't the our delevering We'll certainly of now. give but in have we that better will Rail call, us of well

Great. just for And then me. one last

you So EBITDA did raise for the $XX guide million.

was Just flow $XX I raised I'm the then think -- then -- million, but by free cash lowered $X and sorry, million. by you EBITDA

that So accounts in and sort flow raise for EBITDA? cash lower what free of a

really kind Yes. year receivables a in It's China. have of function that. $XX We I'll We're it, $XX million that's QX. of million million came a into $XX this challenge. pushed being And we through call with, into

And contractual not a collectible, in be the this so few when. quarter, would resolved be it's we'll this matter matters we where contract we just of we'll I question so again, that QX. -- a collect and whether are -- there fourth that in it's a is to or had there's a And million assumed will. of that situation they see And see need $XX that

Baynton The Capital comes next Markets. Instructions] with Davis from question [Operator BMO

Devin for Dodge. on Davis is This

Earth, seems to lost year, conditions some you but Earth's labor have to in your maybe mentioned staffing XXXX. in the this accelerate current Clean previous the improved in And in what's So Are of a labor conditions? from Clean revenues continuing outlook there? had lack

Yes.

drivers, in staffed we much, to of and companies shortage coupled with challenge forth. we Clean much last in so referring fully shortage, inflation a challenges that year. many are year. position think but level diesel we costs quarters. than of other prices that That had, with the were better many a one But in to as truck I like was Earth was for won't and drivers logistics I yes, that us respect we last that and say acute you're we'd the did rather previous had to the we're

really terms the of situation. I in that believe revenue So losing on we're much profit based don't labor or

Okay. And to Harsco then over switching just Environmental.

you steel into how a bit do already So terms bit what about production customers the weaker-than-expected levels? you just segment. you by near-term that saying a mill had of production visibility -- in your please steel But in And customers that could have about business? expand much maybe talked are you've

some is Yes. held Well, have geographies the this growing reasonable We've Western service nicely, first quite all, growing mix Turkey. China seen India It's only year. mill the provider Certainly, let us kind just Americas growth seen comment me in on India. that We've And We're India. of within and growth good in well. really HE. back. of quite in Europe are the

the higher -- U.S. our differential Fortunately, developing doing markets are the Europe is towards better weighted that are the than weighted margins margin the relatively -- and

of of -- thought we, of as production. hasn't uptick, the steel it our we that bit terms just customers We we'd course, year, forecasts to visibility, half happened. listen well. for In and of an a year We the coming see second this follow many different into

so been we'd versus fact, be year X% in the in second bit. And second thought a XXXX. of down or this And of half it's X% half plus we

of customers, do our volume expect growth. that XXXX, in most forecasts see we discuss as Most we

If the out you support, first the is least that at half [ you look XX-year at mills low. utilization at XXXX steel at if we of of kind mill ] a take capacity

And certainly expect we improve. to that so

we and in so do anticipate economists do do, customers growth XXXX. Our

This Dave the concludes like conference any Martin to back I would to for remarks. question-and-answer closing session. our now turn over

your interest that feel follow-up speaking Thank soon. you, you call. always, Thank you. forward joined we look Enviri to everyone you Debbie, in and free with this And with Please me and to to contact as questions. appreciate any thank

today's concluded. The attending now has presentation. conference Thank for you

You may now disconnect.