Good afternoon. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Warrior Met Coal First Quarter 2023 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] This call is being recorded and will be available for replay on the Company's website. Before we begin, I have been asked to note that today's discussion may contain forward-looking statements, and actual results may differ materially from those discussed. For more information regarding forward-looking statements, please refer to the company's press releases and SEC filings. I have also been asked to note that, the company has posted reconciliations to of the non-GAAP financial measures discussed during this call in the tables accompanying the company's earnings press release located on the Investors section of the company's website at www.warriormetcoal.com. In addition to the earnings release, the company has posted a brief supplemental slide presentation to the Investors section of its website at www.warriormetcoal.com. Here today to discuss the Company's results are: Mr. Walt Scheller, Chief Executive Officer; and Mr. Dale Boyles, Chief Financial Officer. Mr. Scheller, you may begin your remarks.

Thanks operator. Hello, everyone, and thank you for taking the time to join us today to discuss our first quarter 2023 results. After my remarks, Dale will review our results in additional detail, and then you'll have the opportunity to ask questions. We were pleased to deliver another extremely strong quarter reflected in our financial results and better-than-expected sales and production volumes. We entered the first quarter with optimism that strong customer demand, with facilitated drawdown of our inventories with the expectation of continuous improvement and performance at the McDuffie Terminal. We've previously spoken about the performance issues at the McDuffie Terminal and have taken a number of actions to address them. Over the past few months, we've implemented several initiatives to improve the loading throughput at the terminal, including the allocation of personnel and resources. These initial efforts focus primarily on addressing maintenance and equipment reliability issues on belt conveyor systems. We are pleased with the progress made so far, but we acknowledge that the Terminal's performance remains vulnerable and will require long-term support and attention from Warrior. One additional challenge is that, the terminal is undergoing a significant overhaul of its ship loader number one belt structure, which will remain out of service until the end of the second quarter. We will continue to work closely with the Alabama State Port Authority to help achieve its objectives. In the interim, Warrior will ship small volumes from alternative ports to ensure timely deliveries for our customers at minimal extra costs. Our commitment to delivering sustainable results at the terminal remains unwavering. From a market perspective, during the first quarter, the steel industry demonstrated a better-than-expected performance, as evidenced by a sustained increase in steel prices across North America, Europe and select Asian regions. European steel producers, announced the restart…

Thanks, Walt. For the first quarter of 2023 the company recorded net income on a GAAP basis of $182 million or $3.51 per diluted share, representing a 25% increase over net income of $146 million or $2.83 per diluted share in the same quarter of last year. Non-GAAP adjusted net income for the first quarter, excluding the non-recurring business interruption expenses, idle mine expenses and other non-cash adjustments was $3.57 per diluted share. This compares to an adjusted net income of $2.97 per diluted share in the same quarter of 2022. These increases quarter-over-quarter were primarily driven by higher sales volumes, partially offset by lower average net selling prices and higher inflation. We reported adjusted EBITDA of $259 million in the first quarter of 2023, compared to $244 million in the same quarter of last year, representing a 6% increase. The quarterly increase was primarily driven by a 73% increase in sales volume, partially offset by lower average net selling prices and the impact of inflation on supplies and electricity. Our adjusted EBITDA margin was 51% in the first quarter of 2023, compared to 64% in the same quarter of last year. Total revenues were $510 million in the first quarter of 2023, compared to $379 million in the first quarter of last year. This 35% increase was primarily due to the 73% increase in sales volume, partially offset by lower average net selling prices. Other revenues were higher in the first quarter of 2023, primarily due to the fact that the prior year included a mark-to-market loss of $13 million on our gas hedges, offset partially by a decrease in revenues due to lower natural gas prices. Platts Premium Low Vol FOB Australian Index price on average was $131 per short ton lower in the first quarter of 2023,…

Thanks, Dale. Before we move on to Q&A, I'd like to make some final comments on our outlook. As we look forward, we anticipate ongoing stable demand for our products based on discussions with our diverse customer base. While China's steel production remains difficult to predict, our current view is that we'll correct during the year resulting in a decline in annual production year-over-year. As restocking eases and the potential slowdown in the second half of the year begins to materialize, we expect steel prices to lose some or most of their recent gains. Additionally, we foresee that met coal pricing will face further downward corrections absent any other unforeseen disruptions primarily due to improving supply chain out of Australia and higher Mongolian exports into China. As I said earlier, we expect the return-to-work process of eligible employees to continue through the end of May. We are revising our internal budgets and outlook for the remainder of the year and expect that process to be completed in early June. At that time, we expect to provide an external update to the investment community on our 2023 guidance targets. Our initial assessment indicates that the majority of any incremental production volume will primarily start to occur in June and impact the second half of the year. We expect the higher production volume in the second half of the year to result in higher sales volumes as well. We expect 2023 will be a significant turning point in the development of our world-class Blue Creek mine that will drive long-term stockholder value. Later this year, we will begin groundbreaking for the larger infrastructure components such as the new coal preparation plant a bathhouse of mine offices and overland belt conveyor and a barge load out. We're excited to see the progress that will come this year as we expect to invest approximately $250 million on the project. We're extremely excited about this organic growth project which will transform Warrior and allow us to build upon our proven track record of creating value for our stockholders. As we have previously indicated we expect the first development tons from continuous mining units in the third quarter of 2024 with a Longwall scheduled to start up in the second quarter of 2026. With that, we'd like to open the call for questions. Operator?

[Operator Instructions]. The first question comes from Lucas Pipes of B. Riley Securities. Please go ahead.

Thank you so much operator. Good afternoon, everyone and congrats on a terrific start to the year. My first question is in regards to the staffing levels today and your outlook on that. Could you comment when you would expect to be fully staffed? And in a way do you have excess labor after the end of the strike in February, or is that your expectation? Thank you very much for your comments on that.

Thank you, Lucas. Appreciate your question. And after we get the employees back they have decided to come back we will still be about 200 people short for or 150 to 200 short of where we were pre-strike. So we'll be continuing to hire aggressively throughout the year and probably into next year as we begin to look at Blue Creek as well. So that's how we'll be doing that and that's one of the things we're looking at is exactly how many people, because we're in the process and like I said some of them have already come back and by the end of May or early June we expect to have the folks back that are going to make it.

Very, very helpful. Thank you for that. And when you think about that 150 to 200 headcount shortage, how would you bridge that? Is that attrition or retirements? Would appreciate any comments on what changed in the interim.

Lucas, I think we just had as the -- we striking miners whenever they -- we're total return to work I think we had some of them who for whatever their personal reasons were decided not to return whether they took employment at other operations, or whether they just retired, or for whatever reason personally they were just ready to move on.

That's very helpful. Thank you for that. And then shifting topics really quickly. Dale you commented on using up the federal NOLs either later this year or early 2024 and I wondered if you get to that situation could that have an impact on your capital return approach it could it make more sense at that point to have a greater share buyback for example? I would appreciate your thoughts on that. Thank you.

Good question. Thanks Lucas. Yes, as we've said before once we get through the NOLs, I think, we would probably have a more balanced fixed quarterly dividend with variable quarterly dividends combined with stock buybacks at some point. And we said, look, we're committed to returning excess cash even during the development of Blue Creek if there is excess cash available. So once we get past the NOLs, I think, we would have a more robust capital return program, including all of those different options.

Very helpful. Thank you. And then I'll squeeze in a market-related question. When I look at Platts met coal pricing as of last night FOB Australia PLV 229; CFR China delivered coal price 243. And when I think of kind of very roughly about a $30 freight rate from Mobil to China had come at a kind of net back price of 213 [ph], if you were to sell into China. So I wondered is this market open to you? And how would you approach the China opportunity today? Thank you very much.

Well, I think your numbers are kind of spot on with where everything is. And what we'll be looking at as we look at the remainder of the year and whatever our spot opportunities are we'll look for whatever is the best opportunity. And if that happens to be moving those tons into China at a little lower rate than we could -- than what we're doing from a contractual standpoint and that's what we'll have to consider. But we're looking at all those things right now.

Very helpful. Again, -- thank you very much and again, terrific work. Really appreciate it.

Thank you.

Thanks.

[Operator Instructions] The next question is from Nathan Martin from The Benchmark Company. Please go ahead.

Thank you, operator. Good afternoon, guys. Congrats on the quarter. Thanks for taking the questions.

Hey, Nathan.

Walt, you made the comment that production was even better than expected in the quarter. And I know, I think for instance, it looks like Mine four production was up over 30% quarter-over-quarter. Was that really just better productivity or the ability to put more miners to work? And then maybe where are you applying the bulk of the union workers that have returned at this point? It would be great to get your thoughts there.

Well, the productivity was simply being able to run the longwall as much as we could and putting more CM units back in line. As far as where the employees that are coming back to work are going, those employees when they left were assigned to a certain mine and they returned back to that mine. And what we've seen is if you really consider us to be really for the most part three portals three big portals. It's about equally spread between the three as the people return to work. So Mine 4 will get about a third of the people and Mine 7 get about two-thirds roughly.

Okay. That's helpful. And then maybe along the same lines, again, I understand you guys are waiting to update production shipment guidance for June. But as I think about the potential for an increase due to the return of some of the union workers, is there any CM lead work that would need to be done kind of ahead of a potential ramp to more nameplate capacity production?

No, really it's -- we've been -- since the strike started, we've really been running five days a week and the real opportunity here is to add on additional shifts. Our minds are skip constraint on how much coal they can get out per day and they've been running really well. So the real opportunity is finding -- you've got to find additional hours where you can mine. So that's what it really comes down to. And we're building all that in the budget right now.

Got it. Makes sense. And then maybe shifting to the budget you just mentioned. As we think about Blue Creek CapEx, I think you commented on the last call Walt that you guys were still entering into some of the key large contracts and would be in a better position to update us later in the year. Maybe could you talk about what kind of progress you've had there? Any expectations on labor being sticky lead times that everybody is seeing kind of extend and possibility for any pressure on CapEx and then maybe when we could expect to get any updates? Appreciate it.

Thanks Nathan. This is Dale. I'll answer that one. We're still early on as we said in our prepared remarks, still working primarily on the slopes more than halfway down and we're going to be breaking ground some of the larger stuff later this year. So once we get those contracts, we'll have a better idea if there are any changes in cost, but that's going to come late probably in the year before we know that. As we said, look for the last 15 months we've been seeing inflation in labor. We've seen it in supplies materials even beginning to see it in rate increases and electricity costs. So, we would expect some type of inflation, but it's a five-year project, so some of that will normalize or even out over that time and then we may have some scope changes as we get into all those specifics of the contracts with each of those major components, so still too early to tell.

Well, I appreciate those thoughts Dale. And then maybe just one last thing. I mean strong cost performance I would say in the quarter guys despite some of those items you just mentioned, down quarter-over-quarter you've been with an increase in realized prices. Some of that is just the one quarter lag on the rail side. I would expect that's probably a headwind in the second quarter. I just want to make sure I think about that correctly from a modeling standpoint.

That would be correct. You're right. Rail rates will go up in the second quarter based on the higher average met coal price in the first quarter.

Okay, perfect. I appreciate the time. Best of luck good rest of the year.

Thank you.

The next question is from Luther Lu of LMR Partners. Please go ahead.

Thank you. Hi Walt. You mentioned in the prepared remarks that there is a major repair at the McDuffie Terminal currently. Will that impact the second quarter shipment?

No, that impact occurred -- we're probably six weeks or more into that. It's the rails basically the rail and the belt system that the ship loader runs on needed to have a significant amount of structural work done. And so we've been dealing with that for the last couple of months but the improvements in load rates at the number two ship loader have just been really strong and have allowed us to perform -- has allowed the port to perform in a manner that's allowed us to reduce inventory by a couple of hundred thousand tons. So, we've been very satisfied with that. But it's critical for them to get that Ship 1 loader back up and running as well so that more than one vessel can be loaded at a time.

Okay. And one of the mines in Alabama right now is not producing much, but your peers is trying to put in long walls and ramp up production in 2024. Will the terminal be able to handle extra 2 million tons of annualized production in the current state?

That's why we need that number one ship loader back up and running Luther.

I see. Okay. And could you give us some color on just exactly how much the demurrage cost was per ton-wise is in the first quarter?

Well, it's $4 million in total. So, a couple of bucks a little less than a couple of bucks.

Okay. Got it. Thank you very much for the color.

Thank you.

The next question is a follow-up from Lucas Pipes of B. Riley Securities. Please go ahead.

Thank you very much for taking my follow-up question. It's high-level market related. You have good insights into Europe, South America, Asia too. I wondered if you could maybe expand a little bit on your comments in the prepared remarks that you would expect pricing to continue to moderate. What are you seeing out of these different end markets? Would very much appreciate your color. Thank you.

Well, we're still seeing strong demand out of all those markets. But I guess what we're seeing is, it's the supply side of the equation where we're starting -- as I said with Mongolia increasing their shipping or their trucking into China just dramatically. And with -- it looks like Australia is starting to get their production or their transportation issues and production issues back in line. So I think we're going to have more supply available. And we've always -- we've been saying for quite a few quarters that we thought there would come a time when pricing would moderate. And even in our budget this year, I think our estimate was about $200. So we're not surprised at all with where the market is going as supply constraints seem to be easing. And I think that's -- we're just not really surprised with where it's headed right now. And even at two-third we expect a little more downward pressure.

That's very helpful. Appreciate the color and best of luck.

Thank you.

At this time, there are no further questions. I will now turn the call back over to Mr. Scheller for any comments.

That concludes our call this afternoon. Thank you again for joining us today and we appreciate your interest in Warrior Met Coal.

Thank you. That concludes today's conference. Thank you all for participating. You may now disconnect.