Harsco Corporation Aktie

Good afternoon. My name is Chuck, and I'll be your conference facilitator. At this time, I would like to welcome everyone to the Enviri Corporation First Quarter 2026 Earnings Release Conference Call. [Operator Instructions] Also, this telephone conference presentation and accompanying webcast made on behalf of Enviri Corporation are subject to copyright by Enviri Corporation and all rights are reserved. No recordings or redistributions of this telephone conference by any other party are permitted without the express written consent of Enviri Corporation. Your participation indicates your agreement. I would now like to introduce Mr. Dave Martin of Enviri Corporation. Mr. Martin, you may begin the call.

Thank you, Chuck, and welcome to everyone joining us this afternoon. With me today is Nick Grasberger, our Chairman and Chief Executive Officer; Russell Hochman, our President and Chief Operating Officer and incoming CEO of New Enviri; Tom Vadaketh, our Senior Vice President and Chief Financial Officer; and Pete Minan, the incoming CFO of New Enviri. Today, we will discuss our results for the first quarter as well as our outlook for Harsco Environmental and Rail. After our prepared remarks, we will take your questions. Our quarterly earnings release and slide presentation for this call are available on our website.

During today's call, we will make statements that are considered forward-looking within the meaning of the federal securities laws. These statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties that may cause actual results to differ materially from those forward-looking statements. For a discussion of such risks and uncertainties, see the Risk Factors section in our most recent 10-K and as updated in subsequent 10-Qs. The company undertakes no obligation to revise or update any forward-looking statements. Lastly, on this call, we will refer to adjusted financial results that are considered non-GAAP for SEC reporting purposes. A reconciliation to GAAP results is included in the earnings release today as well as the slide presentation. I'll now turn the call to Nick to begin his prepared remarks.

Thank you, Dave, and good afternoon, everyone. Let me start with a brief status update on the Clean Earth sale and spin-off of New Enviri. Last week, our shareholders voted to approve the Clean Earth sale, and the Form 10 filing related to the New Enviri spin-off was approved by the SEC and declared effective. As a result, we have now cleared the key regulatory milestones for both the sale and spin-off transactions and expect to close in approximately 3 weeks or June 1, which is in line with our anticipated timing. We will announce the cash payout to shareholders from the Clean Earth sale shortly prior to closing.

Our cash conversion range remains $14.50 to $16.50 per share. We are working diligently through the details related to the payout and won't comment further today on potential outcomes. With the Clean Earth sale closing soon, this will be my last earnings call with Enviri. It has been a privilege and a pleasure to lead this company over the past 12 years. The professionalism displayed across the company over the years has been unmatched, and I'm grateful for the hard work and consistent support of our employees and our Board.

I'd like to recognize the employees of Clean Earth and our entire Enviri team for their efforts and dedication in creating a better business and completing the successful yet complex transaction. It certainly provides a great outcome for our shareholders. And I wish the Clean Earth team well, and I'm confident they will thrive as part of Veolia. I'd also like to recognize Tom Vadaketh, who will be leaving Enviri when the transaction closes. Tom has been a driving force behind the tremendous value creation for our shareholders during his 2.5-year tenure. Tom is liked and respected by all, and I simply cannot imagine a better partner for me and our colleagues during his time with our company.

With that said, there is more value to be created here through New Enviri and under the leadership of Russell. New Enviri's implied valuation today is compelling, and we believe Harsco Environmental and Harsco Rail have attractive earnings growth potential. These are strong businesses poised to improve as demand rebounds in their respective markets. Margin growth for each will be further supported by the initiatives contemplated by Russell and team. New Enviri is in very good hands, and I look forward to watching its continued progress as a sizable shareholder. Russell, Tom, and Pete Minan will comment further on Q1, our outlook and our priorities. Now over to Russell.

Thank you, Nick, and good afternoon, everyone. Harsco Environmental and Rail started the year with positive momentum, each exceeding our expectations as a result of better volumes, positive operational execution, and prudent cost management. I'm optimistic about what's ahead for New Enviri. Harsco Environmental and Rail are market-leading attractive businesses that we believe are at an inflection point. New Enviri will benefit from a strong capital structure and with less burden from related interest costs. And we're confident our internal actions will drive margin improvement.

As market conditions improve, we'll be even better positioned to drive earnings and cash flow growth, further reduce debt, and continue to enhance shareholder value. Next, I'll provide an update on my key priorities. These include our deep dive business review of both Harsco Environmental and Rail aimed at driving self-help improvement initiatives to boost business performance over the coming quarters and years and the derisking of Rail's ETOs. Our review is ongoing at an accelerated pace. We're working to refine our business strategy and priorities as well as to identify levers to reduce our complexity and drive operational excellence. Through this process, we are challenging ourselves to think critically about our business approach and best practices and importantly, to make often difficult decisions that will position us to achieve our goals.

In Harsco Environmental, we're focused on initiatives that will improve our site level productivity and maintenance efficiency as well as opportunities to optimize our SG&A and support costs. In Rail, additional initial restructuring is underway. We're taking actions to improve our supply chain and reduce inventory. We're prioritizing Rail's aftermarket business where margins are attractive and significant opportunities exist as well as evaluating other capital-light business opportunities, and we continue to evaluate further actions to optimize our manufacturing operations and reduce our global footprint and SG&A costs.

Overall, I'm pleased with our progress through this review and encouraged by the engagement and commitment of our people. We'll have more to communicate on this initiative in the months ahead. Our goal is to show demonstrable progress in 2026 and head into 2027 with key implementation programs in place. With regard to Rail's European ETO contracts, I'll reiterate that reducing or minimizing our ETO risk is critical and a top priority for me in 2026, and we are on track to meeting this commitment. For SBB, most of the first group of vehicles has been delivered and accepted by the customer. The remaining 2 of 48 vehicles are expected to be accepted by the customer in the coming months. Homologation for the second vehicle type has started, and we expect to complete that process in early 2027.

Overall, we believe that we're in a good position on the SBB contract and that its risk profile has improved drastically in the past year. As a reminder, we anticipate turning cash positive in 2027 for this project. For our contract with Deutsche Bahn, the first three vehicles are progressing as we look for ways to maximize net cash flows and otherwise derisk the contract. For Network Rail, we are actively engaging with our customer to improve the financial outlook for the contract and/or otherwise minimize the volatility and risk. This derisking is among the highest priorities for New Enviri. The opening capital structure for New Enviri will provide us with the financial flexibility to pursue any and all derisking options. I'm optimistic about what we can accomplish over the next year, and I'm extremely confident in our team. With a fresh start provided by the Clean Earth transaction to optimize our capital structure, there is considerable value creation potential at New Enviri, and we're laser-focused on priorities that will maximize this opportunity.

Lastly, let me officially welcome my former colleague, Pete, back to the team. Pete knows Harsco Environmental and Rail very well, and he has already been a valued leader in the formation of our strategy for New Enviri. I cannot imagine a better partner for me and our colleagues during this exciting time. I'd also like to acknowledge Nick and Tom as they prepare to depart the company. Tom joined the company during a time of considerable uncertainty, successfully leading numerous financial and strategic initiatives and contributing to the transaction soon to be completed. He has been a great partner to me during his time with Enviri. Nick, of course, has been the visionary leader of this company for more than a decade. He brought stability to Enviri and instituted strategic direction, business process, and core values, all of which made a better company. I'm grateful to have served with Nick, and I'll benefit from my experience with him as we enter the next phase of growth under new Enviri. Now let me turn it over to Tom to discuss the quarter in detail.

Thank you, Russell, and good afternoon, everyone. I'll briefly review the first quarter results and then hand it over to Pete to comment on the outlook. Please turn to our first quarter performance details starting on Slide 4. In the first quarter, total revenue was $550 million and adjusted EBITDA was $65 million. Revenues were unchanged from the prior year. Adjusted earnings for Harsco Environmental and Rail were little changed year-over-year, while Clean Earth results were impacted by lower volumes. Our adjusted diluted earnings per share was $0.10 for the quarter. The unusual items in the quarter included strategic costs connected to the sale of Clean Earth and the spin-off of New Enviri as well as costs related to rail restructuring, which we have mentioned previously.

Lastly, our adjusted free cash flow for the quarter was a negative $6 million during a traditionally weak cash quarter for the company. Cash performance for Harsco Environmental and Rail did improve from the prior year, although Rail remains a consumer of cash. Rail's negative cash flow was $18 million, which is largely attributable to its ETO contracts. Please turn to Slide 5 in our Harsco Environmental segment. Segment revenues totaled $257 million, an increase of 6% compared with the prior year quarter. And adjusted EBITDA totaled $38 million, exceeding our expectations for the quarter. The year-over-year earnings change reflects volume from new sites, higher services demand, and operational improvements at existing sites as well as FX benefits. Customer steel output was up modestly, with higher output in India and the Middle East, mostly offset by lower production in Europe.

These favorable impacts were offset by contract exits, lower eco product volumes, and a change in business mix. Lastly, the trade measures to further support the EU steel industry continue to progress. Alignment on the quota and tariff changes was achieved in mid-April and formal endorsement is expected later in May, with implementation anticipated in July. Now please turn to Slide 6 to discuss Clean Earth. Clean Earth also executed well in the quarter, although its financial results were impacted by sluggish project-related work and industrial volumes, much of which related to winter storms in the first quarter. These extreme weather conditions impacted our peers as well and were most pronounced in late January and then again in mid-March.

Now please turn to Slide 7 in our Rail business. Rail revenues totaled $67 million and its adjusted EBITDA loss was $1 million in the first quarter. Rail's base business generated positive EBITDA in the quarter, exceeding our expectations. Its modest loss is attributed to overhead costs supporting its ETO contracts. The change in earnings year-over-year reflects higher contributions from contracted services work, which was offset by lower equipment volumes for which demand remains weak, as we've discussed in the past and higher operating costs.

As with Nick, this will be my final earnings call with Enviri. It's been a pleasure working with Nick, our corporate team and the business leaders within each of our divisions. Nick has led this company through its transformation, embedding strong values with a steady focus on improving the businesses and creating value. I'm proud of what this collective team has accomplished under his leadership. I've also greatly appreciated the support from our analysts, our shareholders, our banks, and our debt holders over the years. Russell has been a key leader and a partner to me, and the company is in great hands as he takes over as CEO. I wish him, Pete, and the entire team the very best. Now over to Pete.

Thanks, Tom, and hello, everyone. First, let me say how excited I am to be back here at Enviri. The tremendous success of Clean Earth and the hard work by Nick, Tom, and the team to unlock the value in Enviri is truly remarkable. And I'm looking forward to continuing that success with New Enviri, working with Russell and the senior leadership team to improve margin growth, reduce volatility and risks at Rail and help to drive cash flow and earnings growth.

So let me provide my perspective on the full year and next quarter outlook of New Enviri. In summary, and as Russell mentioned, our guidance for both Harsco Environmental and Rail and therefore, New Enviri is unchanged for 2026. HE's adjusted EBITDA range remains $170 million to $180 million, and Rail's EBITDA loss range remains $19 million to $26 million. As stated previously, these ranges translate to pro forma EBITDA of approximately $140 million for New Enviri using the midpoint of each range.

Our expectation for modest free cash flow during the year is also unchanged at the present time. While Q1 results were stronger than expected, there is still a significant amount of economic uncertainty. For Harsco Environmental, this uncertainty includes the geopolitical situation in the Middle East, where we maintain some operations. And it's also unclear how higher energy prices will impact business conditions in Europe and globally in the coming quarters. In Rail, the demand for equipment continues to remain challenged, and we have not yet filled our order book for the year.

With that said, our EBITDA guidance for the second quarter can be found on Slide 8. Harsco Environmental performance is expected to be comparable to the second quarter of 2025, while Rail's EBITDA is anticipated to decrease as a result of lower volumes. And I'll remind you that our financial reporting for the year will include a mix of Enviri and New Enviri. And once the sale of Clean Earth happens, it will be reported as a discontinued operation for financial reporting purposes. Also, corporate results will reflect that New Enviri will continue to support Clean Earth through a transition services agreement with Veolia for a period of time after closing.

But before I hand it back to the operator for Q&A, let me once again say how great it is to be with you all again. I came back to Enviri simply because I'm a firm believer in the value creation potential of Harsco Environmental and Rail, and I'm 100% aligned with Russell's priorities. I look forward to catching up with many of you and reporting on our progress in the upcoming quarters. Thanks, and I'll now hand the call back to the operator for Q&A.

[Operator Instructions] And the first question will come from Rob Brown with Lake Street Capital Markets.

I guess the first question is on the Rail business. I think you talked a little bit about the order book still needing to get filled. Could you give us some color on how the order book typically fills and maybe the visibility that, that brings as it fills up?

Yes, this is Pete. Normally, we'd expect to see pretty much a proportionate, maybe even slightly more than proportionate order book by this time. So we're running a good bit behind. It's related to primarily OEM equipment in North America. And we expect it to come back a little bit in the second half of the year. But as of this point in time, we're a little bit behind what we historically see in terms of a filled order book relative to our estimated revenue for the new equipment.

Okay. And then also aftermarket, I think Russell mentioned that as an area of focus. And I know it's -- can you remind us how much of your business is aftermarket and some of the things you could do there?

Yes. Roughly about 40% of our revenues is aftermarket. And that has been -- and we had a pretty good aftermarket in Q1. We expect that to continue at a similar pace in the rest of the year. But that's clearly an area of focus for us because it not only is a kind of a good offset to the decline in OEM, but it also provides pretty good margins. It's got pretty much 2x the margins that the original equipment has. So that's the primary reason we're focusing on it.

[Operator Instructions] And this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Martin for any closing remarks. Please go ahead.

Thank you, Chuck, and thank you for everyone joining us this afternoon. Feel free to contact me with any follow-up questions. And as always, we appreciate your interest in Enviri, and have a great day. Take care.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Hello, and welcome to the Special Meeting of Stockholders of Enviri Corporation. Please note that today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn today's meeting over to Nick Grasberger, Chairman and Chief Executive Officer of Enviri Corporation. Mr. Grasberger, the floor is yours.

Good morning, everyone. My name is Nick Grasberger, and I am the Chairman and CEO of Enviri Corporation. It is my pleasure to welcome you to this Special Meeting of Stockholders of Enviri Corporation.

On behalf of the Board of Directors, I want to thank you for your support in conducting this meeting virtually. And I will officially call the meeting to order. Today's meeting will follow the order of business available on the virtual meeting portal. I'm joined today by Russell Hochman, President and Chief Operating Officer. Representing Computershare, the corporation's transfer agent and Inspector of Election is Sue Nelson. Following the vote on the special meeting matters, we will facilitate the Q&A session if there are any questions submitted through the question box on your screen.

Appropriate documentation of notice for this meeting was given as indicated by an affidavit and report provided by our transfer agent, Computershare. The affidavit and copies of the notice of special meeting of stockholders, proxy statement and proxy card will be filed with the minutes of this meeting. All stockholders of record at the close of business on March 20, 2026, are entitled to vote at this meeting.

As of March 20, 2026, the special meeting record date, there was a total of 82,704,523 shares of common stock outstanding. Sue Nelson, the representative of the Inspector of the Election has signed the oath of the inspector for this meeting. That signed oath shall be filed with the minutes of this meeting. Our first order of business of this meeting is to determine whether shares represented at the meeting, either in person or by proxy, are sufficient to constitute a quorum for the purpose of transacting business.

I have a Secretary's Report indicating that the total number of shares of common stock represented by stockholders and voting in person or by proxy is 70,175,504 or approximately 84.85% of all the outstanding shares entitled to vote. A copy of the Secretary's report will be filed in the minutes of today's meeting.

Based on this report, I confirm that a quorum of stockholders entitled to vote at this meeting is present, either in person or by proxy, and that this meeting has been properly convened for purposes of transacting such business as may properly come before it.

We will now proceed with the matters properly brought before this meeting to be acted upon by stockholders. The first proposal for stockholder action is the proposal to adopt and approve the merger agreement and the merger. The affirmative vote of at least a majority of the shares of our voting stock entitled to vote and represented in person or by proxy at this meeting is required to approve this proposal.

The second proposal for stockholder action is the vote on a nonbinding advisory basis to approve merger-related named executive officer compensation as set forth in the proxy statement. The affirmative vote of at least a majority of the shares of voting stock entitled to vote and represented in person or by proxy at this meeting is required to approve this proposal.

The time is now 8:05 a.m. Eastern Time, and I declare the polls are now open for each matter to be voted on today, May 4, 2026. If you have not yet already done so, please vote your shares.

[Voting]

I hereby declare the polls now closed at 8:06 a.m. Eastern Time, and ask that the Inspector of Election tabulate the ballots.

As mentioned earlier, the Board of Directors has appointed Computershare, represented here today by Sue Nelson, as Inspector of the Election. Ms. Nelson has tabulated the stockholder votes and has provided me with the preliminary results of the voting. The preliminary results from the Inspector of Election indicate that the transaction proposal has been approved, and secondly, that the advisory merger-related executive compensation proposal has not been approved.

The final report of the Inspector of Election will be filed with the minutes of today's meeting. Thank you. The Special Meeting of Stockholders of Enviri Corporation is now adjourned. I will now turn to any questions that have been submitted through the online portal. Seeing that there are no questions, I thank you for your attendance today and for your support of Enviri Corporation.

This concludes the meeting. You may now disconnect.

Good morning. My name is Rocco, and I will be your conference facilitator. At this time, I would like to welcome everyone to the Enviri Corporation Fourth Quarter and Full Year 2025 Results Release Conference Call. [Operator Instructions]

Also, this telephone conference presentation and accompanying webcast made on behalf of Enviri Corporation are subject to copyright by Enviri Corporation and all rights are reserved. No recordings or redistributions of this telephone conference by any other party are permitted without the expressed written consent of Enviri Corporation. Your participation indicates your agreement.

I would now like to introduce Dave Martin of Enviri Corporation. Mr. Martin, you may begin your call.

Thank you, Rocco, and welcome to everyone joining us this morning. With me today is Nick Grasberger, our Chairman and Chief Executive Officer; Russell Hochman, our President and Chief Operating Officer and the future CEO of New Enviri; and Tom Vadaketh, our Senior Vice President and CFO.

This morning, we will discuss our results for the fourth quarter and the full year of 2025 as well as our outlook for Harsco Environmental and Rail, which are the 2 businesses that will make up New Enviri following their spin-off into a new stand-alone publicly traded company in connection with the sale of Clean Earth. After our prepared remarks, we'll take your questions. Our quarterly earnings release and slide presentation for this call are available on our website.

During today's call, we will make statements that are considered forward-looking within the meaning of the federal securities laws. These statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties that may cause actual results to differ materially from those forward-looking statements. For a discussion of such risks and uncertainties, see the Risk Factors section in our most recent 10-K and as updated in subsequent 10-Qs. The company undertakes no obligation to revise or update any forward-looking statement.

Lastly, on this call, we will refer to adjusted financial results that are considered non-GAAP for SEC reporting purposes. A reconciliation to GAAP results is included in our earnings release today and our slide presentation.

Now I'll turn the call to Nick to begin his prepared remarks.

Thank you, Dave, and good morning, everyone. Let me start with a brief status update on our transaction to sell Clean Earth. We continue to target the midyear closing, and we are working diligently to complete the transaction. The HSR waiting period is scheduled to expire on March 9, absent a request for more information. We expect to publicly file both our Form 10 and proxy documents later in March, and at that point, we'll begin to focus on our shareholder meeting and a date to close the transaction.

Finally, we are not yet in a position to narrow the cash payout range of $14.50 to $16.50. The payout will take into consideration the time of the closing and the company's cash flow up to that point as well as the amount of cash we determine is prudent to retain in support of Rail's ETO contracts. We may decide that New Enviri should retain more cash for these contracts than we had hoped a few months ago.

We are in the midst of discussions with various parties that will impact the amount of cash that will need to be retained and ensuring New Enviri is soundly capitalized and set up for success is, of course, a priority for us. We look forward to providing further updates when appropriate. And at this time, there's not much more that we are able to say about the cash payout range.

As I reflect on the Clean Earth transaction, I'm pleased with what we have accomplished over the past few years. The improvement realized at Clean Earth has been extraordinary. And I credit the Clean Earth leadership team for having the vision to identify strategic initiatives and drive their execution throughout the organization. I'm confident that Clean Earth will continue to prosper as part of Veolia.

And while the sale of Clean Earth is a major step towards capturing the sum of the parts value of the Enviri portfolio, it's certainly not the final step. There's more value to be created through New Enviri. Harsco Environmental and Rail are market-leading businesses with strong reputations within their markets, and we are optimistic that underlying demand will improve, and we believe Russell and his team are poised to accelerate positive change within and throughout these businesses.

Tom and Russell will comment further on Q4, our outlook and our priorities. So first, over to Tom.

Thank you, Nick, and good morning, everyone. We finished 2025 with quarterly adjusted earnings that was towards the high end of our expectations. Full year revenues for 2025 were $2.2 billion, led by 4% growth at Clean Earth, which was achieved through a mix of price increases and volume growth. This growth was offset by lower revenues at both Harsco Environmental and Rail due mainly to lower volumes as well as divestitures in the case of HE.

Adjusted EBITDA for the year totaled $275 million. Clean Earth again realized record earnings and margins in 2025. For Harsco Environmental, market challenges persisted throughout the year, but we're pleased its performance improved as the year progressed. Our HE team executed well operationally and successfully renewed a larger-than-normal volume of contracts during the year.

Looking forward, we're hopeful that underlying steel demand and production will improve for our customers, particularly in Europe, where trade protections are pending and expected to be implemented later this year. Any benefits from these trade actions in Europe are not considered in our guidance for 2026 at this point, and I'll share more on that shortly.

At Rail, standard equipment demand remains weak and its ETO contracts continue to weigh on its earnings and cash flow. Despite sluggish demand, Rail's base business remained profitable in 2025 and its cash flow did improve. For the year, Rail's ETOs contributed an EBITDA loss of approximately $20 million and these contracts consumed roughly $40 million of cash during the year.

We are pleased with the results of the actions the team has taken to improve efficiencies in the supply chain and manufacturing operations. We are continuing to take aggressive actions at Rail to manage ETO risk and address the challenging demand situation, including a recent additional restructuring to rightsize the business. We'll come back to the path forward for Rail in a bit, and you can find the full year financial summary in the appendix within our presentation.

Now let me turn to our fourth quarter performance details, starting on Slide 4. In the fourth quarter, total revenues were $556 million, and adjusted EBITDA was $70 million. Both revenue and adjusted earnings were unchanged compared with the 2024 quarter with year-over-year growth for Harsco Environmental and Clean Earth, offset by Rail. Overall, our earnings performance was towards the higher end of our expectations with the primary driver being Harsco Environmental, which achieved its highest quarterly adjusted EBITDA for the year. HE benefited from better cost performance during the quarter and tax recoveries in Brazil, which were not anticipated. It also benefited from some price and various other adjustments at year-end.

Meanwhile, Rail benefited from additional machine shipments in the quarter versus our earlier expectations. I'd note that corporate costs were higher than expected as a result of compensation expense linked to our share performance and other incentives.

Our adjusted diluted loss per share was $0.17 for the quarter, excluding the impact of unusual items. These unusual items totaled $57 million pretax and included the following: $15 million of costs directly related to the sale of Clean Earth and the spin-off of New Enviri. It also includes $7 million to accelerate the vesting of certain stock compensation to mitigate the tax impact of the company, which can also be considered as deal related and it includes $24 million of additional estimated costs to complete our ETO projects with SBB and Deutsche Bahn, which we will discuss further.

Lastly, our adjusted free cash flow for the quarter was $6 million and for the full year, we ended at negative $15 million. This outcome was better than our latest guidance and reflects improved collections in the fourth quarter. For the year, Harsco Environmental and Clean Earth generated more than $160 million of free cash flow. This total, however, was offset by an interest burden of more than $100 million and Rail's negative cash flow of more than $50 million, both of which are expected to improve as part of New Enviri. A schedule detailing our free cash flow by business is included in our press release.

Please turn to Slide 5 and our Harsco Environmental segment. Segment revenues totaled $257 million, an increase of 7% compared with the prior year quarter and adjusted EBITDA totaled $48 million, which translates to a margin of nearly 19%. The year-over-year earnings increase can be attributed to a number of factors, including higher service levels, improvement actions at certain underperforming sites and FX as well as tax recoveries in Brazil. These positives were partially offset by lower product contributions which can mainly be attributed to our ALTEK business.

HE's results in Q4 were supported by a modest increase in steel production at our customer sites with growth most prominent in India, the Middle East and North America. Steel output in Europe or our largest market, however, remained very weak in the quarter. And while customer steel output overall did improve somewhat in the second half of the year, we continue to see significant room for upside. If implemented, we expect the trade measures contemplated in Europe mentioned earlier to support its steel industry with benefits for Harsco Environmental possible during the back half of 2026. Proposed changes were recently approved by the EU trade Committee and are now before the full parliament. Our steel customers in Europe expect these policy changes to become effective at the beginning of July this year.

Now please turn to Slide 6 to discuss Clean Earth. For the quarter, revenues totaled $244 million, and adjusted EBITDA reached $38 million. Hazardous waste revenues grew approximately 3% through a mix of price and volume. And this increase was partially offset by a lower volume as a result of project-related work completed in the prior year quarter and mix changes in soil dredge materials. CE's adjusted EBITDA margin was just under 16% for the quarter. which includes the impact of higher incentive compensation.

Now please turn to Slide 7 and our Rail business. Rail revenues totaled $56 million and its adjusted EBITDA loss was $4 million in the fourth quarter. Compared with the prior year quarter, lower volume across all business lines as well as a weaker business mix led to the decline in adjusted earnings. As we have commented in prior quarters, we have been seeing weakness in the North American market, resulting in contracting volumes. Our Rail team has done a nice job during 2025 to drive completion of several smaller ETO projects, improve our manufacturing processes and have also addressed the weaker demand by taking restructuring actions throughout the year to resize our capacity accordingly.

Now let me provide a brief status update on Rail's large European ETOs. Russell will provide some perspective later as well. On the Network Rail contract, we continue to work towards some important project milestones while we continue discussions with our customer to improve the financial terms of the contract. Delivery and on-site testing of the first machine is planned for the summer, soon after which we expect to finalize our revised contract negotiations.

For SBB, most of the first group of vehicles, which includes 48 wagons have been delivered and accepted by the customer. The remainder are expected to be accepted by the customer by end of Q3. Homologation for the second vehicle type, which will total 11 machines has started, and we expect to complete delivery of these machines by mid-2027. For Deutsche Bahn, the first 3 vehicles are scheduled to be completed and undergo homologation in the coming quarters under the existing contract.

Now let me turn to our outlook on Slide 8. As Nick mentioned earlier, we're targeting a midyear closing for the sale of CE as well as the spin-off of New Enviri. Post the close date, we will likely be providing certain transition services to Veolia for some months, and 2026 accordingly will be a mixed year of Enviri and New Enviri. Therefore, today, we're only providing guidance for Harsco Environmental and Rail, the 2 businesses that will exist within New Enviri. This outlook doesn't contemplate any major improvements in economic or business fundamentals including within the European steel industry as a result of trade protections and in the case of Rail, our expectation is that demand will soften this year relative to 2025 with overall volumes reaching historic lows.

While our outlook does consider the cost-out actions and improvements implemented in recent months within both Rail and HE, the benefit of these actions won't reach a full run rate until the second half of the year. Furthermore, our outlook does not incorporate any benefits from other projects underway within the company that Russell will speak to shortly.

For Harsco Environmental, adjusted EBITDA is expected to be within a range of $170 million to $180 million. This range reflects that volume from new site startups a modest improvement in customer steel output and cost-out initiatives will be offset by [ cost ] and certain items not repeating in 2026.

For Rail, we expect an EBITDA loss of between $26 million and $19 million. This outlook reflects lower demand for standard equipment and contract services as well as lower capacity utilization at our main plant, which will be partially offset by the restructuring actions I mentioned earlier.

These expectations translate to pro forma EBITDA for the year of approximately $140 million for New Enviri. This figure is $5 million higher than what we presented in November when we disclosed the Clean Earth sale and reflects pro forma corporate post significant rightsizing of our corporate team and costs. The specific changes contemplated at corporate have been already announced internally and will be fully implemented after the close of the Clean Earth transaction and the completion of transition services.

For free cash flow, we anticipate cash generation to be modest for New Enviri in 2026. I'd remind you that our free cash flow is typically negative in Q1 as a result mainly of our bond interest payments. For the year, HE and Rail cash flows are projected to improve compared with 2025, but we expect Rail ETOs to remain negative in 2026 under the existing contracts.

Let me conclude on Slide 9 with our first quarter guidance. Here, I'll simplify and note that segment performance for these 2 businesses is projected to be lower year-over-year as well as lower compared to the just completed fourth quarter. These changes reflect lower volumes of demand, low volumes or demand for both businesses as well as contract exits for HE. This guidance also reflects that certain Q4 items such as the Brazil tax credits won't be repeated in the first quarter.

Now over to Russell.

Thank you, Tom, and good morning, everyone. I'm as energized today as when we announced the launch of New Enviri. I'm going to spend some time talking about priorities and the work underway now to position Harsco Environmental and Rail for the future once the spin-off into New Enviri is complete.

To start with, we've assembled an outstanding leadership team and announced the return of Pete Minan as our CFO. Many members of the team were integral to the identification, creation and rapid growth of the Clean Earth platform. This team is already hard at work, laser focused and aligned to our priorities. The sale of Clean Earth is the first of many steps that I expect will create value.

New Enviri will begin with a prudent capital structure, which is very important and I'm confident that we'll make positive changes within each of these businesses that will result in strong earnings and cash flow growth.

In the near term, New Enviri guidance implies stability or some improvement in the case of Harsco Environmental, However, I am not satisfied with this guidance and believe that we can do much better going forward as we focus on improving these businesses, refining our strategic priorities for HE and Rail and taking additional aggressive actions to reduce complexity and drive operational excellence. Since announcing the spinoff, the team has been moving with urgency to implement initiatives that will carry us forward.

To begin with, we have taken steps to strengthen Rail's cost performance and are working diligently to reduce or minimize its ETO contract risk, which I see as a critical priority for 2026. Two cost-out restructurings have already been completed at Rail, the most recent of which was in January. In addition, the team has achieved a significant reduction in third-party inventory management costs and taken actions to improve Rail's material, supply chain and reduce inventories while optimizing shop floor throughput.

We are not stopping here and are actively pursuing other initiatives to rightsize our manufacturing operations and global SG&A. On the larger ETOs, while I won't comment on specific outcomes for these, we can anticipate improving our financial terms under certain arrangements or meaningfully reducing our ETO exposure. I am committed to accelerating actions to derisk the Rail ETOs this year.

As it relates to corporate costs for New Enviri, we recently began efforts to streamline central functions, such as IT, across what will be a much smaller organization following the sale of Clean Earth.

We have also launched a deep dive review of HE and Rail operations with the assistance from third-party experts to identify additional levers to improve efficiency, further optimize costs and strengthen our industry positions. In HE, focus areas include SG&A and support function costs as well as site level productivity and spending on personnel and maintenance. It also includes revenue and price initiatives.

In Rail, the focus is on ways to simplify our regional manufacturing and global footprint, materials management and support costs. We look forward to communicating with you once our analysis is complete. And while the specific benefits from these initiatives are not contemplated with our 2026 plan, we are confident they will drive significant value for shareholders in the years to come.

Harsco Environmental and Rail are both attractive businesses with strong market positions and each is at an inflection point. We remain confident that their respective markets will eventually recover, and we are taking actions now that will drive better margin and returns through economic cycles.

In summary, we are optimistic that New Enviri will see significant earnings and cash flow growth over time, and I look forward to updating you on our progress.

Thank you, and I will now hand the call back to the operator for Q&A.

[Operator Instructions] And today's first question comes from Larry Solow of CJS Securities.

Great. Just quickly just on the Clean Earth just on the fact that it sounds like your cash usage or what you may need to retain at New Enviri sort of running towards the higher end of the range or maybe above that a little bit. So I guess that just infers that the cash payment will be towards the lower end, I guess, is that fair to say?

No, I wouldn't say that, Larry, it's Nick. In fact, is that there are just many moving parts here. And so we just can't be more specific, but I wouldn't infer from the comments that payout is trending to the lower end of the range. That's not necessarily the case.

Okay. That's fair. Well, I can talk about that more offline. Okay, good. So HE had a really nice quarter actually. I know it's just 1 quarter, and it sounds like there were some onetime benefits in there. Your outlook is, I think, in line with expectations, somewhat muted, but in this environment, I think it within expectations.

Just curious, looking -- breaking out some of the moving parts, what are your expectations for steel production? Is it flattish still? And I think over the last few years, your customers have actually even been hurt more than overall industry. So just curious if you can help parse that out a little bit.

Yes. Well, certainly, as I think you know, we are more exposed to the EU steel markets than other geographies, and that's been in particular weak. And Tom commented on that and certainly indicated reason for optimism, even though not built into guidance, and we could begin to see some of those benefits as early as the second half of this year. .

But I would say in other geographies, North American volumes are reasonably good. Of course, they continue to be strong in India and the Middle East, Brazil and Mexico were a bit weaker perhaps. But overall, I would probably use the term stable and hopefully improving in the latter part of this year.

Got you. And just Harsco specifically, I know you mentioned some newer contracts, and I think you've had a couple of press releases out. But then there's some net exited contracts. So I'm curious, is your -- and I know sometimes you exit discretionarily because of lower margin, but is your -- are you netting a benefit as we look out, you're getting -- you're adding more contracts in that are going out the door? Or any way you can give us color on that?

Yes. I think for this year, that contract churn, if you will, in terms of revenue will be -- margin should be higher. We believe that we're mixing up in terms of the margin on contracts. And you're correct, the contracts that we've exited have largely been due to price that we're simply not willing to sacrifice margin given the large number of opportunities we have that we view as more attractive.

So as we look forward kind of beyond this year, given the visibility we have to our pipeline and the likelihood of entering into some of these new contracts, we expect that churn rate to be positive to both EBITDA and margin.

Great. Just one question on Rail. It sounds like just demand environment continues to weaken. Just on the ETO contract specifically, though, I think you said $20 million EBITDA loss, $40 million on free cash flow for '25. It sounds like directionally, we're going a little bit better in '26, maybe not as much as initially expected. But did you actually -- or can you give sort of at least a little more specifics on what that might look like in '26?

Yes, Tom, do you want to take that one?

Yes. Larry, we haven't spoken to that and we'll probably stay off it. But yes, we expect improvements as we go along. ETOs will still be a large use of cash in 2026. The $40 million that we had in 2025, if you remember when we started the year, I had talked about completion of small ETO projects. And our Rail team did a real nice job of driving those to completion. And as a result, it got paid for many of those. And that has partly the reason why the $40 million is certainly better than what we had last year, for instance, in 2024. But for 2026, we still expect to see a fairly large cash use from mainly the big 3 European ETOs.

[Operator Instructions] And it looks like our next question today comes from Devin Dodge of BMO Capital Markets.

A bit of a modeling question, maybe tying back to, I think, the last question. But just the guidance had some directional comments on pro forma free cash flow in 2026 and looking for some improvement year-over-year. I believe there's a table at the back of the deck that outlines the cash flow performance by business. So that's helpful. But Tom, I was just wondering if you can walk us through the puts and takes to get to a reasonable range that pro forma free cash flow number, both in 2025 and 2026.

I think what I said in my comments were that we expect it to be modest. So whether it's total Enviri or the pro forma of a New Enviri, I would have it breakeven or slightly worse than breakeven.

But in general, I mean, I think we expect better cash flow in HE, less negative cash flow in Rail kind of offset by some items in corporate. Is that right?

That's right. Yes.

Okay. Okay. That's helpful. Okay. On the Rail business, look, I know adjusted EBITDA excludes the impact from the large ETO contracts. But I think if earnings are expected to remain in negative territory in 2026. I think you mentioned it was down $19 million to $26 million.

Just I know there's some overhead costs in the business that are tied to supporting those ETO contracts. Can you just remind us how much those are and when those should roll off? And if you back those out, would the business be operating at or above a breakeven level?

Yes. The -- so the -- the SG&A, Devin, to support those, it's not just SG&A, there's some other overheads as well, is in the $15 million to $18 million range. And so removing those, the business we're projecting will still be at a loss in the base business. And that is because of just the demand, the very weak demand situation. We have taken cost actions and there'll be more cost actions to follow.

But it takes time for those to reach a full run rate and particularly in the manufacturing business, even though you save cash costs, it takes time for that to come through the P&L. So we expect to see a full benefit of those towards the back half of the year. And that is partly the reason why we're projecting a loss for the base business.

Okay. Okay. And then sticking with the Rail business. Do you feel like most or all of the lower revenues that you're seeing, is that due to just soft industry conditions? Or is there a regional mix element to that? Or is there market share losses? Just trying to understand or if you could unpack what you're seeing on the top line performance?

It's Russell Hochman. Maybe I'll start and then, Tom, if you want to add anything or Nick. Just it's primarily related to the North America base business. We just see continued weakness, really historic weakness. We are hopeful that at some point, the customers will start investing in this equipment, but this is a cyclical low. That's really what's driving a lot of that market contraction for us.

Yes. And in our guidance, Devin, we didn't want to build in undue optimism. So we have based the guidance for the year based on current demand levels. And as Russell said, hopefully, that will start to change as the year progresses. And if it does, we'll certainly update you.

For sure, for sure. And if I could just squeeze in one last one. Tom, I think you have some good color on the contracts with SBB and Deutsche Bahn. Apologize if I missed it, but is there any update on the contracts in -- for the ETO contract?

Devin, I didn't catch you -- I think you mentioned Network Rail, right? Yes. Yes, Network Rail, so this -- we are progressing towards the completion of the very first machine. And once that is delivered, it will undergo what we've referred to before as homologation that will occur in the U.K.

We are also in talks with the customer to improve the commercial terms, the financial terms so that the go-forward picture is more attractive for the company. And what we have sensitively agreed with the customer is that upon -- around the timing of the delivery, the arrival of the machine in the U.K., we will also look to finalize this agreement. Basically, that's the focus of our activity for now. There are more machines to be made, but our focus is on completing the first one and then also completing these negotiations.

And our next question today comes from Rob Brown at Lake Street Capital Markets.

Good morning. Just sort of sticking to the ETO contracts. A lot of things are going to happen this year. I guess, what's -- exiting '26, what do you sort of see the ETO exposure and risk level down to? Is it sort of complete by the end of '26? Or I guess, is the Network Rail still outstanding? But just a sense of after these steps happen this year, what's the remaining risk on the ETO side?

So it's Russell Hochman. I'll start with my thoughts on your question. So with regard to the -- what we're calling the smaller ETOs, those will be essentially completed this year with a minor exception, which will be completed in the first quarter of 2027. And we're -- as we've said before, not taking on any new ETOs. So that will be the end of the smaller ones. With the larger ones, as I said in my comments, my commitment is to derisk the company of these.

And so I'm directly involved along with Tom and others in these conversations with these customers. And I would say the message that we've communicated is pretty clear that we will come to terms on these contracts this year. Obviously, something on a mutually beneficial basis or we will look to pursue other ways of de-risking the portfolio, right? But my commitment is to complete those conversations so that the terms are improved or we've derisked the portfolio, as I said, in other manners.

Okay. Great. Got it. And then I guess thinking Rail, the cyclical kind of downturn activity, I know it's hard to predict the sort of recovery. But what are sort of the dynamics as these orders start to recover, how quickly can it come back? And what's the kind of customer -- I assume the longer they wait, the more they kind of have a pent-up demand, maybe that's not how it works. Just a sense of how the recovery cycle tends to happen in the Rail market?

Well, we haven't seen it this -- volumes this low for a very long time. But Rob, it's a fairly quick cycle kind of business. So these are standard pieces of equipment. We can make them pretty fast unlike, say, the ETOs, for example. So if demand comes back, we should start to see our volumes respond pretty quickly. And we are monitoring, as you can imagine, monitoring the market very closely.

For now, our customers are not ordering as much as they have in the past. They're choosing to conserve cash. In some cases, they're looking to remanufacture or refurb some of the old machines and stretch them out. And so yes, it's a matter of waiting at the moment.

And that concludes our question-and-answer session. I'd like to turn the conference back over to Dave Martin for any closing remarks.

Thank you, Rocco, and for everyone that joined us this morning. Feel free to contact me with any follow-up questions. And as always, we appreciate your interest in Enviri and look forward to speaking with you in the future. Have a great day.

Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

Good morning, everyone. My name is Jamie, and I will be your conference facilitator. At this time, I would like to welcome everyone to the Enviri Corporation Third Quarter Release Conference Call. [Operator Instructions]

Also, this telephone conference presentation and accompanying webcast made on behalf of Enviri Corporation are subject to copyright by Enviri Corporation and all rights are reserved. No recordings or redistributions of this telephone conference by any other party are permitted without the expressed written consent of Enviri Corporation. Your participation indicates your agreement.

I would now like to turn the conference call over to Dave Martin of Enviri Corporation. Mr. Martin, you may begin your call.

Thank you, Jamie, and welcome to everyone joining us today. With me is Nick Grasberger, our Chairman and Chief Executive Officer; and Tom Vadaketh, our Senior Vice President and Chief Financial Officer. On the call, we will discuss our results for the third quarter and our outlook for the remainder of the year. We'll then take your questions. Our quarterly earnings release and slide presentation for this call are available on our website. During today's call, we will make statements that are considered forward-looking within the meaning of the federal securities laws.

These statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties that may cause actual results to differ materially from those forward-looking statements. For a discussion of such risks and uncertainties, see the Risk Factors section in our most recent 10-K and as updated in subsequent 10-Qs. The company undertakes no obligation to revise or update any forward-looking statements. Lastly, on this call, we will refer to adjusted financial results that are considered non-GAAP for SEC reporting purposes. A reconciliation to GAAP results is included in our earnings release as well as a slide presentation.

With that being said, I'll turn the call to Nick.

Thank you, Dave, and good morning, everyone. Before we dive into our Q3 results, I will take a moment to provide a brief update on our strategic review process that we announced a few months ago. Recall that this process is aimed at identifying and executing alternatives to unlock the inherent value of our business portfolio. In our view, this value is not yet reflected in our market value. Throughout our process and as expected, we have seen strong and definitive interest in our Clean Earth business from both strategic parties as well as others.

While nothing can be certain, we believe that there is a path to crystallizing its value in a tax-efficient manner for our shareholders. We have spent considerable time with our advisers thinking through structures that work, one of which involves a simultaneous sale of Clean Earth together with a taxable spin to our shareholders of our Harsco Environmental and Rail businesses. We believe this structure would result in minimal tax leakage for our investors and would allow for a sizable cash payment to shareholders upon the sale of Clean Earth. In fact, we have recently amended our credit agreement to allow for this transaction. Tom will comment further on this amendment.

We will update you further when appropriate, but we believe we should be in a position to conclude our process review prior to the end of this year. Now let me turn to our third quarter earnings, starting with Clean Earth, and Tom will cover our financial results in detail shortly. Clean Earth's revenue and earnings grew single digits and its margins exceeded 17%, translating to a record quarterly performance for the business. The degree of execution delivered by the Clean Earth team remains very high despite various distractions as it focuses on its key priorities. Our investments in new capabilities continue and CE's IT implementation is on track and nearing completion.

Commercially, the team committed to a new growth strategy a year ago, and we've built a strong business backlog since, and CE is now seeing healthy volume growth as a result. We expect strong performance or more of the same from Clean Earth in Q4. Turning to Harsco Environmental. Results improved in Q3 with HE's margin reaching 17% and the business generating $30 million in free cash flow in the quarter. Looking back, we believe this business troughed in the first half of 2025. New contracts are in place to replace those exited over the past year and improvements in underperforming sites, while slower than we'd like, are ongoing with benefits expected in coming quarters.

HE has also experienced some cost inflation in recent quarters, and we've implemented cost-out actions to absorb this impact. These added costs should be offset in 2026 through these efforts and also through price increases. We're also hopeful that the steel industry volumes are set to improve. In early October, the European Commission proposed new and significant safeguard measures to protect its steel industry. These actions include higher import tariffs and lower quotas among other changes. These measures are likely to lift volumes in a key market for HE if implemented next year.

Overall, HE remains the industry leader and we expect 2026 to be a better year for the business. Moving to Harsco Rail. Our challenges in rail are clear. And I'm pleased with how our new management team, which is operationally focused and has considerable ETO experience within the broader rail and street is taking aggressive and appropriate action to move the business forward. Shop floor bottlenecks have lessened and supply chain pressures are improved. Overhead costs are being addressed as well.

Confident this management team can transform the business over the next year or 2. On the commercial side, demand for standard equipment and aftermarket parts remains weak and at unprecedented levels. We're hopeful that this downturn will be short-lived given that maintenance spending can only be deferred for so long, but we've yet to see signs of upcoming improvement.

Importantly rail based business is profitable and cash generative despite this market situation and HarscoRail remains a technology and industry leader. Rail is also making good progress with its ETO contracts, which continue to consume cash. Our discussions with Network Rail to amend or exit that contract are ongoing deliveries and development work on SBB and DB are on track with few surprises in recent months. As we've discussed previously, rails cash flow profile is anticipated to turn positive in 2027 as our ETO contracts mature, and we are paid for the machines that we deliver.

As a result of the demand weakness in rail and other impacts in HE, we have lowered our outlook for the year. Looking further ahead, we are optimistic about 2026 and confident in the earnings and cash flow potential of our company. The evaluation of strategic alternatives is to address this disconnect. and we will update you further on this review when appropriate.

I will now turn the call over to Tom.

Thank you, Nick, and good morning, everyone. In the third quarter, total revenue was $575 million, and adjusted EBITDA was $74 million. Both figures are high for the year, but lower than our expectations at the beginning of the quarter. Rail accounted for much of the shortfall, where as we discussed last quarter and as Nick just mentioned, demand for standard products and aftermarket parts remain very sluggish. Also some contract services work for certain U.S. customers was deferred into future quarters. Our product orders did improve somewhat from the prior quarter, but the increase was from a low base and this activity will not benefit rail in 2025.

Performance at Harsco Environmental was also slightly lower than expectations, due to higher operating costs and lower contributions from new sites. Actions are underway that are expected to help offset the challenges in both segments, as Nick mentioned, Still, we have lowered our outlook for the fourth quarter, which I'll provide details on shortly. Now let me turn to our third quarter performance details on Slide 4. In the third quarter, our revenues were unchanged as reported and 1% higher on an organic basis.

Adjusted EBITDA was lower year-on-year as anticipated, with record earnings at Clean Earth, offset by our other segments. The impact of divestitures on EBITDA within HE [indiscernible] with the prior year. Our adjusted diluted loss per share was $0.08 for the quarter, excluding the impact of unusual items. These unusual items totaled $12 million pretax with most of this related to strategic project costs and various restructuring actions across the company adjustments on our large ETO contracts in rail were less than $2 million and much lower than in recent quarters.

We believe this illustrates our progress in de-risking these projects. Our adjusted free cash flow for the quarter was $6 million which was $20 million above Q2 and in line with our expectations. Working capital management and capital spending controls offset the impact of lower earnings for the quarter. Before moving on to segment performance, let me add to Nick's comments on the amendment to our credit agreement. First, I'd like to thank our bank group for their continued support of the company. and their flexibility to support our strategic initiatives and changing financial situation.

In addition to allowing for the potential sale or separation of clean [indiscernible] we modified our financial governance to provide additional flexibility. The credit agreement also now provides a capital structure framework for our remaining businesses if we complete the Clean Earth sale. Under this scenario, our initial net leverage ratio post the transaction would be 2x or less, and our maximum net leverage would be 3x further details on this amendment are available in our SEC filings this morning.

Please turn to Slide 5 and our Harsco Environmental segment. Segment revenues totaled $261 million and adjusted EBITDA totaled $44 million. The year-over-year change in earnings is the result of divestitures and site exits or closures. ECO product contributions were also slightly lower with this impact attributable to our Excel operations in the U.S. and steel felt business in Europe. Steel production at our customer locations on a continuing site basis rose modestly compared with prior year with puts and takes across our global portfolio, as you'd expect.

Higher output in the U.S., India and the Middle East was mostly offset by lower production in Canada and Brazil. Volumes in our largest market, Europe were unchanged year-over-year. And while quarterly revenues and steel output was the highest this year, overall production rates remain subdued. Customer utilization rates remain in the mid-70s as a percentage of capacity with our largest market, Europe being below 70%. So we see lots of room for improvement across our service portfolio.

Next, please turn to Slide 6 to discuss Clean Earth. For the quarter, revenues totaled $250 million, which was up 6% compared with the 2024 quarter, and adjusted EBITDA reached $43 million. CE's adjusted EBITDA margin was 17.3% in the quarter. Revenue growth was slightly more weighted to volume over price. CE's volume growth was realized across end markets in hazardous waste and reflects the team's success executing on a commercial growth plan that had developed over a year ago. Meanwhile, contributions from CE's soil and dredge business were lower compared with the prior year quarter as anticipated.

This change reflects the timing of work activity and business mix. Now please turn to Slide 7 and our Rail business. Rail revenues totaled $64 million and its adjusted EBITDA loss was $4 million in the quarter. Compared with the prior year quarter, lower equipment and service volumes as well as higher manufacturing costs and a weaker business mix were partially offset by higher aftermarket sales. Operationally, rail continues to make steady progress, as Nick mentioned, although further manufacturing and supply chain improvements are needed and targeted to strengthen the business.

On rails large European ETOs, we continue to make steady progress as well, particularly with Deutsche Bahn and SBB. For Deutsche Bahn or DB, the next key milestone is for the first 3 vehicles to progress through homologation or the formal acceptance process. The first vehicle has already started this process, and we expect that all 3 vehicles will be undergoing homologation as we move into the first half of 2026. As we've said before, once we complete homologation, the risk on this project from a cost and schedule perspective will significantly diminish and we would move into a repeatable manufacturing process for the remaining vehicles.

For SBB, delivery of the first group of vehicles is to be completed by January 2026. The second vehicle type is currently undergoing homologation and we expect to complete all deliveries of this second group of vehicles in early 2027. On the network rail contract, negotiations with the customers have continued to progress. Although progress has been slower than we would like, our customer is focused on the delivery of the machines and is negotiating in good faith.

Good progress has been made recently to gain alignment on several technical design areas, which had been open. This is an important step for us to be able to complete manufacturing the machines. Additionally, we are seeking a meaningful improvement in the economics of this contract in order for us to continue or we will negotiate a mutually acceptable exit from the contract.

Now let me turn to our full year outlook on Slide 8. The midpoint of EBITDA guidance is reduced by $27 million, and the point for free cash flow is reduced by $50 million. The EBITDA change is largely driven to by rail and to a lesser extent, HE. For rail, we have removed from our outlook certain unsold equipment and parts that aren't supported by our order books and pipelines, and for AG, we anticipate that the challenges in Q3 will persist through year-end.

Our updated free cash flow guidance reflects this revised earnings outlook as well as some previously anticipated milestone payments on certain rail contracts being deferred into 2026. Let me conclude on Slide 9 with our fourth quarter guidance. Q4 adjusted EBITDA is expected to range from $62 million to $72 million. Cleaners is again expected to show nice year-over-year growth in Q4. Hospital environmental earnings are anticipated to be modestly below the prior year quarter due to contract exits and rail results are projected to be lower due mainly to volumes.

Thanks, and I'll now hand the call back to the operator of Q&A.

[Operator Instructions]

Our first question today comes from Larry Solow from CJS Securities.

Great. Nick, wondering if you could I know you can't give us too much detail, but just any more color on the you sound pretty confident, at least on the process that the process is nearing an end or you'll have some kind of something in the next few weeks, it sounds like by year-end. So can you just give us any more is it you're confident that we'll will we actually hear something before year-end? Or just anything will be great on that front.

Larry, honestly, there's not much more we can say at this point. As I indicated, we've had, as we expected, very strong interest in the business we've created a tremendous amount of value in Clean Earth over the past couple of years. It's not in our share price. We need to find a way to unlock that. That's what we've been doing. The specialty waste industry is consolidating and you've likely seen some of the values that have been paid for like businesses that have transacted over the past couple of years. So we're happy with where we are. It's been it's been a strong process, and we're well supported by our advisers and of course, and most importantly, the cleaner leadership team has just been doing a tremendous job. .

Great. I appreciate that. Just on the guidance and the outlook, a pretty significant drop. It looks like a lot more actually, Q3 was a bit of a miss, but the outlook Q4 is even looks like it's somewhat even worse and you mentioned it's predominantly rail, but just trying to Tom, maybe you can help us a little bit with that $27 million delta? Is it like mostly rail there? I'm just trying to get a little more granularity there.

Yes. versus our last guidance, Larry. The bulk the highest variation is on rail. And as I said in my remarks, what that consists of is we're trying to kind of derisk our outlook for the remainder of the year. So we took out from that any volume that is currently unsupported by either firm orders or good visibility in our pipeline. And so that's what that is mainly and then on AG, We've also taken it down somewhat partially most of it is basically the miss in Q3, but just reflecting the pace that we're on in Q3 expected to largely continue into Q4.

Okay. If I can just squeeze 1 more in. Just on cleaner. Another good quarter, especially on the hazardous side. Was the soil did they have an exceptionally good year last year? It looks a pretty good year-over-year drop in EBITDA contribution in the quarter for kind of a minority part of the business. And then you mentioned various distractions. Any more color on that on Clean Earth.

Yes. Just maybe for context for the full year, we're expecting EBITDA in hazardous waste to be up about 15% and down 15% in SDM likely know hazardous waste is 5 to 6x the size of STM. But SDM, as we've indicated before, can be a very lumpy business. We have a very attractive backlog of projects and we try to anticipate when they're going to begin. And; oftentimes, they're delayed. And that's what we're facing now. There's also a mix component within SDM. There are some projects that have margins that are 15 to 20 points higher than others.

And so what we've seen in the second half of this year is both a mix challenge as well as the starts of the projects being pushed out. But again, the backlog is very good. The mix is good in the backlog it's not an overall demand issue. It's not a market share issue. It's just a timing issue in SM.

[Operator Instructions] Our next question comes from Rob Brown from Lake Street Capital Markets.

Congrats on the sale process, I think you talked about sort of a peer group that's with consolidation, the multiples that are in the peer group, I guess, are you sort of comfortable that those multiples are sustaining out there in the industry and just a sense on [indiscernible] multiples?

Yes. Yes. I would say if you look at precedent transactions, the multiple that we would expect would certainly be consistent with those Okay.

Great. And then in terms of the I think at 1 point you talked about rail kind of the baseline business, excluding ETO contracts of sort of $30 million to $35 million or so maybe things are a little weaker now but what's sort of the baseline rail business kind of run rate in the current environment in terms of EBITDA?

Yes. So it is Larry, it is a little lower, reflecting the current drop in demand. We don't expect that to be long-standing and it should be short-lived because we think the demand will come back at some point during 2026. So on a longer-term basis, on a sustainable basis, if you're trying to model this it would be in that $35 million to $40 million range on a stand-alone base business. Today, you're probably looking at a range of in the 30s.

And again, the visibility to that is fairly good because we have a good sense of when these ETO contracts are going to be completed and when we'll get paid for them, yes that can slip by a quarter or 2, as we've seen recently on some of the smaller contracts. And there's a good bit of overhead cost in our business that supports those contracts that will be removed. So it's not difficult to adjust the current performance of the business for what will happen at the end of those ETO contracts. And it's there's just a lot of costs embedded in the business that will be removed.

Ladies and gentlemen, with that, we'll be ending today's question-and-answer session. I'd like to turn the floor back over to Dave Mart for any closing remarks.

Thank you all that joined us today, and thanks, Jamie for hosting our call. Feel free to reach out to me with any follow-up questions. And as always, appreciate your interest in Enviri and look forward to speaking with many of you shortly. Take care. .

And with that, we'll conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.

Good morning. My name is Danielle, and I will be your conference facilitator. At this time, I would like to welcome everyone to the Enviri Corporation Second Quarter Release Conference Call. [Operator Instructions]

Today's conference is being recorded, and this telephone conference presentation and accompanying webcast made on behalf of Enviri are subject to copyright by Enviri Corporation and all rights are reserved. No recordings or redistributions of this telephone conference by any other party are permitted without the expressed written consent of Enviri. Your participation indicates your agreement. I would now like to turn the call over to Dave Martin of Enviri Corporation. Mr. Martin, you may begin your call.

Thank you, Danielle, and welcome to everyone joining this morning. With me today is Nick Grasberger, our Chairman and Chief Executive Officer; and Tom Vadaketh, our Senior Vice President and Chief Financial Officer.

This morning, we will discuss our results for the second quarter and our outlook for the year. We will also discuss briefly our announcement this morning related to the evaluation of strategic alternatives. We'll then take your questions. We ask that you keep your questions focused on earnings, operations and the outlook as there is limited additional information we can provide on strategic alternatives at this time.

Before our presentation, let me mention a few items. First, our earnings release and slide presentation for this call are available on our website. Second, we will make statements today that are considered forward-looking within the meaning of the federal securities laws. These statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties that may cause actual results to differ materially from these forward-looking statements.

For a discussion of such risks and uncertainties, see the Risk Factors section in our most recent 10-K and 10-Q. The company undertakes no obligation to revise or update any forward-looking statement. Lastly, on this call, we will refer to adjusted financial results that are considered non-GAAP for SEC reporting purposes. A reconciliation to GAAP results is included in our earnings release today as well as the slide presentation.

With that being said, I'll turn the floor to Nick.

Thank you, Dave, and good morning, everyone. Before we dive into our Q2 results, I would like to take a moment to discuss the announcement that we made this morning about our review of strategic alternatives.

As you would expect, the Board and our management team are continuously focused on evaluating options and taking actions that are in the best interest of Enviri and its shareholders. In this context, we continue to believe there is a significant and persistent gap between our market valuation and the sum of the parts value of the company.

Over the past several years, we have created a portfolio of valuable businesses focused on delivering compelling solutions to our customers. Clean Earth is an especially valuable business in an attractive and consolidating industry, while Harsco Environmental is a market leader with unmatched service capabilities and a strong earnings and cash flow profile.

We are also continuing to take actions to stabilize rail, building on the improvements that we've made there. We're confident that executing our operating plan will continue to create value over time. With that said, we believe there may be alternatives to unlock this value sooner, and we think now is the right time to initiate a formal evaluation of our business portfolio and strategic options with the assistance of our advisers.

This evaluation will consider a wide range of alternatives, including a tax-efficient sale or separation of the Clean Earth business, along with the continued execution of the company's business plan. This process will also consider, amongst other things, the capitalization needs for our businesses in the future. I am proud of what our teams have accomplished, and I'm excited about the opportunities this process may present for our company and its employees.

We expect that this evaluation will take some time given the complexity of our business. I also hope you appreciate that we do not intend to disclose further details or developments on the evaluation process until the company determines that disclosure is appropriate or required.

Now let me turn to our second quarter earnings, starting with our Environmental segment, which performed quite well in the quarter despite some unique and short-term external challenges. Tom will cover our financial results in more detail shortly.

Clean Earth's revenue and earnings grew single digits and its margin reached 16.3%. The Clean Earth team achieved these results despite weather-related pressures, a weaker business mix in soil and dredge and a temporary rise in disposal costs.

CE continues to perform remarkably well overall, and the team is executing against its priorities by investing in new service capabilities and building a strong business pipeline. CE's ongoing project to implement a common IT platform is also on track with further productivity benefits anticipated next year from the completion of this project.

Turning to Harsco Environmental. The business is managing well through persistent softness in the global steel market by managing its costs and flexing capital expenditures, among other actions while maintaining industry-leading service levels. We have experienced a modest uptick in volumes in the U.S. of late due to added trade protections, but this benefit has been offset elsewhere.

Overall, volumes are flat and more trade actions are needed, particularly in Europe, to deal with excess steelmaking capacity in China. With that said, recent U.S. dollar weakness is a positive, and we expect HE's results to improve considerably in the second half of the year, much of which will be driven by internal initiatives. New sites will benefit us more in the coming quarters as will improvements at a few underperforming locations.

Moving to Harsco Rail. Demand for standard equipment and parts has slowed considerably since the end of Q1. Orders from U.S. customers as well as those from China have paused in recent months. Demand from key customers elsewhere, including in Canada and Mexico is also very weak. We attribute this softness to economic and global trade uncertainty with the related impacts appearing more pronounced in our niche segment of maintenance of way.

We expect these impacts to be temporary and are confident in our market position. We may benefit from the finalization of U.S. trade agreements, but we would not expect to accrue any related benefits until next year at this point. As a result, we have reduced our outlook for the year, and our Rail leadership team is increasingly focused on internal initiatives to help offset these impacts.

Supply chain and factory improvements are ongoing, and we're focused on lowering Rail's overhead. The team also continues to advance and reduce our risk on the large ETO contracts. Last quarter, we announced an amendment to our Deutsche Bahn contract, and we are still engaged in discussions with Network Rail.

Several other smaller ETO contracts have been completed, and the remainder will be finished next year. As we've said in the past, the cash flow in our Rail business will change materially over the next few years as these and the larger ETO contracts are completed. Overall, we expect continued economic uncertainty to result in weaker demand that will cause pressure for Enviri in the short term.

And as I mentioned, we've lowered our outlook for the year to reflect this. However, our Environmental businesses continue to perform well, and we expect business performance to strengthen for each of our segments in the coming quarters.

Looking further ahead, our optimism regarding the earnings and cash flow potential for our company is unchanged. And the same is true with respect to the intrinsic value we see in our business. We look forward to progressing the evaluation of our strategic alternatives, and we'll update you on that process when appropriate. I will now turn the call over to Tom.

Thank you, Nick, and good morning, everyone. In the second quarter, total revenue was $562 million and adjusted EBITDA was $65 million. As Nick mentioned, our Environmental segments executed well and performed consistent with our expectations in the second quarter. Favorable cost performance and a weaker U.S. dollar in Harsco Environmental offset the impact of sluggish product and services volumes relative to our expectations earlier in the quarter.

At Clean Earth, better pricing and volumes as well as administrative cost controls offset weather impacts and higher disposal costs resulting from outages at our primary service providers. Overall, our adjusted EBITDA was within guidance, albeit at the lower end, driven by the Rail results.

Rail performance was negatively impacted by volumes with equipment, aftermarket and technology sales coming in much lower than anticipated. We saw our customers adopting a very cautious view on maintenance-related spending. Rail's order activity has been unusually weak by any historical measure as a result.

This demand weakness is most prominent in the U.S. where customers, including the Class 1s and others now seem to be deferring maintenance and related capital spending due to economic uncertainty. And we're also seeing limited to no demand out of Mexico, Canada and China, likely as a result of global trade tensions.

Given these trends in Rail, we have lowered our guidance for the year. I'll come back to Rail and our outlook in a bit when I'll comment on actions underway to mitigate Rail's operating and market challenges.

Now let me turn to our second quarter performance details on Slide 4. In the first quarter, revenues totaled $562 million, which was down approximately 6% on an organic basis. Adjusted EBITDA was $65 million with Clean Earth achieving record second quarter profits in the quarter.

Divestiture impacts were an unfavorable $3 million compared with the prior year and FX impacts were not material. Our adjusted diluted loss per share was $0.22 for the quarter, excluding the impact of unusual items. These unusual items include $16 million in Rail, mainly related to additional costs anticipated to complete our Network Rail and SBB contracts.

The amount related to Network Rail assumes we continue with the contract. As Nick mentioned, our discussions with Network Rail are ongoing. In fact, we recently sent Network Rail a letter communicating our urgent need to bring these negotiations to closure and summarizing various options, including a substantial revision of the contract's economic terms or finding a mutually acceptable exit.

And the additional SBB costs are for manufacturing and commissioning expenses as we approach completion of deliveries of the first vehicle type and work towards the final phase of this contract to complete production and deliveries of the second vehicle type.

The remaining unusual items in the quarter include project-related costs and an $8 million impact in HE, most of which relates to our decision to exit a downstream products business in France.

Lastly, on this slide, our adjusted free cash flow for the quarter was a negative $14 million, which is in line with our expectations. Our cash flow performance is expected to improve in Q3 despite our semiannual interest payment on our bond and free cash flow should further improve in Q4.

Now please turn to Slide 5 and our Harsco Environmental segment. Segment revenues totaled $258 million and adjusted EBITDA totaled $40 million. The year-over-year change in earnings is the result of divestitures and lower service levels resulting from site exits and closures as well as lower product sales from our Excell operations. These impacts were partially offset by lower SG&A expenses and severance costs that were incurred in 2024 that were not repeated this year.

Steel production at our customer locations on a continuing site basis rose modestly compared with the prior year with various puts and takes across our global and diverse footprint. The implementation of steel import tariffs in the U.S. has supported higher production at our customer locations domestically. However, this impact has been offset elsewhere, including in Canada, where output has declined.

Overall, steel demand globally remains stable, although utilization rates remain well below optimal levels. Next, please turn to Slide 6 to discuss Clean Earth. For the quarter, revenues totaled $246 million, which was up 4% compared with the 2024 quarter and adjusted EBITDA reached $25 million, up 5%.

Revenue growth was slightly more weighted to price over volume. CE's earnings growth is attributable to the increase in revenue as well as cost efficiencies, partially offset by higher transportation and disposal expenses. As mentioned earlier, transportation and disposal costs were higher as we utilized alternative and more costly disposal options given that our primary outlets were not available for a period of time.

This situation has improved in early Q3. Each of our industry segments verticals within hazardous waste saw solid growth in the quarter, while soil dredge volumes and earnings were lower as anticipated. The lower contribution from soil dredge relates to seasonal weakness due to dredging restrictions in the Northeast and some higher-margin projects in 2024 that are not repeating this past quarter.

Now please turn to Slide 7 and our Rail business. Rail revenues totaled $58 million, and its adjusted EBITDA loss was $3 million in the second quarter. The year-over-year EBITDA change is the result of lower volumes and a less favorable product mix as well as higher manufacturing costs due to inefficiencies and inflation.

We've discussed our manufacturing challenges previously, and these continue. Supply chain and manufacturing improvements are underway. These initiatives take time, however, and the related benefits are taking longer than we originally expected. Rail is now also dealing with a weak demand environment, as mentioned earlier. Q2 standard equipment bookings were anemic, and our year-to-date orders are now down more than 30%.

Rail's backlog has contracted as a result. We're taking actions to rightsize the rail organization in line with the lower demand. The team is currently working on restructuring plans to support the lower demand outlook with these actions starting in late Q3 and fully implemented in Q1 of next year.

Finally, on the ETOs, we've already mentioned Network Rail. We are making good progress on our smaller contracts as well as the SBB and Deutsche Bahn contracts. We expect to complete most of our smaller contracts, which total roughly 10 this year. The remaining 2 should conclude in 2026. On SBB, where we are delivering 2 vehicle types, we expect to have completed deliveries of the first vehicle type by the end of this year.

On the second vehicle type, we will be testing the equipment later this quarter and expect to complete deliveries by the end of next year. On Deutsche Bahn, which is a contract to deliver 23 vehicles, we are encouraged by our internal testing results on the first unit. The first 3 vehicles will commence the formal acceptance process in Germany by the end of this year, after which they can be accepted by the customer.

Production of the remaining 20 vehicles are on track to be completed and delivered by the end of 2027. We continue to expect that our existing ETO contracts will consume roughly $50 million of cash this year, an improvement from the $80 million outflow in 2024.

Next year, we expect similar cash impacts before these contracts turn positive in subsequent years. Importantly, we continue to expect that project cash flows on these ETO contracts will be neutral on a go-forward basis.

Now let me turn to our full year outlook on Slide 8. The midpoint of EBITDA and free cash flow guidance is reduced by $15 million, driven by Rail. Our EBITDA range is now $290 million to $310 million, and our free cash flow range is now $15 million to $35 million.

Let me conclude on Slide 9 with our third quarter guidance. Q3 adjusted EBITDA is expected to range from $76 million to $86 million. Each of our segments is anticipated to see sequential improvement in earnings. Compared with the prior year quarter, HE results are expected to be lower as a result of divestitures and site exits, while results for CE and Rail should be higher due to volumes and/or price.

Thanks, and I'll now hand the call back to the operator for Q&A.

[Operator Instructions] The first question comes from Larry Solow from CJS Securities.

I'm just curious on the reduced outlook revised guidance. Is it driven entirely by Rail? I missed a little bit of the call. I was actually juggling a couple here. It does sound like some of the trends in Clean Earth and Environmental maybe just temporarily a little bit below our expectations certainly in the quarter. So I'm just curious, is that $15 million entirely Rail and the other is just kind of rounding errors? And then the related question, just kind of housekeeping, does the currency impact the weaker dollar? Is that a benefit for you? Has that been a little bit of an added benefit as the years progress?

Yes. Larry, it's Tom Vadaketh. Yes. So the reduction in outlook for the year, both on EBITDA and free cash flow is entirely due to the reduction in Rail and stemming from some of the demand issues and market issues that we've covered in the call.

And then on FX, as you know, we went into the year expecting a $9 million or $10 million impact. There's been some clawback. The dollar has weakened during the year. And at this point, we still see a slight negative year-on-year, but not as large as we thought at the beginning.

Okay. And then on Clean Earth, particularly, it sounds like things are going well there. Just curious, just qualitatively, the impact of tariffs. Have you seen anything -- just some of your customers obviously are in a global world impacted. So have you seen any indirect impact or anything that would give you a pause on that or from the economy or anything on that?

And then the follow-up on Clean Earth is, and I think you might have discussed it, but just the margins were flattish year-over-year and sequentially or down a little bit even in the quarter. Was there any particular reason behind that? I think you discussed something there. So maybe I missed that.

Larry, it's Nick. On your first question about the tariffs, no, we've not seen any direct impact. In fact, the volume trends in our so-called manufacturing and industrial segment of our hazardous waste business, which is the largest segment, have been quite good, not only revenue, but orders and our pipeline.

So we're really encouraged by the performance of that segment within our haz waste business. So really no impacts to speak of tariffs on Clean Earth. I would say on the margin, it was a little softer than we expected, primarily due to some unplanned maintenance-related outages at some disposal facilities. So we had to move the waste further distances to dispose of it and also in a few cases, pay some higher rates than kind of our standard solution. So that's behind us. It's not continuing. It actually was behind us later in the second quarter. So very much a temporary impact.

Okay. You also mentioned the mix, too, I guess...

Larry, sorry, one second. Yes. I'll just supplement. So in the quarter for Clean Earth, margins are slightly up year-on-year. And then as Nick said, sequentially going into Q3 and Q4, we would expect margins to climb versus the first half performance.

Yes. And Larry, the other impact that I think we mentioned in terms of margin was the mix with our soil and dredge business. As you may know, the margins in that business generally are a few points higher than the [indiscernible] haz waste business. And that segment was a bit weaker in terms of volume than we expected. And I think you also know that, that tends to be a function of project starts, which can be difficult to predict and a bit lumpy. So it's really not a demand issue. It's more of a short-term issue.

The orders and the backlog in that, I think, had done well, at least in '24, right? So that business, hopefully, it's just a timing thing.

Exactly. The outlook is good for that business, yes.

Larry, do you have another question?

No, no. I think I'm all set. You discussed it. All set.

The next question comes from Rob Brown from Lake Street Capital Markets.

On the Environmental business, I think you talked a little bit about an expectation of some improvement in margins and results in the back half. Could you just clarify sort of what's driving that at this point?

In HE?

Correct.

Did you say in HE?

Yes.

Yes. Well, we have some new sites ramping up, and that will help. We have some cost reduction initiatives, which we'll have a full 6 months of in the second half of the year. So that's certainly going to help. And then we talk about a handful of sites that we have a lot of focus on improving their performance and some of those benefits should also help us in the second half of the year.

Okay. Okay. Great. And I know there's a lot of cross-currents on Rail right now. But I guess, historically, when you have these down cycles in Rail, how long do they last? What's sort of the kind of a down cycle? Or is there such a thing as a typical down cycle, but maybe a sense of how long these cycles last in the Rail business?

Yes. Well, in this case, we expect it to be shorter-lived because there's, as you know, we're not in a recession. There's a lot of uncertainty and of course, other big things happening amongst our customers in the Class 1 railroads in the U.S. And so this does happen from time to time where they just cut back spending.

We've -- there are many data points that we have access to across customers and competitors that make it clear that this is an industry issue. It's not a Harsco Rail issue, but we do expect it to be short-lived. So it's -- we don't see this persisting into 2026 at the moment.

[Operator Instructions] The next question comes from Devin Dodge from BMO Capital Markets.

So I was going to maybe take a stab at asking a question around that other announcement this morning. Just wondering if you could provide just a bit of background on the strategic review and what prompted the Board to consider its options now? I'm just trying to get a sense if there have been some inbound interest or if it was prompted by new challenges in the business that a turnaround in financial performance may be pushing out a bit.

Well, certainly not the latter. I would say we've done a lot of work. The discount to our sum of the parts value continues to persist. And I think we have a bit more confidence in the potential outcome of a few of these options. And so we're digging deeper into them, and we've hired advisers.

And I think the distinction here is it's a bit more formal of a process. And so that's -- but beyond that, we really can't comment. We have done a lot of work on a number of different options.

Okay. Okay. Fair enough. I had to ask there. Okay. Second question, look, apologies, I may have missed it during the remarks, but I believe there was a pretty meaningful step-up in forward loss provisions at Harsco Rail. Just can you provide a bit more color behind the drivers behind those charges?

Yes. So both the charges relate to Network Rail, that was the largest chunk and then also a smaller chunk for SBB in total, about $15-or-so million. And $10 million of that is Network Rail. We -- and it's really a revision in our estimated cost to complete that contract.

It's a normal quarterly process, Devin. And as we look out to the end of this period when we are going to complete all the vehicles and there's about 11 that we need to deliver to the customer, that's just an update in our cost estimates at this point. So there's nothing more unusual than that.

As we remarked and I think in my prepared remarks, we separately have a negotiation ongoing with Network Rail that could end up in different outcomes. There could be an improvement in the contract terms and the economic terms, similar to what you saw with Deutsche Bahn earlier this year. We hope that's an outcome or we're also potentially talking to the customer about just exiting the contract on a mutually acceptable basis.

This adjustment that we recorded in Q2 just assumes that things proceed as they are currently without either of those 2 potential changes coming in. And then on SBB, this project is reaching the end, actually. So we -- the major part of the contract, which is to deliver about 50 vehicles, we expect to be done with that by the end of this year, the end of 2025.

And then the second vehicle type, we expect to be done by the end of 2026, next year. And this was, I would say, more -- again, similar concept to what I explained on Network Rail. It's a regular and quarterly process where we are continually reviewing what it's going to take to complete the vehicles as we get closer, as the designs get locked down, as we have more certainty around input costs and so forth, it's sort of a natural outcome of that process. And that was about $4 million or $5 million.

Okay. Good color. I appreciate that. And then just one last one. I think there's been a new leader in Rail now for a little while. Just wondering if you could kind of highlight -- clearly, there's some maybe near-term demand headwinds, but just if you could highlight focus areas and maybe some early wins from the new leader coming in?

Yes. Well, he has a rail industry background. He's very operationally oriented, and that's much of his background. So his focus, of course, I guess, early on has been operations and supply chain and the logistics with our outsourced warehouse that feeds the Columbia plant.

And we have seen some better metrics over the past couple of weeks in terms of that warehouse filling the needs of the Columbia, South Carolina factory. So we're quite encouraged by the team. We have a new finance leader in that business as well. Our operations leader has been with us for about a year. So we feel quite confident that this team has the requisite background and skill set to resolve our operational issues.

This concludes our question-and-answer session. I would like to turn the conference back over to Dave Martin for closing remarks.

Yes. Thank you, Danielle, and thank you to everyone that joined us this morning. Please feel free to contact me with any follow-up questions. And as always, we appreciate your interest in Enviri and look forward to speaking with many of you in the near future. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.