ENVIRI Corp Q1 FY2026 earnings call

Corporate Transaction Update

• All key regulatory and shareholder approval milestones for the Clean Earth sale and spinoff of New Envire have been cleared, with closing expected in approximately three weeks on June 1, 2026, in line with prior guidance.
• Expected cash payout to shareholders from the Clean Earth sale remains in the range of $14.50 to $16.50 per share; no further details will be shared until close.
• Outgoing CEO Nick Ratzberger and outgoing CFO Tom Vadekith will depart upon transaction close, with Russell Hockman (current President and COO) becoming incoming CEO of New Envire and Pete Minan becoming incoming CFO.

New Envire Strategic Priorities

• An accelerated deep-dive business review of both core segments is ongoing to identify operational improvement opportunities, reduce business complexity, and streamline costs, with demonstrable progress targeted for 2026 and full key implementation planned for 2027.
  • For Harsco Environmental: Priorities include improving site-level productivity and maintenance efficiency, and optimizing SG&A and support costs.
  • For Harsco Rail: Initial restructuring is underway, with focuses on improving supply chain, reducing inventory, growing the high-margin aftermarket business, evaluating capital-light opportunities, optimizing manufacturing operations, reducing global footprint, and cutting SG&A costs.

ETO Contract De-Risking Progress (Rail, Top 2026 Priority)

• For the SBB contract: Most of the first batch of vehicles have been delivered and accepted; the remaining 2 of 48 vehicles are expected to be accepted in the coming months. Homologation for the second vehicle type has started and is expected to complete in early 2027. The contract's risk profile has improved drastically over the past year, and it is expected to turn cash positive in 2027.
• For the Deutsche Bahn contract: The first three vehicles are progressing, and management is working to maximize net cash flows and de-risk the contract.
• For the Network Rail contract: Management is actively engaging with the customer to improve the contract's financial outlook and reduce volatility and risk. New Envire's opening capital structure will provide full financial flexibility to pursue all de-risking options.

Q1 Operational Performance

• Both Harsco Environmental and Harsco Rail outperformed management expectations in Q1, driven by higher volumes, strong operational execution, and prudent cost management.

In Q1 2026, total consolidated revenue was $550 million (flat year-over-year), with an adjusted EBITDA of $65 million, adjusted diluted EPS of $0.10, and adjusted negative free cash flow of $6 million. Segment-level results are as follows:

1. Harsco Environmental: Revenue of $257 million, representing a 6% year-over-year increase and accounting for ~46.7% of total consolidated Q1 revenue. Adjusted EBITDA was $38 million, which exceeded management expectations. Growth was driven by new site volumes, higher services demand, operational improvements at existing sites, and foreign exchange benefits.
2. Clean Earth: Revenue was not separately disclosed, but results were negatively impacted by lower project and industrial volumes due to severe winter storms in Q1. It will be classified as a discontinued operation after the completed Clean Earth sale.
3. Harsco Rail: Revenue of $67 million, ~12.2% of total consolidated Q1 revenue. The segment posted an adjusted EBITDA loss of $1 million, where the base business generated positive EBITDA (exceeding expectations) and the net loss was driven by overhead costs for its fixed-price engineering, technology, and order (ETO) contracts. Negative cash flow for Rail was $18 million for the quarter, almost entirely attributable to its ETO contracts.

• Full-year 2026 guidance for New Envire (post-transaction) is unchanged from prior estimates:
  • Harsco Environmental adjusted EBITDA remains guided in the range of $170 million to $180 million
  • Harsco Rail adjusted EBITDA loss remains guided in the range of $19 million to $26 million
  • Midpoint of the above ranges gives a pro forma total adjusted EBITDA of ~$140 million for full-year 2026
  • Full-year 2026 expectation of modest positive free cash flow is also unchanged
• Q2 2026 guidance: Harsco Environmental performance is expected to be comparable to Q2 2025, while Harsco Rail EBITDA is anticipated to decrease due to lower volumes

• Persistent macroeconomic uncertainty remains, including geopolitical instability in the Middle East (where Harsco Environmental operates) and uncertain impacts of higher global energy prices on European and global business conditions
• Harsco Rail ETO fixed-price contracts continue to generate negative cash flow and create financial volatility; full de-risking of these contracts has not yet been completed
• Harsco Rail new equipment demand remains weak, and the 2026 order book is significantly behind historical full-year fill rates as of Q1
• Clean Earth results were negatively impacted by extreme weather in Q1, highlighting sensitivity of project and industrial volumes to short-term disruptive events

Q: Rob Brown (Lake Street Capital Markets) asked for context on Harsco Rail's 2026 unfilled order book: how does order filling typically progress, and what visibility does the current backlog provide? / A: Management confirmed the 2026 new equipment order book is running well behind historical levels, particularly for OEM equipment in North America. While management expects some order intake to pick up in the second half of 2026, the backlog remains below target for the full-year estimated revenue as of Q1 end.

Q: Brown also asked for details on Harsco Rail's aftermarket business, the size of the segment, and why it is a strategic focus. / A: Aftermarket currently makes up roughly 40% of Harsco Rail's total annual revenue, and it performed well in Q1 2026 with performance expected to hold steady for the rest of the year. Aftermarket is a key focus because it delivers approximately twice the margin of original equipment manufacturing, making it an ideal offset to weak new equipment demand.