Good afternoon. My name is Megan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Warrior First Quarter 2024 Financial Results Conference Call. [Operator Instructions] This call is being recorded and will be available for replay on the company's website. Before we begin, I have been asked to note that today's discussion may contain forward-looking statements, and actual results may differ materially from those discussed. For more information regarding forward-looking statements, please refer to the company's press releases and SEC filings. I have also been asked to note that the company has posted reconciliations of the non-GAAP financial measures discussed during this call in the tables accompanying the company's earnings press release located on the Investors section of the company's website at www. warriormetcoal.com. In addition to the earnings release, the company has posted a brief supplemental slide presentation to the Investors section of its website at www. warriormetcoal.com. Here today to discuss the company's results are Mr. Walt Scheller, Chief Executive Officer; and Mr. Dale Boyles, Chief Financial Officer. Mr. Scheller, you may begin your remarks.

Thanks, operator. Hello, everyone, and thank you for taking the time to join us today to discuss our first quarter 2021 results. After my remarks, Dale will review our results in additional detail, and you'll have the opportunity to ask questions. We delivered very strong results for the first quarter, driven by our operational performance. The volume is still making coal that we produce reach levels not seen since 2020. And -- we took advantage of the inventory levels we had built over the preceding quarters to generate over $104 million in cash from operations, which we primarily use to invest in our Blue Creek growth project and return additional cash to stockholders. We also made excellent progress on Blue Creek, meeting several key milestones as we advance the development of this world-class growth project that has the potential to transform our company. First, let me provide an overview of the steel and steelmaking coal markets during the first quarter from Warrior's perspective. The first quarter was predominantly marked by a strong correction in pricing that started in early March and quickly accelerated. The rapid change in market sentiment was driven by a combination of macro factors. On the demand side, we observed a sudden retreat of demand interest from China and India. On the supply side, several loaded vessels were resold by end users, increasing available supply in an environment that was already experiencing additional supply availability. The softness in India demand was largely attributed to the slowdown in projects associated with the upcoming national elections in April through early June. In China, lower demand was a result of continued weakness in the property and construction segments that China is struggling to improve despite numerous stimulus efforts. As we've continued to observe for several quarters, demand from our contracted…

Thanks, Walt. For the first quarter of 2024, the company recorded net income on a GAAP basis of $137 million or $2.62 per diluted share compared to net income of $182 million or $3.51 per diluted share in the same quarter of 2023. Non-GAAP adjusted net income for the first quarter, excluding the nonrecurring business interruption expenses, was $2.63 per diluted share. This compares to adjusted net income of $3.57 per diluted share in the same quarter of 2023. These decreases quarter-over-quarter were primarily driven by the 9% lower average net selling price, higher cash cost of sales and lower results from our gas business, partially offset by 9% higher sales volumes. We reported adjusted EBITDA of $200 million in the first quarter of 2024 compared to $259 million in the same quarter of last year. Our adjusted EBITDA margin was 40% in the first quarter of 2024 compared to 51% in the same quarter of last year. As I previously mentioned, these decreases quarter-over-quarter were primarily driven by the 9% lower average net selling price, higher cash cost of sales and lower results from our gas business, which were partially offset by 9% higher sales volumes. Total revenues were $504 million in the first quarter compared to $510 million in the first quarter of 2023. This overall decrease of $6 million was primarily due to the 9% decrease in average net selling prices, offset by the 9% increase in sales volume and lower demurrage and other charges. The merge and other charges were $3 million lower compared to 2023's first quarter. Emerge and other charges resulted in an average net selling price of $234 per short ton in the first quarter of 2024 compared to $257 per short ton in the same quarter of last year. Other revenues, mainly…

Thanks, Dale. Before we move on to Q&A, I'd like to make some final comments. We expect demand from the world's largest met coal import regions to remain softer throughout the second quarter. On one hand, India's steel demand is expected to be subdued until later in the summer as the country awaits the completion of its national election process and the impact of the monsoon season. On the other hand, China is harder to predict, but the absence of convincing improvements in the property and construction segments are leading us to remain cautious. We also expect global met coal supply to be strong during the second quarter as is normally the case. We expect disruptions caused by the Baltimore bridge collapse to be manageable by the industry and should be contained within the second quarter. For these reasons, we expect pricing to remain lower for the second quarter compared to the first quarter, potentially challenging some of our peers who are higher cost and marginal producers. Although we have good visibility in our contracted volumes, spot opportunities are expected to remain scarce and mostly skewed towards the Pacific Basin, where current pricing levels and freight costs are driving lower than desired average net selling prices. For these reasons, we will continue to be patient when possible and seek opportunities to maximize average net selling prices for Warrior, even if we need to temporarily manage higher-than-normal inventory levels. While we're well prepared to address a variety of market conditions, we are also extremely excited and laser-focused on the disciplined development of our world-class Blue Creek reserves. As mentioned earlier, we continue to make excellent progress in developing Blue Creek. We are on track for the first development tons from continuous minor units in the third quarter of 2024, with a long wall scheduled to start up in the second quarter of 2026. With that, we'd like to open the call for questions. Operator?

[Operator Instructions] Your first question comes from the line of Lucas Pipes with B. Riley Securities.

Well, Dale, for my first question, I wanted to touch a little bit on the near-term outlook. It sounded like by the sound of your kind of closing comments there, Walt, that in Q2, we should expect lower shipments, but your realizations to kind of continue that favorable trend from Q1. So I wondered if you could maybe expand on that a little bit.

I think that's accurate. I think that when we look at the second quarter and where demand is and what's going on globally, we expect prices to stay relatively stable. And our production profile, as we said, we look at the whole year and we look at sales and production for the second quarter. We just think it's -- first quarter was really strong, and we need to be a little cautious in the second quarter.

And in terms of sales, should we think of it being less than production.

No, I'm not saying it will be less than production. I just think that the first quarter was pretty strong. We had the 2 rollover vessels that went into the first quarter, then I got added in there. And we're just always kind of cautious as to where we'll be for the quarter.

But that 85% to 90% realization on the benchmark, that's the right way to think about it.

Yes.

And in terms of your kind of market outlook, you commented there's still some risks out there. And I just wondered if you could maybe speak to where things might be getting a little bit better, where they're still more challenged?

I just think, as I said, with India, I think India is a real bright spot, but I think we've got to let them get through the elections and through the monsoon season. What we're seeing in Europe is, again, contracted volumes are moving very well there in into South America. It's just spot opportunities are pretty thin in those areas. And then we're really just -- we don't have a whole lot of confidence in what will happen in China.

And then one last one around Blue Creek. So congrats on the progress to date. And you mentioned kind of all of the pieces are lined up for starting the longwall panel development later this year. And I wondered if you could remind us what production you expect through these development panels in 2024. And then I think you mentioned a number for 2025, but if you could remind me of that, I would appreciate it. And then if you could also explain the sales implication from those development tons, both this year and next year?

Sure. Well, we could mine a couple of hundred thousand tons this year. And that will just be from the CM units as they start to ramp up, we'll have to start on, and then shortly thereafter after we clear a little more room, we'll start a second. And after we clear a little more room, we'll start a third unit. So by the year-end, we should be running 3 continuous miner units and have about 200,000 tons clean equivalent on the ground. And we -- that coal will remain on the ground until we get the prep plant up and running, which will be in the middle of next year. And in the meantime, by then, next year, we're looking at probably a total of about 1 million tons produced off the CM sections. But we'll start to move that coal when the preparation plant comes online, which should be midyear. So that's when those -- we should start looking at moving that coal into the market and selling that coal in the back half of $25.

Well, I look forward to that and I really appreciate all the color and continued best of luck.

Your next question comes from the line of Nathan Martin with the Benchmark Company.

Congrats on the strong operational performance. And maybe just to follow up with Lucas' last question there. targeted plant start-up, I think you said second half of '25, then maybe you can move some of those tons. When do you expect to have your rail load-out and bars load out in place at that point? Or would you be looking to truck coal? Just any more details there would be great.

I think in the back half, we'll still be working on the -- I think we'll be running trucks over to a train load out at that point in the back half of the year next year, while we continue to complete the overland belt to the rail load out by barge, I'm not as certain by bars when we'll start moving some of those tons by barge. But I know we'll be able to -- our expectation is we'll be moving to the rail load out as soon as the preparation plan starts up.

And then maybe just kind of a modeling question. Sorry if I missed it. I know you guys mentioned the capture rate of 84% in your prepared remarks for the first quarter. Could you kind of walk us through how you get to that 84% just so we can be clear.

Yes, Nate, this is Dale. It's really just our average net selling price divided by the average of the index for the quarter. Straight, just try to easy way to model it. [indiscernible] Yes, the calendar average.

I apologize for cutting off. What were the numbers again, sorry?

So our net average selling price of $2.34, okay, in short tons divided by 2.79, which was the average on a short-term basis for the first quarter.

And then maybe just an update on logistics, how are kind of the upgrades of the pore progressing? I think you guys said they did pretty well this quarter. I know you said rail was exceptional. But any seeing any effects from the Panama Canal or the Red Sea.

Well, as far as what's going on in mobile, things are going very well. The improvements they've made have made a huge difference in the efficiency down at the Portomobile. For our customers, we're still seeing with the issues in the Red Sea is longer transit times for that coal to get to customers. And the same thing is with the Panama Canal. So we're seeing longer transit times, which can then also impact transportation costs. But that's really been the impact, and that's thing going on for a couple of quarters now.

And maybe just one more. Walt, you mentioned in your prepared remarks on the labor front regarding hiring, what kind of progress have you guys made at the existing lines? I think you said 250 total, maybe 100 out of Blue Creek? And how has the initial reception been to Blue Creek as you start your hiring ramp up there?

Well, I'll tell you, we are -- naturally, we have a schedule and a budget on what we expect, and we are right on budget for where we expected to be year-to-date. And what we're seeing in terms of people looking toward Blue Creek because we're seeing a strong reception of those of applicants for those roles. So we're pretty happy with where things are right now, and we think we're right on schedule.

[Operator Instructions] Your next question comes from Katja Jancic with BMO Capital Markets.

Regarding the Blue Creek incremental volume, do you expect to contract that incremental volume next year once you start selling in the second half? Or is that going to be more spot exposed?

I think what we'll be doing there is going out and canvassing customers to see who's interested in trying the product. And so I think it will be contracted. It's not going to go -- I don't think it will go out into the spot market. It will be people getting test volumes and smaller volumes, so they can see what the products like.

And maybe just as a follow-up. I'm assuming it's going to be tracking more the East Coast high-vol A index, is that fair?

Yes.

Your next question comes from the line of Lucas Pipes with B. Riley Securities.

The first one, just a reminder, I think we discussed this 3 months ago, but looking for a quick update. In terms of kind of the split between CFR and FOB business by my #7, mine #4. What's the rough breakdown today?

I think you can look at -- when we talk about where the coal is flowing to the all coal flowing into Europe, which was 44% for the quarter, is all FOB. Everything going into South America, which was, what, 17%, 18%. That's all FOB and probably a much smaller percentage going into Asia as FOB. So the remainder -- everything else going into Asia would be CFR [indiscernible].

And so for the rest of the year, we can probably just hold this kind of roughly constant.

Our expectations are we get back to a spot cargoes of 25%, where we were much higher than that in the first quarter. So again, our expectation right now, at least, is that we'll have a little higher volumes going into Europe and South America. I mean that could change. But I think right now, given the information we've shared with you our expectation is those numbers into Europe and South America increase on a percentage basis a little bit.

And is that for the remainder of the year or for Q2 specifically?

That's for the remainder of the year. We said we expected spot volume to be 25% for the year. And I think you can expect the spot volumes will almost completely be going into Asia.

And then I noticed recently on the results of the proxy vote that a proposal related to a poison pill bylaw provision was adopted. And I wondered if you could maybe share a little bit how this came about and if there was any specific catalysts that drove that?

You know what? I think just looking at that provision, I think a lot of shareholders just think that's kind of common place. The biggest thing that we didn't think was is commonplace in that provision or request was the request to be put into the bylaws. But we've gone out every time we've done anything we've gone out and asked for shareholder approval anyway. So it wasn't something that we really thought was necessary because we've been doing it in the past anyway.

At this time, there are no further questions. I will now turn the call back over to Mr. Scheller for any comments.

That concludes our call this afternoon. Thank you again for joining us today, and we appreciate your interest in Warrior.

Thank you. And that concludes today's conference. Thank you all for participating. You may now disconnect.