Operator: Greetings. Welcome to the Alpha Metallurgical Resources Q3 2026 Results Conference Call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I would now like to turn the conference over to your host, Emily O'Quinn, Senior Vice President, Investor Relations and Communications. You may begin.
Emily O'Quinn: Thank you, Rob. Good morning, everyone. Before we get started, let me remind you that during our prepared remarks, our comments regarding anticipated business and financial performance contain forward-looking statements, and actual results may differ materially from those discussed. For more information regarding forward-looking statements and some of the factors that can affect them, please refer to the company's Q3 2026 earnings release and the associated SEC filing. Please also see those documents for information about our use of non-GAAP measures and their reconciliation to GAAP measures. On the call today, I am joined by Alpha's Chief Executive Officer, Andy Eidson, and Chief Financial Officer, Todd Munsey, who will provide prepared remarks. Also participating on the call are our President and Chief Operating Officer, Jason Whitehead, and our Chief Commercial Officer, Dan Horn. Following the prepared remarks, we will be available to answer questions.
Emily O'Quinn: With that, I will turn the call over to Andy.
Andy Eidson: Thanks, Emily, and good morning, everyone. Today, we released our definitive Q3 financial results, which include adjusted EBITDA of $29.4 million and 3.9 million tons shipped. Our Q3 volumes improved compared to the first two quarters of the year, which were 3.6 and 3.5 million tons respectively. Cost pressures continue to influence our financial results, and we remain committed to managing these cost challenges and continually evaluating the portfolio against the needs of the metallurgical coal market. Speaking of the market, we have completed our annual budgeting process that culminates in the operational guidance expectations we issued today. I will let Todd cover those in detail, but it is important to note that our 2027 guidance reflects current expectations for the coming calendar year, which includes our analysis of potential financial impact and 2027 terminal capabilities at DTA in Newport News.
Andy Eidson: Following the storm-related damage that occurred in June, DTA management has worked diligently to keep operations moving and collaborate with the various parties about potential go-forward plans. As a result of these conversations, DTA believes the stacker reclaimer, referred to as SR1, will need to be replaced as opposed to repaired, and they have been in close contact with DTA's insurance provider about covering the replacement cost, as well as potentially certain other expenses incurred due to the damage. As such, it is important to note that we do not anticipate significant capital outlays in association with the stacker reclaimer replacement process. As far as timing is concerned, a total replacement of the stacker reclaimer would be a fully custom build, requiring specialized design, engineering, construction, and installation. Such work will likely require a lengthy timeline, with current estimates in the 2-year ballpark.
Andy Eidson: This is why we have worked so hard to establish a logistical framework that minimizes the disruption to our sales and logistics processes, and allows us to keep coal moving to our customers while DTA addresses the damaged stacker reclaimer. This includes a plan to also utilize our throughput capacity at other Hampton Roads terminal in addition to DTA. As evidenced by our more normalized Q3 shipment volumes, we are optimistic about our ability to move all the tons we need to in 2027 and beyond. As we look to next year, our guidance includes 3.5 million tons that we plan to sell to domestic customers in 2027, and at an average price of $135.48 per ton. We are pleased to announce the results of the domestic negotiations, which are fixed-price annual contracts.
Andy Eidson: Each year's negotiation is a little different depending on the market backdrop and a variety of factors. For example, high vol made up a greater proportion of our 2027 domestic quality mix than in 2026, which influences the average price achieved for the total domestic book. All in all, we are pleased with these commitments, and we look forward to building the rest of our 2027 sales around opportunities in the seaborne market. As usual, our teams are doing great work throughout the Alpha organization, and several operations have received recognition for their efforts. On the environmental front, our Paramont team in Virginia was recently honored with three Excellence in Mining Awards from the Metallurgical Coal Producers Association. Virginia Energy also awarded them with three safety awards at their recent ceremony.
Andy Eidson: Both of Alpha's mine rescue teams continue stacking wins as well, including first and second place finishes across many categories of competition in the National Mine Rescue Contest that was held in August. We are extremely proud of our Paramont team that earned the top honor of National Grand Champion this year with a perfect score for the competition. These miners continually train, practice, and challenge themselves so they are prepared to respond when their skills are needed. So congratulations to all those team members. I will now turn the call over to Todd for a review of our financial results for Q3.
Todd Munsey: Thanks, Andy. Good morning, everyone. Adjusted EBITDA for Q3 was $29.4 million, up from $25.6 million in Q2. We sold 3.9 million tons in Q3, up from 3.5 million tons in Q2. Met segment realizations increased quarter-over-quarter, with an average realization of $121.09 in Q3, compared to $118.71 in Q2. Export met tons priced against Atlantic indices and other pricing mechanisms in Q3 realized $107.03 per ton, while export coal priced on the Australian indices realized $150.46 per ton. These results are compared to realizations of $109.08 per ton and $143.82 per ton respectively in Q2.
Todd Munsey: The realization for our metallurgical sales in Q3 was a total weighted average of $124.52 per ton, roughly flat against the Q2 average of $124.30 per ton. Realizations in the incidental thermal portion of the met segment were also essentially flat quarter-over-quarter at $79.44 per ton in Q3, compared to $79.36 per ton in Q2. Cost of coal sales for our met segment increased to $106.93 per ton in Q3, up from $103.7 per ton in Q2. SG&A, excluding non-cash stock compensation and non-recurring items, increased to $15 million in Q3, compared to $13.7 million in Q2. Moving to the balance sheet and cash flows.
Todd Munsey: As of 30 September, we had $334.1 million in cash and cash equivalents, as compared to $338.5 million of cash and short-term investments as of 30 June. We had $184.3 million in unused availability under our ABL at the end of Q3, partially offset by a minimum required liquidity of $75 million. As of the end of September, Alpha had total liquidity of $443.4 million, down slightly from $447.8 million at the end of June. CapEx for Q3 was $33.8 million, down from $45.1 million in Q2. Cash provided by operating activities was $46.9 million in Q3, up from $39.9 million in Q2. As of 30 September, our ABL facility had no borrowings and $40.7 million of letters of credit outstanding. Looking ahead, we issued 2027 operational guidance this morning.
Todd Munsey: For sales volumes, we expect to ship between 13.1 and 14.1 million metallurgical tons, as well as another 1.2 to 1.6 million tons of incidental thermal coal, bringing total 2027 shipment expectations to a range of 14.3 to 15.7 million tons for the year. For 2027 cost of coal sales, we are guiding to a range of $104 to $110 per ton. Selling general and administrative costs are expected to be between $53 and $59 million in 2027, excluding non-recurring expenses and non-cash stock compensation. Idle expense is expected to be between $25 and $33 million. We anticipate 2027 net cash interest income of between $2 and $4 million, and depreciation, depletion, and amortization of $148 to $162 million. Capital expenditures, including carryover, development, and maintenance capital, are expected to be in the range of $145 to $165 million.
Todd Munsey: Contributions to equity affiliates are expected to be in the range of $28 to $37 million, which include cash contributions for DTA. Lastly, we are projecting a 2027 cash tax rate of between 0% and 5%. In terms of our committed position for 2026, at the midpoint of guidance, 87% of our metallurgical tonnage in the met segment is committed and priced at an average price of $126.69. Another 12% of our met tonnage for the year is committed, but not yet priced. The thermal byproduct portion of the met segment is fully committed and priced at the midpoint of guidance at an average price of $76.6. Coal markets remain subject to uncertainty and volatility resulting from geopolitical conflicts and global economic conditions.
Todd Munsey: Improving indicators in manufacturing conditions across key Alpha markets suggest that economic conditions are stable, with almost all in growth territory. While global steel demand remains weak, supply-related factors such as mine closure announcements temporarily influenced metallurgical coal indices to rise toward the end of Q3, with further volatility continuing after the quarter close. The Australian premium low vol index increased from $244 per metric ton on 1 July to $272.10 per metric ton on 30 September. The US East Coast low vol index rose from $190 per metric ton at the beginning of the quarter to $210 per metric ton by the end of September. The US East Coast high vol A index increased from $157 per metric ton at the start of the quarter to $195 per metric ton at the quarter's close.
Todd Munsey: The US East Coast high vol B index rose from $147 per metric ton to $170 per metric ton at the end of the quarter. Since then, the Australian premium low vol index has decreased from $262.20 per metric ton as of 5 November, representing a drop of roughly 4% since quarter close. US East Coast low vol is unchanged from quarter close at $210 per ton. US East Coast high vol A has declined about 3% to $190 per ton, while high vol B has risen slightly to $174.50 per ton as of 5 November. In the seaborne thermal market, the API2 index was $115.50 per metric ton at the beginning of July and increased to $141.40 per metric ton at the end of September.
Todd Munsey: Since then, the API2 index has moved down to $136.30 per metric ton as of 5 November. With that, operator, we are now ready to open the call for questions.
Operator: Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. One moment, please, while we poll for questions. Our first question comes from George Eadie with UBS. Your line is now live.
George Eadie: Yeah, good morning, team. Thanks for the update today. Can I ask on the cost front? Cash costs only 2% higher year-on-year at midpoint, even if I adjust for marginally higher midpoint sales volumes. Can you maybe just talk through what goes into that and sort of potential cost sensitivities to things like diesel? I guess it sort of seems like a very low year-on-year cost increase given a lot in this sector are talking about a lot of input and broader sort of cost pressures. Thank you.
Andy Eidson: Hey, George. This is Andy. Appreciate the question. Yeah, we are actually pretty pleased with where our cost guidance is coming out for next year, although it is up a bit. I mean, we have really seen the vast majority of the input cost impacts have already found their way into the system for us. So, again, we would hope that there would be some relief on the diesel side. Hopefully, that situation gets resolved sometime in the near future. Even then, it will take a while to work its way through the system. But we are not saying that the input cost increases have flatlined, but the rate of increase has tailed back quite a bit. Once you bake in the impact of the diesel and all the oil adjuncts, I think currently our run rate is pretty well reflective of that.
Andy Eidson: Next year, we do not see a material amount of increase from there.
George Eadie: What diesel price did you assume in guidance for 2027, Andy?
Andy Eidson: Off the top of my head, I do not know. I think it was low to mid-fives on a per gallon cost.
George Eadie: Okay. What is the sensitivity if you were to estimate ballpark per ton on your cash cost guidance? If that went back to say, mid-threes, what is the potential reduction in cash cost?
Andy Eidson: Well, I will leave you to do the math on that, but we do run in the low 20 million gallons of diesel across all operations. So, 20 to 22 million gallons. You could figure what the sensitivity is on that across all the tons.
George Eadie: Okay. That is perfect. Thank you. Just one more, getting back to the 16 million ton per annum levels, can you talk through how that looks and if DTA being down for the two-year ballpark you guys flagged is a constraint? Another way of asking was if market got a lot stronger next year, could you push beyond that 15.7 upend, do you think? What is the constraining limit to higher volumes for you guys at the moment?
Andy Eidson: Yeah, I mean, DTA obviously will be a constraint. Our sales and logistics teams have done a really nice job, as I mentioned in the prepared comments. They have done a nice job of finding flexibility and optionality with other export terminal access. There will be a point in which we cannot expand any further. I am not going to throw out a number for that because, again, the team is pretty creative in finding new paths to get tons where we need them to go.
Andy Eidson: But I think we are comfortable with our current run rate. I do not think there is a huge amount of upside to that. We are going to need the terminals to operate well. We are going to need the railroads to perform well to hit all of our numbers the way we want to. But I think we are going to be able to get there.
Andy Eidson: It is not going to look that different year-over-year, compared to 2026. From a quality perspective, it is going to look a little bit different because, again, I think we are moving around. As has been our plan, we are shifting, as a lot of other folks are. We have been working on a multi-year plan to shift more of our production from higher-ranked coals, from the low vol and mid vol, and a little bit less on the high vol side. So that will continue to develop. But I think logistically, all of that fits pretty well into what we have got planned for 2027.
George Eadie: All right. That is helpful. Thanks, guys. Thank you.
Andy Eidson: Thank you.
Operator: Our next question comes from Nick Giles with B. Riley Securities. Your line is now live.
Nick Giles: Yeah, thanks, operator. Good morning, guys. It was good to hear that there is more high vol coal in the domestic mix, which I assume leaves more low vol coals to send into the seaborne market. I was wondering if you could just quantify that mix shift, maybe how many incremental tons of low vol would you be able to send export next year. Thank you.
Andy Eidson: Yeah, good morning, Nick. I will throw that one over to Dan. That one is definitely, he has got the numbers at his fingertips there.
Dan Horn: Thanks, Andy, and hey, Nick. Well, let us start by saying that the high vol that moved into domestic market, that is coal that is, let us say, little lower value coal, and that was reflected in the overall comments that we had there and the pricing. As we ramp up the low vol mine, our new Wildcat mine, it is kind of dynamic. You cannot really compare our portfolio in 2026 to what it is going to look like in 2027. As Wildcat ramps up, we will have more low vol available. Broadly speaking, at this moment, that is all available for the seaborne market, but we have had a lot of interest in the domestic market too, as it ramps up. I will not give you a number, but it is several hundred thousand tons at least that would be available to go seaborne easily.
Dan Horn: As well as our usual mix of high vol and quite a bit of mid vol, which is always sought after.
Nick Giles: Got it. Okay. No, thanks for that, Dan. I mean, any sense for how much of that would be PLV-linked, or I guess, kind of what do the commercial discussions look like today in terms of getting more tons sold on a PLV basis?
Dan Horn: Well, I do not have a I will say this. There is quite a bit of interest from customers that we would sell against the Aussie indices, but I cannot quantify that. The Wildcat coal is a premium coal that will achieve a premium to a lot of other US low vols, we think. So, whether we sell it against an Aussie index or very strongly against a US East Coast index, I mean, we are happy. We focus on the net return, not just the index.
Nick Giles: Makes sense. No, I appreciate that. Maybe just shifting gears to the stacker reclaimer. It is good to hear that you feel like that is fully covered from an insurance perspective. But how should we think about the timing of those insurance reimbursements versus any capital outlays that may be required? Or said differently, is there a scenario where you might have to invest in the new stacker reclaimer and kind of wait a few quarters for the insurance reimbursements to come in?
Andy Eidson: Yeah, I think it is probably a little too early to comment on that one, Nick. I do not expect there to be too much of a sequencing problem from that respect, certainly not a multi-quarter type of reimbursement gap. Obviously, you may have a few weeks or a few months, but we are pretty pleased with how our insurance or how DTA's insurance carriers responded thus far. They have been very helpful and constructive in helping us move along this process relatively quickly. Yeah, I do not expect an impact, but again, it is probably too early in the process to be making too many prognostications there.
Nick Giles: Okay. No, fair enough, Andy. Maybe just one last one for me on the capital allocation front. It would just be good to get an update on what you are seeing among your kind of smaller peers in Central App. Are there any opportunities out there to pick up some tons at a discount, or have you heard any rumblings of kind of more capacity that has come offline?
Andy Eidson: Really not in a position to comment on any of those folks. I mean, they will have to speak for themselves. As we have always taken the position, we look at anything and everything. We want things to be a good strategic fit. If things are available, we want it to be either, well, not either, but a combination of geographically synergistic, quality synergistic, and accretive from a financial standpoint. Those boxes, all three boxes are kind of hard to check right now when you look around the chessboard. But there are some things out there that we can look at. But again, we are really focused on managing our own portfolio, particularly in markets like this, making sure that we are optimizing our outcomes and optimizing both the productivity and the profitability of the portfolio.
Nick Giles: Well, guys, I appreciate the update and continued best of luck.
Andy Eidson: Thanks, Nick.
Operator: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. One moment, please, while we poll for questions. Our next question comes from Nathan Martin with StoneX. Your line is now live.
Nathan Martin: Thanks, operator. Good morning, everyone. I had a question on DTA as well. I mean, just given the fact that you said the repair replacement timeline could be extended into a year or two, just curious, do you see any opportunity to improve logistics or lower transportation or port costs in the meantime?
Andy Eidson: In the meantime, before we get to a repaired DTA, probably not. I mean, that is more of a focus on just getting the tons moved where we can, as best we can. On the other side of DTA and during the repair, could there be some opportunities? Yeah, I mean, anytime you are looking at older equipment that is going to have to be replaced for any reason, you hope to find some opportunities to improve things, whether it is from a throughput capacity standpoint or from a cost reduction. But that is for future conversations as we actually get into the nuts and bolts of mechanically fixing and replacing the SR.
Nathan Martin: All right. Understood, Andy. Appreciate that. Maybe looking at CapEx for 2027, guidance fell roughly flat year-over-year. I noticed an updated slide in your deck with kind of the breakdown there, but if you can provide a little more detail around the development projects you plan to spend capital on in 2027, because I see that kind of ticked up a little bit there.
Andy Eidson: Yeah, I mean, some of that is related to existing operations. We do have some refuse impoundment needs in Virginia that will obviously extend the life and help with managing the waste cost at the McClure Prep Plant where Deep Mine 41 is handled. That is obviously something that we are very focused on. Likewise, some potential work at the Kepler Prep Plant, where Road Fork 52 reports, and Road Fork 52, Deep Mine 41 definitely being at the top of our list as far as the portfolio mines that we have. Any other development, we are looking at other, or kind of our next projects, which are a little bit longer dated, 2, 3 years out.
Andy Eidson: Just doing a little bit of prospective work there, not necessarily committing to a project, but making sure things are moving to the extent where if we want to pursue a project, we are not losing any time. Not a whole lot to report on that just yet.
Nathan Martin: All right, appreciate that. Maybe a final question for Dan. Dan, how should we think about the quality mix of what you guys have left to sell here for 2026? I think you are roughly 80% committed in price at the midpoint guidance, so seemingly a few tons left to put to bed. How should we think about that as we head to the end of the year?
Dan Horn: Yeah, Nate, probably the typical blend, maybe a little heavier with the low vol as Wildcat ramps up, we are producing a little more of that. I do not think probably the same roughly blend. Still a fair half high vol maybe, and maybe the rest mid and low, something like that.
Nathan Martin: All right, great.
Dan Horn: But again, with low.
Nathan Martin: Thanks, Dan.
Dan Horn: Going forward, more low. Our plan is, and it will happen, that we are going to have more low vol in our mix and more medium vol as we go forward. That is certainly the plan, and a little less high vol. The rest of the year is pretty well known. It is right in front of us.
Nathan Martin: All right, understood. Appreciate the time. Good luck in Q4.
Dan Horn: Thank you.
Andy Eidson: Thanks, Nate.
Operator: We have reached the end of the question-and-answer session. I would now turn the call over to Andy Eidson for closing remarks.
Andy Eidson: Well, thanks everyone for dialing into the call and checking in online. We appreciate your interest in Alpha, and we hope you all have a great weekend.
Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
