ENVIRI Corp Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Clean Earth: Delivered record revenue, EBITDA, and cash flow in the fourth quarter. Contribution to consolidated EBITDA grew from 25% to over 50% since 2021. Expect double-digit EBITDA improvement in 2025. Focus on shifting to specialty waste business with higher growth and cash flow.
• Harsco Environmental: Managing through challenging global steel industry conditions. Mitigating impact via cost reduction and efficiency programs. Adjusted EBITDA in 2024 flat vs 2023, expected mostly unchanged in 2025.
• Harsco Rail: Most challenging business with few remaining ETO contracts. Anticipate EBITDA range of $35-$40 million once projects are completed. Upgraded leadership team. No new ETO contracts intended.

Segment Performance

• Clean Earth: For the full year 2024, cash earnings, profit margins, and free cash flow were each two times higher than at the time of acquisition. In the fourth quarter, revenues totaled $241 million, adjusted EBITDA reached $36 million (up 26% year on year). It contributed over 50% to consolidated EBITDA in 2024.
• Harsco Environmental (HE): Segment revenues totaled $240 million. Adjusting for FX and divestiture impacts, organic revenue decline was 4%. Adjusted EBITDA for the quarter was $41 million, down from the prior year quarter. Impacted by weak global steel production and strong US dollar.
• Harsco Rail: Revenues were $77 million in the fourth quarter, with adjusted EBITDA of $2 million. In 2024, adjusted EBITDA totaled $9 million, with the base business contributing $30 million and engineer-to-order (ETO) contracts losing $20 million.

Guidance

• Full-year 2025 adjusted EBITDA expected to be within $305 to $325 million (5% organic growth). Revenues expected to increase less, offset by divestitures and FX.
• Free cash flow anticipated $30 to $50 million, improving due to Rail and pension.
• Clean Earth EBITDA to grow low double-digit. HE profitability lower due to stronger dollar and divestitures. Rail EBITDA to improve.

Risks

• Harsco Environmental impacted by weak global steel production, strong US dollar, and site closures.
• Harsco Rail's ETO contracts causing cash usage and free cash flow challenges.
• Forward-looking statements subject to risks and uncertainties outlined in SEC filings.

Question and Answer

Q: About Clean Earth volumes in 2024 and outlook for 2025.

A: Nick Grasberger says there was churn in top retail accounts in 2024, but pipeline has grown significantly. Expect 4-5% volume lift in industrial within Clean Earth in 2025, with top line growth around 5% (half price, half volume).

Q: Harsco Environmental volume downside.

A: Nick Grasberger states most sites not at contract floors, site closures have been the bigger impact.

Q: Clean Earth IT and facility improvements.

A: Nick Grasberger says IT harmonization is more than halfway through a two-and-a-half-year program, and facility spending is for high returns with quick paybacks.

Q: Rail incremental costs and ETO deliveries.

A: Tom Vadaketh says risk dissipates dramatically once first vehicle is delivered, with about 12-15 months away for big contracts. Nick Grasberger adds focus on mitigating risk for remaining large contract in UK.

Q: HE steel production and footprint.

A: Nick Grasberger says volume in India, Middle East, Africa expected to grow 3-4% in 2025, others flat. Normalized production could add significant revenue to HE.

Q: Clean Earth PFAS opportunity.

A: Nick Grasberger says Clean Earth is active in PFAS but no substantial build-in planned for 2025.

Q: Rail cadence in 2025.

A: Tom Vadaketh says production plan will be level loaded to optimize manufacturing and allow for improvements.