NVRI Q1 Earnings Call: Clean Earth Delivers, Steel Headwinds Persist, Rail Risk Reduced
Steel and waste handling company Enviri (NYSE:NVRI) missed Wall Street's revenue expectations in Q1 CY2025, with sales falling 8.7% year on year to $548.3 million. Its non-GAAP loss of $0.15 per share was 29.7% above analysts' consensus estimates.
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Revenue: $548.3 million vs analyst estimates of $560.1 million (8.7% year-on-year decline, 2.1% miss)
Adjusted EPS: -$0.15 vs analyst estimates of -$0.21 (29.7% beat)
Adjusted EBITDA: $66.94 million vs analyst estimates of $60.8 million (12.2% margin, 10.1% beat)
Management lowered its full-year Adjusted EPS guidance to -$0.23 at the midpoint, a 73.1% decrease
EBITDA guidance for the full year is $315 million at the midpoint, above analyst estimates of $310.9 million
Operating Margin: 5.5%, in line with the same quarter last year
Free Cash Flow was -$15.02 million compared to -$25.53 million in the same quarter last year
Market Capitalization: $610.2 million
Enviri's first quarter results reflected mixed dynamics across its segments, as management highlighted Clean Earth's margin expansion and operational resilience amid challenging market conditions. CEO Nick Grasberger pointed to Clean Earth's 'record first quarter results,' crediting both volume and price improvements, while Harsco Environmental faced ongoing steel market headwinds, and the Rail segment remained pressured by legacy contracts. Management also described the completion of a major contract renegotiation in Rail as a critical risk-reduction milestone, with new leadership appointments expected to further stabilize operations.
Looking ahead, Enviri's full-year guidance is shaped by expectations of continued momentum in Clean Earth and stable performance in Harsco Environmental, despite global trade uncertainties and steel industry overcapacity. Grasberger cautioned that 'macroeconomic uncertainty driven by the ongoing global trade issues' could slow demand, but the company does not anticipate material direct impacts from new tariffs. Management is focused on operational efficiency, cash flow improvement, and executing IT initiatives in Clean Earth to drive future margin gains.
Enviri's leadership discussed the divergent performance of its business units, with Clean Earth's operational improvements standing out. The Rail segment's contract renegotiation is expected to reduce ongoing financial risk, while steel market challenges continue to weigh on Harsco Environmental.
Clean Earth Margin Expansion: Clean Earth achieved over 100 basis points of margin growth, driven by balanced price and volume increases, and ongoing operational efficiencies, particularly through routing and disposal optimization.
Steel Market Pressures: Harsco Environmental continued to face excess capacity and subdued demand in the global steel sector. Management noted that recent EU actions to support local steelmakers could be beneficial, but an improvement in customer volumes has yet to materialize.
Rail Contract Amendment: The renegotiation of a major engineered-to-order (ETO) contract with Deutsche Bahn resulted in higher contract revenue and a more realistic delivery schedule, reducing future penalty risk and improving segment outlook.
IT and Productivity Initiatives: The rollout of the 'One Clean Earth' IT platform is expected to drive further efficiency gains and margin improvements, with management expressing optimism about additional cost-saving opportunities ahead.
Leadership Team Renewal: The appointment of a new President and CFO for the Rail segment is intended to address operational bottlenecks and supply chain management, supporting a turnaround in that business unit.
Management's outlook for the remainder of the year centers on Clean Earth's growth, operational improvements, and mitigating macroeconomic risks from global trade and steel overcapacity.
Clean Earth Volume and IT Gains: Management expects Clean Earth's growth to be increasingly driven by volume improvements and productivity gains from the One Clean Earth IT initiative, supporting margin expansion.
Steel Demand Uncertainty: Persistently weak global steel demand and ongoing capacity issues remain a risk for Harsco Environmental, though recent trade measures in Europe and a weaker U.S. dollar could provide some relief.
Rail Recovery Path: Successful execution of amended ETO contracts, combined with new leadership and operational improvements, is critical to stabilizing Rail's performance and reducing its drag on consolidated cash flow.
Larry Solow (CJS Securities): Asked about the impact of tariffs and steel demand on Harsco Environmental; management emphasized currency benefits and efficiency programs to offset site closures, while noting steel volumes are expected to remain flat in the near term.
Larry Solow (CJS Securities): Inquired about Clean Earth's volume outlook; CEO Nick Grasberger highlighted visibility into second-quarter volume growth and the importance of IT-driven efficiencies, while acknowledging no signs yet of economic slowdown.
Rob Brown (Lake Street Capital Markets): Sought details on the remaining risks in the Deutsche Bahn ETO contract; CFO Tom Vadaketh explained that risks are now mainly tied to successful product testing and homologation later this year.
Rob Brown (Lake Street Capital Markets): Questioned the sustainability of Clean Earth's margin expansion; management stated that margin gains are broad-based and ongoing, with IT initiatives expected to drive further improvements.
Davis Baynton (BMO Capital Markets): Asked about steel market capacity and underlying demand trends; management reiterated that volume growth is limited but expects a stronger second half from new site ramp-ups and operational initiatives.
In the coming quarters, the StockStory team will monitor (1) Clean Earth's ability to sustain margin and volume growth as IT initiatives roll out, (2) any tangible recovery in global steel demand that could lift Harsco Environmental's volumes, and (3) the effectiveness of new Rail leadership and contract risk mitigation strategies. Progress in these areas, alongside macroeconomic conditions and potential shifts in trade policy, will be key to assessing Enviri's execution against its strategic goals.
Enviri currently trades at a forward EV-to-EBITDA ratio of 2.4×. In the wake of earnings, is it a buy or sell? The answer lies in our free research report.
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