Hello, and welcome to the Advanced Emissions Solutions Q4 2022 Earnings Call. My name is Lauren, and I will be coordinating your call today. [Operator Instructions]. I will now hand you over to your host, Ryan Coleman with Investor Relations to begin. Ryan, please go ahead.

Thank you. Good morning, everyone. Thank you for joining us today for the fourth quarter and full year 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 the downloadable version of todays presentation is available there as well. A webcast replay will also be available on our site. 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 in 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 Form 10-K for the year ended December 31, 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 other forward-looking statements to reflect future events, developments or retain 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. This is our first earnings call since the closing of the Arq acquisition, and as such, I'd like to extend a special welcome to our new team members from Arq as well as any new shareholders who are joining on today's call. We are truly excited as we begin executing our new plan to transform and capitalize on the complementary nature of our combined assets and teams to become a diversified, leading environmental technology company. I'll cover more on this transformative plan, which will begin in 2023, but first, I'd like to review our fourth quarter and full year 2022 results. We delivered a solid fourth quarter of consumable sales and production at Red River, which culminated in a record full year revenue performance, exceeding our original expectations for 2022. Consumables revenue for the quarter was $23.4 million compared to $23.2 million in the prior year. Our fourth quarter production and sales revenue remained strong. However, the volumes were not as strong as what we had seen in prior quarters with the elevated average natural gas pricing experienced early in the year. The declining natural gas prices during much of the fourth quarter lowered demand from our power generation customers, which we have continued to see during the first quarter of 2023. Our full year total revenue of $103 million represents a year-over-year increase compared to the prior year, despite $14 million of royalties from our Tinuum investments in 2021 that did not occur in 2022 due to the conclusion of the Section 45 tax credit generation period at the end of 2021. Looking solely at our consumables revenues, they increased 20% year-over-year due to a combination of strong demand from power generation customers, pricing initiatives and product…

Thank you, Greg. Slide 4 provides a snapshot of our fourth quarter and full year financial performance. Fourth quarter revenue and cost of revenue were $23.4 million and $17.5 million, respectively, compared to $25.8 million and $16.9 million in 2021. Revenues and -- revenues and cost of revenues for the full year were $103 million and $80.5 million, respectively, compared to $100.3 million and $65.6 million in 2021. The increase in revenue was primarily driven by higher sales of consumable products as well as successful pricing initiatives, which were partially offset by the nonrecurrence of royalty earnings from Tinuum investments that we recognized in 2021. Product volumes in 2022 were higher in power generation, primarily due to higher natural gas prices compared to the prior year, which contributed to increased demand for our products, although that benefit faded in the fourth quarter as natural gas prices began to decline. Fourth quarter, other operating expenses were $9.3 million compared to $8.1 million for the fourth quarter of 2021. Other operating expenses for the total year totaled $34.6 million compared to $29.9 million in the prior year. The increase is mainly the result of higher legal and professional fees associated with the company's strategic review process as well as the gain on the change in estimate for the asset retirement obligation that occurred in 2021. This was partially offset by the lower payroll and benefits expense. Fourth quarter earnings from equity method investments totaled $3 million compared to $6.8 million in the prior year. For the full year, earnings from equity method investments totaled $3.5 million compared to $68.7 million in 2021. The decline was the result of all remaining invested refined coal facilities reaching the end of their tax credit generation period as of December 31, 2021. The company does not…

Thanks, Morgan. Slide 5 again highlights the synergistic nature of the combined ADES and Arq businesses. Pre-acquisition, ADES was a top 3 producer of activated carbon products in North America with the ability to potentially serve an estimated 35% of the activated carbon market with our lignite-based portfolio of products. Post-acquisition, utilizing both ADES's existing lignite-based feedstock and Arq powder as a bituminous-based feedstock, the combined company will be well positioned to provide activated carbon products that serve more than 80% of the North American activated carbon markets, and we'll do so through an expanded focus in Granular Activated Carbon, or GAC products, which will generally provide higher value and higher-margin opportunities. We will benefit from our strong existing customer base, and we will be able to pursue new, diverse and high-growth end markets served by both powder and GAC products. This diversification of our product offering will mitigate longer-term headwinds that our existing lignite-focused business would otherwise encounter, specifically within the declining coal-fired power generation market. As such, this acquisition provides us with a longer-term, sustainable and diversified product mix and facilitates participation in higher-margin activated carbon products and end markets. In addition, we expect the acquisition to yield a competitive advantage via product performance, longer-term sustainable product cost and environmental benefits compared to other activated carbon producers. The competitive value of securing a high-quality domestically sourced feedstock that is cost competitive and vertically integrated into the combined operations -- and that has been shown to create high-performance products is significant. We will be the only North American activated carbon manufacturer that controls 100% of of its primary feedstock needs, both through our existing resource operations as well as through the access to Arq powder. Further providing a platform for long-term success is the fact that Arq's composition and…

[Operator Instructions]. Our first question comes from Gerry Sweeney from ROTH Capital.

You touched upon this a little bit, but just -- I'm curious about pricing and contracts. Could you give a little bit more detail on -- maybe the contract, how often they roll? And do you have any contracts that were maybe longer dated, maybe 1 to 2 years that maybe -- that have under market pricing that you could see improvement across, and -- if possible?

Yes. So generally, Gerry, the contracts within our portfolio are about 3 to 4 years in duration. So -- on an average basis, I would say, we'd always have about 25% of the portfolio turning just based on kind of those numbers. When we think about the portfolio and -- look at what we think might be current market pricing for the various products and those sort of things, I'd estimate that we probably have about 15% of our overall portfolio that may be below today's existing market pricing -- that -- as those contracts come up, we'll definitely work to renew -- towards the market environment that we're operating in.

Got you. And do all 15% of those contracts renew this year or some of it this year, next year, et cetera?

I would say, some of those are a little further out, but there's a good portion of those that will be this year, Gerry.

Got you. Okay. Switching gears, Marshall Mine, I think you had about $10 million of unrestricted cash -- or I'm sorry, restricted cash on the balance sheet associated with -- I'm not sure if all of that $10 million is Marshall Mine. But I'm curious as to how much could come unlocked this year? And if there's other sort of gauge or milestone that unlock more in the future?

Yes, Gerry, we estimate that probably 50% to 70% of that restricted cash will come off as that restriction will be freed up when we close this transaction. To get to that point, we're still going through all the regulatory approvals for that transaction. So we still think that's going to close in the first half of 2023.

Okay. Got you. And then maybe a final question. Arq, I think it's a great acquisition, vertically integrate you, opens up a larger addressable market, higher value market, et cetera. So one question, but maybe really 2 in actuality. Just curious as to when you can maybe start seeing some revenue from some of the Arq products? Now granted -- this isn't all activated carbon related as we've talked about in the past, but I just wanted to get an idea when some revenue may start to hit the income statement from Arq-related production of -- the Arq powder?

Right. So I think the plan, Gerry, is to materially complete most of the CapEx to enable us to start producing some product very early in the year next year out of the Corbin facility, and the Red River CapEx is going to take longer. So the first thing that we're going to do this year is really work on the additional testing opportunities that we have to bring some Arq additive-based products to market. The desire would be to do that in the early portion of 2024, and then later in 2024, probably around the fourth quarter time period as long as all the capital expenditures at Red River go according to the timelines that we anticipate. And that's going to be impacted by permitting and those sort of things that are out there, but that's when we would expect to start generating some revenue from the GAC-related products.

Greg and Gerry, We've also continued to include an invitation to submit questions ahead of time at the bottom of the conference call announcement press release and in yesterday afternoon's earnings press release. Thank you to those of you who sent in questions, and we continue to invite listeners to submit questions in future quarters. One question that we received was about power generation customers and natural gas. What are your expectations for power generation customers and the overall PAC business, if natural gas pricing remains low? And how much exposure do you have related to this market?

So Ryan, as we're aware, natural gas pricing has the potential to materially impact the demand and products that are needed by our power generation customers. Contrary to the expectations from various third parties as well as our own expectations during the third and fourth quarters of last year, natural gas pricing has not remained at the anticipated pricing levels. Additionally, we've seen further declines here in the first quarter. This kind of goes back to exactly why we did the Arq transaction. This provides a bituminous-based feedstock that allows us to diversify in the markets in general, but then also to transition to more of a GAC-focused business on a longer-term basis, which will help us have a broader earnings profile and more sustainability. As we think about the current year, if natural gas does remain low, it will impact demand just as it positively impacted demand really for the last 1.5 years in those power generation customers.

And then a final question. Can you talk a bit about the combined R&D efforts for the company? Where do development efforts stand for the Colloidal Carbon Product for soil and groundwater remediation?

Okay. I'll take both of those, Ryan. On a combined basis, we've begun the integration of our technology teams and have been very pleased with the power -- of combining the strengths of the respective company's technology efforts. The culture of tackling technology opportunities from idea to lab prototyping to customer engagement by both groups is very similar and focused. Specifically related to the development of our Colloidal Carbon, we have completed the development of our generation 1 product and have secured a manufacturing partner to produce commercial scale quantities. On a market front, we've also engaged various entities that are active within the marketplace, and we are prepared to provide them product that has been produced to meet their testing and treatment schedules.

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

Thank you, and thanks to everyone for joining the call this morning. We are eager to begin executing on our key actions for 2023 and plan to provide updates on these initiatives along the way. We look forward to speaking with everyone soon. Thanks.

This concludes today's call. Thank you for joining. You may now disconnect.