Advanced Emissions Solutions(ADES) - 2023 Q1 - Quarterly Report

Financial Performance - For the three months ended March 31, 2023, the company reported a net loss of $7.5 million, compared to a net loss of$3.0 million for the same period in 2022, primarily due to increased expenses related to the Arq Acquisition and decreased demand for AC and chemical products [110]. - Total revenues for the three months ended March 31, 2023, were $20.8 million, a decrease of 21$26.4 million in the same period of 2022, driven by lower sales volumes and unfavorable product mix [111]. - Operating expenses for the three months ended March 31, 2023, increased to $11.5 million, up 39$8.2 million in the same period of 2022, largely due to higher payroll, legal, and professional fees related to the Arq Acquisition [115]. - Consolidated Adjusted EBITDA loss for the three months ended March 31, 2023 was $7.7 million, a significant decrease from an Adjusted EBITDA of$0.88 million in the same period of 2022 [129]. - Cash flows used in operating activities decreased by $19.8 million, primarily due to a net loss of$7.5 million and a decrease in accounts payable and accrued expenses of $10.8 million [133]. Acquisition and Capital Expenditures - The company completed the Arq Acquisition on February 1, 2023, for a total purchase consideration of$31.2 million, consisting of common and preferred stock [105]. - The company expects to incur between $40.0 million and$45.0 million in capital expenditures for 2023, including $27.0 million to$30.0 million for growth capital related to the Arq acquisition [137]. - The company anticipates significant capital expenditures associated with the Arq acquisition, including quarterly interest payments beginning in March 2023 [136]. Financing and Cash Flow - The company entered into a term loan agreement for $10.0 million on February 1, 2023, with an interest rate of either Adjusted Term SOFR plus a margin of 9.00$23.9 million, primarily due to net borrowings of $8.5 million on the Term Loan and net proceeds from the PIPE Investment of$15.2 million [135]. - Cash and restricted cash increased from $76.4 million as of December 31, 2022 to$79.1 million as of March 31, 2023 [131]. - The company expects that cash on hand as of March 31, 2023 will provide sufficient liquidity to fund required contractual obligations and operating losses for the next 12 months [136]. Market and Economic Factors - The average natural gas spot prices for the three months ended March 31, 2023, were $2.65 per MMBtu, down from$4.66 per MMBtu in the same period of 2022, impacting demand for coal-fired power generation [113]. - The company expects a slight increase in consumables revenue in the second half of 2023 compared to the first half, driven by changes in customer and product mix, despite anticipated decreases in volumes due to alternative energy prices [113]. Other Financial Metrics - Interest expense for the three months ended March 31, 2023, increased significantly to $534,000, compared to$86,000 in the same period of 2022, primarily due to the new term loan [124]. - The company recorded an income tax benefit related to out-of-period state income tax refunds for the three months ended March 31, 2023, despite a pretax loss of $7.5 million [125]. - The company reported a cash distribution from equity method investees of$0.64 million for the three months ended March 31, 2023, down from $2.51 million in the same period of 2022 [129]. - As of March 31, 2023, the company had outstanding surety bonds totaling$7.5 million related to reclamation of the Five Forks Mine [138].