NVRI

• Post-Spin Strategic Progress

  • This is the first earnings call following the June 2026 completion of the Clean Earth sale and Enviri's launch as an independent standalone public company. Management confirms it has wasted no time advancing core strategic priorities to strengthen the company's foundation for future earnings, margin, and cash flow growth.
  • The company made the strategic decision to exit the two high-risk legacy Deutsche Bahn and Network Rail ETO (equipment manufacturing) contracts, which is the top priority de-risking action for the business. Manufacturing and development activities for these contracts have ceased, and transition plans are underway.
  • Only the SBB legacy ETO contract remains, which is progressing on plan: the first group of vehicles has been delivered, second set assembly is underway, regulatory approval is expected in early 2027, manufacturing will conclude in H2 2027, and positive cash flow is expected to start in early 2027.

• ETO Contract Transition Details

  • For the Deutsche Bahn contract, Enviri has signed an agreement with primary subcontractor GBM to sell relevant assets and transfer supplier obligations, with DB support. GBM will complete the vehicles and will compensate Enviri for inventory and intellectual property in upcoming quarters.
  • For the Network Rail contract, Enviri has proposed upgrading Network Rail's existing fleet of stone blowers (which Enviri already maintains under a separate services agreement) as a transition plan, and discussions are ongoing to reach a finalized agreement.
  • The two exited ETO projects consumed $40 million in cash in 2025 and were expected to use a similar amount in 2026; exiting the contracts greatly improves the company's go-forward cash flow profile and strategic flexibility. Sufficient cash from Clean Earth sale proceeds was already set aside to cover all exit obligations with no new leverage or shareholder burden.

• Comprehensive Self-Help and Cost Improvement Initiatives

  • Management launched a company-wide operational review to improve efficiency, margins, and cash flow. Restructuring actions have been implemented across both segments and corporate, including closure of the Ludington, Michigan manufacturing operation, and optimization at European and South Carolina locations. Approximately 300 positions are being eliminated, and full run-rate annual margin uplift from these actions is expected to exceed $15 million.
  • Harsco Rail: Supply chain and manufacturing optimization are improving productivity and working capital efficiency. A refined commercial strategy for aftermarket services is driving strong customer engagement and sustainable profit growth. Engineering and administrative overhead has been right-sized. Post-exit, Harsco Rail will focus exclusively on its core maintenance business, where it has competitive advantages, predictable earnings, and lower execution risk.
  • Harsco Environmental: Structural cost improvements are being implemented across maintenance, consumables, and indirect spending, alongside service delivery and contract performance optimization. Site-level and central function consolidation has been completed across the global footprint to strengthen cost competitiveness.

• Full-year 2026 guidance for both Harsco Environmental and Harsco Rail is maintained unchanged, despite first half 2026 performance coming in better than anticipated, due to ongoing macro and geopolitical uncertainty across end markets.
  • Harsco Environmental adjusted EBITDA guidance range remains $170 to $180 million.
  • Harsco Rail adjusted EBITDA loss range remains $19 to $26 million.
• At the midpoint of guidance, Harsco Environmental Q3 2026 performance is expected to be modestly above Q3 2025, while Harsco Rail adjusted EBITDA is expected to decrease due to lower original equipment volumes.
• Q3 2026 gross corporate costs are expected to be ~$9 million, flat compared to Q2 2026.
• Adjusted free cash flow for Q3 2026 is expected to be modestly negative. Management expects rail free cash flow to approach break even by Q4 2026, and Enviri to deliver improved earnings and cash flow performance starting in 2027.

This summary excludes Clean Earth, which was sold in June 2026.

• Harsco Environmental (HE): Total segment revenues of $266 million, a 3% increase year-over-year (YoY). Adjusted EBITDA was $46 million, a 15% YoY increase. Revenue contribution makes up ~78% of total adjusted segment revenue (excluding the negative ETO contract adjustment).
• Harsco Rail (Roehl): Adjusted total segment revenues of $58 million, flat quarter-over-quarter. Adjusted EBITDA recorded a $5 million loss in Q2 2026. Aftermarket revenue is growing double digits YoY, and now makes up more than 40% of total rail revenue (up from the historical 40% baseline due to low original equipment demand). Revenue contribution makes up ~22% of total adjusted segment revenue.
• Corporate: Approximately $8 million in annual expenses previously allocated to Clean Earth are now reflected in the corporate segment. Gross corporate costs for Q3 2026 are expected to be ~$9 million, flat compared to Q2 2026.
• Consolidated: Total reported Q2 2026 revenue was $187 million, which includes a $136 million negative revenue adjustment from exiting the two rail ETO contracts. Adjusted EBITDA for the consolidated company was $34 million, a 22% increase YoY. Adjusted free cash flow was negative $9 million, an improvement YoY and quarter-over-quarter. Net debt was approximately $290 million with a net leverage ratio of 1.9x.

• The two exited legacy Deutsche Bahn and Network Rail ETO contracts carried significant technical and financial risk, which has now been largely removed from the company's go-forward profile. Finalization of the Network Rail transition remains open; failure to reach an amicable agreement could result in conflict or litigation, which would lead to costs reaching the full $190 million accrued maximum liability.
• Harsco Environmental is facing current volume headwinds in Northern Europe and China, and additional Q3 volume pressure in the Middle East due to the ongoing regional conflict, which creates a near-term headwind for performance.
• While the recently ratified European steel tariff and quota changes are expected to be a modest positive for HE starting in 2027, there may be offsetting impacts across the company's global customer portfolio.
• Original equipment demand for Harsco Rail remains at multi-decade lows, creating ongoing pressure on near-term earnings until the market cycle improves.

Q: Analyst Larry Solo asks for clarification on the status of the ETO contract exit negotiations, the $190 million accrued liability, and cash set aside for these exits. He also confirms volume assumptions for HE and asks about rail cash flow timing. / A: Discussions with Network Rail are ongoing, and the company is working closely with the customer to find an amicable transition pathway, with updates expected later in 2026. The total accrued liability for both exits is $190 million, and the company holds ~$300 million in total cash, all earmarked for these obligations, so no new leverage is needed. Management confirmed HE guidance does not assume any material market volume uplift, and accounts for current Middle East volume headwinds. Rail is expected to approach break even free cash flow by Q4 2026, with positive standalone cash flow in 2027.

Q: Analyst Rob Brown asks for Enviri's Middle East business exposure and clarification on whether the $190 million accrued liability for ETO exits is the maximum expected exposure, plus the new revenue mix for post-exit Harsco Rail. / A: Enviri operates multiple sites across Oman, Abu Dhabi, Bahrain, and Egypt; no sites have shut down and no employees have been harmed, but customer production is facing material headwinds from supply chain disruptions and softening demand. The $190 million is the full accrued exit liability, and the company will no longer make periodic accounting adjustments for these contracts, putting all ETO-related volatility in the rearview mirror to de-risk the business. Historically, aftermarket made up 40% of rail revenue; with low original equipment demand and the exit of ETO contracts, this share has grown, and aftermarket will be a core focus going forward.

Q: Analyst Devin Dodge asks what could lead to exit costs being higher or lower than the $190 million estimate, the payment terms for the GBM agreement for Deutsche Bahn, and how quickly ETO-related overhead will be cut. / A: Costs could be lower than accrued if the current transition proposals for Network Rail are finalized as planned. Costs could reach the full $190 million maximum if negotiations fail and lead to conflict/litigation, though management expects a mutually acceptable solution. No additional capital will be provided to GBM; all cash flow will flow to Enviri as GBM hits manufacturing and regulatory approval milestones, with all payments expected within the next six months. Overhead reductions have already started, reflected in Q2 results, but some overlap between support for the exited DB contract and the remaining SBB contract will limit the amount of cost cuts in the near term.