Advanced Emissions Solutions, Inc.
Q3 2016 Earnings Call Transcript

Published: 10 Nov 2016

[Operator:]

Good morning. My name is Virgil and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Advanced Emissions Solutions Q3 2016 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Nick Hughes, Investor Relations, you may begin your conference.

[Nick Hughes:]

Thank you, Virgil. Good morning, everyone, and thank you for joining us today for our quarter 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 Relations section of our website. A webcast replay will also be available on our site and you contact the Alpha IR Group for investor relations support at 312-445-2870. Let remind you that the presentation and remarks made today include forward-looking statements as defined in Section 21E the 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 annual report on Form 10-K for the year ended December 31, 2015 and other filings with the Securities and Exchange Commission. Except as expressly required by the securities law, 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 reasons. In addition, it is very important to review the presentation and today's remarks in conjunction with the Form 10-Q and the GAAP references in the financial statements. So, with that, I’d like to turn the call over to Heath Sampson. Heath?

[Heath Sampson:]

Thanks, Nick. And thanks to all of you for joining us today. Let's start on slide three and I’ll walk you through the third quarter highlights at a high level. Our third quarter results were in line with expectations and included no surprises. And we are pleased to be able to report one of the strongest quarters in recent history in terms of net income. The proactive and strategic actions we took early in the year are paying off as our leaner, more flexible business model is turning us into a cash generating entity that we all thought it could become. Beginning with the Refined Coal segment, I’d like to take a second to point out that Clean Coal Solutions, LLC, of which we own 42.5%, is now named Tinuum group. So, throughout the presentation and materials moving forward, you will see Tinuum group. And to clarify, this was not the result of any acquisition or merger, but rather a name change, coupled with improved branding and a new webpage. So, with that out of the way, let's discuss the quarter's performance. It is becoming easier to see the value we have in Tinuum’s customer base as we realize strong distributions in the third quarter, aided by the transitioning of a tax equity investor from a lower producing facility to a higher producing facility during the second quarter. Also, as we forecasted for you during last quarter's call, Tinuum completed the lease of an additional RC facility in late August to an existing investor at a coal plant that has historically burned approximately 3 million tons of coal per year. That facility is royalty bearing and replaced a previously announced investor cancellation from earlier in the year. Thus, Tinuum continues to operate 13 facilities in aggregate today. And we remain diligent in our pursuit to obtain tax equity investors for the remaining RC facilities. While we don't have anything more to disclose today, I want to reiterate that there is definitely positive momentum in Tinuum sales activities. And as always, we will continue to provide updates with regards to facility closures in a timely manner. In the interim, we continue to be encouraged by our future prospects. Moving to Emissions Control or our EC side of the business, we continue to remain impressed with the pipelining caliber of the sales discussions taking place. In particular, our chemical offerings are still young relative to the marketplace and we learn more day by day regarding its potential applications and customer profile. Additionally, the sales cycle for replacing an incumbent technology at a utility is lengthy and laborious, mainly because most utilities already have a product that works and we have to convince them through extensive testing that our product is better and more cost-effective. On the positive side, we did sign a substantial agreement in the quarter with an existing customer whereby a coal plant will utilize our M45 chemical technology. And although there are no minimum purchase requirements, the agreement will increase the customers’ use of the chemical technology and is expected to produce revenue of $2.5 million per year assuming the customer is operating all units and maintains its current burn rate. Additionally, our continued execution on equipment contracts, coupled with our cost containment initiatives, have proven effective and our EC business structure is vastly improved and it requires very little resources and capital. This is evidenced by significant improvements in our working capital and cash balances since June 30, 2016. Overall, we view EC as an appealing opportunity that we are still working towards with a minimal cost structure. With that, I’d like to turn the call over to Greg Marken who will talk us through the financial results for the period. Greg?

[Greg Marken:]

Thanks, Heath. I’ll start on slide four, which provides a closer look at the major components of our financial results for the period ended September 30, 2016. Revenue was up year-over-year, driven primarily by completed contracts and equipment sales, but also weighted by chemical sales which increased over 400%, albeit of a small base compared to the third quarter of 2015. Moving on to expenses, cost of revenue increased in line with sales, yet we had extensive reductions in other operating expenses. Specifically, we reduced these costs by over 55% compared to the third quarter of 2015. We remain on track to meet our goal and enter 2017 with an annual operating cost base of $12 million to $14 million, which is an optimized cost basis with minimal amount of resources required that are needed to meet our remaining equipment contracts to maximize our ability to sell and prove, to operate a public company, and to support our investment in Tinuum. Earnings from equity method investments, which generally represent our RC distributions, were up substantially during the three and nine-month periods ended September 30, 2016 compared to the same periods in 2015. The comparable 2015 periods were negatively impacted by the operation of retained facilities, as well as the installation of several refined coal facilities, both of which won’t be factored during the current period and we don't expect Tinuum 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 the nine-month period ended September 30, 2016, our earnings from equity method investments amount to $30.1 million. Moving on, you’ll notice that royalties were once again down year-over-year. This is largely the result of comparable 2015 royalty figures that were higher due to the operation of several retained royalty-producing facilities, all of which are no longer operating as well as a decrease in the per ton margin on which the royalty is earned. Additionally, coal throughput on a broader historical basis continues to decline, although we did see this trend dissipate in the third quarter with the convergence of natural gas prices. All of that said, if you look sequentially from the second to third quarter, you will see the impact of increased royalty-bearing installed facilities as royalties increased over 200%. Net income for the quarter was $9.6 million compared to a net loss of $8.7 million in the third quarter of 2015. This is largely attributable to the increase in earnings from equity method investments in the quarter, but also the result of increased cost containment initiatives and increase revenues in the EC business. Our cash and cash equivalents at the end of the quarter were $7.6 million compared to $2.2 million as of the end of the second quarter of 2016 and $9.3 million as of December 31, 2015. Additionally, we had $8.8 million in restricted cash at the end of the quarter compared to $11.2 million as of the end of the second quarter 2016. The cost structure changes the we've carried out in recent quarters as well as our continued execution against our equipment contract obligations have both been significant drivers of the improved working capital and liquidity position we have currently even compared to just a quarter ago. As we’ve discussed in the past two quarters, we expect to see our cash balances grow as we move forward, given our more effective cost base. In a moment, Heath will talk to you about how we are starting to strategize the uses of the potential future increases in our cash balance. The select components of net income on slide five, we have provided this slide again as an outline of select components in the quarter to offer a little more context related to income and expense by segment and to point out how certain items have impacted our financial performance over the respective periods. The critical takeaway here is that the noise of the past is largely behind us and moving forward we will stop providing this reconciliation as our special item issues have largely dissipated. Now that I have discussed the financials in depth, I’ll shift the call back to Heath to talk us through our segments a bit more and our go-forward strategy. Heath?

[Heath Sampson:]

Thanks, Greg. Before I move on to talking about each of our business segments, I’d like to briefly address our growing cash position. As Greg mentioned, we better positioned the company and expect to be a strong generator of cash moving. This quarter’s financial results reflect this momentum and we’ve begun to strategize around the best uses of that future cash, both at the management and board level. We’re not quite ready to outline a formal capital allocation policy just yet, but we will consider a variety of options designed to best maximize stockholder value in the future. This includes inherent to our 2016 strategies and commitments and could also come in the form of dividends and share repurchase strategies. The key takeaway here is that we are committed to do what’s right for our stockholders and plan to have a more formal announcement on the matter as early as the fourth quarter's conference call. Moving on to slide seven, you’ll see that Tinuum ended the third quarter with 13 facilities with tax equity investors and 15 non-operating facilities. Of those 15 non-operating facilities, eight were installed and ready for operation, dependent on signing one or several tax equity investors, while the rest remained uninstalled. Over the trailing 12 months, Tinuum’s operating facilities have processed 40.3 million tons of refined coal, which is marginally higher than the 39.9 million tons of refined coal that were processed over the trailing 12 months ended June 30, 2016. On slide eight, you can see the components of our RC earnings. Greg went into detail regarding the performance of the RC business, including the significant increase in equity method revenue. But I’d like to quickly point out the impact of eliminating the drag from the RCM6 facility and also lower 453A interest expense. In terms of our operating tons, as you can see on slide nine, Tinuum’s 13 operating facilities processed over 13,200,000 tons of coal during the second quarter compared to the 9,400,000 tons of coal processed in the quarter prior. On slide ten, you can see our royalty stream relating to the use of our patented M45 technology. Out of Tinuum’s 13 operating facilities in the third quarter, seven had royalty streams associated with them. Worth highlighting is the increased tonnage in those seven royalty-bearing facilities compared to the second quarter of 2016, which also had seven royalty-bearing facilities from which we earned royalties. On slide 11, we have updated Tinuum’s future rent payments expected from RC facilities through 2021. As a reminder, this table shows you our forecasted rent payments that are expected to be collected based on all of our current contracted, invested facilities, assuming no modification to these contracts. At the end of the second quarter, we projected future rent payments to the Tinuum group of $639 million through 2021. As of September 30, 2016, based on the newer additions, we are projecting future payments of $648 million. Again, ADS receives 42.5% of these payments, which are net of applicable operating, G&A, and Class B preferred return expenses at Tinuum. Slide 12, again, walks through the potential relating to the 15 non-operating facilities and their respective status. Tinuum has eight facilities that are ready to be operated as soon as they find a tax equity investor for them. This is the last slide covering the RC segment. So, let’s now direct our attention to the EC segment. With regards to our Emissions Control business, we're continuing to explore the market for our products by simultaneously evaluating potential means of monetizing the assets within that business. While we have no significant news to share around the strategic options review on today's call, the process continues today and is progressing as planned. We remain on track to have a go or no go decision by our fourth quarter earnings call. Slide 14 provides more detail on the components of earnings specific to your EC business for the three months and nine months ending September 30, 2016 compared to the same periods of last year. Equipment contracts were again the largest driver of our revenue in third quarter, but decreased slightly for the nine months ended September 30, 2016 compared to the prior year. It's worth mentioning again, equipment sales are reported on a completed contract basis. And we will see the sales in this segment trail off in the coming quarters. Our chemicals sales quadrupled in the third quarter of 2016 compared to the third quarter of 2015 and our cost of revenue in that segment decreased as a percentage of sales. Additionally, I’d like to remind you that we expect the chemicals business to have a margin within 40% to 50% range. We remain optimistic around the chemicals market, particularly around the commercialization of our M-Prove technology. The table on slide 15 shows the impact that our cost containment initiatives had so far in 2016, with the impact apparent on the bottom line with net income of $9.6 million in the third quarter of 2016 compared to a net loss of $8.7 million in the third quarter of 2015. We have, again, provided a cash flow update on slide 16. Looking specifically at the cash flow associated with the Tinuum group, operating cash flows have increased substantially for the nine months ending September 30, 2016 compared to the same period in 2015. Investing activities had minimalized because there have been no costs associated with the installation of RC facilities in the quarter. The increasing in financing activities is the result of the distributions paid out to members of Tinuum group, which again have increased substantially in 2016. Lastly, I’d like to walk you through at 50,000 feet the value in the current RC business, looking only at the invested facilities as of September 30, 2016. Calculating just off those 13 facilities and assuming no modifications of contracts, Tinuum group is expected to generate $648 million in aggregate tax equity investor payments from now until the end of 2021. If we remove the cumulative SG&A costs associated with the Tinuum group of roughly $10 million to $11 million annually and also remove estimated Class B preferred return expenses and then apply our 42.5% ownership in Tinuum group, the undiscounted pretax cash flows to ADS is roughly $250 million. Now, compare that $250 million to our current market cap roughly of $175 million. And understand that this is looking strictly at the base contracts based on the 13 facilities and does not include royalties, anything from Tinuum Services or any of the assets located in the EC business. However, as disclosed on slide eight, ADS has earned nearly $4 million year-to-today with royalties and expects approximately $3.5 million per year in Tinuum Services distributions. Worth noting, approximately 70% of this incremental cash flows from royalties in Tinuum Services will be offset by taxes and 453A interest expenses. I'll leave you with that, so you all can draw your own conclusions to the value of the stock compared to the based RC business. Now, let’s turn to slide 17 for a reminder of our strategic priorities. We've eliminated several overhangs on the stock, including relisting on the NASDAQ, becoming current with all our financial filing. Additionally, we have implemented cost containment initiatives and eliminated all debt on the balance sheet. Looking ahead, we’ll continue to pursue monetizing the IP and products within the Emissions Control business, while simultaneously evaluating strategic alternatives for that business. Consistent with that, we’ve been focused on historically – we will continue to market the remaining RC facilities aggressively. And lastly, we will assess and have an answer regarding how to most appropriately return value to our stockholders in the near future. With that, we’ll open the line for questions. Operator?

[Operator:]

[Operator Instructions]. Your first question comes from the line of Sean Hannan from Needham & Company. Please go ahead.

[Sean Hannan:]

Yes. Good morning, folks. Thanks for taking my questions here. Can you hear me?

[Heath Sampson:]

Yes, yes. Good morning, Sean.

[Sean Hannan:]

Good morning. Okay. So, first question here, on the EC business, particularly the equipment, so the expectation for that, the trailing loss, can you elaborate a little bit more around the expectations of how that materializes as well as what might be considered kind of a general runway once you achieve that or once you hit that point? Thanks.

[Heath Sampson:]

Again, the equipment business, which is primarily our ACI and DSI installations that most of those contracts were in place in 2013 to 2014 and most of the construction incurred in that period. But because we’re on a completed contract, which the completed contract allows us to recognize revenue and basic substantially done and there's a lot of startup and finishing that is occurring on all that equipment right now, so that will – and we’re right in the heart of that. That will continue to – as each quarter goes through, you’ll see a material in that happening. So, I guess, I’d look at it in the next three to six quarters. You’ll start to see that really drop down from where it is today. And then run rate going forward, there's not a lot of sales in the equipment side. That’s not our strategic priority. So, there may be some one-off stuff that happens in there, but I wouldn't expect any material additions in the ACI or DSI sales.

[Sean Hannan:]

Right. But do we drop down – there’s going to be some – there will be some maintenance, replacement, other types of numbers you generate there, do we ultimately expect that that becomes a $1 million to $2 million a quarter type of run rate or – just some context would be helpful.

[Heath Sampson:]

Yeah, you’re right. There are services that would come around that and that is – it would be in our services line. Our focus right now is primarily in the chemicals and that is something that will be evaluated as we move through these next number of quarters. But your numbers are right. It’s not going to be that large, if it is. But it would be in that less than $1 million right now range on the services side. But as we move through these each quarters and power plants specifically understand where they are with meeting their math requirements, there could be more services or opportunities for us to grow.

[Sean Hannan:]

Okay. Switching over to the refined coal or the clean side, can you help to remind us, when we add – when they’re able to add a new facility, what do we expect in terms of some of the costs associated with that and the duration of those costs as they get up a new – sort of the up and going forward update?

[Heath Sampson:]

Yeah. So, I’ll go a little bit deeper with that as well. On page 11 of our slide deck, at the bottom, talks about the cash inflows that we expect for a $4 million per year unit coming on. But your question is specific to the costs. Most of the costs that are needed to occur are to do with the installation of those specific facilities. And that kind of ranges anywhere from $1 million to $4 million. But as a reminder, we have eight of those already installed. So, a big chunk of our – the cash that was used by Tinuum last year was installing those eight facilities. So, that’s done. And getting those eight to starting produce, it’s a fairly small amount of cash. So, I wouldn’t expect much money needed to go into that from a capital perspective. And then, if those other five that need to be installed, again, that’s a range from kind of that $1 million to $4 million range on the capital side. And then what typically happens when – before an investor comes, it usually is operated for some period of time, potentially one month up to three months, and then those specific operating costs, we would incur those for that specific time period as well. But as a reminder, we would earn tax credits on that as well. So, that’s the cost structure for again installing and then maybe 1 to 3 months of operating before a tax equity investor took that over.

[Sean Hannan:]

Okay. That’s helpful. And then, lastly here, I realize that there’s not necessarily a lot new to update around where we are in bringing on new facilities, but perhaps we can just give it a shot and provide a little bit of color to really try understanding, are there some tangible opportunities that could have some momentum over the coming quarters or is it really quite subdued at this point?

[Heath Sampson:]

Yeah. No, we are – I’ll tell you, the Tinuum team led by Ron Eller and his great team there, our fellow partners, were completely aligned and working diligently with the opportunities we have in front of us. We are very encouraged about those discussions with very sophisticated business people that have been very thoughtful in how they go about this. So, I'm really excited about these next upcoming months and quarters because of all the hard work that we have done here. So, I’m not going into kind of the detail of what's in our pipeline and how that's flowing through. I can just tell you that we’re in a good spot and I feel good about where we are and the team is executing hard every day to ensure we get some of these closed as soon as possible.

[Sean Hannan:]

Okay. Last question here and I’ll jump back in the queue. Any perspective to your new business, the Tinuum business as the talking points of the election?

[Heath Sampson:]

Yeah. No, I’d say – I think everybody probably got a couple hours of sleep last night. So, the one thing, just from my perspective, I think it’s tough to predict what Donald Trump is going to do. But, in general, around the energy/coal industry, I think you’ll view it as positive for us. We need to look at our customers, our are utilities, on the EC side and watch them. On the refined coal side, the people that we are in discussions with can see through that kind of maybe the coal reputation that affected this market. So, they understand that this credit is a good credit and they want to invest in that. So, I don't see them being distracted one way or the other from what has happened in the election. So, that’s where we are people with the people that we’re having those discussions with. Outside of that, potentially new people, one of the big headwinds that we've been talking about for the last couple of years, and specifically for the last six months is the reputation of coal in the marketplace. So, your guess is good as probably all ours. What does this election mean to how a large corporation is going to view them being in the coal business? We’ll see. We’ll see. I can tell you we’ll be talking to a lot of people and revisiting all these people that we’re currently in the pipeline or in the pipeline around what their thoughts around the reputation of coal. So, again, with the people we have in place, I feel good about where our discussions are. They’re fact-based database and we'll see what happens as the months play out with the rest of the business.

[Sean Hannan:]

Great. Thanks for taking my questions.

[Heath Sampson:]

Yeah, thank you.

[Operator:]

Your next question comes from the line of Shantanu Agrawal from BlackRock. Please go ahead.

[Shantanu Agrawal:]

Hi, guys. Great job on the comp side and building some cash. If you guys will hear me, I have a slew of questions for you on a variety of your businesses. So, firstly, on the refined coal portfolio, in the last two calls, you talked about near misses and what sounded like relatively large multiunit monetization transactions. Can you give us a little bit more color as to what went wrong from those transactions? Was the issue in your control? Was it just bad luck? And as we sit here today, were there any other near misses in the third quarter? And when we think about the pipeline, are there similarly large potential customers in the pipeline today?

[Heath Sampson:]

Yeah. So, the people that we are talking to and focused on are all large – one, because, in essence, kind of need to be large to take advantage of these; but, two, we think that's the best use of our time; and then, three, typically large people are more sophisticated and will have the necessary tax expertise, legal expertise and business courage to really – to invest in one of these. But I can't get too specific on the near misses that happened before for obvious reasons. It’s confidentiality. So, I don't want to give too much information. So, these people don't want to disclose who they are. But I can tell you, they were large corporations that spent a lot of time and resources on evaluating these. And one of them, the primary reason for them not being there was primarily coal and primarily coal being – being a four-letter word and one or two people can actually stop the deal. We made it all the way through, but in the end one or two people stopped the deal. So, they went through the process. There is no issues with the credit, no issues with our facilities. It was really a reputation issue. The other large organization, I’m just giving you a couple examples, really went through the same issue. They also had some organizational priorities where they were really growing through some type of M&A. So, that was also a top priority. So, I think to just read underneath your question there, those near misses happened late in the game. And from a business model perspective and the assets we have, just proved that they were doing the right things and the business model is strong and our assets are strong. But there was a headwind primarily around priorities and the coal, the reputation of coal. Again, we’ll see what happens with this election, if that changes. But only time will tell.

[Shantanu Agrawal:]

Got it. Second question on M-Prove, so you guys put out a recent investor deck that talked about the addressable market for M-Prove being something like 350 units at $1 million to $3 million apiece. Can you quantify what that means in terms of run rate EBITDA and CapEx and can you discuss a little bit more on what the pipeline for M-Prove looks like or how you are marketing the product today?

[Heath Sampson:]

Yeah. So, you got it right. There’s 300 plus boilers for us. And that is – looking at those 300 plus is a very detailed analysis. We have a good understanding because of our knowledge and expertise and because the data is out there and then understanding what products are currently in there, where our product will. And that's why we selected that market of kind of 300, 350 boilers. And then, with that – with those specific utilities, and as I said earlier today, which was a large utility, and I think we'll have five of those boilers going. It’s about $2.5 million per year on that. And then, the margin on that, the operating margin is between 40% and 50% and then the cost structure is very minimal to support that after you get it up and running because it's really the supply chain and providing the necessary chemical and putting it on there. So, if we are successful on getting these clients converted to using our chemicals technology, it’s a reoccurring revenue with a strong 40% to 50% margin that is relatively easy to repeat. But on the challenging side, and I said this in my script, is that we are probably three years late to the market on selling this product. So, there are currently solutions in place, at most, if not all the utilities for mercury control. So, our job is to convince them that our product is better and more cost-effective and then get the customer out. And that’s taking longer than we thought. That’s a long sales cycle and it requires a lot of testing. So, I’m encouraged about where we are. We have 10 to 15 additional tests currently in place. We have two customers that are buying full-time. So, that would have extended. I still feel really good about it and look forward to updating you as the quarters go by.

[Shantanu Agrawal:]

Just to follow-up on some of those numbers, so if we assumed an addressable market of 300 boilers at $2.5 million of revenue per year at a 45% margin, that's an addressable market of, call it, $300 million plus EBITDA per year, with limited CapEx. So not to say you’ll get 100% of the market, but if you were, the $300 million of EBITDA with no CapEx, so $300 million of cash flow.

[Heath Sampson:]

Yeah. That’s hitting a 100% of the market, right? That’s great. Your math is correct and that's why we’re investing some of our time in that. So, your math is correct. That is our addressable market. What percentage of that market will we get and the timing of that is what we’ll be working through each quarter when we come back to you guys? But, again – so just a little bit about the utility market and their buying behavior, I was actually with a utility earlier this week. And on the coal side, from utility, there is absolutely lots of cuts happening and they're – one of their big drivers, obviously, is to ensure that they’re producing power, but also it is to do it in the most cost-effective manner. So, there’s been a lot of downsizing, a lot of pressure on cost. Our solution to them is very low capital low-cost. So, with our expertise, coupled with that business model, coupled with where the industry is in the coal space, I’m really encouraged about us being able to sell more of our product.

[Shantanu Agrawal:]

That’s great. Just moving along to the IP portfolio, it sounds like you guys have a lot of patents and these patents go beyond M-Prove. And you talked about it on some of the prior calls about touching or halogens or other coal burning applications. Is it possible to describe the portfolio in more quantitative terms? And if you can’t put a number out there, can you talk about how you guys are quantifying it internally?

[Heath Sampson:]

Yeah. So, we’re not ready to put a number out there. And the right way to think about the patents around our portfolio and we have patents across the entire business, the big value are all centered around the M-Prove technology and there's other chemical type patents that would complement that and support that. So, we're currently talking with customers on how we could use some of these other chemicals that would complement the M-Prove technology. And so, we’re evaluating that at a customer basis as well as a more legal basis to see where we are with those specific patents. So, we’re in the early stages of that. And how we’re evaluating that is using experts, evaluating the market, talking to customers. So, encouraged about our patent portfolio and we'll see how we monetize that. Either that’s through – potentially, people are evaluating us whether or not they want to buy those or how we can sell those current products that are tied to those patents to our current customers. So, early on, but that's how we are evaluating using the necessary experts and the market and our customers to help us value those.

[Shantanu Agrawal:]

Great. Final question from me. Just talking about the cash return strategy, I just wanted to quantify just the magnitude of what we're looking at today. It strikes me that you could have, call it, 15% to 20% of your market cap in cash in just two months. And I want to confirm that math is directionally correct. So, I’m just looking at your unrestricted cash today. It sounds like restricted cash could be potentially unrestricted if you're able to get the revolver done. And then you’re going to generate cash in Q4. So, correct me if I’m wrong, but you could have 15% to 20% of your market cap in cash in just, call it, two months from now.

[Heath Sampson:]

Yeah. So, you are starting to see what – that in our current filings. And as we've disclosed, we’re getting $10 million to $12 million per quarter. And if we’re burning into that cash, we will quickly build cash, which we are doing. So, your back-of-the-napkin is right. And we look – that's why we're talking about and currently planning on what's the best way to get cash back to you guys.

[Shantanu Agrawal:]

What gets you more excited on that? Is that share repurchases or dividends?

[Heath Sampson:]

It depends. There’s a lot of opinions around what the best thing is. I bet you if I polled everybody on this call, I’d get ten different answers. So, we have the right advisers. We are talking about that as a board with our advisors. And we will come up with the best strategy on a mix of that or one of that, one of each. Who knows? But I can tell you the board and I are committed to the best strategy to increase stockholder value. And we’re getting a lot of help on that to advise us what’s the best way to do that. And again, we’ll share that here in the next couple of months.

[Shantanu Agrawal:]

Great. Thank you for your time. Great quarter.

[Heath Sampson:]

Thanks, Shantanu.

[Operator:]

Your next question comes from the line of Kevin McKenna from Stifel. Your line is open.

[Kevin McKenna:]

Thanks. Most of my questions have been answered. So, I'm going to look at the amount of utilities burning natural gas and how if we have a cold weather that could – a cold winter that could affect the coal market. Could you guys address what that would do for you on a cash flow basis?

[Heath Sampson:]

Well, yeah. So, the government, the EIA, has a lot of good information on this. And a lot of projections on what they think is going to happen in the utility space and what’s the mixtures of fuel that was going to be burned. I think, in general, the consensus is, we’ve really kind of hit the bottom last quarter around coal versus natural gas. As everyone knows, natural gas prices are going up. And, therefore, directly aligned, you’re starting to see coal burn go up as well. So, it’s a fairly linear relationship. And that’s expected to continue right now. Again, who knows? But that's expected based on what everyone thinks gas prices are going to be that coal will continue to be burned. And then based on – then the other factors are weather. So, that’s TBD. But I can tell you the plants that we have at the refined coal side and the plants that we are pursuing on the EC side are the ones that are burning coal. Obviously, there’s exceptions to that on the fringes. But, in general, from a micro perspective, our facilities, we feel really good about. And our future customers, we feel really good about as we move through the year that they will be burning as much coal or more coal than they currently have based on what we think the natural gas prices are.

[Kevin McKenna:]

Thank you.

[Heath Sampson:]

Okay, great. Thank you. Well, great.

[Operator:]

There are no further questions at this time. I turn the call back over to the presenters.

[Heath Sampson:]

Well, thanks, everybody, for joining the call today, especially, I’m sure, most people who were up all night following the election. So, I really appreciate all the support and look forward to sharing future results with you as we progress. Have a great day.

[Operator:]

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