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Day, and welcome to the Warrior Met Coal Q1 2026 conference call. After today's presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Mr. Brian Chopin. Please go ahead, sir.

Good afternoon, and welcome everyone to Warrior's Q1 2026 earnings conference call. Before we begin, let me remind you that certain statements made during this call, including statements relating to our expected future business and financial performance, may be considered forward-looking statements according to the Private Securities Litigation Reform Act. Forward-looking statements, by their nature, address matters that are different degrees uncertain. These uncertainties, which are described in more detail in the company's annual and quarterly reports filed with the SEC, may cause our actual future results to be materially different from those expected in our forward-looking statements. We do not undertake to update our forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required by law. For more information regarding forward-looking statements, please refer to the company's press releases and SEC filings.

We'll also be discussing certain non-GAAP financial measures, which are defined and reconciled to comparable GAAP financial measures in our Q1 press release furnished to the SEC on Form 8-K, which is also posted on our website. Additionally, we will be filing our Form 10-Q for the quarter ended March 31, 2026 with the SEC this afternoon. You can find additional information regarding the company on our website at www.warriormetcoal.com, which also includes a Q1 supplemental slide deck that was posted this afternoon. Today on the call with me are Mr. Walt Scheller, Chief Executive Officer, and Mr. Dale Boyles, Chief Financial Officer. After our formal remarks, we will be happy to answer any questions. With that, I will now turn the call over to Walt.

Thanks, Brian. Hello, everyone, and thanks for taking the time to join us today to discuss our Q1 2026 results. I'll start by providing an overview of the quarter before Dale reviews our results in additional detail. The Q1 marked a defining milestone for Warrior Met Coal as we completed the final construction and project spending associated with the development of our transformational Blue Creek mine, delivering the project ahead of schedule and fully in line with our capital expenditure guidance. This achievement reflects years of planning, disciplined capital allocation, and exceptional execution by our team and concludes the construction and investment phase of Blue Creek. Our total project capital expenditures were a little over $1 billion. As a reminder, this is on budget and fully paid out of cash from operations without incurring any funded debt.

The new Blue Creek mine was a major contributor to higher volumes and profitability in the Q1 2026, which led to record quarterly sales and production volumes. Our Q1 volumes were higher than our internal plans and are expected to be higher for the remainder of the year to meet our full-year outlook and guidance. As we look at the Q1, steelmaking coal market conditions, pricing remained notably strong in the premium quality segment and well above our original expectations, while the High-Vol A quality segment underperformed expectations. We believe the strength in premium quality pricing was driven by tightness in the segment resulting from supply constraints stemming from weather disruptions and mine production-related challenges in Australia. These factors drove up premium quality pricing by 15% in January, leading to noticeably higher demand for our Mine 7 premium quality product.

As Australian supply chains have begun to recover from these events, the emergence of a new conflict in the Middle East introduced additional cost pressures, specifically in freight markets, while increasing the uncertainty around global energy availability. Steelmaking coal prices have remained strong as inflationary cost pressures from the rise in oil and diesel prices have asserted a firmer floor despite soft seaborne demand, especially in the spot market. However, from a global seaborne demand perspective, India continues to be a key market supported by firm domestic steel prices, improving margins, and growing steel production, which has helped sustain demand for high-quality steelmaking coal. Global pig iron production decreased by 2.1% for the first 2 months of 2026 as compared to the same period last year. India continued to demonstrate strength, showing a 3.1% for the same period.

China's pig iron production declined by 2.7% during the 2-month period. Our primary index, the PLV FOB Australia, rose very quickly in the Q1 as a result of supply constraints stemming from previously discussed challenges in Australia, reaching a high of $229 in early February and averaged $213 per short ton. The index average was 17% or $31 per ton higher than the Q4 2025, and was 27% higher than the Q1 of 2025. As for the main second tier indices, the Australian LVHCC index price experienced more modest gains and averaged $173 per short ton for the Q1.

This is $19 per ton or 12% higher than the Q4 of 2025, and 30% higher than the Q1 of 2025. As a result, the relativity of the Australian LVHCC index price to the Australian PLV index price decreased from 85% for the Q4 2025 to 81% for the Q1 of 2026. In contrast to the Australian LVHCC index price, the average U.S. East Coast HVA index price only increased $8 per ton, or 6% in the Q1 from the Q4 of 2025, and averaged $144 per short ton.

As a result, the relativity decreased from 75% for the Q4 of 2025 to 68% for the Q1 of 2026. More importantly, this relativity dropped to an all-time low of 62% for a brief period during the Q1 and represents a significant spread difference with the Pacific Basin relativity. We achieved a gross price realization of 72% for the Q1 compared to 75% in the Q4 of 2025. Our gross price realization was lower and driven by a combination of factors. First, while the average of both main pricing indices increased in the Q1 compared to the Q4 of 2025, the price spreads or relativities widened, reaching one of the lowest values ever recorded.

Second, our sales mix of High-Vol A quality was 11% higher. Third, that higher sales mix was primarily sold in the Pacific Basin on a CFR basis, with higher average freight rates due to the conflict in the Middle East. We sold 4% more volume into the Pacific Basin in the Q1 than in the Q4 of 2025. Warrior achieved a record high quarterly sales volume in the Q1 of 3 million short tons compared to 2.2 million tons in the same quarter of 2025. This represents a 38% increase, primarily due to the additional sales volume from the new Blue Creek mine. Our Q1 sales volume mix was 61% High-Vol A, representing a 10% increase over the Q4 2025.

As production from Blue Creek continues to increase, we expect our sales volume mix to become more weighted toward High-Vol A products in the Pacific Basin destinations over time. Our sales by geographies for the Q1 break down as follows: 61% into Asia, 25% into Europe, and 14% into South America. Our spot volume was 6% for the Q1 of 2026. Sales volumes in the Pacific Basin were 61% for the Q1, which were 4% higher than the 4th quarter of 2025 and 18% higher than the Q1 of last year. Production volume in the Q1 of 2026 was a record high 3.5 million short tons compared to 2.3 million in the same quarter of last year, representing a 55% increase.

This increase reflects the significant contribution of Blue Creek. Our coal inventory levels increased to 1.9 million short tons at the end of March of this year, compared to 1.6 million tons at the end of December of 2025. We expect to manage the excess inventory over the remainder of the year to maximize sales volume, profitability, and free cash flow. I'll now ask Dale to address our Q1 results in greater detail.

Thanks, Walt. Let me first highlight our Q1 financial results compared to the Q4 of 2025. Our Q1 adjusted EBITDA of $143 million was 54% higher than the Q4 of 2025, primarily due to the following factors: two positives offset by two negatives. Our sales volume were 4% higher in the Q1, driven by an increase of tons sold from Blue Creek. Our average net selling price was $20 per ton, 15% higher in the Q1, primarily due to a 10% higher mix of High-Vol A volume sold into the Pacific Basin on a CFR basis at elevated freight rates.

Third, cash costs per ton were $2 higher in the Q1, primarily attributable to higher variable costs for transportation and royalties, and were partially offset by Blue Creek's inherently low cost structure and a $3 per ton benefit from the new 45X production tax credit from the One Big Beautiful Bill Act. Finally, operating cash flows were -$12 million, which was $88 million lower than the Q4 of 2025. This result is attributed to the increase in working capital, primarily for accounts receivable and inventory. Accounts receivable were higher on higher sales volume and higher steelmaking coal prices. In addition, sales volume for the quarter was heavily weighted to the month of March by 43%.

Our spending for capital expenditures in mine development were a combined $24 million lower in the Q1 compared to the Q4 of 2025, primarily due to lower investments in Blue Creek. Now let me compare the Q1 of 2026 to the prior year's Q1 results, where you recorded net income of $72 million or $1.37 per diluted share in the Q1 of this year, compared to a net loss of $8 million or $0.16 per diluted share in the same quarter of 2025. We reported adjusted EBITDA of $143 million in the Q1 of 2026, compared to $39 million in the same quarter of 2025, an increase of 263%.

Our adjusted EBITDA margin improved to 31% in the Q1 of 2026, compared to 13% in the same quarter of last year. On a per ton basis, our adjusted EBITDA margin improved to $48 per short ton for the Q1 of 2026, compared to $18 in last year's Q1. The primary drivers of these improvements were a 38% increase in sales volumes, a 10% increase in average net selling price, and a 14% reduction in cash cost, reflecting the increasing contribution from our new Blue Creek Mine. Total revenues were $459 million in the Q1 of this year, compared to $300 million in the same quarter of last year.

The total increase of $159 million was primarily due to the impact of higher sales volumes of $113 million and the impact of an increase in average gross selling prices of $69 million. This was partially offset by the impact of a higher mix of High-Vol A ton sold of $24 million. In addition, the merge and other charges were $4 million higher compared to last year's Q1. This resulted in an average net selling price of $149 per short ton in the Q1 of 2026, compared to $136 in the Q1 of last year.

Cash cost of sales were $289 million, or 64% of mining revenues in the Q1 of this year, compared to $244 million or 83% of mining revenues in the Q1 of last year. Of the $45 million net increase in cash cost of sales, there was a $93 million increase in cost, which were attributed to the 38% increase in sales volumes and slightly higher variable transportation royalty costs on higher average steelmaking coal price indices. These higher costs were offset partially by $48 million of lower costs that were driven by the leverage of lower cost Blue Creek tons sold and $8 million of benefit from the 45X production tax credit.

Cash cost of sales per short ton FOB port was approximately $96 in the Q1 of 2026, compared to $112 in the same quarter last year. The 14% decrease was primarily related to the factors I just mentioned on a dollar basis. Cash margins per short ton increased 127% to $53 in the Q1, from $23 in the same quarter of last year. Our Q1 of 2026 SG&A expenses were $28 million and were $10 million higher than the same quarter of 2025, primarily due to higher employee-related expenses, including stock compensation expenses. SG&A expenses are on track with our full-year outlook and guidance.

Depreciation and depletion expenses were $52 million in the Q1, which was 15% higher than the Q1 of 2025, primarily due to the additional assets placed into service at Blue Creek and the higher sales volume in the Q1 of 2026. We recorded income tax expense of approximately $6 million on pre-tax income of $79 million in the Q1 of 2026. Our effective income tax rate varied from the statutory federal income tax rate of 21%, primarily due to tax benefits recognized from depletion expense and a foreign-derived intangible income deduction, resulting in an effective income tax rate of 11%. Now let us turn to cash flows from the Q1 of 2026.

Cash flows from operating activities were a negative $12 million in the Q1 of 2026, and were $23 million lower than the previous year's Q1. Working capital increased by $146 million during the Q1, primarily due to $115 million of higher accounts receivable. This outcome was primarily attributed to higher sales volume, higher steelmaking coal prices, and the timing of quarterly sales volumes that were 43% weighted to the month of March, thereby pushing cash collections into the Q2. In addition, coal inventory was higher as production exceeded sales volume during the Q1.

Free cash flow was a negative $92 million due to $12 million of cash used by operations, combined with cash used for capital expenditures of $80 million. This outcome of negative free cash flow was expected and previously communicated on our last earnings call in February. Capital spending included the final $66 million invested for the completion of the Blue Creek development project. Our free cash flow was slightly more negative than anticipated in the Q1. It was primarily due to timing of sales volume and is expected to turn positive in the Q2. We're pleased that we continue to maintain strong liquidity while delivering higher profitability.

Our total available liquidity at the end of the Q1 was $364 million and consisted of cash and cash equivalents of $203 million, short-term investments of $20 million, and $141 million available under our ABL facility. Finally, let me turn to our current outlook and guidance for the full year 2026 as detailed in our earnings release. We expect the steelmaking coal markets to remain generally consistent with recent trends, absent any major disruptions in supply or demand or a prolonged conflict in the Middle East. Q1 results were on track and generally consistent with our expectations for the full year, and that is why we are reaffirming our outlook and guidance for 2026 as previously communicated in February.

Having said that, there are a few cautionary notes to keep in mind. We are beginning to see some inflationary cost pressures on materials and supplies such as steel roof supports and shear bits, as well as diesel fuel. In addition, we are experiencing some tariffs and higher shipping costs on these raw materials. While we have not been materially impacted by inflation so far this year, we believe the remainder of the year could see an increase of a few dollars per ton. At this point, it is extremely difficult to predict any full-year impact to our cash cost. Obviously, we're taking all possible measures to mitigate any impacts of inflation. I'll now turn it back to Walt for his final comments.

Thanks, Dale. Warrior performed very well in the Q1, and our financial and operational results were better than expected as premium quality steelmaking coal prices were higher for a longer period of time, and our volumes were slightly ahead of our internal plans. This strong beginning to 2026 supports our full-year outlook and guidance. Our current view of the steel and steelmaking coal markets is both positive and resilient. While we face uncertainty from the Middle East conflict and its effect on the global economy, at this point, the full impact of the conflict and its length are not quantifiable on the full year. As Dale noted, we may have to contend with some inflationary cost pressures, but right now, we see these potential impacts outweighed by higher production as a result of European protectionist measures and rising steel prices across nearly all geographies.

As is often the case in such dynamic and unpredictable environments, disruptions may create short-term or region-specific opportunities that we fully intend to take advantage of. For now, we expect steelmaking coal prices to remain above their 2025 average levels, absent material changes in supply and demand. Most importantly, Warrior has the tools to continue to drive value creation for our stockholders by continuing to execute our strategy to optimize production, control our costs, and generate free cash flow. With our high-quality assets and low first quartile cost structure, we are as well-positioned as we've ever been to thrive in a wide range of steelmaking coal environments. With that, we'd like to open the call for questions. Operator?

Thank you. We will now begin the question-and-answer session. Our first question for today will come from Nick Giles with B. Riley. Please go ahead.

Thanks, operator. Good evening, guys. My first question was just, you know, obviously a fairly meaningful working capital build in 1Q, which you had foreshadowed. How much of this could we see unwind in the 2Q? Then another question would just be can you remind us of the cash flow balance sheet implications for the 45X production tax credit? How much did that contribute to the build, if any? Thanks.

Hey, Nick. It's Dale. I mean, it's hard to predict exactly how much of the working capital will turn around, but it's just timing. A large portion will come back. I'm not sure we'll be back to breakeven. We'll be shy of that probably on a year-to-date basis through the first half. As far as the 45X credit, that was worth about $8.4 million or $3 a ton for the quarter.

Understood. Thanks, thanks for that, Dale. You mentioned some, you know, initial inflationary pressures stemming from the conflict. You know, I think Warrior is more insulated, but can you just speak to the diesel usage across your operating platform? Or, you know, if you have any kind of sensitivity or total consumption, just so we can try and understand that impact. Thanks.

Well, again, we don't do a lot of trucking of coal. You know, we do truck a little bit to the barge load out. We're not a high usage like strip mines and things like that, you know, or surface mines. We just don't use a lot of diesel. I don't have a projection for you because, one, you know, I have no idea how long oil prices will stay this high and what those passthroughs could be. You know, we're subject to some passthrough on surcharges and things like that. As I said earlier, we haven't seen anything material yet. It depends on how long this continues. We could see some increase later in the year. We are seeing some other things, like I said, the bits, that's tungsten coming out of China.

You know, that's a challenge right now. We're starting to see and hear it from some other suppliers too, on other materials and supplies. We just haven't been able to quantify it yet. We're really working hard to look for alternative vendors, alternative sources, anything that we can do to mitigate it.

Understood. No, that's still a helpful perspective. Just one more, if I could. Inventories have been rising for the past couple quarters. I think 1.9 million tons is what you said. Most of the working capital build, I think, was more from receivables. Can you just speak to how you could see those inventories unwind in the coming quarters, and what kind of mix we're working with? I assume it's mostly Blue Creek product. Appreciate the clarification.

Yeah, you know, our sales projections for Blue Creek are actually we're even ahead of schedule from where we thought we would be in terms of placing Blue Creek for the year. It's just production levels have been so much higher than that they surpassed our expectations. I think as we look out through the remainder of the year, we're still doing some tests with different potential customers on Blue Creek. The hope is to get more and more of that coal put to bed. You know, when we look at how much of it's moving in the spot market, it's very little.

As we put those tons to bed, we'll again, we're gonna do everything we can to make sure we back the inventory down to what we consider to be a more normal level. It's gonna take us all year to work at it.

Yeah, I think you would just see a gradual decline over the next few quarters. Nothing dramatic in a single quarter. The mines are running well, so the production is coming pretty good. You know, obviously the highest amount of production or inventory that we have is High-Vol A.

Got it. Okay. Well, sounds like a first-class problem to me. Thanks, guys.

Thank you.

Thanks.

The next question will come from Katja Jancic with BMO Capital Markets. Please go ahead.

Hi. Thank you for taking my questions. First on the volume that you ship to Pacific Basin, the 60% that you shipped there in 1Q, how much of that is on CFR basis?

All of it.

Can you talk a little bit about the current freight costs to ship what it currently is versus, let's say, recent quarters?

They're averaging much higher. I think the average is a little bit different, but I know we saw some freight rates last week in around mid $50 last week. I think it's only averaging somewhere in the upper $40s for the quarter, so for Q2, that is. It's been pretty significant.

Maybe one last one. You mentioned, you know, all your operations are operating very, very well. Do you have any limitations on how much inventory you can hold at any time?

Well, not really. I mean, from where we are today, we can hold a lot more inventory. You have to remember, a lot of this is Blue Creek. Blue Creek, given its design, has multiple places where we could store significant amounts of inventory. No, we're not bounded by anything at this point.

Okay. Thank you.

Yeah.

The next question will come from Nathan Martin with The Benchmark Company. Please go ahead.

Thanks, operator. Good afternoon, gentlemen. Congrats on wrapping up Blue Creek. You know, I guess now that the project has wrapped up, it'd be great to, you know, hear about what your priorities are for free cash flow and shareholder returns going forward. Thanks.

Well, once we start to generate some cash going forward, yeah, I think we'll be in a period of time when we would look to provide more shareholder returns, since we have not done so in the last few months, last few quarters. I think we would be headed in that direction. It's hard to say exactly when. It depends on when we start to generate the cash, and have it available to distribute. I would think if we turn positive in the second half, it could be sometime in the second half, maybe the latter part of the year. That would be the earliest I think you could see or expect anything.

Appreciate that, Dale. What form? Do you guys have any preference there? I know historically you've done obviously the regular dividend, but also done some special dividends. Any thoughts on that versus maybe buybacks?

I think we're gonna stick to some, somewhat similar philosophy as we've used in the past, which is a rising fixed quarterly dividend supplemented by special dividends and some selected stock buybacks. That has done well for our shareholders that have held on to our stock over time. We have one of the highest TSRs over the last ten years in this sector, and that's worked really well for us.

All right. Got it. Appreciate that. Maybe any thoughts from you guys how the recent Section 303 determination signed by the administration could impact Warrior's business?

You know, I really think that, you know, if we look at it right now, things are gonna just continue to move as they are today. I don't think there's gonna be any significant changes. No, I don't think there'll be much of an impact.

I appreciate that, Walt. I'll leave it there, guys. Continue. Best of luck. Thanks.

All right. Thanks, Nathan.

Thank you.

Again, if you have a question, please press star then one. That will conclude our question and answer session for today. I would like to turn the conference back over to Mr. Walt Scheller for any closing remarks. Please go ahead.

That concludes our call this afternoon. Thank you again for joining us today, and we appreciate your interest in Warrior.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.