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Enviri Corp (NVRI) (Q1 2024) Earnings Call Transcript Highlights: A Strong Start with Robust ...

GuruFocus Research
·4-min read

  • Revenue: Increased to $600 million, up 7% from the previous year.

  • Adjusted EBITDA: Reached $78 million, up 19% from the previous year.

  • Net Income: Adjusted loss per share was $0.03 for the quarter.

  • Free Cash Flow: Negative $17 million, compared to positive $16 million in the prior year quarter.

  • Consolidated EBITDA: Increased about 20% versus Q1 of last year, margin improved by nearly 150 basis points to 13%.

  • Cash Flow Improvement: Expected improvement by $40 million to $50 million across segments.

  • Leverage: Expected to approach 3.85x by year-end, with a goal to reduce further to 3.75x.

  • Harsco Environmental (HE) Segment: Revenue up 9% to $299 million, adjusted EBITDA reached $49 million.

  • Clean Earth (CE) Segment: Revenue up 2% to $226 million, adjusted EBITDA up 25% to $34 million.

  • Rail Business: Revenue totaled $75 million, adjusted EBITDA was $2 million.

  • 2024 Outlook: Adjusted EBITDA expected to be within $325 million to $342 million, reflecting a 9% increase at the midpoint versus 2023.

Release Date: May 02, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Enviri Corp (NYSE:NVRI) reported a strong start to 2024 with each of its three segments performing above expectations in terms of cash flow and adjusted EBITDA.

  • Consolidated EBITDA increased by approximately 20% compared to Q1 of the previous year, with EBITDA margin improving nearly 150 basis points to 13%.

  • Enviri Corp (NYSE:NVRI) updated its full-year guidance to reflect about a 5% improvement in the underlying performance of the Clean Earth and Harsco Environmental segments.

  • The company's cash earnings are at the highest level in the last decade, indicating strong financial performance.

  • Enviri Corp (NYSE:NVRI) is actively working on reducing leverage, with a target to generate $50 million to $75 million of cash from asset disposals this year.

Negative Points

  • The degree of financial leverage is higher than desired in the current economic and interest rate environment, posing a risk.

  • Currency headwinds impacted the performance and are expected to pose more of a challenge over the remainder of the year.

  • Free cash flow for the quarter was negative $17 million compared to a positive $16 million in the prior year quarter.

  • The divestiture process for Harsco Rail has been paused due to risks associated with large European contracts, delaying potential strategic and financial benefits.

  • The company's Rail business includes loss-making engineered-to-order contracts, which have required forward loss charges and continue to pose financial risks.

Q & A Highlights

Q: Can you discuss the volume trends in Clean Earth and how they might evolve over the next 12 to 18 months? A: (F. Nicholas Grasberger - Chairman, President & CEO) The volume outlook for Clean Earth varies by end market, with no significant volume growth expected this year due to various challenges. The focus will be on price/cost efficiency and mix improvements, particularly in hazardous waste and soil/dredge businesses. The manufacturing/industrial and health care segments might perform slightly better in volume compared to retail.

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Q: Regarding the Rail business, how much longer will the ETO contracts last, and when can we expect them to conclude? A: (F. Nicholas Grasberger - Chairman, President & CEO) Most ETO contracts will be delivered this year with cash received later. Two major contracts in Europe will continue for a couple more years. Negotiations with the German customer may lead to a price increase to offset previous charges, and the company anticipates reduced risks associated with these contracts soon.

Q: What are the long-term prospects for the Rail business once the ETO contracts are resolved? A: (F. Nicholas Grasberger - Chairman, President & CEO) Excluding ETO contracts, the base Rail business could generate $35 million to $40 million in EBITDA. The company expects these contracts to conclude in the next few years, returning to pre-COVID profitability levels. The upcoming Investor Day will provide a more detailed long-term outlook.

Q: Can you provide an update on the internal deleveraging efforts, especially with the Rail sale on pause? A: (F. Nicholas Grasberger - Chairman, President & CEO) The focus has increased on disposing of smaller businesses and assets, aiming to generate $50 million to $75 million in cash this year. This includes the sale of planes and a small business within the Harsco Environmental segment.

Q: How did the January weather impact Clean Earth's performance in the quarter? A: (F. Nicholas Grasberger - Chairman, President & CEO) The weather slightly affected the soil and dredge business as well as hazardous materials, but it wasn't significantly material to the overall better-than-expected performance for the quarter.

Q: What is the current outlook for global steel production and its impact on Harsco Environmental? A: (F. Nicholas Grasberger - Chairman, President & CEO) The outlook for global steel production remains unchanged from previous guidance, with expected volume growth of 6% to 7% in the mill services business, driven by market conditions and new contracts.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.