Good morning, ladies and gentlemen. Welcome to the Advanced Emissions Solutions Q3, Earnings Results Call. My name is Digrita, I'll be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to your host, Ryan Coleman, with Investor Relations. Ryan, please go ahead.

Thank you, and good morning, everyone. Thank you for joining us today for our third quarter 2022 earnings results call. With me on the call this morning are Greg Marken, Chief Executive Officer, President and Treasurer; as well as Morgan Fields, Chief Accounting Officer. This call is being webcasted live within the Investors section of our website, and a downloadable version of today's presentation is available there as well. A webcast replay will also be available on the site, and you can contact Alpha IR 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 in or implied by these statements. These risks and uncertainties include, but are not limited to, those factors identified on Slide 2 and 3 of today's slide presentation, in our Form 10-Q for the quarter ended September 30, 2022, 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 is especially important to review the presentation and today's remarks in conjunction with the GAAP references in the financial statements. With that, I'll turn the call over to Greg.

Thank you, Ryan. And thanks to everyone for joining us this morning. Our third quarter showed another period of solid consumables revenue growth, as macro-economic conditions continue to support demand and revenue improvements from our power generation, industrial and municipal water customers. Consumables revenue for the quarter grew to $28.4 million, compared to $26.7 million in the prior year, a 7% increase. The growth was driven by increased volumes and improved pricing partially offset by product mix. Our consumables gross margin was 24.1% in the quarter, compared to 25.2% in 2021. On a year-to-date basis, total sales volumes are significantly higher than the prior year, along with a much-improved average selling price, which has driven consumables revenue growth of 27% compared to the first nine months of 2021. For the quarter, we reported a net loss of $2.4 million in 2022 compared to net income of $24.3 million in 2021. The difference being due to the effect of Tinuum investments in the prior year. Our adjusted EBITDA loss was $0.5 million compared to adjusted EBITDA of $28.5 million in 2021, which again was the result of Tinuum investment contributions in 2021. As we have discussed on previous calls, Tinuum ceased operations as of December 31, 2021. As a result of the end of the section 45 Tax Credit generation period. Our production volume at Red River was strong during the quarter and our inventory position modestly improved during the period. However, inventory tightness and supply constraints continue to be a concern. Additionally, our capital allocation priority remains the organic investment in our manufacturing assets to ensure we are able to meet customer demand and to continue to win attractive commercial opportunities within the market. In September, we announced that we reached an agreement to sell our Marshal Mine to Caddo…

Thank you, Greg. Slide 5 provides a snapshot of our third quarter and nine months ended financial performance. Third quarter consumables revenues and cost of revenues, exclusive of depreciation and amortization were $28.4 million and $21.6 million, respectively, compared to $26.7 million and $20 million for the third quarter of 2021. For the nine months, ending September 30. consumables revenues and cost of revenues, exclusive of depreciation and amortization were $79.6 million and $63 million, respectively, compared to $26.2 million and $48.7 million for the first nine months of 2021. The revenue increased quarter-over-quarter is due to a combination of higher sales volumes and improved pricing. Year-to-date, our revenue growth is primarily driven by higher product volumes, which generated approximately $11.2 million of revenue improvement. Product volumes in 2022 were higher in power generation, primarily due to higher natural gas prices compared to the prior year period, which contributed to increased demand for our products. Year-to-date, consumables revenues also increased by approximately $4.3 million due to favorable selling prices of our products, and by approximately $0.6 million due to favorable product mix. Third quarter other operating expenses were $9.5 million, compared to $7.6 million for the third quarter of 2021. Trailing nine months, other operating expenses were $25.3 million, compared to $21.8 million in the prior year. The increases are mainly the result of higher legal and professional fees associated with the company's strategic review process, which was partially offset by lower payroll and benefits expense, as well as the gain on change in the estimate on the asset retirement obligation that was recorded in 2021. We did not record any earnings from equity method investments in the third quarter, compared to $22.2 million in the third quarter of 2021. Year-to- date earnings from equity method investments totaled $3.2 million,…

Thank you, Morgan. As we have discussed, our recent third quarter included robust performance, both operationally and financially. Not only did we see continued high demand for our products and capitalized on improved pricing, but we also took steps to reduce risk to our business by selling the Marshal Mine. In addition, the quarter was highlighted by the announcement of our intent to merge with Arq Limited. I would like to take a few minutes to reiterate the reasons why we are so excited about this transaction. Broadly speaking, the merger will be transformative to our company in a number of ways. First, it expands our commercial growth opportunities by enabling us to produce new GAC products using Arq powder as an ultra-pure high value bituminous base feedstock, thus allowing us to participate in expanded and higher margin activated carbon markets. As it relates to the market today, we believe that the current North American activated carbon market is structurally underserved. The expansion of our product portfolio to include bituminous based GAC products will allow us to address more than 80% of the North American activated carbon market versus the 35% that currently may be addressable using our existing lignite-based products. In other words, the merger with Arq will provide a longer term sustainable and diversified product mix to compete in higher margin activated carbon markets. However, the utilization of effective second feedstock will create the need to expand the production capabilities of our Red River facility. Our Red River Plant was not designed or constructed to include certain manufacturing processes necessary to produce bituminous activated carbon. Although, we would have needed to have included many of these same capital upgrades to our plant over the long term to enable the processing of alternative feedstocks for our standalone growth. The…

[Operator Instructions]

Thanks, Greg. We continue to include an invitation to submit your questions ahead of time at the bottom of the conference call announcement press release and in yesterday afternoon earnings press release. Thank you to those of you who sent in your questions and we invite all listeners to submit their questions going forward. Our first question why merge with Arq rather than a joint venture or licensing of the intellectual property.

We evaluated a number of different deal structures, but are confident that the merger with Arq provides the most value enhancing path forward. The value of this merger lies in the ownership of the entire combined infrastructure, which captures funding for the capital improvements that would be necessary to utilize any bituminous based feedstock. The long-term cost advantages and security of owning the feedstock and production process and the growth opportunities available outside of activated carbon that would not otherwise be available to us. As I mentioned by combining with Arq, we will be the only North American activated carbon producer that owns and controls its primary feedstock sources that insulate us from much of the price and supply risks that competitors are exposed to by purchasing feedstock on the open market.

Our second question, we're yet to see the true earnings potential of Red River as a standalone operation. So why pursue this merger before getting to that point.

Although, we are currently operating in an environment that has provided strong demand for our lignite-based products, that may not always be the case, as long-term pressure on fossil generation remains in place. We need to capitalize on opportunities to expand our feedstocks, manufacturing capabilities, and in markets that we serve during this period of favorable market conditions. This transaction provides the opportunity to diversify into producing products that address over 80% of the North American activated carbon market while doing so from a position of operational strength, as we have a strong customer base and a highly utilized manufacturing plant. This opportunity will allow us to continue to transform our business by serving faster growing and emerging GAC markets relative to the markets we currently serve, and will accelerate our long-term growth.

Our third question, how confident are you in the $75 million of required CapEx forecasts for the merged co in this environment of high inflation, supply chain issues and material scarcity?

As with any company's capital expansion program, macroeconomic conditions including inflation, and supply chain bottlenecks can definitely impact the ultimate cost and timing of completed capital projects. We will closely monitor these factors and attempt to mitigate them as effectively as possible through value engineering, project management and proactive scheduling of these expansion activities. Today, this is our best estimate given the market conditions that exist as to what it will cost to expand and modify our Red River Plant and Arq’s Corbin plant in support of our combined business plan.

And our fourth and final question, what is the status of the necessary regulatory filings and timelines related to the shareholder vote?

As many of you probably saw, we filed the initial S-4 filing on November 4. The standard review process with the SEC will occur over the coming weeks and months. And right now we do continue to believe that the shareholder vote would likely occur in Q1 of 2023.

Thanks, Greg, and thanks again to everyone who submitted questions. I'll turn the call back over to Greg for any closing remarks.

Thank you, Ryan, and thanks to everyone for joining the call this morning. We are truly excited about the ways in which we have continued to improve our business over the past nine months both operationally and financially and believe the Arq merger will provide a unique opportunity to enhance our long-term growth. We look forward to updating everyone next quarter.