Ladies and gentlemen, thank you for standing by. The conference will begin shortly. Once again, please continue to hold. We thank you for your patience. And the Rayonier Advanced Materials Inc. conference will begin shortly. Good morning, and welcome to the Rayonier Advanced Materials Inc. Fourth Quarter 2024 Earnings call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened to questions with instructions to follow at that time. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mickey Walsh, Treasurer and Vice President of Investor Relations. Thank you. You may begin.

Good morning, and welcome to Rayonier Advanced Materials Inc.'s fourth quarter 2024 earnings conference call. Joining me today are De Lyle Bloomquist, our President and CEO, and Marcus Moeltner, our CFO and Senior Vice President of Finance. Last evening, we released our earnings report and accompanying presentation materials, which are available on our website at rayonieram.com. These materials provide key insights into our financial performance and strategic direction. In today's discussion, we may make forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially. These risks are outlined in our earnings release, SEC filings, and on slide two of the presentation. We will also reference certain non-GAAP financial measures to offer an additional perspective on our operational performance. Reconciliations to the most comparable GAAP measures can be found in our presentation on slides 21 to 27. We appreciate your participation in today's call and your ongoing interest in Rayonier Advanced Materials Inc. I will now like to turn the call over to De Lyle.

Alright. Thank you, Mickey, and good morning. I'll begin with a recap of our financial and strategic achievements in 2024 before handing it over to Marcus to walk through the details of our business segments, capital structure, and liquidity. After his remarks, I'll return to discuss our ongoing initiatives and outlook for 2025. 2024 was a year of execution, resilience, and strategic progress. We made significant strides in improving profitability, strengthening our balance sheet, and positioning the company for long-term value creation. We achieved meaningful EBITDA growth, improved our free cash flow, and advanced key strategic initiatives aimed at reducing earnings volatility and increasing shareholder return. Let's review our key financial results for 2024. Revenue for 2024 came in at $1.63 billion, a slight $13 million decline compared to 2023. Operating income significantly improved to $39 million, an increase of $104 million over the prior year. Adjusted EBITDA reached $222 million, marking an $83 million or 60% year-over-year increase, driven by strong cellulose specialty pricing and volumes as well as cost reductions resulting from our Temiscaming high purity cellulose indefinite suspension. EBITDA margins expanded to 13.6% from 8.5%. 2024 adjusted free cash flow stood at $128 million, an improvement of $75 million or 142% from 2023. Our net secured debt decreased by $73 million, and our net secured leverage ratio improved to 2.7 times covenant EBITDA. We are firmly on track to meet our long-term 2.5x target. High purity cellulose was a primary driver of the EBITDA growth, delivering a $93 million or 65% increase year-over-year. Higher cellulose specialty pricing and volumes, improved sales mix towards cellulose specialties, cost benefits from strategic capital investments, lower costs due to the Temiscaming indefinite suspension, and Canadian emergency wage subsidy or SEWS benefits supported this growth. However, we faced some offsetting impacts from…

Thank you, De Lyle. Annual 2024 sales for the HPC segment declined by $11 million to $1.3 billion, as summarized on slide five. Despite a 5% net increase in overall HPC pricing, driven by a higher mix of cellulose specialties products, total sales volumes fell by 5%. This was due to a 10% rise in CS sales, offset by a 19% decline in commodity sales. The increase in CS volumes was supported by several factors, including a competitor plant closure in late 2023, accelerated sales volumes from the Temiscaming HPC indefinite suspension, a gradual recovery in ethers demand, and the absence of a prior year one-time benefit from a change in customer contract terms. EBITDA rose by $93 million to $237 million, reflective of the improved CS sales mix, cost improvements due to the indefinite suspension of the existing HPC plan, and the benefits of strategic capital investment. EBITDA margins improved from 11% to 18.2%. Turning to slide six, paperboard sales grew by $9 million, reaching $228 million, driven by higher volumes as customer destocking eased. EBITDA declined by $4 million to $48 million, mainly due to lower pricing influenced by higher European import and cost increases related to higher labor and custodial site costs. These impacts were partially offset by improved productivity. EBITDA margins for the segment declined to 21.1% as compared to 2023. High yield pulp sales, as set out on slide seven, declined by $9 million to $127 million, primarily due to a 9% drop in external sales prices, reflecting oversupply in China and lower demand. Cost improvements as a result of higher productivity and lower cost inputs were partially offset by increased labor and custodial site costs. Segment EBITDA declined by $4 million to a $5 million loss compared to a $1 million loss in the…

Alright. Thank you, Marcus. Let's now turn our attention to slide ten, where I'll provide an overview of our key initiatives for 2025. We will be implementing new segment reporting beginning in Q1 of 2025, which will better reflect our evolving business and strategic direction. The new segments will include cellulose specialties, cellulose commodities, biomaterials, paperboard, and high yield pulp. We believe that these reporting segments will provide investors with a clear picture of the resilient earnings power of our cellulose specialty business, the progress in the execution of our biomaterial strategy, and the steps we are taking to reduce exposure to non-fluff commodity markets. Next, we remain committed to debt reduction. We will continue to prioritize debt reduction to strengthen our financial flexibility. However, our debt reduction in 2025 will likely be limited to the scheduled amortization of $20 million permitted under our credit agreements, as discussions with potential buyers of our paperboard and high yield pulp businesses have stalled due to the market uncertainties introduced by the US tariffs. We have successfully reduced our exposure to non-fluff HPC commodities from 50% in 2023 to just 6% in 2024, and we believe that this commodity exposure will continue to decline as ethers demand recovers to historical levels and we successfully requalify the Temiscaming cellulose specialty production at our other HPC facilities. Such qualifications remain on track. In 2024, we invested $10 million of strategic capital into cost efficiency projects that, when added to an additional $5 million investment to be made in 2025, is projected to generate $10 million in EBITDA in 2025. Significant opportunities remain, and we will continue to invest in such high-return strategic capital projects to reduce unit production costs, increase labor productivity, improve reliability, and input efficiencies. Finally, growing our biomaterials business remains a key…

Thank you. At this time, we'll be conducting a question and answer session. You may press star two if you'd like to remove your question from the queue. Our first question comes from the line of Daniel Harriman with Sidoti and Company. Please proceed with your question.

Hey, guys. Good morning. Thank you so much for taking my questions. Congrats on a really wonderful year of execution. Just a couple of quick ones from me today. The first, when we look at capital allocation, both on a strategic and a maintenance level, for 2025, can we expect that to kind of follow the same cadence as 2024 in terms of, you know, quarterly spend? And then I hate to bring this up, but just wanted to ask about the sale of the paperboard and high yield pulp assets at Temiscaming and wondering if maybe you're seeing a better market, more conducive market thus far into 2025. And if investors are hung up on the oversupply of high yield pulp from China and the upcoming paperboard capacity ads in that market. Thank you so much.

Hey. Good morning, Daniel. This is De Lyle. So on your capital allocation question, which is specifically around, I think, calendarization of the spend throughout the year, I would say that with respect to the maintenance CapEx, it'll be a little heavier in the first half than it will be in the second half because, again, our outages at the three facilities will happen in March and April of this year. So you'll see heavier weighting in the first half of the year. With respect to the strategic capital, it's probably a little bit the opposite because we're still going through the evaluation of various projects and so forth. The spend on that tends to happen in the second half, the later part of the year, after projects have been validated and approved. And then, obviously, the execution of implementation actually doesn't happen until after all that happens. So at the end of the day, given the size of the maintenance CapEx relative to the strategic CapEx, you'll probably see on a combined consolidated level, a little heavier in the first half and a little lighter in the second half. And then with respect to the potential sale of the paperboard and pulp assets, again, obviously, we're very interested in making this happen sometime in the near future. I think that you hit on a couple of points about why this has been dragging out: the excess capacity of high yield pulp in China and its weighing down on prices for high yield pulp not just in China, but around the world. The issues with respect to the new capacity on paperboard coming online later this year and the impact it will have on prices certainly has weighed on interest. But I would say that, you know, the uncertainty that surrounds the tariff news that has been going out, I think the uncertainty with respect to the flip-flop we're seeing between it is not helping. And until all that settles out, until things become much more certain, and we can put together a long-term coherent strategy to deal with that, I think we're going to be in a situation where most potential suitors will sit on the sidelines until all that settles out.

Okay. Thanks, De Lyle. I appreciate it.

Yep.

Thank you. Next question comes from the line of Matthew McKellar with RBC Capital Markets. Please proceed with your question.

Good morning. Thanks for taking my questions. First, I'd like to ask about the outlook for CS volumes this year. Is there any more color you can provide, particularly around the destocking trend in the acetates you noted, maybe around what kind of destocking you're seeing now and how you expect the impacts of destocking to affect demand through the year? And then just around what's driving continued improvement in ethers, both in terms of the end uses and then the impacts of restocking versus improvements in underlying demand you might be expecting. Thanks.

Okay. Well, good morning, Matthew. Talk about the destocking of acetate in China. And, actually, I would say it's probably global. This is really, I think, taking our own direct customers a little bit by surprise themselves. We look at the supply chain from our product all the way up into the actual cigarette sticks, there seems to be an overstocking throughout the supply chain. With respect to ourselves, the order book for 2025 was reduced by the large consumers of the acetate product that we make. And as a consequence, although we were able to maintain share, our volumes did come down. But we were able to raise price. So, again, continuing to push the value over volume there. In terms of percentages, in terms of a decline in demand, I would say it's in the single digits, roughly. Certainly, let's say, mid-single-digit impact relative to last year. The expectation of how long this is going to last, I mean, this lasted longer than we thought it would. We thought this would be well over, well behind this going into 2025. But, you know, right now, we really don't have any clear sight of when this is going to end. So we'll just keep our ear to the rail, so to speak, and we'll inform investors as we get new information. As for ethers demand, we're seeing improvement in 2024. Some of that improvement was due to restocking, but also an increase in demand from a few end uses, principally food and pharma. Construction continues to be a little weak, but, again, we expect that the demand will continue to increase in ethers in those two segments that we saw improvements in 2024. And there may be some upside on construction activity, particularly around, you know, if the wars in Gaza and Ukraine end, construction activity may pick up, and that obviously will then drive construction-related ethers demand.

That's great. Thanks very much for that color. And then just on other CS grades, appreciate that demand there remains fairly robust. Just looking underneath the surface level, any specific end uses that you call out as being stronger or weaker here, maybe either around kind of what's happening with defense spending with respect to nitrocellulose or autos with respect to tire cord and filtration applications?

Yeah. I would say that filtration has been a strong growth market for us, for the business. Also, nitro, obviously, you know, the sad commentary about the various geopolitical activities going on in the world is actually driving munitions, and that's been supportive for us. Autos, I would say, if you look at the auto build rate, it's weak. But given the mix change to electric vehicles and the impact of the heavier cars, electric cars have on tires, we're actually seeing an uplift in the premium tires that go into EVs. Casing is relatively flat. We're not seeing growth there. MCC, which again is primarily tied to food and pharma, we're seeing improvements in. So at the end of the day, three markets are up: MCC, nitro, and filtration. Casing and tire cord are relatively flat right now.

That's great. Thanks very much for that color. And then last question for me, just around tariffs in your paperboard business. Assuming this 25% tariff level is sustained, how quickly would you expect to capture more business within Canada versus business you might expect to lose out on in the US? You've called out, I mean, one year qualification period is a consideration here. Is that pretty universal across the business you'd expect the targets? Or how would you just think about that kind of relative relationship between?

That's a great question. And, you know, getting down to specifics would probably be a little premature on our part right now. But if I look at paperboard, you know, there are really two big segments that we'd be looking at in converting in Canada: commercial writing, commercial print, and then packaging. We think packaging is going to have the much longer qualification period, and so that'll be the one where we'll need to take a little bit of government support and so forth to make those conversions. But where we think we can get quick wins is on the commercial print side, and the qualifications are much shorter in that space. So with the retaliatory tariffs expected to go into effect at the end of March, given the strong Canadian sentiment to buy Canadian products, we believe that we'll be able to convert fairly quickly upwards of 30,000 tons of production away from US exports to Canadian domestic business in 2025. Obviously, we will continue during that period going through the qualification on the packaging grades, and we would expect to start seeing those conversions in 2026. So that's our strategy. That's our action plan right now with respect to that.

Great. Thanks very much. Turn it back.

Thank you. Ladies and gentlemen, as a reminder, our next question comes from the line of Dmitry Silversteyn with Water Tower Research. Please proceed with your question.

Good morning, gentlemen, and congratulations on a strong end to the year and a very good 2024. A couple of questions if I may. One, you talked about one-time benefits that helped with the profitability, I believe, of your high purity cellulose business in 2024. Could you just go through and remind us what those one-time benefits were so we know how to adjust our 2025 expectations?

Yeah, Dmitry. By the way, good morning. With respect to 2024, let's say there was probably roughly $15 million of one-time benefits in 2024 that we would not see continuing in 2025. One of them is SEWS, you know, it's Canadian employment wage subsidy benefits that we were able to recognize in 2024. That totaled about $10 million. There were benefits that came from the Temiscaming indefinite suspension, you know, that pull forward of demand by our customers to have inventory on the floor while they went through a qualification process. That was probably another $17 million of benefits last year. So those two together are $27 million, and then offsetting that would be the fire at Jessup. And so when you take that out, which was roughly a $9 million hit, that gets you down to roughly that $15 million impact for last year.

Okay. That's helpful. Thank you. That's what I thought it was. I just wanted to make sure I wasn't missing anything. And then switching quickly to the tariff impact, obviously, paperboard is the one that's in the crosshairs immediately here, starting in April. So your guidance, I'm presuming, is based on three quarters of tariff impact because the first quarter looks like it, you know, you sort of cash the board in the first quarter impact. So is this basically a nine-month kind of worst-case scenario guidance that you're giving us of a $35 million hit on EBITDA?

Yeah. No. We're actually assuming a ten-month hit because it was effective as of March 4th. So, and you look at an unmitigated exposure, roughly a $35 million potential impact. Now, as I said, we expect to pass on as much of that tariff as we can to our US customers. But that being said, we will retain our share in the US while we work through qualification processing in Canada with our potential customers. So there's a lot of puts and takes here. One of the immediate benefits that we got was foreign exchange working in our favor, and that alone will provide us benefits of $5 to $5.5 million all by itself. So, and then you look at the conversions and some of the things we're doing on putting holds on some discretionary spend at the enterprise level, we believe that we'll largely mitigate that $35 million potential exposure due to these tariffs in 2025.

Okay. That's encouraging. Then I just want to make sure I understand this correctly. In your biomaterials guide, you talked about reaching a $55 million EBITDA run rate when these projects come in. I think last time you were mentioning something in the neighborhood of $40 million in EBITDA when these projects come up. So are you adding more projects in your line of sight to get to the $55 million, or do you expect what you've told us before to be more profitable on a run rate basis when you get the production fully up?

Yeah. And that's a great question because it is a little confusing. $55 million is related to projects that we're going to spend strategic capital on starting in 2025 through 2028. One thing is it doesn't include the bioethanol plant that we've already invested in in France. So just for easy math, let's just assume that you add another $10 million EBITDA to the $55 million to get to the potential that we get to at the end of 2028. So you've got this increase of roughly $18 million plus that versus what we've mentioned in the past. And really, the difference is the AGE project. So the AGE project is advancing pretty quickly since we received the purchase power agreement from Georgia Power last year. We'll be making a final investment decision on that later this year. The potential EBITDA impact of that is $25 million to $30 million per year. And so by the time that we get that plant up and running in 2028, which is it would come on in the later half of 2028 because it takes about three years to build, so you get some of the benefit in 2028, and then you get a full year impact in 2029. So when you get to 2029, you're possibly looking at a $70 million EBITDA number for biomaterials.

Okay. So if I'm to think about this over the next couple of years, kind of going back to your original 2027 guidance, that $40 million EBITDA expectation is still valid.

Well, there's been delays, principally around the bioethanol plant in Fernandina Beach as we go through the public participation process on the permitting. So achieving $42 million at the end of 2027 or for the year of 2028 is probably not likely, I mean, yeah, 2028, because of that delay.

Okay. Got it. Thank you very much. That's all the questions I had.

Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Bloomquist for any final comments.

Okay. Well, once again, thank you for taking the time today to listen to our earnings call and for your continued interest in Rayonier Advanced Materials Inc. 2024 was a great year for us, and I'm incredibly proud of all the hard work and efforts and progress we made in 2024. As we move forward, we will continue our focus on advancing our high-return investments and continuing to maintain our financial discipline to drive the long-term value of the business. So we appreciate your support, and we will continue to strengthen our business and position ourselves for sustained growth going forward. We're committed to transparency and open communication, so please don't hesitate to reach out to us if you have any further questions. Thank you again, and I look forward to talking to you in the future.

This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.