Good morning. My name is Danielle, and I will be your conference facilitator. At this time, I would like to welcome everyone to the Enviri Corporation Second Quarter Release Conference Call. [Operator Instructions] Today's conference is being recorded, and this telephone conference presentation and accompanying webcast made on behalf of Enviri 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 expressed written consent of Enviri. Your participation indicates your agreement. I would now like to turn the call over to Dave Martin of Enviri Corporation. Mr. Martin, you may begin your call.

Thank you, Danielle, and welcome to everyone joining this morning. 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 second quarter and our outlook for the year. We will also discuss briefly our announcement this morning related to the evaluation of strategic alternatives. We'll then take your questions. We ask that you keep your questions focused on earnings, operations and the outlook as there is limited additional information we can provide on strategic alternatives at this time. Before our presentation, let me mention a few items. First, our 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 the 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 forward-looking 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 statement. Lastly, on this 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 our earnings release today as well as the slide presentation. With that being said, I'll turn the floor to Nick.

Thank you, Dave, and good morning, everyone. Before we dive into our Q2 results, I would like to take a moment to discuss the announcement that we made this morning about our review of strategic alternatives. As you would expect, the Board and our management team are continuously focused on evaluating options and taking actions that are in the best interest of Enviri and its shareholders. In this context, we continue to believe there is a significant and persistent gap between our market valuation and the sum of the parts value of the company. Over the past several years, we have created a portfolio of valuable businesses focused on delivering compelling solutions to our customers. Clean Earth is an especially valuable business in an attractive and consolidating industry, while Harsco Environmental is a market leader with unmatched service capabilities and a strong earnings and cash flow profile. We are also continuing to take actions to stabilize rail, building on the improvements that we've made there. We're confident that executing our operating plan will continue to create value over time. With that said, we believe there may be alternatives to unlock this value sooner, and we think now is the right time to initiate a formal evaluation of our business portfolio and strategic options with the assistance of our advisers. This evaluation will consider a wide range of alternatives, including a tax-efficient sale or separation of the Clean Earth business, along with the continued execution of the company's business plan. This process will also consider, amongst other things, the capitalization needs for our businesses in the future. I am proud of what our teams have accomplished, and I'm excited about the opportunities this process may present for our company and its employees. We expect that this evaluation will take some time…

Thank you, Nick, and good morning, everyone. In the second quarter, total revenue was $562 million and adjusted EBITDA was $65 million. As Nick mentioned, our Environmental segments executed well and performed consistent with our expectations in the second quarter. Favorable cost performance and a weaker U.S. dollar in Harsco Environmental offset the impact of sluggish product and services volumes relative to our expectations earlier in the quarter. At Clean Earth, better pricing and volumes as well as administrative cost controls offset weather impacts and higher disposal costs resulting from outages at our primary service providers. Overall, our adjusted EBITDA was within guidance, albeit at the lower end, driven by the Rail results. Rail performance was negatively impacted by volumes with equipment, aftermarket and technology sales coming in much lower than anticipated. We saw our customers adopting a very cautious view on maintenance-related spending. Rail's order activity has been unusually weak by any historical measure as a result. This demand weakness is most prominent in the U.S. where customers, including the Class 1s and others now seem to be deferring maintenance and related capital spending due to economic uncertainty. And we're also seeing limited to no demand out of Mexico, Canada and China, likely as a result of global trade tensions. Given these trends in Rail, we have lowered our guidance for the year. I'll come back to Rail and our outlook in a bit when I'll comment on actions underway to mitigate Rail's operating and market challenges. Now let me turn to our second quarter performance details on Slide 4. In the first quarter, revenues totaled $562 million, which was down approximately 6% on an organic basis. Adjusted EBITDA was $65 million with Clean Earth achieving record second quarter profits in the quarter. Divestiture impacts were an unfavorable $3…

[Operator Instructions] The first question comes from Larry Solow from CJS Securities.

I'm just curious on the reduced outlook revised guidance. Is it driven entirely by Rail? I missed a little bit of the call. I was actually juggling a couple here. It does sound like some of the trends in Clean Earth and Environmental maybe just temporarily a little bit below our expectations certainly in the quarter. So I'm just curious, is that $15 million entirely Rail and the other is just kind of rounding errors? And then the related question, just kind of housekeeping, does the currency impact the weaker dollar? Is that a benefit for you? Has that been a little bit of an added benefit as the years progress?

Yes. Larry, it's Tom Vadaketh. Yes. So the reduction in outlook for the year, both on EBITDA and free cash flow is entirely due to the reduction in Rail and stemming from some of the demand issues and market issues that we've covered in the call. And then on FX, as you know, we went into the year expecting a $9 million or $10 million impact. There's been some clawback. The dollar has weakened during the year. And at this point, we still see a slight negative year-on-year, but not as large as we thought at the beginning.

Okay. And then on Clean Earth, particularly, it sounds like things are going well there. Just curious, just qualitatively, the impact of tariffs. Have you seen anything -- just some of your customers obviously are in a global world impacted. So have you seen any indirect impact or anything that would give you a pause on that or from the economy or anything on that? And then the follow-up on Clean Earth is, and I think you might have discussed it, but just the margins were flattish year-over-year and sequentially or down a little bit even in the quarter. Was there any particular reason behind that? I think you discussed something there. So maybe I missed that.

Larry, it's Nick. On your first question about the tariffs, no, we've not seen any direct impact. In fact, the volume trends in our so- called manufacturing and industrial segment of our hazardous waste business, which is the largest segment, have been quite good, not only revenue, but orders and our pipeline. So we're really encouraged by the performance of that segment within our haz waste business. So really no impacts to speak of tariffs on Clean Earth. I would say on the margin, it was a little softer than we expected, primarily due to some unplanned maintenance- related outages at some disposal facilities. So we had to move the waste further distances to dispose of it and also in a few cases, pay some higher rates than kind of our standard solution. So that's behind us. It's not continuing. It actually was behind us later in the second quarter. So very much a temporary impact.

Okay. You also mentioned the mix, too, I guess...

Larry, sorry, one second. Yes. I'll just supplement. So in the quarter for Clean Earth, margins are slightly up year-on-year. And then as Nick said, sequentially going into Q3 and Q4, we would expect margins to climb versus the first half performance.

Yes. And Larry, the other impact that I think we mentioned in terms of margin was the mix with our soil and dredge business. As you may know, the margins in that business generally are a few points higher than the [indiscernible] haz waste business. And that segment was a bit weaker in terms of volume than we expected. And I think you also know that, that tends to be a function of project starts, which can be difficult to predict and a bit lumpy. So it's really not a demand issue. It's more of a short-term issue.

The orders and the backlog in that, I think, had done well, at least in '24, right? So that business, hopefully, it's just a timing thing.

Exactly. The outlook is good for that business, yes.

Larry, do you have another question?

No, no. I think I'm all set. You discussed it. All set.

The next question comes from Rob Brown from Lake Street Capital Markets.

On the Environmental business, I think you talked a little bit about an expectation of some improvement in margins and results in the back half. Could you just clarify sort of what's driving that at this point?

In HE?

Correct.

Did you say in HE?

Yes.

Yes. Well, we have some new sites ramping up, and that will help. We have some cost reduction initiatives, which we'll have a full 6 months of in the second half of the year. So that's certainly going to help. And then we talk about a handful of sites that we have a lot of focus on improving their performance and some of those benefits should also help us in the second half of the year.

Okay. Okay. Great. And I know there's a lot of cross-currents on Rail right now. But I guess, historically, when you have these down cycles in Rail, how long do they last? What's sort of the kind of a down cycle? Or is there such a thing as a typical down cycle, but maybe a sense of how long these cycles last in the Rail business?

Yes. Well, in this case, we expect it to be shorter-lived because there's, as you know, we're not in a recession. There's a lot of uncertainty and of course, other big things happening amongst our customers in the Class 1 railroads in the U.S. And so this does happen from time to time where they just cut back spending. We've -- there are many data points that we have access to across customers and competitors that make it clear that this is an industry issue. It's not a Harsco Rail issue, but we do expect it to be short-lived. So it's -- we don't see this persisting into 2026 at the moment.

[Operator Instructions] The next question comes from Devin Dodge from BMO Capital Markets.

So I was going to maybe take a stab at asking a question around that other announcement this morning. Just wondering if you could provide just a bit of background on the strategic review and what prompted the Board to consider its options now? I'm just trying to get a sense if there have been some inbound interest or if it was prompted by new challenges in the business that a turnaround in financial performance may be pushing out a bit.

Well, certainly not the latter. I would say we've done a lot of work. The discount to our sum of the parts value continues to persist. And I think we have a bit more confidence in the potential outcome of a few of these options. And so we're digging deeper into them, and we've hired advisers. And I think the distinction here is it's a bit more formal of a process. And so that's -- but beyond that, we really can't comment. We have done a lot of work on a number of different options.

Okay. Okay. Fair enough. I had to ask there. Okay. Second question, look, apologies, I may have missed it during the remarks, but I believe there was a pretty meaningful step-up in forward loss provisions at Harsco Rail. Just can you provide a bit more color behind the drivers behind those charges?

Yes. So both the charges relate to Network Rail, that was the largest chunk and then also a smaller chunk for SBB in total, about $15- or-so million. And $10 million of that is Network Rail. We -- and it's really a revision in our estimated cost to complete that contract. It's a normal quarterly process, Devin. And as we look out to the end of this period when we are going to complete all the vehicles and there's about 11 that we need to deliver to the customer, that's just an update in our cost estimates at this point. So there's nothing more unusual than that. As we remarked and I think in my prepared remarks, we separately have a negotiation ongoing with Network Rail that could end up in different outcomes. There could be an improvement in the contract terms and the economic terms, similar to what you saw with Deutsche Bahn earlier this year. We hope that's an outcome or we're also potentially talking to the customer about just exiting the contract on a mutually acceptable basis. This adjustment that we recorded in Q2 just assumes that things proceed as they are currently without either of those 2 potential changes coming in. And then on SBB, this project is reaching the end, actually. So we -- the major part of the contract, which is to deliver about 50 vehicles, we expect to be done with that by the end of this year, the end of 2025. And then the second vehicle type, we expect to be done by the end of 2026, next year. And this was, I would say, more -- again, similar concept to what I explained on Network Rail. It's a regular and quarterly process where we are continually reviewing what it's going to take to complete the vehicles as we get closer, as the designs get locked down, as we have more certainty around input costs and so forth, it's sort of a natural outcome of that process. And that was about $4 million or $5 million.

Okay. Good color. I appreciate that. And then just one last one. I think there's been a new leader in Rail now for a little while. Just wondering if you could kind of highlight -- clearly, there's some maybe near-term demand headwinds, but just if you could highlight focus areas and maybe some early wins from the new leader coming in?

Yes. Well, he has a rail industry background. He's very operationally oriented, and that's much of his background. So his focus, of course, I guess, early on has been operations and supply chain and the logistics with our outsourced warehouse that feeds the Columbia plant. And we have seen some better metrics over the past couple of weeks in terms of that warehouse filling the needs of the Columbia, South Carolina factory. So we're quite encouraged by the team. We have a new finance leader in that business as well. Our operations leader has been with us for about a year. So we feel quite confident that this team has the requisite background and skill set to resolve our operational issues.

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

Yes. Thank you, Danielle, and thank you to everyone that joined us this morning. Please feel free to contact me with any follow-up questions. And as always, we appreciate your interest in Enviri and look forward to speaking with many of you in the near future. Thank you.

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