Alpha Metallurgical Resources Inc

Results of Operations

Our results of operations for the three months ended March 31, 2024 and 2023 are discussed below. For comparability purposes, certain immaterial segment information for the three months ended March 31, 2023 has been recast to conform to the current year presentation. Refer to Note 15.

Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

Revenues

The following table summarizes information about our revenues during the three months ended March 31, 2024 and 2023:

Coal revenues. Coal revenues decreased $45.4 million, or 5.0%, for the three months ended March 31, 2024 compared to the prior year period. Lower average realizations resulting from a weaker pricing environment were the primary factor resulting in the lower revenues, partially offset by an increase of 11.5% in coal sales volumes, or 450,000 tons. Refer to the “Non-GAAP Coal revenues” section below for further detail on coal revenues for the three months ended March 31, 2024 compared to the prior year period.

Cost and Expenses

The following table summarizes information about our costs and expenses during the three months ended March 31, 2024 and 2023:

Cost of coal sales. Cost of coal sales increased $109.2 million, or 20.3%, for the three months ended March 31, 2024 compared to the prior year period, primarily related to an 11.5% increase in coal sales volumes. In addition to increased volumes, cost of coal sales also increased due to start up costs related to our new Checkmate Powellton mine, an increased level of coal purchases, and inflationary pressure, partially offset by reductions in royalties and taxes as a result of a lower coal pricing environment.

Depreciation, depletion and amortization. Depreciation, depletion and amortization increased $11.3 million, or 38.3%, for the three months ended March 31, 2024 compared to the prior year period. The increase was primarily due to an increase in capital expenditures.

Selling, general and administrative. Selling, general and administrative expenses increased $1.7 million, or 8.1%, for the three months ended March 31, 2024 compared to the prior year period. This increase was primarily related to increases of $1.6 million in wages and benefits expense and $1.3 million in incentive pay, partially offset by decreases of $0.7 million in stock compensation expense and $0.3 million in professional services fees.

Other operating loss (income). Other operating loss increased $4.1 million, or 373.4%, for the three months ended March 31, 2024 compared to the prior year period, primarily due to a decrease in income on sale of assets in the current period.

Total Other Expense, Net

The following table summarizes information about our total other expense, net during the three months ended March 31, 2024 and 2023:

Income Tax Expense

The following table summarizes information about our income tax expense during the three months ended March 31, 2024 and 2023:

Income tax expense of $14.2 million was recorded for the three months ended March 31, 2024 on income before income taxes of $141.2 million. The effective tax rate differs from the federal statutory rate of 21% primarily due to the permanent impact of percentage depletion, foreign-derived intangible income deductions, and stock compensation, partially offset by the impact of non-deductible compensation and state income taxes, net of federal impact.

Income tax expense of $42.4 million was recorded for the three months ended March 31, 2023 on income before income taxes of $313.2 million. The effective tax rate differs from the federal statutory rate of 21% primarily due to the permanent impact of percentage depletion and foreign-derived intangible income deductions, partially offset by the impact of state income taxes, net of federal impact. Refer to Note 11 for additional information.

Non-GAAP Financial Measures

The discussion below contains “non-GAAP financial measures.” These are financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with generally accepted accounting principles in the United States (“U.S. GAAP” or “GAAP”). Specifically, we make use of the non-GAAP financial measures “Adjusted EBITDA,” “non-GAAP coal revenues,” “non-GAAP cost of coal sales,” and “non-GAAP coal margin.” We use Adjusted EBITDA to measure the operating performance of our segments and allocate resources to the segments. Adjusted EBITDA does not purport to be an alternative to net income as a measure of operating performance or any other measure of operating results, financial performance, or liquidity presented in accordance with GAAP. Moreover, this measure is not calculated identically by all companies and therefore may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA is presented because management believes it is a useful indicator of the financial performance of our coal operations. We use non-GAAP coal revenues to present coal revenues generated, excluding freight and handling fulfillment revenues. Non-GAAP coal sales realization per ton for our operations is calculated as non-GAAP coal revenues divided by tons sold. We use non-GAAP cost of coal sales to adjust cost of coal sales to remove freight and handling costs, depreciation, depletion and amortization - production (excluding the depreciation, depletion and amortization related to selling, general and administrative functions), accretion on asset retirement obligations, amortization of acquired intangibles, net, and idled and closed mine costs. Non-GAAP cost of coal sales per ton for our operations is calculated as non-GAAP cost of coal sales divided by tons sold. Non-GAAP coal margin per ton for our coal operations is calculated as non-GAAP coal sales realization per ton for our coal operations less non-GAAP cost of coal sales per ton for our coal operations. The presentation of these measures should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.

Management uses non-GAAP financial measures to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. The definition of these non-GAAP measures may be changed periodically by management to adjust for significant items important to an understanding of operating trends and to adjust for items that may not reflect the trend of future results by excluding transactions that are not indicative of our core operating performance. Furthermore, analogous measures are used by industry analysts to evaluate the Company’s operating performance. Because not all companies use identical calculations, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company depending on long- term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate, capital investments and other factors.

Included below are reconciliations of non-GAAP financial measures to GAAP financial measures.

The following tables summarizes certain financial information relating to our coal operations for the three months ended March 31, 2024 and 2023:

(1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions.

Non-GAAP Coal revenues. Non-GAAP coal revenues decreased $53.2 million, or 6.8%, for the three months ended March 31, 2024 compared to the prior year period. The decrease was primarily due to a $42.25 per ton, or 20.2%, reduction in non-GAAP coal sales realization per ton as pricing softened from the prior year period, partially offset by a 16.8% increase in coal sales volumes.

Non-GAAP Cost of coal sales. Non-GAAP cost of coal sales increased $91.6 million, or 22.2%, for the three months ended

March 31, 2024 compared to the prior year period, primarily related to an 16.8% increase in coal sales volumes. In addition, average non-GAAP cost of coal sales per ton increased 4.6% due to start up costs related to our new Checkmate Powellton mine, an increased level of coal purchases, and inflationary pressure, partially offset by reductions in royalties and taxes as a result of a lower coal pricing environment.

Adjusted EBITDA

The following table presents a reconciliation of net income to Adjusted EBITDA for the three months ended March 31, 2024 and 2023:

The following table summarizes Adjusted EBITDA:

Adjusted EBITDA decreased $164.9 million, or 46.5%, for the three months ended March 31, 2024 compared to the prior year period. The decrease in Adjusted EBITDA was primarily driven by decreased coal margin and lower non-GAAP coal sales realization per ton in the current period.