Enviri's Q3 2025: Contradictions Emerge on Strategic Review Timeline, Rail Segment Struggles, and SDM EBITDA Contributions

Date of Call: November 10, 2025

Financials Results

• Revenue: $575M, unchanged as reported and up 1% on an organic basis YOY
• EPS: Adjusted diluted loss of $0.08 per share for the quarter (excluding unusual items); unusual items totaled $12M pretax

Guidance:

• Q4 adjusted EBITDA expected to be $62M to $72M.
• Clean Earth expected to deliver year-over-year growth in Q4 (continued strong performance).
• Harsco Environmental expected to be modestly below prior-year quarter due to contract exits and cost pressures.
• Harsco Rail expected to be lower due to weak volumes; company removed unsupported unsold equipment/parts from outlook; full-year midpoint EBITDA reduced by $27M and free cash flow midpoint reduced by $50M.

Business Commentary:

* Strategic Review and Clean Earth Process: - Enviri Corporation is in the process of reviewing strategic alternatives to unlock the inherent value of its business portfolio, especially focusing on the Clean Earth business. - Strong and definitive interest from both strategic parties and others has been observed, with potential structures involving the simultaneous sale of Clean Earth and a taxable spin of Harsco Environmental and Rail businesses. - The company aims to conclude this review process by the end of the year, with an eye on minimal tax leakage for investors and a sizable cash payment upon the sale of Clean Earth.

• Clean Earth Performance:
• Clean Earth's revenue and earnings grew by single digits, with margins exceeding 17%, resulting in a record quarterly performance for the business.

• The growth was driven by the execution of new growth strategies, improved business backlog, and IT implementation, despite various internal distractions.

• Rail Segment Challenges:

• Harsco Rail faced challenges with weak demand for standard equipment and aftermarket parts, impacting overall profitability.
• The company is in the process of negotiating with Network Rail to amend or exit its contract, seeking improvements in contract economics or a mutually acceptable exit.

• Despite these challenges, the baseline rail business remains profitable and cash generative, with a sustainable EBITDA run rate of $35 million to $40 million expected once ETO contracts are completed.

• Harsco Environmental Improvements:

• Harsco Environmental improved its margin to 17% and generated $30 million in free cash flow in Q3, with the business expected to troughed in the first half of 2025.

• The company has implemented cost-out actions to offset cost inflation and is hopeful for improved steel industry volumes, driven by proposed European Commission safeguard measures.

• Updated Financial Outlook:

• Enviri's adjusted EBITDA and free cash flow guidance for the year have been lowered due to challenges in the Rail segment and persisting issues in Harsco Environmental.
• The updated EBITDA guidance reflects the derisking of rail volumes unsupported by firm orders, and Q4 EBITDA is expected to range from $62 million to $72 million.

Sentiment Analysis:

Overall Tone: Neutral

• 
  Management highlighted a record quarter at Clean Earth (Q3 revenue +6% YoY; CE adjusted EBITDA margin 17.3%) but lowered the company's outlook: midpoint FY EBITDA cut by $27M and FCF midpoint down $50M, largely driven by continued weakness in Rail.

Q&A:

• Question from Lawrence Solow (CJS Securities, Inc.): Can you give any more color — will we hear something before year-end on the Clean Earth strategic-review process?
  Response: Management: Strong buyer interest in Clean Earth and the process is proceeding well; they expect to conclude the review prior to year-end but cannot provide further details now.

• Question from Lawrence Solow (CJS Securities, Inc.): The $27M EBITDA delta — is that mostly rail? Can you give granularity?
  Response: CFO: The bulk of the variance is rail; removed volumes not supported by firm orders/pipeline to de-risk the outlook; HE was trimmed modestly reflecting Q3 performance.

• Question from Lawrence Solow (CJS Securities, Inc.): On Clean Earth, why did soils/SDM contribution drop and were there distractions?
  Response: CEO: Hazardous waste EBITDA up ~15% for the year while SDM down ~15%—SDM is much smaller and lumpy; current shortfall is timing and mix related (project starts delayed), backlog remains healthy.

• Question from Robert Brown (Lake Street Capital Markets, LLC, Research Division): Are transaction multiples in the specialty waste peer group sustaining?
  Response: CEO: Yes; expected transaction multiples would be consistent with precedent transactions in the sector.

• Question from Robert Brown (Lake Street Capital Markets, LLC, Research Division): What is the baseline rail run-rate in EBITDA today versus sustainable levels?
  Response: CFO: Sustainable stand-alone baseline EBITDA is ~$35M–$40M; current environment puts baseline in the low-to-mid $30M range due to weaker demand, with recovery expected in 2026.

Contradiction Point 1

Clean Earth Strategic Review Timeline

It involves the expected timeline for the conclusion of the strategic review process, which impacts investor expectations regarding the company's strategic direction and potential changes.

What is the current status of the strategic review process and when can we expect a conclusion? - Lawrence Solow (CJS Securities, Inc.)

2025Q3: The expectation is to conclude the process prior to the end of the year. - F. Grasberger(CEO)

What triggered the strategic review, and was there external interest or challenges in the turnaround? - Devin Dodge (BMO Capital Markets)

2025Q2: We expect the process to be largely completed by year-end and potentially up to a few weeks into the new year. - F. Grasberger(CEO)

Contradiction Point 2

Rail Volume and EBITDA Guidance

It involves changes in financial forecasts, specifically regarding volume and EBITDA guidance for the Rail segment, which are critical indicators for investors.

Can you explain the breakdown of the $27 million EBITDA guidance reduction between Rail and Harsco Environmental? - Lawrence Solow (CJS Securities, Inc.)

2025Q3: The $27 million EBITDA guidance reduction is primarily driven by Rail. - Thomas Vadaketh(CFO)

Is the reduced outlook entirely driven by Rail? - Lawrence Scott Solow (CJS Securities)

2025Q2: Our reduced outlook for the year is entirely due to Rail. - Thomas Vadaketh(CFO)

Contradiction Point 3

Soils and Dredging Materials (SDM) EBITDA Contribution

It involves changes in the reported EBITDA contribution from the Soils and Dredging Materials (SDM) segment, which affects investors' understanding of the company's financial performance.

What caused the year-over-year decline in EBITDA from SDM and any related issues in Clean Earth? - Lawrence Solow (CJS Securities, Inc.)

2025Q3: SDM has a lumpy business, with anticipated delays in project starts. The drop is due to timing and mix issues, not overall demand or market share. - F. Grasberger(CEO)

Have tariffs had any indirect effects on Clean Earth's customers? Why were Clean Earth's margins flat year-over-year and sequentially? - Lawrence Scott Solow (CJS Securities)

2025Q2: The decline in EBITDA in Environmental is primarily due to the Soils and Dredging Materials segment, which saw a 25% decline year-on-year. - F. Nicholas Grasberger(CEO)

Contradiction Point 4

EBITDA Guidance Reduction and Reasons

It involves changes in financial guidance and explanations for the reduction, which are critical for investor understanding and expectations.

Can you explain the $27 million EBITDA guidance cut and how it’s split between Rail and Harsco Environmental? - Lawrence Solow (CJS Securities, Inc.)

2025Q3: The reduction is primarily driven by Rail, with unsupported volume taken out. HE's reduction is due to the Q3 miss expected to continue through Q4. - Thomas Vadaketh(CFO)

What are the key factors affecting the HE segment? What is your outlook on steel production and the economy? What are your volume projections for HE this year? - Larry Solow (CJS Securities)

2025Q1: We expect a minor volume growth in HE for the rest of the year. The impact of site shutdowns is mitigated by efficiency programs. The wave of site shutdowns in the second half of last year is over, and the business performed as expected in Q1 without any surprises. - Nick Grasberger(CEO)

Contradiction Point 5

Rail Segment Challenges and Expectations

This contradiction highlights differing expectations for the Rail segment's performance and recovery, impacting financial forecasts and investor expectations.

Can you explain the $27 million reduction in EBITDA guidance and how it's split between Rail and Harsco Environmental? - Lawrence Solow (CJS Securities, Inc.)

2025Q3: The $27 million EBITDA guidance reduction is primarily driven by Rail, with unsupported volume taken out. - Thomas Vadaketh(CFO)

How much visibility do you have on incremental costs in the rail business's engineered-to-order segment, and when might these costs begin to decline? - Rob Brown (Lake Street Capital Markets)

2024Q4: Our fastest-growing regions are India, the Middle East, and Africa, expected to grow 3% to 4%. Other regions are flat. - Nick Grasberger(CEO)