Advanced Emissions Solutions(US:ADES)2021-11-08 16:00Financial Performance - For the three months ended September 30, 2021, the company recognized net income of $24.3 million, compared to net income of $5.0 million for the same period in 2020, representing a significant increase [129]. - Total revenues for the three months ended September 30, 2021, were $28.854 million, an increase of 48% from $19.471 million in the same period of 2020 [130]. - Total revenues for the nine months ended September 30, 2021 were $69,584,000, a 61% increase from $43,217,000 in the same period in 2020 [150]. - Total other income increased by $16,881,000, totaling $25,535,000 for the three months ended September 30, 2021, a 195% increase compared to the same period in 2020 [142]. - Consolidated EBITDA for the nine months ended September 30, 2021, was $76.3 million, compared to a loss of $10.6 million in the same period of 2020 [170]. - Consolidated Adjusted EBITDA for the nine months ended September 30, 2021, was $75.8 million, compared to $31.7 million in the same period of 2020 [170]. Revenue Sources - Consumables revenues increased by 56% to $24.689 million for the three months ended September 30, 2021, driven by higher product volumes and favorable pricing mix [132]. - Consumables revenues increased by $24,465,000, totaling $57,696,000 for the nine months ended September 30, 2021, a 74% increase compared to the prior year [150]. - The APT segment includes revenues from the sale of AC and chemical products, which are used to purify coal-fired utilities and other markets [172]. - The APT segment operating income for the three months ended September 30, 2021, was $4,591,000, compared to a loss of $3,280,000 in the same period of 2020 [185]. Expenses and Costs - Payroll and benefits expenses increased by $0.4 million due to Retention Agreements, despite a headcount reduction of approximately $0.1 million, resulting in a total of $2,637,000 for the three months ended September 30, 2021, a 15% increase from the prior year [135]. - Legal and professional fees decreased by $0.2 million, totaling $1,106,000 for the three months ended September 30, 2021, a 16% decrease compared to the same period in 2020 [137]. - General and administrative expenses decreased by $0.1 million, totaling $1,715,000 for the three months ended September 30, 2021, a 10% decrease from the prior year [138]. - Depreciation, amortization, depletion, and accretion expenses increased by $0.4 million, totaling $2,145,000 for the three months ended September 30, 2021, a 21% increase compared to the same period in 2020 [139]. - Interest expense decreased by $1.6 million to $1.4 million for the nine months ended September 30, 2021, primarily due to a reduction in the principal balance of the Senior Term Loan [166]. Investments and Equity - Earnings from equity method investments increased by $12,677,000, totaling $22,195,000 for the three months ended September 30, 2021, a 133% increase from the prior year [142]. - Earnings from equity method investments for the three months ended September 30, 2021, were $22,195,000, a significant increase of 132.6% compared to $9,518,000 in the same quarter of 2020 [177]. - The company recognized $55.5 million in equity earnings from Tinuum Group for the nine months ended September 30, 2021, compared to $20.5 million in the same period of 2020 [164]. - Cash distributions from equity method investees for the nine months ended September 30, 2021, totaled $66,751,000, an increase from $42,228,000 in the same period of 2020 [181]. Future Outlook - The company expects earnings and distributions from its RC segment to substantially cease as of December 31, 2021, due to the winding down of Tinuum Group's operations [122]. - The company expects a material adverse effect on financial condition and consolidated operating results beginning in 2022 due to the wind-down of Tinuum Group and Tinuum Services operations [180]. - Future cash flows from Tinuum are expected to range from $12 million to $14 million, driven by 16 invested facilities as of September 30, 2021 [188]. - The company is focusing on growth in target APT markets, including water purification, food and beverage, and pharmaceuticals, with potential size and demand being evaluated [206]. Cash Flow and Capital Expenditures - Cash and cash equivalents increased from $35.9 million as of December 31, 2020 to $82.1 million as of September 30, 2021, with a net change of $46.2 million [197]. - Cash flows provided by operating activities decreased by $10.2 million to $24.7 million for the nine months ended September 30, 2021 compared to $34.9 million for the same period in 2020 [199]. - Cash flows from investing activities increased by $44.5 million primarily from distributions from equity earnings in excess of cumulative earnings [200]. - For 2021, capital expenditures are expected to be $9.8 million, up from $7.1 million in 2020, primarily due to product-specific capital related to the Supply Agreement [196]. Regulatory and Market Conditions - The company anticipates the expiration of the IRC Section 45 tax credit period in 2021, which may lead to a wind down of the business and loss of revenue from Tinuum Group and Tinuum Services [206]. - The company is facing increasing competition in the APT market, which could affect market share and pricing strategies [206]. - There is an expectation of increased pricing for APT products, which may impact revenue and market positioning [206]. Legal and Compliance - The company is involved in ongoing litigation and claims related to its business operations, as detailed in the financial statements [213]. - The company has not reported any changes in internal control over financial reporting that materially affect its operations during the fiscal quarter ended September 30, 2021 [211]. - The effectiveness of the company's disclosure controls and procedures was confirmed as effective as of September 30, 2021 [210].