Good morning, welcome to Enviva Inc.'s First Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Kate Walsh, Vice President of Investor Relations. Please go ahead. Thank you. Good morning, everyone. Welcome to Enviva's First Q uarter of 2023 Earnings Conference Call. We appreciate your interest in and support of Enviva. Thank you for your participation today. On this morning's call, we have John Keppler, Executive Chairman of the Board, Thomas Meth, President and Chief Executive Officer, and Shai Even, Executive Vice President and Chief Financial Officer. Our agenda will be for John, Thomas, and Shai to discuss our financial and operating results and to provide an update on our current business outlook and operations. We will open up the call for questions. During the course of our remarks and the subsequent Q&A session, we will be making forward-looking statements which are subject to a variety of risks. Information concerning the risks and uncertainties that could cause our actual results to differ materially from those in our forward-looking statements can be found in our earnings release as well as in our other SEC filings. We assume no obligation to update any forward-looking statements to reflect new or changed events or circumstances. In addition to presenting our financial results in accordance with GAAP, we will also be discussing adjusted EBITDA and certain other non-GAAP financial measures pertaining to completed reporting periods as well as our forecasts. Information concerning the reconciliations of these non-GAAP measures to their most directly comparable GAAP measure and other relevant disclosures is included in our earnings release. Our SEC reports, earnings release, and most recent investor presentation, which contain reconciliations of non-GAAP financial measures we use, can be found on our website at envivabiomass.com. I would now like to turn the call over to John. Good morning. Thank you for joining us. It's clear from our earnings release and 10-Q filed yesterday that the cost and productivity challenges of the first quarter that the team outlined a month ago are deeper and more significant than understood at the time, that the positive effects of the improvement initiatives are taking longer than expected, with the benefits expected to be realized still ahead. The poor operating performance at the end of last year, combined with limited progress in a very disappointing first quarter, is a reality that the team has internalized, as a result, the company is resetting guidance this morning. Thomas will walk through that guide, given our revised expectations about what the company can accomplish in the near term, as well as highlight some important changes he has made to the operations leadership in the company to get the team better aligned on how to reliably deliver the productivity and cost position we have demonstrated possible. With that reset and the quarterly guidance provided, you can expect the team to report on our progress clearly and consistently throughout the year, describing where we have engineered improvement and where we have more work to do. As part of this reset, our board of directors, in consultation with management, undertook a process to reconsider Enviva's capital allocation policy. After a careful review of potential alternative uses of cash flow, the board has decided to revise Enviva's capital allocation framework by eliminating the company's quarterly dividend in order to prioritize maintaining strong liquidity and a conservative leverage profile, maintaining our investment plans to increase the efficiency and cost position of our existing plants, generating internal funding and timing flexibility for our current investment plans in new, fully contracted plant and port assets, and authorizing an opportunistic share repurchase program. This shift in capital allocation also gives us flexibility to potentially accelerate organic and inorganic growth in the future with less reliance on accessing the capital markets. We firmly believe this revision to our capital allocation framework is the best way to create durable value for all of Enviva's shareholders. These changes reposition Enviva from a yield and growth company to a pure play growth company, something I think the market has been telling us for some time. Given the robust opportunity set in front of us, we are improving our ability to take full advantage of the highly visible long-term growth ahead. As many of you know, I stepped down from Enviva last year to deal with some difficult medical issues. I'm very fortunate to have those largely behind me now, but I am also privileged to have the opportunity to be back at Enviva in a different role than before, but no less committed to the company's success. Like the other members of the board, no less convinced in our ability to return to the high levels of financial performance you have seen from us historically. Now, I'd like to turn the call over to Thomas. Thank you, John. Good morning, everyone. I'm going to take some time to walk through our first quarter results and our 2023 guidance update, as it is a significant change to our expectations. Let's start with first quarter results. When we held our Investor Day discussions a little over a month ago, we knew we would have a soft first quarter. It was only when we completed closing the March books and had a view on preliminary results for April that we fully understood the depth and extent of the softness. We reported $3.4 million of adjusted EBITDA for the first quarter of 2023. This is a significant departure from our original expectations of approximately $40 million-$50 million. There are four main drivers of the difference between actual results and expectations. First, as we discussed at Investor Day, we have customer mix impacting our results. This is a straightforward shift of higher price deliveries with lower costs from the first quarter to the second half of this year, but it accounts for about $16 million of that difference. Second, we had approximately $10 million of unplanned repairs and maintenance expenses during the quarter. This is very high. Unpacking this a bit, in select plants, operations leadership have prioritized production over cost management, and we saw cost overages as a result. I call these tons at any cost, and that isn't the way to run a plant. To address this, we're actively changing our culture, discipline and controls around cost management. To that end, we have made some operational leadership changes, exiting two of our senior operations executives who were elevating leaders and general managers in the company that have demonstrated strong commitments to both cost and operational discipline, especially safety. The third area of pressure on our results this quarter relates to approximately $5 million of costs incurred related to professional fees, some tied to plant optimization initiatives. We have one plant that is significantly underperforming our expectations, and we have a highly specialist firm engaged to help us turn it around, and those isolated costs are reported in the first quarter. We also incurred extra accounting and financing fees during the quarter, in part due to the complicated fourth quarter and year-end we went through. Fourth and final, we did have some shipments that were subject to the deferred gross margin transactions accounting with similar treatment to what we saw at year-end. This accounted for approximately $4.6 million, and we expect the deferral to reverse in 2024 and 2025. All that adds up to a $36 million degrade from what we're expecting at the beginning of the year. It's a very difficult start to the year. While production and cost in the first quarter are generally our seasonally most difficult, the improvement in cost and productivity are not materializing at the rate we expected when we entered 2023. Based on results from the first four months of the year, we're taking a more conservative view on what this business will deliver in the short term. We are reducing our adjusted EBITDA expectations for 2023 from $305 million-$335 million to $200 million-$250 million. Let me unpack the two main drivers of the step-down in guidance. Approximately $30 million of the decrease between the previous guidance midpoint of $320 million and the revised midpoint of $225 million is related to the weakness in the first quarter of 2023. The remaining $65 million is related to shifting timing expectations as to when productivity and cost improvements are fully realized. To break down the revised guidance further, we are providing quarterly expectations for the next three quarters to improve transparency around our realistic expectations for the remainder of the year. For the second quarter, we're forecasting adjusted EBITDA to be in the range of $20 million-$30 million. For the third quarter, we're forecasting adjusted EBITDA between $70 million-$90 million. For the fourth quarter of 2023, we are forecasting adjusted EBITDA of between $110 million and $130 million. The ranges are primarily driven by our assumptions around production levels and our ability to drive costs out of the business. I am personally overseeing our operations team now. I know there is a lot of ground we can make up in the near term to get back on track, and it's my responsibility to do just that. As I've said, we are making progress. For instance, from December to March, we reduced the delivered cost of raw material to the company by approximately $3 per ton and drove fixed costs per ton across our total plants down approximately $6 per ton. While it's clearly not been as fast as we expected, it's also not as hard as it sounds. It does, however, require diligent day-to-day management and alignment of the team in how we execute this strategy. We have a portfolio of 10 plants, three of which, those in Lucedale, Cottondale, and Waycross, are consistently capable of outperforming expectations on both volume and cost. They are also our largest plants. Four of our plants perform reliably, but at production rates or costs that are off from the demonstrated performance. Two of our plants, Greenwood and Southampton, are what we call dryer-limited, meaning that we're either bottlenecked at the dryer because of its inherent evaporative limitations to reduce the moisture content in the raw material, which is the case at Greenwood, or on a reliability or operability basis, which is the case at Southampton, where the original dryer line needs refurbishment. With plans in place for each of these challenges and opportunities built around a general management philosophy of staffing our facilities with well-trained operators who skillfully and safely deliver reliable output, continuously improved over time, led by effective managers within a deeply understood and controlled cost position. It's manufacturing one-oh-one, the blocking and tackling of standard work, known and managed equipment set points, and eliminating unplanned downtime. This is what we call operational discipline. We have that in spades at Waycross, Cottondale, and Lucedale, have much of that in place at each of our other facilities. The exception is Southampton, where in addition to the technical challenges, we have staffing and turnover issues that are also standing in the way of progress. That's also a big reason why we have brought in a third-party operational improvement consultant to assist. When we successfully execute this year and make up the lost ground like I know we can, we will exit this year roughly at the run rate we expected when we started 2023. I'll now turn it over to Shai to take us through a deeper dive of our financials. Thank you, Thomas. Good morning, everyone. Let's start with first quarter results. We generated net revenue of $269.1 million for the first quarter of 2023, as compared to $233 million for the first quarter of 2022. Net loss for the first quarter of 2023 was $116.9 million, as compared to a net loss of $45.3 million for the first quarter of 2022. Net loss for the first quarter of 2023 included non-cash interest expense associated with the deferred gross margin transactions of $40.4 million. adjusted gross margin for first quarter of 2023 was $21.3 million, as compared to $50.7 million for the first quarter of 2022. The decrease year-over-year is attributable to the cost and volume challenges Thomas discussed earlier. Adjusted gross margin for metric ton was $17.93 for the first quarter of 2023, compared to $46.27 for first quarter of 2022. Adjusted EBITDA for first quarter of 2023 was $3.4 million, as compared to $36.6 million for first quarter of 2022. Enviva's liquidity as of March 31st, 2023, was $634.4 million, which includes cash on hand, including cash generally restricted to funding a portion of the cost of our Epes, Alabama plant and Bond, Mississippi plant, and availability under our senior secured revolving credit facility. Our growth plan for 2023 is not changed, we expect to invest in total capital expenditures in the range of $365 million-$415 million, with the majority of the spend on our greenfield developments. We expect to invest approximately $310 million at the midpoint of our expectations in the build-out of our Epes and Bond plants, with approximately $60 million being invested in projects across our fleet to improve volume and cost profiles, primarily directed to our underperforming plants. Similar to prior years, our CapEx spend is scheduled to be back-end weighted. We continue to expect to spend approximately $20 million during 2023 on maintenance CapEx. Our commitment to conservatively managing Enviva's balance sheet remains unchanged, and we continue to target a leverage ratio of 3.5x -4x as defined in our credit agreement. We expect to exit 2023 a little above that, but it will be temporary, and we expect to get back to our target range early in 2024. As a reminder, our covenant threshold under the credit agreement is 5.75x. With that, I would now like to turn it back to Thomas. Thank you, Shai. Look, disappointing start to the year, no question. March and April, certainly starting to look better, but improvements are not as fast as we needed and as we expected. Our short-term focus has to be on improving productivity and reducing costs as quickly and durably as we can. Although our near-term outlook has changed, the long-term growth profile of our business and industry, it has never been stronger. Worldwide demand for our product continues unabated. Yesterday, we announced a new sizable take-or-pay contract with an existing Japanese customer for 300,000 metric tons per year, with delivery starting in tandem with the new capacity we have coming online. In Europe, the European Union will finalize the text related to its Renewable Energy Directive III over the next month, which we expect will continue to provide demand tailwinds for woody biomass, given how important this renewable resource is to the net zero targets of the EU member nations. Our industry continues to be persistently structurally short supply. Signing new contracts like the one we just announced means new production capacity must get built. Therefore, these new contracts are underwriting our large scale, fully contracted capacity expansions. As a reminder, our new capacity is modeled after Lucedale, Cottondale and Waycross, which are, as I've said, our best performing plants. Currently, our Epes, Alabama plant is under construction and progressing well. Epes is expected to be operational mid-2024. For our Bond, Mississippi plant, we're moving forward with partnering with an EPC firm, which will help provide cost and construction certainty. We plan to construct at least two new greenfield plants off the Bond under this approach as well. Before we open the call for questions, I'll give a quick recap of what we've discussed this morning. To start off, our results this quarter were much softer than we expected, mainly driven by cost position that is not acceptable. We believe it can be remedied in the short term. We do know what the problems are. We're taking the necessary steps to fix them. We are recalibrating our forecast as to when we will realize the full benefits of our actions. That has led us to reduce our 2023 guidance expectations. We also have taken a very hard look at our capital allocation priorities, and in lieu of maintaining a dividend, we have revised our policies to focus first and foremost on liquidity and leverage with improving our operating cost position and asset productivity, a very close second priority. Our third priority is to opportunistically return capital to shareholders through share repurchases. Fourth, to the extent it is appropriate, we will accelerate our greenfield developments. We have a lot of work to do to rebuild the strength of this company and regain the ground we have lost. We know what needs to be done, and those fixes are exactly what you will see us execute over the coming months and quarters. Now let's open the call for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Elvira Scotto with RBC Capital Markets. Please go ahead. Hey, good morning, everyone. Thanks for the detail that you provided. I guess, I have a few questions. First, I mean, maybe a little more detail here on what changed materially from the Analyst Day on April third when your first quarter was already done, you know, and you kind of affirmed the guidance, and now to cause such a big downward revision to EBITDA. Then, you know, you mentioned that you believe you can remedy these issues, but why do you believe you can remedy these issues in the short term? Elvira, great question. Thank you and good morning. Let me walk you back a little bit to how we got to where we are. As we pre-prepared the plan for 2023, we were benefiting from the productivity and cost profile of September and November. September, October, November. We made great progress. The plants were running well. Cost position was good. That gave us a lot of confidence for where we were going into 2023. As we then moved into December, as we previously thought, talked about, polar vortex set us back, and created certainly a little bit of noise into Q1. When we went to Investor Day, we thought they were behind us. Volumes had recovered. We did not have March results or April results yet. What we realized was that the January and February, the, that the polar vortex blurred our operational challenges. The cost position that we then realized in March and April was substantially higher than we had thought. We thought we were gonna be $20 lower than we ended up. We drove some costs out, but certainly nowhere near what we actually expected. All in all, when we were at Investor Day, we knew we had pressure of about, you know, $15 million in our cost position, but it ended up being more closer to $30 million in that cost position. When you think about where that left us in April, still challenging, better again than March, but again, not where we need to be. With that in mind, we have to reset expectations here and just provide a much more realistic cost profile. Your second question is how do we drive costs down, right? We've actually made really good progress on the volume. Still not quite where we wanted volume to be in February, March, but we've never made more tons as an enterprise than in February and March. It's really primarily a cost position issue. Our R&M, repairs and maintenance costs, way exceeded our expectations, but we know how to manage that on an ongoing basis. Our contract labor was way higher. We just lacked discipline there. As we talked about in the prepared remarks, throughout the last couple of weeks, we took a deep dive into the Southampton plant that was really disappointing, and we realized that it's gonna take us just more time and more effort to get that plant to the potential that it is going to have. When you think about what does that mean for the guidance going forward, right? We're going to drive another $10 out of our cost position in the second quarter. Compared to where we thought we were going to be, it's not, again, a revenue question, it's a cost question. We do think we're gonna be about $30 million below what we thought coming into this year. From March to June, $10, $12 will come out of the cost tower. One of the things that we see as a real tailwind at the moment is the cost of delivered wood has come down substantially. What we've bought the last couple of weeks is lower than any wood we've bought over the course of 2022, so making really good progress there. The cost discipline that we have now very aggressively instilled with the changes in operational leadership will show substantial improvement in that discipline, in contract labor, repairs and maintenance. The plants don't need to spend some of those cost buckets. It's a matter of discipline. As I've said, I am much closer to the plants now than I've ever been. I'm personally managing from an operational leadership perspective, what we need to do. Some of the plants run exceptionally well day in and day out. Lucedale, Waycross, Cottondale are prime examples of what we can do. We have certainly elevated the leadership of those plants in our operations to make sure that all plants adhere to the discipline to get to the reliability, the volumes, the cost position that we know we do every day at some of our best performing plants. Let me just add one last piece before I'll let you ask some more questions if you want. All of our plants have proven that they can hit the volumes at the cost position. This is not something that you have to believe that we're going to step change into something that we have not seen before. We have seen this before at every single one of our plants, both from a volume perspective, and from a cost perspective. The discipline that we're instilling, personally led by me, will get us back on track. It's going to take us a little bit longer than we had thought. With that, we felt it's just prudent to provide a more conservative view that we know we can achieve. Okay. So I guess just as a follow-up to that, you know, if I look at your 2023 guidance, it's a pretty wide range between the low end and the high end of your EBITDA guidance. I guess maybe talk a little bit about what drives the low end versus the high end. Then I guess the bigger question is, you know, what's the potential that you don't make the low end? Like, what would have you actually even missed the low end of your guidance? Elvira, I'll go back to we wanted to provide a guidance that is conservative, you know. We don't have to believe a whole lot. It comes down to cost position, and the guidance range comes down to how fast can we drive costs down, right? If we actually increase the reliability faster than the midpoint of the range, and create more reliability faster, we're certainly going to come out at the higher end of the range, right? None of that is dependent on spot markets or revenue lifts. This is all around how fast can we reduce our costs per ton. Will we maintain the cost improvements that we've seen in the wood fiber? The fundamentals, the macroeconomic fundamentals which certainly suggest that we're on a very good path there. When we see the weekly costs of the wood costs that are running over our scale, that gives us good confidence that we're on a very good track. The cost discipline that we've reimplemented will certainly drive to the range. I feel very confident that this is a conservative estimate. If we increase volume like we had anticipated initially, a little faster than our conservative view, we certainly have a shot at getting to the higher end of the range. Okay. Got it. Then, I guess just my final question here. I appreciate, like, how difficult it was for you to eliminate the dividend. I do think from a financial perspective, it does appear to be the prudent thing to do. Given that, and what's going on, what's the rationale for, you know, announcing, you know, a buyback authorization at this time? No, thank you, Elvira. Appreciate your comment that it's the prudent thing. Look, I mean, we've thought for a long time that our share price is I mean, our company's undervalued. Certainly, at where we are today, it is certainly when you rethink capital allocation, at share price that we see today, it's certainly an obvious way to create total shareholder value hereby by creating a buyback program. It's certainly as part of Even before today, we thought our valuation was way too low, and so that is just a logical consequence of that the board considered and has given us the authorization. Okay. Thanks. I'll stop there. Our next question comes from Mark Strouse with JP Morgan. Please go ahead. Good morning. Thanks for taking our questions. Kind of following up on Elvira's comments there or questions there. The headwinds that you mentioned, can you go into a bit more detail as far as how much of that is within your control? I think you mentioned just now the contract labor being too high, you lack discipline there. Just a bit more color on that or how to think about that, just a more structurally higher, you know, labor cost across the world. The wood input costs coming down over the past few weeks that you mentioned, how is that being reflected in guidance? Are you assuming that stays there or, you know, what level are you baking in? I'll start with the second question. Our guidance certainly assumes that wood costs are staying. And to your first staying where we've seen them now land. I think that's certainly one part. More importantly, contract labor is a classic example of being entirely within our control, right? We are fully staffed now. We've told you we're fully staffed. We had a history of using contract labor when we were not fully staffed, and we lost the discipline to get contract labor out at a time when we're fully staffed. It's entirely in our control. It's completely unacceptable that we haven't done this at the speed that we need to. It's a very good example that when you're fully staffed, you don't need to have the same levels of overtime. You don't need to have the same levels of contract labor. That will certainly be a big part of driving our cost position down. Okay. Okay. Just a quick follow-up. You know, the stock's down obviously pretty significantly since the peak last year. I know that's not exactly your cost of capital. Can you talk just generally about your cost of capital, including, you know, project level debt, what that looks like, and any impacts that that might have on your willingness or ability to add more production, and sign more long-term contracts? Thank you, Mark. Thank you for the question. As we mentioned, during the Investor Day, Epes is fully funded. During Investor Day, we mentioned that to get like Bond to a position that is fully funded, we mentioned about $275 million of visual debt is needed. Definitely with the change in capital allocation, that amount will be now lower. We don't see any reason not to believe that we now, with the change in the, in our capital allocation in the prioritization of our capital allocation, to see any reason not to continue with our growth program, with the potential to even further accelerate that as part of the prioritization. Okay. I'll take the rest offline. Thank you. Thank you, Mark. Our next question comes from Ryan Levine with Citi. Please go ahead. Morning. I'll ask this relatively simply, but if the customer contracts are take-or-pay, can you give us color as to why contracted volumes are delayed into the back half of the year in your prepared comments? Absolutely. The contracts are take-or-pay. When a customer has an operation challenge, for example, they will ask us on the basis of, "Hey, if you can help us, we will absolutely take the volume." Right? That's always the premise, right? This requires us to actually agree to a change. When do we agree to a change? When it's accretive to us and when we get a premium for that change, which in this case, we did get. It's going to come back with a premium over in the second half of the year. Again, we only do these kind of things when we get rewarded for it financially. We have almost 200 ships on the water a year. Many of those ships provide an opportunity to create a little bit of extra margin through the commercial services business. We have said previously that's about 15%-20% of our overall EBITDA. That continues to flow through our guidance that we have outlined today. That has not changed. As part of that 15%-20%, we call that premium that we receive from the customer to move the $16 million into a different period. Given the implications to the capital structure of those decisions, do you have the ability to force them to take the volumes and receive the cash flow? Yes. To preserve the capital structure? Yes, absolutely. To take a big contract, we could tell the customer, "Sorry, we don't really find an opportunity. Unfortunately, we can't help you." We didn't do this in this case, but we could. Okay. In terms of the guidance, you think in your comments, you mentioned that you knew of about $15 million cost decline at the time of the Analyst Day, when the guidance was reaffirmed. Could you give us a little color as to what new information you learned since then? Well- On that vein, just so we understand some of the numbers. In the transcript or the press release, you highlight a $50 million shortfall to management expectations on adjusted EBITDA versus a $30 million shortfall to company guidance. Can you help us kind of understand what the difference between some of these numbers? At Investor Day, we were certainly, we thought we would be trending towards the low end of the original guidance range, but we absolutely thought we were within the guidance range, and we thought it was still possible. The improvements that we that were on the way did not materialize. As we closed the books in April, March cost, the March cost position was significantly higher than what we had anticipated. As we don't have the final numbers for April, but clearly we know that April was lower than certainly we saw at the beginning of the year, but we have not seen the cost reductions that we anticipated. With that, the outlook for the rest of the year changed. As we drive costs out of the business, we're certainly starting at a higher cost base. So that's why we had to acknowledge that, with a reasonably conservative view, Q2 will be about $30 million in EBITDA, lower than we had thought. The remaining $35 million will be divided over Q3 and Q4. We believe we can drive costs out of the organization exactly like we'd anticipated from a goal perspective, it's going to take us longer to really drive that out of the cost position in the. With that, it's just shifting a little bit to the right. The other piece of information is that over the last couple of weeks, our deep dive in Southampton clearly indicated that it's going to take us longer to rebuild that triad that we've outlined, and that's another reason that's setting us back. Okay. Then just to follow up on the $50 million shortfall versus management expectations versus the $30 million shortfall versus company guidance. What's the difference? Yeah. We didn't really for Ryan, for the first quarter, we didn't really provide guidance for the first quarter. I think that like we can take. No, no. It. We moved $16 million into the different period, and $30 million is the miss on the cost basis compared to our original budget, right? That's why we printed, if you take this together, $16 million and $30 million, we printed $4 million, and we had $4.6 million of incremental DGMT. Okay. Thank you. Our next question comes from Pavel Molchanov with Raymond James. Please go ahead. Thanks for taking the question. A month ago, you obviously were sticking with the $0.905 dividend. Today you zeroed it out. What was the thinking in doing a full dividend suspension instead of a cut, you know, 50% or even, you know, 75%, preserving some kind of income for the investor? Pavel, great question. The board evaluated and found more accretive value for our shareholders. Shoring up our balance sheet and an investment in our current fleet clearly necessary, and future asset growth. Of course, the return of capital through the share buyback was certainly another consideration that from an accretion perspective and for total shareholder return. When you think about the priorities that we've outlined, first, liquidity and leverage. Secondly, investing in our existing asset fleet. Third, the share buyback program. Fourth, under the right circumstances, moving up some of our investments in new plants. All this together led us to believe that a complete elimination of the dividend was a better new capital allocation strategy than any of the alternatives. Okay. Will you ever consider restoring the dividend, and if so, under what circumstances? Absolutely, Pavel. We have not moved away from our growth program here, right? We believe in 2026, we're going to hit $500 million in EBITDA, right? That has certainly not changed, right? We believe we're going to build. That requires two more plans to get to $500 million in EBITDA and restoring our cost structure. Those are the two key elements that we need. Beyond that, we can certainly generate more growth, but we are getting to a point where we're certainly going to be able to consider going back to paying a dividend without, in any sort of form, limiting our growth potential. The one thing that's clear is that when we look at our opportunities and our potential, the focus on growth is certainly a key part of our strategy. The tailwinds from RED III that we just talked about a couple of weeks ago are certainly material. Japan, we just evidenced the growth potential in Japan by signing another contract with a Japanese customer, right? Growth is certainly the focus of this company in the medium term, and as part of that growth profile, we're gonna generate cash that will allow us eventually to revisit our capital allocation program. Lastly, can we get an update on Alder Fuels? Pavel, the sustainable aviation fuel space in general is still going very, very strongly. We continue to work with many counterparties in that space. All of them are asking the same question: where's the wood fuel coming from? Whether it's in the boardrooms or whether it's in their financing questions, and we are providing a key solution for that. We're one of the only ones who can provide that solution. That is something we're working on with Alder, but it's not limited to Alder. Alder is progressing, and we believe that they, as like many other companies, are going to successfully deploy capital to build plants to generate sustainable aviation fuels. One of our great partners, and we have many more that we're working with. Thanks very much. Thank you, Pavel. The next question comes from Jordan Levy with Truist Securities. Please go ahead. Morning, all. Thanks for taking my question. Thomas, maybe start out with you. I wanted to see if I could get a sense of how you all have historically looked to evaluate productivity and cost profiles on a plant level basis, and how you're thinking about the potential changes there as we go forward. When you go back to, you know, 2020, 2021, we had a strong sense of cost control. Our cost position was predictable. As we went into 2022, cost position certainly went up, right? We initially thought it was more temporal through the war in Ukraine and inflationary pressures. We really struggled through the first quarter with pandemic-related issues. It certainly turned out that we had expansions that we did at many of the plants. What we've seen in September, October, November, is that these expansions were starting to really flow through on a daily basis. Where we have struggled a little bit is certainly on the reliability of those new plants. We have certainly struggled a little bit with, you know, third-party cost management, and we've struggled with turnover. Right? Particularly those elements. The good news is many of these, if not all of them, are actually within our control, right? We believe we can get the cost down, like we've said. We certainly working very hard to train people. The issue with turnover is not that you can't replace people, but it takes 6 months for these people to be the necessary operators that they can actually, you know, problem solve independently in a night shift, for example, in a plant, right? We've made good progress there, but not as fast as we thought, right? We know what needs to be done, right? We have the skilled labor in place and the retention plans. Productivity is driven by uptime of the plants, right? In addition to cost management. The uptime of the plants is not, in some plants, is not quite where it needs to be. It's a core focus of ours. I think we're making progress, as I've said. The trajectory will show. We'll report out on this, on the progress, so we'll provide as on a go-forward basis, given that this, in the short term, is our number one key initiative. We'll provide more detail as we go forward that the analyst community as well as our investors can measure progress. I appreciate that. Maybe shifting over to the contract side. As we go through 2023 and into 2024, you have a large portion of the mix starts to shift over to Japan contracts. I'm just curious if that acts as another headwind in terms of cost given higher shipping costs and if y'all have addressed that in your thinking? Absolutely. Great, it's a great question. No, this will not have any negative implications. In fact, well, you know, we of course, received a headline price that accounted for higher shipping costs, right? A lot of these contracts that we have in Japan should provide the same or better margins like we've seen historically. I will also say that the contracting environment right now is certainly providing us with an opportunity to enter into contract at a substantially higher contract price than we've seen historically. Certainly pricing is up 20% for compared to what we've seen historically. That will start to roll through. That actually will start to roll through already in the second half of this year. That's why, you know, revenue number for Q1 was $219. On average, it's gonna be $234 this year. Certainly as new contracts roll through, you'll see revenue per ton increase. Thanks for that, Thomas. Appreciate that. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Thomas Meth for any closing remarks. Thank you everyone for taking the time to join us today. We've outlined today that in the short term, number one priority is cost reductions. Our revenues are like as expected, our cost position is not. We will fix that. We have that in our control, and we'll report out on our progress. We, we look forward to providing progress updates on that and our business throughout the coming months as we execute that improvement plan and deliver much better quarterly results going forward. Thank you for joining us today. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.