Arq(US:ARQ)2020-11-10 17:50Financial Data and Key Metrics Changes - Third quarter distributions from Tinuum totaled $9.7 million, while royalty income was $3.6 million, reflecting lower net lease payments due to renegotiated contracts and decreased coal burn driven by alternative energy sources [11][12] - Consolidated net profit for the third quarter was $5 million, with consolidated adjusted EBITDA at $8.7 million, down from $18.5 million in the prior year, primarily due to lower cash distributions from Tinuum [17][29] - Earnings from equity method investments were $9.5 million, compared to $14.4 million in Q3 2019, mainly due to lower earnings from Tinuum Group [25] Business Line Data and Key Metrics Changes - In the PGI segment, third quarter revenue decreased by approximately 4%, with a segment operating loss of $1.3 million, although adjusted EBITDA was slightly better than breakeven [14][15] - The company has diversified its product mix away from coal-fired power generation, achieving success in industrial markets, which helped offset some pressures in the PGI segment [15][16] Market Data and Key Metrics Changes - The company noted a decrease in coal burn driven by cheaper alternative energy sources and lower overall economic activity due to the pandemic [12] - The market for coal-fired power generation continues to decline, exceeding EIA forecasts, prompting the company to focus on adjacent market opportunities [37] Company Strategy and Development Direction - The company announced a 15-year master supply agreement with Cabot Corporation, which is expected to diversify the business and capture value from acquired assets [10][41] - The focus remains on filling plant capacity, diversifying the product mix, and capturing low-cost production advantages [16][41] - The company aims to reduce power generation exposure to less than 50% of its portfolio while targeting annual revenue growth of 30% to 40% from the Cabot agreement [20][45] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the competitive position in the market and the ongoing investor interest in leasing facilities [9] - The company anticipates improved financial performance as production ramps up related to the supply agreement with Cabot [31][42] - Management acknowledged challenges from cheap alternative fuel sources and the pandemic's impact on the market [21][38] Other Important Information - The company reduced its term loan balance to $22 million and expects to pay off the note before its three-year term ends [18][30] - Operating expenses were reduced by approximately 24% in the third quarter, improving overall liquidity [19] Q&A Session Summary Question: What are the expectations for future cash flows from refined coal? - The company updated its expectation of after-tax cash flows to be between $90 million and $110 million through the end of 2021, excluding a recent transaction expected to add $5 million to $7 million [34][35] Question: How does the company plan to address the decline in coal-fired power generation? - The company is focusing on adjacent market opportunities and has made significant progress in non-power generation applications for activated carbon [38][39]