Good afternoon, and welcome to the Warrior Fourth Quarter and Full Year 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, 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. The company has posted reconciliations 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. I would now like to turn the conference over to Mr. Scheller. Please go ahead.

Thanks, operator. Hello, everyone, and thank you for taking the time to join us today to discuss our fourth quarter and full year 2023 results. After my remarks, Dale will review our results in additional detail, then you will have the opportunity to ask questions. Our fourth quarter results reflect the culmination of a highly productive year for Warrior where we made meaningful progress on our strategic priorities to build significant sustainable stockholder value, and we were very pleased to end the year on a strong note. We met or exceeded both sales and production volume targets for the year, recording a 34% increase in sales volumes and a 21% increase in production volumes. These are run rates not seen since 2020. We also achieved record high annual production at Mine 4 of 2.5 million short tons. Our cash generation from operating activities was exceptionally strong allowing us to fund a record high amounts of capital expenditures and mine development. We further strengthened our balance sheet with the early retirement of debt. As a quick aside, there is one fourth quarter metric, total sales volume that could have been better by 129,000 short tons at our last two customers' vessels made it to the terminal on time as scheduled. These contracted shipment delays lowered our adjusted EBITDA by approximately $23 million for the fourth quarter. We know that some investors put a significant amount of emphasis on the MSHA production data equaling sales volumes, which can lead to expectation differences. So it's important to understand the impact of timing differences here and our strategic focus. Our purchase spot volumes is working quite well. As we indicated on our third quarter earnings call, we took a more strategic approach to selling spot volumes in the fourth quarter. Our goal is to…

Thanks, Walt. For the fourth quarter of 2023, the company recorded net income on a GAAP basis of $129 million or $2.47 per diluted share, representing a 29% increase over the net income of $100 million or $1.93 per diluted share in the same quarter of 2022. Non-GAAP adjusted net income for the fourth quarter, excluding the nonrecurring business interruption and other expenses, was $2.49 per diluted share. This compares to adjusted net income of $1.90 per diluted share in the same quarter of 2022. These increases quarter-over-quarter were primarily driven by 6% higher sales volumes and a 3% higher average net selling price, which were offset partially by lower results from our gas businesses. We reported adjusted EBITDA of $164 million in the fourth quarter of 2023 compared to $148 million in the same quarter of 2022. Our adjusted EBITDA margin was 45% in the fourth quarter of 2023 compared to 43% in the same quarter of 2022. These increases were driven primarily by the previously mentioned higher sales volumes and higher average net selling prices, offset partially by the lower results from our gas businesses. Total revenues were $364 million in the fourth quarter compared to $345 million in the fourth quarter of 2022. This increase was primarily due to the 6% increase in sales volume, plus a 3% increase in average net selling prices and lower demurrage and other charges. The merge and other charges were $3 million lower compared to 2022's fourth quarter. As you may remember, the higher demurrage and other charges in the fourth quarter of 2022 were the result of temporary delays in vessel loadings, due to severe weather and port congestion. Emerge and other charges reduced our average net selling price to $235 per short ton in the fourth quarter of 2023…

Thanks, Dale. Before we move on to Q&A, I'd like to make some final comments. As Dale just noted, we have a favorable outlook for 2024 as orders from customers in our traditional markets suggest stable demand for our coals for at least the first half of the year, while we expect markets like India and Southeast Asia to continue to experience an increasing demand with new projects coming online. We're closely monitoring the dual logistical challenges posed by low water levels in the Panama Canal system as well as the geopolitical tensions in the Red Sea. For now, the impact for Warrior has been higher freight costs, especially in the Asian markets, which continue to be above historic averages, while the impact of some of our customers has been longer transit times. It's difficult to predict that this will improve or deteriorate during the next few quarters. We believe its steelmaking coal pricing will remain bifurcated as the availability of premium Low Vol steelmaking coal should stay tighter than the availability of second-tier steelmaking coals. As such, we believe the lower price relativities of the second-tier steelmaking coals will continue for the near future and also depend upon the geography of spot volumes. While we are well prepared to address a variety of market conditions, we are also extremely excited and laser-focused on the disciplined development of our world-class Blue Creek reserves. We expect another year of high capital spending on the project ranging from $325 million to $375 million which can be funded out of cash on our balance sheet if the market should turn unfavorable in 2024. As I mentioned earlier, we continue to make excellent progress in developing Blue Creek. We are on track for the first development tons from the continuous miner units in the third quarter of 2024, with the Low Vol scheduled to start up in the second quarter of 2026. We expect approximately 200,000 short tons of production of High Vol A product from the continuous miner years in 2024. This raw coal production has been included in our production guidance. In conclusion, our full year outlook encompasses a favorable landscape, and we see 2024 representing another strong year of operational success and growth capital deployment, driven by expected higher steelmaking coal production and sales. With that, we'd like to open the call for questions. Operator?

Thank you. [Operator Instructions]. And our first question comes from Lucas Pipes of B. Riley Securities. Please go ahead.

Hi. Thank you very much, operator. Good afternoon, everyone. My first question, Walt and Dale, is on the sales mix for 2024. I wondered if you could maybe provide a rough breakdown of anticipated sales kind of on a percentage proportional basis, High Vol A, FOB port, PLV FOB port and then also High Vol A PLV kind of CFR China so we can get a better sense of how these higher freight costs impact realizations. Thank you very much.

Well, generally, I'll start with the -- our expectation is with Mine 7, we're probably 70% to 80% contracted, and those will all be sold FOB port. The remaining 20% to 30% will be spot tons. And those could go either into our traditional markets to those customers or end up going into some of the markets where we have the CFR issue going into Asia. For Mine 4 we're, I think, about 55% contracted this year some of it into traditional markets. But I would say for Mine 4, you're probably going to look at least 50% of that coal going into CFR sales. I think in total, you're probably 70% Mine 7, 30% Mine 4 tons. If all that -- I've answered your question, I hope so.

There were a lot of helpful titbit in there, I may follow up on some of it. But I want to circle back on Mine number 4. Kind of -- it sounds like a High Vol A product today, does that cover -- does that description cover all of the output of Mine number 4? And should we kind of think of, call it, a Platts or similar index as the best approximation for FOB pricing for Mine 4 today?

Yes. Luke, this is Dale. Yes, that is pretty much a High Vol A product now. And it transitioned in the second half. And I think it's about 30% of our volume, and we typically target the East Coast High Vol A index for our traditional markets. Now when you go into the spot markets, it could be a combination of those different indices outlined in March, which is -- it just depends on where it's going, geography-wide these days. So the markets have really changed with a lot of demand coming at Pacific basins this time over the last six months, and we see that as kind of the future is where a lot of demand is going to continue to come. So we're probably looking at about 65% of our volume going into the Pacific Basin in '24 and about 35% into our traditional Atlantic markets, just in total.

Very, very helpful. Thank you for that. I'll squeeze one in here on the sales side. In terms of the cadence of shipments in 2024, could you provide a little bit of color. It sounded like you had some tons delayed here at the end of Q4. I'd assume they come through in Q1, so maybe Q1 is a bit of a stronger shipment quarter. But would appreciate if you could frame that up. And when I think -- or when we think more at a high level about the production output in Q4 versus tons sold. Is that a reflection of weakness in your traditional markets? Or were there any other complications moving those tons? Thank you very much.

All the contracted tons moved to those customers as expected. What we did, as we said, in the third quarter, we moved more into the spot market, and we decided in the fourth quarter to take a little more strategic approach and maximize margins. So we held off on any business that we felt that would hinder that. So that's how we ended up there. In terms of cadence for sales, Lucas, the problem with that is, in any given quarter, you can have something happen in one week at the end of the quarter that can adjust that downward by as much as 200,000 tons. I think the best -- we try to match production and sales, but that's about -- I can't give you much more guidance than that. And if you look for the year, we kind of give you what we think for the year, but I can't tell you which quarter any reduction in inventories will come in.

Yes. We're just -- we're really focused, Lucas, on just what the year is and the quarters just kind of fall because the ships arrive and as complications arise with bad weather to port and everything, that's less important to us than our full year targets. We really don't manage to the quarter results. We manage long term.

Understood. Understood. No, that's helpful. So maybe to just put it a little differently to help me with the modeling. You have 1 longwall move in Q1. So kind of fair to assume that production may be touch lighter than in Q4. And then you mentioned you're looking to match sales with production. Has that occurred for Q1? Are you currently matched?

We're right on target for where we wanted to be year-to-date.

And with the longwall move kind of slightly less than Q4 and production makes sense?

It does make sense.

All right. Well, this is this is helpful, thank you. I'll turn it over

Thank you. Our next question comes from Nathan Martin with the Benchmark Company. Apologies, our next question comes from Katja Jancic with BMO Capital Markets.

Hi. Thank you for taking my questions. First, starting on the Blue Creek CapEx. The original project cost is about $700 million. And then adding the scope gets you to $820 million to $830 million. Now on top of that, there is inflationary pressure. So I get up to about $1 billion. Are my calculations correct?

That's the general trend. And there's really been no update or change to those initial updates that we had back in the summer. So yes, target inflation. We haven't seen any reduction in labor, materials, supplies, equipment purchases, that inflation is pretty much stuck in this sector. It depends on what particular item, but a range of 25% to 35%. So if you just take the midpoint, 30% on your $700 million plus $130 million scope change, you're right around $1 billion.

Okay. And I think, Dale, you said you're going to be hiring more miners later in the year for Blue Creek. Is that already included in your cost guide?

Yes.

And how many miners do you have to add this year?

We're adding in total 250 to the company and somewhere around 100-ish for Blue Creek of that.

Thank you, all. I'll hop back into the queue.

Thank you. And our next question comes from Nathan Martin with The Benchmark Company.

Thanks, operator. Guys, can you hear me okay now?

Yes.

What I was trying to say is, Dale, I think you were talking again to Lucas' questions around logistics and obviously, you guys pointed out the 2 late vessels in the fourth quarter, affecting shipments there. You mentioned, I think, low water in the Panama Canal, Red Sea issues. We also have the Demopolis lock outage right now. So I guess it would be great to hear how these are not affecting Warrior. Obviously, it sounds like transportation costs are elevated, but how you guys are working through around some of these issues?

The issue around Demopolis has not impacted us. To date, we have -- our rail service has been very, very strong. We hope that continues. And we have other options to get the coal to market if we start to run into issues with the rail. Our expectation of Demopolis right now, the core of engineers has been down there, looked at the problem, they're estimating may start up in Demopolis. I don't know if that's reasonable or not, but we're making sure that we have options to get our coal to market otherwise in terms of the increased cost that we were talking about for if we're talking about CFR. It's just the -- with the potential additional distances coal has to travel, transportation costs are just up and it's also with the issues in the Red Sea, it's caused freight costs to go up considerably.

Appreciate that, Walt. And then maybe sticking with the cost for a second. Again, you just mentioned, obviously, that the $125 to $135 cost per ton guidance for the year, include some of that additional labor. Just curious, is there a net price or net price range that you guys are assuming in that full year cost guidance range?

Yes. We're around between 250, 260 gross index. PLV index.

Very helpful, Dale. I appreciate that. And then maybe just one more kind of going back to the capture rate, and you guys had a good idea. I'm sure the guys did a great job kind of explaining the shifts you've seen contract to spot back to maybe a normal higher level of contract coal this year versus 23%. Also talked about obviously the High-Vol A shift at the Mine 4. But with the increase in Pacific Basin sales you guys called out versus typical Atlantic markets, how should we think about your capture rate going forward? As the last few quarters, it has lagged and been below your kind of historical level, let's call it, 90% plus or minus?

Yes. I think, Nathan, it's a little hard to predict just given all the different things that are happening. But what we're targeting is, call it, 85% to 90% of the PLV index. It's to do something simple because, obviously, with Mine 4 pricing and all these other indices you get a different result than it doesn't price off the PLV anymore. So -- and that's been exacerbated by those price relativities that we talked about earlier where they were closer to the 90s, mid-90s, now they were more like in the 80s this past year. So some of that has been the demand imbalances, some of the supply issues. But we think those relativities will come back, it just might take a little time. But think of it as 85 to 90 when we try to maximize our margins like we did in the fourth quarter where we increased our margin 63% from Q3.

Not a deal. Appreciate that. I'll leave it there. Best of luck to you guys in 2024 Thank you.

Thanks.

Our next question comes from Chris LaFemina with Jefferies.

Hi. Thanks, guys. Thanks for taking my question. So I wanted to ask about Mine 7. But first, on the CapEx profile. So if we have $1 billion of total CapEx for Blue Creek, based on your 2024 guidance by the end of this year, you'll have spent a little more than $700 million. Does that mean $300 million more in 2025? And then in addition to kind of general sustaining CapEx, looking at a 2025 CapEx budget of between $400 million and $500 million? Is that roughly correct?

That's probably a little aggressive in '25. I think you'll have some of that spending will play out in '26 in completion of the project. But that's -- you're right, we'll be up over 700 million by year-end and probably north of 200 million or so next year and finishing up in '26.

And is there a reason why you haven't explicitly changed the CapEx guidance for Blue Creek? You've talked about the 25% inflation, but you haven't actually formally adjusted the numbers. Are you working on specific contracts around that? Or are there other reasons why you might not have formally changed that number yet?

Well, that is the number pretty much, Chris. So mean that's the math. But there are -- gosh, just dozens of contracts that are yet to be signed to finish grading work and all kinds of different things. I mean we're only just barely 2.5 years into this thing. So we've got a long way to go, and there's hundreds of contracts on this thing. So right now, we're just -- that's the trend, and that's where we're headed.

And I think that's based on a current expectation in terms of inflation. And I think one of the reasons we haven't given a real update is because we don't -- we can't determine exactly what the inflationary pressures will be. So we've kind of left that. We recognize that, that could change in either direction right now.

Understood. So my question on Mine No. 7. So at what point does the depletion of reserves there start to impact your production volume and unit costs? You have, what, 7 or 8 more years of production there? Is it later this decade, where you start to see kind of more cost pressures there and potentially lower volumes as a result of depletion? Or is it possible to even extend the life beyond that time frame?

Yes. Our life, actually, what we have right now is just in reserves, we're probably at 13 years, I believe it is, and then resources goes beyond that. And we continue to look at what we have and what we can get to continue the total reserve for that coal mine.

Okay, great. Thank you very much, good luck.

[Operator Instructions]. Our next question comes from Lucas Pipes with B. Riley Securities.

Thank you very much, operator. Thank you for the follow-up question. I wanted to ask kind of on capital returns and how you think about that. Why not maybe do a little bit on the buyback side versus specialty, would be kind of interested how do you think about that? Thank you.

Yes. Look, it's really nothing has changed there. Capital allocation priority is Blue Creek. And to the extent we have excess cash, we'll continue to do it in the manner we have. I don't see that changing until Blue Creek is up and running at the earliest. Again, we have significant state NOLs and all the rules and restrictions that I've talked about for the last 7 years still apply to those rules to the state NOLs, and we have about $900 million of state NOLs less. So we still got clearly a runway on some of these NOLs to utilize them. So again, right now, Blue Creek is the focus to the extent we have a little extra cash, we'll spend that. So -- and most likely it will be in a more like specials until we get further along with Blue Creek.

That's very helpful. And Dale, just to make sure I understood you right. You have about $900 million of state NOLs. And at the current level of profitability, called Q4. How long would you expect those NOLs to kind of last?

Well, that's the $64,000 question there, Lucas, depends on what prices are and profitability over the next several years. So mean those NOLs go out until like 2034, something like that, it's when they start expiring. So they have a long life on them right now. But if we have more profitable years like the last 2 years, we'll burn through them really fast potentially with Blue Creek up and running.

Got you. And so in terms of like, when I think about, call it, 2024 cash flow impact from the NOL. So like what is the kind of net impact on your effective tax rate? Like how much cash benefit are you seeing from the NOLs this year, 2024 versus not having them?

Well, I mean the benefit is basically what your state tax rate is 5%, 6%. So that's your benefit on the state side.

Got it. Got it. That's very helpful. Thank you, thank you for that. And then maybe just one quick follow-up on the Blue Creek CapEx front. You mentioned earlier that lot of things are kind of still to be finalized. You have that range out of 25% to 30%. What gives you the confidence in that number given that you still have to finalize contractors and such, would appreciate the additional color? Thank you.

Yes. I think if you go out there and look at any construction index, you'll see that labor supply of the materials pretty much been averaging that. And that's what's stuck in the sector. It's easy to read the Wall Street Journal and say, well, it's come down to 3.4%. Well, that has nothing to do with the mining sector where there's been a tremendous increase in labor and supplies and materials. And just -- we've talked about it over the last three years, just quarter-after-quarter of the inflation in this sector. So don't see that changing. And it's possible that we go through a period where there's a little less inflation or there's a little more. We just can't predict it at this point. We only halfway into this same barely, and we still got a lot of runway to go. This is not a handful of fixed price contracts. That's just not the way these contracts are developed. No contractors are going to sit there and say, Well, I'm going to fix my steel prices at x and then they go wildly higher, and he's just not going to do that. So you have those pass-throughs. And we try to limit that and work with them on those contracts, but there's just a whole lot of things going on here to manage a project of this size. And it's -- and quite frankly, it would be kind of unwise of us to go say, as well, it's going to be 968,538,000. I mean if anybody can predict that, then you're a little bit of a fool. So yes, I think you've got to be reasonable as what can happen over the next 2.5, 3 years. And know that there's going to be some changes. But to the extent there is an update, we'll give people an update. But we said, look, there is no update at this point. That's the trend, and that trend continues.

Well noted. I appreciate that. And maybe just to put a bow on it. With all of that, you feel 25% to 35% is the right range?

For now, yes.

All right. Well, I appreciate it. Good luck. Thank you. All right.

All right. Thank you.

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

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

Thank you. Thank you all for participating. You may now disconnect.