- Earnings call transcript Q3 2022

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Operator

Good morning, ladies and gentlemen. Welcome to the Advanced Emissions Solutions Q3, Earnings Results Call. My name is Digrita, I'll be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to your host, Ryan Coleman, with Investor Relations. Ryan, please go ahead.

Ryan Coleman

morning, good and you, everyone. Thank joining Thank quarter for third today earnings you results for XXXX call. our us With me as on Chief the call this morning President Accounting Treasurer; Chief Executive are and as Fields, well Morgan Officer. Officer, Greg Marken, call section our Investors of presentation website, within as there version of is downloadable being available live a well. This is today's the webcasted and Relations A contact Alpha can site, and webcast you replay will XXX-XXXX. for also support Investor be (XXX) available on the at IR

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

I'll with the financial in it over today's presentation important in In statements. turn conjunction and to call the is Greg. review the references the especially addition, With that, to GAAP remarks

Greg Marken

morning. to Ryan. us joining And you, for everyone Thank thanks this

revenue revenue another driven period Consumables a from to growth X% grew quarter year, product growth, solid improved municipal improvements pricing million prior the support third was our and to by demand as increase. macro-economic and quarter the water $XX.X increased partially revenue generation, customers. power conditions for by in The and $XX.X volumes continue offset million, compared to industrial Our consumables showed of mix.

Our than a consumables in quarter, higher year, of has gross year-to-date XXXX. volumes the along significantly margin first was in growth to average the basis, compared driven prior months XX.X% total selling are nine price, of with On compared the revenue much-improved sales consumables XX% XXXX. which to a XX.X%

investments year. we being The of For a income XXXX. net million of XXXX in the $XX.X the reported loss due $X.X difference in compared prior to in million the of Tinuum to quarter, effect net

EBITDA adjusted XXXX, of Tinuum the $X.X to compared investment of was was in EBITDA million Our loss adjusted $XX.X which XXXX. in contributions result million again

XX, As have Tinuum we on of as XXXX. calls, ceased operations discussed previous December

a of result the the section period. generation As Credit XX end Tax of

the modestly at quarter during was volume during period. production strong improved our River position inventory Red the Our and

inventory However, and continue tightness a constraints supply to concern. be

reached Caddo capital Arq. merger to as within customer September, be which This we which half our other an priority retirement sell Company. the manufacturing Mine step attractive remains agreement is investment and are the demand Upon $X.X organic allocation balance and we Creek the our to first to with our the quarter our transaction, commercial Additionally, we the announced expect are of from obligation sheet. of on focus meet Red we removed Marshal to ensure win River continue end will another in operations the proposed opportunities sheet our as to and Resources de-risk positive In closing XXXX., occur liabilities, in million, our asset we market. able to of to in that assets approximately balance

goes away. result restricted also Asset We cash once the a Retirement the to the of portion our in expect Obligation sale of release

supported and commercial by pipeline. growth Turning to pricing as sales top a as well initiatives our outlook, macro-economic we strong robust expect factors line continue and to

Our total than prior the volumes year. year-to-date higher are sales

our sales market, bidding plant well slightly to the the down related quarter, on third power However, volumes when retirements in selective were as partially quarter, to certain as to due generation compared the contracts. the scheduled second

to continue our manage sourcing ongoing levels. closely as We support third-party challenges as products, given well demand volumes of strong continued to inventory certain carbons for target

volume third our after and selective we end for a As of been a led and carefully to stepping mechanical are of quarter, the unit. earnings furnaces resolved. pricing addressed which of Red we the mechanical facility, in initiatives focusing has up issue result, of our one targeting make, a the The being and River on downtime products. that half encountered the regarding Shortly week a commitments our activity, bidding at issue overall we profile our

However, a all do external expect of the sources inventory to affect production products order lost our as we XXXX through current in to position to carbon our in we the of associated reduced expect have these year. meet we we Combining of Yet, demand. the downtime levels and into the on impact supplement inventory will has going continue move to inventory resulted forward. profile customer margin high consumable purchase end will positive our which to be the compared in year, of factors,

on carbon, a we higher inflationary of as currently sourcing of unit continue the as number result operational be are Our supplemental margins to experiencing as cost costs. a impacts well of pressured per by this

pressures We expect XXXX. to these into persist

mix, to product as and costs, product trending alleviate an across our in average increased pressures economy as costs, a economics. is cost by attempting better when contracts a In timing, increase through remain negatively headwind changes supply and the in pleased manufacturing contracts seen impacting as We're the selling possible, our conditions average bottlenecks encouraged targeting with our We well selling price and result, to and higher. market markets of ability realign addition, price positive and product current remain chain these input certain general interrelated to transport causing various inputs. receipt

call testament sales financial and customers detail. our In over XX%, is turn renewal support addition, our with a well to as greater both our Morgan activated back teams, of With that, rates the review efficacy performance to our the existing contract which in as to technologies. I'll remains carbon above

Morgan Fields

you, our months X third Slide a nine of quarter and financial ended Thank Greg. snapshot provides performance.

of of revenues were quarter of million Third and million and depreciation compared exclusive for and consumables $XX.X amortization revenues, cost million quarter respectively, $XX.X $XX and $XX.X the to third XXXX. million,

exclusive Product increased which our XXXX of million volumes primarily product due $XX.X For were million driven and which $XX.X higher contributed improved year due to generation, natural XX. approximately increased prices product our revenues consumables $XX $XX.X million gas approximately the nine $X.X due prior primarily also revenues, revenues approximately were the revenue volumes, first power to favorable products. million XXXX. for to months, by due growth million $XX.X depreciation demand amortization is million quarter-over-quarter in Year-to-date, to mix. of consumables to generated and increased to the ending improvement. favorable sales pricing. of respectively, and September period, million, prices compared compared by and combination higher in selling $X.X of products, by to and our cost revenue for nine is higher Year-to-date, months revenue higher The a volumes of and of

compared investments quarter XXXX. We of from XXXX. earnings for in million method with fees any estimate recorded which third equity their and payroll date in in from Third earnings gain review in was XXXX. quarter, result by the expense, on did million strategic declines the million, the The of the that of quarter prior quarter million to Refined to million, was million December were increases the the other mainly other are months, offset compared obligation $XX.X to operating tax third not year. as expenses credit XX, the method as on all end the operating as Trailing retirement period $XX.X Year-to- $X.X of facilities nine XXXX. $X.X investments equity totaled $XX.X the third $X.X invested asset generation were expenses legal and record result compared to The in in compared of professional million, partially XXXX. of company's higher lower associated the the Coal reaching benefits remaining well change $XX.X process, were

collect in distributions investments Going forward, our any from any earnings to do material not we equity expect recognize Tinuum. further nor

compared Third in million of $X.X million, expense to quarter XXXX. the $X.X third quarter was interest

$X.X quarter during year-to-date term period the expense interest the second million for third not for the in quarter full to $X.X by company's was quarter in of income compared for income $X.X XXXX. loan any XXXX tax year-to-date XXXX. While of to prior or senior repayment compared million primarily million the company did tax the year. was of expense expense driven third expense The the interest the of decrease The of benefit recognize

net primarily $XX diluted versus compared net quarter tax did also or $XX.X for or reported income share, not loss declines We $X.XX million, company the third of loss the are third negative XXXX. period a share, expense or The diluted down lower share income net of and per investments. result to wind from of Year-to-date a negative diluted or as again $X.X earnings versus $X.XX per The million basis a or method $X.XX attributable prior of of expense for share per XXXX. income Tinuum million was $X.XX the any net the of $XX.X quarterly year-to-date per benefit quarter million, $X.X on in nine-month in equity recognize to investments a year. million the

positive to of adjusted Third million loss year. EBITDA prior in $X.X compared $XX.X million quarter EBITDA the consolidated was

including was -date was for period million balances royalties to million of in million Tinuum the adjusted increased earnings obligations, XX, September lease consulting $XX.X The nine-month $X.X totaled the prior finance as to The and $X.X EBIDTA nine-month the compared end. compared December proposed XXXX. $X.X the and only EBIDTA to $X.X totaled year. debt $XX.X $XX.X of decline XX, quarter outstanding was decline third period to Arq legal adjusted $X.X million, $X.X ended related in Year-to for investments, totaled XX, along compared prior million the fees quarter of compared merger. million For restricted with the result which as million, year. XXXX. million, the to as September of CapEx in Cash CapEx are million in the mainly in consolidated equity company's cash from

scheduled mine have maintenance of the year. planned level shutdown completion the We We in million and planned with postponed the occurs repairs of a and that remainder along XXXX. been every for including for XXXX, in certain an CapEx anticipate two to in CapEx that of years projects expect development $X.X elevated spend

expect to entered adjustments, $X.X Caddo which Mine during will cash Creek into will roughly we pay not Greg transaction. balance to As mentioned Marshall sheet. sell quarter, our Creek did from Resources we any eliminate infusion an certain retirement obligation million the Rather to Caddo the we Company, agreement the subject from to asset

to cash sometime of released upon restricted We back closing to in also first the the be the our expect now a anticipate turn we which I'll year. Greg. occur of will portion of transaction, call half the

Greg Marken

Thank you, Morgan.

discussed, recent and took also the capitalized steps demand have reduce operationally we robust Marshal for Not performance, both high by selling but on improved only third see quarter included our pricing, continued As to did we our products and business to risk we our Mine. financially.

In addition, merger like was speaking, a would I will a about announcement our highlighted of number intent transformative to the merge ways. of in minutes the the company to Broadly by to excited our the transaction. we are few Limited. to reasons quarter so why take reiterate be Arq this with

value powder opportunities us our as margin produce carbon Arq First, participate growth higher expanded base by to feedstock, bituminous us it enabling thus high allowing in to using and activated commercial GAC markets. new an ultra-pure expands products

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create utilization facility. River Red capabilities the production the our feedstock to need of second effective of expand However, will the

Our manufacturing designed necessary processes to Red not River include Plant or constructed produce was bituminous to activated certain carbon.

superior included and many plant Although, capital unique we feedstocks enable processing opportunity quality to of vertically a our upgrades to the opportunity the patent alternative to term long protected our for standalone needed to this integrated have of same growth. The would and secure these of attractive. immediately makes over feedstock have very

to and and also company. currently us the Carbon within be market pursuing, the include Marine carbon addition In to otherwise Black, to providing activated Arq is Fuel, expanded the new diversification business. door for and carbon markets opportunities, additional These that opens growth not merger for our would available opportunities non-activated the Asphalt, additives existing combined

testing been source positive, carbon to to Second, value of the products to enhanced securing porous. a with combined The vertically our low by merger is the been that very product securing domestically advantage able and to to value sustainable extremely our The be significant. competitive cost shown results date of feedstock is into provides activated consistently feedstock monetize activated to market. compared a go and quality, producers other bituminous are us competitive domestic operations has create own sourced that we we expect of as performance high have performed high performance the and integrated of

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continue Finally, with power vertically and profitability aligning takes and reduces production improve focused attractive disruptions. earnings products. not rising lignite-based costs profile capabilities a away single chain potential a if financial markets. our were It GAC our operating material from would attainable raw otherwise to level our other be supply growing to merger a generation margin producing and exposure creates compelling on we a higher our by and to promotes long-term to market as exposure Vertically diversification the exclusively that our shifting feedstock towards plant integrated

to the existing competitive has months. diverse We're advantages vertical our our of To well profitability benefits world and progress new strength. term value into properties the for In opportunities as and transaction through excited enabling an and enhancing upside. and and markets expanded coming forward long cost we provides forward margin term a term with leveraging growth move allows from carbon this class environmental commercial Arq feedstocks, addition, through into Creating long existing Asphalt, as the and on financial leveraging additional financial access higher powder strategic that Black proposed with dual in existing combined enter believe advantages capabilities, customer activated competitive updating base with partnerships by capabilities. the endeavor and and integration, its by Arq increases technology, to position markets. Arq Arq cost entry provides shareholder Exclusive that as operational in us to long to summarize, look operational manufacturing Marine markets strategic that existing performance Fuel, further Carbon combined additive investors and

outlines XXXX. priorities Finally for our slide X

supply benefit the as for plant, closing managing inventory and of as and our to our the efficient include our efforts to priorities proposed Arq, to remainder best the and the main achieve Red optimizing continuing of merger with Our to ability. capacity of year at tightness profitability involves working well This enhance capture low-cost Red of River’s River. fully the utilization

customer market. via continuing to continue serve mix while generation our product to and will and markets We maintain and water growth industrial and diversify power

We cost back overall us ups and challenges terms. and inventory Q&A. from call stemming through to sourcing turn that, pressures methodical I'll Ryan to will the mitigate and move chain to continue supply over to seek With pricing step commercial into

Operator

[Operator Instructions]

Ryan Coleman

Greg. Thanks,

We continue to sent submit release. bottom conference listeners questions to press we announcement who you the all of their ahead earnings those yesterday release to press questions call in time include Thank of an and and afternoon invitation at to in forward. of questions going submit the your invite your you

Our the venture first Arq merge joint than or question of a why intellectual rather property. with licensing

Greg Marken

production be that opportunities us. and would carbon based security of utilize of and long-term capital process growth necessary are activated of of of for that path The number the deal a forward. the Arq merger enhancing in the confident most evaluated otherwise The this feedstock. bituminous not funding value entire value and to advantages structures, lies infrastructure, improvements merger any the owning would that with provides the the available combined feedstock the to ownership which be We but cost different outside captures available

us Arq, American its are carbon supply and risks by feedstock on be As open and activated only primary insulate price purchasing that competitors by much producer owns exposed to of that mentioned controls North sources market. I the that will the feedstock from we the combining with

Ryan Coleman

Our Red second potential a we're yet as question, standalone River earnings operation. the true to see of

pursue this merger before why So getting that to point.

Greg Marken

this in are pressure We may we environment that not American operating case, operational need us Although, we that generation that address products, the North customer in as always This a transaction long-term and opportunity serving opportunity and for as an manufacturing to position has activated from on favorable we strength, currently conditions. serve allow products lignite-based market into strong currently demand producing remains plant. emerging our accelerate place. the that to of on GAC our diversify provided growing to highly have be strong markets fossil capabilities, feedstocks, manufacturing will doing of markets of serve, during This to base market opportunities and markets our the transform continue a the provides in faster so capitalize business expand by over XX% will to long-term growth. our while carbon we a relative utilized and period to

Ryan Coleman

in forecasts Our third CapEx and confident inflation, how material scarcity? co million merged of supply high for question, in the issues are chain required the environment you of $XX this

Greg Marken

any and capital cost impact definitely and including of timing bottlenecks the As ultimate conditions supply program, projects. can company's expansion chain macroeconomic inflation, with completed capital

our business exist what Plant attempt it in combined of proactive of estimate We as as our will given through possible factors management Today, and our and Corbin monitor Arq’s best conditions is support scheduling and activities. the plan. plant River to will cost market as and expand modify to these expansion Red closely project engineering, mitigate them these effectively this to value that

Ryan Coleman

question, final the filings related the status and and is fourth our the vote? necessary to of what And shareholder timelines regulatory

Greg Marken

November vote continue over standard in coming initial we SEC filing and will would As you And now saw, believe the to filed occur months. QX the The review we XXXX. that shareholder probably with occur of many on process likely the right do the weeks of X. S-X

Ryan Coleman

who any to for again thanks the over questions. call closing to back remarks. and Greg, submitted I'll Thanks, turn everyone Greg

Greg Marken

you, morning. Ryan, call to everyone and this Thank joining thanks for the

forward will over both and We financially to past to updating enhance our our next We are operationally everyone merger look opportunity in quarter. nine the months unique provide ways we truly to have which the and excited about long-term growth. the believe business Arq a continued improve

Arq (ARQ) 9 Nov 222022 Q3 Earnings call transcript