Good afternoon. My name is Drew and I will be your conference call operator today. At this time, I would like to welcome everyone to the Warrior Second Quarter 2024 Financial Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. This call is being recorded and will be available for replay on the company's website. I would like to turn the conference over to D'Andre Wright, Vice President of External Affairs and Communications. Please go ahead.

Good afternoon and welcome everyone to Warrior second quarter 2024 earnings conference call. Before we begin, let me remind you that certain statements made during this call include statements relating to our expected future business and financial performance may be considered forward-looking statements according to the Private Securities Litigation Reform Act. Forward-looking statements, by their nature, address matters that are to different degrees uncertain. Those uncertainties, which are described in more detail in the company's annual and quarterly reports filed with the SEC, may cause our actual future results to be materially different from those expected in our forward-looking statements. We do not undertake to update our forward-looking statements whether as a result of new information, future events, or otherwise, except as may be required by law. For more information regarding forward-looking statements, please refer to the company's press releases and SEC filings. We will also be discussing certain non-GAAP financial measures which are defined and reconciled to comparable GAAP financial measures in our 2024 second quarter press release furnished to the SEC on Form 8-K which is also posted on our website. Additionally, we filed our 10-Q for the second quarter ended June 30, 2024 with the SEC this afternoon. You can find additional information regarding the company on our website at www.warriormetcoal.com, which also includes the second quarter supplemental slide deck that was posted this afternoon. On the call with me today are Mr. Walt Scheller, Chief Executive Officer, and Mr. Dale Boyles, Chief Financial Officer. After our formal remarks, we will be happy to take any questions. With that, I'll now turn the call over to Walt. Walt?

Thanks, D'Andre. Hello, everyone. And thank you for taking the time to join us today to discuss our second quarter 2024 results. After my remarks, Dale will review our results in additional detail, and then you'll have the opportunity to ask questions. We delivered very strong results for the second quarter, driven by our continued success in maximizing the benefits of our high quality assets and our operational capabilities. Our highly successful operational performance led to double-digit increases in both sales and production volumes despite weaker global demand, which led to strong financial performance of adjusted EBITDA and free cash flow. We generated a $147 million of cash from operations, which was used to fund $122 million of CapEx and mine development during the second quarter, resulting in free cash flow of $25 million. In addition, we continue to make excellent progress on Blue Creek, meeting several key milestones as we advance the development of this world-class asset. This exceptional performance and the development of Blue Creek continue to drive value for our stockholders regardless of market factors. From a market perspective, the second quarter played out largely as we had expected with softer demand and stronger supply from all regions, resulting in a weaker steelmaking coal price environment. We were hoping to see signs of improving demand towards the end of the quarter, which did not materialize. In addition, we were surprised by the spot volume availability from Australia in May and June. Customers recognized these favorable supply conditions and were patient in their buying approach. Other factors contributing to the weaker demand included Chinese steel exports and multi-year highs and global steel prices declining for most of the second quarter, reflecting the softer steel demand across all regions. As a result, steelmaking coal prices extended the sharp decline…

Thanks, Walt. Despite the weaker global demand for steelmaking coal in the second quarter, we continue to deliver strong operational and financial performance by leveraging our high quality assets and strong operational competencies. Strong financial performance allows us to invest in the future of our company and drive value for our stockholders. We're investing nearly $1 billion over five years in our company's future from the cash generated from our existing operations without taking on any additional financial leverage. In fact, we have deleveraged the company since the beginning of the development of Blue Creek and paid out incremental special dividends to our stockholders. That makes a strong statement about the high quality of our existing assets, our people, and our focus on generating value for our stockholders. The opportunity at Blue Creek, combined with our operational efficiency and strong existing assets, means that Warrior has a very bright future ahead. Now let's look at the specific financial results for the second quarter. Over the second quarter of 2024, the company recorded net income on a GAAP basis of $71 million or $1.35 per diluted share compared to net income of $82 million or $1.58 per diluted share in the same quarter of 2023. Non-GAAP adjusted net income for the second quarter, excluding the non-recurring business interruption expenses, was $1.35 per diluted share. This compares to adjusted net income of $1.64 per diluted share in the same quarter of 2023. These decreases quarter-over-quarter were primarily driven by the 11% lower average net selling price and lower results from our gas business, partially offset by 18% higher sales volumes. We reported adjusted EBITDA of $116 million in the second quarter of 2024 compared to $130 million in the same quarter of last year. Our adjusted EBITDA margin was 29% in the…

Thanks, Dale. Before we move on to Q&A, I'd like to make some final comments. We're expecting demand to increase as the second half of the year progresses, although we still do not have firm signals and are therefore cautious. We will continue to be patient when possible and seek opportunities that maximize price realizations even if we need to temporarily manage higher-than-normal inventory levels. We do not expect any meaningful demand improvements in our traditional markets of Europe and South America, but are expecting to see demand improve in certain geographies like India and Southeast Asia. As for China, we anticipate steelmaking coal production cuts will be implemented in the second half of the year as the recent stimulus efforts have failed to improve demand. We believe the steelmaking coal supply will be slightly tighter in the second half of the year due to a combination of supply disruptions like mine fires, formal mine maintenance, and longwall moves in Australia. We are well positioned operationally and from an inventory level standpoint to capitalize on increasing market demand in the second half of the year. While we're well prepared to address a variety of market conditions, we're also extremely excited and laser-focused on the disciplined development of our world-class Blue Creek Reserves. We're on track for the first development tons from continuous miner units in the third quarter of 2024 with the 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 with B. Riley Securities.

Walt, Dale, congrats on the progress at Blue Creek. I wanted to ask about your key milestones for the project between now and the end of the year. I also wanted to ask who will have the honor to mine the first ton of coal with the continuous miner unit in Q3?

Key milestones will be getting that first continuous miner unit up and running, which will happen pretty quickly here. It will happen in the third quarter. And then the other key milestone will be getting that second continuous miner unit running before the end of the year after we've cleared enough space with the first continuous miner unit. We've talked about the completion of the slope and the slope belt is being installed now. We'll have the service cage up and running pretty quickly here in the third quarter. The key moments are getting those first two continuous miner units running. And I have no doubt that our mine manager over there will insist that he be the one to make the first cut with the continuous miner.

In terms of your annual guidance, when I look at the midpoint, it implies about 3.5 million tons of production in the second half versus first half at 4.2 million tons, so quite a bit of a pullback. I wondered if there is anything that you see – and I appreciate that's at the midpoint, but is there anything that you see operationally that would call for that reduction or is that a degree of conservatism either operationally or because of where the market is?

We always like to under-promise and over-deliver, but frankly we've got three longwall moves that will occur. While we have shields and those should be zero day moves, you still have to slow down toward the end of the panel in order to complete the meshing process and get that face bolted up before we move over to start the new longwall face. That'll be on all three of those longwall moves. We always expect that, around the holidays – between absenteeism and just trying to get people a little extra time off, we expect a reduction in our production levels.

Then the cost guidance related to that conservatism as well. You had a nice improvement there quarter-over-quarter.

This is Dale. If you look at our year-to-date, we're right on track of where we said we would be in our range. When you look at where prices are and versus what our guidance is built on, we're pretty much in line with all that. All that seems to be actually unfolding as we said. We feel good about where we are.

The next question comes from Nathan Martin with The Benchmark Company.

Maybe start on the pricing side. Walt, felt like you said capture rate up to about 90% this quarter, which is better than – I believe it was 84% in the first quarter. So I'm guessing likely aided a bit by the quarter-over-quarter decline in net prices. But you guys still feel confident that Warrior can hit kind of that 85% to 90% bogey that Dale mentioned previously, the Aussie benchmark for the full year, or should we assume – maybe given the higher High Vol A production that we're seeing from Mine 4, which I think is running at pretty near record levels at least to the first half, and still that wider than historical spread between High Vol A and the benchmark that maybe it ends up being a little bit lower than that range. Just would be great to get your thoughts.

Well, actually, we've seen the spread close back up a little bit, which is very positive. I think your first comment about the declining price pushing those relativities up higher is very – that's very accurate. I think what we'll see is if we see continued declining prices, unfortunately, I think you'd continue to see that percentage go up or stay up. However, I do feel confident that – I'm hoping the price will go back up and I'd rather see the spread and our percentage go down a little bit because we have a rising coal price, but we're still pretty confident in that 85% to 90% range.

Right, I completely understand that mentality, Walt. Maybe just related to then kind of the cadence of shipments for the remainder of the year. You guys mentioned three longwall moves, I think two in Q3, one in Q4, if I remember correctly. You mentioned a slight build in inventories quarter-over-quarter. When would you expect maybe some of those inventories to be drawn down, whether it be third quarter, fourth quarter, any specific thoughts or drivers around shipments between your quarters in the last half of the year?

I think the first thing we have to remember here is, as we've said, we're going to mine a couple hundred thousand tons out of Blue Creek, which is going to be incremental inventory. If we just maintain our inventory levels flat for 4 and 7, we actually increase inventory by 200,000 tons. In terms of working that inventory down, as I said, we're going to be very patient. We are not going to jump in the market just to dump tons. We don't need to do that. We're going to be [indiscernible]. If we see market opportunities that, in our opinion, justify going ahead and moving additional coal, we'll do that, but we don't feel pressured to do so.

Nate, I'll just add to that. If you look at last year, if you remember third quarter, we really pushed a lot of [indiscernible] to introduce our products into Asia. Then we pulled back in the fourth quarter. We only shipped about 1.5 million last year. We try to take advantage of the market situations when we can. If we think the latter half of the year prices are going to increase, then we're going to be a little more patient with our approach. Q3 could be a little lower and Q4 could be a little higher. It just really depends on what the market and customer demand is, so that we maximize price.

Then maybe just one last question on Blue Creek. It's one I get from investors fairly often. Looking to the slide deck, obviously, some of these numbers are a little stale at this point, but specifically focused on the cash costs and the possibilities around the Blue Creek product, I know you guys have said that it should eventually help to lower the overall average cash cost for Warrior. Your slide deck is still showing around $70 or so. But maybe could we just get some thoughts on where that number could look like once you guys update some of these economics, especially given some of the inflationary pressures that we've already applied to the CapEx budget.

No, good question, Nate. We do expect to be updating all those project economics. As we said, the scope change last year really had no effect on – because we had the improvement of transportation costs and everything. So no net impact on the overall economics. I actually think they're going to be better with a higher met coal price in the assumption. So sometime next year, we'll get that information back out. But that's $70 all in before. We've been talking about the inflation and supplies and everything being 30%, 35%. So if you tack that on, you're starting to get to where we think it'll be. Now, I don't know if that's the exact number, but that's a pretty good idea of where we're probably headed right now.

[Operator Instructions]. The next question comes from Katja Jancic with BMO Capital Markets.

I think in the prepared remarks, Walt, you mentioned that the spot exposure in 2024 is going to be between 25% to 30%. Is that a bit higher than what was previously expected? I thought, initially, the expectation was around 25%.

I think we had said 25% to 30% all along. But the issue is there's been really no materialization of spot activity in Europe or South America at all. So it's just having to continue to move the coal into Asia and a lot of that's happening in the spot market.

Is it in the near term? Because as you mentioned, right now, the spot activity is a little softer that the spot volume could be or the spot exposure could be lower during, let's say, the third quarter?

Yeah, it could be. Again, we were at 37% in Q1, down to 30% in Q2, and we're still saying 25% to 30%. So it has to go down. In order for us to hit our range, it has to be below 30% in the third or fourth quarter to drag our number down where we believe it will end up.

And one more, if I may. Longer term, once Blue Creek starts ramping up, does that exposure change?

I think that exposure increases the first couple of years of Blue Creek. You're putting another 4.8 million short tons into the market and getting that coal established and finding homes for it. So I think the percentage of spot will increase for that term for the next few years.

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. We appreciate your interest in Warrior.

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