Ladies and gentlemen, thank you for standing by. And welcome to the Advanced Emissions Solutions Q3, 2019 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session [Operator Instructions]. Please be advised that today's conference is being recorded [Operator Instructions].I would now like to hand the conference over to your speaker today, Ryan Coleman, Investor Relations. Thank you. Please go ahead.

Thank you, Rob. Good morning, everyone. And thank you for joining us today for our third quarter 2019 earnings results call. With me on the call this morning are Heath Sampson, President and Chief Executive Officer and Greg Marken, Chief Financial Officer. This conference call is being webcast live in the Investor section of our Web site, 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 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, factors identified on Slide 2 of today's slide presentation, in our Form 10-Q for the quarter ended September 30, 2019 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 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 everyone for joining us this morning. Let’s begin on Slide 3 and review our third quarter. RC distributions from Tinuum Group, as well as our RC segment operating income, were both strong and in line with our expectations during the quarter. Both were significantly higher than the prior year, driven primarily by the five additional invested RC facilities that we have added since then. During the third quarter alone, we added two facilities, bringing our year to date contracted tonnage to roughly 15 million and comfortably exceeding our previously guided 12 million incremental tons.In our PGI segment, our results were hampered by many of the same issues we outlined during the second quarter call. Coal dispatch has been weak and cheap fuel source alternatives to coal have had a significant impact on our core mercury capture for coal-fired power generation. This market is where we are best positioned today in the PGI segment and thus, these cheap alternative fuels have hurt our volumes.However, there are adjacent opportunities agnostic to coal burn that we have been aggressively pursuing and having success. For example, we have identified several industrial and municipal customers who have activated carbon need, and we are winning incremental volume in these areas. The widespread use and versatility of activated carbon as a purifying agent allows us the flexibility to not be reliant on a single market application. So we will continue to pursue customers and opportunities where we are competitive. Although, we do not yet have all the products, we have the most important competitive advantage, the largest and lowest cost manufacturing plant. And as a reminder, originally costs nearly $400 million to build. I'll talk about these new opportunities later in the call.We have executed in line with our expectations commercially, but the…

Thanks, Heath. Let's start on Slide 4 for our third quarter financial results. Earnings from equity method investments totaled $14.4 million compared to $9.7 million in the prior year. The significant increase was driven by five incremental RC facilities invested since the third quarter of 2018 with total equity earnings of $57.1 million compared to $37.9 million on a full year basis.As a reminder, Tinuum's adoption of the new revenue and lease accounting rules also impacted this increase. We recorded a cumulative adjustment of $28.8 million related to the company's percentage of Tinuum Group's cumulative effect adjustment that increased Tinuum's retained earnings, but those amounts now will not impact our future earnings. 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's net income rather than based on cash distributions during 2019. I want to also reiterate that this accounting standard adoption does not affect the timing or total potential future cash flows from our RC segment from Tinuum.Third quarter consolidated revenue of $19.1 million was also significantly higher than $5.1 million one year ago, driven by the meaningful contribution from Carbon Solutions consumables and additional royalty-bearing RC facilities. Revenue in the nine month period ended September 30, 2019 totaled $54 million compared to $13.3 million in the comparable period in 2018. Within that consolidated revenue, third quarter consumables revenue totaled $14.8 million. This was significantly higher than the prior year, again driven by the Carbon Solutions contributions.Third quarter royalty earnings were also higher year-over-year, totaling $4.4 million versus $4.1 million in 2018. Royalty earnings in the nine months ended September 30, 2019 totaled $12.8 million compared to $10.9 million in 2018. This increase is a result of the…

Thanks, Greg. I'd like to take a moment to discuss our outlook. Turning to Slide 5, you can see the update to our expected future RC cash flows. As of September 30, 2019, we are updating our expected net RC cash flows to a range between $150 million to $175 million to ADES through the end of 2021. This range is after $23 million of RC distributions collected during the third quarter and inclusive of the two units added during this period.Unlike most quarters where changes to our forward RC cash flow guidance is typically related to netting the amount of distributions collected versus incremental tonnage added, the third quarter saw few different moving parts. All-in-all, they amounted to an approximate 6% contraction to our contracted cash flows. Before I summarize the puts and takes, I want to remind everyone that this reduction is for contracted amounts as of September 30th, as we do not increase these cash flows for anything we may expect to add.First, throughout the current year, there has been a broad-based reduction in coal consumption, largely due to lower natural gas prices, as well as unusually lower temperatures during the first half of 2019. As a result of the reduction in coal consumption, during the third quarter, Tinuum Group restructured RC facility contract leases with its largest customer, which will decrease lease payments beginning in the third quarter of 2019.Second, there were two plant closures that were announced by utilities during the third quarter where Tinuum had an invested RC facility on site. One particular closure in Illinois was spun by our regulatory settlement that required a large power company to quickly shut down two gigawatts of coal-fired power by the end of this year. While the closure was not expected, Tinuum is proactively working to…

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

So Heath, just looking at the RC and Tinuum side of the business, with all of these drivers in play right now, including weather, competitive factors, et cetera, when we look at 4Q '19, your expectations for that quarter versus what you saw in the third quarter. I mean, should we anticipate similar performance in the fourth quarter relative to the third quarter?

So just to backup a little bit. When we were entering really this year and the end of last year, we thought that the refined coal investments would decline, because there is around two years left. We were right in some sense. But in the other side of things, we were surprised by how there are additional investors that want to take advantage of refined coal, even for these last two years. So we guided to 12 million tons a few quarters ago, we over achieved that and then we thought we would be done.However, we're not. And then we gave the numbers that we were in current discussions with now that we expect to close. And even beyond that, there is a few other that we expect to close beyond that. So we're pleasantly surprised that our pipeline is full and we should have more closures beyond what we are disclosing today. So we'll have those cash flows that we just talked about here, the $150 million to $175 million and we hope to add on those based on the tonnage that we talked about a little bit earlier.

And these two RC units that are expiring in the fourth quarter. Are these available to maybe new investors or are these done, is there tenure over basically…

Yes, they're done. And only one of those was installed, the other 2019 was not in our cash flows, nor installed. And we've always had that in our cash flow projections and it's in the $150 million to $175 million that we talked about. So yes, they're expired at the end of this year.

And then in the prior quarter you talked about plant maintenance impacting some performance, are those efforts out of the way now, and are you kind of functioning at the levels you were looking to?

As expected, we knew we had to make some investments to ensure that our manufacturing assets were where we wanted to be. So we made those one-time investments to get to the plant to where we wanted to. So we expect a more normal run rate going forward.

And then on the PGI side of things. Right now, we're still sort of in the mercury as our key product line, mercury related offerings. In terms of your product roadmap, can we look for in terms of new products or solutions you're working on and the timeline for maybe introducing these?

So in mercury, though it's hurt this year by just coal-fired power going down, we are still well positioned to gain market share. In addition, what we talked about, as refined coal rolls off, that market is going to expand. Right now, we estimate it's about approximately 25% expansion. So we are in a really good position to capitalize on that. So, though it may seem that the mercury control market is under pressure and it is, because of our capabilities, because of our asset that will continue to be a strategic part for us and we will continue to see growth opportunity within that.That being said and we talked about this it does make sense for us to diversify. One , because we have the asset and we have the availability to expand coupled with our technical expertise, we are able to move into adjacent market. Already we've been doing that, whether that's the industrial market or in the municipal water market. That is our current focus right now, but there is a lot of opportunities beyond that. So we are taking it as fast as we can, but still be very deliberate to ensure that we protect our current business and make sure that when we're grabbing this new business that is sticky for us. So again, as you may or may not know the activated carbon market is very large and we're excited about the future and we'll continue to execute as we articulated in our strategy outlook.

[Operator Instructions] And we have no further questions at this time. I'll turn the call back to our presenters.

Great, so thank you everyone for your time today and your continued support. I really look forward to updating you all the next quarter. Have a great day everyone.

Ladies and gentlemen, thank you for your participation. This concludes today's conference call. And you may now disconnect.