Greetings, and welcome to the Alpha Metallurgical Resources Fourth Quarter 2024 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 now begin.

Thank you, Rob, 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. 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 fourth quarter and full year 2024 earnings release and the associated SEC filings. 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. With that, I will turn the call over to Andy.

Thank you, Emily, and good morning, everyone. Today, we announced financial results for the fourth quarter and the full year of 2024, including adjusted EBITDA of $53 million and 4.1 million tons shipped in the quarter. Despite the deteriorating coal market conditions, our teams completed another year of safe production with record-setting safety metrics. As we've discussed in prior calls, the metallurgical coal market conditions have been negatively impacted by weak global steel demand, and these conditions persist. Our operations, like all others in Central Appalachia, also experienced significant challenges because of extreme weather this winter, which will have substantial implications for our quarterly performance for the first and perhaps second quarters. Jason will be sharing details on those impacts later. These issues caused us to increase the top end of our cost of coal sales guidance for the year and to bring down our annual metallurgical shipment volume guidance by 500,000 tons. This half a million ton figure roughly aligns with the amount we expect to have missed in the first quarter due to the confluence of lawsuits from absenteeism, power outages, snow and flooding impacts, and transportation delays. Beyond these direct impacts on our ability to move coal, other producers who we purchase coal from have experienced the same issues, so we've not been able to buy as much coal as expected in the first quarter. All of this, coupled with the continued weakness in the metallurgical coal markets, means we expect the rest of the quarter to be difficult. The good news is that a year ago, we anticipated market weakness, and we took action to prepare our business and our balance sheet. The weather impacts have been an unwelcome surprise, but we've managed through that, and our teams have worked hard to protect the safety of…

Thanks, Andy. Adjusted EBITDA for the fourth quarter was $53 million, up from $49 million in Q3. We sold 4.1 million tons in Q4, which is the same amount sold in the third quarter. Net segment realizations decreased quarter over quarter with an average fourth quarter realization of $127.84 compared to $132.76 for the third quarter. Export met tons priced against Atlantic and other pricing mechanisms in the fourth quarter realized $122.24 per ton, while export coal priced on Australian indices realized $124.71. These results are compared to realizations of $129.31 per ton and $128.61 respectively in the third quarter. The fourth quarter realization for our metallurgical sales was a total weighted average of $132.63 per ton, down from $136.35 per ton in Q3. Realizations in the incidental thermal portion of the Met segment decreased to $75.39 per ton in Q4 as compared to $76.33 per ton in the third quarter. Also, coal sales for our Met segment decreased to $108.82 per ton in the fourth quarter, down from $114.27 per ton in Q3. SG&A, excluding non-cash stock compensation and non-recurring items, increased to $14.3 million in the fourth quarter as compared to $13.4 million in Q3. CapEx for the quarter was $42.7 million, up from $31.5 million in Q3. Moving to the balance sheet and cash flows, as of December 31, 2024, we had $481.6 million in unrestricted cash. As of September 30, we had $112.9 million in unused availability under our ABL at the end of the fourth quarter, partially offset by a minimum required liquidity of $75 million. As of the end of December, Alpha had total liquidity of $519.4 million, up from $507 million at the end of the third quarter. Cash provided by operating activities was $56.3 million in the fourth quarter, down from $189.5…

At the conclusion of each year, we evaluate each operation's track record to determine the winners of our Best in Class Awards, which recognize excellence in safety, environmental stewardship, and productivity—three critical pillars of Alpha's success. This year is extra special as the award has been renamed in honor of our previous Chairman and CEO. We are pleased to announce the winners of this year's David J. Stetson Best in Class Awards. Rolling Thunder Deep Mine won the best mine category. Mammoth Processing Plant was the winner of the processing plant category. And our Feet Slowed Out took home the honors in the loadout category. Achieving this level of performance requires teamwork and a commitment to continuous improvement, and I want to offer my congratulations to each and every employee whose hard work earned these accolades, strengthening both their respective operations. It's encouraging to see the competitiveness across the company as these teams work hard to earn the sought-after recognition. This makes us all better. While we call out only a few specific operations for Best in Class Awards, it's important to acknowledge the good work occurring across our organization. For example, in the area of environmental stewardship, we maintained our 99.9% water quality compliance in 2024. A measure of success in safety is TRR, or total reportable incident rate, where we consistently perform favorably. In the last two years, we've had back-to-back company records for this safety metric, along with the second-best year on record for company-wide NFTL, or nonfatal days lost, which is another safety measure where we consistently perform better than the coal industry average. In aggregate, we had 41 workgroups which totaled over 2.8 million exposure hours throughout the 2024 calendar year with zero NFTL injuries. As we often say, a safe mine is a productive…

Thanks, Jason, and good morning, everyone. Metallurgical coal markets ended 2024 at sharply lower levels than they began the calendar year, with each of Alpha's followed indices experiencing at least a 30% drop. For example, the Australian Premium Low Vol Index declined by 40% from the start of the year until the end. From the start to the finish of the fourth quarter specifically, there was limited movement among the four indices that Alpha closely monitors. The Australian Premium Low Vol Index fell from $204.75 per metric ton on October 1, 2024, to $196.50 per metric ton on December 31, 2024. The U.S. East Coast Low Vol Index decreased slightly from $189 per metric ton at the beginning of the quarter to $188 per metric ton at quarter-end. The U.S. East Coast High Vol A Index fell from $184 per metric ton in October to $183 per metric ton at the end of December 2024. And finally, the U.S. East Coast High Vol B Index opened and closed the quarter at $171 per metric ton. Since the quarter closed, the Australian PLV decreased to $187 per metric ton as of February 26. The U.S. East Coast Low Vol, High Vol A, and High Vol B indices measured $184, $180.50, and $167.50 per ton, respectively, as of the same date. In the seaborne thermal market, the API 2 index was $118.25 per metric ton on October 1, 2024, decreased to $113.15 per metric ton on December 31, 2024, and since then, the API 2 has fallen to $93 per metric ton as of February 26. The downward movement in metallurgical coal indices is primarily due to a decline in steel demand, which has been influenced by uncertainty in geopolitics and economic conditions across the globe. With numerous elections having been held…

Thank you. At this time, we'll be conducting a question and answer session. Our first question comes from Nathan Martin with Benchmark Company. Please proceed with your question.

Thanks, operator. Good morning, guys. I'm doing well. Thank you. You know, maybe just coming back to your comments here at the end. How should we think about the cadence of sales as we go through the quarters here in 2025? You mentioned clearly the weather disruptions to start the year. I just called out the planned outage at DTA in May. You know, I think typical seasonality also limits domestic shipments in Q1 anyways because of the weather. So, you know, maybe just get some thoughts on how you guys see that playing out quarter by quarter for 2025.

Yeah, Nathan. I mean, I think, well, the domestic shipments should be the cadence on those should be roughly pro rata. We don't have much like business, so we continue. That should be fairly ratable through the year. You know, on the export side, probably have more in the back half as we catch up from some of the missed shipments. We'll have what some of my team calls the accordion effect on the shipments. We'll have low inventories today as things come back to normal. We'll pick up and you'll resume slightly higher level shipments as we go forward. And then the market depends. You know, some of that's market dependent too. We expect the steel demand hopefully improves towards the back half. There should be some more spot demand and spot shipments as well.

Okay. Got it, Dan. That's helpful. And then, you know, talking about cost per ton guidance, clearly, you guys raised that $2 with the high end as mentioned. Is it possible to get a breakdown of that between, you know, the expectation for lower shipments to purchase coal, how that impacted the cost range, and then, you know, the difficult weather to start the year, any way to quantify that?

Hey, Nathan. It's Andy. I don't think so. I mean, we're kind of picking this there. And again, we only increased the upper range $2, and it's a little bit of a fudge factor, to be honest. We do know that there's gonna be some, we've seen the cost impacts in actuals in January. We haven't seen February actuals, of course. But we do expect some impact there. So we're really just guarding against any kind of issues with Q1 throwing us off track for guidance. It gives us a little bit of breathing room. But we do know there's at least a dollar of impact baked in there to the midpoint. And it is, you know, it's really hard to break it down between any of the contributing factors.

Okay. That's fair, Andy. I get it. Maybe just shifting over to the price side. Looks like you guys priced some export met tons now at $113. If my math is close, it's probably around a million tons, maybe a little bit more than that. On the rest of your guidance, could we get an idea maybe of the quality or index mechanism being used for those tons? Because, you know, even in this market, I feel like that $113 is maybe a little lower than I would have expected and literally getting close to kind of the high end of that cost return guidance now. But maybe it's just because it's, you know, high vol B, you're going CFR or whatever, but some additional color would be great.

Yeah, they probably those tons probably are high vol tons. We're still anticipating a little bit of uplift in the price cards as the year goes on. I can't really comment if they're gonna be high vol A, high vol B can't get too granular on that. But broadly speaking, those tons would be priced as high vol. I will say that supply is a little tighter than maybe you'd read in the rags these days. The weather impacts on the East Coast have affected all cap producers and nap producers as well. So I think, you know, maybe things are being a little bit underreported as far as supply.

Okay, Dan. Got it. Appreciate that. And then maybe just one more, guys, just kind of thinking about, you know, the macro in general, you made a couple comments related to tariffs. You know, I was just thinking, we know Alpha is, you know, one of the largest suppliers of met coal to the domestic steel markets, and given the moves we've seen thus far from the new administration, you know, what are your thoughts on how that could impact, you know, domestic demand for your products? And, you know, is there and what's your ability to ship tons, you know, back and forth, you know, domestic export kind of maximize your margins there?

Sure, Nathan. You know, we certainly have the ability to shift some tons between the two, between Seaboard and domestic. I think when you look at the domestic market, it sort of begins and ends with the blast furnaces. And right now, our customers are running their blast furnaces that they intend to run, let's say. I'm not sure that there will be additional blast furnace production coming on. If there is, then that's gonna require additional coal production, and then that'll require additional coke and coke. So to the extent that happens, we're prepared. I'm not sure I see signals that that will happen.

Great. Appreciate those thoughts, Dan. Thank you guys for the time, and best of luck in 2025.

Thanks, Nathan.

Our next question comes from the line of Nick Giles with B. Riley. Please proceed with your question.

Thanks, operator. Good morning, everyone. Guys, congratulations on all your accomplishments at the operating level. I'm sure the trophy case is getting pretty full. My first question is, you know, cash was $480 million, which I believe is roughly flat quarter over quarter, but still higher than historical periods. Is this kind of the level we should expect you to target if the market remains weak? And what kind of level should we think about if markets are to turn, and how should we square this with cash that could be deployed towards share repurchases? Thanks so much.

Yeah, and the compliment. It's kind of lost in the chaos of the market right now of how well operations did perform in Q4. And so we don't want to gloss that over. As I mentioned, the bad market and tariffs get the headlines, but the real story here is how well operations performed in the quarter both from, you know, productivity. Once again, we're top of the heap on the met production side, as far as, IMSA productivity metrics, safety was off the charts, not just for the quarter, but for the year. So a lot of good work happening there, but talking about liquidity, I mean, our target has been, and we talked about, we started this conversation a year ago, really, a year ago almost this week. We felt the market was getting some weak legs, and we went into cash preservation mode, so we suspended the share repurchase, and we wanted to warehouse as much cash as possible. We have hit this kind of a static rate in that generally speaking, we'll call it a $400 to $500 million range of cash and then additional liquidity from the ABL. And, you know, we want to hold on to that as long as we possibly can. We're gonna continue managing to cash rather than any other outside situation, and, you know, at this point, I don't know that, you know, we're really interested in thinking about any share repurchase activity or any kind of capital returns until we do see some trend in the market going the other direction. Because this thing has set in for a little bit, and there's just a lot of uncertainty. So I think we're gonna kind of maintain course on what we've been doing. And job one has always been to protect the franchise. We're gonna continue that direction.

Makes sense. I appreciate that, Andy. Maybe just from an M&A perspective, I think you may have alluded to some potential opportunities out there. Any other additional color around those, whether from a size perspective or what kind of metrics are you paying attention to? What geographies make much sense? Would this be of your central op peers, for instance?

Yeah, and again, let me go ahead and warn you, there's nothing actionable out there at the moment. There are obviously some processes going on with certain assets. There are some bankruptcy processes that are working through the system. So there are lots of opportunities to do some things that could be at, you know, kind of a low entry cost. The issue now is you have to be careful of watching for cash burn from operations. That's the thing you have to keep an eye on, but there are some potentially, some opportunities. We've always thought about the filter of number one, it needs to be geographically synergistic. Number two, it needs to be somewhat synergistic or additive from a coal quality standpoint. And thirdly, it needs to be in some way accretive, whether it's net income, cash flow, or EBITDA. Some metric it needs to make some sense. And, you know, at this point, Tom, it's a little bit tougher to hit the accretion mark. But, again, right now is not forever. So if there's some opportunities for us to see some consolidating M&A, whether it's, you know, very, very small or, you know, slightly larger than a buy size, we're gonna have to strongly consider.

That's helpful. Maybe just one more for me. Any color around kind of where you see marginal cost today? Any other comments you can share around how much supply out of central app might have come out of the market to date and then how much could be at risk?

Oh, goodness. That's the billion-dollar question right there. I mean, we have seen a few tons come out. Some of it has been through actual monad links. Some of it has been through, you know, operational interruptions for other reasons. So it's kind of hard to gauge how much of these are permanently gone or even, you know, more midterm, tons that are out of the market. So I don't want to comment on that. I do think, you know, another thing that we talked about last year was the cost curve. You know, at the time, the cost curve was the C90 was around, you know, the view was it was $225, and the thought was that would provide a floor. And, obviously, that has not been the case. It still boils down to, you know, the breakdown of fixed versus variable cost and what optimizes cash flow for these operations. I think we are at this point think we've probably crossed the Rubicon in some respect of several operations that are moving into that ZIP code of where they may not be covering their variable costs on some of their tons. So I would expect, you know, obviously, kind of staking the obvious, as this market continues, we'll see more pressure on these, particularly the smaller operators that don't have the ability to spread their fixed costs across a bunch of times. We're gonna see some of those more of those folks exiting and a lot of the higher cost operations could be coming out, you know, sooner rather than later. We're not gonna comment on anything specific because everybody's gotta make their own decisions. But I can't see how there's not more to come. I do think marginal cost is becoming a real issue at this point, and I think that's where the pressure is gonna apply, particularly in Central Appalachia.

Andy, I appreciate all that color. If I could sneak in one more. Maybe just on the transportation side. Can you just remind us of maybe any sensitivity to pricing? And then I believe your transportation costs don't work on a lag if you could just clarify that, that'd be helpful.

You're referring to rail costs?

Correct.

Yeah. We don't really comment on that. Those are contractual situations with both railroads, so we don't say too much. I mean, they are somewhat aligned with indexes. So that's probably all I should say about that.

Fair enough. Well, Andy and team, I want to commend you on your efforts in this tough market. So keep up the good work.

Thank you very much. We have reached the end of the question and answer session. I'd now like to turn the call back over to Andy Eidson for closing remarks.

Well, thanks, everyone, for your time today. We appreciate you. We'll see you next quarter. Have a great rest of the day and great weekend.

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