Good morning, and welcome to the RYAM Fourth Quarter and Full Year 2023 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions with instructions to follow at that time. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mr. Mickey Walsh, Treasurer and Vice President of Investor Relations. Thank you, Mr. Walsh, you may begin.

Thank you. Good morning. Welcome again to RYAM's fourth quarter and full year 2023 earnings conference call and webcast. Joining me on today's call are De Lyle Bloomquist, our President and Chief Executive Officer, and Marcus Moeltner, our Chief Financial Officer and Senior Vice President of Finance. Our earnings release and presentation materials were issued last evening and are available on our website at ryam.com. I'd like to remind you that in today's presentation, we will include forward-looking statements made pursuant to the Safe Harbor provisions of Federal Securities Laws. Our earnings release as well as our filings with the SEC lists some of the factors which may cause actual results to differ materially from the forward-looking statements we may make. They are also referenced on slide two of our presentation materials. Today's presentation will also reference certain non-GAAP financial measures, as noted on slide three of our presentation. We believe non-GAAP measures provide useful information for management and investors, but non-GAAP measures should not be considered an alternative to GAAP measures. A reconciliation of these measures to their most directly comparable GAAP financial measures are included on slides 19 through 24 of our presentation. With that, I would like to turn the call over to De Lyle.

Well, thank you, Mickey, and good morning. I'll begin with a financial overview for the fourth quarter and the full year of 2023. Following that, I'll discuss recent company actions before handing over to Marcus for additional details on the business segments in our capital structure and liquidity. After Marcus's update, I will return to offer further insights into our 2024 initiatives and guidance, including an update on the sales process for the Paperboard and high-yield pulp business before opening the call for questions. Let's now turn to Slide 4 to review our performance in the fourth quarter and the full year of 2023. The results for both periods fell below expectations with EBITDA of $37 million for the fourth quarter and $130 million for the full year, reflecting declines of $18 million and $38 million versus 2022, respectively. The fourth quarter shortfall can be attributed to weaker-than-expected demand for Paperboard, while the full year results were impacted by persistent weak demand across various product categories, notwithstanding the strong pricing observed in our Cellulose Specialty segment. Despite the challenges stemming from the weak Paperboard results in Q4, I was encouraged by the rebound observed in our core Cellulose Specialty business. This was principally the result of increased market share accruing to us as a result of the closure of a competitor. As we noted on our previous calls, we focused our efforts on free cash flow generation in the second half of 2023, given these macro headwinds. These efforts resulted in $53 million of free cash flow, which was largely driven by a $93 million benefit in working capital. We expect to maintain this benefit in 2024, and we think we can realize an additional $15 million in working capital monetization this year. The challenges encountered in our high-purity Cellulose Segments stem mainly from declining commodity pricing and decreased volumes in Cellulose Specialties, particularly in markets that are interest rate sensitive, like the construction ethers markets. Conversely, our Cellulose Specialty products maintained strong pricing, realizing an 11% increase compared to 2022. This result reflects our focus on prioritizing value over volume for our specialized products. In the Paperboard segment, EBITDA decreased by $1 million compared to 2022, primarily due to lower sales volumes from customer destocking, partially offset by decreased purchase pulp, maintenance, and logistics costs, along with market-driven downtime taken in response to the weak market conditions. High-yield pulp EBITDA decreased by $20 million versus 2022, driven by lower sales volumes and prices amid weak market demand, increased wood cost, and market-driven downtime taken in response to the weak market conditions. Corporate segment EBITDA declined by $11 million, primarily due to less favorable foreign exchange rates and discounting and financing fees incurred to support working capital enhancements. Next, I would like to offer some high-level commentary on a few significant events that occurred in the fourth quarter, each of which will be elaborated on by Marcus. First, the finance team secured a covenant amendment for our 2027 term loan facility. In January, we announced an amendment to expand the net secured debt covenant to 5.25x. While we are confident in our ability to manage within the original covenant as evidenced by the results of a 4.2x for Q4, we wanted the operational flexibility that the expanded covenant and resultant liquidity would grant us, so we could continue to execute on our strategic initiatives. We also believe that the enhanced flexibility will reassure key stakeholders. Second, we conducted a review of our existing assets and determined that impairments were necessary for our Temiscaming HPC plant and the sea line at our Jesup plant. Regarding the Jesup sea line, we have made the strategic commitment to focus this capacity on fluff production going forward and conversely focus the Jesup specialty cellulose production on the A line and B lines. The write-off related to the Temiscaming HPC plant reflects the transition of the Temiscaming HPC facility to viscose production, which we are making to leverage its low unit variable costs. The total impact of these two non-cash write-offs is $62 million. With that, I'd like to pass the meeting over to Marcus to walk us through the financials for the year.

Thank you, De Lyle. Beginning with our High Purity Cellulose segment on Slide 5. Sales for the year decreased by $23 million or 2% to $1.3 billion due to a higher mix of commodity sales and lower market demand in certain specialty markets. The decline was primarily driven by a 13% decrease in commodity sales prices, partially offset by an 11% increase in Cellulose Specialty pricing, highlighting our commitment to securing fair value for our specialty offerings. Sales volumes increased by 4% to 955,000 metric tons, resulting from the increased sales in the commodity markets. Commodity sales volumes rose by 39% compared to the prior year, whereas Cellulose Specialty volumes decreased by 18%. The decline was associated with lower market demand and substantial customer destocking, primarily in construction markets. Other sales for the year were $98 million, which included $49 million of green energy sales. EBITDA for the segment decreased by $6 million to $144 million, primarily due to a less favorable sales mix, declining commodity prices, and increased labor costs due to inflation. These impacts were partially offset by higher Cellulose Specialty sales pricing. As De Lyle mentioned earlier, we undertook a review of our existing assets and concluded that impairments were necessary for our Temiscaming HPC plant and the Jesup sea line. The total non-cash impact on operating income amounts to $62 million. This will result in a lower annual depreciation expense of approximately $5 million. Turning to Slide 6. Sales in the Paperboard segment experienced a decline of $31 million, mainly due to a 13% reduction in sales volumes due to customer destocking. Year-over-year sales prices have improved slightly, and EBITDA for the segment decreased by $1 million to $52 million, primarily due to lower sales volumes, which more than offset the benefits of reduced purchased pulp, maintenance, and logistics costs. Turning to the high-yield pulp segment on Slide 7. Sales declined by $24 million in comparison to the prior year, mainly due to a 12% drop in external sales prices and a 5% reduction in sales volumes. The reductions were a consequence of weaker market demand. Segment EBITDA stood at negative $1 million, in contrast to $19 million generated in the prior year. Transitioning to Slide 8. Our consolidated operating loss for the year amounted to $65 million, inclusive of the $62 million non-cash asset impairment charge recorded in the fourth quarter. Sales price improvements in Cellulose Specialty and Paperboard were more than offset by the impact of unfavorable HPC sales mix, lower sales prices in HPC commodities and high-yield pulp. Costs remained relatively stable compared to the previous year, with deflation in certain input costs offset by increased labor expenses due to inflation. SG&A and other costs increased by $57 million, mainly due to the $62 million non-cash asset impairment charge, unfavorable foreign exchange rates, discounting and financing fees incurred to support working capital enhancements as well as higher ERP project costs and professional fees. These costs were partially offset by lower variable compensation and one-time severance expenses from the previous year. Now let's turn to Slide 9. Total debt ended the year at $777 million, a reduction of $76 million from the same period in 2022. Net secured debt reflected in our financial covenant ratio associated with the term loan ended the year at $698 million. Our primary focus for 2023 was on free cash flow and debt management. Consequently, we executed opportunistic downtime at both Paperboard and high-yield pulp facilities, as well as our Tartas HPC facility, all key factors in supporting the impressive $93 million working capital benefit generated during the year. In January, management took a prudent and proactive approach and successfully amended the covenant associated with the term loan. While we remain confident in our ability to navigate through the covenant, we believe it was important to ensure the company maintained operating flexibility to fully implement our strategic initiatives while alleviating any liquidity concerns. Structurally, the amendment expands the adjusted net leverage test from 4.5 times to 5.25 times, gradually stepping down until 4.5 times is reached after Q4 of 2024. Net secured leverage closed the year at 4.2 times within the original covenant test. Liquidity ended the year at $199 million, reflecting $76 million of cash, $118 million available under our ABL facility and $5 million for our French factoring facility. We remain committed to adhering to the original 4.5 times covenant test and will focus on all levers at our disposal to maintain appropriate liquidity levels and execute the company's exciting growth opportunities. With that, I'd like to turn the call back over to De Lyle.

Thank you, Marcus. Let's now turn our attention to Slide 10, where I'll outline our key initiatives for 2024. Our top priority for the New Year is to refinance the 2026 senior notes before they go current in January 2025. To best position us to execute on this refinancing, we will continue to prioritize debt reduction. We are targeting a gross debt reduction of $70 million in 2024, financed through business-generated free cash flows and potential monetization of $35 million to $40 million in passive assets. Additionally, as announced last year, we are exploring the potential sale of our profitable Paperboard and high-yield pulp businesses to further reduce debt before refinancing. This sales process is being managed by Houlihan Lokey and it remains on schedule. We received expressions of interest from both strategic parties and financial sponsors, and we'll provide further updates on this project as it develops. We are working hard to implement our asset optimization strategies to address our HPC commodity exposure, given the drag this exposure has on our profit margins and earnings stability. To highlight the importance of this effort, our non-fluff commodity sales had an EBITDA loss of $60 million in 2023, and currently, we project a $48 million EBITDA loss in 2024. Obviously, it's a strategic imperative to mitigate this exposure to non-fluff commodities. As you know, a key element of our strategy entails transferring a significant portion of our viscose production to our Temiscaming HPC facility, which benefits from the lowest variable cost among our HPC lines. I'm pleased to announce the project is progressing according to our initial timeline, and I will provide updates as we move forward. Our final and perhaps most compelling initiative is to continue realizing the exceptional opportunities within our biomaterials business. Our Tartas bioethanol plant is currently going through testing. If all goes well, we expect to begin bioethanol production in March. This project is expected to generate $4 million in EBITDA this year as we ramp up production and then $8 million to $10 million in 2025 and thereafter when we achieve steady-state production. This project is the first of several biomaterial projects that we plan to launch over the next couple of years. As highlighted during our Investor Day, upcoming projects in the pipeline include a bioethanol plant at our Fernandina facility, the AGE project at our Jesup facility, which is the production of green energy for sale to Georgia Power, a prebiotics additive plant to also be located at our Jesup facility and crude tall oil projects in France and in the U.S. As previously disclosed, these projects will primarily be funded by low-cost green project capital and are expected to generate significant margin expansion due to co-product economics and economies of scale. Last night, we announced an MOU with Verso Energy to explore e-fuels, specifically e-SAF from renewable resources, including biogenic CO2 at our Tartas plant. SAF or Sustainable Aviation Fuel would be used by the global airline industry as a drop-in sustainable replacement for current jet fuel. We'll be working with Verso Energy to explore the feasibility of capturing the biogenic CO2 produced at the Tartas plant to produce the e-SAF in combination with green hydrogen. While we are still in the early stages of evaluating this opportunity, the potential impact to RYAM is substantial. We look forward to keeping you updated as this project progresses. Let's move to Slide 11, where I'll present our EBITDA and free cash flow projections for 2024. We anticipate 2024 enterprise EBITDA to range between $180 million and $200 million for the year. Cash interest expense is expected to be in the $85 million range, which is inclusive of $14 million attributed to the timing of interest payments. On a normalized basis, the estimated annual interest expense would be around $70 million. Maintenance expense is set at $85 million, a figure we consider sufficient this year to maintain the reliability of our assets. We project a $15 million benefit from working capital, and an additional $10 million benefit from tax receivables to be realized during the year. With some offsets related to deferred energy payments and other accrued liabilities, we expect adjusted free cash flow to range between $20 million to $40 million for the year, which will be used to reduce debt and invest in strategic capital projects. Currently, we forecast such strategic CapEx spending of around $10 million in 2024, mainly to finance the ERP project and pursue high-return cost reduction projects at the plants. This guidance differs from the $225 million EBITDA estimate that I presented during the Investor Day, and I believe it's important to emphasize the factors driving this experience. Since the Investor Day guidance, we realized a $14 million decrease in Paperboard EBITDA versus expectations due to unforeseen levels of destocking towards the end of the year. High-yield pulp experienced rapid price declines post Investor Day as the pulp market encountered weak demand, resulting in a $3 million impact versus expectations. We also now expect destocking at a couple of large acetate customers, which will impact EBITDA by $23 million in 2024. Additionally, corporate charges were primarily affected by higher discounting and financing fees incurred to support working capital enhancements, due in part to higher interest rates totaling approximately $5 million. On Slide 12, I delve deeper into the expected performance of each of our businesses. For 2024, we expect to achieve EBITDA in the range of $180 million to $190 million for our HPC segment. On average, Cellulose Specialty prices are expected to increase a low single-digit percentage as compared to 2023. Cellulose Specialty sales prices are expected to remain flat in 2024 with increased volumes from market share gain that accrued to us from a competitor's plant closure, offset principally by lower shipments due to destocking to select acetate customers. Demand for RYAM Cellulose Specialties is anticipated to be mixed with improved volumes in construction ethers albeit at lower than historical levels and relatively stable acetate markets. However, as noted, we expect acetate will undergo some level of destocking. We also anticipate strong demand in the other Cellulose Specialty grades. Additionally, we expect resilient market demand for commodity products, the fluff and viscose price is expected to improve from Q4 2023. Moreover, we foresee modest tailwinds from eased raw material and logistics input costs in 2024. As part of our growth strategy, we are actively pursuing strategic investments in our biomaterials business to capitalize on the increasing demand for sustainable products. The Tartas bioethanol plant is set to begin commercial production in the first quarter of this year with an expected EBITDA contribution of $4 million in 2024, which is expected to reach $8 million to $10 million upon full production that is expected in 2025. Regarding Paperboard, we expect to achieve EBITDA in the range of $50 million to $60 million in 2024. Prices are expected to decrease slightly as compared to 2023 Q4 levels, while sales volumes are expected to improve as destocking eases, and production scales up to meet the improved demand. Raw material prices are expected to see a slight uptick as pulp markets rebound. We expect to achieve EBITDA in the range of $5 million to $10 million in 2024 for our high-yield pulp business. High-yield pulp prices are expected to increase in the first quarter as we realize higher index pricing observed in the later part of 2023 Q4. However, we are beginning to see pricing pressure related to the Chinese pulp markets, thus expect pricing pressure in late Q2 and possibly Q3. We are diversifying our portfolio globally to mitigate this exposure. Additionally, sales volumes are projected to improve in Q1 as production ramps up to meet improved customer demand. For 2024, we expect corporate costs in the range of $55 million to $60 million, flat to up slightly versus 2023 as we are in the final year of our multi-year ERP implementation. As the ERP project concludes, we anticipate annual cost reductions of $3 million to $5 million starting in 2025. It's important to note that these costs may vary due to factors like currency fluctuations, environmental charges, and other non-cash expenses. We illustrate the trajectory of our EBITDA margin growth and net leverage decline on Page 13. In 2024, we anticipate our margins to be in the 10% to 11% range, reflecting a weighted average of the strong margins in our Cellulose Specialty and Paperboard segments, counterbalanced by low positive high-yield margins and the anticipated negative margins in our non-fluff commodity sales. The forecast for net secured leverage at the end of the year stands at 3.3 times covenant EBITDA. Our commitment remains resolute in achieving our target net debt leverage ratio of 2.5 times by 2027. With that, operator, please open the call to questions.

Thank you. Our first question is from Daniel Harriman with Sidoti & Company. Please proceed.

Thank you. Hey, good morning, everyone. I just wanted to talk about kind of the transition from 2023 to 2024. And obviously, '23 was a tough year and the fourth quarter was certainly weaker than what you expected. Would you mind providing just more color to us on why you're confident that 2024 will be better, particularly in the first half of the year such that you can kind of prove and show earnings power within the core business to potentially refinance by the end of the year? And then what do you see right now as the biggest risk to not meeting your guidance for the year?

Good morning, Daniel, this is De Lyle. To address your question about the transition from 2023 to 2024, the main driver is our core business, specifically our Cellulose Specialty business. We anticipate that this segment will improve by approximately $30 million to $35 million compared to last year. Several factors give us confidence in this improvement. One is the market share gains we achieved due to competitor closures, with total market share gains expected to be around 50,000 tons, equating to over $35 million and likely exceeding $40 million in value during this period. We also expect some improvement in ethers. While we believe destocking is largely complete, demand remains subdued due to the construction market facing high interest rates. Although there are potential risks to our projections, we still expect to see improvements since we think destocking has largely finished there. We noted some destocking occurring with acetate, but we view this as a one-time impact, largely driven by the supply chain congestion we experienced in 2022 and 2023, along with the uncertainties faced by our Asian customers because of the prolonged supply chain issues. As those customers become more comfortable with the normalization of the supply chain, we foresee a positive change. The acetate destocking has impacted us by about $23 million compared to our expectations for the year. Regarding high yield, there are risks primarily in that space due to current activity in China, as well as underutilized capacity in new paperboard plants that are closely tied to their pulping operations. These facilities can run their operations and sell pulp at substantially lower prices than what we import. We are taking measures to mitigate this risk by redirecting products to regions less affected by these conditions. We believe the destocking in paperboard has concluded, and we are increasingly confident that the numbers we are projecting will be met with our customers. Lastly, we anticipate that corporate charges will remain relatively flat, an area we have tight control over. I hope this addresses your question.

Yes, De Lyle. Thanks so much. I'll get back in the queue.

Our next question is from Matthew McKellar with RBC Capital Markets. Please proceed.

Hi, good morning. Thanks for taking my questions. Firstly, could you maybe give a little bit of color on when you might expect destocking by your acetate customers to fade and confirm if the strong finish to '24 for the Cellulose Specialty business you described is based on acetate markets improving?

Good morning, Matthew. I understand it's early for you. Regarding the destocking for acetate, we anticipate that it will primarily take place in the first half of the year, specifically in the first and second quarters. The market is expected to strengthen as the year goes on, but the most significant effects will be felt during the first half. In terms of how our Cellulose Specialty business will perform, we expect it to align closely with what we observed in the fourth quarter for the upcoming first quarter.

Okay, thanks. Thanks very much for that color. I think also for the HPC business, you mentioned you expect raw material inputs and logistics costs to be lower in '24. Can you maybe just provide a little bit more color on what you're expecting across different input costs and the magnitude of the cost relief you're expecting?

There's a lot of puts and takes with respect to that, as you would expect. I mean, labor costs, of course, are up significantly, particularly here in North America. But that's being offset by lower chemical costs, wood costs, logistics costs. And I would say net-on-net, we're expecting lower manufacturing and logistics costs to the tune of roughly $7 million right now we're forecasting. So overall, I'm expecting costs to come down by about that amount.

That's very helpful. And then maybe last one for me. Are you able to give a sense of where discussions are at with respect to developing a second bioethanol plant in Florida?

We're going through the permitting process with the community as well as with the state. Obviously, on top of that, we're going through, call it, the final detailed engineering on that project. I expect that as everything moves along as expected that hopefully, we will start construction later in '24 and maybe early '25.

Our next question is from Dmitry Silversteyn with Water Tower Research. Please proceed.

Good morning. Thank you for taking my call. I wanted to follow up on your agreement with Verso Energy. The intention is to collaborate on producing SAF, the aviation fuel substitute. How does that align with your bioethanol plant in Tartas? If production moves forward, will this be incorporated into the Tartas plant or the Florida plant, or will a new facility need to be built?

Good morning, Dmitry. With respect to SAF, which the acronym stands for sustainable aviation fuel, it is a direct substitute or drop-in replacement for the current kerosene that makes up aviation fuel today. The deal with Verso is to jointly develop a feasibility study on this opportunity. The size of this opportunity for us can be very significant but largely depends on how we decide to participate. The opportunity for us in Tartas is to capture the biogenic CO2 that we produce, which right now is just emitted into the atmosphere, and then with green hydrogen convert that into the hydrocarbon, the sustainable aviation fuel hydrocarbon that can be sold to commercial airlines, for example. So we don't have to bring in any additional raw materials; we will be using a by-product of our current process to participate in this. It would likely include the construction of carbon capture and other facilities to make this happen. But Tartas has the land and water available locally. The demand for this product is not only something that the airline industries would be interested in but is being required by regulatory agencies in France and the EU for the commercial airline industry to increase over the course of the next 15 to 20 years. Additionally, the regulatory agencies in the state are willing to participate and help fund both the study as well as potentially the project itself going forward. So really, that's why our initial focus is in the EU.

Okay, I understand. De Lyle, could you elaborate on your thoughts regarding the recovery of the ether market? You've mentioned that we've likely passed through most of the destocking phase, yet the construction market remains weak. What factors do you believe will contribute to the recovery in ether, especially as we approach the latter part of the year and won't be comparing against customer inventory reductions?

That's an important question. We're still trying to determine how strongly the ether market will rebound. You're correct that demand in the construction markets in Europe remains weak. However, we are optimistic about an increase in demand because the destocking phase has concluded and we believe it has reached its lowest point. Consequently, we expect to see the underlying demand become more visible. We anticipate that orders in 2024 will exceed those from 2023, even though the overall demand remains somewhat subdued.

Got it. Okay. Just to clarify what's happening in China. There's underutilized capacity in high-yield pulp or paperboard that produces more high-yield pulp, making your product less attractive price-wise when importing into China. Is that correct? If so, how long do you expect this underutilized capacity to remain? Specifically, what needs to change in the Chinese market for that capacity to be fully utilized, allowing your imported products to compete more effectively with local producers?

Dmitry, your description of what's going on is largely correct. What's happened is the paperboard industry in China just overbuilt. They have a lot of unused capacity now, and this new capacity is fully integrated back through pulp manufacturing. In other words, these paperboard plants can also make their own pulp similar to what we do on Temiscaming. To realize any kind of cash, these plants are running their pulp lines relatively hard and generating excess pulp, which they then ship regionally to other paper pulp producers to use to make paperboard. This offsets the imports from other parts of the world, including potentially us coming out of Canada. They are offering this locally produced pulp at substantially price discounts relative to what we currently have been seeing in the fourth quarter and going into the first quarter for our pulp products. So that's the threat and concern. Your question about how long this is going to last, I think that this problem is going to last likely through Q3, at which point the expectation is that we'll start seeing that reduce either because this new high-purity pulp capacity will get itself sold out and therefore will no longer be a problem or paperboard demand picks up and begins to satisfy that supply. So that's currently what our thinking is.

Got it, got it. Okay, thank you very much. That’s all the questions I have now. Thank you.

Our next question comes from Andy Burns with Stifel. Please proceed.

Hi, good morning, everyone. Thank you for the detailed information about 2024. I would like to discuss the HPC business. To clarify, is the volume increase from the Foley closure entirely in specialties, or does it also include some on the commodity side?

That was all in specialties. It was across the three different grades, but primarily the other Cellulose Specialty.

Okay. And then I just wanted to see if you could elaborate a little more on the comment you made in terms of bridging the '24 that '23 had a favorable customer contract term that's not repeated. Anything more you could say about was that just on the volume side and or also pricing? And if it was more on volume, is there the opportunity to regain those volumes sometime this year or 2025?

Yes. I know that was a little confusing. The change in the income terms really was going from, let's say, a CIF or delivered terms to more of an FOB ship point term. That allowed us to realize revenue sooner than what we had historically at some of our accounts. What happened in '23 is when we negotiated that change, we had some deferred sales volumes that were delayed at a '22 to Asia that because of this change, when they shipped in '23, we were able to realize immediately. The increase in volume in sales was capturing the deferred sales that we had coming out of '22. Because of those changes in those income terms, we didn't have a similar impact of deferrals going out of '23 into '24. The total volumes were roughly 22,000 tons, roughly equivalent to about $7 million in EBITDA. It was a one-time impact; I shouldn't expect any changes going forward.

Right. But I guess, importantly, it doesn't sound like it was a customer loss or...?

No, not at all. No, it was just a change in essentially the income terms that allowed us to recognize revenue earlier. Thank you all once again for joining us today. I sincerely appreciate your interest and support for RYAM. I want to note that I'm incredibly proud of all the collective efforts made by our team, particularly during the difficult 2023 year. I am fully confident that we will continue to focus on enhancing our profitability and work diligently to reduce our debt and leverage. I look forward to providing further updates on all of our ongoing projects and initiatives. We at RYAM value your support and look forward to delivering long-term success and growth of the business. We are committed to transparency in open communication. So if you have any questions or if you require further information, please reach out to us at any time. Thank you again for your participation.

Thank you. This will conclude today's conference. You may disconnect at this time.