Welcome again to RYAM's Second Quarter 2024 Earnings Conference Call and Webcast. Joining me on today's call are De Lyle Bloomquist, our President and Chief Executive Officer; and Marcus Moeltner, our Chief Financial Officer and Senior Vice President of Finance. Our earnings release and presentation materials were issued last evening and are available on our website ryam.com. I'd like to remind you that in today's presentation, we will include forward-looking statements made pursuant to the safe harbor provisions of Federal Securities laws. Our earnings release as well as our filings with the SEC list some of the factors, which may cause actual results to differ materially from the forward-looking statements we may make. They are also referenced on Slide 2 of our presentation materials. Today's presentation will also reference certain non-GAAP financial measures, as noted on Slide 3 of our presentation. We believe non-GAAP financial measures provide useful information for management and investors, but non-GAAP measures should not be considered an alternative to GAAP measures. A reconciliation of these measures to the most directly comparable GAAP financial measures are included on Slides 20 through 25 of our presentation materials. And now, I'd like to turn the call over to De Lyle.

Thank you, Mickey and good morning. I'll start with the financial overview for the second quarter of 2024. After that, I'll outline recent company actions before handing over to Marcus, who will provide more details on the business segments, capital structure, and liquidity. Following Marcus' remarks, I'll return to discuss our ongoing initiatives and updated guidance for 2024. This will include updates on the progress towards suspending operations at our Temiscaming HPC plant and brief comments on the sales process of our paperboard and high-yield pulp businesses. We will then open the floor for questions. Let's turn our attention to Slide 4, where we'll discuss our strong second quarter performance. Adjusted EBITDA reached at $68 million, a $41 million or 152% increase from the same quarter last year. In the high-purity cellulose segment, EBITDA improved by $38 million or 136%, driven by higher sales volumes for cellulose specialties, decreased costs for key inputs and logistics and improved productivity. Additionally, this quarter's results included a $5 million benefit from a Canadian Wage Subsidy received during the COVID pandemic, but it was recognized during this quarter due to the completion of the government audit of the benefit. The paperboard segment experienced a $5 million or a 50% increase in EBITDA, driven by higher sales volumes, lower cost for purchased pulp and a $2 million benefit from the Canadian Wage Subsidy. These gains were partially offset by lower sales prices. In the high-yield pulp segment, EBITDA rose by $1 million, primarily due to reduced logistics and chemical costs, along with a $2 million benefit from the Canadian Wage Subsidy. However, these improvements were largely offset by the lower sales prices and volumes. Corporate expenses increased by $3 million, driven by higher costs related to the ERP project, variable compensation, and discounting and financing…

Thank you, De Lyle. Beginning with our HPC segment on Slide 5, quarterly sales increased by $32 million or 11% to $332 million. Overall, HPC pricing increased 5%, reflective of higher mix of CS products, whereas total sales volumes increased by 5%, resulting from a 25% increase in CS sales, partially offset by a 13% decrease in commodity sales. EBITDA margins in the HPC segment reached 20%, demonstrating the success of our initiatives to enhance product mix and prioritize specialties. The rise in CS sales volumes was supported by the closure of a competitor's plant in late 2023, the continued muted recovery in ether sales and bridge volumes from the indefinite suspension of the Temiscaming HPC plant. Other sales for the quarter were $23 million, which included $13 million of green energy sales. EBITDA for the HPC segment rose by $38 million to $66 million, primarily due to an enriched mix of CS sales previously noted and the benefit of decreased costs for key inputs and logistics, along with the impact of improved productivity. This quarter's results also included $5 million for the CEWS benefit. Turning to Slide 6. Sales in the paperboard segment increased by $12 million, driven by higher sales volumes. EBITDA for the segment improved by $5 million, reaching $15 million, primarily as a result of increased sales volumes and the benefit of decreased purchase pulp costs. In addition, the segment included $2 million for CEWS. Turning to the high-yield pulp segment on Slide 7. Sales declined by $11 million in comparison to the prior year, reflecting a 25% drop in sales volumes and a 9% decline in sales prices due to overall reduced demand and the impact of market supply dynamics in China. Segment EBITDA improved $1 million to $2 million as compared to the prior…

Thank you, Marcus. Let's now turn our attention to Slide 10, where I'll provide an update on our key initiatives for 2024. Our top goal this year is to refinance the 2026 senior notes before they go current in January 2025. Working closely with our advisers at Houlihan Lokey are actively exploring refinancing options and engaging with the market to secure the best terms. In support of this refinancing effort, we are also on track to achieve our target of reducing gross debt by $70 million in 2024, supported by business generated free cash flow, a tax refund, and proceeds from the recent sale of the duty refund rights. We enjoy strong interest among potential lenders, therefore, we are confident in completing the refinancing at satisfactory terms within the year. The sales process of our paperboard and high-yield pulp assets is progressing. We have received offers for the Temiscaming assets from multiple parties, but these parties have not met our criteria to transact a sale. Our continuing dialogue with various parties and expect to continue diligence as we work through the complexities of the suspension of the HPC operations at Temiscaming. We are committed to completing a sale of these assets if we receive an appropriate offer, which values the high EBITDA margins in the low custodial capital intensity of the combined paperboard and high-yield businesses. While the proceeds from the sales would significantly reduce our debt load, we are carefully balancing the estimated annual $50 million in free cash flow from these businesses against any potential debt repayment. Given the length of the process, we expect to refinance the 2026 senior secured notes at satisfactory turns prior to a potential sale of these assets. In April, we announced our decision to indefinitely suspend the operations of our Temiscaming HPC…

[Operator Instructions] Your first question comes from the line of Matthew McKellar with RBC Capital Markets. Matthew, your line is now open.

Hi, good morning. Thanks for taking my questions. Maybe first, just on your sales process for the high-yield pulp and paperboard business. I think you mentioned that parties have submitted bids, but they have not met your criteria. Is this a comment on price alone? Or is there anything else worth considering here? And then are you able to give us a sense of how far apart the offers are that you've received from value you think it's fair for the business?

Hey good morning Matthew, this is De Lyle. A couple of points I could think I can make that further clarify where we are on the paperboard and high-yield pulp process. I really can't get into specifics with respect to what we've seen and what -- how our diligence is going, but there are a couple of other points I can make. So, when I talk -- when I say criteria, it's other points in addition to valuation differences. So, -- and really, the other points of criteria revolve around the suspensive operations at Temiscaming. I mean a good example would be the bumping process that is triggered by the reduction in force that is going on at the facility as we speak. Because the unique contract gives the more senior employees employment rights versus the junior employees, those senior employees have the right to get a position in paperboard if they so desire. There's this whole process we need to go through as we go through this mothballing effort. Obviously, when you're changing out personnel, whether it's the hourly and salary personnel, that raises questions or concerns, and so -- with respect to the potential buyer. So, we really need to get through that process and demonstrate when we get to the other end that the plant will be able to run efficiently and effectively going forward. Another issue would be -- for example, would be around what's within the perimeter of the sale. There are shared utilities assets that both of us want to make sure are maintained and operated efficiently and effectively. So, obviously, there's discussions around that of who's going to own them, who's going to operate them, and so forth. So, those discussions are still ongoing as well. In terms of valuations, we point to the sale of the GP Augusta mill as kind of a benchmark, such has been fairly recent, where it's sold at somewhere in the neighborhood of 6 times to 7 times EBITDA and after synergies around 5 times. And that's kind of been our benchmark with respect to that. I mean that's where we're working and having discussions with our potential suitors.

Great. Thanks very much for that color. Maybe next, it sounds like you continue to make good progress on the prebiotic initiative. Can you just maybe update us on how you're thinking about that project today? I think you previously talked about bringing that to market late 2025 or 2026. Is that still a relevant time line? And then if you could just refresh us on any anticipated capital cost and targeted returns to the extent you're able to, please?

Yes. So, the prebiotics opportunity, I mean, it would be located at our Jesup facility, taking advantage of some pulp product streams that craft mill generates and then purifying that stream and then spray drying and packaging material to be sold to various animal feed suppliers. We've gotten through the called the self-GRAS approval process, GRAS standing for generally regarded the safe process and are working closely with our couple of key potential customers as they go through their own independent validation of the benefits of our product versus competitive offerings. And come September, we're going to go through some production trials to make sure that we can produce this at scale before we start committing capital and doing the pre-engineering for the actual prebiotics plant. In terms of timing, we're still targeting late 2025 for a start-up. And though that's starting to get a little tight, we still think we can still hit that date. So, right now, really haven't hit any speed bumps on that. But as you expect, you have to go through quite a lengthy qualification process, and we're marching through that.

Thanks very much. And is there anything you're able to say around anticipated capital costs or targeted returns of that project?

The capital -- that's an open question, and that needs to be answered. We do expect that though that, that capital will be largely financed by green capital, that will be very inexpensive. And in terms of return -- return on equity, it will meet our thresholds, which is north of 30%.

Thanks very much. And then last one for me. Could you maybe just provide a bit of an update around what you're seeing in the high-yield pulp markets and in particular, what you're seeing in China?

Yes. This is one of my favorite topics, at least something I just talk about with my team all the time about because it's really kind of a moving dynamic. What we're seeing is that the paperboard plants that were recently constructed in China are having trouble finding a home for the production of paperboard. So, to bring in any kind of cash flow, they're running their pulp lines and then selling those pulp lines to competitive paperboard plants. And that's obviously in competition with the pulp that we bring into China for the same purpose. That dynamic continues, and it's weighing heavily on the pricing in China. So, in response to that, we're working to reposition our sales outside of China into other large markets like India and Europe. But in terms of how long this is going to go on, given the questions around consumer activity in China, really don't have an idea right now.

Okay. Thanks very much for the color. I'll turn it back.

Your next question comes from the line of Daniel Harriman with Sidoti. Daniel, your line is now open.

Thank you. Marcus, De Lyle, good morning to you both and congrats on the quarter. Just a couple of quick ones for me. First, any concerns at all about the refinancing before the end of the year? And should we think about that as a Q3 event or a Q4 event? And then finally, when we look at your viscose production, it's now down to like 3% of the sales total. So, obviously, you're managing the commodity volatility there. Is it safe to assume that that's going to continue to be a smaller piece of the revenue pie moving towards the end of the year?

Hi Daniel, good morning. Let me address the issues around the refi first and about where we are with the process. What I can tell you is that we've been working with Houlihan Lokey now for a couple of months, and I have worked with a number of potential lenders as well as look at both the private and public markets and continue to do so. We expect that we'll start receiving proposals for the refi come early September. And so obviously, as we go through and evaluate those and pick lead horses and all that, it's likely that the refi won't get completed until, let's say, the fourth quarter. So, -- but again, as we noted in our transcript that we do expect to get this done before year end. With respect to your question around -- what was it -- viscose, around viscose, yes around the viscose, Again, for viscose, similar levels as we've seen through the first half. In 2025 and beyond, we expect to see it decrease further. Let's say, in 2025 roughly, let's say, around 3% lower. And then we're going to continue to put in efforts to continue to push that to zero. And that will largely be accomplished through ether sales as ethers demand normalizes back to historical levels.

Okay, perfect. De Lyle thanks so much. Its very helpful and best of luck in the balance of the year guys.

Thank you.

Your next question comes from the line of Dmitry Silversteyn with Water Tower Research. Dmitry, your line is now open.

Good morning gentlemen and congratulations on a strong quarter and good to see you guys swing back into the black. A couple of questions, if I may. First of all, you mentioned that your paperboard business is being impacted by lower prices due to European imports. Can you talk about sort of the dynamic behind that why are Europeans becoming more aggressive in terms of importing their product into the U.S.?

Yes and it's, I think, no secret. The issue is just the generally weak economic conditions in Europe. And I can probably say the weak economic conditions worldwide is really driving it. So, you find the European holding boxboard producers are -- have plenty of capacity looking for any kind of sales. And so we have been seeing imports from Europe, actually on an increasing basis and here in the first half.

Okay. So, that's something that is going to be a longer term issue. It has nothing to do with rightsizing inventories or anything like that. That's just a -

No, I think that it's all general -- it's all being driven by the weak consumer demand, I would say, in Europe. And until that returns and starts picking up, we'll see that pressure.

And Dmitry, that's happened before. It ebbs and flows with, as De Lyle mentioned, the general economy in Europe. So--

Understood. Thank you.. And then my second question is, you mentioned in your comments strong earnings for volumes, probably not to the level that you'd like to see in, but certainly getting better. You also talked about lower input costs, which I'm assuming are wood chips and some other chemicals. Typically, you can interpret these data points as being indicative of perhaps construction demand improving, given that it's a key market for ethers and your wood chip costs are inversely related to the growth in the construction market. So, am I reading this right? Are we sort of starting to see an improvement in this important end market for you in ethers or am I reading too much into this?

With respect to ethers, what I could say there is that there has been some pickup in end market demand in certain areas, but we do believe that some of the increase we saw in ethers is being driven by value chain doing some restocking. So, when we go into Q2, we are discounting the increase we saw in the first half related to restocking. So, that is one issue. With respect to the input costs, I would say that many of our key inputs, the purchase prices are lower than they were last year. But I also would like to emphasize that we're seeing improvement being driven by the capital investments we made last year in the plants. And so you're seeing an improvement in material usage efficiencies as well in our operations, which would be much more -- obviously much more long lasting. And then finally, with respect to the impact on variable costs, we're seeing getting a benefit from the improved production mix across our facilities. It's actually easier for us to make a specialty in many cases than it is to make the commodities. On fixed costs, we've also seen significant improvement. One is, obviously, productivity is higher this year. You may remember last year, we actually throttled back the plants to control inventories. This year, the plants are running at capacity. So, the unit fixed costs are down this year. And then the other issue is that you may remember around -- about this time last year, we announced that we were going to aggressively start reducing costs at the facility. And what you're seeing now is you're seeing the comparison and the benefit of that cost reduction in the first half. So, the continuation of those costs -- those realized cost savings that we began in the second half of 2023. So, that's what's going on the cost side.

Okay, that's very helpful, De Lyle. Thank you for that color. And then one last question on the acetate market. You talked about continuing destocking by customers. Is the expectation still that this is going to wind down by the end of this year? Or do you now expect it to get into 2025, given that global economy certainly isn't getting stronger?

Yes, let me make a couple of points about the acetate destocking. First, given that Jesup is sold out, we felt that it was -- there was a need to levelize the expected demand across the whole year of 2024. Previously, we had said that we would take the destocking hit in the first half, and then we'll start seeing improvements in the second half. After seeing the difficulties we would have on trying to make that happen with the plant being sold out, we worked with our customers and we leveled out that demand for the all of 2024. So, you're not going to see this huge uptick in 2024 because we essentially now have got essentially a flat line for the whole year. More directly to your question, though, about do we think that it's going to end in 2024, the destocking is going to end in 2024. Unfortunately, we continue to see elevated inventories in Asia. And again, I think that's been indicative of the consumer weakness, principally in China, but Asia generally. And so there is a likelihood that we'll see some of the lower demand bleed off into 2025.

Understood. Thank you. That’s been helpful.

Your next question comes from the line of Sandy Burns with Stifel. Sandy, your line is now open.

Hi, good morning. And I'll also add congrats on a strong quarter in this environment. I'm just wondering if you can comment or maybe break down the different components of the increasing guidance from earlier in the year versus is it mostly the volume mix improvement and increased confidence in it, more on the cost side, the plant suspension, more clarity on the cost and benefits there, like how would you weigh those in terms of how -- what drove the increase in guidance?

Well, part of it is obvious, which is the $10 million in CEWS benefit that we realized in the first half. Obviously, that's $10 million of it, right? And then the second component of that would be, call it, the advanced sales by some of our customers that wanted to get some inventory in their stock rooms before we suspended operations at Temiscaming. So that -- we saw some sales move forward a little bit as a result of the suspension at Temiscaming. And then with respect to ether sales, we did see an uptick in ether sales, and that was related to demand growth -- or underlying demand growth and that's driving some of the increase in benefit as well. So, if I were to break all that down, I would say that we're looking at roughly a $15 million or $20 million increase in the guidance. When we look at the midpoints, kind of that was CEWS and I would say roughly $5 million and $5 million on ethers -- improvement in ethers demand and then a $5 million improvement in the move forward on sales related to the Temiscaming suspension.

Okay, great. That’s helpful. Thank you.

[Operator Instructions] Your next question comes from the line of -- so, there is no further question at this time. I will now turn the call over to De Lyle for closing remarks.

All right. Well, thank you once again for joining our call today. We certainly appreciate your interest and support in the company. I'm very proud of the hard work and dedication that has been shown by the RYAM team and are very confident in our ability to continue to enhance our profitability and reduce our debt and leverage. I look forward to providing further updates on all our ongoing projects initiatives and value your contribution and support as we strive for the long-term success and growth of the company. We are committed to maintaining transparency in open communication. So, please feel free to contact us if you have any questions or need further information. So, thank you again for your participation.