Alpha Metallurgical Resources, Inc. (AMR) Q3 2026 Earnings Call Transcript

Operator: Greetings. Welcome to the Alpha Metallurgical Resources Third Quarter 26 Results Conference Call. At this time, all participants are in a listen-only mode. A Q&A session will follow the formal presentation. Please note this conference is being recorded. I would now like to turn the conference over to your host, Emily O'Quinn, Senior Vice President Investor Relations and Communications. You may begin.

Emily O'Quinn: Thank you, Rob. Good morning, everyone. Before we get started, let me remind you that during our prepared remarks, our comments regarding anticipated business and financial performance contain forward looking statements. And actual results may differ materially from those discussed. For more information regarding forward looking statements and some of the factors that can affect them, please refer to the company's third quarter 26 earnings release and the associated SEC filing. Please also see those documents for information about our use of non GAAP measures and their reconciliation to GAAP measures. On the call today, I am joined by Alpha's Chief Executive Officer, Andy Eidson; and Chief Financial Officer, Todd Munsey, Who will provide prepared remarks. Also participating on the call are our President and Chief Operating Officer, Jason Whitehead; and our Chief Commercial Officer, Daniel E. Horn. Following the prepared remarks, we will be available to answer questions. With that, I will turn the call over to Andy.

Charles Andrew Eidson: Thanks, Emily, and good morning, everyone. Today, we released our definitive third quarter financial results, which include adjusted EBITDA of $29.4 million and 3.9 million tons shipped. Our third quarter volumes improved compared to the first 2 quarters of the year, which were 3.6 million and 3.5 million tons respectively. Cost pressures continue to influence our financial results and we remain committed to managing these cost challenges and continually evaluating the portfolio against the needs of the met coal market. Speaking of the market, we have completed our annual budgeting process that culminates in the operational guidance expectations we issued today. I will let Todd cover those in detail, but it is important to note that our 2027 guidance reflects current expectations for the coming calendar year, which includes our analysis of potential financial impacts and 2027 terminal capabilities at Dominion Terminal Associates. In Newport News. Following the storm related damage that occurred in June, DTA management has worked diligently to keep operations moving and collaborate with the various parties about potential go forward plans. As a result of these conversations, DTA believes stacker reclaimer referred to as SR1 needs to be replaced as opposed to repaired. And they have been in close contact with DTA's insurance provider about covering the replacement cost as well as potentially certain other expenses incurred due to the damage. As such, it is important to note that we do not anticipate significant capital outlays associated with the stacker reclaimer replacement process. As far as timing is concerned, a total replacement of the stacker reclaimer would be a fully custom built requiring specialized design, engineering, construction, and installation. Such work will likely require a lengthy timeline with current estimates in the 2-year ballpark. This is why we worked so hard to establish a logistical framework that minimizes the disruption to our sales and logistics processes, and allows us to keep coal moving to our customers while DTA addresses the damaged stacker reclaimer. This includes plan to also utilize our throughput capacity at another Hampton Roads terminal in addition to Dominion Terminal Associates. As evidenced by our more normalized third quarter shipment volumes, we are optimistic about our ability to move all the tons we need to in 2027 and beyond. As we look to next year, our guidance includes 3.5 million tons that we plan to sell to domestic customers in 2027 at an average price of $135.48 per ton. We are pleased to announce the results of the domestic negotiations, which are fixed price annual contracts Each year's negotiation is a little different depending on the market backdrop and a variety of factors. For example, Hyvall made up a greater proportion of our 2027 domestic quality mix than in 2026, which influences the average price achieved for the total domestic book. All in all, we are pleased with these commitments and we look forward to building the rest of our 27 sales around opportunities in the seaborne market. As usual, our teams are doing great work throughout the Alpha and several operations have received recognition for their efforts. On the environmental front, our Paramount team in Virginia was recently honored with 3 Excellence in Mining Awards, from the Metallurgical Coal Producers Association. Virginia Energy also awarded them 3 safety awards at their recent ceremony. Both of Alpha's mine rescue teams continue stacking wins as well, 1st and 2nd place finishes across many categories of in the National Mine Rescue contest that was held in August. We are extremely proud of our Paramount team that earned the top honor of National Grand Champion this year with a perfect score for the competition. These minors continually train, practice and challenge themselves so they are prepared to respond when their skills are needed. So congratulations to all those team members. I will now turn the call over to Todd for a review of our financial results for the third quarter.

J. Todd Munsey: Thanks, Andy. Good morning, everyone. Adjusted EBITDA for the third quarter was $29.4 million up from $25.6 million in the second quarter. We sold 3.9 million tons in Q3, up from 3.5 million tons in Q2. Met segment realizations increased quarter over quarter with an average realization of $121.09 in the third quarter compared to $118.71 in the second quarter. Export met tons priced against Atlantic indices and other pricing mechanisms in the third quarter realized $107.3 per ton while export coal priced on the Australian indices realized $150.46 per ton. These results are compared to realizations of $109.08 per ton and $143.82 per ton, respectively, in the second quarter. The realization for our metallurgical sales in the third quarter was total weighted average of $124.52 per ton roughly flat against the second quarter average of $124.3 per ton. Realizations in the incidental thermal portion of the met segment were also essentially flat quarter over quarter at $79.44 per ton in Q3 compared to $79.36 per ton in Q2. Cost of coal sales for our met segment increased to $106.93 per ton in the third quarter up from $103.07 per ton in the second quarter. SG&A, excluding non cash stock compensation and non recurring items increased to $15 million in the third quarter compared to $13.7 million in the second quarter. Moving to the balance sheet and cash flows, as of September 30, we had $334 million in cash and cash equivalents as compared to $339 million of cash and short term investments as of June 30, We had $184 million in unused availability under our ABL at the end of the third quarter, partially offset by a minimum required liquidity of $75 million As of the end of September, Alpha had total liquidity of $443 million down slightly from $448 million at the end of June. CapEx for the third quarter was $33.8 million down from $45.1 million in Q2. Cash provided by operating activities was $46.9 million in the third quarter, up from $39.9 million in the second quarter. As of September 30, our ABL facility had no borrowings and $40.7 million of letters of credit outstanding. Looking ahead, we issued 2027 operational guidance this morning, For sales volumes, we expect to ship between 13.1 million and 14.1 million metallurgical tons as well as another 1.2 million to 1.6 million tons of incidental thermal coal, bringing total 27 shipment expectations to a range of 14.3 million to 15.7 million tons for the year. For 2027 cost of coal sales, we are guiding to a range of $104 to $110 per ton. Selling, general and administrative costs are expected to be between $53 million and $59 million in 2027, excluding non recurring expenses and non cash stock compensation. Idle expense is expected to be $25 million and $33 million We anticipate 2027 net cash interest income of between $2 million and $4 million and depreciation, depletion and amortization of $148 million to $162 million Capital expenditures, including carryover development and maintenance capital are expected to be in the range of $145 million to $165 million Contributions to equity affiliates are expected to be in the range of $28 million to $37 million which include cash contributions for Dominion Terminal Associates. Lastly, we are projecting a 2027 cash tax rate of between 0% to 5%. In terms of our committed position for 2026, at the midpoint of guidance, 87% of our metallurgical tonnage in the met segment is committed and priced at an average price of $126.69 Another 12% of our met tonnage for the year is committed but not yet priced. Thermal byproduct portion of the met segment is fully committed and priced at the midpoint of guidance at an average price of $76.60 Coal markets remain subject to uncertainty and volatility resulting from geopolitical conflicts and global economic conditions. Improving indicators in manufacturing conditions across key alpha markets suggest that economic conditions are stable, with almost all in growth territory. While global steel demand remains weak, supply related factors such as mine closure announcements temporarily influenced metallurgical coal indices to rise toward the end of the third quarter with further volatility continuing after the quarter close. The Australian premium low vol index increased from $244 per metric ton on July 1 to $272.10 per metric ton on September 30. The U. S. East Coast Low Vol Index rose from $190 per metric ton at the beginning of the quarter to $210 per metric ton by the end of September. The U. S. East Coast High Vol A Index increased from $157 per metric ton at the start of the quarter to $195 per metric ton at the quarter's close. The U. S. East Coast High Vol B index rose from $147 per metric ton to $170 per metric ton at the end of the quarter. Since then, the Australian premium low vol index has decreased from $262.20 per metric ton as of November 5, a drop of roughly 4% since quarter close. U. S. East Coast low vol is unchanged from quarter close $210 per ton. U. S. East Coast High Vol A has declined about 3% to $190 per ton. While High Vol B has risen slightly to $174.50 per ton as of November 5. In the seaborne thermal market, the API2 index was $115.50 per metric ton at the beginning of July and increased to 141.40 per metric ton at the end of September. Since then, the API2 index has moved down to $136.30 per metric ton. As of November 5. With that, operator, we are now ready to open the call for questions.

Operator: Thank you. At this time, we will be conducting a question and answer session. Our first question comes from George Ayday with UBS. Your line is now live.

George Aidey: Yes. Good morning, team. Thanks for the update today. If I can ask on the cost front, so cash cost only 2% higher year-on-year at midpoint. Even if I adjust the marginally higher midpoint sales volumes, can you maybe just talk through what goes into that and sort of potential cost sensitivities to things like diesel and I guess it sort of seems like a very low year-on-year cost increase given a lot in this sector are talking about a lot of input and broader sort of cost pressures. Thank you.

Charles Andrew Eidson: Hey, George. This is Andy. Appreciate the question. Yes, we are actually pretty pleased with where our cost guidance is coming out for next year, although it is up a bit. I mean, we have really seen the vast majority of the input cost impacts have already found their way into the system for us. So again, we would hope that there would be some relief on the diesel side. Hopefully, that situation gets resolved. Sometime in the near future. And even then, it will take a while to work its way through the system. But we are we are just. We are not saying that the input cost increases flat line, but the rate of increase is tailed back quite a bit and you bake in the impact of the diesel and all the oil adjuncts. I think we are currently our run rate is pretty well reflective of that. So next year we do not see a material amount of increase from there.

George Aidey: What diesel price did you assume in guidance for 2027, Andy?

Charles Andrew Eidson: Off the top of my head, I do not know. Yes, I think it was low- to mid-$5s. On a per gallon cost.

George Aidey: Okay. And then, what is the sensitivity if you were to sort of estimate ballpark per ton on your cash cost contracts, if that went back to sort of, say, mid threes, like, what is the potential reduction cash cost?

Charles Andrew Eidson: Well, I will leave you to do the math on that, but we do run the low 20 million gallons of diesel across all operations. So 20 million to 22 million gallons So you could, you know, you could figure what the sensitivity is on that across all the tons.

George Aidey: Okay. Yes, that is perfect. Thank you. And then just 1 more and sort of getting back to the 16 million tonne per annum levels, can you talk through how that looks? And if DTA sort of being down for the 2 year ballpark you guys flagged, Is it constrained? Or I guess another way of asking was this, markets got a lot stronger next year, could you push beyond that 15.7 million ton upper end, do you think? Or like what is the constraining limit to higher volumes for you guys at the moment?

Charles Andrew Eidson: Yeah. I mean, DTI obviously will be a constraint. Our sales and logistics teams have done a really nice job, as I mentioned in the comments. The prepared comments. They have done a nice job of finding flexibility and optionality with other export terminal access. So you know, there will be a point in which we cannot we cannot expand any further I am not you know, I am not gonna throw out a number for that because, again, the team is pretty creative in finding new paths to get tons where we need them to go. But I think we are comfortable with our current run rate. I do not think there is a huge amount of upside to that. And you know, we are gonna need we are need the terminals to operate well. We are going to need the railroads to perform well to hit all of our numbers the way we want to. But I think we are gonna be able to get there and it. You know, it is not gonna look that different year over year. Compared to 2026. From a quality perspective, it is going to be a bit different because, again, we I think we are moving around in our as has been our plan, we are shifting as a lot of other folks are. We have been working on a multiyear plan to shift more of our production from higher rank coals from the low vol and mid vol and a little bit less on the high vol side, so that will continue to develop. But I think logistically, all of that fits pretty well into what we have got planned for 2027. Alright. that is helpful. Alright. that is helpful. Thanks, guys.

J. Todd Munsey: Thank you. Thank you.

Operator: Our next question comes from Nick Giles with B. Riley Securities. Your line is now live.

Nick Giles: Yes. Thanks, operator. Good morning, guys. it is good to hear that there is more high vol coal in the domestic mix, which I assume leaves more low vol coals to send into the seaborne market. So I was wondering if you could just quantify that mix shift, maybe how many incremental tons of low vol, would you be able to send, export next year? Thank you.

Charles Andrew Eidson: Yes. Good morning, I will field that 1 over to Daniel. That 1's definitely. he is got the numbers at his fingertips there.

Daniel E. Horn: Thanks Andy and hey Nick. Well, let's start by saying that the high vol that moved into domestic market that. that is coal that is a little, let's say, little lower value coal and you know, that was reflected in the overall comments that we have there and the pricing. But as we ramp up the low vol mine, our new Wildcat mine, it is kind of dynamic So you cannot really compare our portfolio in 2020 to what it is gonna look like in 2027. So as Wildcat ramps up, we will have more low vol available. And broadly speaking, that is at this moment, that is all available for the seaborne market. We have had a lot of interest in the domestic market too. As it ramps up. But I will not give you a number, but it is several hundred thousand tons at least that would be available to go seaborne easily. As well as our usual mix of high vol and quite a bit of medium vol. Which is always sought after.

Nick Giles: Got it. Okay. No. Thanks for that, Daniel. I mean, any sense for how much of that would be PLV linked? Or I guess, kind of what do the commercial discussions look like today in terms of getting more tons sold on the PLV basis?

Daniel E. Horn: Yes, I do not have -- I will say this, there is quite a bit of interest from customers that we would sell against the Aussie, but I cannot quantify that. It. The wildcat coal is a premium coal that will achieve a premium to a lot of other US low vols, we think. So whether we sell it against an Aussie index or a you know, very strongly against the US East Coast index. I mean, we are we are happy. We focus on the net return, not, you know, not just the index. Makes sense.

Nick Giles: No. I appreciate that. Maybe just shifting gears to the stacker reclaimer. it is good to hear that, you know, you feel like that is fully covered from an insurance perspective. But how should we think about the timing of those insurance reimbursements versus any capital outlays that may be required or said differently, or said differently, is there a scenario where you might have to invest in the new stacker reclaimer and kind of wait a few quarters for the insurance reimbursements to come in?

Charles Andrew Eidson: Yeah. I think it is probably a little too early to comment on that 1, Nick. You know, I do not expect there to be too much of a sequencing problem from that respect, certainly not a multi quarter type of reimbursement gap. Obviously, you may have a few weeks or a few months, but you know, we are we are pretty pleased with how our insurance or how DTA's insurance carrier has responded thus far. They have been very helpful in and constructive in helping us move along this process relatively quickly. So yeah, I do not expect an impact, but, again, it is it is probably too early in the process to be making too many prognostications there. Okay. No. Fair enough, Andy. Just 1 last 1 for me on the capital allocation front. Would just be good to get an update on what you are seeing among your kind of smaller peers in Central App. Are there any opportunities out there to pick up some tons at a discount? Or have you heard any rumblings of kind of more capacity that is come offline? Really not in a position to comment on any of those folks. I mean, they will they will have to speak for themselves. there is as we have always taken the position, we look at anything and everything. We want things to be a good strategic fit. If things are available, we want it to be either. Well, not either, but a combination of geographically synergistic, quality synergistic, and an accretive from a financial standpoint. And those boxes, all 3 boxes are kinda hard to check right now. When you look around the chessboard. But there are some things out there that we can look at. But again, we are we are really focused on managing our own portfolio, particularly in a market like this, making sure that we are optimizing our outcomes and optimizing both the productivity and the profitability of the portfolio. Okay. Well, guys, I appreciate the update. And continue best of luck.

Daniel E. Horn: Thanks, Nick.

Operator: Our next question comes from Nathan Martin with Stonix. Your line is now live.

Nathan Martin: Thanks, operator. Good morning, everyone. I had a question on DTA as well. I mean, just given the fact that you said the repair replacement time line could be extended into a year or 2, Just curious, do you see any opportunity to improve logistics or, you know, lower logistics, transportation, or port costs in the meantime?

Charles Andrew Eidson: In the meantime, before we get to a repair at DTA, probably not. I mean, that is more of a focus on just getting the tons moved where we can as the best we can. On the other side of DTA and during the repair, could there be some opportunities? Yeah. I mean, anytime you are looking at older equipment that is gonna have to be replaced for any reason, you are gonna. You hope to find some opportunities to, to improve things and, know, whether it is from a throughput capacity standpoint or from a cost reduction. So but that will that is for future conversations as we actually get into the nuts and bolts of mechanically fixing and replacing the SR.

Nathan Martin: Alright. Understood, Andy. Appreciate that. And maybe looking at CapEx, for 2027 guidance, while roughly flat year over year. I noticed an updated slide in your deck with kind of the breakdown there, but if you can provide a little more detail around the development projects you plan to spend capital on in 2027 because I see that is kind of ticked up a little bit there.

Charles Andrew Eidson: Yeah. I mean, some of that is related to existing operations. We do have some refuse impoundment needs in Virginia that will obviously extend the lives and help with managing the waste cost at the McClure and Report prep plant where Deep Mine 41 Is handled. So that is that is obviously something that we are very focused on. Likewise, some potential work at the Keppler Prep Plant where Roadfork 52 reports and, you know, Roadfork 52, Deep Mine 41, definitely being at the top of our list as far as the portfolio mines that we have. You know, any development or any other development, we are, you know, looking at other. Or kind of our next projects. Which are a little bit longer dated, you know, a couple 3 years out. Just do a little bit of, perspective work there, not necessarily committing to a project, but making sure things are moving to the extent where if we wanna pursue a project, we are not losing any time. So not a whole lot to report on that just yet.

Nathan Martin: Alright. Appreciate that. And then maybe final question for Daniel. Daniel, how should we think about the quality mix of what you guys have left to sell here for 2026? I think you are roughly 80% committed and priced at the midpoint of guidance. So seemingly a few tons left to put to bed. I mean, how should we think about that, you know, as we head to the end of the year?

Daniel E. Horn: Yeah, Nate. Probably, probably the typical blend, maybe a little heavier with the low vol is Wildcat Ram up, we are producing a little more of that. So I do not think probably the same roughly blend. Still a fair bit of high vol, maybe and then maybe, you know, the rest mid and low. Something like that. Alright. Great. But again, with more low vol. it is. But going forward. I am sorry. Going forward more low, you know, our plan is that it will happen that we are gonna have more low vol in our mix and more medium vol as we go forward. That. that is certainly the plan and we will burn less high vol. But the rest of the year is pretty well known. it is right in front of us.

Nathan Martin: Yeah. Alright. Understood. Appreciate the time. Good luck in the fourth quarter.

Daniel E. Horn: Thank you. Thanks, Nate.

Operator: We have reached the end of the question and answer session. I would now turn the call over to Andy Eidson for closing remarks.

Charles Andrew Eidson: Well, thanks everyone for dialing into the call and checking in online. We appreciate your interest in Alpha, and we hope you all have a great weekend.

Operator: This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.