Earnings call transcript Q4 2022

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Operator

Hello, and welcome to the Advanced Emissions Solutions Q4 2022 Earnings Call. My name is Lauren, and I will be coordinating your call today. [Operator Instructions].

I will now hand you over to your host, Ryan Coleman with Investor Relations to begin. Ryan, please go ahead.

Ryan Coleman

you. Thank everyone. morning, Good joining XXXX for earnings for and fourth full year results us you the today quarter Thank call. as and With morning me as President are this Chief well Treasurer; Greg Marken, Officer. on Chief Executive the Morgan Fields, call Accounting Officer, live being of our version the Investors presentation is available This website webcasted section the and call within is well. downloadable todays of there as replay on our webcast site. available will be also A

Investor for You can support XXX-XXX-XXXX. IR contact Relations at Group Alpha

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

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

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

call the turn I'll Greg. that, to With over

Greg Marken

extend joining to team as Arq such, well first new joining Arq and of call like as closing this call. are from Thank on to since the who and you, morning. This everyone Ryan, earnings members a is our our to shareholders us as thanks welcome today's for acquisition, any new special I'd the

company. assets our a technology executing transform leading diversified, We of combined environmental capitalize our complementary plan begin to truly excited as teams and and to on we the new nature are become

production begin a We will and I'd plan, our on of and results. sales quarter I'll to review revenue performance, expectations in fourth our cover was to year. revenue quarter transformative in $XX.X at full fourth delivered Consumables for for Red a million like record first, $XX.X original quarter solid XXXX, the XXXX the which more which million in River, year compared this consumable culminated but exceeding prior year full XXXX.

fourth quarter strong. sales and remained revenue Our production

volumes as what natural the we seen as However, experienced generation gas elevated the natural the of see prices in declining quarter first we quarter much year. early from not continued strong quarters lowered of demand the which our during prior during in average had The fourth the power XXXX. were with pricing to gas have customers,

increase from year not investments year-over-year Our did the conclusion $XXX total Tinuum of Section of XX $XX to in occur million the despite our revenue full year, million that credit prior of at end compared the of XXXX. royalties generation due period XXXX in XXXX a represents the tax to

-- solely of generation they product pricing initiatives mix due demand strong at consumables increased year-over-year product our from XX% power combination and to Looking customers, improvements. revenues, a

related additional million $X.X For a $X.X of process. current of in EBITDA Tinuum to compared our $X.X loss quarter, million XXXX. The down in adjusted year the is the $X.X investments million compared variance the of to XXXX. effect to adjusted of costs in wind loss recorded we net strategic in EBITDA million reported our year-over-year an We net primarily and the results of in XXXX of income

quarter volume during production lower incremental was downtime to than River anticipated unplanned the due Red for Our maintenance.

expectations. carbons, blended XXXX the However, volume, our exceeded full including overall year production of impact our

position, we by year our strong constrained both continue at for million, from overall plans from product third to our overall Arq of will the in a may to tight our continue manufacturing assets as environment, projects ongoing parties and the manufacturing inventory cash $XX.X ended those product and high acquisition which sourcing mix We remain perspective. of growth rates enable facilitate operations an various inflationary with While points to XXXX. as capital to organic volume capacity, and be Those position well related investment the expenditure operational from focused to assets. our efforts on continue production will improve

assets subject to September, in This will closing conditions. an reminder, Marshall integration. balance we Creek to future sheet. related approximately agreement retirement a Resource of the asset sheet initiatives million As removed our that obligation to the to closing, $X.X liabilities, as continue to and sell us be our reached other transaction announced totaled as and allow company, had year-end, to we Caddo Mine our derisk Upon balance from on we will Arq focus certain which

expect addition, be goes cash obligation asset retirement In away. we as a that our of restricted portion to released

year. We continue first will to expect of Mine half this the the that Marshall close transaction during

our XXXX. Turning for to outlook

internal could power top balance around a and also could impact therefore, revenue a we diverse and we generation pipeline, demand and lower persistently customers hinder from actions and gas strong expect natural initiatives performance as prices We that sales line other though commercial markets. pricing acknowledge our

to a X our place The for associated this to is nature. of expected of weeks, note, exercise is maintenance Also maintenance approximately which every last normal occurs activity X plant in scheduled years scheduled downtime that take regularly is April.

planned we we period. any this to As minimize meet for demand during customer have we to have will continue downtime, inventory sufficient disruption and hand this that on ensure

that as on of a albeit margins of of number reduced supplemental as to continue as volumes, sourcing plant carbon, of routine During aspects costs. inflationary will XXXX, we operational external turnaround, pressured cost at result by well higher expect be the production the unit our a per

mix, to are alleviate economics. markets positive and well selling customers average attempting as through increased with changes We cost as manufacturing end-use these product and pressures in our price targeting improved

result, to our ASP continue when a realign continues contracts as our conditions with market and encouraged higher. be We to by to trend ability current possible,

River commencing to order sites in the GAC also enable to are Corbin and and we commercial-scale powder mentioned, production. As capital Arq Red modify projects

In and products technical sales ultimately production position for to taking GAC success, derived and other powder when we addition, from commercial begin. Arq of the are business steps combined

acquisition believe a commercial our ongoing these portfolio diversified in lead roughly $XXX towards initiatives of full basis. are and And on an and million, performance path approximately for long-term on the improved to more in detail EBITDA business will excluding with the finally, a efforts and call. forecasting revenue a for I'll later year, investments economic We loss we onetime sustainable costs. $X these more discuss million

the to With Morgan over that, call in financial our to review will performance turn greater I detail.

Morgan Fields

and in initiatives, to $XX.X year as our $XX.X in and revenue as offset was the and and were million XXXX. $XXX.X $XX.X by were which of million, by The a driven Fourth full and year provides of quarter cost earnings million, XXXX. consumable fourth million primarily $XX.X $XX.X quarter million royalty nonrecurrence compared revenues respectively, successful financial products of in revenues and recognized performance. were -- X Slide in Greg. million increase million that investments you, respectively, for we Tinuum XXXX. of revenue full Thank cost revenue Revenues pricing partially to well $XXX and higher sales million snapshot the compared and from of $XX.X

the natural fourth although decline. which XXXX began totaled were gas quarter, result that primarily million power $X.X total quarter process the the to for operating professional in million compared XXXX. million fourth lower contributed our prices to retirement the year in to was year. $XX.X for other fees higher as $XX.X is of of prices and XXXX. Fourth offset This compared the as and $X.X legal Other prior the on expenses to in in operating the by for quarter payroll associated expenses strategic with increased increase well estimate benefit million products, higher gain for the natural expense. occurred demand mainly that were change higher company's prior generation, to compared due benefits The as to gas in faded Product in the year, review volumes the the partially asset obligation

million method prior $X compared quarter earnings equity $X.X Fourth from to the totaled year. investments in million

remaining totaled from period $XX.X earnings For company The distributions December any does the XXXX. of the $X.X expect end not was XXXX. forward. to million generation reaching of all investments in as tax refined facilities The material method compared of equity going XX, invested their full decline the credit result from year, investments million coal Tinuum

of of tax for expense $XX.X of and tax $X.X the income XXXX quarter year the XXXX the expense income million of company full income expense recognized to in full XXXX. million fourth fourth for quarter and $X.X The tax compared year million

was per $XX.X recorded per of loss Fourth of year per $X.X diluted income a quarter share prior full loss prior or or compared was $XX.X adjusted year. million the million million million million in share or $X.X $X.X diluted $X.X in a per adjusted XXXX. positive while $X.X was $X.XX million in $X.XX compared The share in the Fourth year share to EBITDA diluted the loss year diluted a income positive compared of or a company to prior $X.XX million net to net during net $X.XX of net million EBITDA to the $X.X full positive quarter compared year.

EBITDA the net of in from were Tinuum investments a investment. of to as the equity and lower method declines adjusted again down income The due wind earnings result

XX, compared to XXXX. restricted $XX.X of of balances million XX, Cash as December including as cash, totaled December million $XX.X

for finance were CapEx obligation, As be an started $XX of million the the production totaled XXXX. XXXX, projects, turnaround as that in year to as and lease anticipate Full planned We to XXXX completed $X.X are $X.X only level million and in outstanding GAC future in and which compared the between by of amounts the debt CapEx capabilities was XXXX of were December million, $XX during million million. driven to $X.X scheduled certain turnaround. XX, planned enhanced completion enable company's elevated well plant

the to sale mentioned, Mine of Marshall of during Greg expect half the we As first year. the close

roughly adjustments, future remove reclamation we outflows Creek, discussed, the retirement to Caddo obligation paying As and certain which sheet balance $X.X to our associated million eliminate previously will mine. asset the from with all cash the of subject anticipate

be a restricted transaction. to cash expect of We also our closing portion the upon released of

years. completion upon future of offset may coming the utilized federal Arq retain in -- acquisition, Lastly, approximately to the tax business $XX federal that million to expect of may be grows we existing the payments credits, the as tax we owe which our

I'll Greg. call now the back turn to

Greg Marken

the highlights market Arq of X Morgan. serve synergistic ADES North carbon ADES of with products with activated of and the activated X America portfolio lignite-based the an carbon businesses. our in producer nature potentially Thanks, of XX% was a Pre-acquisition, top again products. to Slide estimated ability combined the

markets, powder provide opportunities. activated to be will positioned that and existing and XX% generally feedstock, we'll combined the feedstock Granular expanded more well which focus both utilizing Activated will provide through a carbon of so carbon Carbon, as American higher bituminous-based than in Arq products, an do or Post-acquisition, ADES's value higher-margin the and North products activated lignite-based company serve GAC

benefit will generation will markets that we market. strong products. longer-term customer diverse of base, be and This within will otherwise served the our and our offering our able product existing from end lignite-focused to powder by specifically encounter, diversification both high-growth existing business pursue declining and GAC power We headwinds new, mitigate would coal-fired

such, As with product longer-term, and products and provides activated diversified a mix acquisition this higher-margin in end facilitates sustainable us markets. carbon participation and

domestically cost competitive to performance, producers. sourced significant. the to and expect value sustainable advantage The product environmental has we that competitive of cost shown addition, been In create that is benefits products the integrated -- high-quality carbon other compared competitive to operations high-performance via combined feedstock activated longer-term is a yield vertically securing into acquisition and product a and

of the Arq's capabilities of only as converting to its processes carbon American needs, We into enhance existing reduced providing transition operating and Further production Arq be business and patent powder. activated coal for resource products. execution our powder combination composition as the protected. XXX% both as believe existing primary North to operations the of that a success of manufacturer producing the long-term the range is that waste we sales access will broader are risk technical, well the a platform through and We feedstock through our Arq of presents that controls for fact capabilities

provide the as activated business Our technology, within it today. access Corbin to carbon facility when existing markets, assets, our with a to Arq's proven nonactivated platform markets, sales customers know manufacturing applications transform product expertise, and patented we carbon combined and channels feedstock,

And our key and finally, XXXX. provides Slide X for outlook milestones

Red existing our looking we operate to continue will to simultaneously we foremost, and to as First have while plant business. and continue grow improve River historically our

market We and are high to selective conditions maintaining bidding contracts opportunities. rates customers existing process our aligning focused new on renewal with within our topline maximize being with PAC our

team, acquisition integration of first Arq it will assets operations. our As the our be the to relates of and Arq, priority

are the transformative efforts enthusiasm the to date We teams of encouraged and are pleased our business combined executing to integration plan. with our begin by

focus River key GAC the Corbin the customer products for optimize these our capital of The of the higher-value powder GAC the and Red to and scale bituminous-based Operationally, enabling industrial commencing includes the and plant heat will GAC and Red market. the installation channels both River to most and shaping products. sales modifications significant Arq be treatment production entry the into developing work new relates facilities to manufacture feedstock on and and processing of processes, of

Red note existing important expenditures -- plan and approximately these to related the interrupted will improvements. these will growth-focused million PAC River be capital $XX be production It XXXX to at by to is not We the customers business that deliveries capital $XX estimate of to phase that our initial million. interrupt

also the focus channels for other GAC American lead and market will emerging securing sales customers and both Our on our be building products. North within

We initial the on expanded the product of expect for full to EBITDA the capabilities when associated year roughly revenue improvements undertake in will million, million roughly with capital in costs areas, testing which believe we of Financially, we onetime generate of to acquisition. excluding completed. XXXX, provide these the expect to opportunity an all are capitalize XXXX $X and further $XXX loss an

used North in integrated, and us our new American markets, opportunities about beneficial carbon meet materially technology a compete carbon carbon growth critical forward. business market. powder towards demands a distribution. the variety up, with long-term in activated by company be The pursue markets growing going products in ability is environmentally other and and to diversified within diversification and from completely be the excited will served provider markets, vertically wrap able environmental our will -- both combined stronger ahead profitability. differentiated activated carbon path we To activated result of The market sustainable of company and integrated be and very activated avenues -- to where are only a a the truly feedstock the the of The to can platform combined products to company yield granular will

that, With back the us to operator to Q&A. over turn our I'll call to move

Operator

Instructions]. [Operator

Capital. comes Gerry Sweeney question from from first Our ROTH

Gerard Sweeney

-- you about little -- -- this how a have dated, you and that X do any contracts on upon the longer bit that maybe pricing bit, more touched but across, little market to You could a detail maybe contract, were maybe maybe possible? years just roll? I'm if -- often you pricing curious Could contracts. have give improvement and under that And that they X see

Greg Marken

Yes.

duration. contracts our Gerry, to within the years portfolio generally, about in are So X X

we things, at we would might estimate contracts have numbers. pricing probably think -- existing of -- turning portfolio may say, as So our that up, those that the an portfolio the environment products -- basis, of to renew we'll those kind of market on I of about we'd market overall what today's about pricing work sort be I'd and XX% various think definitely come have average portfolio for in. towards below that look the operating -- always we're those that market and -- current about based When XX% on the we just be

Gerard Sweeney

this all XX% cetera? year next do renew of And et you. contracts Got or year, of this some it those year,

Greg Marken

year, but portion I a this a those Gerry. further will of those would good little say, of some are that out, be there's

Gerard Sweeney

Got you.

I'm sure on if -- Mine, Marshall cash of I'm I all that other this I'm the to of unlock is as Mine. you million with future? $XX unlocked restricted how come sheet -- more Okay. But that balance $XX about much of milestone curious had year? And Switching not could associated cash if think Marshall or there's or million gears, sort the gauge in sorry, unrestricted

Morgan Fields

as cash come transaction. will that that Yes, that To transaction. approvals probably we that this regulatory that the restricted all estimate be going get Gerry, still close through will we're to XX% freed for point, restriction up off to of we when XX%

think in first to still going XXXX. we that's half of close So the

Gerard Sweeney

Okay. And acquisition, vertically et then final larger think Got addressable market, question. a a opens cetera. I it's up a Arq, maybe you. you, market, higher great integrate value

X but So maybe question, really one actuality. in

seeing of production get powder? when as of some just -- curious but revenue when income from from activated some an statement to to can the -- Arq-related carbon Just the you hit the idea in revenue products? maybe the some Arq past, Now about related we've I granted may start as all to start isn't Arq this talked wanted

Greg Marken

Right.

materially to longer. the some out going start CapEx think producing is the year Corbin the plan, in River to I Gerry, take year most the is product to complete CapEx very the to early facility, Red us So enable of and of next

period the that's impacted we year time by going long the start Red additional as be XXXX, testing but we the probably around the of in first are products. do we're out to things permitting revenue to later that fourth the that there, expenditures that River quarter desire generating So market. would portion additive-based thing timelines some is on expect to to as that according this Arq and to And opportunities all the The we products to then from be have do to of anticipate. some the that's sort those XXXX, in bring that really when and GAC-related go going early capital at work would

Ryan Coleman

that Thank continue you to questions, release. the in earnings gas. low? expectations natural sent market? ahead we also and time call exposure release to and afternoon's We've listeners you customers about to this of One business, was we power are gas how questions and press invite the much announcement at natural in customers of conference continued and to invitation Gerry, who submit questions and of generation the What generation Greg question have an yesterday press do PAC submit you in those to remains to if for power bottom received include future quarters. And pricing your overall related

Greg Marken

So Ryan, pricing expectations pricing year, our fourth of gas the to at and third own our last demand expectations parties pricing needed power various products from as we're remained as customers. potential gas generation impact that aware, materially to and the natural the anticipated third levels. are as Contrary the by natural well during has not has quarters the

in in back declines the seen why kind Additionally, a exactly This then also broader business GAC-focused but Arq a a the and of first we've the earnings more us here which bituminous-based further quarter. on we markets in sustainability. allows feedstock provides basis, help of did transition a longer-term that to profile will diversify to have goes transaction. general, to This to us more

impact think generation about years X.X last remain impacted it the gas natural just we demand for year, As will those low, in customers. if as current the it positively demand does really power

Ryan Coleman

And for Colloidal efforts for Where do final talk the then and R&D stand efforts about for the question. development bit soil Carbon the Product a combined Can a remediation? you company? groundwater

Greg Marken

prototyping strengths is Okay. very both very begun with and focused. company's a efforts. of culture power engagement the I'll idea teams by integration technology to of take tackling the of have On -- to technology pleased customer been we've of basis, our both the those, from similar lab opportunities Ryan. of the The respective groups combining combined technology and

have manufacturing Carbon, and been that engaged of our has Colloidal of marketplace, Specifically are their development prepared are also we we've scale to produce active them front, a completed a entities various the On to have quantities. within and schedules. treatment our secured related market produced meet testing to commercial provide and the X to that product product partner the generation we development

Ryan Coleman

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

Greg Marken

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

soon. updates the We look and these to We are way. everyone our initiatives on along Thanks. on actions eager for key speaking forward to begin executing to provide with XXXX plan

Operator

This concludes joining. today's Thank call. you for

disconnect. You may now

Arq (ARQ) 9 Mar 232022 Q4 Earnings call transcript