Q3 2023 Advanced Emissions Solutions Inc Earnings Call
Speaker 1: Greetings and welcome to the Advanced Emission Solutions Q3 2023 earnings conference call. At this time, all participants are
Greetings and welcome to the advanced emissions solutions Q3, 2023 earnings conference call.
At this time all participants are in a listen only mode.
Speaker 1: A brief question and answer session will follow the formal presentation.
A brief question and answer session will follow the formal presentation.
Speaker 1: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this...
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
Speaker 1: It is now my pleasure to introduce your host, Ryan Coleman with Investor Relations.
It is now my pleasure to introduce your host Brian Coleman with Investor Relations. Thank you. Mr. Coleman you may begin.
Speaker 2: Thank you, Mr. Coleman. You may begin. Thank you. Good morning, everyone. And thank you for joining us today for our third quarter, 2023 earnings results call. With me on the call today, our Bob Rasmus, our Chief Executive Officer, and President, as well as Kim Hanson, our VP of Finance.
Thank you good morning, everyone and thank you for joining us today for our third quarter 2023 earnings results call with me on the call today are Bob Rasmus, Our Chief Executive Officer, and President as well as Kim Hansen, Our VP of Finance. This conference call is being webcast live within the investors section of our website and a downloadable version of today's presentation.
Speaker 2: This conference call is being webcasted live within the investor 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 our site and you can contact LFYAR Group for investor relations support at 312-445-287-
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That replay will also be available on our site and you can contact Alpha IR group for Investor Relations support at three one to 445 to eight 7%.
Speaker 2: Let me remind you that the presentation in remarks made today include forward-looking statements as defined in Section 21E of the Security 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 opportunity to differ materially from those expressed in or implied by these statements.
Mind, you that the presentation and remarks made today include forward looking statements as defined in section 21 E 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 two of today's slide presentation, and our Form 10-Q for the quarter ended September 30th 2023, and other filings with the Securities and Exchange Commission.
Speaker 2: These risks and uncertainties include, but are not limited to those factors identified on slide two of today's slide presentation. In our form, 10Q for the quarter-ended September 30th, 2023, and other filings with the Securities and Exchange Commission. Accept is expressly required by security laws. The company undertakes no obligation to update those factors or any forward-looking statements to reflect future events, developments, or change circumstances, or for any other reason.
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.
Speaker 2: In addition, it is especially important to review the presentation and today's remarks in conjunction with the gap references in the financial statements. With that, I'd like to turn the call over to Bob.
With that I'd like to turn the call over to Bob.
Speaker 3: Thank you, Ryan, and thanks to everyone for joining us this morning. We delivered a solid third quarter marked by revenue growth over the prior year, improved margins and profitability, and continued progress towards executing our strategic plan for the transition to becoming a producer of granular activated turbines.
Thank you Ryan and thanks to everyone for joining us. This morning, we delivered a solid third quarter marked by revenue growth over the prior year improved margins and profitability and continued progress towards executing our strategic plan for the transition to becoming a producer of granular activated carbon.
Speaker 3: Last quarter, I promise that our absolute focus would be on execution, starting with a strategic expansion of our production capabilities at Red River and Torban, all while running our existing businesses in the most efficient manner.
Last quarter I promised that our absolute focus would be on execution, starting with the strategic expansion of our production capabilities that Red River and corvette, all while running our existing businesses in the most efficient manner.
Speaker 3: Regarding our existing business, I felt that there were things we could and should be doing better. One of our first initiatives was to take a candid, nothing is a good look at our existing passport portfolio.
Regarding our existing business I felt that there were things, we could and should be doing better one of all our first initiatives was to take a candid nothing is sacred look at our existing portfolio.
Speaker 3: Our goal was to improve economics and overall profitability. We reviewed all existing contracts within an emphasis on improving overall economics, eliminating unfavorable or lost making relationships, focusing our sales and production efforts on the best opportunities to improve product mix, and most importantly, profitability.
Our goal was to improve economics, and overall profitability, we reviewed all existing contracts with an emphasis on improving overall economics, eliminating unfavorable or loss, making relationships focusing our sales and production efforts on the best opportunities to improve product mix and most importantly.
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Speaker 3: As a result, our average selling price or ASP is higher by roughly 16% year-to-date compared to 2022.
As a result, our average selling price or a SP is higher by roughly 16% year to date compared to 2022.
Speaker 3: As a reminder, we observed lower power generation volumes due to lower average natural gas prices compared to the prior year. However, we saw much stronger volumes within our water markets where ASPs increase substantially compared to the prior year.
As a reminder, we observed lower power generation volumes due to lower average natural gas prices compared to the prior year. However, we saw much stronger volumes within our water markets, where a S p's increased substantially compared to the prior year.
Speaker 3: Taking together, these initiatives improved our financial performance as we move through the quarter. Our gross margin in the quarter was 30.6%, which is significantly better than 24.1% in 2022. What are new?
Taken together these initiatives improved our financial performance as we move through the quarter, our gross margin in the quarter was 36%, which is significantly better than 24.1% in 2022.
Speaker 3: As a result, after four consecutive quarters of negative EBITDA, we achieved positive EBITDA for the third quarter.
As a result after four consecutive quarters of negative EBITDA, we achieved positive EBITDA for the third quarter.
Speaker 3: The quarter also saw a 5% revenue growth for our consumables products compared to the prior year. We also ended the quarter with
The quarter also saw a 5% revenue growth for our consumable products compared to the prior year. We also ended the quarter with positive momentum.
Speaker 3: While volumes were slightly higher than the prior year, we were more profitable. This is a point which I want to stress is being of great importance to me as the CEO and as a shareholder. We will continue to working to improve the business performance via a laser focus on profitability over value.
While volumes were slightly higher than the prior year, we were more profitable. This is the point, which I want to stress as being of great importance to me as the CEO and as a shareholder we will continue to working to improve the business performance via a laser focus on profitability over volume.
Speaker 3: My goal is to eliminate all unprofitable contracts, an obvious but necessary measure to take in order to become a much more profitable business.
My goal is to eliminate all unprofitable contracts and obvious but necessary measure to take in order to become a much more profitable business cause this and I am happy to report that by year end 2023 we expect that we will have only two contracts outstanding with negative gross margin.
Speaker 3: To this end, I am happy to report that by year end 2023, we expect that we will have only two contracts outstanding with negative gross margin, and we'll be looking to address these over the course of 2024.
And we will be looking to address these over the course of 'twenty 'twenty four.
Speaker 3: As we think about demand for our consumables projects going forward, we have recently seen an increase in natural gas prices, which is encouraging, is that typically supports demand levels among our power generation customers.
As we think about demand for our consumables products going forward. We have recently seen an increase in natural gas prices, which is encouraging is that typically supports demand levels. Among our power generation customers. The sector remains volatile, but we are confident that the ongoing optimization of ipass.
Speaker 3: This set remains valid, but we are confident that the ongoing optimization of our path portfolio coupled with our initiatives to step up the ASP of our overall portfolio would help to offset any potential future volume decline.
Portfolio, coupled with our initiatives to step up the E. S. P of our overall portfolio would help to offset any potential future volume declines. We also continue to see stable demand from our industrial and water markets. Though these remained smaller markets, where our products compared to power generation.
Speaker 3: We also continue to see stable demand from our industrial and water markets, though these remain smaller markets for our products compared to power generation. Turning to our expansion.
Turning to our expansion plans and strategic projects, we remain pleased with the progress of our work at Red River and corvette delete purpose salary assets kept producing commercialized granular activated carbon products recently, our focus has been on the permitting process at Red River while simultaneously.
Speaker 3: We remain pleased with the progress of our work at Red River and Corbin to repurpose our assets to produce and commercialize granular activated carbon products.
Speaker 3: Recently, our focus has been on the permitting process at Red River, while simultaneously purchasing long lead-type equipment and preparing for construction.
Painlessly purchasing long lead time equipment and preparing for construction.
Speaker 3: At Red and River, we recently obtained all necessary permits to move on to the construction phase, which will begin this month. We have also completed all site grading and prep work in October . Our fourth quarter task will be the finalization of the commissioning and staffing plan, as well as the commencement of civil construction and piping fabrication.
Red River, we recently obtained all necessary permits to move on to the construction phase, which will begin. This month. We have also completed all site grading and prep work in October our fourth quarter task will be the finalization of the commissioning and staffing plan as well as the commencement of civil construction and power.
Fabrication.
Speaker 3: This first phase includes the construction and installation of new shaping and heat treatment processes that will provide the plant with the capabilities to handle and process both a bituminous-based feedstock and our current Ligmex feedstock. We expect the shaping and treating equipment to be installed and operational by the fourth quarter of 2024.
This first phase includes the construction and installation of new shaping and heat treatment practices that will provide the plant with the capabilities to handle and process well, let's say by two minutes based feedstock and our current lignite feedstock, we expect the shaping of treating equipment to be installed and operational.
By the fourth quarter of 2024.
Speaker 3: Upon completion, we expect this first phase of the expansion will result in name plate capacity of about 25 million pounds of annual granular activated carbon production.
Upon completion, we expect this first phase of the expansion will be felt a nameplate capacity of about 25 million pounds of annual granular activated carbon production.
Speaker 3: At Corbin, initial modifications to the plant, as well as other planned improvements, are nearing completion.
At cornerback initial modifications to the plant as well as other planned improvements are nearing completion.
Speaker 3: We have completed 70% of the construction of the water clarification project and controls procurement and engineering has been completed as well. Our next steps at the site will be the welding and installation of clarification project piping and control system installation as well as site grading and the raising of the stack.
We have completed 70% of the construction of the water clarification project and controls procurement and engineering has been completed as well.
Net steps at the site will be the welding and installation of clarification, blackjack piping and control system installation as well as site grading and the raising of the stacker.
Speaker 3: The company has previously stated the total phase one tap acts between Red River and Torban to be between $45 and $50 million. A figure that we confirmed in our October 23rd press release.
The company has previously stated the total phase one capex between Red River and Torben could be between 45 and $50 million a figure that we confirmed in our October 23rd press release.
Speaker 3: However, we are revising our CAPEX expectations for calendar year 2023. We now expect our CAPEX this year to be between 35 to 40 million dollars as opposed to 40 to 45 million dollars previously.
However, we are revising our capex expectations for calendar year 'twenty two 'twenty three we now expect our capex this year to be between $35 million to $40 million as opposed to $40 billion to $45 billion previously.
Speaker 3: I want to be clear that this revision to our spending expectations is in no way related to any delay or postponement of our expansion plan.
I want to be clear that this revision to our spending expectations is in no way related to any delay or postponement of our expansion plan.
Speaker 3: We are currently exactly where we expected to be on the timeline of our expansion projects. And as of today, there's been no change to future expectations or to our anticipated commercialization of granular activated carbon by year end 2024.
We are currently exactly where we expected it to be on the timeline of our expansion projects and as of today, there's been no change to future expectations or to our anticipated commercialization of granular activated carbon by year end 'twenty 'twenty four it.
Speaker 3: The change is simply a function of the timing of when we expect to incur certain costs.
Change is simply a function of the timing of when we expect to incur certain costs with some now expected to occur in early 2024 as well as other factors such as lower downpayments on equipment than previously anticipated.
Speaker 3: with some now expected to occur in early 2024, as well as other factors such as lower down payments at equipment than previously anticipated.
Speaker 3: As previously stated, I wanted to conduct a thorough review of all aspects of the company's operations, including the strategic plan. The initial focus was on existing operations and profitability. You can see the results of that work in our third quarter numbers and our comments on contract and relationship profitability.
As previously stated I wanted to conduct a thorough review of all aspects of the company's operations, including the strategic plan.
Initial focus was on existing operations and profitability you can see the results of that work in our third quarter numbers and our comments on contract and relationship profitability.
Speaker 3: Quite frankly, these efforts were more extensive and time-consuming than anticipated. I also wanted to conduct a thorough review of our capital spending cadence to optimize our spend in the most efficient manner and ensure, at the very least, that we hit our project milestone.
Quite frankly these efforts were more extensive and time consuming than anticipated I also wanted to conduct a thorough review of our capital spending cadence to optimize our spend in the most efficient manner and ensure at the very least that we hit our project milestones.
Speaker 3: We hope to complete what we do in the near future and be in a position to share material updates soon.
We hope to complete that we deal with in the near future and be in a position to share material updates soon.
Speaker 3: Given customer conversations in market demand, my goal is to accelerate the timeline. We are having very encouraging pre-production conversations with potential customers that continue to demonstrate the strong demand for high performance activated carbon technologies in the air, water, and soil remediation market.
Given customer conversations and market demand my goal is to accelerate the timeline, we are having very encouraging preproduction conversations with potential customers that continue to demonstrate the strong demand for our high performance activated carbon technologies and the air water and soil remediation.
Markets given the market demand we are seeing we believe it is possible and even likely that we could contrast, our light one capacity before the start of production and commercialization.
Speaker 3: Given the market demand we are seeing, we believe it is possible, and even likely that we could contrast our line one capacity before the start of production and commercialization.
Speaker 3: As such, we are evaluating the practicality and cost associated with accelerating certain aspects of the business plan.
As such we are evaluating the practicality and costs associated with accelerating certain aspects of the business plan.
Speaker 3: We recently announced with the commencement of phase one of our expansion plan that we retain the optionality to expand the scope of that plan in four potential additional phases with an estimated total cost for all five phases of approximately $251 million.
We recently announced with the commencement of I used one of our expansion plan that we retain the optionality to expand the scope of that plan and for potential additional phases with an estimated total cost for all five phases of approximately $251 million. It's important to note that we.
Speaker 3: It's important to note that we benefit from having a sole discretion to accelerate our phase, our expansion plan, as our realized roast, internal forecasts, and market conditions dictate.
Benefit from having sole discretion to accelerate or phase our extent expansion plan is our realized gross internal forecast and market conditions dictate.
Speaker 3: As we look beyond the first phase, we expect to take a diligent approach, again exercising our sole discretion as to whether, when, and how we undertake each successive phase of the plan.
We look beyond the first phase, we expect to take a diligent approach again exercising our sole discretion as to whether when and how we undertake each success of phase of the plan.
Speaker 3: We are also working alongside both state and federal officials regarding our participation in incentive programs, such as the state of Louisiana's industrial tax exemption and quality jobs program.
We are also working alongside both state and federal officials regarding our participation and incentive programs such as the state different Louisiana's industrial tax exemption and quality jobs program.
Speaker 3: It is perhaps worth reiterating that the basis for this potential multi-phase expansion is our confidence in this granular product line. And I would repeat that any expansion will only be executed at our option, which we will continually evaluate based on customer demand and market conditions.
It's perhaps worth reiterating that the basis for this potential multi phase expansion is our confidence in this granular product line and I would repeat that any expansion will only be executed at our option, which we will continually evaluate based on customer demand and market conditions.
Speaker 3: As we look at the broader market conditions to which our product demand will react, we are extremely encouraged by the regulatory-led developments we are already seeing gathering pace.
We look at the broader market conditions to which our product demand will be yet we are extremely encouraged by the regulatory lead development. We are already seeing gathering pace and as an example, we anticipate that the E. P. A may release, its national primary drinking water regulation by the end of this calendar year and with it a.
Speaker 3: It is an example. We anticipate that the EPA may release its National Primary Drinking Water Regulation by the end of this calendar year and with it a significant focus on PFAS or forever chemicals.
Difficult to focus on P fast or forever chemicals, such regulation could potentially raise the required standards for drinking water across the U S expanding demand for our products in a market facing supply shortages.
Speaker 3: Such regulation could potentially raise the required standards for drinking water across the US, expanding demand for our products in a market facing supply shortage.
Speaker 3: This is one of the main reasons for our optimism about our initial expansion plans at Corbin and Red River. But I should add that there was a clear trend for stricter regulations beyond the USA. Our customer engagement suggests that market participants are very eager to secure supply before it becomes even more constrained. The conversations with the broad range of customers, which we have had today clearly demonstrate that the triple benefit we offer them is unique.
One of the main reasons for our optimism about our initial expansion plans at carbon and Red River, but I should add that there was a clear trend for stricter regulations beyond the USA our customer engagement suggests that market participants are very eager to secure supply before it becomes even more constrained.
The conversations with a broad range of customers, which we have had to date clearly demonstrate at the triple benefit we offer them as unique I, providing a vertically integrated supply chain and environmentally responsible feedstock and the potential for a materially lower emissions profile, we can offer something.
Truly distinctive.
Speaker 3: It is perhaps also we're touching on the process as to how we are working to satisfy this demand. We are engaging with a very large market sector with potential demand significantly in excess of what we can produce.
It is perhaps also worth touching on the process as to how we are working to satisfy this demand we are engaging with a very large market sector with potential demand significantly in excess of what we can produce.
Speaker 3: We are already well underway with some of these conversations, and they anticipate this will accelerate as we enter 2024. So I am very excited about the progress we are making in this regard, and look forward to updating the market and due course as we secure further interest.
We are already well underway with some of these conversations and I anticipate this will accelerate as we enter 2024. So I am very excited about the progress we are making in this regard and look forward to updating the market in due course as we secure further interests.
Speaker 3: Separately, but related to this drive towards ongoing greater profitability. I previously mentioned our operational
Separately, but related to this drive towards ongoing greater profitability I.
Obviously mentioned our operational review this is not a one time event it is ongoing.
Speaker 3: This is not a one-time event. It is ongoing. We will continue to evaluate ways to simplify the overall organization and operations, while maintaining the ability to achieve the growth initiatives inherent in our business plan.
We'll continue to evaluate ways to simplify the overall organization and operations, while maintaining the ability to achieve the growth initiatives inherent in our business plan is.
Speaker 3: As part of that process, we recently announced that Jeremy Deke Williamson has been appointed as our new chief operating officer.
As part of that process, we recently announced that Jeremy Dr. Williamson has been appointed as our new Chief operating officer.
Speaker 3: Deach has extensive experience optimizing plant operations and successfully completing construction and expansion projects on or ahead of time.
He has extensive experience optimizing plant operations and successfully completing construction and expansion projects on or ahead of time.
Speaker 3: I am confident that his leadership and past experience will be invaluable as we execute our goal of being the safest, lowest cost, and most profitable company in the industry.
I am confident that his leadership and past experience will be invaluable as we execute our goal of being the safest lowest cost and most profitable company in the industry.
Speaker 3: Geek's impact is already being felt and we look forward to his contribution.
This impact is already being felt and we look forward to his contributions.
Speaker 3: Additionally, if you may have seen, we also recently announced the promotion of Stacia Hansen to the role of Chief Accounting Officer. We are excited at having Ms. Hansen in her new role. I will provide a bit more color on how we're thinking about our priorities going forward. But first, I'd like to turn the call over to Kim to review our third quarter results in greater detail. Kim. Thank you, Bob.
Additionally, as you may have seen we also recently announced the promotion of Stacia Hansen to the role of Chief Accounting Officer, We are excited in having mishaps and in her new role.
I'll provide a bit more color on how we're thinking about our priorities going forward, but first I'd like to turn the call over to Kevin to review, our third quarter results in greater detail Kim Thank.
Thank you Bob.
Speaker 4: Slide 10 offers a high-level review of our third quarter and year-to-date financial results.
So I can offer you a high level overview.
Third quarter and year to date financial results.
Speaker 4: Third quarter revenue total of $20,000, $28,000, $28,000, $4,000, and the third quarter of 2022. The increase was mainly driven by higher average selling price.
Third quarter revenue.
It's 28 $5 million in the third quarter, it's funny 22 P.
The increase was mainly driven by higher average selling prices.
Speaker 4: for a consumable product. Year-to-date revenues were 71.1 million compared to 79.6 million for the comparable period in the prior year. The revenue decline was the result of lower sales volumes due to lower average natural gas prices which negatively impacted the company's power generation customers, partially offset by higher average selling prices for consumable products.
Chemical products year to date revenues were 71 point.
Compared to 79.6 known as the comparable period in the prior year.
Revenue declined Mr myself lower sales volume she doesn't know.
Average natural gas prices, which negatively impacted the company's power generation customers, partially offset by higher average selling prices are consumable products.
Speaker 4: Well, lollins have declined. The growth margin per pound has improved from prior year due to higher average selling prices and better input cost management.
Well volumes have declined across smart.
Thailand has improved from prior year due to higher average selling prices.
And better cost management.
Speaker 4: Third quarter other operating expenses were $11.6 million compared to $9.5 million for the third quarter of 2022. Year-to-date, other operating expenses were $34.3 million compared to $25.3 million in the prior year period.
Third quarter other operating expenses were about $6 million compared to $9 five.
Third quarter 2022.
Year to date other operating expenses were $30 3 million compared to $25 3 million.
One of your peers.
Speaker 4: The increases remain as a result of higher payroll and benefit expenses, as well as higher general and administrative expenses associated with the acquisition of substantially all of the subsidiaries of AHRQ.
The increase is mainly from yourself from higher payroll and benefit expenses.
Well as higher general and administrative expenses associated with the acquisition of <unk>.
Substantially all of its subsidiaries.
Speaker 4: Third quarter operating loss was $2.5 million compared to $2.6 million in the prior year. The improvement was man with the results of better growth, converging in the company's consumable products. Year-to-date operating loss totaled $16.4 million compared to an operating loss of $8.7 million in the prior year. The decline was mainly result of lower consumables, revenue, and higher operating expenses.
Third quarter operating loss was $2.5 million compared to $2 6 million in the prior year.
The improvement was mainly the result of bankruptcy back to you on the company's consumable products.
To date operating loss totaled $16 4 million compared to an operating loss of eight seven in the prior year.
Yeah.
The decline was mainly a result of records.
T Mobile's revenue and higher operating expenses.
Speaker 4: Third quarter interest expense was $0.8 million, compared to $0.1 million in the third quarter of 2022. Year of the date interest expense was 2.2 million, compared to $0.3 million in the prior year period. The increases were primarily driven by incremental interest expense on the company's $10 million term bonds.
Third quarter interest expense was down $8 million compared to 0.19 in the third quarter 2022.
Yeah.
<unk> expense was $2 2 million compared to three nine in the prior year period.
The increases were primarily driven by incremental.
I'm, the company's $10 million term loan.
Speaker 4: We did not recognize any income tax expense or benefit for the 3rd quarter of 2023 or 2022. The company recognizes all income tax benefits during the year-to-date period of 2023, compared to not recognizing any income tax expense or benefit in the comparable period of 2022.
We did not recognize any income tax expense or benefit for the third quarter of 2023 or 2022.
The company recognized an income tax benefit gain year to date period, 20th century compared to not recognizing any income tax expense or benefit any comparable period 2022.
Speaker 4: Third quarter net loss was $2.2 million or simply expense per diluted share compared to a net loss of 2.4 million or 13 cents per diluted share in the prior year. The improvement was driven by a smaller operating loss in the prior year. Year-to-state net loss was $15.5 million compared to net loss of 5.8 million in the prior year. Mainly the result of lower operating earnings.
Third quarter net loss was $2.2 million or six cents per diluted share compared to a net loss of two 5 million or 13 fringe of a share in the prior year.
Improvement was driven by a smaller operating loss in the prior year year to date net loss was $15 five compared to net loss of $5 8 million. The prior year, mainly as a result of our operating earnings.
Speaker 4: Third quarter adjusted EBITDA was $0.9 million compared to an adjusted EBITDA loss of $0.5 million in the prior year. The improvement was driven by a smaller net loss.
Third quarter adjusted EBITDA, what's your it looks like $9 million compared to an adjusted EBITDA loss of five 5 million in the prior year.
For example, in Germany by a smaller net loss.
Speaker 4: Year-to-date adjusted EBITDA loss was $9.8 million compared to positive adjusted EBITDA of $2.5 million for the comparable period in 2022. This decline was mainly the result of larger net loss driven by higher operating expenses. It is also likely worth reminding everyone that from a seasonality standpoint, Q3 and Q1 tend to be our strongest quarters as they encompass the warmest and coldest months of the year.
Year to date adjusted EBITDA loss was $9 8 million compared to positive adjusted EBITDA of $2 5 million for the comparable period in 2022.
The decline was mainly yourself net loss driven by higher operating expenses. It is also likely worth reminding everyone that from a seasonality standpoint, Q3, and Q1 tends to be our strongest quarters and thank god, the warmest and cold it's nice to be here.
Speaker 4: Cash balances as of September 30th, including restricted cash totaled $61.3 million. Compared to $76.4 million as of December 31st, 2022.
Cash balances as of September 30th excluding restricted cash totaled $61 $3 million compared to $76 $4 million as of December 31st 2022.
Speaker 4: Total debt, inclusive of financing uses, as of September 30, totaled $21.2 million, compared to $4.6 million as of December 31, 2022. The increase was driven by the term loan entered into in conjunction with the AHRQ acquisition as well as the assumption of AHRQ's loan.
Total debt inclusive of finance leases as of September 30th totaled $21 $2 million compared to $5 6 million as of December 31st 2022. The increase was driven by the time alone entered into in conjunction with the arc acquisition as well as the assumption of our.
Hello.
Year to date Capex.
Speaker 4: of $17 million compared to 6.2 million in the first nine months of 2022. The increase was the result of initial costs of the growth capital projects, as well as higher standards associated with the annual turnaround earlier this year.
$17 million compared to $6 2 million in the first nine months 2022. The increase was the result of an initial cost of new growth capital projects as well as higher spend associated with the annual turn around earlier this year.
Speaker 4: As Bob mentioned, we now expect to incur between 35 and 48 million dollars in capital expenditures in 2023, driven by enhanced manufacturing and processing capabilities to enable future granular activated carbon production and amounts for the completed plant turnaround as well as the completion of certain plan projects that were started in 22 and completed during 2023. With that, I'll turn the call back to Bob.
As Bob mentioned, we now expect to incur between 35 and $40 million in capital expenditures in 2023.
Given by enhanced manufacturing and processing capabilities to enable future granular activated carbon production and amounts for the completed plant turnaround as well as the completion of certain planned projects that were started in 'twenty two and completed during 2023.
With that I'll turn the call back.
Speaker 3: Thank you, Kim. I'll close with a brief review of our priorities going forward. The integration of ARC in the initial operational review are substantially in the rear view mirror. Our key focuses going forward are pack market expansion to non-traditional markets and continuing to emphasize the requirement for customer profitability.
Thank you Kim I'll close with a brief review about priorities going forward.
The integration of Aragon. The initial operational review are substantially in our rearview mirror.
Our key focuses going forward are.
Market expansion to non traditional markets and continuing to emphasize the requirement for customer profitability.
Speaker 3: Since our business expansion plan and pivot to granular products will be uses of capital for the near term, our goal is for our PAC portfolio to be a net cash contributor. We are confident that the steps being taken today to eliminate economically unfavorable contracts from the portfolio, coupled with a more focused go-to-market approach that emphasizes the most attractive opportunities, will have a tangible positive impact on our PAC portfolio.
Our business expansion plan and pivot to granular products will be uses of capital for the near term. Our goal is for our patent portfolio to be a net past contributor.
We are confident that the steps being taken today to eliminate economically unfavorable contracts food portfolio, coupled with our more focused go to market approach that emphasizes the most attractive opportunities we will have a tangible positive impact on our patent portfolio.
Speaker 3: We also continue the review of our planned expansion plans. The primary focus is evaluating the benefits and implications of accelerating the expansion timeline. As we have stated today, we expect to meet or beat the current timeline.
We also continue to review all of our planned expansion plans.
Primary focus is evaluating the benefits and implications of accelerating the expansion timeline as we have stated today, we expect to meet or beat the current timeline.
Speaker 3: The work towards granular pre-qualification discussions with customers has been extremely encouraging regarding our unique and patented process and the product's efficacy and testing results. We are building out our sales channels to secure lead granular customers ahead of full-scale commercialization.
The work towards granular prequalification discussions with customers has been extremely encouraging regarding our unique and patented process in the product's efficacy and testing results. We are building out our sales channels to secure lead granular customers I had to full scale commercialization.
Speaker 3: Our sales team has been very active and our ultimate goal is executed granular activated carbon contracts prior to initiating production.
Our sales team has been very active in our ultimate goal is executed granular activated carbon contracts.
Or to initiating production, we will share key updates in this area as appropriate.
Speaker 3: We will share key updates in this area as appropriate.
Speaker 3: And lastly, we are exploring additional revenue opportunities for both our PACT products and ArcWetCake. While these developments regarding ArcWetCake are too early to share, they do represent potential opportunities to expand our business while diversifying our revenue stream.
And lastly, we are exploring additional revenue opportunities for both our past products and Oracle wet cake well leased developments regarding our worst case, that's too early to share they do represent potential opportunities to expand our business, while diversifying our revenue stream.
Speaker 3: You may have seen our announcement regarding our team with LOSR in Europe . We are confident that this provides an excellent opportunity to provide meaningful sales volumes in 2024. We will continue to focus on profitability over value.
You have seen our announcement regarding our teaming up with Oh, Sarah in Europe. We are confident that this provides an excellent opportunity to provide meaningful sales volumes in 'twenty 'twenty four we will continue to focus on profitability over volume.
Speaker 3: Our goal is to make ADES the safest, lowest cost and most profitable company in the industry. We have an incredible opportunity in front of us to capture thematic customer and regulatory tailwinds to better serve a structurally undersupplied market, all while ensuring our air, soil and water remain clean and free of contaminants.
Our goal is to make a D E F. The safest lowest cost and most profitable company in the industry, we havent been incredible opportunity in front of us to capture the mass customer and regulatory tailwind.
Better serve a structurally under supplied market all while ensuring our air soil and water remains clean and free of contaminants I remain incredibly excited about our prospects and look forward to updating you on progress as we forge ahead.
Speaker 3: I remain incredibly excited about our prospects and look forward to updating you all on progress as we forge ahead. With that, I will turn the call back over to our operator to move us to Q&A.
With that I will turn the call back over to our operator to move us to Q&A.
Speaker 1: Thank you. We will now be conducting a question and answer session.
Thank you.
We will now be conducting a question and answer session.
Speaker 1: If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue.
If you'd like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate that your line is in the question queue.
You May press star two if you'd like to remove your question from the queue.
Speaker 1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker 1: Our first question comes from the line of Jerry Sweeney with Roth Capital Partners. Please proceed with your question.
Our first question comes from the line of Gerry Sweeney with Roth Capital Partners. Please proceed with your question.
Speaker 5: Hello, this is Brandon Rodgers on for Jerry Sweeney. Thanks for taking my question. Happy to do it.
Hello. This is Brian Rogers on for Jerry Sweeney. Thanks for taking my question happy to do it.
Speaker 5: So, my first question is just on gross margins. I saw some improvement. You highlighted some of the reasons for the gains. Can you just bucket out how much of the gains came from mix, price, and contract removal? And then if you see if there's any more improvements you can do on this front.
So my first question is just on the gross margins are so some improvement.
Yeah, you highlighted some other reasons for the gains can you just bucket out how much of the gains came from mix pricing contract removal and then if you see if there's any more improvements you can do on this front.
Speaker 3: There's really two primary reasons for the improvement in gross margin. One is the elimination of negative margin contracts, just overall the focus, as I mentioned, on profitability over volume. And the other is paying more ruthless attention to cost and what our inputs were. And part of the negative gross margin previously was that we had some fixed price contracts and our underlying cost rose faster than anticipated.
There are really two primary reasons for the improvement in gross margin. One is the elimination of negative margin contracts I'm. Just overall the focus as I mentioned on profitability over volume and the other is paying more ruthless attention to cost and and whatever.
Inputs, where and part of the negative gross margin previously was that we had some fixed price contracts in our underlying costs rose faster than.
Than anticipated.
Speaker 5: Awesome. Thank you. And then another question on the expansion plans or at River.
Awesome. Thank you and then another question on the expansion plans that Red River.
Speaker 3: Do you, Wendy believe you have clarity on the potential to accelerate the expansion plans that Red River? I had hoped to have clarity for this call, but as I mentioned, the operational review took on greater magnitude.
Do you what do you know.
When do you believe you'll have clarity on the potential to accelerate the expansion plays that Red River.
I hope to have clarity for this call, but as I mentioned the operational review took on greater magnitude than originally anticipated and took up more time I certainly hope to have it by the next quarterly call, but quite frankly, I expect it sooner than that and regarding.
Speaker 3: then originally anticipated and took up more time. I certainly hope to have it by the next quarterly call, but quite frankly, I expected sooner than that. In regarding acceleration of the timeline, now it's our goal based on customer receptivity to evaluate that and see what the greatest benefit to shareholders would be.
Acceleration of the timeline there it's our goal based on customer receptivity to evaluate that and see what the greatest benefit to shareholders would be but assuming that there is no acceleration, we're comfortable and confident that our cash on hand, and future cash flow will be sufficient to fund.
Speaker 3: But assuming that there is no acceleration, we're comfortable and confident that our cash on hand and future cashflow will be sufficient to fund our currently scheduled CapEx plans.
Our currently scheduled Capex plans.
Thank you I'll hop back into the queue.
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Thank you.
Speaker 1: There are no further questions at this time, and I would now like to turn the floor back over to CEO and President Bob Rasmus for a closing comment.
There are no further questions at this time and I would now like to turn the floor back over to CEO and President Bob Rasmus for closing comments.
Speaker 3: Thank you, Camilla. In summary, we're pleased with the progress we've made this quarter, but we're far from satisfied with our results. I'd like to thank everyone for joining us on the call this morning, and we look forward to updating everyone as events warrant and certainly no later than the next quarter.
Thank you Kim Hello in summary, we're pleased with the progress we've made this quarter, but we're far from satisfied with our results I'd like to thank everyone for joining us on the call. This morning, and we look forward to updating everyone as events warrant and certainly no later than the next quarter.
Speaker 1: Thank you. This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation.
Thank you. This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation.
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