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EC

ENVIRI Corp (NVRI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $559M and Adjusted EBITDA was $70M; adjusted diluted EPS was $(0.04). GAAP diluted EPS was $(1.03) driven by large unusual items in Harsco Environmental and Rail .
  • Results landed within prior Q4 guidance ranges (Adj. EBITDA $68–$78M and adjusted EPS $(0.03)–$(0.14)$) and management issued FY2025 guidance for Adjusted EBITDA of $305–$325M and adjusted free cash flow of $30–$50M .
  • Clean Earth delivered another strong quarter (Adj. EBITDA $36M, 15.0% margin), while Harsco Environmental declined on FX, divestitures, and weaker service levels; Rail remained challenged by ETO contract losses and a $13M goodwill impairment .
  • Balance sheet flexibility improved: covenant net leverage ended 2024 at 4.07x; credit agreement amended to increase liquidity and relax leverage covenant trajectory; AR securitization capacity raised to $160M .

What Went Well and What Went Wrong

  • What Went Well

    • Clean Earth posted another record quarter: revenue $241M (+2% YoY), Adj. EBITDA $36M (+26% YoY) with margin up 280 bps to 15.0%. “Strong operational execution, improvement initiatives and a favorable pricing environment drove Clean Earth to once again achieve record profits and margins.” — CEO Nick Grasberger .
    • Rail saw sequential improvement vs Q3 in both Adjusted EBITDA and free cash flow as operational initiatives and ERP investment progressed; Q4 Adj. EBITDA was $2M versus $(2)M in Q3 .
    • Net leverage ratio improved to 4.07x and facilities were amended to enhance liquidity and covenant cushion (AR securitization capacity up to $160M) .

  • What Went Wrong

    • GAAP loss widened: Q4 GAAP diluted EPS $(1.03)$ with special items totaling ~$90M, including environmental charges, asset impairments, forward loss provisions, and a Rail goodwill impairment; adjusted diluted EPS was $(0.04)$ .
    • Harsco Environmental: revenue down 18% YoY to $240M; Adj. EBITDA fell to $41M (17.1% margin) on FX, divestitures, contract exits, and a $27.2M environmental processing/disposal charge .
    • Harsco Rail: continued ETO contract pressures (additional forward losses of $12.8M in Q4) and $13M goodwill impairment; Adj. EBITDA was $2M with less favorable mix and lower aftermarket volumes .

Financial Results

  • Consolidated Summary
MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$610 $574 $559
Adjusted EBITDA ($USD Millions)$86 $85 $70
Adjusted EBITDA Margin (%)14.1% 14.8% 12.6%
GAAP Diluted EPS (Continuing Ops)$(0.16) $(0.15) $(1.03)
Adjusted Diluted EPS (Continuing Ops)$0.02 $(0.01) $(0.04)

  • YoY/Sequential Context

    • Q4 revenue down 7% YoY, primarily FX and divestitures (~$13M impact); Adjusted EBITDA down 9% YoY with ~$4M FX headwind .
    • Q3 revenue down 4% YoY (FX/divestitures); Adjusted EBITDA up 3% YoY .
    • Q2 revenue comparable YoY; Adjusted EBITDA up 7% YoY .

  • Segment Breakdown

SegmentQ2 2024 Revenue ($M)Q3 2024 Revenue ($M)Q4 2024 Revenue ($M)Q2 2024 Adj. EBITDA ($M)Q3 2024 Adj. EBITDA ($M)Q4 2024 Adj. EBITDA ($M)
Harsco Environmental$292.9 $279.1 $240.3 $49.2 $53.1 $41.2
Clean Earth$236.1 $236.8 $240.9 $38.1 $41.5 $36.2
Harsco Rail$81.0 $57.7 $77.5 $7.4 $(2.5) $1.8
  • KPIs
KPIQ2 2024Q3 2024Q4 2024
Net Cash Provided by Operating Activities ($M)$39.0 $1.4 $36.3
Adjusted Free Cash Flow ($M)$9.5 $(34.2) $7.5
Credit Agreement Net Leverage (x)3.9x —4.07x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA ($M)FY 2025—$305–$325 New
Adjusted Free Cash Flow ($M)FY 2025—$30–$50 New
GAAP Loss from Continuing Ops ($M)FY 2025—$(36)–$(17) New
Adjusted Diluted EPSFY 2025—$(0.25)–$(0.01) New
Net Interest Expense (ex unusual) ($M)FY 2025—$105–$109 New
AR Securitization Fees ($M)FY 2025—~$10 New
Pension Expense (Non-Op) ($M)FY 2025—~$20 New
Tax Expense (ex unusual) ($M)FY 2025—$21–$26 New
Net Capital Expenditures ($M)FY 2025—$130–$140 New
Adjusted EBITDA ($M)Q1 2025—$57–$63 New
Adjusted Diluted EPSQ1 2025—$(0.18)–$(0.11) New
Adjusted EBITDA ($M)FY 2024$327–$340 (prior) $317–$327 (Q3 update) Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 and Q3)Current Period (Q4)Trend
Clean Earth pricing/efficiency and IT platformQ2: Price and volume drove growth; efficiency initiatives; Stericycle benefit not repeating . Q3: Record margins; pricing/efficiency offset lower volume; 17.5% margin .Q4: Another record quarter; 15.0% margin; management continuing One Clean Earth IT harmonization, ~80–90% completion expected by year-end; incremental growth capex with quick paybacks .Positive execution; double-digit EBITDA growth expected in 2025
Harsco Environmental steel cycle & FXQ2: Adj. EBITDA comparable; FX and divestiture headwinds . Q3: Organic growth +5% with FX/divestitures offset; 19.0% margin .Q4: Weaker global steel production (customers’ utilization <73%); FX/divestitures; environmental charge; Adj. EBITDA $41M; margin 17.1% .Near-term headwinds; contingency actions; operating leverage to recovery
Harsco Rail ETO contracts & ERPQ2: ETO adjustments; Adj. EBITDA $7M; underlying demand better excluding ETO impacts . Q3: ETO losses; Adj. EBITDA $(2)M; delays and mix issues .Q4: Additional forward losses ($12.8M) and $13M goodwill impairment; ERP investment progressing; sequential EBITDA and cash flow improvement vs Q3 .Gradual improvement; major deliveries expected 2026; risk mitigation ongoing
Cash flow and leverageQ2: Net leverage 3.9x; Q2 adjusted FCF $9.5M . Q3: Adj. FCF $(34)M); ops cash $1.4M .Q4: Ops cash $36M; adjusted FCF $8M; covenant net leverage 4.07x; credit and AR facilities amended to add flexibility .Improvement into 2025 with Rail/pensions tailwinds
PFAS opportunityQ2/Q3: Not a core 2024 driver; CE positioning in specialty waste .Q4: Treating PFAS-contaminated wastewater at Detroit facility; active with DoD pilots; no material PFAS in 2025 plan yet .Longer-term optionality; no near-term financial impact
Governance/Board refreshQ3: Extended revolver and AR securitization .Q4: Nomination of DuPont’s former CFO Nick Fanandakis; ongoing board refresh aligned to core markets and portfolio strategy .Strengthened oversight and portfolio focus

Management Commentary

  • Strategic Message: “We delivered the highest adjusted EBITDA in over 10 years… led by Clean Earth. For 2025, expectations are tempered… weak fundamentals in global steel market expected to weigh on Harsco Environmental, while Clean Earth is projected to see continued growth. Cash flow is anticipated to improve in 2025, supported by Harsco Rail's execution against certain contracts.” — CEO Nick Grasberger .
  • Rail Outlook: “As these projects are completed… we anticipate Rail EBITDA to be in the range of $35–$40 million with a healthy cash flow profile… plans unchanged to divest the rail business and reduce leverage to 2.5–3x.” — CEO .
  • Unusual Items: “Adjusted diluted loss per share was $0.04… special items totaling $90 million… roughly half a dozen items in Harsco Environmental and Rail, with about $40 million representing non-cash impairments/write-downs.” — CFO Tom Vadaketh .
  • Operational Initiatives: “We’re investing in the new IT ERP system for Rail… improvement projects will be completed during 2025… level-load production to optimize manufacturing.” — CFO .

Q&A Highlights

  • Clean Earth volume trajectory: Retail churn and improving industrial pipeline underpin expected ~5% volume lift in 2025; top-line growth ~5% split ~50/50 price vs volume .
  • Harsco Environmental volume floors: Most plants likely near bottom; major impacts from site closures; little further bankruptcy/idling risk seen currently; contract floors not broadly approached yet .
  • Rail ETO risk cadence: Risk dissipates after first vehicle delivery acceptance; ~12–18 months to reach key milestones on 2 of 3 big contracts; U.K. contract remains largest remaining risk .
  • PFAS: Active wastewater treatment and DoD pilots; no material PFAS revenue embedded in 2025/3-year plan yet .
  • 2025 steel production assumptions: Volume up ~1–2% overall, stronger in India/MENA, flat elsewhere; HE EBITDA down YoY due to FX/divestitures .

Estimates Context

  • We attempted to pull Wall Street consensus (S&P Global Capital IQ) for Q4 2024 and FY 2025 EPS/Revenue/EBITDA, but the service returned a daily limit exceeded error, so consensus estimates were unavailable at the time of query [SPGI error].
  • As a proxy, management’s Q4 actuals landed within prior Q4 guidance ranges and FY 2025 guidance implies stable Adjusted EBITDA with materially improved adjusted free cash flow versus FY 2024 .

Key Takeaways for Investors

  • Clean Earth is the core earnings engine with sustained pricing and efficiency momentum; double-digit EBITDA growth targeted for 2025 and margin approaching ~17% .
  • Harsco Environmental faces cyclical/FX/divestiture headwinds; management is cutting capital and costs and sees strong upside operating leverage when steel production normalizes .
  • Rail remains the principal risk but is incrementally improving; ERP and operational projects are progressing, with major delivery milestones expected in 2026 and supportive FCF improvement in 2025 .
  • Liquidity/covenant risk mitigated via credit agreement amendments and expanded AR facility; covenant net leverage at 4.07x with path for improvement through Rail and pension cash tailwinds .
  • Q4 results were pressured by ~$90M in special items; watch for reduced non-GAAP adjustments as remediation, impairments, and ETO loss provisions normalize .
  • Near-term trading: narrative likely driven by Clean Earth strength and 2025 FCF guide, offset by HE macro and Rail contract risk headlines; any signs of steel production recovery or ETO schedule clarity could be catalysts .
  • Medium-term thesis: portfolio reweighting toward specialty waste (Clean Earth), Rail divestiture ambition, and deleveraging to 2.5–3.0x underpin equity rerating potential as execution de-risks .