ENVIRI Corp Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Clean Earth was a standout performer with double-digit earnings growth and record first quarter results.
• Harsco Environmental performed well despite global steel market challenges, exceeding internal expectations.
• Rail had soft Q1 results but renegotiated a major ETO contract and strengthened its leadership team.
• Global trade developments impact operations, but direct tariff impact on Enviri is not expected to be material.
• Cash flow was ahead of expectations, supporting full year cash flow guidance of 30 to 50 million.
• Completed rebuild of rail leadership team with new President and CFO.

Segment Performance

• Clean Earth: Revenues totaled $235 million and adjusted EBITDA reached $38 million, with a 12% increase in EBITDA. Revenue growth was 4%, driven equally by price and volume. Hazardous materials revenues increased 3% to $198 million, while soil dredge sales rose 9% to $37 million. It delivered record first quarter results and had double-digit earnings growth.
• Harsco Environmental: Segment revenues totaled $243 million and adjusted EBITDA totaled $39 million. Impacted by site exits and FX, but operating initiatives helped. Same-store steel production at customer locations declined less than 1% year-over-year, with service volumes and earnings up slightly. Roughly 80% of its revenues are generated outside the U.S., and dollar weakness is a potential tailwind.
• Rail: Revenues totaled $70 million and adjusted EBITDA loss was $2 million. Soft results as anticipated, but successfully renegotiated a major ETO contract with Deutsche Bahn. The segment strengthened its leadership team with new hires in rail, finance, and operations.

Guidance

• Maintained full year guidance: Company EBITDA expected to be within $305 million to $325 million and free cash flow projected to be $30 million to $50 million.
• Organic growth in the year driven by Clean Earth, while Harsco Environmental's performance expected to be stable on a like-for-like basis.
• Anticipate lower net outflows on rail contracts and lower pension contributions to generate positive cash flow.
• Long-term goal of annual free cash flow of $150 million on a consistent basis, as communicated during Analyst Day last June.

Risks

• Macro-economic uncertainty driven by global trade issues may lead to slower economic activity and demand.
• Potential tariff impacts on operations in Mexico and Canada, though direct impact on Enviri is not currently material.
• Risks related to certain ETO contracts in Rail that weigh on consolidated earnings and cash flow.

Q: Larry Solow asked about the environmental segment, volume projections, and impact of tariffs.

A: Nick Grasberger mentioned Clean Earth is now comparable in profitability to Harsco Environmental, HE expects some volume growth, and no significant slowdown seen yet in Clean Earth with levers to mitigate economic impacts if needed.

Q: Rob Brown followed up on Rail ETO contract renegotiation and Clean Earth margins.

A: Tom Vadaketh discussed the Deutsche Bahn contract amendment reducing risk, and Nick Grasberger noted Clean Earth margins have been improving for years with further potential from IT initiatives.

Q: Davis Baynton inquired about steel industry excess capacity and Clean Earth efficiencies.

A: Nick Grasberger and Tom Vadaketh commented on EU actions helping HE, and Clean Earth gains efficiency from routing, waste disposal, and processing, with ongoing margin enhancement opportunities.