ADES - Earnings call transcript Q4 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Advanced Emissions Solutions Q4 2019 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Ryan Coleman, Investor Relations. you. Thank ahead. go Please

Ryan Coleman

are Good our and year fourth With Marken, call results Chris. Executive and us and Officer; XXXX for today call. Greg today the on for quarter Financial me Sampson, morning, you, President thanks Chief Officer. everyone, Chief joining earnings Heath Thank and full

replay and available there being of today's version XXX-XXX-XXXX. our is call the as conference you the downloadable A live within can be support Investor Alpha for is a available will section site and This IR webcast at of on Investor well. webcast our also website contact presentation Relations Group

me Let opportunities in cause are actual information and business currently in that defined Section could remarks and XXE and and prospects these uncertainties and available of that materially to or those based implied made on us, differ Exchange presentation involve statements today remind the risks future forward-looking These as expressed you statements. include performance from statements Securities to by results, the Act.

but other uncertainties changed year today's laws, or factors as circumstances required Except future forward-looking or of those any Commission. update any on Exchange and those or These our identified the developments, risks undertakes with XXXX to, limited by for X are presentation, XX, the and reason. XX-K December not for Slide the expressly no securities ended company in factors to reflect Form obligation the filings statements Securities slide and events, other to include,

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

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

Heath Sampson

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

is manage want get everyone with this pandemic. trying started, COVID-XX we empathize to Before to through I that

I later the many Although health portfolios. pressing under call. our to operations we COVID-XX extreme market most pressure are everyone, our in manage and to their touch think and about will on and are financial shareholders of also how the safety

four record Tinuum Let’s now higher Within review by the for in distributions All full-year these roughly also Refined drove and quarter during of added facilities begin increase tons were brought royalty XXXX. in than we facilities that driven additional XX% XXXX. XXXX, Coal was incremental the million year. and our four on fourth for Slide bearing, X year. $XX royalties, saw were The the increase operating our XX% segment, compared to that which were which

coal-fired two third the Tinuum were and quarter. Despite it the we decline largest refined not full was royalties Tinuum year in fourth coal generation, the lease contracts restructured power between fourth in resulted The quarter which both increases, of – lower closure all the of in driven customer coal refined quarter XXXX. adding and done distributions facilities which decreases significant in its by volume being we of all are call. at, had discussed That utilities that said, on and

generation. time, the same expect additional power also At due poor coal-fired to headwinds we

incremental As such, XXXX. how in prudent not volume net we to much it is announce expect

each update expectations incremental deal We will happens. as volume

commercial and poor progress the dispatch. power performance were assets coal-fired with almost financial PGI disappointed throughout the XXXX, we strategic to these due segment, but our in significant exclusively year, In made we of

with of resulted in generation XXXX, coal-fired months, decline alternative summer compared U.S. the XXXX. power in cheap fuel in XX% the coupled flat aggregate in Although power remained both and generation to sources, weather winter approximate mild of

the affects PGI business, segment. a entirety burn more coal it effect depressed While is our on our sharper nascent of

cost business. and headwinds, what revenues these total and the can lower anticipated. been volume of a were We've materially than we on responding managing by As result focusing control, diversifying

on highest we're and the win were new We of long-term up company at for for customers that the executed in to the renewal. history agreements well secure XXXX, opportunities we achieved Overall, able rate XX%. XX% in

So, long-term we encouraging the clear competitive are marketplace. forward and developments to we're competitive in activated we position to the as able offer decline while highly solutions look these is assets. the potential that It power, this carbon overcome coal-fired of in not these cornerstone

They of Our plan some realize PGI have the them best their potential. assets in remain the and underutilized are full industry. help to we a

One additional XXXX spent key and and sales of further out to on team our is the markets. building product components opportunities and internal the better industrial within market markets. water And identified allow these non-coal have plan us that focus compete portfolio. much We non-coal that of of a heightened diversify to pursue infrastructure we several

efforts into those to momentum We our build XXXX. existing on expect

within that equilibrium, We demand positioned the and best will among landscape capitalize on changes. be to we those market strategically rationalization towards trend also to ultimately in believe supply expect and industry competitive the carbon activated participants

streams, we I'll and package. solutions winning the In have about leveraging call. our segment product to we in acutely complete the the outlook focused PGI meantime, remain revenue right diversified this our talk segment more for filling in on where on markets, our plants with share the more capacity later win,

XXXX, return allocation over as capital significant million share repurchases. our to year $XX priorities. to through our to delivered our In we we during shareholders our to and continue program holders, capital dividend Moving the equity

continue XXX,XXX for to In shares. authorized million $X.X repurchase we opportunistically. Board we additional outstanding repurchases In roughly purchase aggregate, November, dollars to share spent XXXX in the and

reaffirming quarterly Lastly, of $XXX RC end after and we through million $XXX our normal the distributions, from net cash flow total XXXX. to the our even between are segment outlook

focused current opportunities. on In the volume are we incremental completing near-term, our

to I’ll walk and There’s [indiscernible] we pulls that on contracts, However, also the need the point and an though everyone reducing call. to in in at where operations, later we XXXX. by costs. are renegotiating a refined streamlining opportunity money the pushes save for plan

and be like replace happy healthy a CEO. been retirement. I the the as Dowd into Before who has hand business, to CEO, leadership Eller, recently announced Rick Ron of Tinuum moment to retirement. this Ron will wish Tinuum his to a I’d Greg, call Ron's to we instrumental success take and thank him stepping

served look to continue have as thus, and we work The in smooth Rick with with Tinuum Rick for to team. previously years. CFO, several forward worked closely the and Tinuum transition was Rick we

our forward detail Greg? fourth discuss outlook results. Greg I'll greater after quarter reviews full-year and our in

Greg Marken

Heath. Thanks,

Let's $XX Slide compared X in full-year while financial were million higher million in Earnings for start investments million, significantly fourth $XX review. our method to last $XX million equity compared XXXX, of year, from totaled to on XXXX. the $XX quarter in earnings at

by in Heath facilities. XXXX, compared the third from earnings payments to Tinuum well XX, As as net incremental as in September lower driven the coal and had where refined two offset in period partially equity ended closure with third facilities of increase lease XXXX full-year parties operating by unexpected the four invested mentioned, was the the Tinuum utilities beginning XXXX, quarter

January cumulative now percentage to of million that adopted our not of X Also rules. Group's our the XXXX, increased revenue cumulative lease new Tinuum impact earnings, accounting related and We recorded amounts company's on effect Tinuum of $XX.X future adjustment earnings. retained a adjustment will those but

XXXX. cumulative for our rather Tinuum has in Group’s than net rata distributions cumulative based cash cash recording longer distributions recognized the share excess Group’s the earnings rata pro our of income. by XX, net of share equity company pro income, no ended ADES December Therefore, on year of Tinuum

in recognized be our XXXX. GAAP transactions XXXX, expect two as However, coal point sales than in less time facility will equity Tinuum we refined due earnings XXXX, during that having significantly to

of facilities, in customer. lease Tinuum’s in from two where lives largest the the operating due their had to of In addition the net facilities change quarter closure for and impacts payments utilities depreciable refined third coal Tinuum lower

timing, to the our affect not or in projected XXXX. XXXX cash we both does our cash exceed method this earnings expect from see significantly distribution future flows GAAP and from equity However, the and segment, total investments RC

quarter full-year totaled consumables increases in Carbon royalty and than XXXX, of revenue in $XX extent, million of the XXXX. quarter a as to and higher both than full-year impact the a full-year. $XX Fourth $XX XXXX. fourth the The for million result the by while revenue million lesser of versus were for Revenue by million acquisition higher was Solutions revenue higher were full-year $XX earnings driven

and for million full-year, million $XX.X fourth by respectively. totaled lower year-over-year, the by in Royalties XX% and X% $X.X quarter higher the

the The the the which Tinuum’s we XXXX, Heath largest the for generating was, customer again, of as company, XX depreciable to facilities during from During payments lease and increase. decline result change lower royalties drove net impacts of facilities. lives to quarter XXXX, a compared had fourth Tinuum’s full-year mentioned in RC coal XX due refined

upon applicable expenses. is Royalty expense of of based a margin, income impacts other pre-tax per to ton related inclusive and percentage depreciation the

coal as long-term ton per $X.XX on $X.XX the earnings updated restructuring coal expectations within forward. to $X.XX were contracts roughly burn from expectations going part of Our royalty to based refined that

assets. caused was prior the lower allowance the the deferred year-over-year, for quarter by Net income by in which expense to was in income fourth a our higher tax year, valuation tax driven decrease compared

Full amortization impacted by when income method legal offset sales, Carbon in integration, was Solutions XXXX, compared depreciation higher XXXX. expenses $XX.X was from impact income was due expenses. operation, operating margin by equity year to but earnings contribution net and higher full-year the of million the flat Net to and and

$X a in of step-up goods the in amortization a also acquired were Earnings basis basis finished of million negatively connection impacted adjustments. purchase inventory on accounting with by full-year to related

$XX higher the $XX EBITDA EBITDA decline million XXXX XXXX. in lower XXXX. expense expense million, was prior and higher operating The amortization compared and of increase in in a compared million to was equity earnings $XX Fourth at to significantly Full-year million, driven and to to quarter depreciation compared higher XXXX. was was result compared $XX The full-year earnings interest by year.

loan in the principal mandatory acquisition subject entered we to began term Solutions. XXXX, requirement of of March million, $X payments a loan three-year end the term fund $XX quarterly of to XXXX. amortization which senior million At Carbon into has This

of quarter, current In a loan the payments reducing to fourth including principal principal the million totaling we portion million] $XX as [$X of year. During the balance, the term the end made million. made principal XXXX, we $XX payment,

its to off this than expect of balance years. continue to in less stated pay We term three

use to our the Solutions and the million of to operating cash XXXX of acquisition compared loan, of repurchases of to contributed and term capital balance capital Carbon the related in end and shares, year the driver total outstanding at cash higher of was expenditures of this costs also balance The the outstanding XX year. change. the have as ended $XX.X in $XX.X million $XX.X of largest the reduce We million, our dividends reduction paid, of with to September

long-term to to restrictions of loan. also this due $X We cash term continue the cash million classify as from restricted

just of million the above including fourth share of sits the XXX,XXX shares quarter for outstanding activity during Throughout year. repurchase consideration we $X.X total XXX,XXX year, in as the currently for approximately a in result $X.X we repurchased Our repurchased $XX count million share shares engaged the million.

going shares We have in share account opportunistic our reducing will back evaluate remained opportunities buy forward. and always to

additional mentioned, an Heath November. the As Board approved million $X.X in

of remaining. the we of just end year, $X have over the As million

I'll now turn the call back Heath. to over

Heath Sampson

before like Greg. moment to take Thanks, I'd our a taking discuss outlook questions. to

X, can Based of expectation to quarterly $XXX and Slide to flows. to future ADES even the RC cash of year-end end cash flows reaffirming distributions, we XX see as our expected of XXXX. are of Turning million the invested our you our normal after-tax million $XXX facilities after through on

updated As at facilities. these this had XX invested third closure due to two sites the which was of quarter in September last of RC a reminder, unexpected the utilities – during year, Tinuum facility two number

operated. facilities reduction also service during two always forward also facilities and Only quarter. their included were the they given placed our fourth invested been cash thus, two XXXX, guidance. that have expirations met of date XX-year in one flow in expiration expected, and were that these these were The the And included in

of disclosing As to line and believe have we we into occur. noted XXXX look them sight also incremental earlier, in forward volume as adding they that

for engage cessation. coal, refined While continue refined existing the we we partners important in equity that plan potential will also it's incremental tax for investment to and coal

years two for with expected. remaining business, just refined a some coal incremental have We growth

refined As consistently while will such, coal. money, a Tinuum to ensuring look save produce

cash by Additionally, we also will reducing respond generation decline power changing costs. to coal-fired quickly the

costs to need in million offerings. annualized optimizing an target basis, both will $X lower diversify reductions and while our product and products manufacturing process. at our do least We We on

some we we the X, of to what outlined for opportunities our potential of as Slide assets. key activated us maximize to the Turning see carbon

this than opportunities adjacent at continues generation not which decline, forced earlier the but power us to to expected, to coal-fired has turn plant. market As velocity,

are carbon, in about activated talked the we with industrial are been we begun similarly some traction and have application These products have We regulations ahead by where have gain products. the for – those of our to expectations. applications markets that non-coal of of our initial industries our bound

municipal new the markets. water infrastructure out with compete built better We also have to internal the

Our product in expect portfolio in results markets, momentum as water carrying fruitful improved, to see XXXX. and are and commercial these strategy markets is more we greatly these solid in we

throughout industry of we market talk nature we fragmented we expand will the market Back Today, highly remains new as emissions fragmented XXXX about into operated. catalyst and highly key be control a XXXX, and the the rationalization for activated carbon markets. growth

As we’ll possess best advantage to given this market. believe be position market in we we this and on capitalize opportunities, cost the assets the high-quality of in rationalization occurs, the emerging characteristics

Flipping to X. Slide

a added have show projections market We in power slide changing U.S. the coal-fired the the for to

in how from government we You decline in expected And each see quickly XXXX. the agency and can asset these expectations fallen how precipitous forecast December have have this incorrect year. XXXX specifically, experts been underwrote the when

and low sustained scale; coal. business demand; decline natural prices; unexpected of societal, of renewables governmental three, against result factors: to lower meaningful gas two, One, convergence power was This the four, and overall pressure coming the four

generation falling provider. solutions it by control to based Information that grid U.S. power XX% service we faster, long-term suite estimate. stable a will be bring and is to of XX% emission expected expect to Administration remaining of that is providers coal-fired utilities need upon full While Energy the the XXXX remain Those

on how power coal-fired products the our our of side from is right-hand intend diversify around figure to estimates this slide The internal away generation. we

progress that in diversifying XXXX as during made expand can significant coming we stream, continue You expect that our capabilities. we quarters to revenue see we and the success our toward

XX% is carbon market the market additional activated size of share. opportunity products full ample carbon in and there Importantly, base so gain roughly U.S., to activated constitute the

but to utilization of can as plants of low-cost part the $X.XX our we of that would we for every structure, allow to we add the assets. parties have and capacity, As dollar which rates Remember, to approximately the volume, negotiations with our allow us us discussions plant. focus our to maintained fixed cost increase greatly to nature fill allows go our current fluid, ongoing These line. will the are leverage bottom leverage volumes

off will possess will the are the as viability industry. And growing long-term to unchanged. overall I opportunities of rocky with quickly asset these adapt the changing, dynamics. current the assets XXXX and market align as market the mentioned, previously start, we in costs a premier our capability future of Additionally, market is our cash business the while got to and the We

we not the to even our in PGI innovations have be but exceeded value we near to expect We have these accomplished in coal-fired player XXXX XXXX. these investments our We closures entering a with meet significant coal of expectations, dispatch. creation after path a plant and did segment poor power refined made adjacent we because two results, clear markets, are we and and

XXXX. growth our success beyond to we solid short, and accelerate order refined claim emerging of In our long-term and continue in other grow into the XXXX because coal, short-term to segment, PGI were but in our need to maintain results share markets core in market opportunistically dynamic

we return of Slide shareholder the recapped On program capital balanced approach. our our X, progress of

holders. returned shareholders million of mid-XXXX value has since debt authorizations. critical program but continue repurchase capital are to distribute term balance pay-off We aim to allocation, component committed reduction dividend and our quarters, between term, equity we three-year for over to In $XXX our as this to share a the recent a than become less have in we loan now more

our introduce let's X. Finally, Slide XXXX initiatives on

RC PGI continue investment unchanged, cash cash our as Our flows. protect allocation including streams This continue to increase in priority capital is, program, our initiatives. flow our the is to and facilitate broader net priority the

the growing and opportunities will market entail Our these as vigilant This market our to as we for about, as opportunities reducing filling wins additional remaining advantages. the be with well as and low-cost in plants costs. volume well upon initiative will new spoke incremental leverage utilization second key plants rationalization, expected cash

returning to committed shareholders, loan strategically to in down remain senior Carbon we while finally, our term also Solutions. And capital and our investing paying

needed. had not not evaluating Obviously, are COVID-XX, to changing daily, of it by and we conditions a questions, we as as changes situation. interruption are Before the relates as hour, business the take these have we result if any

direct well staff plans priority. the for preparing possible, our ourselves impact varying Tinuum position to who will best contingency We seen one staff, communicating So our are employees, personal as business partners while far, no remain and our number as place in to safety potential Tinuum we've with degrees of preventative disruption. also or business

Tinuum use many chemicals and is the domestically-based as of same we do.

have ample they Additionally, the stored in U.S. inventory

chain. with integrated focused business are a vertically We supply and efficient domestically also highly a

The proximity hub, supply those may dislocations in their the opportunity insulate be mine, service us an temporary [Nothing customers supply stability local less]. from us many potential our actually of helps to by to seen coupled and our offered disruptions offers us chain. who with distribution

We situation the changes and this treat any seriousness will continue it with appropriate. to to as respond deserves

questions. we'll that, with take So,

Operator

Thank C. you. Amit Dayal H. The [Operator is first Instructions] question with Wainwright.

Your line is open.

Amit Dayal

morning, Good you. everyone. Thank

Heath Sampson

Good morning.

Amit Dayal

Heath, just to – good morning.

there Just are projections? closures other with, your any in core to begin plant expected

Heath Sampson

that they're No, more on happening, we but two are we was our specifically, seeing based what in one located, in we're projecting these The foresee are closures. – the not. states XXXX, nor surprised, facilities any anything don't

Amit Dayal

And slides, there's indicating do to your think might more more XXXX, than an in you you're in you one opportunity add one? add

Heath Sampson

Yes.

there's that we do So, think opportunity.

in than are discussions to We one. more add

as really, most the critical are months to additional – additional adding volume. probably those us So, for as point six but next well facilities,

a is we're coal-fired similar as past, dynamic then is And evaluating what to to that perspective going this the noted, to we've committing I but incremental dispatch. from in power mean financial volume had also

we'll incremental to the announce as that is coming we over happen So, be, volume each deals those next going of think kind of net what months.

Amit Dayal

operating on? of we the costs, lower of or any what then focused in your operations? it personal And aspect to Is exactly efforts other Understood. terms are

Heath Sampson

SG&A to legal the optimization product We’ll on from the expect is it that's – side. cost Board. continue cost side to you'd get reducing estimates. It’s efficient, even personal. be consulting. in and across It's manufacturing It's that the And then normal our not all whether to or

across So, Board. the it is

Amit Dayal

And but – has two contribution contribution one from from far opportunities, are Understood. water when then of these away, getting away how growth been related looking it away? sort from… How years year long I mean, focus, you’re non-mercury we is a active area of we efforts, at should

Heath Sampson

commercial well in very capabilities, a was a improved us. XXXX We realigned invested as lot our processes year and as our and important have for product equipment staff.

So XXXX, each give these by. quarter as look opportunities update we significant goes increase expect and to an forward in

Just feel – the to why that because this that asset a grow reminder, to why of continue about really have. we good there opportunity manufacturing is we

If you remember, asset in asset newest North the million, investment it’s $XXX the in of this over – had an and America.

us, capability for the carbon. and the we activated have make to So cornerstone asset

in So really the out and for did nominal some us, to it XXXX. that then can all markets, application rounding we was properly capabilities and our ensure test investments understanding that we

So, showed on growth again, we about was and mercury, that that XXXX. it a again, see complete it really what we lot think It's that. and had water of from And a aligned that in we’re – encouraged year not one that. in the meaningful products this of is guidance, we to slides this growth but primarily graphic in industrial expect expect

Amit Dayal

Thank Understood. you so That’s all, guys. much.

Heath Sampson

you. Thank Okay.

Operator

at questions are further for to call turn There back the any closing remarks. time. Sampson no I’ll Mr. this

Heath Sampson

to you continued next us support. quarter. on We and Have everyone. Well, forward call great. for today look our updating day, a Well, your everybody the great thanks, joining

Operator

concludes you Thank conference for this gentlemen, participating. call. today's Ladies and

may disconnect. now You

Arq (ARQ) 17 Mar 202019 Q4 Earnings call transcript