Good morning. My name is Tracy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Advanced Emissions Solutions Q4 2016 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remark, there will be a question-and-answer session. [Operator Instructions] Mr. Ryan Coleman, you may begin your conference.

Thank you, Tracy. Good morning, everyone, and thank you for joining us today for our fourth quarter and year end 2016 earnings results call. With me on the call today is Heath Sampson, President and Chief Executive Officer; and Greg Marken, Chief Accounting Officer. This conference call is being webcast live within the Investor's section of our website. A webcast replay will also be available on our site, and you can contact the 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, 2016, and other filings with the Securities and Exchange Commission. Except as expressly required by the securities laws, the Company undertakes no obligation to update those factors or any forward-looking statements to reflect future events, developments or change in circumstances or for any other reason. In addition, it is very important to review the presentation and today's remarks in conjunction with the Form 10-K and the GAAP references in the financial statements. So with that, I'd like to turn the call over to Heath Sampson. Heath?

Thanks, Ryan, and thanks to all of you for joining us today. Let's start on Slide 1 as I let Slide 3, as I'd like to review what an exciting year we had last year. 2016 was a year of dramatic transformation for Advanced Emissions, as we solidified the foundation of the Company and setting on course for future growth and opportunities. We started in early 2016 by getting our financial house in order through the filing of our 2014 and 2015 annual financial statements. That was a significant exercise, and I'm very proud on how our accounting, finance and legal teams pulled together then and how they continued to keep us on target given how complex accounting and financial reporting can be at times. Though our financial -- through our financial compliance, we were next able to relist on the NASDAQ exchange, which provided for strong liquidity and increased investor interest in our story. From there, we not only eliminated debt and enhanced our liquidity profile. We took dramatic steps to decrease our cost base across the organization, which now leaves us in a position to be a significant cash generator moving forward. We'll talk later today about our new capital allocation plans, specifically plans for our first ever quarterly dividend, given our strong projected future cash flows. Additionally, we streamlined our Emissions Control or EC business and took significant cost out of it. We delivered on our numerous equipment contracts and modestly invested in building our Emissions Control, chemical technology products from our extensive patent portfolio. Through the commercialization of a number of these patents, we were able to drive numerous successful demonstrations of these chemical technologies for our utility partners, which led to solid sales growth in 2016 and a strong growing pipeline in 2017. Further, while…

Thanks, Heath. I'll start on Slide 5, which provides a closer look at the major components of our financial results for the year ended December 31, 2016. Revenues benefited from the growth in our chemicals business, but that was offset as we completed a fewer number of contracts in equipment sales and thus revenues declined year-over-year. In terms of expenses, cost of revenues decreased relatively in line with sales, yet we had extensive reductions in other operating expenses. Specifically, we reduced these costs by over 50% compared to fiscal 2015. As we enter 2017, we are slightly adjusting our annual operating cash cost forecast to range between 13 million to 15 million. This is an optimized cost basis with minimal resources needed to meet our remaining equipment contracts, and we can still maximize our ability to sell chemicals to operate a public company and to support our investment in Tinuum. Earnings from equity method investments, which generally represent our refined coal distributions, we're up substantially during the 3-and 12-month periods ended December 31, 2016, compared to those both same periods in 2015. The comparable 2015 numbers were negatively impacted by the operation of retained facilities as well as the installation of several refined coal facilities, both of which were not a factor during current year. We don't expect to incur material operating expenses for retained facilities moving forward and capital will only be spent for new installations as required to support anticipated transactions. Regardless, over fiscal year 2016, our earnings from equity method investments amount to 45.6 million, driven by a great fourth quarter with 15.5 million in equity earnings. Moving on, you will notice that royalties decreased in 2016 compared to 2015. This was also largely as a result of comparable 2015 royalty figures that were higher due to…

Thanks, Greg. Moving to Slide 9, you can see our leased and non-operating facilities as of December 31, 2016. This slide does not reflect the new lease we expect to close by the end of Q1 with an existing tax equity investor. Our current operating facilities are processing roughly 41 million tons of refined coal per year, and if we're able to lease the remaining non-operating facilities, we could effectively more than double that output. On Slide 10, you can see the components of our RC earnings. Greg went into detail regarding performance of RC business in the fourth quarter including the significant increase in equity method revenue, but I like to again quickly point out that year impact of no longer operating the retained facilities as well as eliminate the drag from the RCM6 facility. In terms of our operating tons processed that you can see on Slide 11, Tinuum's 13 operating facilities processed slightly over 10 million tons of coal during the fourth quarter, which exceeded the 8.8 million tons of coal processed in the same period last year. Looking at tons processed on an annual basis, Tinuum's 13 operating facilities processed over 41.6 million tons of coal during the fourth quarter, which exceeded the 37.7 million tons of coal processed in fiscal 2015. One of the key takeaways, I think for investors here is we see fairly consistent performance over the last three years despite numerous political and coal to gas switching dynamics that have occurred during the time period. Moving to Slide 12, you can see our royalty stream related to the use of our patented M-45 technology. Out of Tinuum's 13 operating facilities in the fourth quarter, seven had royalty streams associated with them. And looking at the trends by quarter, you can see that…

[Operator Instructions] Your first question comes from the line of Sameer Joshi with Rodman Renshaw.

So, the first question relates to the EC business and I know you showed in the slide, there is around 49.5 million of unrecognized revenue that you expect over the next six quarters. Should we expect most of it in the first half or second half of 2017?

Yes, so the EC equipment business and the revenue recognized through the quarter. Is that what your question is?

Correct. The equipment.

Yes, so most of it's going to be in the early part of the quarter, but early part of the year kind of the first and second quarter, primarily in the second quarter. But those are for a couple of big, so the timing on those depending on when close gets slip a little bit. But based on our current projection, most of that will occur by the end of the second quarter.

Substantially, most as in 50%, 60% of the total $49 million? Or

Actually, it's even higher than that, it's more in the kind of 75% 80% range will be by the end of the second quarter. With the bulk of it really being right now in the second quarter, I don't want to guide too much to it is in the first through the second. It's really just when we finish off these installations and the customers except that. So, some of that could slip into the first quarter, again our current schedule is to have 75% to 80% of that total backlog to be completed by the end of the second quarter.

And moving on to the partnership that you have with this broker and that you are treating as a new sales channel. Is it mainly for deploying most of the four unidentified utility partners, RC units or like what is the target for that? Is it the units?

Yes, so to think about the Refined Coal business, the utility relationships that we have are different from the brokers that we used to find tax equity investors. So, the facilities that we have installed or even uninstalled, we feel good about where we are currently and the potential to fill those once out. Where the brokers and the brokers just in general have been helping us for the last number of months, it's been a move for us to strategically focus on those. And the new ones that we have signed up, it's really a broad partner, has kind of strategic relationships with certain large companies. So -- and we view this relationship that we've just entered into as really important to really get a large number of these facilities closed on. We can think more of it like a bulk-type sale. So that's this the new relationship or partnership that we've just got into. They are helping us do that and as I said in my script comments that there really focused on 1 large company right now that's in due diligence with us right now.

I have question on Slide 12 where you show the operating tons. In Q4, the operating tons were quite low compared to the Q3 tons. And it looks like Q1, Q2 and Q4 are roughly at the same level. Was there something

The main difference is the seasonality of coal bun and where our specific plants are. And then if you look at the difference prior year, you will see that but the main correlation to why it's a little bit higher, a little bit lower is the additional plants that we have coming on. They also get some noise in the prior year in 2016. You have some coal to gas switching. So, in general, when you see the Q3 to Q4 reduction, it's primarily seasonality and coal bun.

So going forward, you expect roughly at the Q4 levels and then Q3 maybe slightly different based on seasonality?

Yes, yes. There might be different based on if we bring more plant, but the difference between Q3 and Q4, you should expect to see that in similar manner as you see on this page.

Okay. I just have one more question on the chemicals sales and an outlook given was very bright and positive. But what level do you expect those sales to reach? Do you expect it to completely replace the EC sales that you are not having in the future?

Yes, so the equipment sales that we have, those were -- I don't expect that to happen at that large extent. Like we said earlier, in the current market, it's about $100 million market for what we're going after. And we said, we're going to get potentially 20% to 40% of that over the next coming months and years. We could get more continue where that is. But right now we think it's reasonable and achieve able to think about 20% to 40%. So therefore, between $20 million and $40 million annually, it could be larger. If we got 50%, it could be $50 million or so forth. So we want to give them really kind of fair and conservative guidance around that 20% to 40% on $100 million market.

Got it. And just one last one from me. Have you already identified any M&A targets? Or are you in any discussions with any of these targets?

We are not. This is early stages and we're in the scanning phase just beginning that. And we look forward to keeping the disciplined approach and seeing what's coming in. So, none yet.

[Operator Instructions] There are no further questions at this time. Mr. Heath Sampson, I turn the call over to you.

Great. Thanks, again, for your time today and your continued support. We hope to see some of you at the two investor conferences we will be attending in March, which include Roth, which is today, and the Sidoti Conference at the end of the month. So thanks, again, and have a great day.

This concludes today's conference call. You may now disconnect.