Good morning. My name is Kasey and I will be your conference operator today. At this time, I'd like to welcome everyone to the Advanced Emissions Solutions, Inc. Q4 and Year-end 2017 Earnings Conference Call. [Operator Instructions]. Thank you. Mr. Ryan Coleman, you may begin your conference.

Thank you, Kasey. Good morning, everyone, and thank you for joining us today for our fourth quarter and year-end 2017 earnings results call. With me on the call today are Heath Sampson, President and Chief Executive Officer; and Greg Marken, Chief Financial Officer. This conference call is being webcast live within the investors section of our Web site. A webcast replay will also be available on our site and you can contact Alpha IR Group for Investor Relations support at 312-445-2870. Let me remind you that the presentation and remarks made today include forward-looking statements as defined in Section 21E of the Securities Exchange Act. These statements are based on information currently available to us and involve risks and uncertainties that could cause actual future results, performance and business prospects and opportunities to differ materially from those expressed and/or implied by these statements. These risks and uncertainties include, but are not limited to, those factors identified on Slide 2 of today's slide presentation, in our Annual Report on Form 10-K for the year ended December 31, 2017 and other filings with the Securities and Exchange Commission. Except as expressly required by securities laws, the company undertakes no obligation to update those factors or any forward-looking statements to reflect future events, developments or changed circumstances or for any other reason. In addition, it's very important to review the presentation and today's remarks in conjunction with the Form 10-Q and the GAAP references in the financial statements. So with that, I'll turn the call over to Heath Sampson. Heath?

Thanks, Ryan, and thanks to everyone for joining us this morning. Let's begin on Slide 3 and discuss some of our fourth quarter and full-year highlights. Our capital allocation plan returned over $32 million to our shareholders last year through a combination of the company's first three recurring quarterly dividend payments, and a successful Dutch tender offer, which we completed in June, and a stock repurchase program that our Board of Directors approved in December. Returning capital to shareholders and delivering shareholder value will continue to be a key focus moving forward. Along those lines, we announced the first quarterly dividend of 2018 in February, which was paid to our shareholders last week. The cash generation power of the business remains strong and supports this capital allocation plan in full. In fact, year-over-year, we saw our cash position rise a 132% and we ended 2017 with $30.7 million of unrestricted cash and cash equivalents. This was a result of our continued commitment to reducing our indirect operating cost structure, coupled with further strong distributions from Tinuum. With respect to our RC distributions, they were one of the highest in our history during the fourth quarter and total $16.5 million during the period and $53.5 million for the year, both solid increases from 2016. As previously announced, Tinuum group completed the sale of two refined coal facilities to a third-party investor in November of last year. These sales are located at coal burning power plant that have historically burned in excess of 3.5 million tons of coal per year and are royalty bearing. This brings the total number of facilities invested to '17. Looking ahead, we continue to observe sustained strength in our tax equity investor pipeline. This strength has been further improved by the passage of the Tax Act, this…

Thank you, Heath. Let's start on Slide 6 to review our financial results. Total revenue for the fourth quarter was $544,000, while the full-year was $35.7 million. These results were lower than prior comparable periods, almost entirely due to the expected decrease in revenue from our legacy equipment sales business. Further, and as a reminder, the company adopted a new revenue recognition standard on January 1, 2018. As a result of this change, we anticipate that all remaining balances of material equipment sales revenue will be recognized through an opening balance sheet adjustment and not impact revenues or margins in 2018. Thus, we do not expect material equipment revenues in the future as utilities have already purchased and installed ACI and DSI equipment systems to assist in achieving compliance with regulatory standards. Revenue from our chemicals business for the quarter was $400,000 compared to $1.3 million in the fourth quarter of 2016. Full-year chemical revenue, however, came in at $4.3 million, an increase of 40% compared to full-year 2016. As we’ve talked about all year, this newer startup business is expected to yield lumpy quarterly sales figures as we continue to validate our proprietary chemical technology offerings and compete for market share against a fragmented and dynamic environment that has seen significant price decreases occur at the pack and all other competing technologies over the last 12 to 18 months. Distributions from Tinuum were $16.5 million during the fourth quarter and $53.5 million for the full-year. These represent increases of 12% and 16%, respectively. Royalty earnings for the quarter and full-year were $3.2 million and $9.7 million, increases of 47% and 58%, respectively. The increases in both distributions and royalty earnings are a result of the additional RC facilities being invested during the fourth quarter as well as the full-year…

Thanks, Greg. I’d like to take a moment to review our go-forward strategy in each of our business segments before taking your questions. Let's turn to Slide 8, and discuss some changes within the refined coal environment. As I briefly mentioned earlier, the refined coal environment has undergone some favorable changes in the last year. For starters, the IRS's publication of the technical advice memorandum or TAM, in the spring provided validation of our tax equity model and brought both new and legacy investors to the negotiating table. Since the memorandum's publication, Tinuum has completed deals for three refined coal facilities and a fourth total in 2017. I think it's important to repeat that while Tinuum has obtained third-party tax equity investors for four facilities this year. We know of only one small non-Tinuum refined coal transaction in 2017. In fact, in the last two full calendar years, Tinuum has executed eight of the 10 known refined coal transactions, which really is a testament to the combined hard work that our two organizations put forth over the time period. In addition, as a result of the industry efforts, including Tinuum, the IRS just-released guidance on refined coal commercial structures to its IRS field officers. This guidance is not Safe Harbor, however, it is helpful that it does set boundaries and standards that will help investors better understand the commercial structures that will be respected by the IRS. We view this as positive for Tinuum and the refined coal industry. In addition, to the IRS commercial structure transparency, the passage of the Tax Act in late December has provided much-needed clarity for many of our perspective tax equity investors. Prior to passage, impending corporate Tax Reform was a major hurdle. The lack of clarity surrounding the final bill would include and…

Thank you. [Operator Instructions] Your first question comes from the line of Amit Dayal - H.C. Wainwright. Please go ahead. Your line is open.

Thank you. Good morning, Heath.

Good morning.

Just in terms of the backlog -- or the work you’re doing towards trying to close additional RC facilities, could you provide what the pipeline looks like? We did four closings last year, should we expect a similar rate this year, given the tax clarity? Just any granularity on this front will be helpful. Thank you.

Yes. So we have 11 remaining facilities and our goal was to close those as fast as possible. Our pipeline is primarily made up of very large taxpayers that could take more than one facility. So we’re really encouraged about 2018. Though '17 was successful, we're hoping for even more success for 2018. So, consistent with what I’ve done before, I’m not really predicting the exact number and timing. But like I said before, because of the clarity around what the IRS has done with their publications, and recent publications as recent as last week, coupled with the tax reform, there's more interest than we've ever had looking forward to a great 2018 and getting more closures in RC.

Great. So, how should we look at beyond 2018, given that these expire by 2021. Does the probability of new tax investors taking this drop quite a bit after 2018, would be really interested to hear your view on that front?

Yes. So, as a reminder, if you earn investor in refined coals, you get to carry forward the tax credits for 20 years and back for one-year. So the majority of the investors that we have view that using the cash and the year they have. And then if they can, they can carry forward. So though we are getting closer to the 2021 guideline for where we are right now it has not been an issue for us to obtain tax equity investors. And I don't expect that for the next couple of years. We'll see how that plays out after 2019, call it. But the way to view this is that they can use these tax credit and invest in this all the way to the last day in 2021, because they can use those credits at year-end carrying forward.

And just one clarification, Heath. Does the amount of coal burned also have an impact on Tinuum revenue -- revenues or are these like sort of fixed price contracts?

So it's both, depending on who the customer is. So a good chunk of our portfolio are fixed. But those fixed are based on what is expected to burn in those, no specific facilities and there are others that are truly production tax credits on that side. So it's a mix, but a good proxy for looking at what our revenue would be is what is actually burned and it matches to that. So, hopefully that answers your question. So said a different way, we feel really good about a good chunk of our fixed payments that we expect through 2021. They are less susceptible to those fluctuation, but that's just a portion of our portfolio. Also as a reminder the places that we have, these facilities placed are at utilities that are expected to burn well past 2021. So regardless of whether its fixed or less fixed or variable, we feel good about our forecast and the future to 2021.

And maybe just one last one for me in regards to the mercury control business. Should we assume, you’re trying to sort of unload this by the end of this year and focus on M&A opportunities? How do we sort of prioritize between trying to keep this business around versus trying to find something new that we apply our resources towards?

Yes, so I think there's -- its a second priority right now. As we noted, and if you look at the market size and how dramatically that has changed, and I expect it to change through the end of 20 -- till this year, I think it will stabilize at the end of this year if you look at the different substitute products when -- within mercury control. I think we've hit close to rock-bottom on this potential prices that people can charge. So within that market we’re going to wait to see what happens. We have strong patent, strong technologies, and some contributing revenue. So we're going to continue to get that revenue and close on deals that we need to close on. And then we will evaluate where we’re in 2018. So, I'm not saying we’re going to sell or not, it's a second priority and we’re going to evaluate options as the year progresses.

Got it. That’s all I have. Thank you so much, Heath.

Hey, thank you.

And your next question comes from the line of Shantanu Agrawal from BlackRock. Please go ahead. Your line is open.

Hi, Heath. Just one quick question. Can you please talk about the new IRS guidance that came out? It sounds like last week, was this a new TAM? Was this a follow-up to last year's TAM? What exactly did the IRS say and what priority does it provide to the market today?

Yes. That’s a very good question. Thanks. Thanks for that. So it really is providing clarity to the TAM that came out last year. It's a detailed -- more detailed description of what is acceptable for commercial structures within this space. So when the TAM came out last year, though we viewed it as very positive. It was relatively short and ambiguous. So for some investors and some of our competitors, there were still uncertain of the structures that would be respected by the IRS. However, what came out last week was detailed and provided much-needed clarity. So for the market as a whole, we are extremely excited about that clarity and many of the investors that we are -- that we have or are talking to are excited about this clarity as well. So it's really good for us and the industry as a whole to get that much-needed clarity from the TAM that was released last year, and just recently released update last week.

Great. Thank you.

And your next question comes from the line of Patrick Wolff with Grandmaster. Please go ahead. Your line is open.

Hi. Thank you. I have two questions. One is just if you could provide a little more clarity on the potential future cash flows for the 11 RC facilities that are installed, not operating, not invested. I mean, are they roughly comparable -- so are they roughly sort of in proportion to the '17 that are currently leased? Like how should we think about that?

Yes, in general, when you look across the average of those 11 facilities they should be larger than the historical ones. A lot of the earlier facilities that were installed at plants were at lower burning facilities. So the average of those 11 should be higher on average. Some will be smaller, some will be larger. So that's the right way to think about it. What we've done in the past just so you have context on how to model this is assume about 4 million tons per those -- for each facility. Again, that could -- that will be probably up or down around that, but that's a good proxy. We hope it to be higher than that, but I think again that’s a good proxy to use going forward on average across all 11.

Okay, great. And then, I guess, the second question -- and I think I brought this up before, but just in terms of the aggressiveness with which you’re buying back stock. I mean, if I sit here, you have wherever you are, roughly let's call the $240 million market cap today and $30 million of cash, pretty much no liabilities, you think you have pure line of sight to $275 million to $300 million undiscounted over the next three years or so with the potential to grow that somewhat meaningfully. I mean, it sure looks like you’ve achieved stock, and you’ve been very good about returning cash to shareholders, which is terrific. But every time you pay a dollar out in dividends and you don't use that dollar to buy back stock, it's a net loss of potential -- so a net loss of gain, if that’s a way to put it for the shareholders. And you bought back some stock during the year, which is great, but it seems like you really could have been more aggressive. So I really love to hear your thoughts on that.

Yes. Well, so it was on purpose that Greg and I said it maybe four or five time that the capital allocation plan is specifically buying back stock is a critical part of our strategy, especially because we are in a great spot with cash and do expect that cash to continue and increase. It is a major part of our strategy to continue to evaluate and buyback stock. And for all the reasons that you just talked about. For last year when we announced, we bought as much back as we could within the blackout period. Though we’re looking now with how do we increase that, how do we do better with that. So it's an important part of our strategy, top priority for us and we will continue to do it as aggressively as possible.

Understood. Thank you.

And ladies and gentlemen, that is all the time we have for Q&A. I will turn the call back over to Mr. Heath Sampson for closing remarks.

Great. Thank you again to everyone for your time today and your continued support. I look forward to updating you all on our progress. Have a great day everyone.

And ladies and gentlemen, this concludes today's conference call. You may now disconnect.