Greetings and welcome to the Alpha Metallurgical Resources First Quarter 2023 Results Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to your host, Emily O'Quinn, Senior Vice President, Investor Relations and Communications. You may begin.

Thank you Rod and good morning everyone. Before we get started let me remind you that during our prepared remarks our comments regarding anticipated business and financial performance contain forward-looking statements and actual results may differ materially from those discussed. For more information regarding forward-looking statements and some of the factors that can affect them, please refer to the company's first quarter 2023 earnings release and the associated SEC filing. Please also see those documents for information about our use of non-GAAP measures and their reconciliation to GAAP measures. Participating on the call today are Alpha's Chief Executive Officer, Andy Eidson; and our President and Chief Operating Officer, Jason Whitehead. Also participating on the call are Todd Munsey, our Chief Financial Officer; and Dan Horn, our Chief Commercial Officer. And with that, I'll turn the call over to Andy.

Thanks Emily and good morning everyone. We are pleased to report a very good first quarter performance today marking steadfast progress towards our ambitious production goals for this calendar year. Our performance -- our teams performed well both from a production and sales standpoint within the quarter in addition to the everyday excellence of our workforce that is show in the results we will discuss later. Several particularly Alpha teams have been recognized with noteworthy accolades in recent weeks and months. In terms of safety performance on a national level, our Paramount Group [ph] won the Interstate Mining Compact Commissions 2023, mine safety and health training industry award for the underground division. At the state level in West Virginia eight Alpha properties won Home Safety Association awards in 2022. Marmet [ph] processing, multiple processing, Black Castle Surface Mine, Kingston's House Surface Mine, Workman Creek Surface Mine, Glen Allen Tunnel Mine, Cedar Grove Number 2 Mine, and Road Fork 52 Mine. I'm pleased to announce that the Home Safety Association also selected one of our operations Vice Presidents as the 2022, West Virginia Coal Safety Leader, an individual award recognizing excellence in safety achievements and records. Jimmy Wood, who leads out this Midwest Virginia surface and Kingston region was selected as the 2022 recipient of this prestigious award. We're very proud of Jimmy’s hard work and dedication to safe production. Additionally, Alpha won four West Virginia Mountaineer Guardian awards for exceptional safety performance. These winning mines are Workman Creek, Cedar Grove Number 2, Kingston Number 2, and Road Fork 52. In March, the Paramount mine rescue team competed in the Southeast Regional Mine Rescue Contest, where they took home top honors as the overall contest grand champions, as well as first place in the mine rescue overall bench competition and first…

Thanks Andy. First quarter adjusted EBITDA was $354 million, up from our fourth quarter level of $248 million. We sold 3.9 million tons in the quarter, 3.7 million of which came from our net segment, and 200,000 tons from the all other category. Quarter-over-quarter realizations increased for the met segment as a whole, with an average realization of $280.93 for the first quarter, compared to $186.29 in the fourth quarter of 2022. Export met tons priced against the Atlantic indices and other pricing mechanisms in the first quarter realized $211.31 per ton, while export coal priced on Australian indices realized $240.76. Realization for our metallurgical sales in the first quarter was a total weighted average of $213.21 per ton, an increase of roughly 12% against the prior quarters $190.94 per ton. Realizations in the incidental thermal portion of the Met segment decreased quarter-over-quarter coming in at $137.65 per ton in Q1 as compared to $146.24 in Q4, reflecting the lower thermal pricing for the period when the tons were sold. Similarly, first quarter realizations in the all other category were $109.36, down from $126.10 per ton in the fourth quarter. This quarter-over-quarter drop in realization is also due to the declining pricing environment for thermal coal. Cost of coal sales within our met segment decreased to $110.56 per ton, down from $112.97 per ton in the fourth quarter. Cost of coal sales in the all other category also decreased quarter-over-quarter to $74.69 per ton, down from $80.76 per ton in the fourth quarter 2022. SG&A excluding non-cash stock compensation and non-recurring items decreased to $17.7 million in the first quarter as compared to $19 million in the fourth quarter. Q1 CAPEX was $74.2 million, up from $61 million in the fourth quarter of 2022. This increase includes some rollover expenditures…

Thanks, Todd and good morning, everyone. I'm pleased to report that the Alpha mines are operating very well so far in 2023 and Q1 was Alpha’s highest production quarter in at least the last five years. Our Captive Mine production was nearly 4.4 million tons and I'd also like to congratulate our Deep Mine 41 guys at McClure for setting their own personal record of 638,000 tons in the quarter. Based on Q1 EMSA [ph] data for the Central Appalachian Basin, Alpha operations claimed five of the top nine producing coal complexes. Our Marfork complex took first place in the quarter while our McClure manual operations claimed third and fourth. We're always looking for opportunities to efficiently improve our output, bringing on additional continuous miners in mines that are performing well. We've added a nice continuous miner to our Road Fork 52 mine at Kepler and at Marfork our Panther Eagle has ramped from three to four continuous miners. We continue working on the development projects we've recently announced like Rolling Thunder and Checkmate [indiscernible] mines to replace tonnage from locations that are mining out, and aide in future capacity. We're making progress and nearly completing our prep plant enhancements as well. As reminder once fully implemented, these upgrades will allow us to recover additional coal in the washing process yielding combined additional tonnage of roughly 160,000 tons per year at a very low incremental cost, all while increasing the rate of raw coal processing. We've also been pleased with the vertical integration of our Maxim rebuild division that we announced last quarter to address supply chain issues. Maxim transportation, which includes more than 70 on road coal trucks and several pieces of sporting equipment and the team members is at nearly fully staffed levels as we continue to refine schedules and processes within this division. We have seen increased coal flows to and from preparation plants and load outs. Maxim Manufacturing has been a reliable supplier for gear cases, as we originally intended, but they've also proven capable of much more. In the first quarter we tested out a number of additional equipment parts, successfully integrating the development of several other continuous minor parts into the pipeline. Bringing this work in house has been a game changer for our rebuild and maintenance teams, allowing them to expand their calendar for the year and streamline the supply chain while eliminating many delays and reliability problems from various other third party suppliers. I can't say enough about the employees involved in these efforts. They work to integrate a manufacturing company into Alpha, while so far exceeding our expectations about the immediate and future usefulness of Maxim manufacturing. Congratulations to all involved in these successful efforts. With that, I'll turn the call over to Dan for some additional information on the coal markets.

Thanks, Jason and good morning everyone. Since the beginning of the year, metallurgical coal markets have softened amid broader recessionary concerns, uneven recoveries in manufacturing demand, and most recently economic unease stemming from regional bank failures in March. Persistent inflation and rising interest rate environments in many economies, including the U.S. have hampered steel demand. As global geopolitical issues continue, the strength of China's reopening or the lack thereof after its years long, strict zero COVID policy is a factor that we expect will continue to influence demand. Additionally, the duration and potential outcome of Russia's invasion of Ukraine could significantly impact Europe's resiliency and growth prospects. Despite these uncertainties, the world steel association's most recent short range outlook projects a 2.3% rebound in steel demand this year, bringing expected global demand to 1.82 billion metric tons. The organization expects steel demand of 1.85 billion metric tons in 2024, a further increase of 1.7% likely led by manufacturing and accelerating growth in most regions, with the exception of China where world steel expects deceleration due to population decline. In terms of the indices and first quarter price movements for metallurgical coals, the Australian premium lowball index increased slightly from $294.50 per metric ton on January 1 to $301 per ton at quarter close. The U.S. East Coast lowball index increased from $280 per metric ton on January 1 to $287 on March 31st. U.S. East Coast Highway Index moved from $276 per metric ton at the start of the quarter to $285 per ton at the end of March. U.S. East Coast HighVol fell from $275 per metric ton at the beginning of January to $265 per metric ton at the end of March. Throughout April and into the early days of May, all four indices have softened considerably from…

Thank you. [Operator Instructions]. Our first question comes from Lucas Pipes with B. Riley. Please proceed with your question.

Thank you very much, operator. Good morning, everyone and congratulations on a good quarter and the many environmental safety and social recognition steps, that's terrific to see. My first question is on the sales outlook for the remainder of the year when Q1 was good, but when I look at the full year midpoint, it seems like there's still a step up coming, so I wondered if you could maybe articulate the timing and your outlook on that front? Thank you very much.

Hey Lucas, it’s Dan. Good morning. Well, I think we had in spite of the transport some of the issues I mentioned, the DTA and with the railroads, we probably would have shipped a little more coal, if it wasn't for those. We'll catch those tons up. And going forward, I think I mentioned on previous calls, we talked some more contract positions in 2023 than in recent years. So, we have good confidence in our numbers because these tons regardless of which direction the market indices go, these tons are going to ship. So, I think we have pretty good confidence in those numbers. Certainly there's been some demand softening in some of the markets but when that happens, it's good to have tons under contract.

Yeah. Hey, Lucas this is Andy. Just to add a fine point on that, I think historically, you see that the second and third quarters of our years are probably a little bit more hold at higher volumes, at least they have been in the last three or four years. And so that's -- you're looking at a curve, we're pretty close to being ratable but there's typically a little bit of a bump up entering and exiting summer. So I think that's where you'll see the numbers start looking closer to what the annualized guidance number is.

Got it? Very helpful. And then the reduction in the tax rate, what was the driver of that and kind of going forward should we think more kind of that that 15% to 20% or how would you frame that up?

Hey, Lucas, really that's just a passage of time, having a little more granularity into the calculation. Our tax rate is dependent upon some pretty large permanent differences that affect the rate. And so it's really just having more granularity as we progress through the year. And so in terms of looking forward, obviously, we adjusted the range down. So we feel like that's kind of where things will finish out this year.

Got it. Very helpful. Thank you for that. And then Todd one last one, could you remind us of how you think about minimum liquidity and minimum cash requirements, terrific to see that rolling thunders is progressing well and so wanted to get a quick take on those other two items? Thank you.

Yeah, our view on minimum liquidity hasn't changed, Lucas. I mean, we want to keep 250 million to 300 million of cash. And when we do have the DOL matter that we've talked about before, that's still in process. And so market is being a little bit choppy. I mean, we're pretty resolute that that's the area we need to stay to move things forward.

Got it. Very helpful. Gentleman really appreciate the color and continue best of luck.

Thanks Lucas, appreciate it.

[Operator Instructions]. Our next question is from Nathan Martin with The Benchmark Company. Please proceed with your question.

Hey, good morning, guys. Congrats on the quarter and the awards as well. Thanks for taking my questions. Maybe kind of going back to Lucas's question on shipment cadence, I mean it looks like, again, I think, as Jason mentioned, very strong production quarter, maybe built around 250,000 tons or more of inventory, just comparing them to numbers in your reported sales. Any idea when you kind of expect to ship some of that inventory and again, are we kind of above rideable maybe into Q3 or just any more color be helpful?

Yeah. Hey, Nate it is Andy. Yeah, as I mentioned to Lucas there, I think that Q1 typically and all the quarters and it varies across years, they do tend to be somewhat radical, but we do tend to sees bumps in the second and third quarter, higher volumes. And so I think that's -- and that's for numbers of reasons. But I don't think this year is going to be different from that. So I do think you'll see a spike in the middle of the year. So we see more shipments and so building some inventory in Q1, was pretty helpful for the shipment requirements that we'll be seeing over the next three, four or five months. And again, we can't -- I can't stress enough how the incredible job that the production team did. I mean operations, Jason and his crew absolutely crushed it this quarter, setting records across the board on the volumes that we're pushing out. I mean, five of the top nine production complexes in Central Appalachia were Alpha complexes. And so we're extremely proud of that kind of performance. And to do that, while maintaining a very safe environment and doing a good job in that regard and winning all these awards. You just can't beat that. So really excited about Q1, really excited about the rest of the year as well.

Appreciate the talks Andy and then maybe as it relates to the prep plan enhancements, when are those expected to be completed if you could remind me and with that maybe it will be helpful in increasing your sales rates as well?

Hey, this is Jason. I think, there's actually two different sets of enhancements that are kind of going on simultaneously. And they're really spaced. There's different phases as they come on throughout the year. But I think it's safe to say by September, October, that those will all be behind us. But, some are complete, some are ongoing, and some are soon to be underway. But, those -- that nominal increase is baked into our guidance, we don't expect any material changes from any of that.

Thanks, Jason. Maybe taking a step back, you guys sold so many tons into the global macro market. Dan I appreciate the discussion kind of in your prepared remarks, would be great to get some more color. And what you guys see opportunities to sell the remainder of your coal for this year, and even kind of going forward, maybe and then we talked about also benchmark come down but seems to have found some stability here recently, however, the CFR China price continues to move in the opposite direction, so it would be great to get your thoughts on whether you feel like met prices largely reflect the market at this point or if there could be a chance for further moderation from here, thanks?

Well Nate, certainly demand softened a little bit here in Q1. And what we saw were a lot of buyers sitting on their hands, just watching the price drift down. What we expect to see here is, as we get closer to July, our regular customers will come in for coal, I think we'll see the market pick up, we'll see the demand pick up. There's been a lot of waiting because the old catch of falling knife thing here for the last couple of weeks. And as you said, recent days have seen the trough, we're coming out of that trough it appears. So with regard to the markets, if we're going to ship coal to the markets we've already outlined a lot of coal going into the Atlantic Basin, India is going to be strong this year. And occasional cargo to China as you point out CFR China is not a particularly attractive number at this point. But, we'll be opportunistic there in China if there's something there. So really, where we expect to ship is where we've been shipping all along. Nate and I'll add that the North American market has been quite strong. The North American steel industry is running pretty well and the coal plants and blast furnaces in particular are running well. So I'll add that.

Thanks, Dan. Appreciate that. And then maybe one more, on shareholder returns, you guys obviously continue to execute on your buyback program. As you've told the market you would, you also increased your regular quarterly dividend, I think for the third consecutive quarter in a row, I believe. Have you considered a more defined shareholder return program at some point like many of your peers are doing but again, maybe something that gives you flexibility to repurchase shares to regular dividend or even a special dividend when cash levels are high enough?

Yeah, thanks for the question, Nate. I guess to go back to what I said last quarter, I mean, even today with the market going where it is, we're still -- we still be the company to be. I won't say criminally undervalued but criminally undervalued. And to that degree, I think we would like to continue to pick up these shares. I mean, when companies are trading, this whole sector is trading at the multiples that we are it's on hard assets. It's odd to me. So we're very happy to continue acquiring our own shares, we will continue obviously with the regular dividend. And while we don't have a -- we don't have a formula out there for cash flow, I think you can look at what we've done over the past 13-14 months, and you can kind of back into what our cadence has been. It's been lumpy but by and large, we spent a certain amount of money over that timeframe each week. And that's not guiding towards the cadence in the future but that's how we think about it. We like to be not slow and steady, we do have opportunities and open windows to go out and pick up more shares. If we choose to do so we do that very judiciously. But as long as the market allows, we think that the best allocation of that shareholder return program is still to repurchasing the shares.

Excellent. Thanks for the thoughts, Andy. And thank you all you guys for your time and information and best of luck.

Alright, thanks, everyone. With that, I appreciate everybody being on the call and appreciate your interest in Alpha. Hope you all have a great day.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.