Advanced Emissions Solutions(US:ADES)2020-08-10 20:58Financial Performance - For the three months ended June 30, 2020, the company reported a net loss of $23.8 million compared to a net income of $8.1 million for the same period in 2019, representing a significant decline in performance [110]. - Total revenues for the three months ended June 30, 2020, were $11.5 million, down 26% from $15.6 million in the same period of 2019, primarily due to lower sales volumes [112]. - Total revenues for the six months ended June 30, 2020, decreased by 32% to $23.746 million compared to $34.906 million for the same period in 2019 [129]. - The company reported a pretax loss of $25.2 million for the six months ended June 30, 2020, compared to pretax income of $30.8 million for the same period in 2019 [146]. - Consolidated Adjusted EBITDA for the six months ended June 30, 2020, was $23.08 million, down from $33.13 million in 2019 [152]. Revenue Breakdown - Consumables revenue decreased by 28% to $8.2 million for the three months ended June 30, 2020, compared to $11.4 million in 2019, driven by a 5.4% decrease in overall power generation [113]. - Consumables revenues decreased by 34% to $17.387 million for the six months ended June 30, 2020, primarily due to lower volumes and a 5% decrease in overall power generation [130]. - License royalties from related parties decreased by 21% to $3.3 million for the three months ended June 30, 2020, due to a reduction in production and lower royalty rates [114]. - The company recognized $8.168 million in earnings from equity method investments for the three months ended June 30, 2020, down 61% from $20.935 million in the same period in 2019 [122]. - Equity earnings from Tinuum Group for the three months ended June 30, 2020, were $6,764,000, down from $19,244,000 in 2019, reflecting a decrease of about 64.8% [159]. Operating Expenses - Operating expenses increased by 366% to $35.1 million for the three months ended June 30, 2020, compared to $7.5 million in the same period of 2019, largely due to the impairment charge [116]. - Operating expenses for the six months ended June 30, 2020, increased by 173% to $44.545 million compared to $16.321 million for the same period in 2019, largely due to an impairment charge [133]. - The company’s payroll and benefits expenses rose by 36% to $3.8 million for the three months ended June 30, 2020, primarily due to severance costs related to an executive resignation [116]. - Payroll and benefits expenses increased by 22% to $6.554 million for the six months ended June 30, 2020, primarily due to severance costs [134]. Impairment Charges - The company incurred impairment charges of $26.1 million related to long-lived assets during the three months ended June 30, 2020, significantly impacting operating expenses [116]. - For the three months ended June 30, 2020, the company recorded an impairment charge of $26.1 million [121]. - The PGI segment incurred an impairment charge of $23,232,000 for the three months ended June 30, 2020, contributing to the increased operating loss [164]. Cash Flow and Liquidity - Cash and cash equivalents increased from $17.1 million as of December 31, 2019, to $21.7 million as of June 30, 2020, reflecting a net change of $4.653 million [183]. - Operating activities provided $24,085,000 in cash for the six months ended June 30, 2020, a decrease of 21.2% from $30,572,000 in 2019 [183]. - The company made principal payments of $12 million on its Senior Term Loan during the six months ended June 30, 2020 [178]. - The company declared and paid quarterly cash dividends of $4.8 million for the six months ended June 30, 2020, compared to $9.2 million in 2019, a decrease of 47.2% [181]. - Cash flows from operating activities decreased by $6.5 million for the six months ended June 30, 2020, compared to the same period in 2019, primarily due to a net income decrease of $48.2 million [184]. Future Outlook and Risks - The company anticipates continued challenges in revenue generation due to the expiration of IRC Section 45 tax credits by December 31, 2021, affecting the RC segment [106]. - The company expects lower royalty rates per ton in 2020 and 2021 due to higher depreciation and reduced lease payments [131]. - The company expects lower pro-rata share of Tinuum Group's earnings for the remainder of 2020 and 2021 due to higher depreciation and reduced lease payments [140]. - Future earnings in the RC segment are expected to be impacted by coal-fired electricity generation dispatch and lease renegotiations [169]. - The company anticipates ongoing challenges related to the commercialization of technologies and operational disruptions due to COVID-19 [192]. COVID-19 Impact - The impact of COVID-19 has led to increased operational costs and inefficiencies, although both business segments have continued to operate during the pandemic [109]. - The company emphasizes the importance of not placing undue reliance on forward-looking statements and advises consulting SEC filings for additional risk discussions [192]. - Risks associated with forward-looking statements include potential changes in regulations, economic conditions, and the impact of COVID-19 on demand for products and services [191].