Enviri Corporation Reports First Quarter 2024 Results
Harsco Corporation (NYSE: NVRI)
- Harsco Rail Now Reported Within Continuing Operations As Sales Process is Paused
- First Quarter Revenues Totaled $600 Million, an Increase of 7 Percent Over the Prior-Year Quarter
- Q1 GAAP Operating Income of $26 Million
- Adjusted EBITDA in Q1 Totaled $78 million, an Increase of 19 Percent Over the Prior-Year Quarter
- Harsco Environmental and Clean Earth Adjusted Earnings Growth (Year-on-Year) Exceeded Prior Guidance for the Quarter
- 2024 Adjusted EBITDA Now Expected to be Within Range of $325 Million and $342 Million Including Harsco Rail
PHILADELPHIA (May 2, 2024) - Enviri Corporation (NYSE: NVRI) today reported first quarter 2024 results. Revenues in the first quarter of 2024 totaled $600 million, an increase of 7 percent compared with the comparable quarter in 2023. GAAP operating income from continuing operations for the first quarter of 2024 was $26 million and Adjusted EBITDA was $78 million in the quarter, an increase of 19 percent over the prior-year quarter.
On a U.S. GAAP ("GAAP") basis, the first quarter of 2024 diluted loss per share from continuing operations was $0.21, after strategic expenses and a long-lived asset adjustment in Harsco Rail. The adjusted diluted loss per share from continuing operations in the first quarter of 2024 was $0.03. These figures compare with first quarter of 2023 GAAP diluted loss per share from continuing operations of $0.11, including a net gain on a lease to relocate a site, and adjusted diluted loss per share from continuing operations of $0.10.
“Enviri delivered another quarter of strong performance, as we continue to benefit from firm demand for our environmental solutions and solid execution by our team,” said Enviri Chairman and CEO Nick Grasberger. “Our results were supported by healthy underlying volumes in key end-markets and favorable cost performance relative to our earlier expectations, supported by internal efficiency initiatives. We expect that business performance will remain strong in the coming quarters and our 2024 outlook for Clean Earth and Harsco Environmental (cash earnings and cash flow) remains largely consistent with the guidance provided in February."
“While Enviri continues to pursue a strategy focused on environmental solutions, we have announced we're including Rail again within continuing operations. Rail’s performance has improved in recent quarters following significant internal improvements and the Board determined that a divestiture at this time would not maximize shareholder value. Our 2024 outlook for Rail is also positive, and we anticipate its earnings and cash flows will strengthen in the future as we work to further simplify and de-risk the business. We will continue to optimize our portfolio and believe that executing on our strategic initiatives, along with our focus on deleveraging and stronger cash flow, will create increased value for shareholders.”
Consolidated First Quarter Operating Results
Consolidated revenues from continuing operations were $600 million, an increase of 7 percent compared with the prior-year quarter. Each of the Company's business segments realized an increase in revenues compared to the first quarter of 2023. Foreign currency translation negatively impacted first quarter 2024 revenues by approximately $2 million compared with the prior-year period.
The Company's GAAP operating income from continuing operations was $26 million for the first quarter of 2024, compared with GAAP operating income of $32 million in the same quarter of 2023. Meanwhile, adjusted EBITDA totaled $78 million in the first quarter of 2024 versus $66 million in the first quarter of the prior year, an increase of 19 percent, with this increase driven by performance in the Harsco Environmental and Clean Earth segments.
Harsco Environmental revenues totaled $299 million in the first quarter of 2024, an increase of 9 percent compared with the prior-year quarter. This increase is attributable to higher services and products demand and price increases. The segment's GAAP operating income and adjusted EBITDA totaled $20 million and $49 million, respectively, in the first quarter of 2024. These figures compare with GAAP operating earnings of $22 million and adjusted EBITDA of $44 million in the prior-year period. The year-on-year increase in adjusted earnings of 12 percent reflects the above mentioned impacts, partially offset by related compensation and other spending as well as currency impacts. As a result, Harsco Environmental's adjusted EBITDA margin increased to 16.5 percent in the first quarter of 2024 versus 16.1 percent in the comparable quarter of 2023.
Clean Earth revenues totaled $226 million in the first quarter of 2024, a 2 percent increase over the prior-year quarter as a result mainly of higher services pricing. The segment's GAAP operating income was $21 million and adjusted EBITDA was $34 million in the first quarter of 2024. These figures compare with GAAP operating income of $16 million and adjusted EBITDA of $27 million in the prior-year period. The year-on-year improvement in adjusted earnings of 25 percent reflects higher pricing as well as internal efficiency initiatives. As a result, Clean Earth's adjusted EBITDA margin increased to 15.1 percent in the first quarter of 2024 versus 12.3 percent in the comparable quarter of 2023.
Harsco Rail revenues totaled $75 million in the first quarter of 2024, a 16% increase over the prior-year quarter. This change is principally due to higher equipment and contracting services demand, partially offset by lower aftermarket volumes. The segment's GAAP operating loss was $9 million and adjusted EBITDA was $2 million in the first quarter of 2024. These figures compare with GAAP operating income and adjusted EBITDA of $2 million in the prior-year period. The year-on-year change in adjusted earnings reflects the above mentioned factors as well as a less-favorable business mix.
Divestiture Process for Harsco Rail
The Company's evaluation of strategic alternatives for Harsco Rail has not yielded a transaction structure and financial terms that are acceptable to Enviri. While the Company received substantial interest for the business over the course of its strategic review process, following a thorough review and evaluation of the proposals, the Board concluded that none of the proposals would maximize value and be in the best interests of the Company or its shareholders.
Harsco Rail is a strong business with market-leading product capabilities. Its core business is performing well, and the outlook is positive. A finite number of large ETO (engineered to order) contracts continue to weigh on Harsco Rail's operations as well as its earnings and cash performance. While there has been substantial progress to stabilize these contracts, further improvements are needed, including through ongoing commercial discussions which are expected in the coming quarters. Realizing these and other improvements are a priority for the business, and Enviri is committed to evaluating the strategic direction for Harsco Rail in the future, as appropriate.
Net cash provided by operating activities was $1 million in the first quarter of 2024, compared with net cash provided by operating activities of $37 million in the prior-year period. Adjusted free cash flow was $(17) million in the first quarter of 2024, compared with $16 million in the prior-year period. The change in adjusted free cash flow compared with the prior-year quarter is attributable to the timing of incentive compensation payments and working capital movements.
2024 Outlook
The Company's 2024 guidance continues to point to earnings growth compared with 2023, with this outlook supported by stable economic conditions as well as internal growth and improvement initiatives. Relative to prior guidance in February, this outlook now incorporates Harsco Rail. In addition, it reflects an improved outlook for Clean Earth as a result of greater business visibility and lower operating costs. These impacts are partially offset by a revised outlook for Harsco Environmental, where an improved underlying operating result for the year is offset by negative currency effects compared to February guidance and the sale of Performix Metallurgical Additives on April 1.
Key business drivers for each segment as well as other 2024 guidance details are below (prior period segment information including Harsco Rail within Continuing Operations is included in this press release):
Harsco Environmental adjusted EBITDA is projected to be comparable with prior-year results. Higher services volumes and pricing, site improvement initiatives and new contracts are expected to be partially offset by lower commodities, currency impacts and certain product volumes as well as personnel investments and the sale of Performix.
Clean Earth adjusted EBITDA is expected to increase versus 2023 as a result of higher services pricing (net of inflation), efficiency initiatives and higher volumes, offsetting the impacts of a less favorable project-related business mix as well as certain other 2023 items not repeating (Stericycle settlement).
Harsco Rail adjusted EBITDA is expected to increase versus 2023 as a result of higher demand and pricing for standard equipment offerings, technology products and contracted services, partially offset by lower contributions from aftermarket parts (volume and product mix driven).
Corporate spending is anticipated to be comparable with 2023 (considers that a portion of Corporate costs are again allocated to Harsco Rail in both periods).
Conference Call
The Company will hold a conference call today at 9:00 a.m. Eastern Time to discuss its results and respond to questions from the investment community. Those who wish to listen to the conference call webcast should visit the Investor Relations section of the Company’s website at www.enviri.com. The live call also can be accessed by dialing (833) 630-1956, or (412) 317-1837 for international callers. Please ask to join the Enviri Corporation call. Listeners are advised to dial in approximately ten minutes prior to the call. If you are unable to listen to the live call, the webcast will be archived on the Company’s website.
Forward-Looking Statements
The nature of the Company's business, together with the number of countries in which it operates, subject it to changing economic, competitive, regulatory and technological conditions, risks and uncertainties. In accordance with the "safe harbor" provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, the Company provides the following cautionary remarks regarding important factors that, among others, could cause future results to differ materially from the results contemplated by forward-looking statements, including the expectations and assumptions expressed or implied herein. Forward-looking statements contained herein could include, among other things, statements about management's confidence in and strategies for performance; expectations for new and existing products, technologies and opportunities; and expectations regarding growth, sales, cash flows, and earnings. Forward-looking statements can be identified by the use of such terms as "may," "could," "expect," "anticipate," "intend," "believe," "likely," "estimate," "outlook," "plan," "contemplate," "project" or other comparable terms.
Factors that could cause actual results to differ, perhaps materially, from those implied by forward-looking statements include, but are not limited to: (1) the Company's ability to successfully enter into new contracts and complete new acquisitions, divestitures, or strategic ventures in the time-frame contemplated or at all, including the Company's ability to divest the Rail business; (2) the Company’s inability to comply with applicable environmental laws and regulations; (3) the Company’s inability to obtain, renew, or maintain compliance with its operating permits or license agreements; (4) various economic, business, and regulatory risks associated with the waste management industry; (5) the seasonal nature of the Company's business; (6) risks caused by customer concentration, the long-term nature of customer contracts, and the competitive nature of the industries in which the Company operates; (7) the outcome of any disputes with customers, contractors and subcontractors; (8) the financial condition of the Company's customers, including the ability of customers (especially those that may be highly leveraged or have inadequate liquidity) to maintain their credit availability; (9) higher than expected claims under the Company’s insurance policies, or losses that are uninsurable or that exceed existing insurance coverage; (10) market and competitive changes, including pricing pressures, market demand and acceptance for new products, services and technologies; changes in currency exchange rates, interest rates, commodity and fuel costs and capital costs; (11) the Company's ability to negotiate, complete, and integrate strategic transactions and joint ventures with strategic partners; (12) the Company’s ability to effectively retain key management and employees, including due to unanticipated changes to demand for the Company’s services, disruptions associated with labor disputes, and increased operating costs associated with union organizations; (13) the Company's inability or failure to protect its intellectual property rights from infringement in one or more of the many countries in which the Company operates; (14) failure to effectively prevent, detect or recover from breaches in the Company's cybersecurity infrastructure; (15) changes in the worldwide business environment in which the Company operates, including changes in general economic and industry conditions and cyclical slowdowns; (16) fluctuations in exchange rates between the U.S. dollar and other currencies in which the Company conducts business; (17) unforeseen business disruptions in one or more of the many countries in which the Company operates due to changes in economic conditions, changes in governmental laws and regulations, including environmental, occupational health and safety, tax and import tariff standards and amounts; political instability, civil disobedience, armed hostilities, public health issues or other calamities; (18) liability for and implementation of environmental remediation matters; (19) product liability and warranty claims associated with the Company’s operations; (20) the Company’s ability to comply with financial covenants and obligations to financial counterparties; (21) the Company’s outstanding indebtedness and exposure to derivative financial instruments that may be impacted by, among other factors, changes in interest rates; (22) tax liabilities and changes in tax laws; (23) changes in the performance of equity and bond markets that could affect, among other things, the valuation of the assets in the Company's pension plans and the accounting for pension assets, liabilities and expenses; (24) risk and uncertainty associated with intangible assets; and the other risk factors listed from time to time in the Company's SEC reports. A further discussion of these, along with other potential risk factors, can be found in Part I, Item 1A, “Risk Factors” of the Company’s most recently filed Annual Report on Form 10-K, as updated by subsequent Quarterly Reports on Form 10-Q, which are filed with the Securities and Exchange Commission. The Company cautions that these factors may not be exhaustive and that many of these factors are beyond the Company's ability to control or predict. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. The Company undertakes no duty to update forward-looking statements except as may be required by law.
NON-GAAP MEASURES
Measurements of financial performance not calculated in accordance with GAAP should be considered as supplements to, and not substitutes for, performance measurements calculated or derived in accordance with GAAP. Any such measures are not necessarily comparable to other similarly-titled measurements employed by other companies. The most comparable GAAP measures are included within the definitions below and reconciliations of these non-GAAP measures to the most directly comparable GAAP financial measures are included at the end of this press release.
Adjusted diluted earnings per share from continuing operations: Adjusted diluted earnings (loss) per share from continuing operations is a non-GAAP financial measure and consists of diluted earnings (loss) per share from continuing operations adjusted for unusual items and acquisition-related intangible asset amortization expense. It is important to note that such intangible assets contribute to revenue generation and that intangible asset amortization related to past acquisitions will recur in future periods until such intangible assets have been fully amortized. The Company’s management believes Adjusted diluted earnings per share from continuing operations is useful to investors because it provides an overall understanding of the Company’s historical and future prospects. Exclusion of unusual items permits evaluation and comparison of results for the Company’s core business operations, and it is on this basis that management internally assesses the Company’s performance. Exclusion of acquisition-related intangible asset amortization expense, the amount of which can vary by the timing, size and nature of the Company’s acquisitions, facilitates more consistent internal comparisons of operating results over time between the Company’s newly acquired and long-held businesses, and comparisons with both acquisitive and non-acquisitive peer companies.
Adjusted EBITDA: Adjusted EBITDA is a non-GAAP financial measure and consists of income (loss) from continuing operations adjusted to add back income tax expense; equity income of unconsolidated entities, net; net interest expense; defined benefit pension income (expense); facility fees and debt-related income (expense); and depreciation and amortization (excluding amortization of deferred financing costs); and excludes unusual items. Segment Adjusted EBITDA consists of operating income from continuing operations adjusted to exclude unusual items and add back depreciation and amortization (excluding amortization of deferred financing costs). The sum of the Segments’ Adjusted EBITDA and Corporate Adjusted EBITDA equals consolidated Adjusted EBITDA. The Company‘s management believes Adjusted EBITDA is meaningful to investors because management reviews Adjusted EBITDA in assessing and evaluating performance.
Adjusted free cash flow: Adjusted free cash flow is a non-GAAP financial measure and consists of net cash provided (used) by operating activities less capital expenditures and expenditures for intangible assets; and plus capital expenditures for strategic ventures, total proceeds from sales of assets and certain transaction-related / debt-refinancing expenditures. The Company's management believes that Adjusted free cash flow is important to management and useful to investors as a supplemental measure as it indicates the cash flow available for working capital needs, repay debt obligations, invest in future growth through new business development activities, conduct strategic acquisitions or other uses of cash. It is important to note that Adjusted free cash flow does not represent the total residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements and settlements of foreign currency forward exchange contracts, are not deducted from this measure. This presentation provides a basis for comparison of ongoing operations and prospects.
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About Enviri
Enviri is transforming the world to green, as a trusted global leader in providing a broad range of environmental services and related innovative solutions. The company serves a diverse customer base by offering critical recycle and reuse solutions for their waste streams, enabling customers to address their most complex environmental challenges and to achieve their sustainability goals. Enviri is based in Philadelphia, Pennsylvania and operates in more than 150 locations in over 30 countries. Additional information can be found at www.enviri.com.