Good afternoon, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Clearwater paper fourth quarter and full year 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question to answer this session. If you would like to ask a question during this time, simply press the star button followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. I would now like to turn the call over to Sloan Bowen, Head of Investor Relations. Please go ahead.

Thank you, Kelvin. Good afternoon, and thank you for joining Clearwater Papers' fourth quarter 2024 earnings conference call. Joining me on the call today are Arson Kitsch, President and Chief Executive Officer, and Sherry Baker, Senior Vice President and Chief Financial Officer. Financial results for the fourth quarter of 2024 were released shortly after today's market close you will find a presentation of supplemental information including a slide providing the company's current outlook posted on the investor relations page of our website at clearwaterpaper.com additionally we will be providing certain non-gap financial information in this afternoon's discussion a reconciliation of the non-gap information to comparable gap information is included in the press release and in the supplemental information provided on our website please note slide two of the supplemental information covering forward-looking statements Rather than reading this slide, we'll incorporate it by referencing to our prepared remarks. And with that, let me turn the call over to Arsene.

Thank you for joining us, and good afternoon. I'm going to structure my remarks today across three key areas. First, I'll provide a summary of our major strategic accomplishments in 2024. Next, I'll discuss our fourth quarter performance, including our perspective on current industry conditions. And lastly, I will outline our near- and long-term priorities, including actions that we're taking to reduce our cost structure. I will then turn the call over to Sherry to provide additional details on our fourth quarter and full-year results, as well as our outlook for 2025. Let's start with an overview of our strategic accomplishments in 2024. We announced the planned acquisition of the Augusta paperboard facility in February of last year. This was our first major step to transform Clearwater to premier independent paperboard packaging supplier in North America. The Augusta acquisition increased our paperboard capacity by around 70% and improved our geographic footprint. We closed the transaction on May 1st and are well on track to integrate the Augusta mill into our network. We believe that this acquisition can contribute 140 to 150 million dollars of annual adjusted EBITDA to Clearwater once we capture volume synergies and assuming the industry returns to normalized cross-cycle utilization levels. Within three short months of closing on the Augusta acquisition we announced the planned sale of our tissue business for 1.06 billion dollars. Our team worked tirelessly over the last several years to improve our tissue business leading to this outstanding outcome for Clearwater. We completed the sale on November 1st and utilized the net proceeds to significantly deliver our balance sheet. These two deals transform Clearwater and position our company for future growth in paperboard. I'm very proud of our team for these tremendous accomplishments in such a short period of time and look forward to the next chapter of our story. Let me now turn the focus to our performance in the fourth quarter. We delivered $21 million of adjusted EBITDA across total operations, which included one month of discontinued operations from our tissue business. The quarter was impacted by Hurricane Helene, particularly operations at our Augusta facility. The mill suffered some damage, which was then followed by a planned major maintenance outage that took place within a few weeks of the hurricane. These events created a very challenging operating environment, which led to higher costs and operational disruptions. The Augusta team did an outstanding job at recovering, and the mill was back on track as of year-end. As we've discussed throughout 2024, while market demand has continued to gradually improve, the industry continued to operate with utilization rates below historical averages, resulting in lower market pricing and margin pressure. Lastly, our board authorized a new $100 million share repurchase program, and we repurchased approximately nine million dollars of our shares through February 7th of this year. Let me now provide some comments on market and industry conditions. Let's start with demand. Based on AFMPA data, industry shipments increased by four percent in 2024 versus 2023. Demand is further projected to grow by three to five percent in 2025, based on various industry publications returning to pre-COVID levels. This supports our view that demand continues to recover, and we're optimistic about the long-term prospects for paperboard packaging. Now let's turn to supply. Industry utilization rates improved in 2024 to 85% versus 82% in 2023. Net exports decreased by approximately 250,000 tons in total, driven by increased global supply and competition. North American capacity remained largely unchanged in 2024, although new industry capacities forecasted to be added in 2025. As we've discussed previously, we believe a balanced market will have utilization rates between 90 and 95%. Let me provide you with an overview of the actions that we're taking to drive revenue growth and reduce our cost structure. We recently signed a major long-term supply agreement with a customer that should help us fill out our open capacity and capture volume synergies from the Augusta acquisition. We expect this volume to gradually ramp over the next several years. We have incorporated this volume into our 2025 assumptions that Sherry will discuss in a moment. In addition, we're taking actions to reduce our cost structure. We're targeting $30 to $40 million in cost savings in 2025 across SG&A and operations. We took a major step in January with a 10% reduction in all positions across the company. This action eliminated more than 200 positions in salaried and hourly roles. We're also targeting spend reductions in other areas, including contractors, professional services, and maintenance. We expect benefits from these initiatives to ramp through the year. We have also incorporated the impact of all these actions in our 2025 outlook. Finally, we continue to explore ways to broaden our product offering to better service our converter customers. We are focused on compostability, increasing the recycled content of our products, and light weighting to name a few. We have product development efforts underway to deliver these solutions to our customers. These are near-term initiatives and we expect that they will require modest capital investments that fit into our overall capital outlook. We're also exploring options to diversify into additional paperboard substrates. This may include beverage carrier grades, white top or recycle board. These are larger and longer term investments that will likely take 24 to 36 months to execute. We're kicking off market studies as well as engineering efforts to explore these options. Let me conclude my comments by reiterating our view of the industry. We operate in an inherently cyclical industry driven by supply and demand. With demand being relatively stable, this balance is greatly impacted by changes in supply. Across the cycle, we would expect utilization rates to average around 90 to 95%, while in an upcycle, these rates can exceed 95% with increasing margins. SBS is currently in a down cycle, which we believe to be a temporary condition until supply and demand come back into balance. As we navigate the current environment, we're focused on actions that are within our control, including improving our operational performance, reducing cost, and strengthening our product offering. With that, let me turn the call over to Sherry for a more in-depth review of our financials.

Thank you, Arson. As Arson mentioned earlier, we delivered $21 million of adjusted EBITDA in the fourth quarter, down from $63 million in the previous year. This decline was driven by two fewer months of contributions from the tissue business which we divested on November 1st. The other sources of the decline were major maintenance expenses at our Augusta mill and lower paperboard pricing. This was partly offset by higher sales and production volumes from the addition of the Augusta mill and lower input costs. As we turn to the full year 2024 adjusted EBITDA from total operations was 182 million down from 281 million in 2023. The change in year-over-year results was predominantly driven by a 90 million impact from lower paperboard pricing. Two fewer months of contribution from the tissue business also lowered our results versus 2023. Partly offsetting these headwinds was additional volume as a result of our Augusta acquisition and some input cost deflation. With the completion of the divestiture of our tissue business, we generated significant value. We recognized a gain on the sale of the business of $307 million in Q4, contributing significantly to our full-year net income. We utilized the approximately $850 million of net proceeds to significantly deliver our balance sheet and meaningfully reduce our debt. For full year 2024, we reduced net debt by $199 million, and as of year-end, we have $275 million of notes outstanding due in 2028 and a net leverage ratio of 1.1 times. Turning to our outlook for the first quarter of 2025. In the first quarter, we expect to deliver $20 to $30 million of adjusted EBITDA. We will not incur planned major maintenance outage costs in the first quarter and will continue to match supply to meet demand we expect approximately four to five million in higher energy costs in the quarter due to higher seasonal pricing and usage this will also be our first full quarter as a paperboard only business with no tissue impact and as arson mentioned we took initial actions to reduce our fixed costs in january including a 10 percent reduction in all positions across the company. We expect the savings from these actions to ramp throughout the year. For full year 2025, we are making the following assumptions. We expect a continued demand recovery, but with utilization rates remaining low as the industry absorbs new capacity that is forecasted to come online beginning in Q2. Our internal utilization rate is projected to be around 85%, with expected revenue of approximately $1.5 to $1.6 billion as we benefit from a full year of incremental Augusta sales volume. We are expecting that improved mill operating performance will offset pricing and inflation headwinds. We are also expecting less impact from weather-related events and other operational disruptions that we experienced in 2024 in addition to improved manufacturing performance we are targeting 30 to 40 million of fixed cost reduction with actions that should translate to an overall 40 to 50 million annual run rate as previously announced we are migrating to an annual major maintenance outage cadence which we believe will lead to smaller less costly and more predictable outages. We expect to incur $40 to $50 million of outage costs, with the bulk of the cost coming from Lewiston in Q3 and Augusta in Q4. We expect capital expenditures of $80 to $90 million, which includes our projected $70 to $80 million of annual maintenance CAPEX, plus additional carryover spend from our large projects that we will complete this year. As Arson noted and we stated last quarter, we remain confident in a market cycle recovery and our ability to deliver mid-cycle margins in the 13% to 14% range with free cash flow conversion of 40% to 50%, which would produce more than $100 million in annual free cash flows. I will close with a brief overview of our capital allocation philosophy. Our first goal is to maintain and improve the performance of our assets, which will require approximately $70 to $80 million of annual maintenance capital. This excludes large strategic or replacement projects, which could add another $10 to $20 million per year on average over the long term. Please note that these additional expenditures are episodic and come in large increments. We will communicate these large projects ahead of time, just like we did with the Recovery Boiler Project in Lewiston and the Emissions Project in Cypress Bend in 2024. for. Second, we aim to maintain a strong balance sheet with a net leverage ratio of one to two times through the cycle. We may temporarily go above or below that range to provide us with strategic flexibility. Third, we aim to return capital to shareholders when it provides a better return than reinvesting in the business.

Let me now turn the call back over to Arson for closing remarks thank you sherry i'll summarize what we are today we completed two major strategic transactions in 2024 that transformed clearwater into paperboard focus company we're now focused on strengthening our position as an independent supplier of paperboard packaging products to north american converters we will look for opportunities to expand our product offering which may include new applications for existing paperboard as well as new substrates we have a well-invested asset base and a strong balance sheet that will help us weather this part of the industry cycle. We remain optimistic about the medium to long-term prospects for our industry and our company. As a result, we expect strong margins and cash flows through the cycle and aim to strategically deploy capital to create long-term shareholder value. Finally, I'd like to thank our people for their efforts to remain focused on operating safely and providing excellent service to our customers during this time of change and transition. I would also like to thank our customers for putting their trust in us and our shareholders for their continued interest. With that, we'll open it up to your questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. At this time, I would like to remind everyone to ask a question. Press the star button followed by the number one on your telephone keypad. We will pause this for a moment to compile the Q&A roster. One moment, please, for your first question. Your first question comes from the line of Matthew McCullough, RBC Capital Market. Please go ahead.

Hi, good afternoon. Thanks for taking my questions.

First, starting with the new agreement you mentioned, recognize that it's supposed to ramp over several years, but are you able to help us get a better sense of how meaningful those incremental volumes could be with time or what the shape of that ramp up curve looks like yeah so we incorporated into our 25 volume assumptions uh this was part of our assumption set that we were contemplating um with the augusta acquisition um so it's going to take several years to ramp but it should provide us with enough volume to fill out our open capacity and capture augusta synergies and matthew if you recall uh when we purchased augusta the mill was approximately 70% full, which provides us with approximately 150 to 200,000 tons of open capacity. So I think it provides you a bit of an idea of what this could look like over the long run.

Okay, that's helpful. And maybe one other kind of cleanup just in your opening remarks there. You talked about you're expecting improving operating performance to help offset the pricing and inflation headwinds, which in your, I think, initial 2025 assumptions, you kind of dimensionalize is $40 million to $50 million year over year. Just wanted to, I guess, make sure I'm understanding moving parts here. Are you expecting, I guess, incremental benefits now versus your initial assumptions around how you run your mill system? Or just wanted to make sure we're thinking about that message in the correct way.

I think there's probably three areas to think about. I think the first area is improving operational performance. As you mentioned, that should offset those price and cost headwinds. I mean, we talked about $40 million to $50 million last quarter. The next set of improvement will come from hopefully fewer disruptions due to the major weather events that we experienced in 2024. hard to predict, but it's also hard to imagine having such two large events like we did last year in Lewiston and Augusta. And the third bucket is the $30 to $40 million of cost reductions that we're pursuing. And we took actions here in January to capture some of those savings. I think those are the three buckets of improvement that we're expecting in 2025 versus 2024.

Thank you. That's very helpful. Maybe sticking with those headcount reductions and other fixed-cost savings, are you expecting much benefit from those initiatives in Q1, or does that really start to show up in Q2?

It would be, I'd say, a modest amount that you'll see in Q1. It'll start to ramp more through Q2 with, I'd say, the bulk of the savings really happening in the second half of the year.

Great. Okay, that's helpful. And then just backing up a little bit here, if the U.S. applies tariffs to Mexico and Canada, and they apply reciprocal tariffs in return, what do you think the impact of the SPS market would be? Or, I mean, SPS and the other grades you consider yourself peeing against. And then how would your thinking change if we also see tariffs on the European Union? Realize there's a lot of moving parts there and a lot of ambiguity, but just any high-level thoughts would be helpful.

Yeah, so let me talk about how it potentially could impact us. You know, we purchased some of our supplies from Canada. Chemicals and pulp would be two good examples. We do do some export into Mexico and a little bit into Canada, so there would be an impact that we would feel, but it would primarily come from higher costs passed on to us from our chemical suppliers, potentially, and pulp suppliers. Our goal in that scenario would be to pass on those cost increases to our customers. But it's hard to predict how all those tariffs and the flows would be impacted by these tariffs. So that's how we think about impact on Clearwater. It's higher cost to us, which we would then pass on to our customers. We're primarily a domestic supplier, so there could be some impact in the global flow of pay-per-board, but it's really hard to predict what that would look like.

Okay, that's fair. And if I could get one more in, obviously, your balance sheet's in a great place now, and I recognize their options are considering that you could have to put some capital against over the medium term, but for the stock is today, do you think you have more room to get aggressive on the share repurchases versus, I think it's $9 million is done since November, or how are you thinking about that option for capital allocation? Thanks.

You know, I think what we've said all along is we'd be opportunistic buyers of our shares, you know, when they trade at a sufficient, you know, discount to what we think our intrinsic value is. Our top priority remains investing in our assets and maintaining a strong balance sheet. And as we see our cash flow generation in 2025, I think we'll make adjustments to the share buyback program. But again, we view this as an investment, but our top two priorities are investing back into our assets to maintain their competitiveness and also to maintain a really strong balance sheet.

Okay, that's great. And if I can do one more, just looking at how demand has started the year here versus maybe where you saw things trend in Q4, any comments on what you're seeing, any differences across, you know, folding carton versus common plates, any other trends to call out here? Thanks.

Yeah, I think this is maybe a little bit anecdotal, but the conversations we're having with our customers are positive. I think they're expecting 25 to be a better year than 24. I would also tell you that some of our food service demand is more robust than our folding carton demand. In fact, we are on several of our machines, on a couple of our machines, we are close to being sold out, especially on what I call extruded products. So think cup. We're essentially being pretty close to being sold out. so it's it really depends on the category but we're seeing some some hopeful signs of demand continue to recover okay great thanks for all the color i'll turn it back great thank you there are no further questions at this time and with that ladies and gentlemen that concludes your conference call.

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