Good morning. My name is Nathalie, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Advanced Emissions Solutions Q1 2019 Earnings Call. [Operator Instructions]. Thank you. Ryan Coleman, Investor Relations, you may begin your conference.

Great. Thank you, Natahalie. Good morning, everyone, and thank you for joining us today for our First Quarter 2019 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 website, and a downloadable version of today's presentation will be available there as well. 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 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 or opportunities to differ materially from those expressed in or implied by these statements. These risks and uncertainties include, but are not limited to, the factors identified on Slide 2 of today's slide presentation, in our Form 10-Q for the quarter ended March 31, 2019, and other filings with the Securities and Exchange Commission. Except as expressly required by securities law, the company undertakes no obligation to update those factors or any other 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 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 everyone for joining us this morning. Let's begin on Slide 3 and review our first quarter. During the quarter we remain focused on maximizing our RC cash flows on continued integration of Carbon Solutions into our new combined organization. We've renamed the historical Emissions Control business to Power Generation & Industrials Segment, and we'll be referring it to as PGI segment throughout this presentation. As we stated in last quarter, our strategy has not changed and we remain committed to our RC segment while integrating the Carbon Solutions business with our existing platform. As these two businesses are highly complementary segments. In the RC segment distributions were inline with our expectations. Distributions were higher year-over-year as result of additional invested RC facilities in both the second half of 2018 as well as the previously announced closure in January, 2019. Additionally, equity earnings increased significantly year-over-year and was driven by the additional RC facilities but was also impacted by the adoption of new accounting standards by Tinuum Group. Greg will review this change in greater detail in a moment, but the key takeaway is that there will be no impact to the total amount of cash we collect. We expect to collect from Tinuum. Our cash position was up slightly from the end of 2018 despite our dividends, further share repurchases, repayment of long-term borrowings and integration costs. We ended the first quarter with total cash balance of $25.9 million, an increase of $2.1 million from the end of 2018. As it had been a key theme for several quarters now, we remain committed to returning capital to our shareholders. During the quarter, we paid our quarterly dividend and repurchased over 63,000 shares for a total of roughly $700,000. Going forward, we remain committed to the…

Thanks Heath. Let’s start on Slide 5 for our first quarter financial review. Earnings from equity method investments were significantly higher as a result of the three additional facilities period-over-period and as Heath mentioned, a change in Tinuum’s accounting practices. Tinuum Group adopted a new revenue and lease standards as of January 1, 2019. As a result, we recorded a cumulative adjustment of $28.8 million related to our company's percentage of Tinuum Group’s, cumulative effect adjustment that increased the company's retained earnings and investment balance related to Tinuum Group as of the adoption date. Based on the impacts of this adoption, we no longer have cumulative cash distributions in excess of our cumulative pro-rata share of Tinuum Group’s net income. Therefore, we recognized equity earnings by recording our pro-rata share of Tinuum Group’s net income rather than income being based on cash distributions for the three months ended March 31, 2019. As heath mentioned, this does not affect the timing or the total projected cash flows from Tinuum to the company, but affects the accounting treatment of the pro-rata share of earnings and the cash distributions. Absence this accounting change, Tinuum Group’s equity earnings would have equaled $16.8 million rather than $19.8 million. That increase is roughly 37% higher than the equity earnings in the prior year, which totaled $11.1 million. In the PGI segment, consumables revenue was $14.6 million higher from the prior period driven by the contributions from Carbon Solutions. This top line result was in line with our expectations. First quarter total company revenue and costs of revenue and were $19.3 million and $14.1 million respectively compared with $3.9 million and $0.6 million in the first quarter of 2018. Revenues for the first quarter were higher year-over-year due to the impacts of the acquisition as well as…

Well, thanks, Greg. I’d like to take a moment to discuss our future outlook. Let's turn to Slide 7 and briefly discuss the Refined Coal backdrop. As we have previously discussed over the last several quarters, we continue to see tailwinds surrounding Tinuum efforts to close additional facilities. These tailwinds are the results of IRS tax clarification achieved in early 2018 and increasing clarity on certain divisions within the tax bill, which is how tax equity investors better understand the true impact of tax reform on their businesses. On the other hand, our biggest challenge to obtaining new tax equity investors remains the public and political stigma of being associated with coal-fired power generation. Tinuum works hard to educate prospective investors that this tax incentive was instrumental in enabling the development of mercury control technologies and as a whole Refined Coal truly helps reduce harmful emissions. Turning to Slide 8, you can see the number of invested facilities versus the number of waiting for tax equity investor or waiting to be installed as of March 31, 2019. So as of today, we have 20 invested facilities and eight uninvested. To maximize this Refined Coal opportunity and secure additional investors for the remaining units, Tinuum has proactively installed facilities in preparation for investment, and two are currently in the installation phase. During 2018, Tinuum has spent roughly $17 million related to capital expenditures, nearly all of which was engineering and installation costs. Tinuum and its members, including us, would certainly not be incurring these costs if we were not confident that we will translate into future invested RC facilities. We have active ongoing conversations with potential tax equity investors for several facilities. Should we finalize deals on our current discussions, they have the potential to add additional 8 million tons to…

[Operator Instructions] And our first question comes from the line of Amit Dayal, [H.C. Wainwright]. Your line is open.

Thank you. Good morning, Heath.

Good morning.

Great to see the progress being made across all fronts. Just on your comments about the $12 million, roughly additional RC done for the year, largely this is going to be driven by new unit deployments I believe. Is that the right way to basically look at it? We've already done one, maybe we should look for three more units for the year.

Yes. You're thinking of it right. So just to clarify again, in – early on in the year we had a 3.5 million ton closure and I stated that we should close on another facility in that 3 million to 4 million range next month. And then that leaves us to closures on a couple more facilities to get there. And we have line of sight into that with multiple different parties. So we feel really good about making that 12 million ton commitment that we gave last year.

And just to clarify, you have potentially one closing next month.

Yes.

Would you have sort of two installed or in the process of being installed, so you'll have probably expectations that second one will close soon as well?

Yes. So the – like all months and years predicting the timing of when closures are happening, we have to get pretty close, which is why I am confident in talking about our closure next month. Outside of that, what month it is, it's a little difficult to project. However, we do have good line of sight and are far along. So I do expect additional closers before the end of 2019.

Understood. How does that impact sort of your royalties going forward from here? Because I think you commented all of these units are expected to be royalty bearing, going forward that are going to be deployed.

Yes.

So could we expect royalties to potentially begin trending a little bit higher than where it was in the first quarter?

Yes it correct, all future facilities will be royalty bearing. So as we add the facility consistent with prior quarters – our prior quarters and closures, it will proportionally increase just like it has in the past. So royalties will trend up as we close in additional facilities.

Understood. And in regards to the CS integration, I think in the last call or maybe during the end of the quarter on the acquisition, you had indicated efforts would be made to improve utilization from around 60% to 85% levels, any progress on that front yet or are you still working on that?

Yes, a top priority for us. We have an incredible operation down in the Louisiana both with the mine and then the plant, and it's underutilized. So that's a great opportunity for us to fill up that plant, that remains to be a top priority for us and it is happening. So I look forward to giving you a little more guidance on where we are with that and where we plan to be with that, but we are in line with what we thought when we initially made this acquisition.

Understood. Just one last one from me, I don't know if I've got this correct, but you paid down 6 million of the 70 million associated with the acquisition. So you're now at around $64 million related to that?

Yes, sir.

Okay, perfect. Thank you, Heath. That's all I have congratulations.

Yes. Thank you. That's great.

And our next question comes from the line of Sameer Joshi of H.C. Wainwright, your line is open.

Good morning. Thanks for taking my questions.

Good morning.

The first question is about the consumables cost of revenue, is that what we should expect going forward or does it have any overhead or fixed costs that we should be aware of?

Yes, so on the cost of revenue, the one thing that we did highlight there is about $3.6 million in the consolidated results related to a step-up in basis of purchase accounting. And we said in the Q that there's about 1.4 million more to come during the year. So if you exclude those items, that gives you a pretty good picture of your expectations as you look forward. But that does have the one-time purchase accounting adjustment in there.

So, it is the 14.1 million has a 3.6 million adjustment is that correct?

On the cost of sale side, it does, yes.

Yes. Okay. And then on the operating expenses, I know they were higher because of one-time costs at $8.8 million, but on a continuing basis, do you expect this to revert back to like 7.5 million, 7.8 million level or how should we look at it?

It's going to be a little higher than where we historically were, given the fact that we have a much different operating organization than we used to, but we have very good expectation and we captured a bunch of savings already that we have built into our expectations during diligence and we will feel really good about where we're going to end up. We'll be able to provide a little more guidance on that in the next quarter.

Okay. But sequentially it will be slightly lower than the $8.8 million, just to make sure.

Yes, I think that's probably a pretty good way to look at it.

Okay. On the Tinuum, distribution view or predictions were pretty conservative and I guess it was because we were assuming additional costs to bring this online, including CapEx cost. But I guess based on your Slide 8, it seems a bunch of CapEx has already been incurred. So should we expect distributions from Tinuum to be at these levels ex any addition of new facilities?

The distribution will be consistent. We do expect – if we have additional facilities to install as it shown on Slide 8 and we have an expectation that an investor is there, Tinuum will spend CapEx, but those distributions sequentially year-over-year will be higher given the additional facilities consistent with where we were in this quarter.

Right. But, why don't you expect – CapEx levels at around $4 million to $5 million for a facility or are those the numbers?

Yes, the $4 million to $6 million is the general number on a new installation. Some of those facilities may have already been installed on the work done in the latter half of last year, so there's some timing that carries over period-over-period.

Okay. I think that, those are all the questions I had. Thanks.

Great. Thank you.

There are no further questions at this time.

Great. Well thank you again to everyone for the time today and your continued support. I look forward to updating you all next quarter and providing further color on our new business. Have a great day, everyone.

This concludes today’s conference call. You may now disconnect. Have a great day.