ADES - Earnings call transcript Q1 2019

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Operator

Good morning. My name is Nathalie, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Advanced Emissions Solutions Q1 2019 Earnings Call. [Operator Instructions]. Thank you. you your Relations, Investor Coleman, may conference. begin Ryan

Ryan Coleman

the well. Investors downloadable morning, thank be can within our Group President the site, section you Thank webcast as me Quarter you, Chief version joining available and and Officer. at support Good Natahalie. on With and Call. for Great. today's Chief live for Executive website, our a Investor XXX-XXXX. of for Heath also webcast Greg being and contact will everyone, us will This of presentation there Earnings conference on IR Results be A replay today is our Relations (XXX) Officer; call the are XXXX available Alpha you Marken, Sampson, First Financial today call and

me that uncertainties no us by based to those the are with slide presentation these Securities future not other X obligation differ any you changed and Except as uncertainties reflect expressed as These and or or in ended update implied quarter the Commission. Form or on XX-Q remarks and or Section the expressly developments filings of include identified results, in Exchange Exchange forward-looking presentation, Slide securities materially These today required information events, from circumstances risks risks limited to, factors today's for to our prospects of XXXX, on the currently in business March could to include, by statements other statements. defined XX, reason. made and undertakes and or opportunities company Act. future any involve the factors law, other statements forward-looking the to and those performance actual but cause Securities statements XXE are remind Let and available for

to references the the statements. it's presentation conjunction the addition, important very in remarks today's GAAP in In and financial review with

Heath? the So over Sampson. Heath turn to with that, I'd call like to

Heath Sampson

this morning. for joining and to thanks us Ryan Thanks everyone

on begin quarter. Slide Let's our review first X and

the Carbon as cash Generation maximizing focused we historical this referring organization. our segment integration continued and & of into PGI quarter Power Solutions new business presentation. the Segment, remain to Industrials combined RC be During we'll to Control renamed it on throughout our Emissions flows on We've

we quarter, not to platform. existing remain integrating our our As last our in and with the stated we has segment Solutions changed strategy RC business committed Carbon while

As segments. In in these the segment highly two as in higher expectations. our were XXXX of the of facilities well half invested result previously businesses complementary inline as the XXXX. announced were second distributions Distributions RC RC as additional closure are with year-over-year both January,

was was adoption equity in by Tinuum additional the increased a greater that the in impacted Additionally, of of is RC collect. total Group. the there review the and facilities this no cash earnings impact significantly we new to accounting but also but detail will key by will moment, year-over-year takeaway change standards driven Greg by amount be

expect collect We from Tinuum. to

first dividends, increase million, quarter repayment cash was position of million share borrowings and the costs. We of from of despite end end of cash integration long-term the with further our $XX.X XXXX up Our from XXXX. $X.X repurchases, the an ended of slightly total balance

our quarters a been shareholders. remain several to had it for capital returning now, we theme committed As key to

During total of the quarter, quarterly $XXX,XXX. for XX,XXX roughly we repurchased a paid shares dividend and our over

authorization and in dividend Going forward, we under November. buy we remain opportunistic committed the announced share backs to the

the Tinuum The million contracted over facility has tons Solutions scaling year. announced to the as main capital facility that stands closures, invested Carbon XX. the is forward the Refined new remainder acquisition, currently Coal integrating and on And dividend X.X per is year, royalty focused debt. a look previously payment, and we In segment, buybacks, the down opportunistic total January future number As paying bearing. in of RC at little facility our the of priority

committed As million deliver progress refined to coal tons tons incremental next month X million the plan X.X million to XX in of X into XXXX. and January, annual remain to million remaining adding XXXX, to year-end. another in we prior expect we We delivered

now Generation Industrials Let's or PGI Power segment. turn to the &

revenue marked with first first million. first quarter The we our newly acquired carbon recognize the quarter quarter assets. full activated our In $XX.X segment of

initial with over to months see is a beginning to very are wins line-of-sight integration of been the acquisition very well control pleased We incremental encouraging as customers the with four to-date, provider. solutions the front mercury us. and continue as to have we and complete the are successes as progress Renewals existing into we're in

for the industry Additionally, pathway our great a and that bolt-on encouraged feedstock to the a to other marketplace grow to and opportunity exceed fully market. have our our not adjacent the combined statement potentially the be power expectations. on mine we in longer-term initial within company and and we believe the long-term recession best-in-class executing We PGI by to carbon We're by continue manufacturing remain Louisiana. plan integration. focused that within is match significantly and excited integration, activated near true the growth overall expectation We plants utilize near-term our integration continues market see on Northern

be efficient it continue work. to eliminating and We has one operating of duplication financial although and lot creating been a on and are will platform, focused

and excited Our committed about the employees future. are

It Additionally, win XX% a incremental simply our and competitive we around direct contracts to us provider have our renew the is in beginning suite feedback has this see received mercury we volume. over control being This of enabled and of capabilities of are new solutions positive marketplace. advantages complete not to product full talk. customer feedback

asking to mercury be us help them on our are fact, In control. customers even

various and to has and With her will financial our call Board from Haas, our results and large Director team Solutions at and the highly Rohm joins experience to quarter. be over CEO are moment other call from the CEO we Tennant, Brian Ashland a global respected company. turn take Dow of next leading to Leen cover specialty and brings She President a wealth a he enter experience Brian years I Resources, to currently Directors. a Chemical. the I specialty mergers like Carol on experience. of Before and of has valuable Stock additions of roles. midsize Greg, leaderships over solutions Carol value. industrial chemicals Chemical, from company to battery to operations, environmental experience DuPont, Both Both has Carol I'll turn production first significant manufacturing Board plastics acquisitions Innocor, Gopher us of Exchange of and Carbon executives. Eicher and commercial a the in back to and industry. welcome of phase board senior Today XX New business provider nearly also is chemicals and individuals automotive serves leadership industry in private the equity York the shareholder to credibly creating that, Greg long-term as this deep chemical and

Greg Marken

Thanks Heath.

Let’s XXXX. practices. start mentioned, on review. period-over-period result new accounting method first higher as as January of Tinuum’s significantly a X, Slide change financial as Group lease and from the were standards X our a Heath quarter and Earnings in investments Tinuum three revenue adopted a for of equity additional facilities

earnings of the to a of our as longer percentage Tinuum of we related cash Group’s the on and our for adjustment have being no Therefore, cash balance As of adjustment net Based we result, recording of the effect $XX.X share in excess our by a Group adoption, recorded income. March on of to that Group’s, distributions Tinuum cumulative months investment earnings Group’s million pro-rata cumulative share Tinuum pro-rata XXXX. we distributions date. equity rather company's net cumulative income adoption income ended company's cumulative than increased XX, three related Tinuum of recognized impacts retained the based this

does $XX.X company, treatment rather flows than As by Tinuum this not earnings Solutions. the equity heath have in timing segment, $XX.X top total the result In or expectations. year, is accounting higher higher Absence with contributions the consumables from million. Carbon increase That million driven was the the earnings million $XX.X of was Tinuum line accounting PGI share projected our This mentioned, and but this earnings the the the revenue XX% pro-rata period equaled line the million. equity distributions. affects prior from would which Group’s to $XX.X of cash in affect change, cash roughly the the from prior totaled than

first company bearing $X.X total revenue well from and greater million revenue and of quarter costs and million higher the the number the impacts the were due and royalty first First as year-over-year with in royalty quarter RC were a $XX.X XXXX. coming facilities. earnings compared of higher for acquisition as of million Revenues million respectively quarter of to $X.X $XX.X

results million over of Tinuum quarter. from earnings higher the royalty year's $X.X fact the compared XX% were $X.X to million prior In in

to During XX generating we XX period XXXX. RC had facilities compared during same the the in quarter first royalties

January completed royalty units. As previously total be future per to roughly are mentioned in expected Long-term and as be added closures $X.XX all ton. contract we earnings have the royalty RC said continue bearing to to additional RC expectations facility this

cash to the with to of from see future to projected year As potential come the may facility March XXXX. through XXXX $X Tinuum facility million add per flow we each million between million be XXX between company. incremental this We on, additional are of add $X flows million each and expected have XX potential as to and to end cash the to XXX

sales, million, million $X.X of to In XXXX, first compared largely operating in of quarter million were the quarter Solutions. segment, was over and our acquired EBITDA XXXX. $X.X XXXX. loss Carbon $X of expenses related million was negatively segment inventory the million was $X.X purchase acquisition due first a year-over-year increase $X.X of operating The PGI to of basis Our increase of is – $X.X million quarter increase an the and of of Segment loss decrease $X.X to an a the by accounting. costs in to of impacted $X.X over of first the was million million the to adjustment due

of Excluding impacts been the and a segment EBITDA segment income the million have operating purchase been have would adjustment, loss $X.X million. PGI of PGI would $X accounting

overall seasonality related business a by a reminder, will more fourth utility third bit does to As will driven quarters the and customers. but of highest PGI Heath later, the discuss the the demand. demand periods power generally be contain

$XX.X to million, was higher net quarter first and income million of pre-tax compared first to was The income compared XXXX. compared the income million to driven quarter of consumables the in for income by was quarter earnings year. expense the million income increase for prior royalty net earnings, lower Net XXXX. First equity tax net $X.X revenue, for $XX.X $XX.X a

Looking total of total a $XX.X $XX.X $XX.X XX, XXXX, had restricted and sharer and of million paid cash position that our activity, at as and related of December well slightly available loan as million, of dividends which million, million, company cash increase million to than for as $X.X of cash is totalled purchase interest principal the as leases. XXXX. March XX, of and This capital higher payments, term of inclusive $X.X the

As restricted the from to term a portion, reminder on $X.X balance cash restricted the of million cash stemming long-term the remains minimum primarily restrictions due loan. the cash

a prior which we we through will to down to term into Turning will This term entered loan end flows acquisition our to Solutions. three-year cash mandatory review the upon loan of address debt, Carbon largely million, year continue believe Tinuum $XX requirements a of has we our loan term. of this and the we pay the three amortization

the million. quarter we principal $XX term on payment. During quarterly million At principal our the made first balance was loan end $X our remaining quarter,

As the leases. entities to sheet, XXXX, standard previously record the causes as all that of leases balance mentioned, January lease not financing on all adopted we new just X,

as As leases additional of million recorded January such, of an XXXX. we X, $X

with pay share opportunistic program, the upon activity, based prioritize Lastly, we be down we in shorter-term. will our currently but repurchase debt to the repurchase also authorized continue may

Heath Sampson

take I’d our moment outlook. Well, thanks, discuss Greg. a to like future to

Refined X Slide to backdrop. the turn discuss Let's Coal and briefly

which XXXX tax previously impact we true to the achieved close the results certain facilities. As of early last equity clarity how These we discussed is on of to several Tinuum continue see divisions increasing and within better reform understand in bill, over clarification tailwinds their tax investors businesses. tax quarters, IRS additional surrounding the on efforts the tailwinds tax have are

whole investors public other this coal-fired and in and the truly the our helps enabling to educate of remains prospective challenge stigma a to the incentive with hand, biggest obtaining development works instrumental being of associated hard mercury tax was Coal On emissions. new harmful generation. control political Tinuum power that reduce tax as technologies equity investors Refined

installed facilities to Turning XX, to be you tax see the X, as of of or waiting Slide waiting number can equity number investor versus March invested of XXXX. for the

facilities two invested units, and phase. the currently XX installed have remaining investors Tinuum we investment, and Refined eight today, additional proactively preparation has and uninvested. opportunity for this of the in Coal as So installation facilities in To for maximize are secure

million nearly us, that During RC its certainly these Tinuum capital costs if related has was XXXX, we future costs. translate incurring Tinuum installation which expenditures, confident roughly to and $XX would spent all members, facilities. engineering not and of into including were will we invested not be

incremental range to XX million potential finalize they on additional Tinuum's conversations million. expect tons next tons have annual facilities. deals X facility total million tax to have million equity approximately additional X current for Should We to ongoing several discussions, we in to with full Again, the the to X month. active million in close our XXXX, bringing to potential the add X tons ton investors ton we an

Slide cash XX for to of update future an our flows. expected RC Let's turn

resources XX, integration Coal third-party unaffected us, involvement investors, our million with commitment to invested experienced range ADES oversight and Coal and and are our remember leasing integrate million allow an to the and the and our of cash team This has its of including Also $XXX for scaling is execute Refined of units strategic our us net will March idle XX of devoting grow with reaffirming the been owners, assets. by RC in Refined As our selling run the simultaneously to number facilities is end or XXXX. priority, PGI continue between inclusive to while one Segment. to we expected XXXX, Refined guidance. by Coal, flows $XXX that and structure to This management from necessary the business through

This leader within for North carbon become asset the Slide leverage industries. slide new we multiple to activated strategy. flip our and Let's shows XX American ADES roadmap how plan to quickly new our and our review in to diversified the

control positioned years as to America the segment. burned it North in has already gas. profitable is changes competitive; completion The shifted the growth market are attractively few for of to over our due mercury We position leading past the new many undergone coal natural in has

do are generation resources that for a strategic generators can power They or As coal-fired now dramatically result, provide significant headcount the reduced at simply not looking cost to savings. anymore scale. have continuously for – many more less. vendors have looking They and are compete fewer bandwidth for

mercury market. for for be Gaining choice is best are the within number We either driving market by to or of pricing positioned control the supplier incremental products, share this changing performance, American one. power North power by service premium priority

commands today municipal in be positioned price and share our also achieve the our immediately material further year. market, the personnel and a It in also – are initial pounds it. that providing expand will in broader products consumer comprised to is XXX immediate better in a into focused with we is we or of market. many This to Longer-term, this to this ourselves presence – number We believe growing, of opportunity resellers. here premium thus, positive we a this To grow on fragmented producers and a opportunity require highly market points. not presence. existing and, any addressable industry penetration to space have to plant our will limited focused per results. XXX of million – environment see pound demand Next, treatment to investment space, commercial the bigger water grow the estimated is water lead million U.S. premium expand market adjacent This and position incremental aim

seen compared higher mercury approximately to This demand over market commands the higher control has XX% years, across margins here growth rates. XX% increasingly the by clean As has to and both everyone globe. is water and

or and entering would However, capital upgrades to feedstocks. the existing market this require facility expensive more

mature, margins. oil carbon, market growth The In addition consumer other the leader markets and these opportunity as like higher as less, as U.S. initiatives will outside evaluate markets market other American more Nothing initiatives and products. opportunities activated adjacent such to adjacent or the mercury and and broader water, regulations North water and as positioning of higher mercury – well for as ourselves segments food we have control pursuing tomorrow. rates beverage capture and also adjacent international specialized are gas,

we to to significantly XX our occur quarter. plant municipal control One regarding As mercury planned months In service appropriately. within to a the continues that immediately scheduled expected, we for growth is facility. best-in-class as second our and impacted of These they two period water. PGI focused inventory we are required most scheduled customers the that to three for activated are maintenance assets downtimes organic note a on are our preparation during and scheduled carbon to be period weeks for segment entering sufficient downtime, be will ensure every XX the built of downtime

company quarter, second our we will additional we guidance As mentioned last consolidated during earnings and provide segment for quarter our call. XXXX PGI

may out remainder expectations quarter's weather. it power helpful is be year. of this results seasonality to for dispatch to context the However, affected the in this for and business point by Coal-fired greatly

Our lower Midwest the and largest customer is South. in footprint

demand the air-conditioning the high third in is needed. quarter, such, As when is

Additionally, demand year-end the customers end high as the the complete quarter their fourth has summer orders. customer and

the quarter slowest our by second generally for business. quarter The are quarters the followed first

new next to than higher revenue expect the starting providing of forward half year. second for remainder second of XXXX we the we to up quarter. Again, guidance the expect customers in more In half. first to the the and year Additionally, half the summary, have of margin we have look

Moving on to XX. Slide

be initiatives and paid dividends second quarter dividend business. honor utilized paid $XX capital Since capital to into XXXX, our of Xth million the of start We generate paid Xth. invest quarter company on shares. and allocation our of our quarter the return to capital program second the repurchase will ours the in return in plan. a both key million the commitments fourth Let's and recap remain June $XX of we cash yesterday has on These March we believe dividend focus our flows sufficient declared and capital of

our years review tax flows their to RC Slide be Finally, priorities in Unchanged prior focus. to our our cash leasing facilities is ongoing investors. on continue Maximizing equity RC efforts first XXXX from secure Tinuum let's supporting to will XX. and commitment

American will goal mercury acquired share people market. strategic assets, to our tax newly the the second integration Our capture of control operations and immediately North be in

We simultaneously compelling dividend will And verticals rates higher continue increase well our program, as revenue. pursue to quarterly continued and to to commitment We shares. like will water. generate growth to acquired utilization outstanding high-margin opportunities within as capital opportunities of evaluate see attractive in and adjacent recently finally, opportunistic assets our return our through shareholders the our we repurchasing

that, take I'll So questions. with a few

Operator

[Operator comes of our Wainwright]. [H.C. Instructions] first Amit the from question And line Dayal,

Your line is open.

Amit Dayal

Good you. morning, Thank Heath.

Heath Sampson

morning. Good

Amit Dayal

Great to across see the progress being fronts. made all

for on for going year, $XX maybe the the way roughly Just the to three comments it? at more believe. additional this about your should by year. look already we be for done new We've unit the done deployments right basically largely units RC driven look million, I that one, is to Is

Heath Sampson

Yes.

You're thinking of it right.

million with of different So us to have X we had a close I that sight clarify million another on in and X.X leaves month. in to early couple X parties. stated more just year facility then facilities closures line And multiple to that should on we there. get that we range into next And million – ton to a in on again, that the closure

feel really we about XX good making that last we that year. million ton So commitment gave

Amit Dayal

to clarify, have next And potentially month. just closing one you

Heath Sampson

Yes.

Amit Dayal

being so well? second the expectations of close or Would two probably as installed, will have sort have that in you'll one you of process installed soon

Heath Sampson

Yes.

close, closures it all like timing to closure it's project. am why the Outside have happening, that, I get when a next our is, to confident is about years – predicting pretty which little months of the we month talking are in So month. and of what difficult

good far have do we sight and However, are along. line of

of additional XXXX. I So the expect before end do closers

Amit Dayal

going your these does of forward commented royalties from all to that forward deployed. to going be here? are that going sort be of royalty think are expected Because impact How I units bearing, Understood. you

Heath Sampson

Yes.

Amit Dayal

trending it the was we quarter? in little a could expect than where higher potentially So bit royalties begin to first

Heath Sampson

all facilities it Yes royalty be future correct, bearing. will

it So like consistent facility as proportionally prior we increase our it past. the quarters prior and add with – has the just in will closures, quarters

in So royalties trend up facilities. close will we additional as

Amit Dayal

levels, maybe the that? integration, Understood. in And think made CS would that you I on be quarter XX% are end on utilization in to last the working had yet front on still of you during improve from indicated XX% progress to any regards the or the or acquisition, around the efforts call to

Heath Sampson

top priority us. a for Yes,

the both with have the the operation plant, mine underutilized. in incredible an and We then and Louisiana down it's

remains great up So a us to fill plant, that that's to a it top priority is be for that opportunity us for and happening.

forward guidance we when a where and on in we plan look be that, we where but with with to to with are thought acquisition. I we more So that are what giving line we you this little made initially

Amit Dayal

Understood.

with last if I but XX the associated I've this one don't of down from Just got million million X acquisition. you know correct, one paid the me,

you're related So that? around $XX at to now million

Heath Sampson

Yes, sir.

Amit Dayal

you, Thank all Heath. I perfect. have congratulations. Okay, That's

Heath Sampson

That's you. Thank Yes. great.

Operator

And Joshi line open. question of H.C. of from the our line your comes next Wainwright, is Sameer

Sameer Joshi

Good morning. taking Thanks questions. my for

Heath Sampson

Good morning.

Sameer Joshi

about we or going should fixed be does is is have overhead the any we costs question what should first expect it that aware forward cost of that or consumables revenue, of? The

Heath Sampson

in we accounting. Q the so a year. about million in that there related during revenue, of the to $X.X step-up million X.X consolidated Yes, the highlight there's to And thing one did is we cost in the come said of about results on that purchase more basis the

if exclude expectations accounting picture pretty that one-time gives you forward. items, your look of there. you as But does adjustment that you purchase have a in those the So good

Sameer Joshi

is adjustment correct? million X.X a has million that XX.X the is it So,

Heath Sampson

On sale yes. does, it side, the cost of

Sameer Joshi

Yes.

I to you million, should X.X a but on or $X.X continuing like to this higher we costs expect it? they because expenses, how were at Okay. operating back then one-time do X.X level basis, the on of million, know revert And million look at

Heath Sampson

good that given the we a bunch fact diligence really we have little in and that than a to, were, different historically our we It's expectations good expectation next where up. little a the able operating built savings than more much going end provide about have we will on to that we're where during of to into already we quarter. captured We'll but going a be feel be guidance very used have we organization and to we higher

Sameer Joshi

But Okay. sequentially will than to $X.X be it the lower sure. slightly make just million,

Heath Sampson

that's Yes, probably pretty way it. look I good to think a at

Sameer Joshi

Okay.

Tinuum, On including based But assuming I predictions or because the on distribution your were costs been conservative cost. was additional view a guess we CapEx Slide it pretty and it guess were online, seems has to bring bunch CapEx X, this incurred. of I already

So Tinuum any levels should at these to we of expect facilities? distributions ex be new addition from

Heath Sampson

facilities We consistent. we investor be with those will the have to have install as we spend additional – is there, Tinuum CapEx, distributions given expect X quarter. distribution Slide where will additional if in will expectation were higher year-over-year an and it facilities on sequentially shown consistent be an we that this The do but

Sameer Joshi

CapEx you million don't expect around $X facility the are for or levels why numbers? at But, Right. those $X – a to million

Heath Sampson

million is on the number $X new general Yes, million $X the installation. to a

those the so year, period-over-period. there's latter already timing of half have over may installed in done that Some the of work last been some carries on facilities

Sameer Joshi

Okay.

all I think I Thanks. that, had. those the are questions

Heath Sampson

you. Great. Thank

Operator

time. further at no are this questions There

Heath Sampson

providing and great again everyone. you today everyone updating further new support. Have color look thank Well a Great. and for on day, our I you your next business. the quarter continued forward time to all to

Operator

conference call. today’s concludes This

day. a disconnect. great now may You Have

Arq (ARQ) 7 May 192019 Q1 Earnings call transcript