Radius Health, Inc. (NASDAQ:RDUS) Q4 2023 Earnings Call Transcript

Radius Health, Inc. (NASDAQ:RDUS) Q4 2023 Earnings Call Transcript October 25, 2023

Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to Radius Recycling Fourth Quarter 2023 Earnings Release Call and Webcast. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Please note that, today’s conference may be recorded. I will now hand the conference over to your speaker host, Michael Bennett of Investor Relations. Please go ahead.

Michael Bennett: Thank you, Olivia, and good morning. I am Michael Bennett, the company’s Vice President of Investor Relations. I am happy to welcome you to Radius Recycling earnings presentation for the fourth quarter of fiscal 2023. In addition to today’s audio comments, we have issued our press release and posted a set of slides, both of which you can access on our website at radiusrecycling.com. Before we start, let me call your attention to the detailed Safe Harbor statement on slide 2, which is also included in our press release and in the company’s Form 10-K, which will be filed later today. As we note on slide 2, we may make forward-looking statements on our call today, such as our statements about our targets, volume growth and margins.

Our actual results may differ materially from those projected in our forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in slide 2 as well as our press release of today and our Form 10-K. Please note that, we will be discussing some non-GAAP measures during our presentation today. We’ve included a reconciliation of those metrics to GAAP in the appendix to our slide presentation. Now, let me turn the call over to Tamara Lundgren, our Chairman and Chief Executive Officer. She will host the call today with Stefano Gaggini, our Chief Financial Officer.

Tamara Lundgren: Thank you, Michael. Good morning, everyone, and welcome to our fiscal 2023 fourth quarter earnings call. On our call this morning, I’ll discuss our recent rebranding review our quarterly and full year financial results, the trends affecting our business and project on the strategic activities we have underway to address industry dynamics and create long-term value through the cycle. Stefano will then provide more detail on our financial performance our capital investments and our capital structure. I’ll wrap-up and then we’ll take your questions. Before we begin our review, I’d like to recognize our team for their unwavering commitment to safety. The health and safety of our employees and all who work at and visit our sites is paramount.

In fiscal 2023 almost 90% of our facilities were free of any lost time injuries. While we still have work to do our team is dedicated to continuing their progress in identifying and addressing potential hazards before they become injuries to ensure a safe working environment for everyone. So let’s turn now to slide 4 to get started. In July, we announced the launch of our new corporate name in logo Radius Recycling. This is an exciting new step in our company’s history. Over the last 18 years we’ve operated under many names from our humble beginnings in 1906 through over 50 acquisitions. Today, we operate in more than 100 communities across North America employing over 3,300 talented individuals. The rising demand for ferrous and nonferrous metals continues to propel our company forward.

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Q&A Session

The name Radius Recycling reflects our company’s global leadership in metals recycling and conveys our work our purpose and our vision for a sustainable future. Like the radius of a circle, our work sits at the center of the circular economy, seamlessly connecting all points towards a low carbon future. And while metals recycling and steel manufacturing represent the foundation of our business, we are not the company we were a century ago. Our reach now extends far beyond what the name Schnitzer Steel implied. And it’s important for us to clearly communicate our role in the circular economy and the value we deliver in the communities in which we operate. And while our name is changing, our commitment to our core values of safety, sustainability and integrity remains steadfast.

And those SSI initials will continue to serve as a reminder of our historic legacy. So let’s turn now to slide five to review our fourth quarter highlights. Earlier this morning, we announced our fourth quarter results, which reflected adjusted EPS of $0.47, and adjusted EBITDA of $49 million, which included material insurance recoveries. Our underlying performance reflected market conditions for recycled metals which significantly weakened during the quarter on lower global steel demand. Sequentially, average net selling prices for recycled metals decreased which in combination with the further tightening of supply flows over the summer, led to significant metal spread compression in the quarter, lower ferrous and nonferrous sales volumes and an adverse impact from average inventory accounting.

These effects were substantially offset by the recognition of insurance recoveries. We generated strong operating cash flow and used free cash flow of over $100 million to reduce debt. We also continued our uninterrupted record of returning capital to our shareholders through the issuance of our 118th consecutive quarterly dividend. Let’s turn now to slide six to review our fiscal ’23 highlights. I’m proud of the performance our team achieved in fiscal ’23. During the year characterized by weaker market conditions, our focus on our strategic initiatives delivered positive benefits. Our nonferrous sales volumes increased by 7.5% year-over-year, reflecting initial contributions from our investments in advanced metal recovery technologies. In addition, we expanded our platform and services.

Last November, we acquired ScrapSource, an asset-light business that significantly scales our national sourcing platform and enhances our recycling services offerings, both of which are now integrated under our trademark 3PR brand. Our 3PR services help our customers to increase their recycling rates, reduce material going to landfill, improve their carbon footprint and enhance their sustainability reporting. During the fiscal year, we also successfully implemented $60 million in annual productivity initiatives, focused on production cost reductions, operating efficiencies and SG&A savings. These initiatives helped to mitigate inflationary and other cost pressures. In fiscal ’23, we achieved full year operating cash flows of $139 million, demonstrating our consistent ability to generate cash flow through the cycle.

Our free cash flow was also positive for the year. And last, I’m delighted to share that our company for the third consecutive year earned Great Place To Work certification. This certification recognizes companies that value employee credibility, trust, respect, pride and comradery and is a testament to the positive experiences of our employees and the strong workplace culture we have built together. Let’s turn now to slide 7 for a review of market conditions. One of the most significant drivers of change to our operating margins during fiscal 2023 including the fourth quarter has been the reduced supply of recycled scrap metal. As the US economy slows, our markets are experiencing a tightening in the availability of end of life automobiles, obsolete white goods and scrap from reduced manufacturing activity and construction and demolition projects.