Good morning. My name is Rocco, and I will be your conference facilitator. At this time, I would like to welcome everyone to the Enviri Corporation Fourth Quarter and Full Year 2025 Results Release Conference Call. [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 expressed 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, Rocco, and welcome to everyone joining us this morning. With me today is Nick Grasberger, our Chairman and Chief Executive Officer; Russell Hochman, our President and Chief Operating Officer and the future CEO of New Enviri; and Tom Vadaketh, our Senior Vice President and CFO. This morning, we will discuss our results for the fourth quarter and the full year of 2025 as well as our outlook for Harsco Environmental and Rail, which are the 2 businesses that will make up New Enviri following their spin-off into a new stand-alone publicly traded company in connection with the sale of Clean Earth. After our prepared remarks, we'll take your questions. Our quarterly earnings release and slide presentation for this call are available on our website. During today's call, we will make statements 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 those forward-looking statements. For a discussion of such risks and uncertainties, see the Risk Factors section in our most recent 10-K and as updated in subsequent 10-Qs. 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 and our slide presentation. Now I'll turn the call to Nick to begin his prepared remarks.

Thank you, Dave, and good morning, everyone. Let me start with a brief status update on our transaction to sell Clean Earth. We continue to target the midyear closing, and we are working diligently to complete the transaction. The HSR waiting period is scheduled to expire on March 9, absent a request for more information. We expect to publicly file both our Form 10 and proxy documents later in March, and at that point, we'll begin to focus on our shareholder meeting and a date to close the transaction. Finally, we are not yet in a position to narrow the cash payout range of $14.50 to $16.50. The payout will take into consideration the time of the closing and the company's cash flow up to that point as well as the amount of cash we determine is prudent to retain in support of Rail's ETO contracts. We may decide that New Enviri should retain more cash for these contracts than we had hoped a few months ago. We are in the midst of discussions with various parties that will impact the amount of cash that will need to be retained and ensuring New Enviri is soundly capitalized and set up for success is, of course, a priority for us. We look forward to providing further updates when appropriate. And at this time, there's not much more that we are able to say about the cash payout range. As I reflect on the Clean Earth transaction, I'm pleased with what we have accomplished over the past few years. The improvement realized at Clean Earth has been extraordinary. And I credit the Clean Earth leadership team for having the vision to identify strategic initiatives and drive their execution throughout the organization. I'm confident that Clean Earth will continue to prosper as part of Veolia. And while the sale of Clean Earth is a major step towards capturing the sum of the parts value of the Enviri portfolio, it's certainly not the final step. There's more value to be created through New Enviri. Harsco Environmental and Rail are market-leading businesses with strong reputations within their markets, and we are optimistic that underlying demand will improve, and we believe Russell and his team are poised to accelerate positive change within and throughout these businesses. Tom and Russell will comment further on Q4, our outlook and our priorities. So first, over to Tom.

Thank you, Nick, and good morning, everyone. We finished 2025 with quarterly adjusted earnings that was towards the high end of our expectations. Full year revenues for 2025 were $2.2 billion, led by 4% growth at Clean Earth, which was achieved through a mix of price increases and volume growth. This growth was offset by lower revenues at both Harsco Environmental and Rail due mainly to lower volumes as well as divestitures in the case of HE. Adjusted EBITDA for the year totaled $275 million. Clean Earth again realized record earnings and margins in 2025. For Harsco Environmental, market challenges persisted throughout the year, but we're pleased its performance improved as the year progressed. Our HE team executed well operationally and successfully renewed a larger-than-normal volume of contracts during the year. Looking forward, we're hopeful that underlying steel demand and production will improve for our customers, particularly in Europe, where trade protections are pending and expected to be implemented later this year. Any benefits from these trade actions in Europe are not considered in our guidance for 2026 at this point, and I'll share more on that shortly. At Rail, standard equipment demand remains weak and its ETO contracts continue to weigh on its earnings and cash flow. Despite sluggish demand, Rail's base business remained profitable in 2025 and its cash flow did improve. For the year, Rail's ETOs contributed an EBITDA loss of approximately $20 million and these contracts consumed roughly $40 million of cash during the year. We are pleased with the results of the actions the team has taken to improve efficiencies in the supply chain and manufacturing operations. We are continuing to take aggressive actions at Rail to manage ETO risk and address the challenging demand situation, including a recent additional restructuring to rightsize the business.…

Thank you, Tom, and good morning, everyone. I'm as energized today as when we announced the launch of New Enviri. I'm going to spend some time talking about priorities and the work underway now to position Harsco Environmental and Rail for the future once the spin-off into New Enviri is complete. To start with, we've assembled an outstanding leadership team and announced the return of Pete Minan as our CFO. Many members of the team were integral to the identification, creation and rapid growth of the Clean Earth platform. This team is already hard at work, laser focused and aligned to our priorities. The sale of Clean Earth is the first of many steps that I expect will create value. New Enviri will begin with a prudent capital structure, which is very important and I'm confident that we'll make positive changes within each of these businesses that will result in strong earnings and cash flow growth. In the near term, New Enviri guidance implies stability or some improvement in the case of Harsco Environmental, However, I am not satisfied with this guidance and believe that we can do much better going forward as we focus on improving these businesses, refining our strategic priorities for HE and Rail and taking additional aggressive actions to reduce complexity and drive operational excellence. Since announcing the spinoff, the team has been moving with urgency to implement initiatives that will carry us forward. To begin with, we have taken steps to strengthen Rail's cost performance and are working diligently to reduce or minimize its ETO contract risk, which I see as a critical priority for 2026. Two cost-out restructurings have already been completed at Rail, the most recent of which was in January. In addition, the team has achieved a significant reduction in third-party inventory…

[Operator Instructions] And today's first question comes from Larry Solow of CJS Securities.

Great. Just quickly just on the Clean Earth just on the fact that it sounds like your cash usage or what you may need to retain at New Enviri sort of running towards the higher end of the range or maybe above that a little bit. So I guess that just infers that the cash payment will be towards the lower end, I guess, is that fair to say?

No, I wouldn't say that, Larry, it's Nick. In fact, is that there are just many moving parts here. And so we just can't be more specific, but I wouldn't infer from the comments that payout is trending to the lower end of the range. That's not necessarily the case.

Okay. That's fair. Well, I can talk about that more offline. Okay, good. So HE had a really nice quarter actually. I know it's just 1 quarter, and it sounds like there were some onetime benefits in there. Your outlook is, I think, in line with expectations, somewhat muted, but in this environment, I think it within expectations. Just curious, looking -- breaking out some of the moving parts, what are your expectations for steel production? Is it flattish still? And I think over the last few years, your customers have actually even been hurt more than overall industry. So just curious if you can help parse that out a little bit.

Yes. Well, certainly, as I think you know, we are more exposed to the EU steel markets than other geographies, and that's been in particular weak. And Tom commented on that and certainly indicated reason for optimism, even though not built into guidance, and we could begin to see some of those benefits as early as the second half of this year. . But I would say in other geographies, North American volumes are reasonably good. Of course, they continue to be strong in India and the Middle East, Brazil and Mexico were a bit weaker perhaps. But overall, I would probably use the term stable and hopefully improving in the latter part of this year.

Got you. And just Harsco specifically, I know you mentioned some newer contracts, and I think you've had a couple of press releases out. But then there's some net exited contracts. So I'm curious, is your -- and I know sometimes you exit discretionarily because of lower margin, but is your -- are you netting a benefit as we look out, you're getting -- you're adding more contracts in that are going out the door? Or any way you can give us color on that?

Yes. I think for this year, that contract churn, if you will, in terms of revenue will be -- margin should be higher. We believe that we're mixing up in terms of the margin on contracts. And you're correct, the contracts that we've exited have largely been due to price that we're simply not willing to sacrifice margin given the large number of opportunities we have that we view as more attractive. So as we look forward kind of beyond this year, given the visibility we have to our pipeline and the likelihood of entering into some of these new contracts, we expect that churn rate to be positive to both EBITDA and margin.

Great. Just one question on Rail. It sounds like just demand environment continues to weaken. Just on the ETO contract specifically, though, I think you said $20 million EBITDA loss, $40 million on free cash flow for '25. It sounds like directionally, we're going a little bit better in '26, maybe not as much as initially expected. But did you actually -- or can you give sort of at least a little more specifics on what that might look like in '26?

Yes, Tom, do you want to take that one?

Yes. Larry, we haven't spoken to that and we'll probably stay off it. But yes, we expect improvements as we go along. ETOs will still be a large use of cash in 2026. The $40 million that we had in 2025, if you remember when we started the year, I had talked about completion of small ETO projects. And our Rail team did a real nice job of driving those to completion. And as a result, it got paid for many of those. And that has partly the reason why the $40 million is certainly better than what we had last year, for instance, in 2024. But for 2026, we still expect to see a fairly large cash use from mainly the big 3 European ETOs.

[Operator Instructions] And it looks like our next question today comes from Devin Dodge of BMO Capital Markets.

A bit of a modeling question, maybe tying back to, I think, the last question. But just the guidance had some directional comments on pro forma free cash flow in 2026 and looking for some improvement year-over-year. I believe there's a table at the back of the deck that outlines the cash flow performance by business. So that's helpful. But Tom, I was just wondering if you can walk us through the puts and takes to get to a reasonable range that pro forma free cash flow number, both in 2025 and 2026.

I think what I said in my comments were that we expect it to be modest. So whether it's total Enviri or the pro forma of a New Enviri, I would have it breakeven or slightly worse than breakeven.

But in general, I mean, I think we expect better cash flow in HE, less negative cash flow in Rail kind of offset by some items in corporate. Is that right?

That's right. Yes.

Okay. Okay. That's helpful. Okay. On the Rail business, look, I know adjusted EBITDA excludes the impact from the large ETO contracts. But I think if earnings are expected to remain in negative territory in 2026. I think you mentioned it was down $19 million to $26 million. Just I know there's some overhead costs in the business that are tied to supporting those ETO contracts. Can you just remind us how much those are and when those should roll off? And if you back those out, would the business be operating at or above a breakeven level?

Yes. The -- so the -- the SG&A, Devin, to support those, it's not just SG&A, there's some other overheads as well, is in the $15 million to $18 million range. And so removing those, the business we're projecting will still be at a loss in the base business. And that is because of just the demand, the very weak demand situation. We have taken cost actions and there'll be more cost actions to follow. But it takes time for those to reach a full run rate and particularly in the manufacturing business, even though you save cash costs, it takes time for that to come through the P&L. So we expect to see a full benefit of those towards the back half of the year. And that is partly the reason why we're projecting a loss for the base business.

Okay. Okay. And then sticking with the Rail business. Do you feel like most or all of the lower revenues that you're seeing, is that due to just soft industry conditions? Or is there a regional mix element to that? Or is there market share losses? Just trying to understand or if you could unpack what you're seeing on the top line performance?

It's Russell Hochman. Maybe I'll start and then, Tom, if you want to add anything or Nick. Just it's primarily related to the North America base business. We just see continued weakness, really historic weakness. We are hopeful that at some point, the customers will start investing in this equipment, but this is a cyclical low. That's really what's driving a lot of that market contraction for us.

Yes. And in our guidance, Devin, we didn't want to build in undue optimism. So we have based the guidance for the year based on current demand levels. And as Russell said, hopefully, that will start to change as the year progresses. And if it does, we'll certainly update you.

For sure, for sure. And if I could just squeeze in one last one. Tom, I think you have some good color on the contracts with SBB and Deutsche Bahn. Apologize if I missed it, but is there any update on the contracts in -- for the ETO contract?

Devin, I didn't catch you -- I think you mentioned Network Rail, right? Yes. Yes, Network Rail, so this -- we are progressing towards the completion of the very first machine. And once that is delivered, it will undergo what we've referred to before as homologation that will occur in the U.K. We are also in talks with the customer to improve the commercial terms, the financial terms so that the go-forward picture is more attractive for the company. And what we have sensitively agreed with the customer is that upon -- around the timing of the delivery, the arrival of the machine in the U.K., we will also look to finalize this agreement. Basically, that's the focus of our activity for now. There are more machines to be made, but our focus is on completing the first one and then also completing these negotiations.

And our next question today comes from Rob Brown at Lake Street Capital Markets.

Good morning. Just sort of sticking to the ETO contracts. A lot of things are going to happen this year. I guess, what's -- exiting '26, what do you sort of see the ETO exposure and risk level down to? Is it sort of complete by the end of '26? Or I guess, is the Network Rail still outstanding? But just a sense of after these steps happen this year, what's the remaining risk on the ETO side?

So it's Russell Hochman. I'll start with my thoughts on your question. So with regard to the -- what we're calling the smaller ETOs, those will be essentially completed this year with a minor exception, which will be completed in the first quarter of 2027. And we're -- as we've said before, not taking on any new ETOs. So that will be the end of the smaller ones. With the larger ones, as I said in my comments, my commitment is to derisk the company of these. And so I'm directly involved along with Tom and others in these conversations with these customers. And I would say the message that we've communicated is pretty clear that we will come to terms on these contracts this year. Obviously, something on a mutually beneficial basis or we will look to pursue other ways of de-risking the portfolio, right? But my commitment is to complete those conversations so that the terms are improved or we've derisked the portfolio, as I said, in other manners.

Okay. Great. Got it. And then I guess thinking Rail, the cyclical kind of downturn activity, I know it's hard to predict the sort of recovery. But what are sort of the dynamics as these orders start to recover, how quickly can it come back? And what's the kind of customer -- I assume the longer they wait, the more they kind of have a pent-up demand, maybe that's not how it works. Just a sense of how the recovery cycle tends to happen in the Rail market?

Well, we haven't seen it this -- volumes this low for a very long time. But Rob, it's a fairly quick cycle kind of business. So these are standard pieces of equipment. We can make them pretty fast unlike, say, the ETOs, for example. So if demand comes back, we should start to see our volumes respond pretty quickly. And we are monitoring, as you can imagine, monitoring the market very closely. For now, our customers are not ordering as much as they have in the past. They're choosing to conserve cash. In some cases, they're looking to remanufacture or refurb some of the old machines and stretch them out. And so yes, it's a matter of waiting at the moment.

And that concludes our question-and-answer session. I'd like to turn the conference back over to Dave Martin for any closing remarks.

Thank you, Rocco, and for everyone that joined us this morning. 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 you in the future. Have a great day.

Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.