Alpha Metallurgical Resources, Inc. (AMR) Earnings Call Transcript & Summary

Greetings, and welcome to the Alpha Metallurgical Resources Second Quarter 2026 Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Emily O'Quinn, Senior Vice President, Investor Relations and Communications. You may now begin.

Thank you, Rob, and good morning, everyone. Before we get started, let me remind you that during our prepared remarks, our comments regarding anticipated business and financial performance 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 second quarter 2026 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'm 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, Dan Horn. Following our prepared remarks, we will be available to answer questions. With that, I'll turn the call over to Andy.

Thanks, Emily. Good morning, everyone. Today, we released our definitive second quarter financial results, which included adjusted EBITDA of $25.6 million and 3.5 million tons shipped. We closed out the first half of 2026 with fewer tons shipped and higher costs than expected. Given our performance to date and our outlook for the rest of the year, we recently issued new guidance ranges for shipment volumes and cost of coal sales. Looking at the cost first, we increased our midpoint of guidance by $7 per ton as compared to our early estimations. . This increase is largely due to higher costs on supplies and materials, including diesel. As we communicated last quarter, the impact of the Iran war has resulted in dramatic fluctuations and significant increases to our diesel spend. Other mining supplies have also increased in cost. We're projecting the need to spread these elevated costs across slightly fewer tons overall for the year, and all of these factors are incorporated in our new cost guidance range of $103 to $107 per ton. In terms of sales volumes, we brought down the midpoint of the guidance by 1 million tons for the year as compared to our initial expectations. Several factors informed our decision-making care, including continued net market weakness. The new range of 14.2 million to 15.4 million tons not only incorporates our lighter-than-usual shipment performance in the first half, but it also accounts for a reduced efficiency rate at DTA. As we previously announced, 1 of the 2 stacker reclaimer machines at DTA sustained significant damage during a storm on June 14. High winds reached over 80 miles per hour during the weather event, resulting in significant harm to the machine. The team at DTA has been exceptional working diligently to safely and resourcefully keep as much coal moving through the terminal as possible while simultaneously working through various processes with third-party equipment providers, structural engineers and the terminals insurance carrier. DTA has also filed an insurance claim because of the storm damage. The plans for returning the terminal to full operational capacity in on many processes that are still underway, so we don't have a definitive time line to share just yet. We remain engaged in discussions with our partners at Core Natural Resources and DTA's leadership as appropriate to help advance those processes and gain clarity on the path ahead. In the meantime, we're very pleased with their efforts to keep the coal moving and expect to be able to mitigate isolated delays in coal handling that will normally been accomplished by the damaged stacker reclaimer. Our new shipment guidance rate, for example, contemplates a continuation of the currently reduced operational capacity to DTA. It also reflects our ability to utilize throughput availability at other East Coast terminals. In summary, we're appreciative of DTA leadership in the way they have quickly established alternate workflows to maximize the terminal's capabilities under these unfortunate circumstances. We will provide updates as appropriate once longer-term plans are solidified. Our views on the met coal markets remain largely unchanged since last quarter as we continue to see weakness driven by sluggish global steel demand. The U.S. East Coast indexes have hardly moved and in recent weeks, the Australian POP has begun to retreat. With its latest movement, the spread between Aussie PLV and U.S. East Coast lowball has tightened with the POV roughly 14% higher than U.S. East Coast lowball as compared to about 23% higher when we announced first quarter earnings in May. The further $32 drop from U.S. East Coast low ball down to East Coast High Vol A sits at about 20% as compared to 22% a quarter ago. We continue to believe that this is unsustainable. As I wrap up my prepared remarks, I want to congratulate several of our West Virginia operations on the recognition by the Home Safety Association. 13 of our mines, plants and docs were given awards for their outstanding performance in 2025. Additionally, our outstanding mine rescue teams have brought home top honors in numerous category competitions as well as overall championships in 2 Mine Rescue contest this summer. We're proud of your accomplishments and grateful for your commitment to this important work. I'll now turn the call over to Todd for a review of our second quarter financial results.

Thanks, Andy. Adjusted EBITDA for the second quarter was $25.6 million, down from $30 million in the first quarter. We sold 3.5 million tons in Q2, down from 3.6 million tons in Q1. Met segment realizations decreased quarter-over-quarter with an average realization of $118.71 in the second quarter compared to $124.39 in the first quarter. Export met tons priced against Atlantic ENCs and other pricing mechanisms in the second quarter realized $109.08 per ton while export coal priced on the Australian indices realized $143.82 per ton. These results are compared to realizations of $110.32 per ton and $144.95, respectively, in the first quarter. Realization for our metallurgical sales in the second quarter was a total weighted average of $124.30 per ton down from $128.40 per ton in Q1. Realizations in the incidental thermal portion of the met segment increased to $79.36 per ton in the second quarter, up from $69.41 per ton in Q1. Cost of coal sales for our met segment decreased to $103.7 per ton in Q2 and down from $107.98 per ton in the first quarter. For the second quarter, SG&A, excluding noncash stock compensation and nonrecurring items, increased to $13.7 million as compared to $13.5 million in the first quarter. Moving to the balance sheet and cash flows. As of June 30, we had $307.6 million in unrestricted cash and $30.9 million in short-term investments as compared to $317.2 million of unrestricted cash and $49.6 million in short-term investments as of March 31. We had $184.3 million in unused availability under our ABL at the end of the second quarter, partially offset by a minimum required liquidity of $75 million. As of the end of June, Alpha had total liquidity of $447.8 million, down from $476.2 million at the end of March. CapEx second quarter was $45.1 million, up from $40.7 million in Q1. Cash provided by operating activities was $39.9 million in the second quarter, up from $29 million in the first quarter. As of June 30, our ABL facility had no borrowings and $40.7 million of letters of credit outstanding. In terms of our committed position for 2026 at the midpoint of guidance, 70% of our metallurgical tonnage in the met segment is committed and priced at an average price of $128.17, another 30% of our met tonnage for the year is committed, but not yet priced. The thermal byproduct portion of the Med segment is fully committed and priced at the midpoint of guidance at an average price of $75.94. From a market perspective, metallurgical coal markets were subdued in the second quarter. Continued uncertainty and volatility resulting from the war in Iran, and broader global economic conditions influenced markets alongside persistently weak steel demand. The Australian PLV index increased from $236.80 per metric ton on April 1 to $243.50 on June 30. U.S. East Coast low-vol index dropped from $195 per metric ton in early April to $190 by the end of June. The U.S. East Coast High Vol Index decreased from $159.50 per metric ton at the beginning of the quarter to $157 at the quarter's close. And the U.S. East Coast Hal B index declined from $149.50 per metric ton to $147 at the end of the quarter. Since then, the Australian premium low vol index has decreased to $214.30 per metric ton as of August 6, representing a drop of roughly 12% since quarter close. The U.S. East Coast indices are stagnant with low vol at $188 per ton, virtually flat to the quarter end level. The U.S. East Coast High-Vol A and HLB indices are also largely unchanged from quarter close at $156 and $146.50 per ton, respectively, as of August 6. In the seaborne thermal market, the API2 index was $117.80 per metric ton at the beginning of April, decreased to $115.65 at the end of June. Since then, the API2 index is roughly flat at $115.75 as of August 6. With that, operator, we are now ready to open the call for questions.

[Operator Instructions] First question comes from Nick Giles with B. Riley Securities.

Maybe first just on DTA. It sounds like there is still a fair few unknowns, but -- just curious how you might quantify the kind of optimization that you can achieve with just 1 stacker reclaimer -- and how much of that optimization could we see show up in maybe 3Q versus further improvements in 4Q as kind of temporary fixes are installed, if you will.

Nick, it's Andy. Yes. I think the folks at Court did a pretty good job answering this question yesterday. And we'll -- our view is exactly the same. There's a lot of moving parts here up to and including insurance settlements and really engineering work. If you've ever been to DTA and you just see the scale and the size of these machines and the amount of damage that is sustained it's a pretty big undertaking to figure this out and try to optimize. So I can't give you any specifics. But again, I think our revised guidance covers what we believe we can accomplish. Hopefully, there may be a little bit of upside to that, but a lot of it is going to depend on how quickly we can get just the logistics worked out and moving the damaged SR off of the current plot, moving it over to a yard where it can be disassembled and we can start to work on just clearing out the space so we can start moving pieces around. But the team down there has done a fantastic job handling the situation and keeping us as efficient as possible. But -- we are -- I mean, we are seeing some reduced efficiency and some throughput. But as I said, that's all reflected in our guidance for the rest of the year.

Understood. And sorry to stay on the topic. But just -- do you have any initial sense for if there was 100% utilization with both stacker reclaimers kind of what utilization you could achieve with just 1 as we look out to 2027.

No. I mean that's an unanswerable question, Nick. We don't have any plans to contemplate it that way. We're devising those as we go. So yes, really it's going to be a while before I could tell you that. .

Understood. No, fair enough. Maybe just switching gears on the cost side, costs are obviously impacted from DTA and from the kind of higher diesel prices as well. But are there any -- are there any areas where you're seeing relief for any kind of further efforts that you can do operationally just to drive costs lower?

Yes, we are. I mean, right now, it's more just looking at the portfolio. And obviously, the guidance reduction was looking at, whether it's something as simple as schedule changes versus surface mines are easier to ramp up or ramp down based on the situation. So we're continuing to look through that and see what tons are most at risk. And it's not always just about cost. It's about margin. That's the number that we're worried about. So if you got a low-cost mine that is achieving a very low realization then it needs to be at risk rather than something that's higher cost but achieves higher margins. So -- we continue to go through that and evaluate the portfolio to see what other actions that could be taken. And of course, Jason and his team always have a couple of tricks up their sleeve as far as identifying efficiencies or areas where costs can be taken out. So we'll just let that develop as the rest of the year moves on.

[Operator Instructions] Our next question comes from Nathan Martin with the benchmark company.

Hoping we can get your thoughts on shipping cadence for the balance of the year. What gets you to the higher low end of your new guidance? And then how long does the shipment guidance assume the damage PTA stacker reclaimer remains out of commission.

Well, by the way, I'll take those in reverse order. Obviously, our guidance runs through the end of the year. So that's the assumption. And -- as far as the cadence, I would -- I mean if you take just the pro rata for the back half of the year and look at our typical seasonal trends between Q3 and Q4, I think that would probably apply. And there's been a little bit of back and forth -- the timing could get us. We are in concert with this market. We're seeing some of our customers pushing back on some cargoes. So that could flip about from 1 quarter into the next. But I think generally speaking, our seasonal trend will probably still apply just as at a lower overall rate.

Appreciate that, Andy, that's helpful. And then maybe a question for Dan. I noticed in your updated committed and priced cable. The domestic tonnage decline, I think, to $3.8 million from $4.1 million previously. First, I was just hoping to get some color on that.

Yes, Nate, this is Dan. The domestic piece, we had some customers that had some optionality built in there, some options they can declare not to clarity. Some of those were not declared. But generally speaking, we're shipping more or less what we thought. That happens most every year. There's some optionality built into our domestic contracts that as the year progresses, they either nominate them or don't nominate them. And this year, they didn't nominate them. So that's the main reason.

Got it. And that makes sense. I appreciate that. And then when I have you, it looks like you guys still have about 30% of your met tons that are committed, but still unpriced. How should we think about the quality mix of what you guys have left to sell for the year? And which markets do you expect those committed tons to move into?