Good morning, and welcome to the RYAM Second 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. Michael

Good morning and welcome again to RYAM's Second 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, ryam.com. These materials provide key insights into our financial performance and strategic direction. During today's call, 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 make reference to certain non-GAAP financial measures to offer additional perspective on our operational performance. Reconciliation to the most comparable GAAP measures can be found in our presentation on Slides 30 to 35. We appreciate your participation today and ongoing interest in RYAM. I'd now like to turn the call over to De Lyle.

Good morning, everyone. In today's call, I will address, first, our change in 2025 guidance and why we believe the underlying factors were driven by a set of extraordinary and primarily nonrecurring challenges we faced this year. These challenges, both macroeconomic and internal, have certainly impacted our near-term financial results, but we believe they are largely behind us as evidenced by the normalizing cellulose specialty orders, and we believe that such challenges do not alter our long-term trajectory. Second, I'll outline why we expect to nearly double our EBITDA over the next 2 years relative to our revised 2025 guidance and walk through the key drivers behind that growth. And third, I'll discuss our strategy for delivering substantial shareholder value through accelerating revenue growth expanding margins and earning exceptional returns on our strategic growth investments. Before diving into these points, I want to take a step back and emphasize a critical perspective. Isolating and understanding the temporary nature of the headwinds we've encountered this year helps clarify why our long-term value proposition remains intact and in fact, more compelling than ever. These extraordinary impacts do not change the core fundamentals of our business or the powerful opportunities ahead of us. We remain highly confident in the strategy we've set and the unique position we're in to drive meaningful business and shareholder value in the years to come. Let's now turn to Slide 4. In total, we're navigating roughly $59 million in EBITDA headwinds this year, predominantly from issues we believe are onetime in nature. These headwinds, combined with some structural softness in our paperboard and high-yield pulp segments resulted in us lowering our guidance from $215 million to $235 million at the beginning of this year to our current guidance of $150 million to $160 million for 2025. These headwinds include: First, tariff-related uncertainty negatively impacting EBITDA by approximately $21 million. Second, we experienced $8 million of losses from foreign exchange revaluations. Third, operational disruptions accounted for another $18 million impact. Fourth, we incurred $12 million in noncash environmental charges. And finally, our noncore paperboard and high-yield pulp segments experienced higher-than-expected softness. We have characterized $200 million as 2025 normalized EBITDA, which excludes the isolated items that we do not expect to reoccur in the future. Two other items, the secondary impact of tariffs and the paperboard high-yield pulp weakness, we have excluded from our normalized EBITDA number. But as I will explain, we will continue working to mitigate our exposure in these areas. Now let's discuss each of these factors and why we believe that their impact is largely behind us and consequently, why we expect 2025 to be our trough year and Q2 to be our trough quarter with each subsequent quarter and year expected to show accelerating growth and profitability. Let me provide an update on tariffs, which is detailed on Slide 5. First, some context. RYAM is one of the top 50 U.S. exporters. We export about 70% of our U.S. production. So it comes as no surprise that RYAM was impacted by the economic uncertainty caused by the tariff wars. We estimate that the negative impact of uncertainty caused by those tariffs on our 2025 EBITDA is approximately $21 million. Of that, roughly $7 million is tied to direct tariff-related disruptions, issues we anticipate fully recovering from as trade policies stabilize in the coming quarters. The remaining $14 million reflects indirect effects, primarily due to the impact tariffs have had on our customers' abilities to access key geographic markets. While we are actively working to mitigate these challenges and regain lost volumes, we are not assuming a recovery of this portion within the current forecast period. It's important to note that the period of uncertainty in April and May following the initial imposition of the 125% Chinese tariff rate had a pronounced short-term impact on order activity. That said, since June, we've seen orders return to more normalized levels, reinforcing our view that the worst of the disruption is now behind us. Even more encouragingly, we see the latest development in the tariff talks providing potential tailwinds as trade policies stabilize. To quickly recap, the disruptive Chinese tariffs have largely been resolved. Currently, our cellulose specialty and dissolving wood pulp exports to China are tariff-free and our paperboard imports into the U.S. remain tariff-free under the USMCA free trade agreement. Our only directly tariff product at this point is fluff pulp into China at 10%, and we're actively addressing this by trialing a new dissolving wood pulp fluff product and expanding sales into nontariff regions. Importantly, recent U.S. tariffs include a 15% tariff on EU's CS imports, a 10% tariff on Brazilian CS imports and a 50% tariff on Brazilian ethanol imports, all of which will enhance our competitive positioning. Additionally, the ongoing investigations by the USTR against Brazil for unfair trade practices could provide potential upside given that Brazil imports approximately 150,000 metric tons of cellulose specialty acetate annually. In parallel with these tariff-related dynamics, we also experienced foreign exchange headwinds during the quarter with a negative EBITDA impact of approximately $8 million tied to recent U.S. dollar weakness. Though this is recorded as a short-term negative, the weaker U.S. dollar has lowered our cost of U.S. production relative to our major competitors, which could increase our competitive advantage. In short, the tariff story was clearly a headwind in 2025, is showing strong indications of turning into a potential strategic advantage for us moving forward. However, we are not incorporating any of these potential tailwinds in our outlook. On Slide 6, I'll dive into several operational challenges that significantly impact our 2025 results. These totals about $18 million in EBITDA headwinds and included the following: Labor strikes at Tartas contributed to approximately 20 days of lost or significantly reduced production, compounded by additional 3 days of downtime due to the Iberian Peninsula power outage staffing constraints at Tartas, severe winter disruptions and equipment warranty issues at Jesup and the temporary extended 16-month Fernandina outage interval. These issues have largely been resolved. Tartas currently operates near normalized levels with staffing levels improving. Jesup production is stable and Fernandina will return to a regular 12-month maintenance interval. Additionally, as discussed earlier, we also incurred an isolated noncash environmental charge totaling $12 million. This charge was related to legacy site remediation responsibilities, which carry no immediate cash impact. Slide 7 addresses the current situation at Temiscaming and our plans for that asset. Our current 2025 guidance for the paperboard and high-yield pulp businesses is roughly breakeven to a slight EBITDA loss due to soft market conditions and custodial site expenses related to the suspended HPC line. We've identified a clear set of actionable opportunities worth approximately $35 million to restore Temiscaming to historical profitability. These include aggressive reduction of custodial site and fixed costs, including labor and outside consultants; improvements in paperboard operating efficiency by increasing planning automation and reducing unplanned maintenance outages and grade changes; launching strategic new products with minimal capital, including freezer board, oil and grease resistant board and specialized high-yield pulp rolled softwood and finally, capturing North American market share from European imports now impacted by a 15% U.S. tariff. Given the strong secular North American paperboard market growth of 4% to 6% annually, our unique market positioning as the only North American 3-ply board producer and our highly achievable initiatives I just outlined, we're confident in restoring Temiscaming to historical EBITDA levels that averaged around $30 million, positioning us favorably to divest these noncore assets. Analyst estimates and public comps indicated a divestiture multiple in the 5x to 7x mid-cycle EBITDA range is reasonable. Now let's discuss what we expect the next couple of years to unfold and why we are so confident and excited about the future of our company, our growth initiatives and the tremendous value creation opportunities that lie ahead. Slide 8 shows forecasted growth of our EBITDA from 2026 onwards from our core cellulose specialties and biomaterial businesses and the drivers of that growth. As discussed, we plan to divest of our noncore paperboard and high-yield pulp businesses at Temiscaming, transforming us into a company focused on our core businesses. On this slide, we start with $200 million of EBITDA that our core business would have generated in 2025, but for the headwinds we discussed earlier that we do not anticipate will reoccur in 2026 and moving forward. Then we layer on various key drivers that will dramatically grow that EBITDA in the future years. These drivers include a highly attractive cellulose specialties market with strong supply-demand dynamics supported by meaningful pricing power; our multiyear plan to reduce unit costs and expand year-over-year margins; our unique ownership of the majority of the excess cellulose specialty capacity in the market, strategically positioning us to capture market share growth opportunities; and our biomaterials initiatives, which provide compelling opportunities to recycle capital at exceptionally high investment returns. Backed by a strong balance sheet and robust liquidity, we can fund these initiatives internally without shareholder dilution, placing us firmly on a track for a normalized core EBITDA run rate of approximately $308 million by the end of 2027, increasing further to about $338 million with our AGE project in 2028. Now let's discuss each of these initiatives one by one. Turning to Slide 9. Not only has the cellulose specialty industry become quite attractive after a long time of earning subpar returns, but also RYAM is exceptionally well situated from a competitive standpoint. Poor historical returns and low margins have led to the closure of several plants and the exit of multiple competitors, permanently removing excess capacity from the industry. According to third-party analysts, the industry has become highly consolidated with RYAM, Borregaard and Bracell collectively representing roughly 80% of the dissolving wood pulp cellulose specialty market. Industry utilization now hovers around 90% and expected to tighten further. We anticipate that these market dynamics will support a more stable pricing environment with industry analysts forecasting sustained annual price increases of approximately 4% to 6%, which is expected to more than outpace RYAM's all-in cost inflation. Recent tariff disruptions have underscored the essential nature of our cellulose specialty products and the lack of alternatives as our offering has emerged largely unscathed from retaliatory tariffs. We are widely recognized as a global leader in producing highly specialized noncommodity products recognized by their superior purity. Our position is supported by proprietary technology and enduring customer relationships that reinforce strong retention and long-term value creation. Additionally, approximately half of our cellulose specialty markets are noncyclical, providing stable demand. In the more cyclical segments, we see meaningful upside potential, particularly in sectors like European construction and industrial markets, which remain depressed and could represent significant opportunity as broader economic conditions improve. Our forecast does not incorporate these upsides. On Slide 10, our strong structural cost reduction initiatives are central to expanding margins sustainably. We're targeting around $10 million in corporate expense reductions, primarily through automation and efficiencies gained from our recently implemented ERP system. Additionally, we anticipate roughly $20 million in operational savings from initiatives, including automation of manufacturing processes, improved material usage efficiency, reduced energy consumption and enhanced asset reliability through targeted capital investments. We plan to invest $24 million to achieve the aforementioned $3 million of annual savings in 2026. Beyond 2026, we have a robust pipeline of cost-saving projects for 2027 and beyond with similarly attractive return profile. These cost-saving initiatives, along with pricing improvements are core pillars of our margin expansion strategy. Now turning to Slide 11. I want to highlight the substantial EBITDA growth opportunities stemming from our ability to capture the growth within the cellulose specialties market. Third-party market forecasts remain highly favorable, with analysts projecting market growth of approximately 80,000 metric tons over the next 2 years. Given our unique position of controlling most of the excess capacity within the cellulose specialty market, we are exceptionally well positioned to capture a meaningful portion of that growth. Specifically, through the requalification of our Temiscaming production at other facilities and organic market growth, we are projecting incremental EBITDA contributions in the range of $30 million by the end of 2027. This estimate assumes that we will capture volumes in line with our existing market share, though it is likely that we will capture an upsized share of the organic growth due to our outsized share of the industry's excess capacity. Beyond these conservative projections, further upside not in our forecast exists, particularly tied to the European ethers market. To frame this clearly, European ethers demand declined approximately 110,000 metric tons between 2022 and 2023 due to broad economic headwinds. Tartas has 20,000 metric tons of excess ethers capacity, which could yield an additional $15 million in EBITDA for RYAM and much more than that if prices increase, which is likely in a recovery scenario. Further upside, also not in our projections, stems from our position as the leading global producer of nitrocellulose for munitions and explosives, particularly given increased global defense spending trends. Turning your attention now to Slide 12. I'd like to clearly outline our biomaterial strategy and the exciting opportunities we have to monetize previously underleveraged byproducts stemming from our cellulose specialty production processes. As you know, approximately 60% of the dry portion of the tree is composed of non-cellulose byproducts historically utilized for energy value. Our biomaterials initiative strategically transforms these materials into high-value products like biofuels, bioelectricity, crude tall oil, prebiotics, lignosulfonates, turpentine and biogenic CO2 for sustainable aviation fuels. The contracted cash flows generated from these products justify a high multiple in the marketplace because of their stable characteristics. Our Tartas bioethanol project represents the first step in the execution of this strategy. This initiative required only $5 million in RYAM equity investment due to our leveraging of European green financing at attractive interest rates and securing a stable 5-year take-or-pay contract with ExxonMobil. The single project alone is expected to generate between $8 million to $10 million of EBITDA annually, yielding an exceptional equity ROI of over 10x our initial equity investment based on market valuations. This clearly demonstrates the potential embedded within our biomaterials development strategy, utilizing our existing infrastructure. We believe we have barely scratched the surface of this opportunity and have a multiyear pipeline of these high-return projects that will be a core driver of our growth going forward. Our future biomaterials project pipeline is highlighted in Slide 13. Our BioNova JV with SWEN Capital is advancing 4 significant Portfolio 1 projects to final investment decisions. Specifically, these include an additional bioethanol plant at Fernandina, prebiotics and CTO facilities at Jesup and an additional CTO facility at Tartas. With committed capital in place, these projects represent a total investment of approximately $110 million and are projected to generate around $39 million in annual EBITDA. Due to strategic financing structures and favorable market valuations, we expect exceptional RYAM equity returns of 7x ROI. The Altamaha Green Energy or AGE project at Jesup developed in partnership with the Beasley Group further complements our biomaterials portfolio. Scheduled for completion in late 2028, AGE leverages our existing Jesup site infrastructure. RYAM's 49% share of the AGE pretax income is expected to be $30 million annually through a secured 30-year fixed price power purchase agreement with Georgia Power. With RYAM's equity contribution of about $40 million towards the $500 million project, we anticipate equity returns ranging from 10 to 12x ROI, clearly demonstrating once again the compelling financial returns achievable through our biomaterials initiatives. Now moving to Slide 14. I'd like to reinforce the unique competitive advantage that we believe RYAM possesses. Our ability to recycle capital into high-return biomaterial projects driven by our extensive asset base. Illustratively, our Jesup facility alone is estimated to have a replacement cost exceeding $4 billion. This asset base provides us with unmatched flexibility and cost efficiency when launching new initiatives. Unlike potential competitors who must start from scratch, we have existing infrastructure and technical know-how already in place, giving us a clear cost advantage over any newcomers. These initiatives aren't speculative ventures carrying technical or market validation risks. Their commercial viability has already been clearly validated in markets by competitors such as Borregaard. Our recent signed memorandum of understanding with Verso Energy for exploring eSAF opportunities in both Jesup and Tartas and with GranBio for a pilot-scale ethanol or jet plant at Jesup are validation of the rich pipeline of potential high-return opportunities that leverage our asset base and provide visibility for our growth and value creation for years to come. Slide 15 highlights our strong solid financial foundation, which remains critical to executing our strategy. As of the end of Q2, RYAM maintained strong liquidity totaling approximately $202 million, including around $71 million of cash on hand. Additionally, we continue to operate well below our covenant thresholds. Using a disciplined approach to capital allocation, coupled with strong cash flow management will enable us to fund strategic initiatives internally without shareholder dilution. Additionally, the potential divestitures of our noncore paperboard and high-yield pulp segments, as discussed earlier, will further materially strengthen our financial position. Anticipated proceeds will significantly improve our leverage profile, further enhancing our strategic flexibility and allowing us to continue funding high-return growth initiatives and explore potential shareholder returns down the road. In addition, our existing term debt becomes callable in 2026, providing a meaningful opportunity to reprice our debt and significantly reduce interest expense, further enhancing free cash flow. Illustratively, if we can lower the interest rate by 400 basis points and use the proceeds from the sale of the Temiscaming asset of $180 million to pay down the debt, the cash interest would be reduced by over $40 million per year. We anticipate generating exceptional free cash flow as our EBITDA grows. RYAM's targeted 2027 run rate core EBITDA of over $300 million would imply nearly $140 million of free cash flow to be utilized in high-return growth investments, further deleveraging and shareholder returns. Finally, on Slide 16, I'd like to summarize the compelling investment opportunity RYAM represents. We believe our current value significantly understates the intrinsic strengths and growth potential embedded in our business. The temporary 2025 headwinds detailed earlier, tariffs, operational disruptions, environmental charges and foreign exchange impacts appears to be now largely behind us. We enjoy strong competitive positioning in our core business. Our strategic initiatives in cellulose specialties and biomaterials are well on track, and our financial foundation is solid. Applying conservative peer multiples to our forecasted normalized 2027 EBITDA demonstrates a clear valuation upside of approximately 8x to 10x our current market valuation. As investors increasingly recognize our compelling strategic positioning, the value of our biomaterials initiatives and the structural improvements we've made across the enterprise, we firmly believe substantial shareholder value creation lies ahead. In summary, while 2025 represents a set of extraordinary headwinds, we believe the most significant impacts are now behind us. With strong recovery momentum, a disciplined capital strategy, compelling growth initiatives in cellulose specialties and biomaterials, we believe RYAM is well and uniquely positioned to unlock significant shareholder value. At current valuation levels, we believe there is a disconnect between our market price and underlying fundamentals, presenting a compelling opportunity for investors as our strategy progresses. With that, I'll turn the call now over to Marcus for additional financial and segment level insights. Marcus?

Thank you, De Lyle. Let's now turn to Slide 17, which summarizes our second quarter 2025 financial highlights. In the second quarter, revenue was $340 million, down $79 million year-over-year. Operating loss was $1 million, declining by $29 million compared to the prior year. Adjusted free cash flow year-to-date was negative $52 million, while adjusted EBITDA was $28 million, a $40 million decrease compared to the second quarter of last year. As a reminder, the prior year period included a $10 million benefit associated with deferred income from the Canadian Emergency Wage Subsidy program known as CEWS. The primary drivers of the EBITDA decline this quarter can be summarized with the following highlights. In CS, earnings decreased by approximately $22 million, driven by lower sales volumes due to tariff-related disruptions and the indefinite suspension of the Temiscaming HPC line, along with higher input costs and operational challenges at our Tartas facility due to the labor strike. The Paperboard segment saw earnings decline by $10 million, reflecting lower sales volumes and prices impacted by indirect tariff effects and increased competitive activity. In high-yield pulp, earnings decreased by approximately $9 million, driven by lower pricing and volumes due to continued oversupply conditions in China and broader macroeconomic headwinds. Given these results, we have revised our full year 2025 adjusted EBITDA guidance to a range of $150 million to $160 million, which implies second half EBITDA of approximately $105 million to $115 million. Adjusted free cash flow guidance is estimated at negative $10 million to $25 million for the full year, with positive free cash flow of approximately $35 million anticipated in the second half of the year. Let's now review our segment results, beginning with Cellulose Specialties on Slide 18. Quarterly net sales for CS decreased $33 million to $208 million. A 3% increase in sales prices was more than offset by a 15% decline in sales volumes, driven by tariff-related order pauses in April and May, elevated prior year sales ahead of the Temiscaming HPC indefinite suspension and the labor strike at Tartas. Operating income declined $21 million year-over-year to $29 million. This decline was mainly due to lower sales volumes, higher input costs and lower production due to the operational challenges and labor strike at Tartas. Adjusted EBITDA margins declined to 22% from 28% a year ago. On Slide 19, in our Biomaterials segment, net sales declined by $2 million year-over-year to $6 million caused by operational challenges and the labor strike at Tartas, which temporarily limited feedstock availability for the bioethanol facility. Operating income was flat at $1 million as reduced higher shared service and ancillary costs were offset by lower production costs. Adjusted EBITDA margin for this segment was 17% compared to 25% in the prior year, reflecting the temporary operational impacts. Turning to Cellulose Commodities on Slide 20. Net sales decreased by $26 million to $59 million, driven by a 33% decline in sales volumes due to lower non-fluff commodity sales and the labor strike at Tartas, partially offset by a 7% increase in sales prices, driven by market supply dynamics for fluff. Operating results improved by $12 million compared to last year, reducing the operating loss to $9 million. This improvement reflects lower non-fluff commodity losses, reduced indefinite suspension charges and favorable input costs, partially offset by the lower production volumes related to operational challenges. Our paperboard results are detailed on Slide 21. Net sales declined by $13 million year-over-year to $47 million, reflecting a 23% decline in sales volumes and a 3% decrease in prices impacted by product mix, shifting customer dynamics tied to tariff uncertainty and increased competitive activity due to higher EU imports and new U.S. capacity. Operating income declined $12 million year-over- year, primarily due to lower sales volumes and pricing and Temiscaming custodial site costs. Adjusted EBITDA for the segment was $5 million, with margins declining to 11% from 25% in the prior year quarter. Lastly, Slide 22 covers our High-yield Pulp segment. Net sales decreased $4 million year-over-year to $29 million driven by an 11% decline in sales prices and a 7% reduction in sales volumes, reflecting continued oversupply conditions in China and shipment timing delays to customers in India. Operating loss increased by $8 million to $7 million, primarily due to lower pricing, reduced volumes, higher logistics costs and Temiscaming custodial site costs. With that, operator, please open the call to questions.

[Operator Instructions] The first question comes from Matthew McKellar with RBC Capital Markets.

First, I'd just like to ask, what kind of time line are you anticipating for having this dissolving wood pulp fluff product approved for sale in China at 0 tariffs and qualified with the Chinese customers? And how should we think about the potential pickup in EBITDA that would be associated to this in the context of any changes in cost to produce the product versus the traditional fluff and the volumes that you then expect to sell into China?

Matt, this is De Lyle. The question on fluff and our product development around the new dissolving wood pulp fluff. We have -- where we are with that right now is that we have sent and are sending material to our customers in China as we speak for their trials and qualifications. And if those go well, then the expectation is as we approach 2026, that we'll be able to commercialize those going forward. In terms of impact on EBITDA, a little harder to say other than to suggest that the increase in cost to make the dissolving wood pulp fluff versus our standard fluff is a little bit higher than it would be otherwise. And that's fully to be expected given that the purity level will be higher. But at the end of the day, we do expect that as we introduce that product that we'll recapture most, if not all, of our share loss as a result of the 10% tariff that we have right now going into China.

Okay. Next for me, just on the structural cost reduction initiatives. Is the $24 million of capital you've mentioned to be spent entirely in 2026? Or does that incorporate any spending in 2025? And then should we think about that $30 million target is what you capture in '26 or your exit rate? And just last, the initiatives at Temiscaming, how should we think about the timing of execution there? Is that also effectively a run rate to exit '26?

Okay. So addressing the cost savings that was mentioned, the $30 million that we had mentioned in the presentation and the $24 million of capital we spent, most of that $24 million in capital will be spent in '25. And the $30 million of value that we noted will be realized as we expect to realize that in 2026. So we'll be positioned as we enter '26 to realize those savings. With respect to what Temiscaming and the turnaround there, we were somewhat fortunate in that we are well positioned coming into '25 with introducing a number of the new products that was noted. And as a consequence as we go into '26, we believe that we'll be well along our way in terms of getting those products qualified and introduced into the market in '26. So the freezer board, which has now been fully certified and is the customers for trials now, the oil and grease board, which is passed through our production trials and is now going to our customers for their work to do to qualify the product. Again, we believe that those products will be well positioned to commercialize in '25 -- in '26. The high-yield pulp softwood rolls product that would go -- which is a brand-new product for us in high yield, is targeted to go into China as a low-grade absorptive product to -- for bed pads and for pet pads and things like that. There was a number of steps we had to get through. And the first step, which was to show that we could make a softwood pulp off of one of our high-yield pulp lines, which historically has been hardwood. And that trial has -- we've just completed and was largely successful. The next is to pass that pulp through our idled HPC machine and roll line, which we plan to do in the next few weeks. And then we'll ship that to our customers in September, October for their trials, again, expecting that we would get those trials completed in the fourth quarter so that we can introduce that product in the first quarter of 2026. And why I mentioned all that is because a large share of the $35 million benefit is tied to new product development. And so it's important for us. And I would call that actually our critical path elements to achieve that $35 million of benefit. The rest of the benefit is really around cost reduction and improving the operating efficiencies of the paperboard line through automation, better planning, reducing grade changes, those kind of things, which, again, utilizing an outside resource. We brought in FTI Global to help us out on identifying those opportunities and helping us to execute that again, as we enter into 2026. Expect that we may not get the full $35 million of benefit in '26, but we should get a lion's share of that in that year.

The next question comes from Daniel Harriman with Sidoti.

Just a couple of quick ones to start off. You're conservatively forecasting $30 million in incremental EBITDA within cellulose specialties through '27. Understanding that's conservative, can you kind of go into what would need to go right to outperform that number? And then on your 2027 core business run rate EBITDA, you're looking to generate $140 million in annual free cash flow. At that stage, obviously, right now, even considering the issues you've had, your balance sheet remains in really good shape. So how should we think about capital deployment in 2027? Would you continue to work down the debt and invest in some of these high-return capital projects? Or does that open the door for potential share repurchases or other mechanisms that you could use?

Let me try to address each one of your questions in sequence. First, the $30 million of additional cellulose specialty margin growth through 2027. That's really tied to the substitution of cellulose specialties in exchange for the commodities. So what's really driving is the organic growth we expect of CS over the next couple of years. And then as that grows, we will then replace the CC or the commodity production that we currently have. So the underlying assumption is that we will grow and increase our volumes roughly 15,000 tons per year, so 30,000 tons in total during those 2 years. And the pricing differential of roughly $1,000 per ton of specialty versus commodity is really how you go about calculating that margin improvement. Does that make sense?

Yes, it does.

Okay. With respect...

Capital allocation, second question, right, Dan?

Yes. Dan can you repeat the...

Sure. Just looking at '27, your run rate core business EBITDA, you're assuming that will generate $140 million in free cash flow. And your balance sheet right now remains in good shape despite the issues you've had through the first 6 months. So I'm just wondering how we should think about capital allocation over the horizon there in terms of continued debt repayment or more geared towards investment in high-return capital projects.

Okay. So with respect to how we use the capital as we go forward, particularly the free cash flow, the focus will be on generating and executing on high-return projects as we plan through 2027. We believe that there are a number of those projects, both on the cost reduction side as well as on revenue growth opportunities. We kind of outlined a couple of them in the presentation, which are around eSAF and bioethanol to jet opportunities. So we think that there will continue to be projects that will provide substantial equity returns for us for the next few years. There will always be a desire to pay down debt. I've stated time and again that we'd like to pay down debt around 5% of the principal per year. In '25, we were restricted on doing that given our new debt agreement. But again, that will be something that we would look to do with some of the capital going forward. As projects dry up or if the return on those projects get to a certain level that is no longer -- would be no longer attractive to our shareholders, of course, we would then consider possibly returning capital back to the shareholders. But I would say that's probably a little further down the list given the, I would say, rich library of opportunities we have to invest the capital in the business.

And Dan, [indiscernible] right? The amortization is around $22 million that De Lyle mentioned, so roughly 3%. So we're close to 5%. And a natural place to allocate capital that De Lyle covered in his deck was the AGE investment, right, because that's outside of BioNova.

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

I want to go back a little bit to your cost reduction, $30 million of cost reduction that you're looking to get out of corporate and operations. How fast do you think that you can get to that run rate given that some of these things, particularly the noncorporate portions will require some time as far as automation and things like that, that you're targeting to get these cost savings?

The -- how fast we can get to the $30 million run rate is that we expect that we'll be at that run rate as we enter 2026. A lot of the investments needed to achieve that run rate outside of corporate have already been invested or are being invested and the expectation of those projects will be completed as we exit this year.

Okay. So you will see a gradual improvement in the back end of the year and you hit that run rate going into 2026.

And it will be relatively minor because most of these projects will largely be completed in like the fourth quarter.

Got it De Lyle. And then you mentioned the sort of the positive impact of tariffs as you get into the second half of the year into 2026, specifically the 15% and the 50% tariffs are on EU and Brazil imports. Clearly, you will benefit from that. So I'm kind of interested in how you're thinking about this. Are you going to benefit from it in terms of gaining market share being a lower-cost producer than the Europeans and the Brazilians plus the tariff? Or do you see that as an opportunity to be able to continue to raise prices in these markets as they are, as you mentioned, with 90% capacity utilization in the industry clearly are set up for continuing price increases.

Good question. And I could spend a long time talking about how we internally have been gaining that -- those scenarios about what the tariffs would mean to us, the -- call them the tailwind tariffs, the tariffs on EU imports and the tariffs on Brazilian imports. When I look at pricing, and we've talked about this for the last couple of years, we believe in a value versus volume strategy when it comes to our CS business. So we will continue to look for inflation plus pricing on our CS business so that pricing goes up at least more than inflation and a little higher than inflation to capture what we believe is the intrinsic value of our product offering. So we will continue to do that. The 15% tariff obviously gives us -- will increase our headroom with respect to our competitive positioning relative to our competition. That may allow us to be a little bit more aggressive in defending our share in our home market here in the United States. So -- and maybe at the end of the day, we end up having that realized as increased margin going forward in terms of -- if it translates into a lower U.S. dollar relative to other currencies. So I'm not going to -- the plan is not to use this as a club on our customers. But at the same time, we want to make sure that we completely lever it to strengthen our comparative advantage to -- relative to our competition here in our home market.

Understood. That's helpful. And then final question. When you look at -- when you look at your biomaterials business, you're getting into new markets for you, but they're not brand-new markets. There are existing players there, including SAF, including tall oil. Is your confidence of being able to ramp up your biomaterials business as rapidly through 2028 based on the fact that you see these markets growing fast enough to allow for new entrants such as yourself to gain market share without having to sacrifice price? Or do you intend to, as a new market entrant, use price to gain share?

Okay. To just reemphasize, we're highly confident that we're going to be able to ramp up the construction of these facilities and commercialize them over the course of the next few years. We've gone through a lot of effort to get the engineering completed, working on the permitting to get that behind us, making sure the projects will achieve the investment hurdle thresholds that we've stated that we want to -- that we're enforcing. All that work is coming to a head here. And as we said, we expect to get the final investment decisions on the Portfolio 1 projects as well as AGE project by the end of this year. So the confidence of being able to pull this off in terms of constructing the plants is very, very high. With respect to the strategy to enter the markets that we're pursuing, whether it be CTO or bioethanol or, call it, green electricity, we're a drop in the bucket. So our new supply isn't going to materially change the marketplace in any significant degree. We believe that as we -- as part of the financial -- as a result, as part of the financial investment decision, we will have in hand commercial agreements. That's one of the stipulations of getting to a financial investment decision is actually having a commercial agreement in hand that we will have the ability and already have the agreement to move that material before we even produce the first drop of any of those products.

At this time, I would like to turn the floor back to De Lyle Bloomquist for closing remarks.

Okay. Well, in summary, we believe 2025's temporary headwinds are largely behind us. We look forward to delivering strong sequential and year-over-year growth. Our entire team is enthusiastic about the future, and I feel fortunate to lead a company with strong competitive positioning and a robust pipeline of high-return growth projects. We believe we are well positioned for significant margin expansion, accelerating cash flow growth and disciplined capital deployment opportunities that can generate compelling returns, some with the potential to exceed 10x ROI based on current assumptions and market conditions. It is our job to execute as flawlessly as possible on this opportunity and to educate you, the investors, on our unique value proposition, and we intend to do that job well. Again, thank you for joining us this morning. If you have any questions, please reach out to us. We'll make ourselves available.

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time, and have a great day.