Good afternoon. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the Warrior Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] This call today is being recorded and will be available for replay once the call is over on the company's website. I would now like to turn the call over to Brian Chopin, Chief Accounting Officer and Controller. Please go ahead, sir.

Good afternoon, and welcome, everyone, to Warrior's Fourth Quarter and Full Year 2025 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-ended December 31, 2025, 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. Walt 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 Walt.

Thanks, Brian. Hello, everyone, and thank you for taking the time to join us today to discuss our fourth quarter and full year 2025 results. I'll start by providing an overview of the quarter before Dale reviews our results in additional detail. 2025 was a transformative year for Warrior as Blue Creek began reshaping our production profile, cost structure and long-term earnings potential. This performance was exemplified by our fourth quarter operational and financial results, which exceeded our expectations. As we previously communicated, the longwall operations at Blue Creek began production during the fourth quarter, 8 months ahead of schedule, on budget and funded by cash flows from operations. In continuing our trend of operational excellence throughout the entire Blue Creek project, the ramp-up of the Blue Creek longwall was remarkably smooth, especially for a project of this scale and delivered a strong operating performance during the fourth quarter. We achieved an annualized run rate of production during the quarter that well supports our increased volume guidance for 2026. I'll discuss our 2026 guidance later in my comments. Our strong performance in the fourth quarter, including a record high quarterly sales volume wrapped up a remarkably successful year despite weak market conditions for steelmaking coal. We achieved double-digit volume growth in both sales and production volumes for the full year 2025, which were also record high levels of output for the company. This performance continued to reduce our first quartile cash costs, leveraging the inherently lower cost structure of the Blue Creek mine. In addition to the Blue Creek ramp-up, both Mine 7 and Mine 4 continued their high standards of strong performance, which is particularly important to the overall success of the company. Mine 4 set a new record high output for both sales and production volume. Total sales…

Thanks, Walt. Our fourth quarter results continued the sequential improvement quarter after quarter throughout 2025. As Walt discussed earlier, the steelmaking coal market continue to be pressured in the fourth quarter by the same factors that we have discussed over the last 2 years. Despite these market conditions, we continue to outperform expectations for 2025 as we met or exceeded our full year 2025 guidance targets on the back of a strong fourth quarter, both operationally and financially. Let me first highlight our fourth quarter financial results compared to the third quarter of 2025. Our fourth quarter adjusted EBITDA of $93 million was 31% higher than the third quarter of 2025, primarily due to the following factors. First, our sales volumes were 22% higher in the fourth quarter, including an increase of tons sold from Blue Creek. Second, our average net selling price was $6 per ton lower in the fourth quarter, primarily due to higher mix of High-Vol A volumes sold and that volume was sold into the Pacific Basin on a CFR basis at elevated freight rates. In addition, demurrage was temporarily higher in the fourth quarter, as Walt noted earlier. This result was offset by the increase in the average price indices quarter-over-quarter. Third, cash costs per ton were $7 lower in the fourth quarter and were primarily attributed to Blue Creek's inherently low cost structure, which increased our cash margin per ton. And finally, operating cash flows of $76 million were $29 million lower than the third quarter of 2025. This result is attributed to the increase in working capital primarily for accounts receivable and inventory as we ramped up the Blue Creek longwall in the fourth quarter. Our spending for capital expenditures and mine development were a combined $20 million lower in the fourth quarter…

Thanks, Dale. Warrior is exceptionally well positioned to deliver higher free cash flow and long-term value creation. We expect 2026 sales volumes to be more than 30% higher than 2025 and production volumes to be more than 20% higher than 2025, driven by the contribution of the new Blue Creek mine over the entire year. We expect to reduce our coal inventory levels to just below 1 million tons, which has been reflected in our sales volume guidance. In addition, we've included approximately 4.5 million tons of production from our Blue Creek mine, which could potentially be higher if we continue to be successful with the trial shipments and engage in more long-term contracts with customers. Currently, we have 90% of our 2026 midpoint sales volume under contract, including 85% of the Blue Creek volume. As we look at the current steelmaking coal market conditions, pricing levels remain notably strong and well above our original expectations. We believe this elevated pricing environment is primarily due to tightness in the premium quality segment as a result of recent supply constraints stemming from Australian weather disruptions and mine production-related challenges in Australia. While it's difficult to predict how quickly supply chains will normalize, we anticipate that prices will remain supported through most of the first quarter. However, we believe these disruptions are temporary and unless global steel fundamentals significantly improve, PLV prices should retreat and continue to be impacted by the same market factors that we've seen over the last 2 years. As a result of the recent increase in PLV price, the East Coast High-Vol A price has become disconnected from the Pacific Basin indices and may weigh down overall gross price realization due to the abundant supply of that quality of coal. While we have loss of cautious optimism, we run our company to prepare for the downside risk of weak steelmaking coal markets and hope we're conservative on our price assumptions as Dale just noted in his comments. In conclusion, 2025 marked a transformational year for Warrior. The early start-up of Blue Creek and the strategic expansion of our reserve base has strengthened the foundation of our long-term growth strategy and significantly enhanced our ability to meet sustained global demand for premium steelmaking coal. With Blue Creek now contributing meaningfully to our scale and cost structure, we entered 2026 from a position of exceptional strength, supported by expected record volumes, a stronger first quartile cost platform, disciplined capital allocation and a clear pathway to higher free cash flow generation. Our world-class assets, operational excellence and commitment to long-term value creation positions Warrior to deliver stronger financial results and increased stockholder returns as we move forward. We appreciate your continued support and look forward to updating you on our progress throughout the year. With that, we'd like to open the call for questions. Operator?

[Operator Instructions] And your first question today comes from the line of Nick Giles with B. Riley.

Congrats on the continued progress. You've come out with some really robust guidance here in 2026. And costs are being guided to a range of $95 to $110, fairly wide. But just my first question was what's the PLV price assumption you're using? And then given the costs in the fourth quarter came in below the low end of this range, I mean, what would prevent that level of cost being repeated in the first half year?

Thanks, Nick. Good question. The PLV assumption there is a range of $185 to $215. So it's a little wider, just thinking about the potential increases related to transportation and royalties. With the elevated pricing here early in the year, uncertain as to how long that will continue throughout '26, but we do expect the PLV prices to come back down. On the cost side, good question there. Strong cost performance from the existing mines in Blue Creek. What's going to keep it that low would be prices staying this low, right? Because if we have elevated pricing, which we will have in the first quarter it appears, then obviously, our transportation royalty costs go up. So the cash cost of production should be fairly steady, but transportation and royalties would be higher.

Got it. No, I appreciate that detail, Dale. Just to confirm, you said $185 to $215, that's on a short-term basis, correct?

Correct.

Okay. Great. Second one was, I think you alluded to some of this in your prepared remarks, but how should we be thinking about working capital over the course of 2026? Is it fair to assume you'll build kind of early in the year here? And then same thing on the tax side. I think you had a tax benefit in 2025, but what should we be penciling in for cash taxes in 2026?

On the working capital, it's definitely, the ramp-up of accounts receivable and inventory because we'll be selling more of the Blue Creek tons this year. So expect that. But as we said in our prepared remarks, too, we're going to try to take our overall inventories down 0.5 million tons. That's probably going to come more evenly over the year. So the first half -- the first quarter will weigh heavily on working capital. And we should get a little relief in the second quarter, definitely in the second half of the year. From a tax standpoint, that really depends on pricing. And you know that the 45x credit kicks in, in 2026. And we've said that's about a $40 million benefit to Warrior. So with these price assumptions, I would say we might not be a cash taxpayer in '26. If prices stay at a higher level, we will be, but just not a large amount, I don't think.

Got it. Really helpful. One last one, if I could. You've been really successful in adding some federal leases here in the recent months. I think you made -- there was one more tranche since we last spoke. And so I was just wondering if you could remind us what those payments look like? I think they're spread out over a number of years.

Yes, that's right. Total, it's 4 years, and they're about $9 million a year. So it's -- there's the 4 payments left.

And that would be reflected in the guide or outside the scope of the guidance?

That's all in there.

Got it. Okay. Well, guys, I really appreciate all the detail. I'll turn it over for now, but continued best of luck.

And the next question is from George Eadie with UBS.

Can I just go back to guidance again? I mean you came in 600,000 tons above original production or sales for '25 and $20 a ton above the original midpoint on costs. These cash cost numbers, even on my estimates and putting in that PLV range, you said still seem very conservative. I mean can you talk through maybe how you came there still year-on-year? Like I struggle to see even running 195 PLV at short ton. How you can sort of not be looking to beat guidance again?

Okay, George. Yes, I mean, we built into the guidance, just some conservatism that we said in our comments here. And hope you're wrong on the price assumptions. So specifically, I'm not really sure what you're targeting other than we tried to match the cost guidance with kind of where prices might be for the year in that range, but you may have some of that early in the year. And if they do that downward, you would have some impact. Now one of the things you have to remember, that was a PLV assumption. And if you looked at the relativities of the Low-Vol HCC to the PLV, that was about 85%. And here in the fourth -- first quarter, it's been running about 80%. So very similar to what we've seen in '25. On the flip side, though, the U.S. East Coast index is running at about 65% relativity. So anything we sell into the Atlantic Basin is going to have some margin offset there because of that. So those are some of the factors that we just try to consider here and be conservative on because we don't know why the trend on the East Coast High-Vol A index is so disconnected from the other indexes. So I'm just trying to think about how that might trend the rest of this year.

Yes. Okay. And then just your comment earlier about being free cash flow positive in the second half, I mean, sort of comment from working capital before. If I assume a sort of net neutral working cap position in second quarter, it's hard to not see your free cash flow positive in the second quarter. Obviously, it depends on prices as well. But is there quite a good chance even at sort of prices trending a bit lower, we could see a lot of free cash in the second half -- second quarter, sorry?

Yes, I think we could, given where the prices have been recently. If they stay that way in the first quarter, we could see the second quarter breakeven, but still too early to tell there. But I do think the second half, we will be generating a lot of cash.

Yes. And just on that, Dale, so cash, $300 million, is that still a nice minimum buffer? And should we start thinking from second half all that cash growth gets given back to shareholders? And can you remind us how to think about returns from the second half? Should all of it come back out the door? Or if not, why not?

Well, I think our cash level right now at $300 million is -- plus the investments, I guess, it's about $342 million. So that's about where we want to see it on a long-term basis, maybe slightly higher. So we might build some cash just a little bit there. But I do expect us to start returning cash to shareholders in the near future. Now is that this year in the second half? It's dependent on pricing. But I would expect that we would start returning that cash. Now in what forms? I think what we've said and been pretty consistent about, we think that will be through a higher fixed quarterly dividend because we're going to be a significantly larger company with all the volume increases, and then we would supplement that with some special cash dividends and maybe some selective stock buybacks to take advantage of opportunities there. So I think we would see a combination of those forms.

Right. So just on that, Dale, the share price is below $86 today, like I think you and I both think that's cheap. Why not start going now with the buyback and getting ahead of that before the stock gets more expensive? I mean, I think you think also shares that you're probably going to get higher, why not go early on the buyback?

Well, it's a possibility. I'm not going to commit to a particular stock price. We'll just have to look at what are the cash needs of the business at the time and what's the best distribution or the best way to distribute that cash to shareholders.

And the next question is from Katja Jancic with BMO Capital Markets.

You mentioned earlier that there's a big disconnect right between High-Vol A and the PLV market. With more High-Vol A volume coming to the market over next year, is there a risk that this disconnect could actually at least stay or even potentially wider -- become wider?

I think you're right. I think it will stay for a while. When we look at the tons that have been brought into the market with Metinvest bringing their mine back online, Leer South coming back online and Blue Creek coming online, that's quite a few tons that need to be absorbed. That's going to take some time. So I think that we're probably looking at a market that's fully supplied for the time being. I think that will get absorbed and just over what time it takes for that to happen, I'm not quite sure. But I think given some of the things that are -- where growth is occurring, I think those tons will get absorbed, and we'll get back to a more balanced market.

And then maybe I missed this, but Dale, you talked about working capital build in the first half. How much of a build could we see?

Well, really, it depends on the prices, Katja, because right, that influences our receivables quite a bit and how quickly can we bring down our inventories. But it could be upwards of $50 million or better in the first half.

And the next question comes from Chris LaFemina with Jefferies.

Most of my questions have been answered, but I just have maybe 1 or 2 follow-ups. So the first is back on the point of capital returns, you comment on maintaining that level of cash on the balance sheet, but you also have a net cash position. So you have financial capacity to use some debt. And I understand in mining, and particularly in coal mining, balance sheet is sacred, but you'll be a low-cost producer. And if prices fall, you'll be an even lower cost producer, and you can weather the storm pretty much no matter how bad it gets. So the question is, would you consider using balance sheet for buybacks in the environment where prices were a lot lower? I know there's a lot of hypothetical situations there, but could you use balance sheet? And if not, why wouldn't you? That's my first question.

Yes. No, good question, Chris. I mean, I think -- we've kind of done things a little differently than the rest of the industry, right, in the past. So if prices were to decrease quite significantly, to me, if we have that cash on the balance sheet, that would be an opportunity -- a real opportunity for us to take advantage of a buyback. So I think that would be a good situation that we'll look to do that.

And the next question is a follow-up from Nick Giles with B. Riley.

There's been a lot of questions around the realizations. But just for the avoidance of any doubt, can you just remind us what you said on what you're assuming for the relativity as it relates to your guidance? Like obviously, there's a relativity assumption attached to that cost guidance. So just curious what those are.

Yes. And just overall gross price realizations, we're looking at about 75% for the year. So hopefully, we're conservative there. But if you look at the East Coast index, it's 65% today. And so that has a big significant impact. And like I say, it's been decreasing. It decreased in the fourth quarter, $6 a ton. So that went from 85% to 75%. So a big swing during the third quarter to the fourth quarter.

I do think we need to be careful about how we look at relativities. And remember that right now, our assumption is High-Vol A is pretty well supplied. And for relativities to improve, that means the Low-Vol price has to come down to it. So I prefer to see the relativity stay apart if the High-Vol price isn't going to increase.

Understood. I appreciate that perspective, Walt. And maybe just one more, if I could. It looks like sustaining CapEx ticked up by maybe $20 million or so. Not a huge step change, just given you do have a new mine coming online. What should we be assuming in kind of 2027 and beyond for sustaining capital?

Well, I think -- all right. I think our -- while we're looking at CapEx for this year, that's going to be pretty normal for where we are right now. I think we'll see an uptick of $20 million to $30 million a year. I don't know how quickly that will occur. But as we continue to run Blue Creek and have replacement capital for continuous miners and longwalls and things like that, we'll see an uptick of $20 million to $30 million.

Yes, that's right, Nick. So sorry, I was going to add some to that. So if you factor in Blue Creek of $20 million to $30 million, you're probably looking at $110 million to $140 million somewhere roughly on a run rate basis.

Okay. Understood.

For years, we can pull that down depending on the price environment, but you're going to be -- each year is going to increase for a while because of Blue Creek as more and more things need to be replaced, et cetera, going forward.

Okay. Okay. And I promise this will be my last question. But just anything more to add on the contracting activity? I think you spoke to it, but kind of where do things stand from a contracting perspective for Blue Creek? Could any incremental contracting activity limit the volatility in your realizations? Or are you really at the mercy of the market, if you will?

I don't think it's going to limit the volatility anymore than we see the High-Vol A price. Its volatility is going to be the only limit on the Blue Creek price volatility. And in terms of volumes and percentage of contracted, right now, we're, I think, about 80% -- 80%, 85%. And as we see that number increase and we see that inventory level come down, that's where we'll start to see the opportunity to start to increase production levels because what we've seen, we can clearly do that.

Okay. Well, Kudos to Charles and his team on that front. And guys, congrats again on all the progress.

[Operator Instructions] Our next question comes from Nathan Martin with The Benchmark Company.

A question on Mine 4, I mean, running at record levels really above its nameplate capacity, I think, the last few years. Are you guys expecting that to continue? And then related, could you break down full year sales guidance of 12.5 million to 13.5 million tons by mine? I think it will be helpful maybe when trying to understand how to think about the potential quality mix.

Well, I think we'll see Mine 4 running at about the same level what it did this past year and Mine 7 running about the same level it did this past year. And then we'll see the 4.5 million from Blue Creek. In terms of Mine 4, Mine 4 has done an outstanding job of managing their production up and at the same time, they're spending and their costs down. And I would expect that to continue. They achieved very, very well last year, and I don't see a reason why that will change.

I appreciate that, Walt. And then I noticed some questions on shareholder returns. So maybe taking a step back, how should we think about your priorities for free cash flow overall?

Well, I think the priorities once we get past Blue Creek would be to return cash to shareholders. Until these markets change and demand any further growth on volumes, we would be focused on shareholder returns.

Best of luck in '26.

Thank you.

And at this time, there are no further questions in the queue. I would now like to turn the call back over to Mr. Scheller for any final comments.

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

Thank you. This concludes today's conference. You may now disconnect your lines, and have a pleasant day.