Advanced Emissions Solutions(ADES) - 2023 Q4 - Annual Report

Revenue and Sales Performance - Total revenue for the year ended December 31, 2023, was $99,183,000, a decrease of 4% compared to $102,987,000 in 2022[104] - Consumables revenue decreased by $20,000,000 primarily due to lower volumes sold, particularly among power generation customers[105] - Consumables gross margin increased due to improved pricing and decreased costs of feedstock and additives, despite a decrease in volumes sold[105] Expenses and Costs - Payroll and benefits expenses increased by 44% to $15,154,000, primarily due to the addition of Legacy Arq employees[106] - General and administrative expenses rose by 55% to $12,641,000, driven by costs associated with the Arq Acquisition[106] - Depreciation and amortization expenses increased by 64% to $10,543,000, largely due to new long-lived assets acquired in the Arq Acquisition[106] - Interest expense surged by 797% to $3,014,000, reflecting increased borrowing costs[109] - Interest expense increased to $2.0 million for the CFG Loan and $0.5 million for the CTB Loan in 2023, compared to the previous year[112] Income and Taxation - Earnings from equity method investments decreased by 54% to $1,623,000, primarily due to the winding down of operations at Tinuum Group and Tinuum Services[109] - Reported income tax expense for 2023 was $0.2 million with an effective rate of (1)%, while the valuation allowance on deferred tax assets increased to $98.8 million from $88.3 million in 2022[112] - Income tax expense is determined under the asset and liability method, requiring judgment in estimating future operating results and tax planning strategies[137] - Deferred tax assets are recognized only if they are more likely than not to be realized, with a valuation allowance established when necessary[137] Cash Flow and Liquidity - Cash and restricted cash decreased from $76.4 million in 2022 to $54.2 million in 2023, a decline of $22.3 million[122] - Cash flows used in operating activities increased to $(16.7) million in 2023 from $(6.1) million in 2022, primarily due to a net loss increase of $3.3 million[124] - Cash flows used in investing activities rose to $(28.5) million in 2023, largely due to acquisition costs related to the Arq Acquisition[125] - Cash flows from financing activities increased by $24.6 million in 2023, driven by proceeds from common stock issuance of $16.2 million and net proceeds from the CFG Loan of $8.5 million[126] - The company anticipates that cash on hand as of December 31, 2023 will provide sufficient liquidity to fund operations for the next 12 months[128] Assets and Liabilities - Total liabilities for asset retirement obligations (ARO) as of December 31, 2023, amount to $6.2 million[132] - Consolidated balance sheet reflects total loans of $47.837 million, with $12.199 million due in less than 1 year[132] - Operating lease obligations total $18.559 million, with $3.139 million due in less than 1 year[132] - Finance lease obligations amount to $3.666 million, with $2.274 million due in less than 1 year[132] Business Operations and Future Outlook - The company expects to begin using Arq Powder as a feedstock for GAC products by the end of 2024, which may open new market opportunities[93] - The company changed its name to Arq, Inc. and its common stock began trading under the ticker symbol "ARQ" on February 1, 2024[93] - The company expects to spend between $45 and $50 million on the Red River Plant expansion in 2024, depending on project pace[129] Accounting and Estimates - The company applies the acquisition method for business combinations, requiring significant estimates and assumptions regarding fair values[134] - Long-lived assets and intangibles are reviewed for impairment at least annually, with impairment losses measured based on excess carrying amounts over estimated fair values[135] - Reclamation costs related to AROs are allocated to expense over the life of the related mine assets and adjusted periodically[136] - The company evaluates critical accounting estimates regularly, which are essential for understanding historical and future performance[134] EBITDA Performance - EBITDA for the year ended December 31, 2023 was $123, compared to an EBITDA loss of $(1,687) in 2022[117]