Good morning. Welcome to Rayonier Advanced Materials First Quarter of 2022 Earnings Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions with the instructions to follow at that time. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mr. Mickey Walsh, Treasurer and Vice President of Investor Relations for Rayonier Advanced Materials. Thank you, Mr. Walsh, you may begin.

Thank you, Operator. And good morning, everyone. Welcome again to Rayonier Advanced Materials First Quarter 2022 Earnings Conference Call and Webcast. Joining me on today's call are Vito Consiglio, our President and Chief Executive Officer, and Marcus Moeltner, our Chief Financial Officer and Senior Vice President of Finance. Our earnings release and presentation materials were issued last evening and are available on our website @rayonieram.com. I'd like to remind you that in today's presentation, we will include forward-looking statements made pursuant to the Safe Harbor provisions of federal securities laws. Our earnings release, as well as our filings with the SEC are some of the factors which may cause actual results to differ materially from the forward-looking statements we may make. They're also referenced on Slides 2 and 3 of our presentation material. Today's presentation will also reference certain non-GAAP financial measures as noted on Slide 4 of our presentation, we believe non-GAAP financial measures provide useful information for management and investors, but non-GAAP measures should not be considered an alternative to GAAP measures. A reconciliation of these measures to their most directly comparable GAAP financial measures are included on Slide 16 through 20 of our presentation. I'd now like to turn the call over to Vito.

Thank you, Mickey, and good morning, everyone. I am pleased to report that we had significantly advanced our efforts to improve reliability and manage inflationary costs in order to position the business for EBITDA growth. Starting on Slide 5, sales for the quarter increased 10% to $352 million with price increases across all segments, driven by strong demand, including double-digit price increases for our cellulose specialties’ products. As previously communicated, the EBITDA results started the year slowly as we focused on these historic maintenance outages and managed extraordinary inflationary costs. Turning to Slide 6, we made great progress on our Jesup in Fernandina maintenance outages with each facility coming back online at the beginning of the second quarter. These outages were some of the largest and longest outages that we have executed in our 95-year history of the company. We made significant investments to increase productivity, including rebuilding a large recovery boiler. To build on this momentum, we recently made the strategic decision to accelerate Tartas's planned maintenance outage into the second quarter from the original plan in the fourth quarter. This outage along with Témiscaming's second quarter planned outage will further position our assets to operate with greater reliability and productivity and help mitigate current impacts from supply chain disruptions. Additionally, we are doing our best to absorb and mitigate the impacts of inflation and supply chain challenges. We recently implemented a cost surcharge on all cellulose specialties products to help offset the inflationary costs. These actions will allow us to better service our customers and generate improved financial results. As such, we remain on track to deliver improved EBITDA in the second quarter and we reaffirm our guidance to generate higher EBITDA in 2022. Earlier this week, we also announced the sale of our shares in GreenFirst Forest Products for $43 million. This transaction represents the final consideration for the sale of the lumber and newsprint assets and the culmination of our portfolio optimization initiative. It also represents a 26% premium above the original plan executed nearly a year ago. The sale agreement contains a purchase price protection clause whereby the company is entitled to participate in further stock price appreciation under certain circumstances. Now, I would like to ask Marcus to take us through the financial details for the quarter. I will then come back to provide additional perspective on the business and our market outlook. Marcus?

Thank you, Vito. Starting with High Purity Cellulose on Slide 7, first-quarter sales increased 12%, or $31 million, to $281 million driven by a 17% increase in sales prices. This reflected a double-digit increase in CS pricing per earned negotiated contracts, offset by a 4% decline in sales volumes driven by supply chain constraints, lower production, and improved mix towards CS. Net sales also included $27 million of other sales, primarily from bio-based energy and lignin. EBITDA for the segment declined $19 million to $16 million driven by higher costs across key inputs, including wood, chemicals, energy, and supply chain expenses. Turning to Slide 8, Paperboard segment sales grew by 6 million, driven by a 19% increase in sales prices, partially offset by a 5% decline in sales volumes. EBITDA for the segment held flat at 10 million as higher sales prices were offset by increased costs for purchase pulp. Turning to our High Yield Pulp segment on Slide 9, sales declined $6 million from prior year, driven by a 32% decline in sales volumes, primarily due to supply chain and production constraints. While sales prices increased 17% driven by strong demand for global market pulp. EBITDA further segment declined slightly to break even for the quarter as the price increases helped to offset the volume declines. Turning to Slide 10 on a consolidated basis, operating income declined $16 million from prior year to a $16 million loss as price improvements across each segment were impacted by higher input costs and supply chain constraints. Lastly, on Slide 11, despite the increase in working capital and the elevated CapEx of $45 million in the quarter, both impacted by extensive planned maintenance outages and supply chain constraints. The company maintained a solid $302 million of liquidity, including $179 million of cash. With additional outages planned for the second quarter, we expect the majority of our annual $140 to $150 million of CapEx to be spent in the first half of the year. After making these critical infrastructure investments in the first half of 2022, we expect improved reliability along with actions implemented to offset extraordinary inflationary costs to drive improved cash flow in the balance of the year. Lastly, we continue to monitor capital markets and are prepared to opportunistically refinance our 5.5% senior notes which mature in June of 2024. We expect to deliver improved results for the remainder of the year which will further deleverage our balance sheet and improve the company's credit profile. We are confident that the company will obtain an acceptable refinancing at the appropriate time. With that, I'd like to turn the call back over to Vito.

Thank you, Marcus. Turning to Page 12. I want to provide an update on each of our businesses and a market outlook. We continue to see strong demand for our key cellulose specialty products. The cost surcharge announced earlier this quarter has been successfully implemented as planned. Customers are focusing on securing volume and passing on their own inflationary costs to the end users. Additionally, we expect to realize higher prices for commodity High Purity Cellulose products in the coming quarter as demand for these products remained stable and supply for fluff products is constrained. However, we remain cautious about supply chain constraints and the uncertain outlook in China related to a resurgence of COVID-19. As previously discussed, we are executing our planned maintenance outages to drive improved reliability and productivity. Overall, we expect HPC profitability to improve sequentially and produce significantly better results for the full year 2022 as we realize the benefits of our key initiatives. In Paperboard, we're also experiencing strong demand for packaging and commercial print products. We expect to realize higher prices to outpace inflation in the coming quarter and generate improved EBITDA. Similarly, in High Yield Pulp, we expect to realize higher prices along with higher volumes to generate improved profitability from the most recent quarter. However, there are greater risk in this segment related to supply chain disruptions and demand from China, which are currently uncertain. On the corporate expenses, we expect an increase in the coming quarter before normalizing to around $50 million for the full year. Given the nature of these corporate expenses, we expect continued volatility. We remain focused on executing our planned outages within our $140 to $150 million CapEx guidance for the full year. As noted, we recently received $43 million related to the sale of our shares in GreenFirst and we expect to receive $21 million of tax refunds within the year. Lastly, on Slide 13, we're excited about the future of RYAM. With our unique bio-refinery assets and sustainable business model, we're embarking on a new journey into the bio-future, applying science to nature. Coming very soon, we will be rolling out a new brand that represents our vision to drive renewable to remarkable. In the coming quarter, expect an updated website and signage. Going forward, we will refer to the company as RYAM to distinguish and simplify our image. We will continue to build upon our 95 years of sustainable history as we grow into the bio-future. With that, Operator, please open the call to questions.

. Our first question is from John Babcock with Bank of America. Please proceed.

Hey, good morning and thanks for taking my questions. I guess, just start out. I was wondering if you could review guidance ultimately, how you're thinking about this relative to last quarter when you gave initial guidance for 2022 for growth overall? I want to get a sense, I guess, more specifically, just around pricing, whether or not -- I assume you're having more pricing now than you had expected back then. But the same time costs are an offset. So, I was wondering if you might be able to just balance all that and also broadly, if you're thinking about more growth in EBITDA this year relative to last quarter if it's largely in line just given offsetting factors?

Well, good morning, John. I appreciate your participation and great question. I'll highlight a couple of things and then I'll have Marcus fill in the blanks in a few of those items. We have been seeing the pricing start to flow through in the first quarter and that was diluted a little bit because of the fact that we had some carryover from the prior year. So that's starting to come to realization. You'll see that come through more in the second quarter. Additionally, with the pricing surcharge and cost surcharge that we've put into the marketplace, it's helping us to mitigate the extraordinary costs that we've incurred that came in very heavy in that first quarter. So, from that standpoint, you should see some good growth as we had noted on our prior call in the second half of the year which really start to pick up here in the second quarter. I'm not changing the outlook from our prior communications; we feel confident that we will be in a better position and we will deliver higher EBITDA this year and I don't see anything that's impeding that right now and we're confident in the position in the market. Marcus.

Just to build on Vito's comments, maybe just on the businesses such as Paperboard. In that business, John, you've probably seen in the marketplace, some announced pricing by others. So certainly, that's a business where we're seeing good demand and further price increases and as well in the High Yield Pulp markets, BEK has been seeing increases and we tend to move along with that product as well. So, there's certainly some positive signs on pricing but in the context of that inflationary environment that Vito mentioned.

Got you. And then the next question is on the cellulose, specialty your side of things. You mentioned that demand is broadly pretty strong. I was wondering if you might be able to delineate broadly across the different categories how demand is faring right now, especially on the acetate tow side, just given your exposure there. But then also if you could talk about Europe, the impact you're seeing from the Russia - Ukraine conflict, and also the broader economy in that market, particularly since GDP numbers in the first quarter were probably a bit less robust, I think, than people have been expecting.

John, let me comment a little bit, and again, I'll have Marcus fill a couple of the blanks in here. Specific to Europe, there has been extraordinary challenges there in terms of securing materials to make sure that we're running smoothly. And albeit you haven't asked yet, this is one of the reasons why we looked at the opportunity very opportunistically. Two key factors there, some of the challenges that we're having in securing materials without interruption and more importantly, the successful shutdowns we've had in both Jesup and Fernandina, which really enable us to accelerate our support plan with additional in-house experts. So, I think we're doing a nice job of managing through that. Overall, our demand is very strong within all the segments right now. I think the supply chain constraints are really driving an acceleration of that right now, because there's significant delays in vessel deliveries through our customer base, so I think we've seen and will continue encounter, a strong demand throughout that portfolio. Marcus.

Vito, maybe touching on some of the manufacturing inputs, John, given where gas pricing has gone in Europe, certainly seeing that manifest in higher chemical cost inputs, think of Ammonia. And again, on the energy theme, given the trucking in logistics matters that Vito mentioned, certainly diesel costs have an impact on that as well. So yes, certainly inflationary pressures affecting some of the operating inputs.

Okay. And then last question just before I turn it over, just on that surcharge and cellulose specialties. I don't know if you're able to provide some sense of the magnitude of that. And that also when you say it was successful, does that mean it went in as full and as announced, or were there any challenges and getting that through?

Okay, John. What I would say is our customers understand the need for the surcharge and they all have been encountering similar inflationary impacts. The cost increases that we incurred are clear the evidence in the chemical industry and witnessed by recent earnings releases and market indices. We have pretty strong partnerships with our customers and that's been instrumental in our alignment and our path forward. So, from that perspective, we did implement on April first and we are happy with the results that we've realized so far, and we're going to continue to grow upon that. Marcus.

Enjoying those, that cost surcharges denoted on our invoices separately. So, it's very transparent and as Vito mentioned, openly discussed with our customers.

Okay, great. Thanks for all the details.

Thank you, John.

Our next question is from Paretosh Misra with Berenberg, please proceed.

Good morning. Can you talk about just your cellulose specialty pricing -- cellulose specialty pricing through the year? How should we think about the quarterly progression in price Q1 versus Q2 versus Q3? Is Q2's price will reflect the -- all the price hikes that you have announced or some of that might get in -- get pushed into Q3?

Good morning, Paretosh, and thanks very much for your participation. Regarding the CS pricing, you will -- we -- I don't know if we're going to get the full impact in Q2, but we should see a very strong acceleration of that. We will see strong acceleration from a standpoint of the cost surcharge. And additionally, we talked earlier about the diluted realization of pricing that was implemented last year, it kind of drizzled through on Q1. So, I think you'll also see an acceleration of that as we begin to get through this quarter. So, from both standpoints, I don't think you're going to see the full realization. You'll definitely see a full realization when we get into Q3 and Q4, but you will see evidence of that coming through the marketplace right now because we've been invoicing and receiving accordingly in terms of our AR. So, from that standpoint, I think we're in a pretty good position. Marcus, if you have any additional comments.

And Paretosh, we're actively watching this, it's a very dynamic situation. It's -- this is all a call on how long inflation stays strong, right? So, we got to have a lens on how long does this inflation continue but consistent with Vito's comments, sequentially, definitely pricing improvement due to these initiatives.

Got it. And on the commodity cellulose, so for Viscose and Fluff, you are expecting Q2 pricing to be higher than Q1 if the current market conditions hold, right?

Yes, very much so. We've seen evidence in the marketplace and I think even this morning that issued a report to the market denoting some of the increases that have been sustained out there. So, we're seeing the same evidence of that Paretosh ourselves.

Great, thanks. And the last one for me, I don't know if you've covered that in your prepared remarks but any updates on TemSilk and any -- what kind of opportunities you're seeing for that product?

We haven't made a lot of comments about there right now, we are continuing to develop and I would say stay tuned to some of the feedback that we have there. As you know, some of the marketplace in order for us to do business right have been mitigated by some of the pandemic situation. So that right now is not an area that we've seen a tremendous amount of development and only because it's been subsidize or mitigated by the conditions of the marketplace. So, we'll provide an update for you in the next Q. I don't know if you have any additional comments on that, Marcus?

No, not on that one, but Paretosh, maybe just to highlight back on your comments on pricing, on fluff. That is something you should take note of in your modeling. Given the recent announcements by , the April index for fluff in North America was just under $2,000 a ton. Just around $125 per metric ton increase again.

Interesting. Thanks guys, that's all I had.

Thank you, Paretosh.

As a reminder . Our next question is from Richard Close with Jefferies, please proceed.

Taking my questions just a couple of quick ones here. In terms of maintenance cost, how much of that was in CS in Q1? And then how much do you expect to impact EBITDA in Q2?

Good morning, Richard and thanks for your question. I really appreciate your participation. I'm going to volley that one over to Marcus because I know he's got the details on that so if you could Marcus.

Good morning, Richard. So, the majority of our CS maintenance activities were focused on our Jesup Georgia facility. And those costs are actually amortized over time ago we would deploy the cash to support those activities. So, think of a number in the first quarter of around $30 million, that would then be amortized over a 12-month period to the next shutdown and hit our P&L.

Got it. So, in truth, the EBITDA impact of the maintenance shuts that you guys had in Q1, the EBITDA impact there really wasn't that big. It was really priced cost that drove the year-over-year decline?

Yeah. Very much history of our manufacturing cost inputs, wood, chemicals, energy, and the logistic supply chain costs we mentioned?

Yes, absolutely.

Okay. I understand.

And that was on the bridge, Richard, if you look on Page 7, that's at $47 million, largely cost inputs.

Yeah. Got it. And then just in terms of Q2 compared to that $30 million that you had in Q1, what does the cost look like for Q2?

So, in Q2, it's has the major emphasis on its major outage and that one will be slightly less, think of in the range of $10 million that would be a cash disbursement and then amortized.

Got it, Understood and then maybe lastly, for me, how do you guys think about contingency plans for the cap structure? Let's say you don't get to your guide, how are you thinking about addressing the cap structure as you look to the second half of the year?

So again, we're looking -- it's really a key area of focus for us. Our capital structure at something we're actively in a dialogue with our advisors and staying close to developments. We've said we're going to be opportunistic, we're very focused on executing on our operational strategy to demonstrate improved results sequentially, and we really feel this will further deleverage and improve our credit profile. And then at the same time, using -- Vito mentioned the recent sale of the GreenFirst Forest block shares, and we mentioned tax refunds in the future, that in some total is close to $70 million. We would see ourselves right sizing the next refinancing and then approaching the markets at the right time with that improved credit profile and that momentum with us.

Okay. I got it.

And at that time, Richard, we're going to be fully out of all of our shutdowns. And right now, we've already got past at 60% home, so we're in a real good position to continue on that momentum and you'll see that occurring and hitting us strongly in the second half of the year.

I see. Okay. Thank you for taking the questions. I appreciate it.

Thank you very much for your participation.

Our next question is from Paul Quinn with RBC Capital Markets, please proceed.

Thanks very much. Morning, guys. Just trying to clarify this cost or charge. So that 146 is just on your High Purity stuff to like the 520 thousand or so, 520-550 a year for the nine months. So, it should be similar in the $55 million range?

Good morning, Paul. We figured that you'd focus on that and we appreciate your inside and your questions here. Yeah. Listen, I'm not going to give specific guidance on exactly what that's going to amount to, but in terms of where you're looking right now, you're probably in the range of the areas that we're focused on. So, there's going to be a flux of what it's actually going to be coming through but we feel pretty strong in terms of our ability to implement which we've already executed upon and drive that through. Now, listen if the market conditions changed dynamically, we'll have to make adjustments accordingly. So, I would say that could be up or down and you have to consider that in terms of your modeling.

Okay. And then just on the specialties volume you mentioned it's down 4% year over year but the mix improved. So, if you could split up that High Purity Cellulose from the commodity, is the High Purity with -- I guess it was down less and the commodity volumes were down more.

Yeah, Marcus, I think I'm going to -- you get those details. If you could provide that.

Yes, definitely the commodity volumes were down more, Paul. You're spot on your comments and CS was negligible.

Yes, CS was just a little bit, I think it was 1%.

Okay, that's helpful. And then just some of what you're seeing. You referenced really strong fluff pricing, which I've never seen these increases, so it'll be interesting to see how sustainable it is, but it's a lot of volume coming in on the DP side, just wondering what you're seeing in that market.

Yes, it's a really good point, Paul, the demand has been tremendous for us right now, and I think that's exacerbated by the supply chain constraints. So, for us, we're in a really good position, we provide a high-quality material into the marketplace, and we see the demand extraordinary at this point. If we could make tremendously more, I think we'd be have in a better position.

So, on the dissolving pulp side, the commodity side, you're not seeing any weakness because of the extra volume coming in from some of these new builds up?

Uh, Paul, what we did see is, you saw mentioned of the flooding in South Africa certainly effecting the hardwood supply. You're probably reading the same materials, ASTRA sale of the and start up again so they're coming back into softwood. And everything I've seen from on the new line in Brazil was mainly started up on BK and we're starting to see signs that they're producing DWP now.

Okay. That's good. And then just trying to understand the like most people on maintenance, they try to move these things out into a longer-term schedule and you've moved up Tartas and cited the trying to difficulty securing materials, wasn't materials that you are having trouble security and then additionally on that facility, I mean, you put in green energy project last year. Could you give us an idea but energy self-sufficiency is there just noting that Europe energy prices have gone up so much.

Sure, Paul. I'll make a couple of comments on that. For us right now, there is a great opportunity in the region to really take advantage of the situations approach That one that has been difficult for us and to a point where we were concerned about continuing and having the flux through to read our customer demands. We got through that but thought also, now that we've got some great resources that are available to execute, we put a task force team together that helps us during the shutdowns. We had all the critical personnel available and the team members available to take advantage of it. And you can look at it from a standpoint is if we can execute this thing now, we've got a greater advantage if we go through the year rather than delaying because some of these things are enhancements to the way that we're running right now. So that's how we looked at it and that's why we pulled it forward. We're in a pretty good position from that standpoint and its kind of -- it allowed us to address two birds with one stone. So that's why we took advantage of it. Marcus.

Yeah, Paul, maybe to your question you had on the energy side. As far as electricity load, a portion of that load is fixed based on the electrical rate in France and the rest floats. So, we're not fully exposed to electricity rates and some exposure on the gas where we use gas but we're actually in that producer of electricity, so in totality, we certainly have the ability to mitigate some of these headwinds that we're seeing and then you saw us monetize a portion of our carbon credits this quarter as well --

Right.

-- which really should look at that as a whole, energy offset because they kind of move together.

And as you've noted, Paul, we're going to continue to make investments in that area, so that's been also positive for us.

Okay. So -- just so I understand it, you're a net producer of energy in -- at Tartas so this is higher energy regime right now, it should be a benefit to you, right?

Aside from the -- the floating rate in France has increased, right? So, there is that exposure to any producer in the country.

Right. But you're -- I'm still confused. You're a net producer though so you're going to be a beneficiary of a higher

Remember, the generation contracts tend to be fixed rate and then indexed and then you're going to have that exposure on the market rate that might compress part of that. But you're still gaining, right?

Okay.

You're purchasing and you're selling. So that's where it kind of mitigates one and the other but we aren't impacted as much when you have extraordinary situations.

Okay. Sorry for having trouble understanding that.

No, that's our fault, Paul.

The flexibility in opportunistically repaying this June 24 note, what is your flexibility around that?

And by flexibility, can you clarify what your --

Is there any restrictions at all on any cash that you come in over the next two years? Can you apply that on the debt right away?

Certainly. We've always thought of doing something holistic. So something to address a full refi other than the call ability at par in June, there's nothing else.

Okay. That's all I had. Thanks, guys.

Good.

Thank you very much, Paul. We appreciate your participation. Again, it was great questions. Thank you so much.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Vito for closing comments.

I'd like to thank you again for your time today. We're confident in our ability to execute on our near-term initiatives to drive improved profitability in 2022 and we're excited about the BioFuture of RYAM. Thanks so much.

Thank you. This does conclude today's conference. You may disconnect your lines at this time and thank you for your participation.