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ARCH RESOURCES, INC. (ARCH)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 was operationally challenged: Arch posted revenue of $617.9M, an adjusted EBITDA of $44.2M, and a net loss of $6.2M (-$0.34 diluted EPS), driven by a three-week Curtis Bay shiploader outage (~200K tons impact) and throttled longwalls during geological transitions .
  • The company discontinued formal guidance due to the pending CONSOL Energy all-stock merger, which progressed materially (HSR waiting period expired; all necessary international approvals obtained); closing targeted for Q1 2025 with $110–$140M annual cost synergies .
  • Thermal segment returned to profitability amid PRB cost alignment and West Elk development; Arch ended Q3 with $255.9M cash and short‑term investments and net cash of $127.7M; fixed dividend $0.25/share payable Nov 26 .
  • Management expects a “step-change” in coking coal execution starting mid‑Q4 and through 2025 as Leer/Leer South transition into more advantageous geology; however, Q4 shipments/earnings still tempered by extended longwall moves and market softness .

What Went Well and What Went Wrong

What Went Well

  • Merger progress and strategic positioning: HSR waiting period expiry and international approvals secure; management emphasized integration readiness and identified $110–$140M annual cost synergies (logistics, blending, procurement, corporate streamlining) .
    • Quote: “We remain focused on ensuring a speedy, efficient, and successful integration… unlocks the significant synergistic value of the combination.”
  • Thermal segment profitability improved via PRB cost cuts and better stripping/sales alignment; West Elk operated well despite legacy contract headwinds and continued BC-seam development .
  • Balance sheet resilience and capital return continuity: cash/short‑term investments $255.9M, net cash $127.7M; declared $0.25 fixed dividend; ongoing debt reduction ($5.1M) .

What Went Wrong

  • Logistics outage constrained shipments: Curtis Bay shiploader outage reduced coking coal shipments by ~200K tons; Q3 shipments 2.1M tons; met longwalls throttled back during reserve transitions, elevating unit costs .
  • Profitability compression: Adjusted EBITDA fell to $44.2M from $126.3M YoY; diluted EPS swung to -$0.34 vs $3.91 YoY; merger ($7.0M) and severance costs ($6.6M) weighed on GAAP results .
  • Guidance visibility curtailed: formal guidance discontinued amid merger—reduces near-term estimate anchors; Q4 volumes remain cautious due to extended longwall moves and soft pricing .

Financial Results

Summary vs Prior Quarter and Prior Year

MetricQ3 2023Q2 2024Q3 2024
Revenue ($USD Millions)$744.6 $608.8 $617.9
Diluted EPS ($)$3.91 $0.81 ($0.34)
Net Income ($USD Millions)$73.7 $14.8 ($6.2)
Adjusted EBITDA ($USD Millions)$126.3 $60.0 $44.2

Notes: Adjusted EBITDA as defined in non-GAAP reconciliation in the releases .

Segment Operational Performance

Segment MetricQ3 2023Q2 2024Q3 2024
Metallurgical Tons Sold (M)2.3 2.2 2.4
Metallurgical Segment Sales ($USD Millions)$355.0 $286.2 $282.5
Metallurgical Cash Cost of Sales ($USD Millions)$226.7 $197.4 $229.4
Metallurgical Cash Margin ($USD Millions)$128.3 $88.8 $53.1
Metallurgical Coal Sales per Ton ($/ton, non-GAAP)$151.33 $131.97 $115.55
Metallurgical Cash Cost per Ton ($/ton, non-GAAP)$96.63 $91.03 $93.81
Thermal Tons Sold (M)16.8 11.1 13.8
Thermal Segment Sales ($USD Millions)$281.6 $199.7 $232.2
Thermal Cash Cost of Sales ($USD Millions)$259.0 $200.1 $220.4
Thermal Cash Margin ($USD Millions)$22.7 ($0.4) $11.8
Thermal Coal Sales per Ton ($/ton, non-GAAP)$16.73 $18.03 $16.86
Thermal Cash Cost per Ton ($/ton, non-GAAP)$15.39 $18.07 $16.00

KPIs

KPIQ3 2023Q2 2024Q3 2024
Coking Coal Shipments (M tons)—2.0 2.1
Cash from Operations ($USD Millions)—$59.2 $24.9
Net Cash Position ($USD Millions)—$146.0 $127.7
Cash + Short-term Investments ($USD Millions)—$279.3 $255.9
Dividend per Share ($)$3.01 $0.25 declared for Sept 13 $0.25 declared for Nov 26
PRB Pit Inventory (M tons)—>8 (twice typical) —

Guidance Changes

MetricPeriodPrevious Guidance (Q2 2024)Current (Q3 2024)Change
Coking Sales Volume (M tons)FY 20248.6–9.0 Guidance discontinued Lowered visibility
Thermal Sales Volume (M tons)FY 202450.0–56.0 Guidance discontinued Lowered visibility
Avg Metallurgical Cash Cost ($/ton)FY 2024$87–$92 Guidance discontinued Lowered visibility
Avg Thermal Cash Cost ($/ton)FY 2024$16–$17 Guidance discontinued Lowered visibility
SG&A (Cash/Non-cash, $M)FY 2024Cash $70–$74; Non-cash $19–$22 Guidance discontinued Lowered visibility
D&D&A ($M)FY 2024$165–$175 Guidance discontinued Lowered visibility
Capex ($M)FY 2024$155–$165 Guidance discontinued Lowered visibility
DividendQ3/Q4$0.25/share fixed (Sept 13) $0.25/share fixed (Nov 26) Maintained
Cash Tax Payments (%)FY 2024~0% ——

Management explicitly elected to discontinue formal guidance due to the pending CONSOL merger .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
CONSOL merger progress & synergiesNot applicable in Q1; no merger announced. Q2 focused on logistics recovery and operations .HSR expiry; international approvals; S‑4 prep; $110–$140M annual synergies; Q1 2025 close target .New, accelerating integration planning
Metallurgical execution/geometryQ1: transitioning to favorable geology; Leer South to District 2 in Q4 2024 . Q2: record production; District 2 transition imminent .Longwalls throttled in Q3; start-up mid‑Nov; expect step‑change and lower costs in 2025 .Improving medium‑term
Logistics & Curtis Bay outageQ1: Baltimore bridge closure constrained shipments, DTA pivot . Q2: >$12M netback impact; demurrage/rail surcharges .Q3: shiploader outage cut ~200K tons; managed 2.1M coking shipments ; no major residuals anticipated .Normalizing
PRB cost alignment & pit inventoryQ1: excess stripping vs shipments; PRB losses . Q2: >8M tons pit inventory; expected margin tailwind H2 .Q3: thermal returns to profit; PRB cost cuts contributed .Improving
West Elk pricing & BC seamQ2: industrial contracts >$70/ton replacing legacy ~$40/ton; BC seam to lift quality/lower costs mid-2025 .Q3: legacy contracts roll off YE 2024; pricing as much as $30 higher; BC seam transition continues .Positive
Market balance/destockingQ1: HVA ~$220/mt; marginal cost pressure; small mine closures . Q2: subdued demand; markets finely calibrated .Q3: buyers destocking; market close to balance; Asian demand engagement robust .Supportive medium term

Management Commentary

  • “We expect a positive step-change in operational execution for the coking coal portfolio in 2025… ongoing efforts to prepare for an efficient integration that unlocks the significant synergistic value of the combination.” – CEO Paul Lang .
  • “We expect both Leer and Leer South to deliver much‑enhanced operational execution beginning in mid‑Q4 as well as throughout 2025 due to these transitions.” .
  • On 2025 domestic met contract stance: “We’ve been quite willing to walk away if pricing is too low… we have committed about 0.5 million tons and we’re just under $150 on that price.” .
  • On West Elk uplift: “Legacy contracts… around $40 roll off at the end of this year… replaced with prices as much as $30 higher… plus cost step‑down with BC seam development.” .
  • Merger synergies: “$110 million to $140 million of annual cost savings and synergies” across logistics, blending, procurement, corporate structure .

Q&A Highlights

  • 2025 contract/pricing: Management committed ~0.5M tons domestically “just under $150,” willing to prioritize seaborne if North American pricing lags .
  • High-Vol A market: Soft but near balance; strong Asian demand for Leer’s high CSR and blending properties; netbacks impacted by Q2 provisional pricing and PLV convergence, expected to normalize .
  • Q4 outlook: Expect roughly similar met volumes to Q3 with cautious ramp due to extended longwall moves; step-up in performance in back half of Q4 .
  • Thermal portfolio pre-merger: West Elk is core to seaborne high‑rank thermal; PRB under strategic review for clean exit if feasible .
  • Appalachia supply/marginal cost: Signs of supply pullback; many U.S. mines “out of the money” at current prices; labor/parts availability improving .

Estimates Context

  • S&P Global consensus (EPS, revenue, EBITDA) for ARCH Q3 2024 was unavailable via our SPGI tool due to a CIQ mapping error; thus a formal beat/miss assessment vs Wall Street estimates cannot be made at this time. Values retrieved from S&P Global were unavailable.
  • Given discontinued formal guidance and Q3 operational headwinds, sell-side estimates may need to recalibrate for Q4 tempered shipments and 2025 operational step‑change post District 2/Leer transitions .

Key Takeaways for Investors

  • Near‑term: Expect muted Q4 as longwalls restart and market remains soft; watch for shipment cadence and per‑ton cost improvements starting mid‑Q4 .
  • 2025 setup: Material operational tailwinds from District 2 at Leer South and thicker seams at Leer; West Elk pricing uplift and mid‑2025 cost step‑down should expand margins .
  • Merger catalyst: CONSOL deal appears on track for Q1 2025; synergy realization ($110–$140M) and expanded terminal/logistics footprint could reset combined EBITDA/FCF trajectory .
  • Thermal stabilization: PRB right‑sizing and large pit inventory monetize in stronger shipment periods; Thermal segment returned to profit in Q3 .
  • Balance sheet & returns: Healthy net cash ($127.7M) supports continued capital returns; fixed dividend maintained; potential for opportunistic buybacks post‑close and through cycle .
  • Estimate risk: With guidance withdrawn and SPGI consensus unavailable, near‑term modeling uncertainty increases; monitor S‑4 filing, shareholder vote dates, and integration plans for clarity .
  • Trading lens: Stock likely sensitive to incremental merger milestones, evidence of met unit cost decline in Q4 prints, and Asian contract wins; any PLV/HVA price stabilization could quickly leverage first‑quartile cost position .
Sources:
- Q3 2024 8-K and attached press release/exhibit: **[1037676_0001104659-24-114094_tm2427068d1_8k.htm:0]** **[1037676_0001104659-24-114094_tm2427068d1_8k.htm:1]** **[1037676_0001104659-24-114094_tm2427068d1_8k.htm:2]** **[1037676_0001104659-24-114094_tm2427068d1_ex99-1.htm:0]** **[1037676_0001104659-24-114094_tm2427068d1_ex99-1.htm:1]** **[1037676_0001104659-24-114094_tm2427068d1_ex99-1.htm:2]** **[1037676_0001104659-24-114094_tm2427068d1_ex99-1.htm:5]** **[1037676_0001104659-24-114094_tm2427068d1_ex99-1.htm:7]** **[1037676_0001104659-24-114094_tm2427068d1_ex99-1.htm:8]** **[1037676_0001104659-24-114094_tm2427068d1_ex99-1.htm:10]** **[1037676_0001104659-24-114094_tm2427068d1_ex99-1.htm:11]** **[1037676_0001104659-24-114094_tm2427068d1_ex99-1.htm:12]**
- Q3 2024 earnings call transcript: **[1037676_ARCH_3405798_1]** **[1037676_ARCH_3405798_2]** **[1037676_ARCH_3405798_3]** **[1037676_ARCH_3405798_4]** **[1037676_ARCH_3405798_5]** **[1037676_ARCH_3405798_6]** **[1037676_ARCH_3405798_7]** **[1037676_ARCH_3405798_8]** **[1037676_ARCH_3405798_9]**
- Q2 2024 8-K and press release: **[1037676_0001104659-24-082504_tm2419614d1_ex99-1.htm:0]** **[1037676_0001104659-24-082504_tm2419614d1_ex99-1.htm:1]** **[1037676_0001104659-24-082504_tm2419614d1_ex99-1.htm:2]** **[1037676_0001104659-24-082504_tm2419614d1_ex99-1.htm:3]** **[1037676_0001104659-24-082504_tm2419614d1_ex99-1.htm:7]** **[1037676_0001104659-24-082504_tm2419614d1_ex99-1.htm:10]** **[1037676_0001104659-24-082504_tm2419614d1_ex99-1.htm:11]** **[1037676_0001104659-24-082504_tm2419614d1_ex99-1.htm:12]** **[1037676_0001104659-24-082504_tm2419614d1_ex99-1.htm:13]**
- Q2 2024 earnings call transcript: **[1037676_ARCH_3394515_3]** **[1037676_ARCH_3394515_4]** **[1037676_ARCH_3394515_7]** **[1037676_ARCH_3394515_13]** **[1037676_ARCH_3394515_15]** **[1037676_ARCH_3394515_16]** **[1037676_ARCH_3394515_17]**
- Q1 2024 8-K and press release: **[1037676_0001104659-24-051582_tm2412529d1_ex99-1.htm:0]** **[1037676_0001104659-24-051582_tm2412529d1_ex99-1.htm:2]** **[1037676_0001104659-24-051582_tm2412529d1_ex99-1.htm:9]** **[1037676_0001104659-24-051582_tm2412529d1_ex99-1.htm:12]** **[1037676_0001104659-24-051582_tm2412529d1_ex99-1.htm:13]** **[1037676_0001104659-24-051582_tm2412529d1_ex99-1.htm:14]** **[1037676_0001104659-24-051582_tm2412529d1_ex99-1.htm:15]**
- Q1 2024 earnings call transcript: **[1037676_ARCH_3380783_3]** **[1037676_ARCH_3380783_4]** **[1037676_ARCH_3380783_9]** **[1037676_ARCH_3380783_10]**