Good morning. My name is MJ and I will be the conference facilitator. At this time, I would like to welcome everyone to the Enviri Corporation Fourth Quarter Release Conference Call. All lines have been placed on mute to avoid any background noise. [Operator Instructions] Also, this telephone conference presentation and accompanying webcast made on behalf of Enviri Corporation, are subject to copyright by Enviri Corporation and all rights are reserved. No recordings or redistributions of this telephone conference by any other party are permitted without the express written consent of Enviri Corporation. Your participation indicates your agreement. I would now like to introduce Dave Martin of Enviri Corporation. Mr. Martin, you may begin your call.

Thank you, MJ, and welcome to everyone joining us this morning. I’m Dave Martin of Enviri. With me today is Nick Grasberger, our Chairman and Chief Executive Officer; and Tom Vadaketh, our Senior Vice President and Chief Financial Officer. This morning, we will discuss our results for the fourth quarter of 2023 and our outlook for 2024. We’ll then take your questions. Before our presentation, let me mention a few items. First, our quarterly earnings release and slide presentation for this call are available on our website. Second, we will make statements today that are considered forward-looking within the meaning of federal securities laws. These statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties, that may cause actual results to differ materially from these statements. For a discussion of such risks and uncertainties, see the Risk Factors section in our most recent 10-K and 10-Q. The company undertakes no obligation to revise or update any forward-looking statements. Lastly, on the call, we will refer to adjusted financial results that are considered non-GAAP for SEC reporting purposes. A reconciliation to GAAP results is included in the earnings release, as well as a slide presentation. With that being said, I’ll turn the call to Nick.

Thank you, Dave, and good morning, everyone. The fourth quarter was another strong quarter for Enviri with both Harsco Environmental and Clean Earth, delivering double-digit revenue and EBITDA growth versus Q4 of 2022, capping a very strong 2023. The Rail business, excluding the impact of a few large European contracts, delivered its best quarter in many years. Tom will step through the details of the quarter in a few minutes. So we’re pleased with the continued solid performance of our core businesses. That being said, we believe our share price has not kept pace with the improving fundamentals of our businesses, over the past 18 months. To support the point, I’d like to share a few of the highlights of last year. Number one, revenue and EBITDA both increased at double-digit rates for the full year of 2023. EBITDA margins were up 200 basis points. Cash flow from our two core segments increased $125 million. Financial leverage declined more than one turn to around four turns. Operationally, Clean Earth – the Clean Earth team did a very nice job executing price increases, achieving record service levels, reducing the risk and cost of accessing disposal capacity and increasing our capabilities and engagement in PFAS-related matters, amongst many other accomplishments. At Harsco Environmental, we continue to expand our footprint with new contracts in faster-growing markets with better financial profiles and also to invest in innovation projects focused on extracting environmental benefits from steel slag. HE also achieved its financial plan for the year despite much lower-than-expected steel production, demonstrating strong execution. In terms of leadership, we upgraded our senior management team, with Tom Vadaketh and Jeff Beswick the President of Clean Earth. While also continuing to refresh our Board of Directors with two new appointments. The year was not without some challenges.…

Thanks, Nick, and good morning, everyone. Let me start by saying that my first full quarter with Enviri was rewarding and refreshing. I’ve learned a great deal more about our businesses and our people as well as the tremendous opportunity in front of us. I’ve been impressed with the quality and engagement of Enviri’s employees, and I’m excited about where the company is headed. The Enviri team delivered a strong finish in the fourth quarter to a strong year. With revenue for the full year 2023 growing 10%, adjusted EBITDA growing 28%, a significant improvement in cash generation and an improvement in our covenant net leverage from 5.3 times on January 1 last year to 4.1 times at the end of the year. Now let me comment on our fourth quarter performance, starting on Slide 4. Enviri’s fourth quarter revenues from continuing operations increased to $529 million, up 13%, compared with the prior year quarter. The increase was driven by both pricing and higher demand for our environmental services in both Clean Earth and Harsco Environmental. Adjusted EBITDA totaled $73 million, this result represents a 21% improvement from the prior year and is above our prior guidance range. The stronger-than-anticipated results were driven mostly by volumes and the more favorable business mix with, again, both Harsco Environmental and Clean Earth contributing. Relative to the prior year quarter, each operating segment contributed to the growth in adjusted EBITDA, which I’ll discuss shortly. This was partially offset by higher corporate spending, which was mainly driven by higher incentive compensation spending in 2023 and other smaller items that occurred in 2022, that did not repeat, such as some FX-related hedging gains. Our adjusted loss per share was $0.07 for the quarter. Free cash flow for the quarter was $25 million versus $3 million…

Thank you very much. [Operator Instructions] Today’s first question comes from Rob Brown with Lake Street Capital Markets. Please go ahead.

Good morning.

Good morning.

First question is on the Clean Earth growth expectations. Just wanted to get a sense of how much price is left to realize and how the volume mix is shaking up for 2024?

Well, we – in the last couple of years, we’ve been quite pleased with the pricing leverage within Clean Earth. I think this year, typically raise prices in January. We’ve been very pleased again with the acceptance of that, I’ll say, relative to our inflation. So, I think we continue to expect to see some margin lift over time from pricing. In terms of volume in Clean Earth, the Industrial segment is probably the strongest in terms of its outlook, 3% or 4%. I think something less than that in retail and in health care. We did have a number of large one-off high-margin projects in Clean Earth last year that never quite know if they’re going to repeat. So perhaps we’re a bit conservative here in how we think about the volume in 2024. But the – I will say that the pipeline of those projects remains very strong. We’re just never quite sure when they’re going to start.

Okay. Got it. And what’s sort of the long-term growth rate in Clean Earth that you see at this point? Is it even with those projects, is it in the kind of low to mid-single-digit growth rate in Clean Earth, you see that kind of coming up?

Yes. I think about it as kind of a GDP-plus growth business. So think of GDP plus a few points of growth over a cycle. And of course, we would expect the volume in the business to be somewhat less volatile than GDP overall throughout the cycle.

Okay. Thank you. I’ll turn it over.

Thank you. The next question comes from Michael Hoffman with Stifel. Please go ahead.

Hi, good morning Nick, Tom. Thanks for taking my questions.

Hey, Michael.

Hey. To the – you’ve all been very good about calling out the project activity. Could you just remind us so we get the – because we all start doing quarterly numbers, the cadence of when we should think about that? And, so we get that quarterly cadence, right? And I realize it’s a little bit of a housekeeping question, but I think we all have to pay attention to that.

Yes. Good morning, Michael. It’s Tom Vadaketh. I can take that. So we guided you to the growth rates over the quarter, and I’d expect basically about the same pattern and phasing by quarter. So each – broadly speaking, each quarter for each of the businesses should be – should have the same kind of growth rate. So in a nutshell, a similar phase into last year.

Okay. And then – but just to remember, the project work was heavy in the first half, that’s where we’ve got to overcome that in the first half. Is that correct? In Clean Earth?

Actually, I would say in the soils business, the project work was better in the second half of the year. In the first half of the year, we have somewhat challenged comparison in the – because of the settlement with the large customer, as you may remember.

Yes. Okay. That’s what I wanted to draw out. And then free cash flow, at the segment level, that’s an impressive number going up $30 million year-over-year on $185 million. How do we get – what has to happen in the business model to convert at the whole company level, where the conversion of your EBITDA starts to look more like the peers, which is in the 30% to 40% of EBITDA instead of we’re landing somewhere in the low double digits?

Yes. Great question. First of all, Clean Earth is in that conversion range of 75% to 80%. So, I think that compares very favorably to its peers who are more capital intensive than HE that conversion figure is closer to 50%. Now over time, and there’s a big push this year to transition some of our contracts to more of an asset-light model, where we’re only really investing in the so-called critical assets on the sites, that truly add value and less so in the assets used for logistics. So over time, as that value proposition is better adopted. I think we’ll see the HE cash conversion certainly improved. And then, of course, the last piece of that is, it’s interest expense, right? We’re highly levered. We have a lot of interest expense. And so as rates come down and as we delever, that will certainly help the cash conversion on a consolidated basis.

Okay. To that end, you’re trying to sell a business to help do that. At one point, you alluded to that Nefarious European customer that if you couldn’t get a resolution in a timely manner, you’d pull it out and then just sell the business. What’s changed in the strategy to...

Yes. I think we feel that we really need to negotiate new commercial terms with this one customer. If we were to divest the business and retain the risk on that contract without the ability to execute it. I’m just not sure that would be wise for us to do. So again, that the base business is very strong, standard equipment, aftermarket. Our services business is very strong, but we just don’t believe we can get the right value risk profile for the business until we complete this negotiation. Its still, of course, a strategic imperative to divest it, but it needs to make sense for shareholders. And I guess, I’d also remind everyone that the Rail business is less than 10% of our EBITDA on a consolidated basis. So again, it’s something we want to do. But even if we were to decide to retain it, given that the outlook for the business is good and we might become more comfortable executing the next year or two of these contracts, as opposed to effectively outsourcing it, but retaining the risk that may well be the right thing to do for shareholders. We’re just not at that point yet to make that call.

Yes. I mean it’s the deleveraging aspect, not the EBITDA. I think the market is focused on at this point. Two things on PFAS and then Superfund. So, in your outlook, have you assumed that a more conservative view about PFAS, given the current administration being very slow about issuing final rules? And then on the flip side, they’ve just issued an announcement of 25 sites to get Superfund cleanup funding, and I’m curious about how you see Clean Earth role in some of that activity because a lot of it is predominantly in your sweet spot geographically?

Right, right. Well first of all, on PFAS, we do not have any kind of financial impact of PFAS remediation in our 2024 guidance. We’re feeling very good about how we’re positioned, both in terms of technology and the partnerships that we’ve developed, and you may recall recently an announcement with the DoD on a project to prove out some remediation concepts with the Navy and the Air Force. So we feel very good about how we’re positioned when the – when those volumes begin to flow. In terms of the Superfund sites, I think that it just came out a few days ago, as you know, Michael, we have facilities all over the country, a really strong footprint, both in soil and in hazardous way. So we certainly would expect to participate in their Superfund volumes as they begin to flow.

Okay. Thank you very much.

Thank you.

Thank you. The next question comes from Larry Solow with CJS Securities. Please go ahead.

Great. Thank you and good morning.

Good morning.

Just one quick follow-up on – a follow-up just quickly on the Rail. You said I just want to clarify just in terms of run rate EBITDA or just kind of some number you look at it, is it around $20 million to $25 million, I know you said less [indiscernible] EBITDA, maybe excluding the charges, is there any way to kind of look at what that sort of run rate EBITDA is today or the 2024 outlook?

Yes. No, it’s closer to $30 million this year on – in our outlook, the EBITDA. But on a quality of earnings basis, it’s higher because of a few add-backs. So we’re looking at $35 million to $40 million, in terms of the QEV [ph] EBITDA figure for Rail this year.

Got you. Okay. And then I guess, environmental services, really nice quarter normally seasonally a little bit slower, your margins actually picked up too. So really good to see that. I’m just curious, it sounds like there’s a lot of positives going into 2024. You mentioned you’re expecting volumes and steel to pick up. You called out a few new contracts. I don’t know if you have net contracts business at new is a positive, but it sounds like it is and some favorable pricing. So I’m just – it sounds like that’s also a good guide. So I’m just trying to figure out what are some of the offsets kind of to renew your expectation for the growth in 2024 in environmental?

Right. So the core of the Global Mill Services business is really improving nicely year-over-year, both in terms of volume and EBITDA and cash flow. The ecoproducts business, which is, as you know, in part, exposed to certain commodity prices. So we expect to be weaker because of those commodity prices and we also have a business within HE, called Reed Minerals, that is transitioning from coal slag to steel slag as it is base product for roofing materials and abrasive materials. And that transition, the EBITDA will decline year-over-year. So ecoproducts overall is probably down about $10 million of EBITDA. Again, mostly because of price, but also in this one business.

Okay. Got it. And then just switching – just to Clean Earth couple there. Just on the mix, it sounds like a little bit of a down turn in mix. Is that more on the hazardous side? I guess it sounds like those projects related, you’re not referring to the – or is that also on the soil side? In terms of timing of projects, I guess, that would be on the soil side or not necessarily? Just trying to clarify that.

Yes. So again, the margins on the soil business are about a point or two higher than that on the Hazardous side. We saw very strong growth in the soils volume, particularly in the second half of the year. And so there is a bit of a mix down overall in Clean Earth because of that dynamic this year. We also had some very high-margin Hazardous projects that, again, they may well repeat. The pipeline is good. We just don’t have clear visibility to when. There may be a bit of conservatism there.

Got you. Because I know your bookings were up pretty strongly. I think you had slid those last quarter on the Soil for the whole year.

They were, right. They were. And the outlook is good. Yes.

Got you. And then just last question. Any commentary the positive effects, perhaps just on the intent to contract for Veolia generation. I guess that won’t really kick into 2025. But so I guess is there still kind of a backlog for you guys this year a little about the supply chain issue until you get some of this stuff moved out faster some other ways. Thanks.

Yes. I think we and Veolia feel really very positive about the agreement that we’ve reached. And the benefits are helping us now, even though their large incinerator is not opening until 2025. As part of the agreement with Veolia, we have access to their other incinerators as well. And so the benefits of that contract in terms of capacity access as well as price are benefiting as we speak.

Got it. I appreciate the clarification. Great. Thanks. Thanks for all the color Nick.

Thank you. [Operator Instructions] The next question comes from Davis Baynton with BMO Capital Markets. Please go ahead.

Hi, good morning. This is Davis on for Devin Dodge.

Good morning.

Hi, so just wondering, regarding that European Rail contract. So did I hear correctly when you said that the agreement is likely not going to be reached until the back half of the year? Is there any incremental commentary you can give on the timing of that?

Yes. No, we’re certainly in discussions with them now. We’ve passed a few milestones recently that should enable us to accelerate those discussions. But I’ll just be very honest, dealing with a large beer credit, European state-owned Rail company can be a bit frustrating in terms of the pace at which things move. So it’s difficult to predict.

Yes. I appreciate the color there. And then just maybe one more quickly for me. Just on the accounts receivable securitization, significant decrease in that compared to the previous quarter and the last year. I’m just wondering if there’s any color that you could give there, please?

Well, the – so we – it’s Tom Vadaketh here. We have the facility. Obviously, the facility went into force in 2022, and that’s when there was that effectively a onetime benefit, I think, of about $140 million, $145 million. We had an additional $5 million or so this year. And so the size of the facility today is about $150 million, and we expect it to stay at that kind of level going forward. So there won’t – there shouldn’t be an additional cash flow benefit from that going forward.

Okay. Perfect. Thank you. I’ll turn it over.

Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Dave Martin for any closing remarks.

Thank you, MJ, and thank you for all that joined the call today. Please feel free to reach out to me with any questions. And as always, we appreciate your interest in the company and look forward to speaking soon. Take care.

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