The following discussion and analysis should be read in conjunction with the
historical financial statements and related notes included in Part I, "Item 1.
Financial Statements" of this Quarterly Report. This discussion contains
"forward­looking statements" reflecting our current expectations, estimates and
assumptions concerning events and financial trends that may affect our future
operating results or financial position. Actual results and the timing of events
may differ materially from those contained in these forward­looking statements
due to a number of factors. Factors that could cause or contribute to such
differences include, but are not limited to, public health threats or outbreaks
of communicable diseases, such as the ongoing novel coronavirus "COVID-19"
pandemic and its impact on our business, customers, employees or customers
facilities, capital expenditures, economic and competitive conditions, and
regulatory changes and other uncertainties, as well as those factors discussed
below and elsewhere in this Quarterly Report. Please read "Cautionary Note
Regarding Forward­Looking Statements" included elsewhere in this Quarterly
Report. Except as otherwise required by applicable law, we assume no obligation
to update any of these forward­looking statements.
Charah Solutions, Inc.
Charah Solutions, Inc. (together with its subsidiaries, "Charah Solutions," the
"Company," "we," "us" or "our") was formed as a Delaware corporation in January
2018 and did not conduct any material business operations prior to a
reorganization and certain activities related to the initial public offering
(the "IPO"), which was completed on June 18, 2018. Charah Solutions, Inc. is a
holding company, the sole material assets of which consist of membership
interests in Charah Management LLC, a Delaware limited liability company
("Charah Management"), and Allied Power Holdings, LLC, a Delaware limited
liability company ("Allied Power Holdings"). Through the Company's ownership of
Charah Management and Allied Power Holdings, the Company owns the outstanding
equity interests in Charah, LLC, a Kentucky limited liability company
("Charah"), and Allied Power Management, LLC, a Delaware limited liability
company ("Allied"), the subsidiaries through which Charah Solutions operates its
businesses.
Recent Developments
The pandemic caused by a novel coronavirus ("COVID-19") has impacted many
aspects of our operations, directly and indirectly, including our employees, the
services we provide at our customers' power generation facilities, our suppliers
and the overall market for our products and services. We, along with our utility
partners, have implemented the precautionary health and safety measures
recommended by the Centers for Disease Control and Prevention (the "CDC") in
response to the COVID-19 pandemic, including, but not limited to: an employee
health status questionnaire, taking daily temperatures, enhanced sanitation
practices and cleaning surfaces throughout each shift, and increasing the number
of hand sanitizing stations. We have also increased social distancing measures,
such as staggered shift start and stop times and break times with additional
break spaces to support social distancing as well as safety meetings being held
outside of the site trailer. Furthermore, we have implemented work-from-home
measures for the majority of office employees. With the understanding that the
COVID-19 challenge is evolving, based on new information and feedback, we
continue to monitor the situation and update our proactive measures in
coordination with our customers.
  Multiple nuclear and fossil outages have been completed and several are
currently in progress with little to no interruption to date. We continue to
work closely with our utility partners and concrete producer customers to meet
their needs and are monitoring any potential slowdowns of byproduct sales given
decreased demand for construction materials. We have had no significant
contracts canceled at this time. However, projections for power generation
demand have been lowered and there is the potential for decreased demand for our
byproduct sales in the construction market as capital budgets are reduced and
construction activity slows.
In light of the uncertain and rapidly evolving situation relating to the
COVID-19 pandemic, in April 2020, we implemented a series of preemptive
cost-cutting and cost savings initiatives across the Company including
reductions in employee compensation, reductions in cash-based retainers to our
Board of Directors, reduced hiring and significantly reducing discretionary
spending including travel restrictions. In addition, we are implementing
applicable benefits of the Coronavirus Aid, Relief, and Economic Security Act
(the "CARES Act").
While we anticipate that these measures are temporary, we cannot predict the
duration for which these precautionary measures will stay in effect, and we may
elect or need to take additional measures as the information available to us
continues to develop, including with respect to our employees, relationships
with our third-party vendors, and our customers. Subject to our assumptions
regarding the duration and severity of the COVID-19 pandemic, our currently
anticipated responses thereto and our current projections, we believe our cash
on hand and cash generated from operations will be sufficient to cover our
working capital requirements and debt obligations for the next 12 months from
the issuance of this Quarterly Report. However, the extent to which the COVID-19
pandemic and our precautionary measures in response thereto may impact our
business will depend on future developments, which are highly uncertain and
cannot be predicted with certainty at this time.
The COVID-19 pandemic presents potential new risks to the Company's business. A
sustained downturn may result in the carrying value of our long-lived assets
exceeding their fair value, which may require us to recognize an impairment to
those assets. Furthermore, delays in customer payments for our services may
impact the collectability of our trade accounts receivable. Although there have
been logistical and other challenges to date, there was no material adverse
impact resulting from the COVID-19 pandemic on the Company's results of
operations for the three months ended March 31, 2020.
Our results for the three months ended March 31, 2020 were primarily driven by
the timing of our contract awards and the commencement and progress of work
awarded under contract. Revenue generated from new awards won prior to 2019,
during 2019 and during the three months ended March 31, 2020 was not sufficient
to offset the impact of projects completed during 2019. However, the significant
majority of revenue contributions from these new awards will be recognized in
2020 and beyond.

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Overview


We are a leading provider of mission-critical environmental and maintenance
services to the power generation industry. We offer a suite of coal ash
management and recycling, environmental remediation, and utility plant
outage-related maintenance services. We also design and implement solutions for
complex environmental projects (such as coal ash pond closures) and facilitate
coal ash recycling through byproduct sales and other beneficial use services. We
believe we are a partner-of-choice for the power generation industry due to our
quality, safety, domain experience, and compliance record, all of which are key
criteria for our customers. In 2019, we performed work at more than 50
coal-fired and nuclear power generation sites nationwide.
We are an environmental remediation and maintenance company and we conduct our
operations through two segments: (i) Environmental Solutions and (ii)
Maintenance and Technical Services.
Environmental Solutions. Our Environmental Solutions segment includes
remediation and compliance services, as well as byproduct sales. Remediation and
compliance services are associated with our customers' need for multi-year
environmental improvement and sustainability initiatives, whether driven by
regulatory requirements, by power generation customers initiatives, by our
proactive engagement or by consumer expectations and standards. Byproduct sales
support both our power generation customers' desire to recycle their recurring
and legacy volumes of coal combustion residuals ("CCRs"), commonly known as coal
ash, and our ultimate end customers' need for high-quality, cost-effective raw
material substitutes.
Maintenance and Technical Services. Our Maintenance and Technical Services
segment includes fossil services and, from and after May 2017 when Allied was
created, nuclear services. Fossil services are the recurring and
mission-critical management of coal ash and the routine maintenance, outage
services and staffing solutions for coal-fired power generation facilities.
Nuclear services, which we market under the Allied Power brand name, include
routine maintenance, outage services, facility maintenance, and staffing
solutions for nuclear power generation facilities. The Maintenance and Technical
Services segment offerings are most closely associated with the ongoing
operations of power plants, whether in the form of daily environmental
management or required maintenance services (typically during planned outages).
How We Evaluate Our Operations
We use a variety of financial and operational metrics to assess the performance
of our operations, including:
•Revenue;
•Gross Profit;
•Operating Income;
•Adjusted EBITDA; and
•Adjusted EBITDA Margin.
Revenue
We analyze our revenue by comparing actual revenue to our internal projections
for a given period and to prior periods to assess our performance. We believe
that revenue is a meaningful indicator of the demand and pricing for our
services.
Gross Profit
We analyze our gross profit, which we define as revenue less cost of sales, to
measure our financial performance. We believe that gross profit is a meaningful
metric because it provides insight on financial performance of our revenue
streams without consideration of company overhead. When analyzing gross profit,
we compare actual gross profit to our internal projections for a given period
and to prior periods to assess our performance.
Operating Income
We analyze our operating income, which we define as revenue less cost of sales
and general and administrative expenses, to measure our financial performance.
We believe that operating income is a meaningful metric because it provides
insight on profitability and true operating performance based on the historical
cost basis of our assets. When analyzing operating income, we compare actual
operating income to our internal projections for a given period and to prior
periods to assess our performance.
Adjusted EBITDA and Adjusted EBITDA Margin
We view Adjusted EBITDA and Adjusted EBITDA margin, which are non-GAAP financial
measures, as important indicators of performance because they allow for an
effective evaluation of our operating performance when compared to our peers,
without regard to our financing methods or capital structure.
We define Adjusted EBITDA as net loss attributable to Charah Solutions, Inc.
before loss on extinguishment of debt, interest expense, income taxes,
depreciation and amortization, equity-based compensation, non-recurring legal
costs and expenses and start-up costs, the Brickhaven contract deemed
termination revenue reversal, and transaction-related expenses and other items.
Adjusted EBITDA margin represents the ratio of Adjusted EBITDA to total revenue.
See "-Non-GAAP Financial Measures" below for more information and a
reconciliation of Adjusted EBITDA to net loss attributable to Charah Solutions,
Inc., the most directly comparable financial measure calculated and presented in
accordance with GAAP.


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Key Factors Affecting Our Business and Financial Statements
Ability to Capture New Contracts and Business Opportunities
Our ability to grow revenue and earnings is dependent on maintaining and
increasing our market share, renewing existing contracts, and obtaining
additional contracts from proactive bidding on contracts with new and existing
customers. We proactively work with existing customers ahead of contract end
dates to attempt to secure contract renewals. We also leverage the embedded
long-term nature of our customer relationships to obtain insight into and to
capture new business opportunities across our platform.
Seasonality of Business
Based on historical trends, we expect our operating results to vary seasonally.
Nuclear power generators perform turnaround and outages in the off-peak months
when demand is lower and generation capacity is less constrained. As a result,
our nuclear services offerings may have higher revenue volume in the spring and
fall months. Variations in normal weather patterns can also cause changes in the
consumption of energy, which may influence the demand and timing of associated
services for our fossil services offerings. Inclement weather can impact
construction-related activities associated with pond and landfill remediation,
which affects the timing of revenue generation for our remediation and
compliance services. Our byproduct sales are also seasonally impacted during
winter months when the utilization of cement and cement products is generally
lower.
Project-Based Nature of Environmental Remediation Mandates
We believe there is a significant pipeline of coal ash ponds and landfills that
will require remediation and/or closure in the future. Due to their scale and
complexity, these environmental remediation projects are typically completed
over longer periods of time. As a result, our revenue from these projects can
fluctuate over time. Some of our revenue from projects is recognized over time
using the cost-to-cost input method of accounting for GAAP purposes, based
primarily on contract costs incurred to date compared to total estimated
contract costs. This method is the most accurate measure of our contract
performance because it depicts the company's performance in transferring control
of goods or services promised to customers according to a reasonable measure of
progress toward complete satisfaction of the performance obligation. The timing
of revenue recorded for financial reporting purposes may differ from actual
billings to customers, sometimes resulting in costs and billings in excess of
actual revenue. Because of the risks in estimating gross profit margins for
long-term jobs, actual results may differ from these estimates.
Byproduct Recycling Market Dynamics
There is a growing demand for recycled coal ash across a variety of applications
driven by market forces and governmental regulations creating the need to
dispose of coal ash in an environmentally sensitive manner. Pricing of byproduct
sales is driven by supply and demand market dynamics as well as the chemical and
physical properties of the ash. As demand increases for the end-products that
use CCRs' (i.e., concrete for construction and infrastructure projects), the
demand for recycled coal ash also typically rises. These fluctuations affect the
relative demand for our byproduct sales. In recessionary periods, construction
and infrastructure spending and the corresponding need for concrete may decline.
However, this unfavorable effect may be partially offset by an increase in the
demand for recycled coal ash during recessionary periods given that coal ash is
more cost-effective than other alternatives.
Power Generation Industry Spend on Environmental Liability Management and
Regulatory Requirements
The power generation industry has increased annual spending on environmental
liability management. We believe this is the result of not only regulatory
requirements and consumer pressure, but also the industry's increasing focus on
environmental stewardship. Continued increases in spending on environmental
liability management by our customers should result in increased demand for
services across our platform.
Cost Management and Capital Investment Efficiency
Our main operating costs consist of labor, material and equipment costs and
equipment maintenance. We maintain a focus on cost management and efficiency,
including monitoring labor costs, both in terms of wage rates and headcount,
along with other costs such as materials and equipment. We believe we maintain a
disciplined approach to capital expenditure decisions, which are typically
associated with specific contract requirements. Furthermore, we strive to extend
the useful life of our equipment through the application of a well-planned
routine maintenance program.
How We Generate Revenue
The Environmental Solutions segment generates revenue through our remediation
and compliance services, as well as our byproduct sales. Our remediation and
compliance services primarily consist of designing, constructing, managing,
remediating and closing ash ponds and landfills on customer-owned sites. Our
byproduct sales offerings include the recycling of recurring and contracted
volumes of coal-fired power generation waste byproducts, such as bottom ash, fly
ash and gypsum byproduct, each of which can be used for various industrial
purposes. More than 90% of our services work is structured as time and
materials, cost reimbursable or unit price contracts, which significantly
reduces the risk of loss on contracts and provides gross margin visibility.
Revenue from management contracts is recognized when the ash is hauled to the
landfill or the management services are provided. Revenue from the sale of ash
is recognized when it is delivered to the customer. Revenue from construction
contracts is recognized using the cost-to-cost input method.
The Maintenance and Technical Services segment generates revenue through our
fossil services and nuclear services offerings. Maintenance and Technical
Services segment offerings are most closely associated with the ongoing
operations of power plants, whether in the form of daily environmental
management or required maintenance services (typically during planned outages).
Our fossil services offerings focus on recurring and mission-critical management
of coal ash and routine maintenance, outage services and staffing solutions for
coal-fired power generation facilities to fulfill the environmental service need
of our customers in handling their waste byproducts. Over the last five years,

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our renewal rate for fossil services contracts has been approximately 90%. Our
nuclear services operations, which we market under the Allied Power brand name,
consist of a broad platform of mission-critical professional, technical and
craft services spanning the entire asset life cycle of a nuclear power
generator. The services are performed on the customer's site and the contract
terms typically range from three to five years. Revenue is billed and paid
during the periods of time work is being executed. This combination of the
maintenance and environmental-related services deepens customer connectivity and
drives long-term relationships which we believe are critical for renewing
existing contracts, winning incremental business from existing customers at new
sites and adding new customers.
Results of Operations
The table below sets forth our selected operating data for the three months
ended March 31, 2020 and 2019.
Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019
                                            Three Months Ended
                                                 March 31,                      Change
                                            2020           2019            $              %
                                                         (dollars in thousands)
Revenue:
Environmental Solutions                 $   36,665     $   58,383     $  (21,718 )      (37.2 )%

Maintenance and Technical Services 127,966 104,875 23,091 22.0 % Total revenue

                              164,631        163,258          1,373          0.8  %
Cost of sales                              153,834        147,879          5,955          4.0  %
Gross Profit:
Environmental Solutions                      3,852          8,267         (4,415 )      (53.4 )%
Maintenance and Technical Services           6,945          7,112           (167 )       (2.3 )%
Total gross profit                          10,797         15,379         (4,582 )      (29.8 )%

General and administrative expenses 12,756 13,985 (1,229 ) (8.8 )% Operating (loss) income

                     (1,959 )        1,394         (3,353 )     (240.5 )%
Interest expense, net                       (3,630 )       (5,052 )        1,422         28.1  %
Loss on extinguishment of debt              (8,603 )            -         (8,603 )      100.0  %
Income from equity method investment           296            554           (258 )      (46.6 )%
Loss before taxes                          (13,896 )       (3,104 )      (10,792 )      347.7  %
Income tax benefit                               -           (761 )          761       (100.0 )%
Net loss                                   (13,896 )       (2,343 )      (11,553 )      493.1  %
Less income attributable to
non-controlling interest                       354            476           (122 )      (25.6 )%
Net loss attributable to Charah
Solutions, Inc.                            (14,250 )       (2,819 )      (11,431 )      405.5  %
Accrued Series A Preferred Stock
dividends                                     (111 )            -           (111 )     (100.0 )%
Net loss attributable to common
stockholders                            $  (14,361 )   $   (2,819 )      (11,542 )      409.4  %


Revenue. Revenue increased $1.4 million, or 0.8%, for the three months ended
March 31, 2020 to $164.6 million as compared to $163.3 million for the three
months ended March 31, 2019, driven by an increase in revenue in the Maintenance
and Technical Services segment, partially offset by a decrease in revenue in the
Environmental Solutions segment. The change in revenue by segment was as
follows:
Environmental Solutions Revenue. Environmental Solutions segment revenue
decreased $21.7 million, or 37.2%, for the three months ended March 31, 2020 to
$36.7 million as compared to $58.4 million for the three months ended March 31,
2019. The decrease in revenue was primarily driven by project completions in
2019 within our remediation and compliance services component, including the
completion of the Brickhaven project resulting from the deemed termination
during the second quarter of 2019.
Maintenance and Technical Services Revenue. Maintenance and Technical Services
segment revenue increased $23.1 million, or 22.0%, for the three months ended
March 31, 2020 to $128.0 million as compared to $104.9 million for the three
months ended March 31, 2019. The increase in revenue was primarily attributable
to additional spring nuclear outage work in the three months ended March 31,
2020, and an increase in revenue from our fossil services offerings.
Gross Profit. Gross profit decreased $4.6 million, or 29.8%, for the three
months ended March 31, 2020 to $10.8 million as compared to $15.4 million for
the three months ended March 31, 2019, driven primarily by a decrease in revenue
in our Environmental Solutions segment. As a percentage of revenue, gross profit
was 6.6% and 9.4% for the three months ended March 31, 2020 and 2019,
respectively. The change in gross profit by segment was as follows:
Environmental Solutions Gross Profit. Gross profit for our Environmental
Solutions segment decreased $4.4 million, or 53.4%, for the three months ended
March 31, 2020 to $3.9 million as compared to $8.3 million for the three months
ended March 31, 2019. The decrease

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in gross profit was primarily driven by project completions in 2019 within our
remediation and compliance services component, including the completion of the
Brickhaven project resulting from the deemed termination during the second
quarter of 2019.
Maintenance and Technical Services Gross Profit. Gross profit for our
Maintenance and Technical Services segment decreased $0.2 million, or 2.3%, for
the three months ended March 31, 2020 to $6.9 million as compared to $7.1
million for the three months ended March 31, 2019. The decrease in gross profit
was primarily attributable to margin improvements within our nuclear services
offerings during the three months ended March 31, 2019 that did not reoccur
during the three months ended March 31, 2020, partially offset by an increase in
gross profit from our fossil services offerings.
General and Administrative Expenses. General and administrative expenses
decreased $1.2 million, or 8.8%, for the three months ended March 31, 2020 to
$12.8 million as compared to $14.0 million for the three months ended March 31,
2019. The decrease was primarily attributable to reductions in staff and other
cost-savings initiatives implemented by the Company, partially offset by $2.9
million in lower non-cash general and administrative expenses during the three
months ended March 31, 2019 associated with the amortization of the purchase
option liability due to the deemed termination of the Brickhaven contract.
Interest Expense, Net. Interest expense, net decreased $1.4 million, or 28.1%,
for the three months ended March 31, 2020 to $3.6 million as compared to $5.1
million for the three months ended March 31, 2019. The decrease was primarily
attributable to lower debt balances during the three months ended March 31, 2020
as compared to the three months ended March 31, 2019 and a $1.3 million decrease
in the non-cash mark-to-market expense associated with the change in value of
our interest rate swap, partially offset by an increase in interest rates
related to the amendments to the Credit Facility as discussed below in
"-Liquidity and Capital Resources-Our Debt Agreements-Existing Credit Facility."
Loss on Extinguishment of Debt. Loss on extinguishment of debt increased $8.6
million for the three months ended March 31, 2020 due to the Company's Amendment
No. 3 to Credit Agreement (the "Third Amendment") of our existing Credit
Facility as discussed below in "-Liquidity and Capital Resources-Our Debt
Agreements-Existing Credit Facility." The Company expensed $5.2 million in
amendment fees and wrote off $3.4 million in previously capitalized debt
issuance costs.
Income from Equity Method Investment. Income from equity method investment
decreased $0.3 million, or 46.6%, for the three months ended March 31, 2020 to
$0.3 million as compared to $0.6 million for the three months ended March 31,
2019. The decrease period-over-period was primarily attributable to a reduction
in ash volumes generated by the utility and available for sale by us.
Income Tax Benefit. Income tax benefit decreased by $0.8 million as no tax
benefit was recorded during the three months ended March 31, 2020 as a result of
the full valuation allowance recorded by the Company for the year ended December
31, 2019.
Net Loss. Net loss increased $11.6 million, or 493.1%, for the three months
ended March 31, 2020 to $13.9 million as compared to $2.3 million for the three
months ended March 31, 2019. The increase was primarily attributable to higher
loss on extinguishment of debt as discussed above and lower gross profit,
partially offset by lower general and administrative expenses and interest
expense, net.
Condensed Consolidated Balance Sheets
The following table is a summary of our overall financial position:

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