Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the NACCO Industries Third Quarter 2025 Earnings Conference Call. It is now my pleasure to turn the call over to Christy Kmetko with Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us for today's third quarter 2025 earnings call. I'm Christina Kmetko, and I oversee Investor Relations here at NACCO. I'm joined by our President and CEO, J.C. Butler; and our Senior Vice President and Controller, Elizabeth Loveman. Yesterday evening, we released our third quarter results and filed our 10-Q with the SEC. Both are available on our website for your reference. Before we get into the results, let me remind you that today's discussion will include forward-looking statements. As always, actual outcomes could differ materially due to various risks and uncertainties, which are outlined in our earnings release, 10-Q and other filings. We undertake no obligation to update these statements. We'll also be referencing certain non-GAAP metrics to give you a clear picture of how we think about our business. Reconciliations to GAAP can be found in the materials we posted online. Lastly, as a reminder, during the second quarter, we changed the names of our reportable segments. Coal Mining was renamed Utility Coal Mining. North American Mining is now Contract Mining and Minerals Management was renamed Minerals and Royalties. Segment composition and historical reporting are unchanged. With the housekeeping comments complete, I'll turn the call over to J.C. for his opening remarks. J.C.?

Thanks, Christy, and good morning, everyone. I'm happy to report that our third quarter operating profit of almost $7 million improved sequentially from very disappointing second quarter breakeven results. Our Q3 2025 EBITDA increased to $12.5 million, up from $9.3 million in Q2. This sequential increase was driven by improvements in all segments and demonstrates solid progress in growing our businesses and boosting our profitability. I'm pleased we were able to overcome most of last quarter's temporary operational challenges to deliver these solid third quarter results. Our Utility Coal Mining segment is the foundation of our business, anchored by our long-term mining contracts. We continue to have solid demand in our unconsolidated coal mining operations. However, Mississippi Lignite Mining Company's results continue to be impacted by contractual pricing mechanics that are creating a reduced per ton sales price. The team is working diligently to run the mine as efficiently as possible to meet demand while keeping costs at a minimum, but they cannot outrun the contract mechanics. We anticipate that this contractual pricing anomaly will begin to rectify itself as we move into 2026. In our Contract Mining segment, which is operated by North American Mining, tons delivered grew 20% year-over-year and 3% sequentially. Higher customer demand and improved margins at the mining operations led to substantial improvements in both year-over-year and sequential results. These improved results stem in part from contracts negotiated in recent years and other growth initiatives for this business. Our Contract Mining segment is our growth platform for mining and we continue to add long-term contracts to its expanding portfolio. We provide contract mining services for several of the top 10 U.S. producers of aggregates and our expanding pipeline of potential new deals is strong. We believe this positions our Contract Mining segment as a core driver of future growth. Just last week, North American Mining executed a multiyear contract to provide dragline services for an embankment dam construction project in Palm Beach County, Florida, that is expected to be accretive to earnings beginning in Q2 2026. We are excited about this contract as it advances our growth into large-scale infrastructure projects. It also provides an opportunity to showcase the efficiency and environmental advantages of the new electric drive MTECK draglines, a key factor in our selection for the project. These new MTECK draglines enhance efficiency and uptime for our customers. We're an exclusive dealer for MTECK draglines in all the 2 U.S. states. Turning to our Minerals and Royalties segment. Catapult completed a $4.2 million strategic acquisition in July, which expands our mineral interest in the Midland Basin. The acquisition includes a mix of producing wells as well as additional upside opportunities through future development with existing operators in that region. The Catapult team continues to look for additional investment growth opportunities that will be accretive to earnings. Mitigation resources, a strong reputation and clear competitive strengths are supporting continued expansion into new markets. Although the business continues to be variable in performance due to permit and project timing, it is expected to achieve full year profitability in 2026 and more consistent results over time as new projects are secured. Overall, I believe we are well positioned for meaningful growth. Our business model is built on long-term contracts and investments, delivering strong earnings and steady cash flows that will help us deliver compounding annuity-like returns over time. We followed this approach over the last decade and momentum continues to build. That's why I'm confident in these businesses and our ability to deliver solid 2025 fourth quarter operating results with continued progress into 2026 and beyond. Our long-term strategy is laid out in our latest investor presentation. A copy of that presentation is on our website, along with the recording from the end of August when we attended an investor conference in Chicago. In this presentation, we explained how we have built a portfolio of strong businesses focused on compounding growth and we describe our strategies for achieving our long-term target of $150 million of annual EBITDA in the next 5 to 7 years. If you've not seen that presentation, I encourage you to review it after this call. With that, I'll turn the call over to Liz to provide a more detailed view of our financial results and outlook.

Thank you, J.C. I'll start with some high-level comments about our consolidated third quarter financial results compared to 2024. Then I'll discuss the results at our individual segments. Consolidated revenues were $76.6 million, up 24% year-over-year, while gross profit of $10 million improved 38%. While consolidated earnings improved sequentially, as J.C. mentioned, they decreased compared with the prior year third quarter due to the 2024 $13.6 million benefit from business interruption insurance recoveries. Our third quarter 2025 operating profit was $6.8 million, down from $19.7 million last year. Excluding the insurance recovery income, the underlying consolidated operational performance overall was stronger with a net improvement in operating results. Substantial year-over-year operating profit improvements in our Contract Mining and Minerals and Royalties segments more than offset lower results in the Utility Coal Mining segment and an increase in unallocated expenses. We reported third quarter 2025 net income of $13.3 million or $1.78 per share versus $15.6 million or $2.14 per share in 2024. Significant favorable tax effects in the current quarter helped minimize the decline in net income. EBITDA was $12.5 million versus $25.7 million for the same period last year. Moving to the individual segments. At the Utility Coal Mining segment, the decline in operating profit and segment adjusted EBITDA was primarily driven by the 2024 insurance recoveries that I've just mentioned. The underlying Mississippi Lignite Mining Company business results were also affected by a reduced contractually determined per ton sales price in 2025. Looking ahead, we anticipate steady customer demand for the remainder of 2025 and in 2026 at our unconsolidated mining operations. At Mississippi Lignite Mining Company, fourth quarter 2025 results are expected to improve over 2024 due to operational efficiencies. However, this improvement is not expected to offset the effect of the reduction in the 2025 contractually determined per ton sales price, causing Mississippi Lignite Mining Company and the Utility Coal Mining segment's 2025 full year results to decline compared with 2024. We expect improving profitability in 2026, driven by anticipated improvements at Mississippi Lignite Mining Company in both sales price and cost per ton delivered, particularly as the customers' power plant is able to operate more consistently and formula-based pricing improves as expected. In the Contract Mining segment, revenues net of reimbursed costs rose 22%, driven by higher customer demand and increased parts sales. Improved margins at the mining operations and increase of part sales and lower operating expenses led to significant increases in both operating profit and segment adjusted EBITDA. Operational efficiencies, partly offset by elevated operating expenses are expected to lead to improved 2025 fourth quarter profits in the Contract Mining segment with momentum accelerating into 2026. These factors, combined with earnings from the new contract J.C. mentioned, are expected to lead to a significant increase in year-over-year results. At the Minerals and Royalties segment, operating profit and segment adjusted EBITDA increased year-over-year, primarily due to an improvement in earnings from an equity investment and increased royalty revenues, mainly driven by higher natural gas prices. Looking forward, Minerals and Royalties operating profit and segment adjusted EBITDA for the 2025 fourth quarter are expected to decrease compared with 2024, primarily driven by current market expectations for natural gas and oil prices as well as development and production assumptions. While fourth quarter 2025 results are projected to decline, full year operating profit is expected to increase over 2024, excluding a $4.5 million gain on sale recognized in the 2024 second quarter. In 2026, operating profit is expected to increase modestly over 2025 as income from Catapult's newer investments is expected to be mostly offset by reductions in earnings from legacy assets. Overall, we anticipate consolidated operating profit for the 2025 fourth quarter to be comparable to the prior year quarter. Full year operating profit will be lower than 2024 due in part to the 2025 second quarter breakeven results. We're also terminating our pension plan during the fourth quarter, which will simplify our financial structure going forward. While the plan is overfunded, the termination will trigger a noncash settlement charge. The pension settlement charge and lower operating profit are expected to lead to a substantial year-over-year decrease in net income and EBITDA compared with the 2024 fourth quarter and full year. We expect meaningful year-over-year improvements in both operating profit and net income in 2026. From a liquidity standpoint, at September 30, we had total debt outstanding of $80.2 million, down from $95.5 million at June 30 and $99.5 million at December 31, 2024. Our total liquidity was $152 million, which consisted of $52.7 million of cash and $99.3 million of availability under our revolving credit facility. During the quarter, we paid $1.9 million in dividends. And as of September 30, 2025, we had $7.8 million remaining under our $20 million share repurchase program that expires at the end of 2025. We are forecasting up to $44 million in capital spending for the remainder of this year and up to $70 million in 2026. Most of this is earmarked for new business development. As our returns from previous investments start to materialize, we expect cash flows to improve over the prior year. In 2026, we expect cash flows to be comparable to 2025. With that, I'll hand it back to J.C. for closing remarks.

Thanks, Liz. To wrap up, I have a lot of confidence in our trajectory and our future. We are operating in an increasingly favorable environment. There is strong and growing demand for energy and for the products and services that we provide. Recent government support is also helping to strengthen all of our businesses. I believe the building blocks for durable compounding growth at NACCO are firmly in place. Our team is focused on execution, operational discipline and driving long-term returns for shareholders. We remain confident in our ability to deliver sound fourth quarter 2025 operating results with momentum building as we move into 2026. With that, we'll now turn to any questions you may have.

Our first question comes from the line of Doug Weiss with DSW Investments.

So congrats on a good quarter. I guess starting with the Contract Mining segment. If I just look in your financial filings, you ascribed about $200 million of asset value to that segment. So it looks like at the moment, the ROIC is a little below your targets of mid-teens ROIC. I'm just curious, is that a function of how the contracts were priced historically? And going forward, you think you've made changes that will address that? Or are there other factors you would point to?

Yes, that's a great question. I would say there's a bit of timing involved. There are both past and future elements at play. We have assets related to various projects on contracts that are currently operational and generating full profitability. However, there are also assets in that segment that are still in the process of reaching their potential. We've discussed the long-term nature of these projects, which typically involve investing upfront and reaping rewards later. For instance, in the Contract Mining segment, the Sawtooth mine in Northern Nevada is a good example where we've committed some initial capital for equipment, and we will be repaid over time. However, that project won’t start delivering full levels of profitability until the end of 2027, when we expect to start producing lithium, with significant contributions occurring in 2028, 2029, and beyond. This will be a valuable project for us, so some of the capital reflected in the total asset figure includes initiatives like this. I mentioned Sawtooth, but it’s not the only one. Another recent highlight is the announcement we made about the FAO project just yesterday.

Tuesday.

Two days ago, we issued a press release about a new project in Florida that we previously mentioned. We have some capital committed to this project, and it's set to start generating profitability early next year. There seems to be a mismatch between the current assets and the profitability of the business. Honestly, I think this mismatch will likely persist as we continue to grow the business with these long-term projects, especially when you evaluate the metrics on a period basis. Liz, do you have anything to add?

No, I think that is a good description.

Does that make sense?

Okay. It does. You've traditionally done dragline work, but Sawtooth is surface work. Are the economics any different as you move outside of dragline? Do you have a preference between those types of projects? Well, let me get to the preference piece at the end because I've got to think about that. So the Contract Mining segment is really mining services for things that are not coal or not coal related to energy generation. And you're right, there's one piece of the business. 15 years ago, we called it Florida dragline operations and it was using draglines to mine aggregates that were underwater for aggregates producers. Over the last 10 years, we've been expanding that. But really, we can kind of do any kind of mining. When you think about the very comprehensive scope of what we do in our coal mining operation, we can run draglines. We can do truck shovel operations for people. We run virgin surface miners. And as you get to Sawtooth, we're going to run the entire mine. Now there's no dragline at Sawtooth and there won't be. But it's much more akin to one of our surface mines where we're doing everything from start to finish with respect to the mining. That's different than the dragline operations where we are just running a single piece of equipment. We're really happy to deliver whatever kind of services a customer needs. Really, our preference is that we find a partner that's a good long-term partner where we can really be an integrated part of their operations. When you think of all of those things that we do in the Contract Mining segment, we're part and parcel of what happens with each customer's project. And if that's running a dragline, that's fine. If it's running lots of equipment, that's fine, too. I would say that the more work we do at a given location, the more opportunities we have to get paid for our service since we really are, at the end of the day, a service company. But it's really more about finding the right partners and the right projects than having a strong preference for one model over the other. Happy to grow in any way.

I would also add that our fee would be commensurate. If we bring capital to the table, we would structure our fee to cover the cost of that capital.

Yes, that's fair. If we're operating somebody else's equipment, we're going to have a lower fee there. If we bring capital, obviously, we need to be compensated for the capital we're bringing. Good point, Liz.

In terms of your new business development, do you have a sales force where some team members focus solely on aggregate opportunities while others concentrate on non-aggregate opportunities, or does everyone handle both types?

We operate with a one-team approach. Anyone involved in business development is aware of the specific offerings as well as the comprehensive solutions we can provide. For instance, in the recent project we signed in Florida, we'll be using draglines to construct an embankment. If the project requires support or advice from any other division, such as environmental services, Mitigation Resources, or expertise from North American coal, we'll be ready to assist immediately. Our business development team is well informed and knowledgeable about the wide array of capabilities we possess. We tackle each project and approach potential customers with either specific or broad solutions to meet their needs.

Okay. In the Utility Coal segment...

Sorry, just one more thing I would add. We believe that this approach helps us find and secure more projects than if we were very specific. I don't really consider any of our people to be salesmen given the long-term nature of our work. It's more like business development. We think that by focusing broadly on the solutions we can provide, we are more likely to achieve success, as opposed to having someone concentrate on just one specific area, which might prevent them from addressing the larger opportunities with that potential customer.

I mean, so if you were to just look out 5 years from today, I mean, I think today, you're predominantly aggregate mining plus Sawtooth and then you had the phosphate opportunity and this new opportunity. And maybe there are others that I'm not aware of. But if you look 5 to 10 years from now, would you see the business as more diversified? Or would you still see aggregates as the predominant end customer?

You're really discussing the composition of our business. I believe that in five to ten years, our business will significantly expand. We will have many more projects due to the opportunities we are starting to see. As we broaden our operational areas and diversify our equipment and clientele, we will have more chances to engage with and understand different communities. Consequently, I expect an increasing array of opportunities will arise simply because we are operating in more regions. The aggregates sector will continue to play a vital role in our operations. We provide equipment for some of the largest aggregates producers in the U.S. and are consistently identifying new business for them, which I anticipate will further increase. Additionally, we are likely to uncover a faster rate of new opportunities that go beyond just mining for aggregates. For example, we have a contract where we will use a dragline to excavate aggregates, which will be utilized for constructing an embankment dam, making it more of a civil earthworks project than just supplying aggregates for construction purposes. This opens a new market for us, and we are eager about the prospects it presents. Although this specific project uses a dragline, we are now exploring a market where we can apply our full range of expertise to find new opportunities. I genuinely believe that in five to ten years, our contract mining business will encompass many more initiatives than we currently have. Nonetheless, I still consider the limestone sector to remain a crucial component of our business, given the strong relationships we have with our customers.

Okay. Sounds good. Let's see. On the Utility Coal segment, you've had this pricing agreement that has pressured this year's results. In the K, you describe what sounds like a similar contractual structure in the unconsolidated operations. I'm just curious, obviously, those are doing well. So I'm just curious how those 2 contracts differ and if there's any risk on the unconsolidated?

You're asking about the difference between the unconsolidated mines and Red Hills? Yes.

Yes.

The unconsolidated mines operate on a fee-for-service basis where customers cover all costs at the mine and provide capital either by guaranteeing loans or funding us directly. We charge a fee for every ton of coal delivered, making it a service business. In contrast, the Mississippi Lignite Mine Company Red Hills mine follows a more traditional contract structure where we own all capital and incur all costs. However, the price for the coal sold is not based on market rates but determined by a contractual formula established in 1994. This formula includes specific mechanics related to changes in indices like diesel fuel, tires, and labor, which we analyze over one and five-year periods. Currently, the five-year lookback is affected by past index fluctuations related to COVID, while lower diesel prices present another challenge. Ultimately, the operating profit may fluctuate due to these factors, so I prefer to focus on EBITDA for this contract, especially since it expires in 2032 and requires significant capital investment. Therefore, EBITDA is a more relevant metric for assessing this mine and the segment overall.

Right. That makes sense. I was curious because it seems like the unconsolidated is simply an inflation adjuster, meaning it's related to the fees you pay.

It's primarily based on CPI and PPI. There may be some other indices, but the fee essentially increases with CPI and PPI.

Okay. Got it. Got it. You had a little bit of a larger-than-normal unallocated expense line this quarter. Could you say why that was up?

Yes. There's a few things in there that are causing that increase, mainly employee-related and there's 2 components to that. We had higher medical expenses. And we also had our share-based compensation. We had an increase in our share price if you look year-over-year. So when you include that component into our incentive compensation calculation, purely because of the increase in share price, we're going to have a higher incentive compensation expense. And we also had higher business development expenses running through the quarter.

Okay. Okay. Are you still moving ahead with your solar project?

Yes. Yes. We are working pretty diligently right now on getting those projects that are in the pipeline safe harbored for tax credit purposes. But yes, we're working on those very diligently.

And so it sounds like you're looking at multiple locations now for those?

Yes.

Okay. That might be all I have. Well, I appreciate all the good work and it really seems like things are moving in the right direction.

Well, we appreciate your continuing interest and your great questions.

There are no further questions in queue. I'll turn the call back over to Christina.

All right. With that, we'll conclude. Before we do, I'd like to provide a few reminders. A replay of our call will be available online later this morning. We'll also post a transcript on our website when it becomes available. If you do have any questions, please reach out to me. My number is in our press release, and I hope you enjoy the rest of your day. I'll turn it back to Tina to conclude the call.

As Christina said, an audio recording of this event will be available later this evening via the Echo replay platform. To access the platform by phone, playback ID is 728-4609 followed by the # key. This replay will expire on Thursday, November 13, at 11:59 p.m. Thank you for joining us today. This does conclude today's conference call. You may now disconnect.