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Advanced Emissions Solutions(ADES) - 2024 Q2 - Quarterly Report
ADESAdvanced Emissions Solutions(ADES)2024-08-12 20:29

Financial Performance - For the three months ended June 30, 2024, revenue increased by 24% to 25.4millioncomparedto25.4 million compared to 20.4 million in the same period of 2023[96] - The company reported a net loss of 2.0millionforthethreemonthsendedJune30,2024,animprovementfromanetlossof2.0 million for the three months ended June 30, 2024, an improvement from a net loss of 5.9 million in the same period of 2023[94] - For the six months ended June 30, 2024, revenue increased by 14% to 47.1millioncomparedto47.1 million compared to 41.3 million in the same period of 2023[106] - EBITDA loss for the six months ended June 30, 2024, was 691,000comparedtoalossof691,000 compared to a loss of 7.98 million in 2023, indicating improved operational performance[125] Revenue Drivers - The average selling price of products increased, contributing approximately 1.2milliontorevenuegrowth,whileproductvolumesincreasedby1.2 million to revenue growth, while product volumes increased by 0.8 million, primarily from non-power generation and municipal water customers[97] - Revenue for the six months ended June 30, 2024, increased by approximately 2.8millionduetofavorableproductmixandhigherpricing,despitea2.8 million due to favorable product mix and higher pricing, despite a 1.0 million decrease from lower volumes sold[107] Expenses and Costs - Operating expenses decreased by 14% to 9.6millionforthethreemonthsendedJune30,2024,comparedto9.6 million for the three months ended June 30, 2024, compared to 11.2 million in the same period of 2023[99] - Operating expenses decreased by 9% from 22.7millionin2023to22.7 million in 2023 to 20.6 million in 2024, with significant reductions in selling, general, and administrative expenses by 24%[108] - Cost of revenue for the six months ended June 30, 2024 decreased by 5% to 30.9millioncomparedto30.9 million compared to 32.5 million in the same period of 2023[106] Research and Development - Research and development expenses increased by 20% to 929,000forthethreemonthsendedJune30,2024,comparedto929,000 for the three months ended June 30, 2024, compared to 774,000 in the same period of 2023[99] - Research and development expenses rose by 70% from 1.5millionin2023to1.5 million in 2023 to 2.6 million in 2024, primarily due to product qualification testing[108] Cash Flow and Liquidity - Cash and restricted cash decreased from 54.2millionattheendof2023to54.2 million at the end of 2023 to 37.2 million by June 30, 2024[128] - Cash used in operating activities improved significantly, decreasing from 21.2millionin2023to21.2 million in 2023 to 2.4 million in 2024, reflecting a net loss reduction from 13.4millionto13.4 million to 5.4 million[130] - The company had cash on hand of 28.5millionasofJune30,2024,excluding28.5 million as of June 30, 2024, excluding 8.7 million of restricted cash[128] - The company anticipates sufficient liquidity from cash on hand and additional debt financing to fund operations for the next 12 months[133] Capital Expenditures and Investments - Cash flows used in investing activities increased by 18.4millionforthesixmonthsendedJune30,2024,primarilyduetoanincreaseinproperty,plant,andequipmentadditionsfromtheRedRiverPlantexpansion[131]−Thecompanyexpectstospendbetween18.4 million for the six months ended June 30, 2024, primarily due to an increase in property, plant, and equipment additions from the Red River Plant expansion[131] - The company expects to spend between 55 million and 60millionontheRedRiverPlantexpansionduring2024,dependingonprojectpace[134]−ThecompanyplanstoincursubstantialcapitalexpendituresforadditionalequipmentandlabortomeetthetargetforGACdeliveriesinthefirstquarterof2025[134]MarketandRegulatoryEnvironment−Thecompanyexperiencedadecreaseindemandfromcoal−firedpowergenerationcustomersduetolowernaturalgasprices,whichareexpectedtoremainconsistentthrough2024[93]−TheU.S.EPA′snewPFASNationalPrimaryDrinkingWaterRegulationisexpectedtodriveamaterialincreaseinGACdemandinthewaterpurificationmarketoverthenextfiveyears[93]−ThecompanyexpectstoincreaseitsmarketshareforAPTconsumablesandimprovegrossmarginsthroughbettercustomerandproductmix[133]−Thecompanyfacesrisksrelatedtocompetition,regulatorychanges,andmacroeconomicconditionsthatcouldimpactfutureperformance[139]DebtandFinancing−Interestexpenseincreasedby1860 million on the Red River Plant expansion during 2024, depending on project pace[134] - The company plans to incur substantial capital expenditures for additional equipment and labor to meet the target for GAC deliveries in the first quarter of 2025[134] Market and Regulatory Environment - The company experienced a decrease in demand from coal-fired power generation customers due to lower natural gas prices, which are expected to remain consistent through 2024[93] - The U.S. EPA's new PFAS National Primary Drinking Water Regulation is expected to drive a material increase in GAC demand in the water purification market over the next five years[93] - The company expects to increase its market share for APT consumables and improve gross margins through better customer and product mix[133] - The company faces risks related to competition, regulatory changes, and macroeconomic conditions that could impact future performance[139] Debt and Financing - Interest expense increased by 18% from 1.4 million in 2023 to 1.6millionin2024,mainlyduetonewloansrelatedtotheArqAcquisition[120]−Cashflowsprovidedbyfinancingactivitiesdecreasedby1.6 million in 2024, mainly due to new loans related to the Arq Acquisition[120] - Cash flows provided by financing activities decreased by 8.5 million for the six months ended June 30, 2024, primarily due to the absence of proceeds from the CFG Loan received in the prior year[132] - The company received proceeds of $15.0 million from the issuance of common stock during the six months ended June 30, 2024, net of offering costs[132] Internal Controls - The company is in the process of documenting and testing internal controls over financial reporting for the acquired Legacy Arq, which will be included in the annual report for the year ending December 31, 2024[142] Future Outlook - The company expects to begin using Arq Powder as a feedstock for manufacturing high-quality GAC products by the end of 2024, which is anticipated to open new market opportunities[92]