Rayonier Advanced Materials Inc Stock

Good morning, and welcome to the RYAM Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Cody LaCoste, Senior Manager of Investor Relations and Corporate Development. Thank you. Mr. LaCoste, you may now begin.

Good morning, and welcome to RYAM's Second Quarter 2026 Earnings Conference Call. Joining me today are Dan Krawczyk, our President and Chief Executive Officer; and Marcus Moeltner, our Senior Vice President of Finance, Chief Financial Officer and Treasurer.

Last evening, we released our earnings report and accompanying presentation materials, which are available on our website at ryam.com. These materials provide key insights into our financial performance and strategic priorities. During today's discussion, we may make forward-looking statements subject to risks and uncertainty that could cause actual results to differ materially. These risks are outlined in our earnings release, SEC filings and on Slide 2 of the presentation.

We will also reference certain non-GAAP financial measures to offer additional perspective on our operational performance. Reconciliations to the most directly comparable GAAP measures can be found in our presentation on Slides 17 through 19. We appreciate your participation today and your ongoing interest in RYAM.

I'll now turn the call over to Dan.

Thanks, Cody. Good morning, everyone, and thank you for joining us. It's a privilege to be with you today for my first call as President and Chief Executive Officer of RYAM. Before discussing the quarter or my background, I want to address the company's strategic review directly. The comprehensive review of strategic alternatives remains a top priority for RYAM. It's active, it's progressing with urgency and discipline, and it's focused on evaluating the full range of strategic and financial alternatives available to the company to determine the path forward that best maximizes value for the shareholders.

The review is advancing through the appropriate stages, and we are encouraged by the constructive engagement to date. We currently expect to conclude the strategic review and communicate a clear path forward during the fourth quarter. I recognize that my appointment in the middle of this process has led some shareholders to ask whether the company remains fully committed to the review.

Let me be clear, my appointment does not alter, delay or narrow the process. The Board asked me to bring an operational lens, strategic perspective and transaction experience to a clear mandate; maximize value for the shareholders. My responsibility is to support the rigorous strategic process, strengthen the performance and market position of the business during the process and ensure the company is prepared to execute effectively under the path ultimately selected.

Those responsibilities are closely connected. A comprehensive strategic review requires a clear understanding of the company's underlying value, its commercial and operational opportunities and actions needed to realize that value. It also requires a stable leadership capable of operating the business during the review and executing decisively once a path is established.

Throughout my career, I have led manufacturing businesses through periods of transformation, portfolio change and value creation. Over the past 35 years, I have managed global operations across specialty chemicals, minerals and advanced materials with responsibility for improving operating performance, allocating capital, developing differentiated products and evaluating strategic opportunities. That experience is a strong fit for RYAM and for this moment in the company's history.

Since joining the company, I have spent significant time with our employees, customers, leadership team and advisers as well as interested parties participating in the strategic review and other stakeholders. I have also visited our facilities, reviewed the broader manufacturing network and assessed the opportunities across the portfolio. Those discussions and visits have reinforced my conviction that RYAM possesses substantial untapped value. At the center of that value is a highly differentiated Cellulose Specialties franchise with leading market positions, specialized and difficult to replicate assets, deep technical expertise and strong customer relationships built over decades.

Our products serve demanding applications where purity, consistency, technical performance and continuity of supply are critical. These are durable competitive advantages. Our customers are critical partners and the relationships we have built with them are an important asset for the company. We intend to work collaboratively to respond to their evolving needs, support continued innovation and create value together.

Both capabilities and partnerships support a broad range of end markets, including pharmaceuticals, food, filtration, construction, coatings, consumer products and other industrial applications. RYAM is also an important North American supplier of nitrocellulose grade dissolving wood pulp used in defense and industrial applications, reinforcing the strategic relevance of our assets and technical capabilities.

I've also been impressed by the depth of the expertise and commitment of our employees. Their specialized operating and technical knowledge, together with their focus on safety, quality, reliability and customer service is a critical part of the company's competitive position and underlying value. At the same time, there is meaningful opportunity to improve the performance across our manufacturing network.

We have identified a tangible pipeline of reliability, productivity and cost initiatives, including energy efficiency, process optimization and automation. These are clear actionable levers within our control and can improve the earnings and cash generation capability of the network. The objective is not simply to operate the mills at higher volumes, it's to operate them more reliably and efficiently by aligning production with the most attractive product mix and prioritizing markets where RYAM has the strongest competitive position.

Our strategy is to build on these strengths through disciplined commercial execution, closer customer collaboration and continued product innovation, helping our customers differentiate their products and compete more effectively in the markets they serve. We are also selectively advancing biomaterials opportunities where the commercial potential and risk-adjusted returns support further development.

The most important point I want shareholders to take away from this slide is that executing the business and completing the strategic review are not competing priorities. Stronger operations, disciplined commercial execution and improved cash generation enhance the value of the company and support the full range of alternatives being evaluated.

Turning to Slide 5. Our priorities for 2026 are clear and directly aligned with that objective. First, conclude the strategic review and communicate a clear path forward during the fourth quarter. This remains a top priority. Second, continue executing our cellulose specialties leadership strategy by deepening our customer partnerships and aligning product performance, service and value with evolving customer needs while maintaining disciplined commercial execution. Third, build on sequential improvement already delivered, strengthen business fundamentals across the portfolio and deliver positive free cash flow for 2026.

That means advancing commercial execution, new product commercialization, reliability, product mix and cost performance. Our full year free cash flow trajectory remains aligned with our prior expectations. And fourth, exit 2026 with momentum, supported by a stronger earnings run rate and greater financial flexibility entering 2027, including positioning the company to evaluate potential refinancing alternatives.

These priorities are intentionally connected. Together, they strengthen the company's earnings and cash flow profile, improved financial flexibility and enhance value under any potential outcome of the strategic review.

With that, I'll turn it over to Marcus to walk you through our second quarter results, segment performance and balance sheet. I'll come back to you on Slide 10 to discuss the outlook and the actions positioning the company for a stronger performance in 2027.

Thank you, Dan. Turning to Slide 6. Second quarter net sales were $376 million, up 18% sequentially and 11% year-over-year. Loss from continuing operations improved to $33 million from $81 million in the first quarter and included a $13 million noncash asset impairment charge related to high-yield pulp. Adjusted EBITDA increased to $40 million from $8 million in the first quarter and $28 million in the prior year quarter. On a year-over-year basis, High Purity Cellulose adjusted EBITDA increased $12 million to $57 million.

Paperboard and high-yield pulp declined $8 million to negative $10 million, while Corporate and Other improved $8 million to negative $7 million. In total, adjusted EBITDA increased $12 million or 43% compared with the prior year quarter. I will cover the key segment drivers on the next 2 slides.

Turning to Slide 7. High Purity Cellulose net sales increased $38 million sequentially and $29 million year-over-year to $301 million. Adjusted EBITDA increased $33 million sequentially and $12 million year-over-year to $57 million, with margin expanding to 19% from 9% in the first quarter and 17% in the prior year quarter.

CS pricing increased 8% sequentially and 21% year-over-year, while sales volumes improved 19% from the first quarter. Compared with the prior year, volumes remained lower, as we continued to execute our value-based pricing initiatives. In Cellulose Commodities, pricing improved 6% sequentially but remained 11% below prior year levels. Volumes nearly doubled year-over-year, as operating rates improved and production shifted toward commodities.

The improvement in adjusted EBITDA was driven by higher CS pricing, improved operating rates and lower wood and fixed costs. These benefits were partially offset by lower CS volumes, higher commodity mix and inflation. We also continue to advance trade actions to support fair and competitive conditions in RYAM's U.S. markets.

Turning to Slide 8. Paperboard and high-yield pulp net sales increased $19 million sequentially and $7 million year-over-year to $75 million. Adjusted EBITDA was negative $10 million compared with negative $5 million in the first quarter and negative $2 million in the prior year quarter, as higher volumes were more than offset by lower pricing as well as planned maintenance and market-related downtime.

Paperboard pricing increased 3% sequentially and volumes improved 11%. Tighter market conditions supported the sequential pricing improvement and are supporting a firmer outlook, although pricing remained below the prior year quarter. High-yield pulp volumes nearly doubled sequentially and increased 29% year-over-year, primarily due to shipment timing, while pricing remained under pressure.

We are actively monitoring evolving trade dynamics, including the recently announced tariffs on certain Canadian-sourced products and have actional mitigation plans in place. We also continue to advance higher-value products across freezer board, oil and grease resistant grades and softwood rolled high-yield pulp to improve mix and expand market participation.

Turning to Slide 9. We ended the quarter with total liquidity of $145 million. This consisted of $57 million of cash, $76 million of availability under our North American ABL facility and $12 million under our France factoring facility. Adjusted net debt was $755 million, and net secured debt was $726 million. Net secured leverage was 4.2x covenant EBITDA compared with the covenant test of 4.75x, and we remained in compliance with all debt covenants.

Year-to-date cash provided by operating activities was $37 million, translating into adjusted free cash flow of negative $8 million. This represents a $57 million improvement from negative $65 million in the prior year period and keeps us on track to generate positive free cash flow for the year as performance momentum continues through the second half. Year-to-date CapEx was $45 million, including $9 million for strategic projects. We remain focused on preserving liquidity, managing CapEx and improving cash generation.

With that, I'll hand the call back to Dan.

Thanks, Marcus. Before we open the call for questions, I want to focus on the drivers of expected improvement in the second half and how the actions underway are building momentum into 2027. As shown on the left, our second quarter results were ahead of expectations and keep us on the trajectory we outlined with our fourth quarter results and reiterated last quarter. Our full year outlook remains aligned with our prior expectations of generating positive free cash flow in 2026.

In Cellulose Specialties, pricing increased 21% year-over-year in the second quarter, reflecting the differentiated performance and value of our portfolio. We expect pricing to remain significantly above prior year levels through the second half with full year pricing aligned with our prior expectations. Second half volumes are expected to improve compared with the first half and remain in line with our expectations.

We also anticipate more favorable inventory conditions across the cellulose specialty supply chain as we move into 2027. Underlying cellulose specialty supply and demand conditions remain tight. Our commercial approach will remain disciplined and collaborative as we continue working closely with our customers to align product performance, service and value with evolving needs. In cellulose commodities, market pricing has stabilized, and we expect modest improvement through the balance of 2026.

In paperboard, tighter market conditions supported sequential price improvement in the second quarter and are contributing to a firmer pricing outlook. Operationally, we remain focused on targeted improvements in reliability, productivity and cost improvement across our manufacturing network. We're also continuing cost recovery actions where commercially and contractually appropriate while maintaining a disciplined capital allocation.

Together, these actions are intended to mitigate the inflationary pressure and improve cash generation. We continue to advance appropriate trade actions to support fair and competitive conditions in RYAM's U.S. markets. During the third quarter, USTR announced final Section 301 actions covering imports from Brazil and Norway, including an aggregate 37.5% tariff on Brazilian imports of dissolving wood pulp and 12.5% tariff on Norwegian imports of dissolving wood pulp.

The ultimate impact will depend on several factors, including the availability of downstream trade programs and other applicable regulatory mechanisms. Separately, the antidumping and countervailing duty proceedings remain active with preliminary antidumping duties on imports from Brazil and Norway and preliminary countervailing duties on imports from Brazil. Final determinations are expected later this year.

As Marcus noted, we are also monitoring recently announced tariffs on certain Canadian origin products and engaging with policymakers. We have developed operational and commercial actions that can be implemented as appropriate if tariffs take effect as announced. More broadly, our strategic focus remains centered on strengthening our high-purity cellulose platform. Product innovation and select biomaterials opportunities provide additional paths to value creation.

We will continue advancing these opportunities selectively with a focus on attractive investment economics, customer commitments and disciplined capital deployment. One example is RYAM's capital-light interest in Altamaha Green Energy project through its land and prior investments, preserving potential upside without requiring additional cash equity from the company.

Taken together, the commercial operating cost and capital actions underway support our expectations for improved performance in the second half and are laying stronger earnings and cash generation foundation for 2027 and beyond. We recognize that significant work remains. Certain end markets continue to be challenged. Our leverage remains elevated and performance across portions of the portfolio must improve.

Nevertheless, the opportunities I've seen since joining RYAM reinforce my belief that the company has a valuable foundation and meaningful potential that is not fully reflected today. Our focus is clear: conclude the strategic review with urgency and discipline, deliver the expected second half improvement, generate cash and ensure that the path ultimately selected captures the full value of this unique platform for our shareholders.

With that, operator, please open the call for questions.

[Operator Instructions] Your first question comes from the line of Daniel Harriman of Sidoti.

Dan, I'll start out with you. And I know you touched on this in your remarks, but we do have to ask why and why RYAM. And I guess, specifically, what is it about what you've seen so far, along obviously, with your prior experience that gives you confidence you can really unlock value here for shareholders, whether that value is ultimately realized through a strategic review or operating RYAM as a stand-alone company.

And then Marcus, to you, what should we expect to any more detail you can provide regarding CS volumes in the second half? And what does that path imply for full year free cash flow? And I guess also, as you think about the 2027 debt maturing, how important is delivering that free cash flow to positioning the company to refinance on better terms prior to the 2029 maturity?

All right. Daniel, it's nice to meet you. I appreciate the question. I'm sure it's a question that's on the minds of a lot of folks out there. I'll start out why I was hired. I think there are 2 different things, why I was hired and why I joined the corporation. Why I was hired was to maximize shareholder value by supporting the rigorous strategic review process and continuing to strengthen the business during that process. That ultimately will give us the best flexibility to maximize value for our shareholders.

Why I joined the corporation? Again, looking at the end markets that we serve, we have very strong end markets with varying degrees of growth and opportunity, but we provide really critical products to those end markets. We have a strong Cellulose Specialty platform that is spec'd into many of the products and the functionality of the end products as well as the processability of their products, so again, a strong specified position in Cellulose Specialties, driven by technical expertise and performance in the end products.

That also requires us to support our commodity cellulose products, and that means being an efficient operator. So with that strong spec'd position and that stickiness with the customers, I looked at the opportunities, the tangible opportunities to improve the performance of this corporation. Ultimately, I looked at the commercial execution. I believe there's opportunities to further solidify our commercial execution and how we go to market and partner with our customers to provide stability, security of supply and enhance the growth of the end products.

I also saw a whole stable of operational improvements where we can continue to improve the performance of our assets and deliver better profitability. And there are lists of projects that I think are out there, and these are very closely linked with our commercial execution. If we can build the assets with the right products, we can reduce our yield losses and improve our operations and provide more money to invest.

And then I look beyond the base of the business, and I look at the upsides of our byproducts. We have a proven biomaterials investment to date in both France and coming online with the Altamaha Green Energy project. And we have more opportunities where we can leverage our infrastructure and our assets to grow into new end markets, whether it's CTO or prebiotics or other biomaterials.

So overall, this is a strong match for my background in terms of running specialty businesses that require growth, restructuring, as well as evaluating strategic alternatives as well as transactions.

Dan, thanks for the question. Yes, if I think about HPC and your positive free cash flow comment, we feel good about the momentum on HPC. As you saw, adjusted EBITDA of $57 million in Q2 versus the $24 million that we printed in Q1. And also, that was on the backdrop of strong pricing, up 21% year-over-year and a nice rebound in volumes, 19%.

Our line of sight on volumes for the back half, I think is something in the range of 10% to 15% improvement on volumes and continuing to carry a nice customer and product mix. But it's going to take more than just the CS business. We'll see some benefits on commodity pricing in HPC as well, but certainly, paperboard and high-yield pulp performance, we're relying on the new product pipeline to be additive to the results up in Temiscaming. And then we'll also be focused on working capital for the balance of the year and being mindful on our discretionary spending as it relates to G&A.

I think executing against all those priorities are really the focus such that we can position the business looking forward for refi ultimately. It will all be dependent on operating performance, capital market conditions and the outcome of the strategic review, but it's incumbent on us to be focused on driving our LTM EBITDA back to a level where we can access both public and private markets.

Your next question comes from the line of Matthew McKellar of RBC Capital Markets.

First, assuming the significant new U.S. tariffs on Brazil and Norway persist and stack on the existing duties, how do you see that as impacting the CS market, maybe the U.S. acetates market specifically as you think about that 37.5% in Brazil through the balance of this year, but also into next? How do you see it playing out? And how do the duties and tariffs affect your strategy?

Great. Thank you, Matthew, and I appreciate the question. Again, just to remind everybody, the USTR announced final Section 301 actions that include a 37.5% tariff on the Brazilian dissolving wood pulp and 12.5% tariff on the Norwegian dissolving wood pulp. The separate antidumping and countervailing duties proceedings continue to remain active. If sustained, these actions would provide fair, more competitive conditions for qualified U.S. suppliers, including acetate and other Cellulose Specialty applications.

Ultimately, the outcome of that will depend on the availability of other downstream trade programs and regulatory mechanisms. Ultimately, as we look forward, we need to make sure our customers are successful, but that we are operating on a level playing field. So if they come to fruition, we believe it will continue to improve the competitiveness of our assets and provide for a better level playing field, but it's certainly subject to other regulatory mechanisms.

Maybe next for me, on CS volumes, how are you thinking about potential for churn in your business as you get into the next contract year? Just wondering how you think about that volume trajectory into '27 and whether you expect any portion of customers to evaluate alternative supply with, I guess, the pricing strategy you've been running?

Yes. So as we look into 2027, again, we're seeing good momentum going into the third and fourth quarter for our business in terms of getting additional volumes in place. And as we look at -- as we think about our customers, they're always evaluating alternatives. The value that we bring is we bring the broadest range of products for our customers. So if you look at ethers, we provide a full range of products across our various assets that can serve a variety of different needs.

And again, as we look forward, we believe that the opportunity is to provide additional stability and certainty around the assets that -- or the products that we produce. And that is done through long-range contracts, partnerships and growth opportunities with those customers. So we see the customers, in general, having improving quarterly outlooks as they look into the third and fourth quarter.

And our goal is to provide additional stability. While pricing has been a main focus of the discussions this year, we believe that those relationships remain intact. They're decades old in terms of relationships with our primary customers. And we'll -- ultimately, we believe we can solidify those with longer-term agreements.

Great. And if I could just sneak one last one in regarding the Section 338 tariffs on paperboard. Would you be willing to disclose, I guess, what your share of shipments is into the U.S. at this point? And is there any other color you can provide around the options you have to adapt if the tariffs end up taking effect and persisting for some time?

Again, when we look at the tariffs surrounding our paperboard products, it has the potential to materially impact the economics of our paperboard and high-yield pulp business. When we look at the share that we ship into the U.S., think about roughly about 75% of our volume of paperboard is sold into the U.S. In terms of actions that we're taking, we're actively working with the policymakers to assess the final scope of the tariffs and timing and regulatory actions that are available to us, both in Canada and the U.S. And then we're working on the expected commercial actions with our customers to understand how we can offset those as well as operational responses that we can take to mitigate any negative effects on the business.

[Operator Instructions] Your next question comes from the line of Dmitry Silversteyn of Water Tower Research.

Quick question, Dan. I was intrigued by your comment on nitrocellulose opportunity. Obviously, defense spending is front and center given what's going on in the world. Can you talk a little bit about sort of what the magnitude of the opportunity is, what products you already have qualified and what you're doing to get bigger in that market?

Great question, and good to meet you, Dmitry. Again, in terms of nitrocellulose, RYAM is in a unique position. We remain as the sole remaining U.S. supplier of dissolving wood pulp nitrocellulose applications. And we're proud to be part of the U.S. defense and industrial base supporting our supply chains, both in the U.S. as well as NATO.

When we look at nitrocellulose, it's a unique product. It's a mission-critical feedstock for defense and energetics applications. It requires exact impurity, consistency and performance requirements and ultimately is a critical part of the overall defense supply chain. We are -- again, as we look at our asset base, we continue to look to actively qualify other grades across all of our different facilities to provide security of supply and flexibility for the Department of War and its efforts to improve the supply chain.

And it's an extremely valuable part of our overall Cellulose Specialties product mix. So again, very important, very exact in grades of cellulose that are required to deliver this performance. So critical asset, critical to RYAM, critical to U.S. and critical to NATO.

Understood. That's a very interesting new market for you or new market for you, I guess. Just switching gears a little bit. Looking at your Paperboard and high-yield pulp division, you've had higher production, higher volumes, good utilization rates, but the business is still delivering negative EBITDA. What needs to happen either operationally or in the economy or in the end markets for you to close that gap and actually get this business to modest levels of profitability?

Again, tariffs aside, looking at the business, we're looking at a meaningful step-up in the second half of this year. So it's really dependent on execution. And the primary levers of our execution are commercializing our new high-value products and freezer board, oil and grease resistant board as well as the high-yield wrappers and rolled softwood high-yield pulp for absorbent applications.

We are seeing some tightening in the paperboard market, so we're getting a little lift from the market itself as utilization rates tighten. So that will certainly help us. But we're really tracking the qualifications and recurring orders and shipments so we can realize the margin from these new products. So we'll be keeping a close look -- our eye on the execution of these new products and ensuring that they're gaining the right traction in the market to be successful and mitigate the losses from the first quarter.

Understood. And then final question, switching back to Cellulose Specialties. You had a price increase sequentially after a pretty strong move in the first quarter. So was that a function of mix, or was that a function of signing contracts in the second quarter that were even higher priced than what you did in the first quarter? Just trying to understand where the direction is for pricing as we move through the balance of the year.

Dmitry, thanks for the question. It was a combination of a couple of things. There's both a greater proportion of our higher-value Cellulose Specialties, so there's definitely that product mix, but there was also some customer mix and then the benefits of the pricing discussions. So it was a great quarter as far as all those attributes together. And again, looking forward, we feel, as you -- as I indicated, the volume piece, 10% to 15%, while carrying good pricing and nice mix, probably more weighted in the back half to other CS grades, but we feel good about that outlook.

And I'd add Dmitry, too, as we continue to produce more CS grades, think about it as pushing out the more commoditized cellulose commodities. So there's different grades of cellulose commodities in our spectrum as we continue to upgrade our Cellulose Specialties mixes, those will drop off, and that has a positive effect as well.

Congratulations on the second quarter in a row that you beat expectations. Good trend to continue.

Thank you so much. I'd now like to hand the call back to Dan for closing remarks.

Great. Thank you again for your time today and continued interest in RYAM. The strategic review remains a top priority of the company. We expect to conclude the review and communicate a clear path during the fourth quarter.

Our second quarter results demonstrated strong sequential improvement, and our full year trajectory remains aligned with our prior expectations. We remain focused on disciplined execution, strengthening the performance and financial position of the business and maximizing the value of our -- for our shareholders. We look forward to updating you on progress during the next quarter. Thank you.

Thank you for attending today's call. You may now disconnect. Goodbye.

Good morning, and welcome to the RYAM First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Daniel Bradley, Vice President of Investor Relations. Thank you. Mr. Bradley, you may begin.

Good morning, and welcome to RYAM's First Quarter 2026 Earnings Conference Call. Joining me today is Marcus Moeltner, our CFO and Senior Vice President of Finance and a member of our Interim Office of the CEO. Last evening, we released our earnings report and accompanying presentation materials, which are available on our website at ryam.com. These materials provide key insights into our financial performance and strategic direction.

During today's discussion, we may make forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially. These risks are outlined in our earnings release, SEC filings and on Slide 2 of the presentation. We will also reference certain non-GAAP financial measures to offer additional perspective on our operational performance. Reconciliations of the most comparable GAAP measures can be found in our presentation on Slides 19 through 21. We appreciate your participation today and your ongoing interest in RYAM. I'll now turn the call over to Marcus.

Thanks, Daniel. Good morning, everyone, and thank you for joining us. Before I turn to the quarter, I want to begin on Slide 4 and address the announcements we made on April 20. As disclosed, a formal review of strategic alternatives to maximize shareholder value has been initiated, and the company has engaged Morgan Stanley as financial adviser in connection with that review.

At the same time, an interim office of the CEO has been established to provide continuity during the transition and the search for a permanent CEO is underway. Importantly, the members of the interim office of the CEO bring more than 60 years of combined experience at RYAM and Tembec, which provides continuity and deep knowledge of the business.

We remain focused on safety, reliable operations, serving our customers, executing our 2026 priorities and improving value across the portfolio. That has not changed. With that in mind, the strategic review is appropriately broad. The alternatives under evaluation include, but are not limited to, continued execution of our stand-alone strategic plan, a strategic investment or partnership that strengthens the business, a merger or other business combination and the sale of part or all of the company.

They may also include capital structure actions designed to improve financial flexibility, including potential debt refinancing or restructuring, covenant relief or other collaboration with our lenders. Any path under consideration ultimately needs to be evaluated against the same core objective; what best strengthens the company, improves financial flexibility and maximizes shareholder value. As we said in the press release, we have not set a timetable for completion of the review, and we do not intend to provide updates unless and until disclosure is appropriate or required.

So today, my focus is where it should be on execution, on the operating path forward and on the actions that improve value under any outcome.

Turning to Slide 5. The message is straightforward. Our 2026 priorities are unchanged. We have 4 operating priorities for the year: first, deliver positive free cash flow; second, assert our leadership in CS; third, drive year-over-year EBITDA improvement across every business; and lastly, exit 2026 with momentum.

These priorities reflect both where we are today and what must happen next. We entered 2026 with negative free cash flow and elevated debt. So our task this year is clear: strengthen the earnings profile of the business, improve cash generation and build momentum quarter-by-quarter. The first quarter was an early step in that process. I will cover the detailed results on the next slide, but at a high level, the quarter was broadly consistent with the operating plan we laid out in March as pricing, mix and commercial actions to strengthen our leadership in CS continued to come together.

Let's turn to Slide 6 and the first quarter results. Adjusted EBITDA in the quarter was $8 million. High Purity Cellulose generated $24 million of adjusted EBITDA, and we achieved a 17% increase in average CS sales price year-over-year, while CS volumes were lower and commodity mix was higher, and we executed our CS leadership actions.

Paperboard and high-yield pulp were a negative $5 million, reflecting continued pressure from new third-party supply in paperboard and continued domestic oversupply of high-yield pulp in Asia. Corporate and other costs were $11 million for the quarter with favorable foreign exchange rates compared to the prior year quarter, providing some offset. Importantly, we ended the quarter with total liquidity of $160 million, comprising $68 million of cash on hand, $88 million of availability under the [ AVL ] and $4 million available under our factoring line in France.

The quarter came in broadly in line to slightly ahead of the expectation embedded in our prior outlook. Although still below the level required to achieve our full year objectives, that outcome reflects continued execution of the commercial and operating initiatives required to strengthen our leadership in CS as the near-term benefit from those actions is building. The free cash flow bridge also makes an important point.

Even with a weak first quarter, we generated $12 million of adjusted free cash flow. This reinforces that positive free cash flow in 2026 will come from a combination of better operating performance, improved mix, commercialization of new offerings, disciplined capital allocation and balance sheet actions as needed.

Turning to Slide 7. Our new product pipeline reflects how we are advancing growth through focused innovation and value-added products across the portfolio. What is important here is that these opportunities are not dependent on any single product or end market. They are spread across multiple businesses and in many cases, leverage assets, technical capabilities and commercial positions we already have in place.

The initiatives highlighted in green on the slide are the ones I want to focus on today because they represent the most tangible near-term progress. In paperboard, we continue to gain traction in both freezer board and oil and grease resistant board, and we are targeting approximately 10,000 metric tons of annual sales in 2026 in each of these markets as commercialization and customer qualifications continue to advance.

In high-yield pulp, we see a path to approximately 20,000 metric tons of annual sales in 2026 for softwood high-yield pulp rolls as we move into higher-value absorbent end markets, while the wrapper product provides a nearer-term opportunity to support internal cost reduction and create a path to future external sales.

In Cellulose Commodities, odor control fluff remains one of our more differentiated growth and margin accretive opportunities in the pipeline, which I will come back to on the next slide.

The broader point is that this pipeline supports both near-term earnings improvement and longer-term portfolio value creation. The slide that follows highlights a few representative examples of how the value is being developed through targeted product innovation, sharper commercial focus and a more dynamic operating approach.

So turning to Slide 8. This slide brings together 3 representative examples of how we are working to create value through more focused commercial execution, differentiated product development and a more dynamic operating approach.

First, in Nitration Grade Cellulose. What we have learned is that customers in qualification intensive energetic applications are buying certainty, technical support and disciplined specification control, not simply material that meets the basic spec. RYAM is well positioned here because we are the only supplier with a multisite sulfate and sulfide production footprint across North America and Europe. Our actions are focused on the highest priority conversion and qualification opportunities and on continuing to strengthen customer support, qualification continuity and supply assurance in the applications where reliability matters most.

Second, Odor Control Fluff is a different type of opportunity, but it reflects the same discipline. Adult incontinence is the fastest-growing fluff segment, and there is a clear unmet need for immediate odor control. Our product offers a differentiated urine-activated solution that can be used as a drop-in replacement in existing products. The commercial approach here is also deliberate. We are targeting brands directly in order to pull the solution through the value chain.

Third, Dynamic Asset Allocation is the internal discipline that connects strategy to day-to-day execution. What we have found is that there are still barriers and bottlenecks that can be removed to raise production and improve mix and that we have more flexibility than we have historically used to allocate capacity across our grade portfolio to maximize value. A good current example of this is in the fluff market, where pricing has strengthened. As those market conditions have improved, we have further prioritized volumes into fluff and other attractive softwood pulp markets to take advantage of that pricing environment.

The broader point across all 3 examples is the same. We are becoming more targeted in how we deploy technical, commercial and operating resources, and that is an important part of how we intend to improve the earnings quality of the business going forward.

Let's turn to Slide 9 and the 2026 outlook. The core message on this slide is that 2026 remains a transition year, but one in which we are building leadership momentum and laying the foundation for a stronger 2027 and beyond. The first quarter came in broadly in line to slightly ahead of the near 0 EBITDA level we had anticipated as the benefit of our CS leadership initiative is building.

So while the year still depends on sequential improvement from here, the underlying direction of the plan remains intact. The items on the right side of the slide reinforce that point. In the first quarter, average CS sales price increased 17% as our leadership actions continue to build. We are also advancing trade actions to support fair competition in RYAM's U.S. domestic markets.

Across the CS value chain, we expect inventory conditions to become more favorable as we move into 2027, while CS supply/demand conditions remain tight and continue to support disciplined pricing actions. We also expect to benefit from improving commodity pricing as supply and trade dynamics continue to normalize with pricing currently forecasted to increase sequentially over the balance of 2026.

Beyond the market backdrop, we continue to take actions within the business to improve the earnings and cash flow profile. That includes ongoing inflation mitigation work across the enterprise and continued progress on new product and grade-specific leadership initiatives that are expected to contribute incremental value in 2026 and beyond.

Taken together, these actions are intended to build a stronger earnings base and improve cash generation over time. That said, our priorities for 2026 are unchanged. We continue to target positive free cash flow, assert our leadership in CS, drive year-over-year EBITDA improvement across every business and exit the year with stronger momentum.

We also remain focused on safer operations, strengthening our organization and executing with greater precision and speed. In closing, I have confidence in the plan we are executing and in the team that is advancing it. Regardless of which plan is ultimately chosen, execution remains the anchor under any outcome. The initiatives we've discussed today are the right initiatives for the company. They strengthen our financial position, improve our commercial posture, increase operating discipline and enhance the strategic value of our assets.

The best way we can support the strategic review is to execute the initiatives in front of us, improve our earnings and free cash flow quarter-by-quarter and continue building a stronger company. If we do that well, we will reinforce the business under any scenario and position RYAM for a stronger 2027 and beyond. With that, operator, please open the call for questions.

[Operator Instructions]

Your first question is from the line of Daniel Harriman with Sidoti.

I'll start with a couple, and then I'll get back into the queue. But Marcus, heading into 2026, it was very clear that CS volumes would be under pressure as you continue to push price. And obviously, Q1 results were consistent with that. Could you provide us with a little bit of an update regarding where you stand on those pricing conversations today and when you expect to have that fully placed? I believe you had maybe between 12% and 15% still to go. And then with the breakdown on the CS volume decline, the release calls out elevated acetate inventories and also soft ethers demand. I was just hoping to get an idea of how much of the volume weakness is market-driven versus self-imposed by those higher prices and if that at all changes your confidence in the back half of recovery?

Thanks for your questions. Maybe just as an update to the negotiations and asserting our leadership strategy. As we said, we have secured the majority of our 2026 CS volume. And at pricing that's meaningfully higher than '25. And a good reference point is the evidence that we shared with the 17% increase in Q1.

So again, this really reflects deliberate commercial actions we've taken to manage pricing and improve our mix and better align value -- with the value our products bring to the applications. And that said, if you look at our industry, Hawkins Wright, who publishes capacity and demand figures for the industry, anything above 88% is really balanced, and we're above 90%. So we're still in the backdrop of a very constructive market. So we see our discussions are well advanced, and we continue to make progress.

Speaking to your second question on acetate and ethers markets, we continue to advance our discussions with the acetate customer base in the backdrop of an end-use market that does have existing elevated inventories, but it's improving. In ethers, that's the market where you do see the weakness, European construction. And there's also the impact of competing products from China that make their way into that end-use market. But overall, consistent with our last message in the back half of the year, we will continue to complete these negotiations.

Your next question is from the line of Matthew McKellar with RBC Capital.

First for me, I guess you disclosed on April 20 that you're engaged in a formal process to explore strategic alternatives. I think there was some language in the presentation suggesting you don't have a specific time line. But just to help us get a sense of timing here, can you help us understand maybe when you formally began this process? And maybe more broadly, what do you think is driving interest in RYAM at this point in time? And what do you think public markets have maybe underappreciated about your business?

Yes, Matt, thanks for your question. As I mentioned in my prepared comments today, engaging Morgan Stanley was a decision made given interest expressed by third parties. And as you can see, it's a very broad mandate, right, that could involve numerous permutations of corporate development type activities to -- with the real focus to maximize shareholder value.

And there's also a piece that's related to continuing to address the balance sheet of the company and look to optimize the capital structure of the company. And it's -- that process is -- has the overarching objective, as I mentioned, to maximize shareholder value because I truly believe there is value within RYAM that is not recognized by the marketplace. And we have a unique offering. I think you're seeing that unique offering be reinforced in the current backdrop of what's going on in the world where you've got pressure on oil-based products and our cellulose-based products are well positioned in any environment to be perceived as having high value.

Thanks for that perspective. Maybe next for me, can you provide maybe just a bit more color on the conditions you're seeing in the fluff market right now and maybe how those conditions might be different than your expectations going into the year? And then I guess with that, can you talk maybe just a bit about your mix in the commodities business, maybe around what your mix of fluff looked like in Q1 compared to what it looked like over the past couple of quarters? And then whether you'd expect mix to evolve much through the balance of the year compared to what it looked like in Q1?

Yes. Thanks again, Matt. Yes, so higher fluff pricing is really a positive background to our business right now. And it really melds well with the dynamic asset allocation strategy that I referenced in my comments.

Given what we're seeing in the fluff space, there is definitely upward pricing movement. We're seeing the ability to pivot and drive our mix toward more fluff production. If I were to contrast Q1 versus Q2, we certainly had a higher mix of paper pulp in Q1 versus where we will be this quarter, given that we're going to drive pricing and volumes to fluff.

We're picking up that there's some further pricing announcements pending here in the range of a net $55 increase in China and $120 in North America and Europe. So I think there's a lot of positive momentum in fluff. I think additionally, as we advance the commercialization of the softwood rolled product in Temiscaming, again, that we will be able to have products across the continuum of fluff grades and position our product made out of Temiscaming on this out of high yield and get some further value there as well and drive improved mix. So I'm really excited about that project as well.

Your next question is from the line of Dmitry Silversteyn with Water Tower Research.

Quick question. Recently, there was a development on the antidumping case at the end of last year concerning Brazilian and Norwegian imports. Can you -- the ruling was positive for you in the sense that there was some damage that was assessed, but the amount of remedy, I guess, was a little bit disappointing.

Can you talk about what other things we can look forward to in terms of that trade dispute? And then as a follow-up, you mentioned in your press release that your shipping costs have gone up, particularly to China. Is it in any way related to the conflict, geopolitical that's going on in the Middle East now? Or I guess, to ask it differently, are there any impacts on your logistics and your shipping costs as a result of that conflict?

Dmitry, thanks for your questions. So maybe I'll take the trade comment first. So really, we feel positive about the direction and where things are headed across the tariff-related work streams we have, including AD and CVD and as you know, RYAM is the sole remaining U.S. producer of high-purity dissolving wood pulp. And we think the importance of a reliable domestic supply is paramount. And it's particularly important for critical infrastructure and certain defense-related applications.

And it's continuing to get really better understood. It's early days, but we are optimistic on the direction that this is taking and like the trajectory that we're on, on those discussions.

Maybe secondly, on your comment on inflationary pressures on logistics. Yes. I think like everybody, you're seeing the impact of higher oil pricing and diesel costs. And there are surcharges coming through on freight. We're certainly focused on that. It's creating pressure as well, perhaps on some chemicals, think of the sulfur and ammonia families. But we're actively managing this through supplier negotiations. We've got targeted commercial recovery actions that we're pursuing. And where appropriate, we continue to pursue cost discipline to mitigate these impacts. So thanks again for your questions, Dmitry.

Okay. Just if I can, a quick follow-up. You mentioned in your presentation, several new businesses or business lines that are gaining traction in the first quarter, second quarter, some by the end of the year. If we were looking at Rayonier's performance versus your expectations in your guidance, what -- which of those products do you think will have the greatest impact on your results provided successful commercialization and share gains for 2026. And which should we think about is it more impactful for '27 and beyond?

Yes. Thanks again, Dmitry. So if you look at our new product pipeline, several of those products are Temiscaming centric -- so think of the freezer board and oil and grease, those will help us drive better mix across our paperboard portfolio. And those will be impacts in the second half of this year in '26. And as well as we advance the commercialization of the roll product, the fluff product at Temiscaming again, that is another value adder for the second half. So we see all those products that are being produced in Temiscaming as providing a nice benefit for RYAM for the balance of the year.

If you look longer term, certainly, I mentioned it in my comments, the Odor Control Fluff is a real differentiator and a nice prospect. I can see that adding considerable value to our fluff portfolio going forward. So really excited about all those products. But think of Temiscaming having a nice impact from these activities, Dmitry.

[Operator Instructions] You do have a follow-up from the line of Matthew McKellar with RBC Capital.

Just one follow-up for me and kind of following my previous question, but referencing Slide 8 and the dynamic asset allocation comments you've made. Can you give us any more detail at all around how you've achieved this greater flexibility to increase production and allocate capacity across grades? And then I guess a follow-up on Daniel's question somewhat. Can you share any perspective around how we should think about the sequential change in CS shipments into Q2 and whether the fire adjustment will have any impact to acetate volumes in the quarter in particular?

Yes. Thanks again, Matt. So examples of the execution and leveraging this dynamic asset allocation strategy, it's a question of being more nimble and quicker to respond to market changes because our production lines are quite flexible. And it's just leveraging that capability and putting it into action to be able to adapt to market changes quickly. We had to do that in Q1. We had to adapt B-line to making a mix of commodity paper pulp to keep the lines running. And as that's now filled with acetate, you can see how we've put that into action.

Another example is as fluff markets have improved, I just mentioned it earlier, is driving that mix higher. And we have that same capability at Tartas where we can pivot between ethers type grades and make a fluff product.

So it's just being mindful of our asset capabilities and putting that into action in real time. I would say your second question, sequentially, how should we think about volumes, you should think sequentially that CS volumes will be higher from the base, right? We just did over 70,000 tons of CS. We could be upwards of 15% to 20% higher on those volumes.

We'll also drive some better fluff pricing, and that mix should be greater given that we'll make less paper pulp. Lastly, your question on the fire, as we mentioned, this was a very isolated and contained fire that occurred. And as we confirmed in our comments relative to the previous fire, a minor impact in the range of $5 million we mentioned. And Matt, as far as production, we were more focused on paper pulp as we started up from the outage. So again, the impact on acetate, I would see that as being de minimis.

At this time, there are no further audio questions. I will now hand the call back over to the presenters for any closing remarks.

Again, thank you again for your time today and for your continued interest in RYAM. We really appreciate the support and engagement of our shareholders and other stakeholders. And as I mentioned, our focus remains on disciplined execution, open communication and continuing to build value in the business. And we look forward to updating you further on our progress next quarter. And thanks again.

This concludes today's presentation. Thank you for joining. You may now disconnect your lines.

Good morning, and welcome to the RYAM Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the call over to your host, Mickey Walsh, Treasurer and Vice President of Investor Relations. Thank you, Mr. Walsh, you may begin.

Thank you, and good morning. Welcome again to RYAM's Fourth Quarter 2025 Earnings Conference Call. Joining me today are Scott Sutton, our President and CEO; and Marcus Moeltner, our CFO and Senior Vice President of Finance. Last evening, we released our earnings report and accompanying presentation materials, which are available on our website at ryam.com. These materials provide key insights into our financial performance and strategic direction.

During today's discussion, we may make forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially. These risks are outlined in our earnings release, SEC filings and on Slide 2 of the presentation. We will also reference certain non-GAAP financial measures to offer perspective on our operational performance. Reconciliations to the most comparable GAAP measures can be found in our presentation on Slides 21 through 24. We appreciate your participation today and your ongoing interest in RYAM. I'll now turn the call over to Scott.

Yes. Thanks, Mickey. Good morning, everyone, and thank you for joining us. Since stepping into this role, I've interfaced with many RYAM employees and visited every site, and I'll start with three things. First, I mean, what a great team we have. I am quite lucky to have the opportunity to hold hands with the RYAM employees and make us the absolute leader in cellulose and derivatives. Second, we have exceptional capabilities and adaptability to produce the broadest portfolio of cellulose products. Third, we have urgent work to do to get out of the ditch.

I'm going to keep my prepared remarks focused on Slides #4 through #7. And as you can see on Slide #4, our free cash flow in 2025 was negative USD 88 million, and we also carry plenty of high-cost debt. That combination is not sustainable. So priority 1 on Slide #5 is simple: deliver positive free cash flow in 2026. Every group in the company is executing on priority 1 as a mission-critical activity. We are not just aiming to get out of the ditch. We are aiming to exit 2026 with significant momentum with a heavy focus on execution.

That brings me to priority 2, assert our leadership and lift our value equation in Cellulose Specialties. We're making great progress. 85% of the Specialties business is now arranged at an average price increase of 18% over 2025 with expected volume loss of about 20% compared with 2025. The other 15% is still in discussion and may not be decided until the back half of this year. If we are successful in those discussions, the remaining 15% will only come at an average price increase significantly higher than the 18% level.

A great characteristic of RYAM is that everyone wants to contribute to our success, and that shows up in priority #3. You should expect every business to improve EBITDA in 2026 relative to 2025 through a broad playbook of leadership initiatives, active portfolio management, in other words, leveling up and leveling down market segment categories to maximize contribution profit and new product commercializations across the portfolio shown on Slide #6. Slide #6 shows the new product work across the company. The point is that one business does not carry the load. The point is that we have multiple levers, and we expect every business to take a step forward.

We will execute our way to the outcome shown on Slide #7. The summary is every business improves EBITDA over 2025. We bridge a near 0 EBITDA first quarter as our leadership initiative kicks in, and we deliver a full year EBITDA substantially better than 2025, along with solid positive free cash flow. And we intend to hit 2027 running hard. That's the plan, and it's what we're executing right now. So operator, please open the call for questions.

[Operator Instructions] Our first question comes from Daniel Harriman from Sidoti.

Scott, congratulations on the new role. I have two questions that I'll start with, and then I'll get back into the queue. But Scott, setting aside the near-term noise in the stock move following last week's AIP announcement, I'm curious to know what you've observed internally that gives you confidence in the company's underlying earnings power and the long-term shareholder value that the company can produce. And then as you assert leadership in Cellulose Specialties, how should we think about a ceiling for pricing in that market? And do you think there's a point at which higher prices could invite some competitors to add capacity over time?

Yes. Okay. Thanks a lot, Daniel. Great to be here. Look, I mean, I think early observations are that our best opportunity really comes from the team. I mean, look, the team here is incredible. They've been able to flip to an execution model almost overnight and really drive the free cash flow that we need. I know that the team is capable of more, and you should expect to see more. I'll just say the other surprise, and I mean, it's really a positive surprise is there's more value here than I thought. And we have significant opportunity to execute on that. We're updating our forward plans. You should expect to see more details about those forward plans on our upcoming earnings calls. And those plans will be built mainly around four themes. And hopefully, we get a chance to talk more about those four themes today.

So I think, Daniel, that was your first question. And the second one, the price increase question and how much might be too much. I actually think the best question is maybe what kind of price increase is necessary just to keep really the remaining domestic producers of Cellulose Specialties in business and healthy. Because if you think about it, before we have achieved this 18%, which, by the way, leaves us far, far short of reinvestment economics. But before we achieve that, if you look at the last 4 years, you've seen specialty sites and businesses shut down in the state of Washington, they shut down in Tennessee. They shut down in Florida. We also permanently ceased production of dissolving wood pulp in our Témiscaming facility. So you're really left with two domestic sites, and those two sites are both RYAM’s. We have the capability to fully supply the whole domestic market, but we're not. In fact, we're kind of set up now as an export facility. And it's really because of so many subsidized imports coming in. So I guess that's a long way to say that we've got a long way to go before we get to reinvestment economics and really encourage anybody else to expand or enter the market.

Our next question comes from Matthew McKellar from RBC Capital Markets.

First, just, I mean, recognizing that the process seems to have played out before you joined the company, can you maybe provide some perspective around the recent filing that indicated you've rejected a potential offer? And maybe with that, speak to why you see continuing to progress as an independent company as the superior option to that offer?

Yes. I mean, Matthew, yes -- I'm probably not going to comment on a specific shareholder or any specific offer, except what I will say is we have plans that will deliver substantially more value. I think a good reference point for you in terms of that target is maybe my inducement agreement. So that sets a place that I think and the team thinks that we can get to. You're going to hear more about those plans as we're updating them in upcoming earnings calls. I know I just answered Daniel's question by saying that it'd be good to talk about some of those themes today, and we have four of them. Maybe I'd just outline them here since it's already come up twice, but those four themes are really based on the following.

I mean, number one, we're going to have leadership initiatives where we go out and extract the most value we can from the landscape that's there. Those are going to be a lot more sophisticated than what we're doing today. We're sort of using a blunt instrument to lift value today. Those will be more specific and sophisticated just like we'll look at nitration-grade cellulose into propellants, particularly for the U.S. military. That may be some initiative we work on, and you should expect to hear about playbooks set up around that.

The second theme is that we're going to get a lot more skilled at leveling up and down across all our product groups. And if you think about the product groups across cellulose, you're familiar with them. There's acetate-grade, ether-grade, nitration-grade and so on, but it also includes viscose-grade, fluff-grade, paperboard-grade as well. And we're not going to keep our specialty capacity reserved and not operating while we go out and run an initiative, nor will we run it and just push material into a leadership market. So some of those areas, we have a 30% market share. Some of those areas, we have a 3% market share. But we're going to run our assets all the time and go in and out of those different market areas as necessary to maximize contribution.

And you can almost think of it as like a -- if you watch professional golf, you can think of it as a leaderboard, if you like F1, the F1 leaderboard, NASCAR leaderboard, you're going to see which markets we're going in and out of move up and down that scale as we fully run our assets all the time without damaging where we have a leadership position. So in other words, in those 30% market share areas. The third theme of that plan will be around new products, new cousins of the products we have, new tweaks on those products to deliver maybe what others can't. And then finally, the fourth theme, we'll have a very active idea pipeline across the whole company that always offsets inflation. So those are the main themes of the plan that you should expect to hear more about. Marcus, anything to add or...

Yes, Matt, what -- another fifth that I'd add that is very complementary to the items that Scott covered is that improved performance based on execution on those themes will position RYAM for refi to really address the capital structure and drive down our interest expense and fixed charges. So very complementary in nature and fits well.

Did we answer your question, Matthew?

Yes, that was helpful. Maybe next for me, and then I'll jump back in the queue. Could you just touch on the demand conditions and I guess, market conditions you're seeing in a couple of CS products? Maybe first in ethers, one of your competitors, I think, recently called out it is seeing increased competition from Chinese CLP producers in European markets. Are you seeing something similar? And if so, can you speak to how significant this phenomenon is and how it's affecting the market? And then second, you mentioned nitrocellulose in your previous remarks. Could you just give us a sense of what conditions in that market are like with some of the geopolitical events we're seeing?

Yes, sure. I mean, look, ether-grade cellulose, it is challenged a bit. It's particularly challenged in Europe, but it's mainly because of the ethers coming out of China. In other words, our customers' products are under attack, and therefore, their demand for ether-grade cellulose is less. But I will say, even with that, we've still been able to achieve that near 20% price increase across ethers in Europe, which I think is quite different than what others have said. Again, it's just a demonstration that these products can command more value even when there is demand pressure and even when others may have said that pricing is actually going down. I mean that's a testament to our team, I think. The other part of that, the nitration-grade cellulose, yes, there's lots of new inquiries around that, I would say. There's lots of demand coming from domestic producers of propellants as well. I would say that's an area where we've been able to achieve more than that 18% price increase that we quoted in the prepared remarks.

Our next question comes from Dmitry Silversteyn from Water Tower Research.

Scott, welcome to RYAM. Quick question. There's been some discussion about -- not discussion, but you announced that you're not going to be participating in the energy project in Georgia. There's been some issues with Tartas plant as far as skipping production and getting the raw material sufficient to produce the bioethanol business there. Can you talk a little bit about your strategy for Biomaterials broadly? And then maybe more specifically, how these decisions are impacting the BioNova joint venture?

Yes, sure. Dmitry, good to you. Look, I would say just broadly across Biomaterials, I mean, it's an important business for us today. It's an important part of our growth story in the future. But I would just say that it's really one contributor to our growth. If you think back to the slide that we had put in the earnings deck, you see new products or new cousins across every business. And that's what you should expect to see going forward. We're going to be talking much more about an integrated model across Cellulose Specialties, Commodities and Biomaterials that sort of gets run under the same value creation model. And all of those items will contribute to our growth.

But here, if you go back to the leveling up, leveling down, in other words, like the NASCAR leaderboard that I just talked about before, by running Tartas much more and much stronger, not only are we able to get the value we want in specialties by being able to hold out and not push volume into that leadership market, of course, we're able to access other product groups like fluff. But at the same time, that provides an increased feedstock that goes into the biomaterials business, and in particular, it goes into BioNova there, and we sell more ethanol and we sell more lignosulfonates as well. So we're actively working on a plan to run Tartas harder. We have basically a crisis management team, and we're having success in doing that.

Understood. And then the second question, to follow up on your remarks about pricing getting so low that even an 18% price increase still doesn't put you at reinvestment economics. There's been an antidumping case that you filed against Brazilian and North European importers. I think that's been positively decided, but it hasn't been adjudicated yet. So can you talk about sort of where you think -- or when you think the remedies are going to come in to allow you to restore pricing in North America?

Yes, I will. And I mean, by the way, I mean, we're going down a path of restoring prices with or without the antidumping and the countervailing duties case. It's just that success in those cases would certainly help us close the remaining 15% of business likely sooner than we otherwise would and success in those dumping cases would also make our 2027 improvement and next steps in value likely better as well. But the situation around those, and I'll just start with the countervailing duties case. So there's likely and there will be, we believe, a preliminary determination of those duty rates later this month.

So just as a reminder, that applies to exports out of Brazil from the subsidized state-sponsored producer that has sort of taken over the North American market. So those, we believe, will come in March. The antidumping duties are applicable to both Brazil and Norway, and we believe that there'll be a preliminary determination of those rates in May. And by the way, those things are stackable. In other words, the countervailing duties and the antidumping duties can stack on top of one another as could other things around tariffs as well if they were enacted. So that's the status of the duties.

Our next question comes from Daniel Harriman from Sidoti.

Just a quick follow-up. Scott, we've talked a good amount on Specialties and Biomaterials, but I'm curious to know with the new product initiatives and cost actions underway within the Paperboard and High-Yield Pulp businesses, how do you see them fitting into the company portfolio longer term? And specifically, do you still see them as potential divestiture candidates? Or is there a role for them longer term in the RYAM portfolio?

Yes. Thanks for the question. I would just say across all of RYAM's portfolio, we're not selling any business, and we're not closing any assets. All of them right now are certainly sources of improvement for us, and we expect to improve them all. Both the Paperboard business and the High-Yield Pulp business, look, they're certainly challenged, and they're still absorbing new capacity, particularly in paperboard, but we have new there that we're being successful at commercializing. So the source of improvement in '26 over '25 for Paperboard will be those new products. There's -- one is associated with an oil-and-grease board and the other one is a foldable freezer board, all of which can carry a unique set of printing and coatings on them. So that will be the source of improvement. We expect to do more volume in Paperboard as that other capacity is getting absorbed. High-Yield Pulp, yes, there's a lingering oversupply issue there as well, but we also have a significant new product that is under customer testing, and we've sold some trial quantities there already. And we'll expect to see price start to move back up as that oversupply issue gets addressed.

Our next question comes from Matthew McKellar from RBC Capital Markets.

Scott, you made an interesting comment there about a more integrated model across CS, Commodities and even Biomaterials. Could you maybe expand on that a bit? So I think the current segmentation is helping make clear their products and very different margins within your business. Does that segmentation may be masked to some degree that commodity pricing is very outside your control and maybe you need higher CS margins still to justify continued investments. And I guess, would you even make an argument that maybe the commodity side has become structurally more challenging? And with that, again, that kind of would suggest CS margins maybe a little higher?

Yes. Yes, sure. I mean, look, our forward model is going to be one value creation model in this area. And you look at the scale and scope of our assets, we've got to be successful on every kind of product that can come out of those assets, whether it's the 7 or 8 market segments that we previously classified as specialties or whether it's the 3 or 4 segments that we've previously classified as commodities or whether it's the 4 or 5 other segments that we've called Biomaterials. So we're going to be setting those assets, and we're going to be setting our market participation strategy in whatever configuration gives us the most contribution at the time. So sometimes we're going to be running more fluff and more viscose.

That's just like today. I can tell you for 2026, our highest volume product by far is cellulose fluff. And that's because we're going through this leadership initiative. And we're able to not rush that leadership initiative, not push production out into a market where we're trying to increase the value of it. So it's serving us very well in doing that. You also heard me speak about Tartas for the Biomaterials, the co-product or the black liquor that comes off the production of the other serves as the feed for that. So we can balance all that together instead of sort of isolating those and showing isolated results. It doesn't really matter what we produce. We're just going to be showing a better and better result each time.

Yes. And Matt, as you know, our breadth and production capability, as Scott mentioned, we can make a myriad of products. We've got a sulfite and kraft process. We've got hardwood and softwood capabilities. We're just going to look to optimize that contribution margin across our footprint while driving down absolute fixed costs, right? We must drive down fixed costs and be more profitable across the footprint.

Great. Last question for me. It was interesting to see your Paperboard volumes and prices increase sequentially in Q4. Would you attribute that mostly to the introduction of the freezer board product you mentioned previously? Is there anything else we should understand about your results for that business? And then I guess, with the recently announced closure of a competitor's SBS mill in Quebec, do you see opportunities to potentially win some attractive business there that could further support results?

Yes. Yes. I think that -- and maybe Marcus comment more. I mean, there's some mix issue there. We were successful with the freezer board new product introduction as well because you're speaking about the third quarter of last year compared to the fourth quarter.

Yes. And I'll add to that, Matt. There's an element of mix as it relates to quality as well. Better productivity and better quality at the plant results in less cull. So that's going to drive your mix as well. So we've seen the plant performance better and improved.

Matt, ask your second question.

Yes, sure. So I guess with the closure of a competitor's SBS mill in Quebec, do you see some opportunities to win business that could further support results in that segment?

Yes. Okay. Yes, I think there's opportunities. But at the same time, that's going on. We are having to absorb the new capacity up in the Northeast U.S. as well. So it's sort of maybe helping offset the negative from that.

And we have no further questions. I would like to turn the call back to Scott Sutton for closing remarks.

Yes. Okay. Yes, thanks. I mean there's just a couple of things I'd like to add here at the end, maybe things that didn't really come up. We did comment that we still have 15% of the expected Cellulose Specialties business to place. And I just want to relay that I think we have options for that. I mean, clearly, the first option is to get that in the specialties area. It's mainly a shortage in the acetate area, and it's mainly a shortage in the U.S. And all I would say there is it's going to take some time to be successful. But I would hate to really be the last demand standing there like maybe the U.S. tow producers are going to be. It's sort of like there's a game of musical chairs and someone is going to be left standing without a chair. And we're going to see where that goes. And that's why I made my earlier comments that, that remaining 15% is only going to come at a higher price increase than the 18% that we've already achieved.

The other option that we have there, if we're not successful, at getting that remaining 15% is we'll run our NASCAR leaderboard strategy, and we're already practicing at that. Some will level up and level down as necessary. And we'll go do some more fluff business where we only have a 3% or 4% global market share, and we can enter that market basically without damaging the pricing profile of it. So I think that's something that didn't come up, but it's important because how we manage that is important to our EBITDA profile going forward through the rest of 2026.

Okay. So look, I mean, with that, I guess I'll just end where we began. And I'll just say, look, I mean, what a great team we have. We have a lot of value here, but we have really urgent work to do. And our priorities are really clear: deliver positive free cash flow in 2026; we're going to assert our leadership and lift value in Cellulose Specialties; and we're going to improve EBITDA across every business. Look, we're executing on that now. We intend to exit 2026 with significant momentum and hit 2027 running really hard. You should also expect us to continue to update these plans where we hinted on the four themes that they will contain, and Marcus added a fifth very important value creation theme to that as well. And that's what we'll be talking about in our upcoming earnings calls. So anyway, I mean, with that, I'll just say thanks a lot for your questions, and thanks a lot for your interest in RYAM.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.

Good morning, and welcome to the RYAM Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to your host, Mr. Mickey Walsh, Treasurer and Vice President of Investor Relations. Thank you, Mr. Walsh. You may begin.

Good morning, and welcome to RYAM's Third Quarter 2025 Earnings Conference Call. Joining me on today's call are De Lyle Bloomquist, our President and CEO; and Marcus Moeltner, our CFO and Senior Vice President of Finance.

Last evening, we released our earnings report and accompanying presentation materials, which are available on our website at ryam.com. These materials provide key insights into our financial performance and strategic direction.

During today's discussion, we may make forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially. These risks are outlined in our earnings release, SEC filings and on Slide 2 of the presentation. We will also reference certain non-GAAP financial measures to offer additional perspective on our operational performance. Reconciliations to the most comparable GAAP measures can be found on our presentation and our presentation on Slides 27 to 30. We appreciate your participation in today's call and ongoing interest in RYAM.

I will now turn the call over to De Lyle.

Well, good morning, everyone, and thank you for joining us. Before Marcus walks through the financial results for Q3, I want to cover 5 topics today. First, our updated 2025 bridge and guidance. Second, recent developments in tariffs and trade. Third, our progress resolving the operational challenges we experienced earlier this year. Fourth, the work underway at Temiscaming to restore profitability and position the site for divestiture. And finally, how we're executing to the plan that increases our EBITDA to over $300 million as we exit 2027.

2025 has been a challenging year for RYAM. In response to the extraordinary headwinds, we have focused squarely on strengthening the company's cash generation, enforcing capital investment discipline and protecting our core Cellulose Specialties franchise. I believe that this approach is working and that our third quarter results reflect the normalization of our core business and the continued progress across the strategic plan.

Now let's move to Slide 4. Full year adjusted EBITDA guidance is now $135 million to $140 million, refined from our prior $150 million to $160 million range. The change is primarily driven by proactive downtime of our noncore paperboard and high-yield pulp production during the holiday season to monetize inventory and protect cash given the weaker Paperboard markets. We also are experiencing increased market weakness in the business, but this negative was largely offset by FX tailwinds in the quarter.

We also faced increased headwinds to our fluff business, primarily due to the U.S. fluff industry exports to China being displaced by the China 10% tariffs and creating increased competition into non-China markets. The Cellulose Specialties business performed near expectations and returned to normalized EBITDA margins in Q3.

Turning to Slide 5. Please note that importantly, there are still 0 tariffs on our Cellulose Specialties and dissolving wood pulp products into China, 0 tariffs on U.S. sales to the EU and 0 tariffs on Canadian imports into the United States. Though direct tariff impacts have stabilized, we continue to work through the 10% tariff on our fluff products into China. We're collaborating with customers and adjusting geographic mix as part of our mitigation strategy. We're also developing a dissolving wood pulp fluff product that would avoid this China tariff. Our technical team is working to refine this new product to reduce unit production costs.

Major development in Q3 was the U.S. ITC's preliminary affirmative injury determination and the ongoing antidumping and countervailing duty investigations covering Brazilian and Norwegian dissolving pulp imports. This determination allows the Department of Commerce to move forward with its investigations with preliminary duty determinations expected in early 2026. As a reminder, an estimated 190,000 tons of specialty grade acetate pulp are imported into the U.S. from Brazil each year and about 5,000 tons of ethers pulp are imported from Europe. So this case matters. It's a significant step toward a fair level playing field for U.S. producers of high-purity specialty cellulose pulp. Overall, we now believe that trade conditions are generally trending in our favor as we move towards 2026.

On Slide 6, the isolated operational challenges we've discussed previously are stabilizing. In Q3, operational challenges at Tartas continued, including French national strikes that adversely affected Tartas. These were not RYAM-specific strikes, and the RYAM team did an outstanding job keeping customers supplied. As mentioned last quarter, we were understaffed key technical roles at Tartas. Since June, we filled most of the open key positions via new hires, including the transfer of a couple of technical managers from Temiscaming and expect all key positions to be filled by year-end. Jesup and Fernandina are performing to expectations.

Slide 7 outlines the actions underway at Temiscaming. 2025 has been a difficult year for the Paperboard and high-yield pulp business. We now expect an EBITDA loss of about $14 million compared with historical profitability of roughly $30 million. The decrease in 2025 guidance is due primarily to lower Paperboard prices and volumes due to new U.S. capacity and our plan to idle the Paperboard line and 1 of the 2 high-yield pulp lines for 3 weeks in the fourth quarter to improve working capital and cash flow. Our plan to return the Temiscaming site to historical profitability is focused on 4 key initiatives.

First, reducing Temiscaming costs by approximately $10 million. This initiative has been fully implemented through utility contract improvements and benefits derived from high-return strategic capital investments. Second, improving the Paperboards line OEE by approximately $10 million in 2026 as a result of fewer economic shutdowns, grade optimization and enhanced maintenance reliability. Further upside of $5 million is expected to be realized in 2027 as supply and demand normalizes, resulting in no economic production shutdowns.

Third, advancing the commercialization of new product development to generate an estimated $10 million in 2026 EBITDA and another $5 million in 2027. The new freezer board grade has been qualified and launched in Q3 and orders are being secured. The roll softwood high-yield pulp qualification trials are advancing well with potential customers and the oil and grease resistant board trials will begin this quarter. Additionally, we are developing another new product, a high-yield pulp wrapper product that is in testing, which we will believe will deliver 2026 cost savings and potential for new market entry.

And fourth, we're in active negotiations with U.S. customers affected by the 15% tariff on EU board imports and participating in an AFRY-led study evaluating strategic options for all the assets on the site, including the currently suspended HPC line. We recently responded to an opportunistic inquiry about Temiscaming, so there is current interest in the business. As we restore positive profits and cash flow to Temiscaming in 2026 and once the USMCA free trade review is completed in July of 2026, we believe we can divest the site at a fair value.

Turning to Slide 8. Starting from our normalized EBITDA baseline, we've updated our plan to double our EBITDA from our current guidance over the next 2 years. I will walk through each step and provide an update on how we're progressing. On the pricing front, we believe that we're tracking ahead of plan. We are targeting a significant price reset to reflect the inherent value of our Cellulose Specialty products, which we believe requires recapturing lost value from prior year's inflation. On cost, the $30 million reduction program for 2026 is almost fully implemented. And as upside, we are now working on a $20 million of EBITDA benefit for 2027 that would be derived from strategic capital projects.

From a specialty commodity sales mix standpoint, we are increasingly confident that we will realize the $30 million in EBITDA growth from margin improvement. I'll expand on why in a moment. Finally, our biomaterials projects are progressing, and I'll cover this progress in more detail in a couple of slides. In short, our strategy remains firmly intact, and we have a clear line of sight to achieving our 2027 run rate target.

Slide 9 expands on the pricing and market fundamentals for our core business. We are highly confident that RYAM is in a strong position to realize a significant price reset for its Cellulose Specialty products. We believe that the market is conducive to capturing product value because industry capacity utilization is over 90% with no expected major capacity additions before 2029. RYAM holds most of the excess Cellulose Specialty capacity, and the industry is highly concentrated with RYAM and 2 other producers accounting for roughly 80% of the global Cellulose Specialty capacity.

This is important because we're making a strong push on 2026 cellulose specialties pricing, i.e., pursuing a meaningful reset beyond prior year increases to reflect the value of our high-purity products, which requires us to recapture lost value from inflation that has increased nearly 35% faster than our average cellulose specialty pricing since 2014. We also continue to capture the opportunities to enrich our sales mix towards specialty cellulose. We are on track to requalify Temiscaming CS volumes to generate $5 million of EBITDA in 2026, with 2 customers already qualified and a third expected by year-end.

We also remain highly confident we will generate $20 million in EBITDA over the next 2 years via specialty margin enhancement versus commodity sales. This objective will be driven by organic growth across Cellulose Specialty markets, supported by Orion's outsized share of available excess capacity and potential upside to the plan from increased cellulose specialty volumes following Georgia-Pacific's Memphis facility closure, which produced an estimated 10,000 to 20,000 metric tons of cotton linter pulp grades that go into cellulose specialty applications.

Finally, we continue to expect to realize $15 million of additional EBITDA when ether demand in the EU returns to historical levels, which would also be upside to our plan. On cost, $24 million in strategic investments made this year will generate $20 million in cost reductions at our HPC plants in 2026. We also are taking action to reduce corporate costs by $10.5 million, including eliminating lightly used medical benefits, increasing management span of control, reducing clerical roles via automation and terminating nonemployee technician and professional contracts. We are also working on upside to this cost improvements initiative. We are actively working on projects at the HPC plants to generate another $20 million in EBITDA for 2027 and believe that we can take out another [ $46 million ] in corporate costs via AI and automation over the next 2 to 3 years.

On Slide 10, I highlight the progress we are making on our biomaterial projects. The Altamaha Green Energy or AGE project is a $500 million 70-megawatt renewable power project to be based at our Jesup facility. RYAM will own 49% of this project. Recent progress includes reaching agreement on the EPC contract in September and receiving our air permit in October. Joint venture is now focused on reviewing project financing options, after which the project will move to its FID. RYAM will invest $46 million of equity to realize an annual proportional EBITDA of $50-plus million. Assuming a utility valuation multiple, this project is expected to generate a 12x ROI on RYAM's equity.

The $64 million BioNova Fernandina Beach second-generation bioethanol project is expected to generate $15 million of annual proportional EBITDA for RYAM in return for $6 million of RYAM cash equity, generating a 19x ROI on RYAM equity, assuming a comparable multiple. Funding is secured, the air permit has been approved and engagement with the city of Fernandina Beach has begun with respect to a potential settlement on the land use application. The U.S. BioNova CTO project will produce about 13,000 tons per year of CTO from feedstock primarily sourced from our Jesup and Fernandina plants. Engineering for the project is complete that incorporates a high-quality used CTO plant that we acquired for $350,000 in September. Commercial discussions are advancing, and we expect to file the air permit application by the end of November. This project is expected to generate $6 million of annual proportional EBITDA per year on a total CapEx of $9 million, of which RYAM will contribute less than $2 million of equity. Using a comparable market valuation multiple, this project is expected to generate a 16x ROI on RYAM's equity.

The European BioNova CTO tolling project is small, but requires no RYAM equity. We'll supply feedstock from our Tartas plant to a third-party toller, which will generate approximately $1 million of annual proportional EBITDA.

And finally, the prebiotics project at Jesup is one of the more exciting projects in the BioNova portfolio. As a result of exceptional efficacy results that show that our product delivers significantly higher weight gain and feed conversion performance in poultry than competing alternative feed additives, we are redesigning the plant to a smaller modular footprint that can scale up with demand growth due to lower initial dosing requirements. We've also signed a commercial sales MOU with a feed additives manufacturer for U.S. poultry and swine feed applications. While the redesign may extend this project's time line, this is a positive adjustment. The trial data confirmed our product's superior performance, and as a result, we believe meaningfully expands the commercial opportunities ahead.

Across all these initiatives, RYAM demonstrated its ability to recycle capital into high-return projects due to low capital intensity, attractive project capital and repeatable outsized investment returns.

Slide 11 explains why we can do this. The crux of these opportunities is RYAM's extensive and unique asset base. The noted biomaterial projects will be located at existing RYAM Cellulose fiber plants where the infrastructure, utilities, raw material sources and site management are already in place. Thus, RYAM's asset base anchors our ability to scale new biomaterial projects efficiently. We also believe that replicating this asset base would be prohibitively expensive. Thus, it is unique to RYAM. As a case in point, the replacement value of Jesup alone is estimated to be over $4 billion. So we believe that RYAM is uniquely positioned to pursue such opportunities at very attractive ROIs on equity invested.

The technical and market viability of most of our projects are already proven. Prebiotics isn't the only opportunity that would be new. We are, therefore, taking the necessary steps, including animal feed trials and resizing the plant to mitigate the market and capital risk for this project. The project that I summarized on the previous slide will generate high returns and very profitable growth through 2028, 2029. For the 2030s decade, we are investigating promising opportunities today in biomaterials and bioenergy to provide profitable growth.

For example, we are currently conducting due diligence with GranBio for a pilot scale ethanol to jet plant at our Jesup facility. If this due diligence concludes that such a project would be successful, we will then proceed to construction, which would be fully funded by a DOE grant. We've also signed an MOU with Verso Energy to evaluate eSAF production at Jesup and Tartas that will align with the EU decarbonization mandate starting in 2030. Just yesterday, we were informed that Verso Energy's project at our Tartas plant was selected by the EU Commission for its innovation fund and will receive a $37 million grant towards the construction and commissioning of the Tartas eSAF project after a final investment decision is made.

Turning to Slide 12. I'd like to close with 3 points. First, our near-term issues are mostly behind us. The tariff situation has stabilized and the extraordinary operational challenges, except maybe those challenges tied to political turmoil are resolved. Second, the underlying fundamentals of our strategy remain intact, and our EBITDA-enhancing initiatives are advancing. The core business is performing to expectations with a significant 2026 pricing reset being pursued. The $30 million in structural cost targets will be delivered for 2026, and we're now working on a further $20 million to $25 million plant and corporate cost reductions for 2027. Our confidence continues to build that organic growth across cellulose specialty markets will further expand EBITDA margins by $30 million over the next 2 years. The Temiscaming turnaround efforts are effectively underway and our biomaterials portfolio continues to progress.

Third, RYAM valuation remains compelling. We believe that an up to 5x upside to the stock price for our shareholders would be implied by the comparable double-digit valuation of our competition in a recent transaction on our targeted 2027 $300-plus million run rate EBITDA. 2025 has been a challenging year, but we are getting through it with our strategy intact. Our core is solid and performing and our growth initiatives are advancing. We remain confident in the path ahead and are focused on execution on this plan for our shareholders.

With that, I'll hand the call over to Marcus to take us through the Q3 financial highlights.

Thank you, De Lyle. Let's now turn to Slide 13, which summarizes our third quarter 2025 financial highlights. In the third quarter, revenue was $353 million, down $48 million year-over-year. Operating income was $9 million, an improvement of $26 million compared to the prior year. Adjusted EBITDA was $42 million, a $9 million decrease from Q3 2024. And adjusted free cash flow year-to-date was negative $83 million, driven by working capital timing that is expected to improve in the fourth quarter. The primary drivers of the EBITDA change this quarter can be summarized with the following highlights.

In Paperboard, earnings decreased by approximately $10 million, reflecting lower sales volumes and pricing from tariff uncertainty, competitive EU imports and new U.S. capacity, along with higher fixed costs for market-related downtime and the allocation of Temiscaming net custodial site expenses. In high-yield pulp, earnings declined by approximately $10 million due to continued oversupply in China and higher fixed costs resulting from market downtime. And in Cellulose Commodities, earnings increased by $7 million, driven by stronger fluff pricing, improved mix and the absence of prior year impairment and suspension charges.

Given these weaker-than-expected results in our noncore business, we have now refined our full year 2025 adjusted EBITDA guidance to a range of $135 million to $140 million, implying $25 million to $30 million of adjusted free cash flow for the fourth quarter.

Let's now review our segment results, beginning with Cellulose Specialties on Slide 14. Quarterly net sales for CS were $204 million, down $28 million or 12% from the prior year. The decline was driven by a 17% decrease in sales volumes, partially offset by a 7% increase in average sales prices from negotiated price actions and improved mix. Operating income was $49 million compared to $46 million in the third quarter of 2024. The improvement was driven by higher average selling prices, lower fixed costs related to the Temiscaming Cellulose indefinite suspension and a $7 million energy cost benefit from the sale of excess emissions allowances, partially offset by lower volumes, higher operating costs and the impacts of national labor strikes in France. Adjusted EBITDA was $66 million compared to $65 million last year, with margins increasing to 32% from 28%.

Turning to Slide 15. Quarterly net sales for Biomaterials were $8 million, flat compared to the prior year. Higher turpentine volumes were offset by lower bioethanol sales volumes caused by temporary feedstock constraints and labor disruptions at Tartas. Operating income was $1 million compared to $3 million in the third quarter of 2024, reflecting higher shared and ancillary service costs. Adjusted EBITDA was $1 million compared to $4 million in the prior year, with margins of 13% versus 50% in Q3 of 2024.

Turning to Slide 16. Quarterly net sales for Cellulose Commodities were $85 million, down $1 million or 1% from the prior year quarter. A 2% decrease in volumes, mainly due to the prioritization of production towards cellulose specialties and the absence of Temiscaming sales volumes following the indefinite suspension was largely offset by additional viscose sales as part of inventory and cash management efforts and an 8% increase in average selling price driven by higher fluff pricing and mix improvement. Operating loss was $13 million compared with $55 million last year. The improvement reflects the absence of a $25 million noncash impairment charge and $7 million of indefinite suspension costs recorded in the prior year, combined with higher selling prices, lower fixed costs following the indefinite suspension of Temiscaming cellulose operations and improved cost performance. Adjusted EBITDA was negative $3 million compared to negative $10 million in the prior year quarter.

Let's now move to Slide 17, which covers our Paperboard segment. Quarterly net sales were $39 million, down $16 million or 29% compared to the prior year. Average sales prices decreased 10% and sales volumes were down 21%, driven by mix, shifting customer dynamics associated with tariff uncertainty and increased competitive activity due to EU imports and the start-up of new U.S. capacity. Operating loss was $4 million compared to operating income of $7 million in the prior year quarter. The change was driven by lower sales, higher fixed costs for market downtime and the allocation of Temiscaming net custodial site costs, partially offset by lower purchase pulp costs. Adjusted EBITDA was $1 million compared to $11 million in Q3 of 2024, with margins of 3% compared to 20% in the prior year.

Turning to Slide 18. Quarterly net sales for high-yield pulp were $24 million, down $4 million or 14% compared to the prior year quarter. Average sales prices declined 10% and volumes decreased 8%, reflecting weaker demand, oversupply in China and shipment delays to customers in India. Operating loss was $10 million compared to breakeven results in the prior year. The decline reflects lower sales, higher fixed costs from market downtime and the allocation of net custodial site costs. Adjusted EBITDA was negative $9 million compared to positive $1 million in Q3 of 2024, with margins of negative 38% compared to 4% last year.

Slide 19 provides an overview of our balance sheet and liquidity. We ended the quarter with $140 million of total liquidity, including $77 million of cash and a net secured leverage ratio of 4.1x within the 5x covenant threshold. During the quarter, we experienced working capital outflows across receivables, payables, customer rebates and inventory, which pressured free cash flow. These outflows also reflect temporary inventory management actions by a large Cellulose Specialties customer that affected order timing. We expect working capital levels to normalize as we progress through the fourth quarter and as sales volumes increase. We remain focused on driving working capital efficiency and improving cash flow generation.

For the full year, we expect adjusted EBITDA in the range of $135 million to $140 million and positive free cash flow in the fourth quarter as these timing effects ease. In addition, we have $40 million of committed green debt available to support the execution of our Biomaterials portfolio as the projects move forward. The company will also look to proactively pursue a refi in 2026 to lower interest expense by leveraging RYAM's expected stronger operating performance and potentially lower debt as a result of the targeted divestment of Temiscaming.

With that, operator, please open the call for questions.

[Operator Instructions] Our first question comes from the line of Daniel Harriman with Sidoti.

Just wanted to hit on 2 in the beginning, one for De Lyle and one for Marcus. De Lyle, just going back to the Paperboard and high-yield pulp assets. Can you just talk again, I know you went through it all, but what specific operational and financial milestones do you think you need to achieve in 2026 to make those assets viable for a sale?

And then Marcus, you touched on this at the end of your comments, but with leverage at 4.1x, can you just talk a little bit about how you're thinking about refinancing and repricing opportunities considering that the debt is callable in '26? And then what level of EBITDA would give you comfort that you can regain full balance sheet flexibility? Really appreciate it, guys.

Daniel, this is De Lyle. I'll see if I can address your question on the Paperboard and high-yield pulp business. The way I would look at it is that before I can sell it, there's 2 gating items that we have to get passed. One is the USMCA renewal that is under negotiations right now between the 3 governments. And let's say that, that gets done by the deadline, which should be around July of 2026. I don't think there'll be any interest on anybody's part until we get -- in terms of buying those assets until we get to that point.

The other gating item is that the -- I believe that the business needs to get back to positive EBITDA and positive cash flow. And I outlined 4 different things that we're pursuing to make that happen. I would say 2 of them are high probability or locked. One is the cost reduction, which is largely locked and given the activity we've already done. The other is the OEE of the Paperboard plant, which has been demonstrating significant improvement over the past couple of months, and we expect to continue to do so as we go into 2026.

The last element I would say is really big is really the new product development and the uptake of those new products into the market. So to get to a positive EBITDA, I need all 3 of those elements. And so really, the last critical element that needs to fall in place is the successful commercialization of those new products, which we should start seeing in the first quarter and second quarter of '26. So once I get to a positive EBITDA, positive cash flow and we get past the negotiations on the USMCA, I think at that point, we've got an asset now that's attractive, and we'll be able to dispose of it.

Dan, thanks for your question. Yes, as you mentioned, the term debt becomes callable in May of next year, and there's a 2% takeout premium, right, which falls to 1% in November. I think the key here is, as we've gone through the materials, navigating these transitional headwinds and then demonstrating that this business should return to historical levels of EBITDA, right? We exited last year at $50 million quarters. And when we demonstrate that kind of cadence, we'll anniversary some weaker quarters that we had this year and get our LTM back up over the $200 million level. That certainly is going to give us a better leverage profile to be out in the marketplace and then continue to tell our story on the backdrop of all the positive items De Lyle mentioned in his review and look to do the breakeven on a refi. And we certainly see a line of sight where we can take a measurable amount of interest out of this business at that time.

Does that answer your question, Daniel?

Yes, it does.

Our next question comes from the line of [ Nick Tor ] with [ Blackrok ] Capital.

I just want to hone into a bullet point that you have on Slide 9, which says that as we kick off 2026 Cellulose Specialties pricing discussions, we are targeting a significant reset beyond prior year increases, reflecting the value of our products and recapturing lost value from prior year's inflation. Could you give me a little bit of color on how much value has been lost from prior year's inflation as you head into these negotiations next month or this month? And what does -- what is baked currently into your guidance? And what is the impact of 1% increase in pricing over your cost inflation?

Okay. I know it's early over there in the West. I certainly appreciate you getting up early to participate on the call. That's a question you ask, I'll see if I can try to answer it each of the different components. Starting off with just kind of the rule of thumb on a 1% increase in pricing. It generally generates a $8 million to $9 million increase in EBITDA when we talk about increasing our CS pricing by 1%, okay? So you take that.

And as I stated in the presentation, since 2014, the inflation has increased 35% more than our -- the average pricing for our CS products. So if you take 8% or 9% for every 1% increase in pricing, the value lost is somewhere in the tune of $300 million. I think that's the right math. But anyway, you can certainly do the math quickly.

In the plan that we've laid out with respect to getting to $300 million from our pro forma '25 number, we assumed essentially a 1% higher rate of increase on pricing than inflation. So I think we show on the slide an $89 million increase over 2 years in pricing, offsetting the $80 million in inflation. Largely, the reason for that assumption is because that's what our analysts out there are saying that we can get a 4% to 6% increase in our pricing given the tight market conditions, given the highly concentrated industry we're in and so forth. So we just assume the midpoint on that to drive that number.

What I'll tell you is that we internally believe we need to increase that at a much faster rate than just 1% above inflation to get back to a level that will allow us to reinvest back into our plants and make our facilities viable for the long term because, quite frankly, since 2014, pricing where it has been has not been sustainable. And you've seen that in the industry, in that we've seen a competition and capacity gets shut down and rationalized with GP fully being the last one -- not the last one, actually, Temiscaming operations being the last line being shut down, but GP fully, Cosmo out of Washington State. And just recently, the CLP plant in Memphis, Tennessee, which is not in cellulose specialties, but certainly in the same applications, all right? So pricing must go up. It must go up.

So I know the next question would be, well, how much more do you think is going to go up than just the 1% above inflation? It's going to be multiples of that number. It has to be multiples of that number so that we can get the capital we need to reinvest back in the plants and make these facilities the gold standard that they need to be. So I can't tell you exactly the number that we're after, but all I can tell you is that we're not looking at a 5% increase. We're not looking at a 10% increase. We're looking at higher numbers.

So there is roughly $300 million of cash flow that needs to be recaptured, whether that happens -- a big portion of it probably happens next year and then the remaining in the years after that. But that's an extremely significant number considering your market cap is around $400 million. So that's very exciting. So now that the capacity has been taken out of the industry to the extent that it has and capacity utilization levels are as high as they are, now there is space for -- in the industry for there to be more rational pricing and recapture what has been lost through inflation over the last 9 or 10 years. Is that a fair assumption?

That's -- I couldn't have summarized it better, Nick. That's exactly right.

Okay. Great. And then just second question, I think I see the stock is trading a few percentage points later, which is sometimes the market gives you a gift. But it seems like your reduction in EBITDA from last quarter to this quarter was because of your decision to shut down your operations for a little bit to generate cash from your working capital. Can you just give me -- I think you mentioned in one of your slides that you -- the $10 million loss was from that decision, but that generated or is expected to generate additional working capital and improve the cash flows overall for the company. What's the magnitude of that working capital release?

Roughly about $14 million.

Okay. So you basically sort of made the decision you're going to get the EBITDA down by time, but get $14 million more of cash?

Yes, yes. Now $10 million of EBITDA loss or nonrecurring impact as a result of the, we call it, market or economic shutdowns of the Temiscaming facility. That's over the whole year. So the $14 million benefit is really over the whole year.

Yes. And Nick, to De Lyle's comment, the -- so that's the portion related to downtime. If you look at our guidance in Q4, we're expecting close to $30 million of working capital release, as you saw in the bridge.

Yes. A good chunk of that is Paperboard, but a good chunk of it. There's also a big chunk of it coming out of CS.

Got it. Got it. Got it. And then just last question, just honing in on your AGE project, which seems incredible. It seems like you've basically passed most of the hurdles for your FID. So just working on the financing, you've got an investment-grade counterparty there. And I think the EBITDA now is $50 million applicable to you, which is worth $500 million of value. Again, your market cap is in the $400 million. It's -- is there anything that is preventing or is there any major things that you're concerned about that could potentially derail that project? Or is now just the timing of funding or getting the funding finalized?

It's just getting the funding finalized, Nick. And just to correct you, it's not $500 million of, call it, market cap. I think it's $650 million of market cap because you need to -- this is essentially a utility, 3-year contract, fixed pricing, no volatility coming from a Georgia Power, which is a statewide utility. So you take a 13x multiple and times it by the $50-plus million, it's a $650 million potential impact to our ROI. So we understand and we recognize that it's a super project for this business. The hurdle on this really, it's not so much the project financing, it's really finding the $46 million of equity that we got to -- we, RYAM, have got to put in the business. And we're looking at options of how we're going to find that money to put it to fund this. That's really the issue.

Okay. Okay. Sounds good. Well, I mean, as you know, I own almost 2 million shares of the stock, and I feel like I'm underinvested. So there's very exciting times for the company and it looks like you guys are making very rapid progress on the biomaterials initiatives. But the really exciting news coming out of this quarter, which we didn't know last quarter was the magnitude of price increases that are possible going into next year.

So good luck with those negotiations, and thanks for the time.

Our next question comes from the line of Amit Prasad with RBC.

It's Amit on for Matt. Just starting off with Temiscaming. You noted a $5 million benefit in 2026 from qualifying volumes in other lines. What would that be on a run rate basis? And when do you expect those incremental volumes to show up? And I guess, how much of that historical Temiscaming business do you expect to ultimately have retained through transferring production to other facilities by the end of 2026?

So you're asking on the amount of volumes that we're able to convert from our old HPC line in Temiscaming over to our facilities in Jesup, Fernandina and Tartas. What we're talking about with respect to the $5 million that we're looking to see in terms of increased EBITDA for '26 is conversions that have occurred this year, all right? We've already seen a significant amount of conversion since we suspended the operations back in July of 2024.

So what we're saying is that -- and as we said at the time of the suspension, there was a number of products that would take multiple years in terms of qualification. So we're just now getting through the conversion on -- with 3 customers this year. And when those conversions are completed this year, that should add another $5 million of EBITDA for our business going forward. That being said, there'll be more opportunities in 2026 and probably after that, that's probably about the extent we're going to be able to get to as some of the business like MCC and some other grades that we are producing in Temiscaming have gone to the competition. But we're getting to the end of the road with respect to what we're going to be able to realize from the full conversion of those Specialty Cellulose business that we had up at the Temiscaming facility.

I hope that answers your question.

Yes, that's perfect. And I guess one other quick one for me. We saw paperboard realizations move significantly lower quarter-on-quarter. How much of that was just pricing related being down on a like-for-like basis versus just mix and potentially some FX?

That's a really, really technical question and probably beyond my ability to answer it specifically, but we certainly would be happy to try to answer that question to you one-on-one. Amit after we've done a little bit of investigation, is it okay just to punt that for a couple of hours.

Yes, absolutely. No problem at all.

[Operator Instructions] Our next question comes from the line of Dmitry Silversteyn with Water Tower Research.

I have a couple of them. First of all, you talked about working on a new fluff product that would avoid the tariffs, the 10% import tariffs from China or into China. Can you talk about sort of what would allow -- kind of what the changes are that would allow the new product to bypass these tariffs? And when do you think this product will be available for commercial sales?

Dmitry, welcome, and thank you for being on the call. Great question with respect to our new product development around fluff, we've developed it. We have a product that we believe that would qualify as a dissolving wood pulp product from a tariff perspective into China that would go into the fluff business, all right, or into the fluff market. And that's really the key is that it has to be a dissolving wood pulp product to be able to get into China without any tariffs. And that's -- and we're really the only -- I believe, the only fluff producer who can do that because we're a Specialty Cellulose producer that can make dissolving wood pulp, whereas all the other fluff producers in the world cannot. So it's a real comparative advantage to be able to do that. So we can do that today.

The issue that we're dealing with is that the cost of that conversion from fluff to a dissolving wood pulp product as the cost per ton is higher than the cost we would bear by paying a 10% fluff duty right now. So we've -- we continue to work on seeing if there's a means to lower the unit cost of production to make that dissolving wood pulp fluff. And in the meantime, we'll continue to do what we're doing, which is extend and expand our geographical diversity away from China to keep our fluff volumes high and keep the operation at capacity. But the truth of the matter is we have a product. We just have to figure out a way to make it cheaper.

Understood. That's a very good level of granularity there. I appreciate it, De Lyle. My next question is, you talked about the $30 million in cost reduction projects that you announced last quarter being pretty much fully implemented by now, and we're just sort of waiting for the ramp-up and get to that run rate. You also mentioned that there's an additional $20 million in EBITDA improvement projects for -- through 2027. Is it too early to ask you to provide sort of some major buckets of where that cost saving is going to come from?

Well, it will be the same major buckets that we've had for 2025 and '24, which is around improving reliability, improving material usage on our variable inputs through automation through, I would call it, a preventative and even predictive maintenance practices and measuring devices so that we can capture or catch maintenance requirements before any kind of catastrophic failure. Those are the things we've been focusing on in the past. That's what we'll be focusing in the future. And as I said in the past, a couple of analyst calls, we have a good backlog of projects that we're going through to -- that we'll invest in. And as capital gets available, we'll execute that will give us the returns that we've been seeing for the last couple of years on these type of investments. Those are generally the same -- the buckets, though, Dmitry, that we'll be investing similar to the investments we did last year for this year.

Okay. So basically, kind of like a Japanese approach where you just do better every day go through this and get a little bit more out of it.

That's exactly right. Exactly right. Yes.

Okay. Okay. Great. And then my last question, you mentioned in your high-yield pulp business that there was a shipment delays of a business going to India, and that accounted for some of your volume losses in that business in the quarter. What was the nature of those delays? And have they been resolved? Is there going to be a catch-up in the fourth quarter? Or is this sort of missed until next year?

It's just a timing issue. We'll capture it in the fourth quarter. And really, what it comes down to is the lane between Montreal, Canada and the ports in India, the capacity of those ocean lanes are pretty slim, pretty narrow. And as a consequence, if you miss a ship, then you got to wait a month, right, for the next ship to show up to take it to India. So that's really the issue that we're dealing with.

Mr. Bloomquist, we have no further questions at this time. I'd like to turn the floor back over to you for closing comments.

Okay. Well, thank you. In closing, just to reiterate, the temporary headwinds that defined 2025, we believe are now largely behind us and that our core business is now performing as expected. As we talked about in the Q&A, pricing negotiations are underway, and we will continue to value and put priority on value -- on the value we provide to our customers so that we can be able to get the money that needed to reinvest back into our assets.

Our operations are stable, and our teams are executing with discipline. We have a clear strategy and a strong portfolio of high-return projects that position the company for margin expansion and stronger cash generation and we are very disciplined in our capital deployment. These actions should reinforce your confidence in our path to sustain the growth and the long-term value creation of the project or of the company. Our focus now is very simple: execute with precision and continue to demonstrate the strength and potential of the company.

And thank you for joining us this morning.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.