Advanced Emissions Solutions(ADES) - 2022 Q4 - Annual Report

Financial Performance - Total revenues for 2022 were $102.987 million, a 3$100.294 million in 2021, driven primarily by a 20% increase in consumables revenue to $102.987 million[104]. - Consumables revenue for the year ended December 31, 2022, increased by$11.8 million year over year, primarily due to higher volumes sold and improved pricing, offset by an unfavorable product mix impact of approximately $1.4 million[106]. - Net loss for the year ended December 31, 2022, was$8.9 million compared to a net income of $60.4 million in 2021, representing a year-over-year decrease of$69.3 million[117]. - Adjusted EBITDA for 2022 was $1.3 million, a significant decline from$84.9 million in 2021, indicating a decrease of approximately 98.5%[117]. - Cash distributions from equity method investees decreased by $68.1 million in 2022, totaling$5.9 million compared to $74.0 million in 2021, primarily due to the cessation of material operations by Tinuum Group and Tinuum Services[120]. - The company reported an income tax expense of$0.2 million for 2022, with an effective tax rate of (2)%, compared to $15.7 million and 21$80.465 million in 2022, up from $65.576 million in 2021, reflecting higher production costs[104]. - Operating expenses for the year ended December 31, 2022, totaled$34.6 million, an increase of 16% from $29.9 million in 2021, driven by a 51$3.2 million year over year, primarily due to costs associated with the Arq Acquisition[108]. - The gross margin for consumables decreased in 2022, negatively impacted by higher raw material and transportation costs, totaling $0.8 million in Tinuum Group royalties[106]. Acquisitions and Investments - The Arq Acquisition completed on February 1, 2023, involved a total purchase consideration of$31.2 million, enhancing the company's product offerings in carbon technology[95]. - A PIPE Investment closed on February 1, 2023, for approximately $15.4 million at a purchase price of$4.00 per common share[96]. - Transaction costs related to the Arq Acquisition amounted to $5.0 million, included in the net loss for the year ended December 31, 2022[115]. Debt and Financing - A Loan Agreement was entered into on February 1, 2023, with a term of 48 months and an interest rate margin of 9.00$15.4 million and entered into a Loan Agreement for $10.0 million, receiving$8.5 million in net proceeds[118]. Future Expectations - The company expects to continue inventory purchases in 2023, albeit at reduced levels compared to 2022, due to high demand for AC products[92]. - The company expects a slight increase in consumables revenue for 2023, driven by changes in customer and product mix, despite anticipated decreases in volumes due to alternative energy prices[106]. - Capital expenditures for 2023 are expected to be between $40.0 million and$45.0 million, a significant increase from $9.5 million incurred in 2022, with 65$88.3 million on deferred tax assets, indicating a lack of expected taxable income to utilize these assets[112]. - The company recognizes deferred tax assets only if they are more likely than not to be realized, considering future taxable income and tax-planning strategies[135]. - Changes in estimates for deferred tax assets could materially impact the company's effective tax rate[135]. Regulatory and Compliance - The company must maintain a minimum cash balance of $5.0 million starting March 31, 2023[131]. - The company is required to achieve a minimum annual revenue of$70.0 million for the fiscal year ending December 31, 2023, increasing to $85.0 million for 2024, and$100.0 million for any fiscal year thereafter[131]. - The company must achieve a minimum EBITDA of $3.0 million for the fiscal year ending December 31, 2024, and$16.0 million for any fiscal year thereafter[131]. - The loan to value (LTV) ratio must not exceed 0.40:1.00 during an LTV Trigger Period starting after the fiscal quarter ending September 30, 2023[131]. Asset Management - As of December 31, 2022, Marshall Mine, LLC had outstanding liabilities of approximately $4.9 million, expected to be discharged upon the sale of the mine[94]. - As of December 31, 2022, the company had outstanding surety bonds totaling$24.1 million related to reclamation obligations for the Five Forks Mine and Marshall Mine[127]. - The company expects to fund mine reclamation costs from cash on hand and anticipates closing the sale of equity interests in Marshall Mine, LLC in the first half of 2023[128]. - Reclamation costs for the Five Forks Mine ARO are allocated to expense over the life of the related mine assets and adjusted periodically[133]. - The Marshall Mine ARO is based on a capped fee structure, with costs adjusted quarterly based on actual reclamation costs[134]. Accounting Policies - The company applies the acquisition method for business combinations, requiring significant estimates and assumptions regarding fair values of acquired assets and liabilities[132]. - The company evaluates long-lived assets and intangibles for impairment at least annually, measuring impairment losses based on the excess of carrying amounts over estimated fair values[132].