Core Natural Resources, Inc. 2026 Q2 Earnings Call

Please go ahead. Good morning from Canonsburg, Pennsylvania, everyone, and thanks for joining us today.

Before we begin, let me remind you that certain statements made during this call, including statements relating to our expected future business and financial performance, may be considered forward-looking statements according to the Private Securities Litigation Reform Act. Forward-looking statements, by their nature, address matters that are, to different degrees, uncertain. These uncertainties, which are described in more detail in the annual and quarterly reports that we file with the SEC, may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required by law.

I'd also like to remind you that you can find a reconciliation of the non-GAAP financial measures that we plan to discuss this morning at the end of our press release, a copy of which we have posted in the investor section of our website at corenaturalresources.com. Also participating on this morning's call will be Jimmy Brock, our Chairman and CEO, Mitesh Thakkar, our President and CFO, and Bob Braithwaite, our Chief Commercial Officer. After some formal remarks from Jimmy and Mitesh, we will be happy to take questions. With that, I'll now turn the call over to Jimmy.

Jimmy? Thank you, Deck, and good morning, everyone.

The results of the second quarter were a testament to the continued execution of our strategy, and we are pleased to report a significant step up in our financial performance. We worked diligently with our insurance partners to settle the Leer South insurance claim for the full limits loss, complementing our strong operational results. Across the operating portfolio, we delivered a solid performance and are beginning to demonstrate what our full operating platform is capable of. With the insurance claim now behind us, we are singularly focused on the disciplined execution of our core business. We continue to prioritize safe, efficient operations, maintaining strong customer relationships, optimizing our cost structure, and allocating capital in a way that supports long-term shareholder value creation. Now let me dive into our operational results.

Coal sales within the High CV Thermal segment came in at 8.4 million tons in Q2 2026, compared to 7.7 million tons in Q1 2026. During the quarter, our High CV Thermal segment reported realized coal revenue of $58.11 per ton, compared to $58.86 per ton in the previous quarter. In Q2 2026, cash costs came in at $38.58 per ton, compared to $42.56 per ton in Q1 2026. Segment cash costs benefited from significant tailwinds as mining conditions improved, sales were favorable, and power costs begin to normalize. Adjusted EBITDA for the segment totaled $165 million, which compares to $126 million in the first quarter of 2026. In the Metallurgical segment, coke and coal sales came in at 2.3 million tons in Q2 2026 versus 2.1 million tons in Q1 2026.

During the quarter, our Metallurgical segment reported realized coke and coal revenue of $121.43 per ton. The segment as a whole, including 300,000 tons of thermal byproduct sales, achieved an average selling price of $114.13 per ton. Cash costs for the quarter came in at $85.65 per ton, nearly a $7 per ton reduction quarter-over-quarter, reflecting ongoing improvement in execution at our flagship Longwall mines. Adjusted EBITDA for the segment was $200 million, which included insurance-related proceeds of $125 million. In the Powder River Basin segment, coal sales came in at 10.2 million tons in Q2 2026, compared to 11.9 million tons in the previous quarter. The lower volumes were a function of weak demand during the spring shoulder season, exacerbated by low natural gas prices. Importantly, however, we view the reduced quarterly volumes principally as a timing issue.

We have more than 50 million tons of PRB coal committed for delivery in 2026 and expect to either ship those tons this calendar year or conversely, to capture or even enhance the full value of those commitments via other mechanisms, such as blend and extend initiatives. In addition, we continued to build pit inventory during the quarter, which should serve to enhance operating margins in the year's back half. For the second quarter, our PRB segment reported realized coal revenue of $14.28 per ton and cash cost of $14.85 per ton. Moving to the Core Marine Terminal. The CMT shipped 5.2 million tons during the second quarter, compared to 4.8 million tons in Q1 2026. CMT reported $18 million in Adjusted EBITDA in Q2 2026, which was increased compared to the $16 million in the previous quarter. We had another strong quarter from a shareholder return perspective as well.

As you know, our capital return framework targets the return to stockholders of around 75% of free cash flow, with a significant majority of that total directed to share repurchases. During Q2 2026, we returned $68 million to shareholders, which was a substantial increase from $47 million in Q1 of 2026. Since the program's inception in February of 2025, we have returned over 80%, or $360 million of our free cash flow to shareholders via our capital return program. Of that total, $329 million has been used to repurchase approximately 8% of the company shares outstanding as of the program's launch. As indicated, we believe the stage is set for a further step up in capital returns in coming quarters. Before handing the call over to Mitesh, let me highlight one additional positive development, this one involving Core Innovations.

Recently, the innovations team was selected for a grant from the U.S. Department of Energy to construct a pilot scale facility for the extraction of rare earth elements and critical minerals at the Pennsylvania Mining Complex. This announcement underscores Core's ongoing progress in developing innovative technologies that unlock greater value from the coal supply chain while advancing areas of national strategic importance. It follows an announcement made earlier this year in which Northrop Grumman named Core Touchstone Advanced Composites Group, a key supplier of tooling and components for the Talon Blue collaborative combat aircraft. Let me turn the call over to Mitesh to provide the marketing and financial updates.

Thank you, Jimmy, and good morning, everyone. Let me start by providing an update on our financial performance first. This morning, we reported solid second quarter financial results. For 2Q 2026, we reported net income of $126 million or $2.51 per diluted share, an Adjusted EBITDA of $324 million compared to net income of $21 million and Adjusted EBITDA of $180 million in 1Q 2026. These results were driven by strong operational performances from our High CV Thermal and metallurgical segments, as well as the recognition of incremental insurance proceeds related to the limits loss settlement of our Leer South insurance claim. During the quarter, Core generated $148 million in free cash flow, which included the receipt of $88 million of cash associated with the total Leer South settlement.

The Leer South insurance claim was settled for $155 million in aggregate, of which $125 million was recognized in EBITDA in Q2, and approximately $30 million was recognized in previous quarters. All outstanding receivables at the end of the second quarter associated with the Leer South claim were collected by the end of July. In addition, 2Q working capital was inflated by an increase in inventory value as well as a Section 45X tax credit accrual that should provide a tailwind in future periods. At the end of second quarter, we had total liquidity of $1 billion, including $474 million in unrestricted cash and cash equivalents and short-term investments, which reflects an increase of $81 million in liquidity compared to the first quarter of 2026.

Before transitioning to a discussion of our marketing efforts, I'd like to take a moment to extend my sincere thanks to our insurance partners and broker, as well as the Leer South and corporate teams for their dedication and collaboration in successfully closing out our Leer South insurance claim. Our insurance partners worked efficiently and diligently throughout the process, and we greatly appreciate their responsiveness, thoroughness, and commitment to finalizing this matter in a timely fashion. Their collective efforts were instrumental in achieving a successful resolution, and we are pleased to be turning the page on last year and directing our focus towards the future. Let me update you on the coal market dynamics and the efforts of our marketing team.