Good afternoon. My name is Wyatt, and I'll be your conference call operator today. At this time, I would like to welcome everyone to the Warrior Met Coal, Inc. Fourth Quarter 2024 Financial Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded and will be available for replay on the company's website. I would now like to turn the conference over to D'Andre Wright, Vice President of External Affairs. Go ahead.

Good afternoon. And welcome everyone to Warrior Met Coal, Inc.'s fourth quarter 2024 earnings conference call. Before we begin, let me remind you that certain statements made during this call, including statements relating to our expected future business and financial performance, may be considered forward-looking statements according to the Private Securities Litigation Reform Act. Forward-looking statements by their nature address matters that are to different degrees uncertain. These uncertainties, which are described in more detail in the company's annual and quarterly reports filed with the SEC, may cause our actual future results to be materially different from those expected in our forward-looking statements. We do not undertake to update our forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required by law. For more information regarding forward-looking statements, please refer to the company's press releases and SEC filings. We will also be discussing certain non-GAAP financial measures, which are defined and reconciled to comparable GAAP financial measures in our fourth quarter press release furnished to the SEC on Form 8-K, which is also posted on our website. Additionally, we will be filing our Form 10-K for the year ending December 31, 2024, with the SEC this afternoon. You can find additional information regarding the company on our website at www.warriormetcoal.com, which also includes a fourth quarter supplemental slide deck that was posted this afternoon. Today on the call with me are Mr. Walter Scheller, Chief Executive Officer, and Mr. Dale Boyles, Chief Financial Officer. After our formal remarks, we will be happy to answer any questions. With that, I will now turn the call over to Walter Scheller.

Thanks, D'Andre. Hello, everyone, and thank you for taking the time to join us today to discuss our fourth quarter 2024 results. After my remarks, Dale will review our results in additional detail, then you'll have the opportunity to ask questions. Looking at the fourth quarter, we were pleased with how the company performed despite the current market fundamental headwinds. Our strong operational base continued to differentiate Warrior Met Coal, Inc., driving sales volumes 23% higher and production volumes 7% higher than last year's fourth quarter. When high-quality steelmaking coal prices recover from this past quarter, they reached the lowest level since 2021. Warrior Met Coal, Inc. is well-positioned to capitalize on improved market dynamics. Looking back over the last twelve months, the company had a very successful 2024 as we met or exceeded all guidance targets, achieved sales and production volumes not seen since 2019, recorded the highest annual production from Mine 4, and produced the first tons from our world-class Blue Creek growth project. We generated cash from operations of over $370 million, which was used to both further the development of Blue Creek and return over $43 million of cash to stockholders via dividends. I'd like to thank all our employees for the successes we achieved in 2024 and congratulate them on delivering strong safety results. The safety of our employees is and remains our number one priority. The current state of steelmaking coal markets provides the backdrop for our recent performance, where low prices continued from the third quarter into the fourth quarter. In fact, the markets became weaker over the entire year, reaching their lowest points in the fourth quarter. The primary factors impacting our markets continue to be driven by a confluence of three factors: excess Chinese steel exports into our customers' markets, weak…

Thanks, Walt. We continue to experience weak market fundamentals, with some of the lowest steelmaking coal prices since 2021. Our underlying operations increased production and sales volumes in the fourth quarter and for the full year of 2024. We capitalized on this volume growth and used the proceeds to invest in our business for the long term and to provide additional cash returns to our stockholders, as Walt noted earlier. We delivered another year of strong financial performance where we met or exceeded all of our guidance targets. We made strong progress on the development of our Blue Creek project and remain on schedule and on budget for completion as originally expected. Excluding our investment in Blue Creek CapEx and mine development, our free cash flow was $28 million in the fourth quarter and $261 million for the year 2024, demonstrating the strength of our business model. For the fourth quarter of 2024, Warrior Met Coal, Inc. recorded net income on a GAAP basis of $1.1 million or $0.02 per diluted share compared to net income of $129 million or $2.47 per diluted share in the same quarter of 2023. Non-GAAP adjusted net income for the fourth quarter, excluding the non-recurring business interruption expenses and non-cash valuation adjustments, was $0.15 per diluted share. This compares to adjusted net income of $2.49 per diluted share in the same quarter of 2023. These decreases in quarter-over-quarter comparison were primarily driven by 34% lower average net selling prices, partially offset by 23% higher sales volume. We reported adjusted EBITDA of $53 million in the fourth quarter of 2024, compared to $164 million in the same quarter of last year. Our adjusted EBITDA margin was 18% in the fourth quarter of 2024, compared to 45% in the same quarter of last year. On a…

Thanks, Dale. Given the macroeconomic factors, we have tempered our expectations of any meaningful improvement in our markets and believe the current conditions may persist for a prolonged duration. Barring a meaningful change in the Chinese steel exports or the supply of global seaborne steelmaking coals, the challenging steel and raw material market conditions in China are expected to extend into the seaborne market, which we expect to weigh on steelmaking coal prices. On the supply side, we expect Australian production to remain strong absent some major disruption event. Without a change in the market fundamentals, we would expect supply adjustments to be the logical response, but history tells us that these decisions are far from being easy and are often delayed as long as possible, extending the market dynamics for longer periods of time. In addition, any new tariffs or other trade measures that may be implemented by the United States or retaliatory tariffs and trade measures by other countries, such as those recently announced by China, may or may not negatively impact our financial results. This impact could result from reduced economic growth, changes in purchasing behaviors by our customers, material changes in the pricing of steelmaking coals, or other factors. We believe demand for our products will continue to be strong in these weak market conditions due to brand recognition by our customers for our high-quality products. We are prepared to meet these market challenges for an extended period. We have built our company to thrive in most market price environments with strong customer contractual relationships, high-quality products that realize premium prices, a low and variable cost structure, and a strong balance sheet. In addition, we have the remaining capital needed to fund the completion of the Blue Creek project with cash on our balance sheet. We…

Thank you. At this time, I would like to remind everyone. And your first question comes from the line of Nick Gyles with B. Riley.

Thank you, operator, and good afternoon, everyone. Walter Scheller, Dale Boyles, I want to congratulate you on the continued strong production, particularly at Mine 4. Sales guidance appears robust, and so I was wondering if you could break out the contribution from Blue Creek versus Mine 4 and Mine 7. And then as we think about the prep plant coming online in the second half, how should we think about the cadence of those sales and your level of confidence in achieving realizations in line with your typical guidance? Thanks a lot.

Thank you. What we're projecting for production this year at Blue Creek, this is Walter Scheller, is about a million tons. And with that prep plant not coming on until the second quarter, we will then begin moving that coal to market at that point. I would expect to start selling coal in the third quarter, maybe late second quarter, but probably more like the third quarter after that preparation plant comes online and be selling throughout the remainder of the year. When we look at how it will compare to Mine 4, Mine 4 will mine and sell probably over 2 million tons, and we'll probably have a million or so out of Blue Creek this year.

Well, that's very helpful. My second question was just about your meaningful reductions in cash cost guidance, $8 per ton at the midpoint. And I was curious how much you would attribute to greater fixed cost absorption versus your pricing and sales-sensitive cost expectations and any cost reductions as well?

Hey, Nick. This is Dale. Yes. Most of that, the lowering of our guidance, is going to be because of the lower net coal prices. So it's going to have its effect on transportation royalties the most. So that's what would be driving down that cost guidance. You know, as our outlook for this year, we don't really expect these market conditions to change very much. As far as catalysts, it's kind of hard to identify what that might be. So we're preparing ourselves if this would last throughout this year. So we've baked in a low met coal price assumption and those cost assumptions in that guidance.

Dale, I appreciate that. And one more if I could. You've spoken in the past about carefully monitoring freight differentials, and so how should we think about your sales by geography could shift, particularly any tons that may have otherwise gone to China?

Well, I think those tons that would have gone into China are still most likely to flow into the Asian market, so they would still be going CFR. So I don't think there would be a big differential in terms of cost of transportation for those tons.

Understood. I appreciate all the color and continue best of luck. Thank you.

Thanks, Nick. And the next question will come from Katja Jancic with BMO Capital Markets.

Hi. Thank you for taking my questions. Maybe just quickly back on the sales shipments. So given the currently weak environment and the fact that the Blue Creek volume is going to start shipping more in the second half, is it fair to say that shipments might be more second-half tilted?

Yes. That's right. So if you look at our guidance and we've said that million tons for Blue Creek, well, the majority of that's going to come in the second half.

And then maybe Dale, can you talk a bit about price realizations, especially with High Vol A price basically coming from Blue Creek, is the 85% to 90% still stands?

Yeah. It does for now with that smaller volume as we get to the higher volumes in a couple of years. That may change. But right now, based on history, the relativity of the level HCC to the PLV, if you look back at the ten-year historical average through the end of 2024, that's 95%. However, in the year 2024, that relativity was 79%. So this year you've had a widening of that relativity on that index, but over time, you know, it's much stronger. So we could see more in the lower end of that range, I think, this year as we move forward.

Just one last one if I may. Of the 38% that was shipped into Asia, can you let us know how much of that was to China?

We don't give information by country for obvious sensitive competitive purposes. Just to say that it's not enough to really make a difference. I mean, if we need to orient that volume, we could. We're not over-committed to China.

Okay. Thank you.

And the next question will come from Nathan Martin with The Benchmark Company. Go ahead.

Thanks, operator. Good afternoon, Walter Scheller, Dale Boyles. Maybe just coming back real quick to the cash cost of sales guidance, the $117 to $127 a ton. Dale, you mentioned you're kind of assuming a low met price in that range. Could you kind of provide us what your price assumptions are there?

Yeah. We're assuming a PLD at $200 for the year. Better than $200k. Gonna over-commit to a higher significantly higher price throughout the end of the year.

Okay. Perfect. That's helpful. Also wanted to ask on the inventory front, obviously, growing here, you know, probably the next two quarters before the prep plant starts up at Blue Creek. Is there any kind of level you guys are targeting for year-end 2025 at this point?

We would like to get inventory levels back to a normalized range, and I would say that that's probably a couple hundred thousand. It'll come down but down to a couple hundred thousand tons per mine. You have to remember until later in the year, we won't be able to move high percentages of Blue Creek as we continue to finish up different pieces of the project. But we definitely expect it to come down considerably in the third and fourth quarter.

Okay. Well, thanks for that. And then speaking of moving those tons, how are things coming along with the Overland belt structure there for Blue Creek?

Everything's going very well, on time, on budget. We're very pleased with the progress we're making across the project.

And everything going well through Rail Partners as well?

Yes. Yes. They've been to see a few of the places where they've been investing money to make sure that we're ready to go. And even if when the belt's not ready yet and we're trucking some coal from the preparation plant over the rail loadout, we'll begin moving coal then. So they'll have several months where they'll get to figure out if there's any weaknesses in their system that need to be firmed up. So I think we have a really good plan to have us set up by the time that longwall starts. We should be in great shape. The port, the rail, and the coal mine.

Okay. Great to hear. And then maybe just one more. I noticed in the release today under the capital allocation section, some additional commentary specifically optimizing your capital structure while allowing flexibility to pursue very selective strategic growth opportunities. I think you guys have had that language in your queue, but was just wondering what was behind the decision to kind of bring that front and center to the press release.

Actually, that's been in our press release for, like, two, three, four years. So it's just to caveat, look, we're not committed to a specific method there or quarter or timing. So that's pretty much been there for a long time. Just, you know, all in conferencing.

Okay. Great, Dale. Appreciate it, guys. Best of luck in 2025.

Thank you. And the next question comes from again Nick Gyles with B. Riley.

Nick, your line may be muted.

Sorry about that. Thank you so much for taking my follow-up. In your key factors that may affect your outlook, you do note a new labor contract, and I was wondering if you could remind us of any timing and magnitude of any renewals or could this be related to Blue Creek?

No. That's related to the fact we still have not reached a new contract with United Mine Workers. We continue to negotiate and are not sure what the result of that would look like if we did complete it.

Fair enough. Thanks for the color. And then I just wanted to ask one more. Maybe as we look down the road when Blue Creek begins to reach steady-state operations, how should we think about a minimum cash balance in the context of potential increases in shareholder returns?

Nick. Yeah. We are working on that as we get closer to having Blue Creek online. Right? We're going to be, you know, significantly larger in our volumes, larger companies, so we need to think about what that looks like going forward. We have a company conclusion yet, but, you know, it's going to be significantly more than we've had in the past. Just because risks are changing and, you know, as we've always said, being low-levered was very important to being successful in this industry. So carrying a little more cash is probably the way to go in the future. But we'll have an update on that as we get real close to Blue Creek coming online.

Got it. I appreciate that, Dale, and keep up the good work.

At this time, there are no further questions. I'll now turn the call over to Mr. Scheller for any comments. Please go ahead.

That concludes our call this afternoon. Thank you again for joining us today. We appreciate your interest in Warrior Met Coal, Inc.

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