Financial Data and Key Metrics Changes - Revenue for Q2 2025 was $29 million, representing a 13% year-over-year increase, driven by enhanced contract terms and a 9% growth in average selling price (ASP) [22][6][5] - Adjusted EBITDA was approximately $3.7 million, compared to $1.1 million in the prior year, marking a more than 3x increase [23][6] - Gross margin for the quarter was approximately 33%, slightly higher than in 2024 [22] Business Line Data and Key Metrics Changes - The PAC (Powdered Activated Carbon) business has shown a successful turnaround, with all sales contracts now being net contributors in 2025, a significant improvement from 24% of volumes being loss-making as of December 2022 [24][6] - The GAC (Granular Activated Carbon) line has been successfully commissioned, with a nameplate capacity of 25 million pounds expected to be reached within six months [5][12] Market Data and Key Metrics Changes - The company has reduced its exposure to the mercury emissions market to under 40% of volumes, diversifying into new markets for both PAC and GAC, which improves margins and overall financial performance [8][9] - The granular activated carbon market is experiencing persistent supply shortages, with demand expected to grow significantly due to regulatory changes related to PFAS [10][11] Company Strategy and Development Direction - The company aims to enhance profitability through operational optimization and cost reduction initiatives while expanding into higher growth, higher margin GAC business [7][29] - Plans for a second GAC line are underway, with a final investment decision expected by the end of 2025 [14][29] Management's Comments on Operating Environment and Future Outlook - Management views the current regulatory environment as favorable, with the EPA's pragmatic approach to PFAS regulation seen as beneficial for the business [18][19] - The company is confident in its ability to finance future growth through cash flow generation and existing debt facilities, without the need for further equity issuance [66][68] Other Important Information - The company is engaged in testing programs for asphalt emulsion, which could represent a significant future revenue source [20][78] - The company has reiterated its 2025 capital expenditure forecast of between $8 million and $12 million [26] Q&A Session Summary Question: Can you elaborate on the key milestones in the commissioning process at Red River? - Management confirmed that the operations team is focused on reaching full nameplate capacity of 25 million pounds as quickly as possible, with ongoing tweaks to improve production rates [35][36] Question: What is the expected cost for the second GAC line? - Management indicated that costs are being evaluated and enhancements from the first line will likely reduce expenses for the second line [39][40] Question: What is the timeline for moving from initial sales to contracts in the RNG market? - The timeline varies from one to eight months depending on customer testing requirements, with a focus on maintaining a balanced customer mix across different industries [41][43] Question: What impact did commissioning have on gross margins? - Approximately $1.9 million in costs associated with preproduction inventory were reclassified to R&D expenses, with gross margins expected to remain above 33% going forward [46][47] Question: How confident is the company in financing the second line without issuing equity? - Management expressed confidence in financing through cash flow generation and debt availability, emphasizing a gradual investment approach [66][68]

Financial Performance - Total revenue reached $28.6 million, a 13% year-over-year increase driven by improved Average Selling Price (ASP) and end-market diversification[6] - Gross margin was 33.3%, reflecting sustainable improvement in PAC performance[6] - Adjusted EBITDA was $3.7 million, compared to $1.1 million in the prior year period, marking 5 consecutive quarters of positive Adjusted EBITDA[7, 11] - PAC pricing grew by 9% year-over-year in Q2 2025, with an average quarterly growth of approximately 16% in PAC ASP since Q2 2023[6, 16] GAC Commissioning and Expansion - The company completed the commissioning of its transformational GAC facility at Red River, with ramp-up to nameplate capacity underway[6, 24] - The company is targeting a Final Investment Decision (FID) for a 2nd GAC line prior to year-end 2025[8, 27] - The Red River plant is expected to add production of GAC and expand the plant to deliver an incremental 25 million pounds of GAC product[32] Market and Regulatory Landscape - EPA regulations could boost municipal water market demand by 3 to 5 times from approximately 170 million pounds per year[37] - The company is benefiting from U S tariffs due to its fully integrated domestic supply chain[38] Strategic Initiatives - The company is developing new markets, including the Arq-Enabled Great Lakes Restoration Project, which is the largest PAC sediment remediation in U S history[41, 42] - The company is exploring growth beyond activated carbon, with multiple initiatives focused on developing additional product opportunities and revenue streams from Corbin feedstock[43]

Q2 2025 Earnings Release Overview [Financial Highlights](index=1&type=section&id=Financial_Highlights) Arq achieved strong Q2 2025 financial performance with **13% YoY revenue growth**, improved gross margin, and significantly increased Adjusted EBITDA Q2 2025 Key Financial Highlights | Metric | Q2 2025 | Q2 2024 | Change YoY | | :-------------- | :------ | :------ | :--------- | | Revenue | $28.6M | $25.4M | +13% | | Gross Margin | 33.3% | 32.2% | +110 bps | | Adjusted EBITDA | $3.7M | $1.1M | >200% | - Average Sales Price (ASP) increased by approximately **9%** over the prior year period[5](index=5&type=chunk)[7](index=7&type=chunk) - Exited Q2 2025 with cash and restricted cash of **$15.4 million**[5](index=5&type=chunk) - Capital expenditures forecast for full year 2025 remain in line with previous guidance of **$8 - $12 million**[5](index=5&type=chunk) [Recent Business Highlights](index=1&type=section&id=Recent_Business_Highlights) Arq commissioned its first Granular Activated Carbon (GAC) line at Red River, initiating commercial production and accelerating plans for a second GAC line - Completed Red River plant commissioning with first commercial GAC production and sales, continuing transformation into new higher growth, higher margin businesses[5](index=5&type=chunk) - Expect to accelerate development planning for a second line of **25 million pounds of GAC production** at Red River and make a financial investment decision prior to year-end 2025[5](index=5&type=chunk) - Testing of Arq Wetcake as a feedstock for various asphalt related products with a leading US asphalt company has begun[5](index=5&type=chunk) [CEO Commentary and Strategic Outlook](index=1&type=section&id=CEO_Commentary_and_Strategic_Outlook) CEO Bob Rasmus highlighted successful GAC line commissioning and strong Q2 results, noting solid PAC business performance and favorable GAC market dynamics - Successful commissioning of the first GAC line at Red River represents a significant milestone for Arq, its customers, and shareholders[4](index=4&type=chunk) - The foundational PAC business delivered another solid quarter with further sustained price improvements and its fifth consecutive quarter of positive adjusted EBITDA[4](index=4&type=chunk) - The GAC market continues to show strength with steady demand (**3-5% annual growth**) and minimal new capacity, with potential for a **3-5x increase in demand** driven by recent EPA regulatory changes[6](index=6&type=chunk) - Arq is capitalizing on additional growth drivers like renewable natural gas, having already sold initial Phase 1 GAC product to RNG customers in Q3 2025[6](index=6&type=chunk) - Given favorable market dynamics, Arq now expects to make a Final Investment Decision on a second GAC line prior to the end of 2025[6](index=6&type=chunk) Second Quarter 2025 Detailed Financial Results [Revenue and Cost of Revenue](index=2&type=section&id=Revenue_and_Cost_of_Revenue) Revenue for Q2 2025 increased by **13% year-over-year** to **$28.6 million**, driven by higher average sales prices and increased volumes, while costs of revenue rose by **11%** Q2 2025 Revenue and Cost of Revenue | Metric | Q2 2025 | Q2 2024 | Change YoY | | :-------------- | :-------- | :-------- | :--------- | | Revenue | $28.6M | $25.4M | +13% | | Cost of Revenue | $19.1M | $17.2M | +11% | - Average sales price for Q2 2025 was up approximately **9%** compared to the prior year period[7](index=7&type=chunk) - Increase in costs of revenue was principally driven by an increase in volumes and associated revenue, as well as start-up costs associated with the GAC line at Red River[8](index=8&type=chunk) [Gross Margin](index=2&type=section&id=Gross_Margin) Gross margin improved to **33.3%** in Q2 2025, an increase of **110 basis points** from the prior year, primarily due to higher pricing and volume, partially offset by GAC line start-up costs Q2 2025 Gross Margin | Metric | Q2 2025 | Q2 2024 | Change (bps) | | :---------- | :------ | :------ | :----------- | | Gross Margin| 33.3% | 32.2% | +110 bps | - Gross margin increased as higher pricing and volume were partially offset by start-up costs associated with the GAC line at Red River[9](index=9&type=chunk) [Operating Expenses](index=2&type=section&id=Operating_Expenses) Selling, general and administrative (SG&A) expenses decreased by **16%** to **$5.9 million**, while research and development (R&D) costs significantly increased to **$2.7 million** due to GAC facility pre-production testing Q2 2025 Operating Expenses | Metric | Q2 2025 | Q2 2024 | Change YoY | | :------------------------------------ | :------ | :------ | :--------- | | Selling, general and administrative | $5.9M | $7.0M | -16% | | Research and development | $2.7M | $0.9M | +$1.8M | - The reduction in SG&A was primarily driven by lower payroll and benefits and G&A expenses, with a portion reflecting the capitalization of payroll and benefits associated with the Corbin Facility[10](index=10&type=chunk) - The increase in R&D costs was primarily due to non-recurring expenses relating to feedstock utilized in pre-production testing of the GAC Facility[11](index=11&type=chunk) [Profitability Metrics](index=2&type=section&id=Profitability_Metrics) Arq reported an operating loss of **$1.6 million** and a net loss of **$2.1 million** in Q2 2025, while Adjusted EBITDA significantly improved to **$3.7 million**, marking the fifth consecutive quarter of positive Adjusted EBITDA Q2 2025 Profitability Metrics | Metric | Q2 2025 | Q2 2024 | Change YoY | | :------------- | :-------- | :-------- | :--------- | | Operating Loss | $(1.6)M | $(1.4)M | $(0.2)M | | Net Loss | $(2.1)M | $(2.0)M | $(0.1)M | | Adjusted EBITDA| $3.7M | $1.1M | >200% | - The increase in Adjusted EBITDA over the prior year period was primarily driven by higher revenues[12](index=12&type=chunk) Capital Expenditures and Balance Sheet Summary [Capital Expenditures](index=2&type=section&id=Capital_Expenditures) Capital expenditures for Q2 2025 totaled **$1.9 million**, consistent with expectations, with the full-year 2025 forecast remaining at **$8-$12 million** Capital Expenditures | Metric | Q2 2025 | FY 2025 Forecast | | :------------------------- | :------ | :--------------- | | Capital Expenditures | $1.9M | $8M - $12M | [Cash and Debt Position](index=2&type=section&id=Cash_and_Debt_Position) Cash and restricted cash decreased to **$15.4 million** as of June 30, 2025, primarily due to GAC facility capital expenditures and inventory build-up, while total debt increased to **$28.7 million** Cash and Debt Position | Metric | June 30, 2025 | Dec 31, 2024 | Change | | :------------------------- | :------------ | :----------- | :----- | | Cash and Restricted Cash | $15.4M | $22.2M | $(6.8)M| | Total Debt | $28.7M | $24.8M | +$3.9M | - The decrease in cash was largely caused by capital expenditures relating to the GAC Facility at Red River, trade accounts payable, as well as build-up of inventory and spare parts at the Corbin Facility[15](index=15&type=chunk) - The increase in total debt was driven by an increase in the outstanding principal balance of the Company's revolving credit facility[16](index=16&type=chunk) Corporate Information and Disclosures [About Arq](index=3&type=section&id=About_Arq) Arq is a diversified environmental technology company, the only vertically integrated producer of activated carbon products in North America, providing innovative solutions for removing pollutants - Arq is a diversified, environmental technology company with products that enable a cleaner and safer planet while actively reducing environmental impact[19](index=19&type=chunk) - The company is the only vertically integrated producer of activated carbon products in North America, delivering a reliable domestic supply of innovative, hard-to-source, high-demand products[19](index=19&type=chunk) - Arq applies its expertise to develop groundbreaking solutions to remove harmful chemicals and pollutants from water, land, and air[19](index=19&type=chunk) [Conference Call and Webcast Information](index=2&type=section&id=Conference_Call_and_Webcast_Information) Arq will host its Q2 2025 earnings conference call on August 12, 2025, at 8:30 a.m. ET, with webcast and replay details provided - Arq will host its Q2 2025 earnings conference call on August 12, 2025, at 8:30 a.m. ET[17](index=17&type=chunk) - The live webcast can be accessed through the Investor Resources section of Arq's website at www.arq.com, with registration available at https://www.webcast-eqs.com/Arq_Q2_2025[17](index=17&type=chunk) - A replay of the event will be made available shortly after and accessible via the same webcast link or by dial-in until August 19, 2025[18](index=18&type=chunk) [Caution on Forward-Looking Statements](index=3&type=section&id=Caution_on_Forward-Looking_Statements) This section warns that the press release contains forward-looking statements subject to various risks and uncertainties, advising readers to consult SEC filings for details - This press release contains forward-looking statements within the meaning of Section

PART I. - FINANCIAL INFORMATION This section presents the company's unaudited financial statements and management's analysis of financial condition and operations [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201%2E%20Financial%20Statements%20%28unaudited%29) This section presents the unaudited condensed consolidated financial statements, covering balance sheets, operations, equity, cash flows, and detailed notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------- | :----------------------------- | :------------------------------- | | Total Assets | $284,541 | $284,368 | | Cash | $6,957 | $13,516 | | Total Current Assets | $50,664 | $52,356 | | Total Liabilities | $67,773 | $67,092 | | Total Stockholders' Equity | $216,768 | $217,276 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines the company's financial performance over specific periods, detailing revenue, expenses, and net loss Three Months Ended June 30 | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :----------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Revenue | $28,584 | $25,405 | $3,179 | 13% | | Net loss | $(2,133) | $(1,968) | $(165) | 8% | | Basic Loss per common share | $(0.05) | $(0.06) | $0.01 | -17% | Six Months Ended June 30 | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :----------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Revenue | $55,831 | $47,145 | $8,686 | 18% | | Net loss | $(1,930) | $(5,387) | $3,457 | -64% | | Basic Loss per common share | $(0.05) | $(0.16) | $0.11 | -69% | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) This section details changes in stockholders' equity over specific periods, reflecting net loss and stock-based compensation Total Stockholders' Equity | Date | Amount (in thousands) | | :------------------- | :-------------------- | | Balances, January 1, 2025 | $217,276 | | Balances, June 30, 2025 | $216,768 | | Balances, January 1, 2024 | $178,400 | | Balances, June 30, 2024 | $189,600 | - Net loss for the three months ended June 30, 2025, was **$(2,133) thousand**, impacting stockholders' equity[17](index=17&type=chunk) - Stock-based compensation for the three months ended June 30, 2025, was **$734 thousand**, increasing stockholders' equity[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's cash inflows and outflows from operating, investing, and financing activities Six Months Ended June 30 | Cash Flow Activity | 2025 (in thousands) | 2024 (in thousands) | Change ($) | | :----------------------------------- | :------------------ | :------------------ | :--------- | | Operating activities | $(5,276) | $(2,424) | $(2,852) | | Investing activities | $(5,530) | $(28,851) | $23,321 | | Financing activities | $3,995 | $14,319 | $(10,324) | | Net change in cash and restricted cash | $(6,811) | $(16,956) | $10,145 | - Cash and Restricted Cash at the end of the period decreased to **$15,424 thousand** as of June 30, 2025, from **$37,197 thousand** as of June 30, 2024[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on accounting policies, financial components, debt, leases, commitments, equity, stock-based compensation, income taxes, and segment reporting [Note 1 - Organization and Basis of Presentation](index=7&type=section&id=Note%201%20-%20Organization%20and%20Basis%20of%20Presentation) This note describes the company's business, products, revenue seasonality, and the impact of new accounting standards - Arq, Inc. is an environmental technology company focused on selling consumable air, water, and soil treatment solutions primarily based on activated carbon (AC)[22](index=22&type=chunk)[116](index=116&type=chunk) - The company's primary products include powdered activated carbon (PAC) and granular activated carbon (GAC)[23](index=23&type=chunk)[117](index=117&type=chunk) - Revenue is generally higher in the first and third fiscal quarters due to weather-dependent power generation and increased demand for water treatment products during warmer/rainy months[35](index=35&type=chunk)[37](index=37&type=chunk) - The company is currently evaluating the impact of new accounting standards: ASU 2023-09 (Income Taxes), ASU 2024-03 (Income Statement Expenses), and ASU 2025-05 (Credit Losses for Accounts Receivable and Contract Assets)[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) [Note 2 - Inventories, net](index=9&type=section&id=Note%202%20-%20Inventories%2C%20net) This note provides a breakdown of the company's inventory balances, distinguishing between product and raw material inventories Inventories, net | Inventory Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------- | :----------------------------- | :------------------------------- | | Product inventory, net | $11,813 | $11,166 | | Raw material inventory | $8,965 | $8,148 | | **Total inventories, net** | **$20,778** | **$19,314** | [Note 3 - Revenue](index=9&type=section&id=Note%203%20-%20Revenue) This note details the company's revenue recognition policies and provides a breakdown of receivables Receivables, net | Receivable Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------- | :----------------------------- | :------------------------------- | | Trade receivables, net | $15,547 | $13,265 | | Other | — | $1,611 | | **Receivables, net** | **$15,547** | **$14,876** | - All material performance obligations related to revenue recognized were satisfied at a point in time[43](index=43&type=chunk) - The Company did not have material unbilled receivables (contract assets) or contract liabilities outstanding as of June 30, 2025, and December 31, 2024[45](index=45&type=chunk)[48](index=48&type=chunk) [Note 4 - Debt Obligations](index=10&type=section&id=Note%204%20-%20Debt%20Obligations) This note outlines the company's various debt instruments, including revolving credit facilities and long-term loans Debt Obligations | Debt Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :------------------------------- | | Revolving credit agreement | $18,528 | $13,828 | | CTB Loan due January 2036 | $8,697 | $8,983 | | Finance lease obligations | $826 | $1,269 | | Other | $897 | $1,004 | | **Total long-term debt obligations** | **$8,741** | **$9,370** | - The Company entered into a five-year **$30.0 million** secured revolving credit facility on December 27, 2024, with **$18.5 million** net borrowings as of June 30, 2025[50](index=50&type=chunk)[54](index=54&type=chunk) - The CTB Loan, assumed on February 1, 2023, has a principal amount of **$10.0 million**, matures on January 27, 2036, and bears interest at **6.0%** per annum through January 2026[55](index=55&type=chunk)[56](index=56&type=chunk) [Note 5 - Leases](index=12&type=section&id=Note%205%20-%20Leases)

Financial Performance - Total revenue reached $27.2 million, a 25% year-over-year increase, driven by improved Average Selling Price (ASP) and end-market diversification[6, 10] - Adjusted EBITDA was $4.1 million, compared to a loss of $0.4 million in the prior year period, marking four consecutive quarters of positive Adjusted EBITDA[7, 10] - The company achieved net profitability during Q1 2025, with a net income of $0.2 million compared to a net loss of $3.4 million in Q1 2024[10] - Gross margin remained strong at 36.4% in Q1 2025[6, 20] PAC Business - The company achieved its 8th consecutive quarter of double-digit year-over-year growth in PAC ASP, with an approximately 13% ASP increase year-over-year[6, 11, 18] - 100% of PAC contracts are now net cash producers, as loss-making contracts have been eliminated[6, 7, 18] GAC Business & Red River Project - The Red River project is expected to add 25 million pounds of incremental GAC product capacity[27, 31] - The company has entered into supply contracts for approximately 16 million pounds of the Red River plant's nameplate capacity[31] - First commercial-scale production of on-specification GAC product is anticipated by the end of Q2 or early Q3 2025[31, 35] PFAS Regulations & Market Impact - EPA regulations potentially increase municipal water market demand by 3-5x vs the existing approximately 170 million pounds per year[39] - The company estimates that the annual GAC market could grow approximately 75% to over 700 million pounds[108]

Financial Data and Key Metrics Changes - The company reported revenue of $27.2 million for Q1 2025, a 25% increase compared to the prior year period, driven by a 13% growth in average selling price (ASP) and higher volumes [8][30] - Adjusted EBITDA for the quarter was approximately $4.1 million, a significant improvement from an adjusted EBITDA loss of $0.4 million in the prior year [31][32] - Net income was $200,000, compared to a net loss of $3.4 million in Q1 2024, indicating a turnaround in financial performance [32] Business Line Data and Key Metrics Changes - The PAC business has shown a sustained turnaround with four consecutive quarters of positive adjusted EBITDA, indicating a robust foundation for overall operations [6][11] - The gross margin for Q1 2025 was approximately 36.4%, consistent with the previous year, despite startup costs associated with the GAC line [10][30] - The company achieved its eighth consecutive quarter of double-digit year-over-year percentage growth in ASP, reflecting strong demand for PAC products [9][30] Market Data and Key Metrics Changes - Demand for PAC products remains robust, with a strategic diversification beyond mercury emission solutions to reduce exposure to coal-fired power plant demand fluctuations [9][24] - The company anticipates a supply-demand imbalance to persist through at least 2027 or 2028, which is favorable for its market position [26][100] - The recent EPA comments on PFAS regulation align with the company's mission, indicating strong customer momentum in PFAS mitigation adoption [24][78] Company Strategy and Development Direction - The company is focused on further cost optimization and strategic price management to enhance profitability in its PAC business while pursuing growth initiatives in GAC, asphalt, and rare earth minerals [6][28] - The introduction of a new Chief Financial Officer is expected to strengthen the finance organization and support future growth [36][39] - The company is exploring opportunities in domestic rare earth minerals and synthetic graphite, which aligns with government initiatives [28][91] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in overcoming commissioning challenges for the GAC production line, with full commissioning and first commercial production now estimated by the end of Q2 or early Q3 2025 [21][22] - Despite setbacks, management remains optimistic about the long-term potential of GAC and its role as a growth engine for the company [29][107] - The company is committed to keeping stakeholders informed of material developments as it progresses towards commercial production [42][108] Other Important Information - The company ended Q1 2025 with cash of $14.8 million, of which approximately $6.3 million is unrestricted, and reiterated its CapEx forecast of $8 million to $12 million for 2025 [35] - The company has identified additional opportunities to reduce operating costs and SG&A, which will further enhance profitability [10][33] Q&A Session Summary Question: Can you elaborate on the commissioning process and the root cause of the inconsistencies? - Management confirmed that the primary area of emphasis is related to optimizing the binding and shaping process in Zone 3, which has required adjustments to improve consistency and efficiency [45][48] Question: What gives you confidence that the new timelines will be met? - Management stated that the mechanical process works, and they have produced small-scale GAC, but they are focused on optimizing the speed and consistency of production to achieve full commercial production [51][72] Question: Are there any take or pay benefits in the quarter? - Management confirmed that there were no take or pay impacts to the Q1 results [62] Question: What percentage of Phase One production is currently contracted? - Management indicated that approximately 60% of Phase One production is contracted, with a focus on the RNG market due to higher margins [102]

Financial Data and Key Metrics Changes - The company reported revenue of $27.2 million for Q1 2025, a 25% increase compared to the prior year period, driven by a 13% growth in average selling price (ASP) and higher volumes [6][31] - Adjusted EBITDA for the quarter was approximately $4.1 million, a significant improvement from an adjusted EBITDA loss of $0.4 million in the prior year [32] - Net income was $200,000, compared to a net loss of $3.4 million in Q1 2024, indicating a turnaround in financial performance [32] Business Line Data and Key Metrics Changes - The PAC business has shown a sustained turnaround with four consecutive quarters of positive adjusted EBITDA, and the company aims for double-digit millions in annual EBITDA from this segment [5][10] - The GAC business is facing delays in commissioning, with minimal production expected in Q2 2025, but the company remains confident in its long-term potential [21][30] Market Data and Key Metrics Changes - Demand for GAC products remains robust, particularly in PFAS mitigation, air filtration, and renewable natural gas applications, with strong customer momentum noted [24][26] - The company anticipates a supply-demand imbalance to persist through at least 2027 or 2028, which is favorable for its market position [27] Company Strategy and Development Direction - The company is focused on cost optimization and strategic price management to enhance profitability while pursuing growth initiatives in GAC, asphalt, and rare earth minerals [5][29] - The introduction of new technologies and partnerships is being explored to capitalize on government initiatives related to domestic rare earth minerals and graphite [29] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced during the commissioning of the GAC production line but expressed confidence in overcoming these hurdles and achieving commercial production by late Q2 or early Q3 2025 [21][30] - The company remains optimistic about the long-term demand for GAC products and the overall economic fundamentals supporting its business [106] Other Important Information - The company has appointed a new Chief Financial Officer, Jay Von Cannon, who brings extensive experience in financial leadership and is expected to enhance the company's financial strategy [38][40] - The company ended Q1 2025 with cash of $14.8 million, with approximately $6.3 million being unrestricted [36] Q&A Session Summary Question: What are the root causes of the commissioning inconsistencies? - Management confirmed that the primary issues relate to optimizing the production process, particularly in Zone 3, where adjustments are being made to improve consistency and throughput [46][49] Question: How confident is the company in meeting the new timelines for GAC production? - Management expressed confidence based on the successful production of small-scale volumes and ongoing fine-tuning of the process to achieve uninterrupted commercial production [52][60] Question: Was there any impact from take-or-pay contracts in Q1? - Management confirmed that there were no take-or-pay impacts in the Q1 results [62] Question: What percentage of Phase One production is currently contracted? - Approximately 60% of Phase One production is contracted, with the company holding back some production for the higher-margin RNG market [101]

[Arq Reports First Quarter 2025 Results](index=1&type=section&id=Arq%20Reports%20First%20Quarter%202025%20Results) [Executive Summary & Key Highlights](index=1&type=section&id=1.1.%20Executive%20Summary%20%26%20Key%20Highlights) Arq achieved strong Q1 2025 financial and operational performance, with **25%** revenue growth, continued PAC business transformation, and positive adjusted EBITDA and net income for the fourth consecutive quarter [Financial Highlights](index=1&type=section&id=Financial%20Highlights) Key Financial Data for Q1 2025 | Metric | Q1 2025 | Q1 2024 | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Revenue | 27.2 Million USD | 21.7 Million USD | +25% | | Average Selling Price (ASP) | Approx. 13% growth | - | 8 consecutive quarters of double-digit growth | | Gross Margin | 36.4% | 36.9% | Slight decrease | | Net Income (Loss) | 0.2 Million USD | (3.4) Million USD | Significant improvement | | Adjusted EBITDA (Loss) | 4.1 Million USD | (0.4) Million USD | Significant improvement (positive for 4 consecutive quarters) | | Cash and Restricted Cash | 14.8 Million USD | - | - | [Recent Business Highlights](index=1&type=section&id=Recent%20Business%20Highlights) - All Powdered Activated Carbon (PAC) contracts are now net cash producers after successfully resolving all negative margin agreements by December 31, 2024[5](index=5&type=chunk) - Signed an asset-life PAC contract with an existing customer in April 2025, representing the second-largest dollar value contract in Arq's history[5](index=5&type=chunk) - Appointed Jay Voncannon, with 35 years of financial experience, as Chief Financial Officer[5](index=5&type=chunk) - Expected timing for the first commercial Granular Activated Carbon (GAC) production at the Red River facility updated to late Q2 or early Q3 2025[2](index=2&type=chunk) [CEO Commentary](index=2&type=section&id=1.2.%20CEO%20Commentary) CEO Bob Rasmus highlighted the sustainable PAC business transformation, Arq's unique vertically integrated position, and confidence in GAC technology despite production delays - The PAC business transformation is ongoing and sustainable, providing a stable platform for GAC and other growth opportunities[6](index=6&type=chunk) - Arq holds a unique advantage as the only domestic producer in North America with a fully vertically integrated supply chain in the current market environment[6](index=6&type=chunk) - Commercial production at the GAC facility is expected to be delayed until late Q2 or early Q3 2025 due to final technical testing related to product binding and forming[6](index=6&type=chunk) [First Quarter 2025 Financial Results](index=2&type=section&id=First%20Quarter%202025%20Results) [Revenue and Cost of Revenue](index=2&type=section&id=2.1.%20Revenue%20and%20Cost%20of%20Revenue) Q1 2025 revenue increased by **25%** year-over-year to **$27.2 million**, driven by higher average selling prices, a positive product mix, and increased sales volume, with cost of revenue also rising by **26%** to **$17.3 million** due to increased volume and GAC production line startup costs Revenue and Cost of Revenue (in thousands USD) | Metric | Q1 2025 | Q1 2024 | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Revenue | $27,247 | $21,740 | +25% | | Cost of Revenue | $17,332 | $13,713 | +26% | - Q1 2025 ASP increased by approximately **13%** year-over-year, marking the eighth consecutive quarter of double-digit year-over-year growth[7](index=7&type=chunk) [Gross Margin](index=2&type=section&id=2.2.%20Gross%20Margin) Q1 2025 gross margin was **36.4%**, largely consistent with **36.9%** in the prior year, maintained by higher pricing and a favorable customer mix, offset by GAC production line startup costs and a Q1 2024 one-time accounting adjustment Gross Margin | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Gross Margin | 36.4% | 36.9% | - Gross margin remained stable as higher pricing and a favorable customer mix were offset by Q1 2025 GAC production line startup costs and a Q1 2024 one-time accounting adjustment[8](index=8&type=chunk) [Operating Expenses](index=2&type=section&id=2.3.%20Operating%20Expenses) Total operating expenses decreased by **16%** year-over-year in Q1 2025, primarily due to reductions in selling, general and administrative expenses and research and development costs Total Operating Expenses (in thousands USD) | Metric | Q1 2025 | Q1 2024 | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Total Operating Expenses | $9,253 | $11,007 | -16% | [Selling, General and Administrative Expenses](index=2&type=section&id=Selling%2C%20general%20and%20administrative%20expenses) Selling, General and Administrative Expenses (in thousands USD) | Metric | Q1 2025 | Q1 2024 | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Selling, General and Administrative Expenses | $6,053 | $7,666 | -21% | - The decrease in expenses was primarily due to lower salaries and benefits and general administrative expenses, partly reflecting the capitalization of Corbin plant-related salaries and benefits[9](index=9&type=chunk) [Research and Development Costs](index=2&type=section&id=Research%20and%20development%20costs) Research and Development Costs (in thousands USD) | Metric | Q1 2025 | Q1 2024 | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Research and Development Costs | $874 | $1,625 | -46% | - The reduction in R&D costs was mainly due to product qualification testing for GAC contract processes with potential early adopters in the prior year period[10](index=10&type=chunk) [Operating Income (Loss)](index=2&type=section&id=2.4.%20Operating%20Income%20%28Loss%29) Q1 2025 operating income was **$0.7 million**, a significant improvement from an operating loss of **$3.0 million** in the prior year, primarily driven by revenue growth and expense control Operating Income (Loss) (in thousands USD) | Metric | Q1 2025 | Q1 2024 | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Operating Income (Loss) | $662 | ($2,980) | Significant improvement | [Net Income (Loss) and Adjusted EBITDA](index=3&type=section&id=2.5.%20Net%20Income%20%28Loss%29%20and%20Adjusted%20EBITDA) The company achieved net income of **$0.2 million** in Q1 2025, a substantial improvement from a net loss of **$3.4 million** in the prior year, with adjusted EBITDA reaching **$4.1 million** from a loss of **$0.4 million**, marking the fourth consecutive quarter of positive adjusted EBITDA, primarily driven by revenue growth Net Income (Loss) and Adjusted EBITDA (in thousands USD) | Metric | Q1 2025 | Q1 2024 | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Net Income (Loss) | $203 | ($3,419) | Significant improvement | | Adjusted EBITDA | $4,063 | ($362) | Significant improvement | - Q1 2025 marks the company's fourth consecutive quarter of positive adjusted EBITDA[13](index=13&type=chunk) [Capital Expenditures and Balance Sheet](index=3&type=section&id=Capex%20and%20Balance%20Sheet) [Capital Expenditures](index=3&type=section&id=3.1.%20Capital%20Expenditures) Q1 2025 capital expenditures were **$3.7 million**, in line with management expectations, with the full-year 2025 capital expenditure forecast maintained between **$8 million** and **$12 million** Capital Expenditures (in thousands USD) | Metric | Q1 2025 | Full-Year 2025 Guidance | | :--- | :--- | :--- | | Capital Expenditures | $3,700 | $8,000 - $12,000 | [Cash and Restricted Cash](index=3&type=section&id=3.2.%20Cash%20and%20Restricted%20Cash) As of March 31, 2025, total cash and restricted cash was **$14.8 million**, a decrease from **$22.2 million** on December 31, 2024, primarily due to capital expenditures for the Red River expansion, trade payables, and inventory and spare parts accumulation at the Corbin plant Cash and Restricted Cash (in thousands USD) | Metric | March 31, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Cash and Restricted Cash | $14,803 | $22,235 | ($7,432) | - The decrease in cash was primarily driven by Red River expansion capital expenditures, trade payables, and inventory and spare parts accumulation at the Corbin plant[14](index=14&type=chunk) [Total Debt](index=3&type=section&id=3.3.%20Total%20Debt) As of March 31, 2025, total debt, including finance leases, was **$26.8 million**, an increase from **$24.8 million** on December 31, 2024, mainly due to an increase in the outstanding principal balance of the company's revolving credit facility Total Debt (in thousands USD) | Metric | March 31, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Debt | $26,800 | $24,800 | +$2,000 | - The increase in debt was primarily driven by an increase in the outstanding principal balance of the company's revolving credit facility[15](index=15&type=chunk) [Corporate Information](index=3&type=section&id=Corporate%20Information) [Conference Call and Webcast Information](index=3&type=section&id=4.1.%20Conference%20Call%20and%20Webcast%20Information) Arq will host its Q1 2025 earnings conference call on May 7, 2025, at 8:30 AM ET, offering webcast and dial-in access, with a replay available until May 14, 2025 - The Q1 2025 earnings conference call will be held on May 7, 2025, at 8:30 AM ET[16](index=16&type=chunk) - Webcast access is available through the investor relations section of Arq's website, with dial-in access and replay services also provided[16](index=16&type=chunk)[17](index=17&type=chunk) [About Arq](index=3&type=section&id=4.2.%20About%20Arq) Arq (NASDAQ: ARQ) is a diversified environmental technology company dedicated to a cleaner, safer planet through its products and actively reducing environmental impact, serving as North America's only vertically integrated activated carbon producer, providing reliable domestic supply and innovative products - Arq is a diversified environmental technology company whose products aim to achieve a cleaner, safer planet and reduce environmental impact[18](index=18&type=chunk) - The company is North America's only vertically integrated producer of activated carbon products, offering a reliable domestic supply of innovative, hard-to-source, high-demand products[18](index=18&type=chunk) [Caution on Forward-Looking Statements](index=3&type=section&id=4.3.%20Caution%20on%20Forward-Looking%20Statements) This press release contains forward-looking statements subject to various risks and uncertainties, where actual results may differ materially from expectations, including regulatory changes, operational difficulties, market competition, financing capabilities, and macroeconomic uncertainties, with no obligation to update such statements unless legally required - All statements in this press release regarding future activities, events, or developments are forward-looking statements[19](index=19&type=chunk) - Actual events or results may differ materially from forward-looking statements due to various factors, including GAC facility commissioning timing, market supply and demand, regulatory changes, technical and operational difficulties, competition, and macroeconomic uncertainties[19](index=19&type=chunk)[20](index=20&type=chunk) - The company undertakes no obligation to update such statements unless legally required[20](index=20&type=chunk) [Investor Contact](index=4&type=section&id=4.4.%20Investor%20Contact) This section provides investor relations contact information, including Anthony Nathan of Arq and Marc Silverberg of ICR - Investor contacts: Anthony Nathan (Arq) and Marc Silverberg (ICR)[22](index=22&type=chunk) [Condensed Consolidated Financial Statements](index=5&type=section&id=Condensed%20Consolidated%20Financial%20Statements) [Condensed Consolidated Balance Sheets](index=5&type=section&id=5.1.%20Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, Arq's total assets slightly decreased to **$283.7 million** from **$284.4 million** on December 31, 2024, with a reduction in current assets but an increase in net property, plant, and equipment, while total liabilities also slightly decreased Condensed Consolidated Balance Sheets (in thousands USD) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $283,671 | $284,368 | | Current Assets | $48,234 | $52,356 | | Total Liabilities | $65,498 | $67,092 | | Total Stockholders' Equity | $218,173 | $217,276 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=5.2.%20Condensed%20Consolidated%20Statements%20of%20Operations) In Q1 2025, the company reported net income of **$0.2 million**, a significant improvement from a net loss of **$3.4 million** in Q1 2024, primarily driven by a **25%** year-over-year revenue increase and reduced operating expenses Condensed Consolidated Statements of Operations (in thousands USD, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue | $27,247 | $21,740 | | Operating Income (Loss) | $662 | ($2,980) | | Net Income (Loss) | $203 | ($3,419) | | Basic Earnings (Loss) Per Share | $0 | ($0.09) | | Diluted Earnings (Loss) Per Share | $0 | ($0.09) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=5.3.%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2025 saw a net cash outflow from operating activities of **$5.8 million**, compared to a net inflow of **$0.5 million** in the prior year, with a significant reduction in net cash outflow from investing activities and a positive net cash inflow from financing activities, mainly due to borrowings from the revolving credit facility, resulting in a total cash and restricted cash decrease of **$7.4 million** at period-end Condensed Consolidated Statements of Cash Flows (in thousands USD) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | ($5,803) | $526 | | Net Cash from Investing Activities | ($3,598) | ($9,647) | | Net Cash from Financing Activities | $1,969 | ($1,013) | | Decrease in Cash and Restricted Cash | ($7,432) | ($10,134) | | Cash and Restricted Cash at End of Period | $14,803 | $44,019 | [Non-GAAP Financial Measures Reconciliation](index=8&type=section&id=5.4.%20Non-GAAP%20Financial%20Measures%20Reconciliation) This section defines non-GAAP financial measures (EBITDA and Adjusted EBITDA) and reconciles them to the most comparable GAAP measure (net income/loss), aiming to assist management and investors in evaluating the company's operational performance [Note on Non-GAAP Financial Measures](index=8&type=section&id=Note%20on%20Non-GAAP%20Financial%20Measures) - EBITDA is defined as earnings before interest, taxes, depreciation, and amortization, while Adjusted EBITDA further excludes non-cash gains, adds stock-based compensation expense, other non-cash losses, and non-recurring costs and expenses[29](index=29&type=chunk) - The company provides these non-GAAP measures as management uses them to assess operating performance and believes they facilitate comparisons of operating results across different periods[30](index=30&type=chunk) [Reconciliation of Net Income (Loss) to Adjusted EBITDA (Loss)](index=9&type=section&id=Reconciliation%20of%20Net%20Income%20%28Loss%29%20to%20Adjusted%20EBITDA%20%28Loss%29) Reconciliation of Net Income (Loss) to Adjusted EBITDA (Loss) (in thousands USD) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income (Loss) | $203 | ($3,419) | | Depreciation, Amortization, Depletion, and Accretion | $2,181 | $1,716 | | Interest Expense, Net | $671 | $432 | | EBITDA (Loss) | $3,182 | ($1,144) | | Stock-Based Compensation Expense | $736 | $782 | | Loss on Sale of Assets | $145 | — | | Adjusted EBITDA (Loss) | $4,063 | ($362) | - Adjusted EBITDA (Loss) for the three months ended March 31, 2024, has been revised to include non-cash stock-based compensation expense as an adjustment[33](index=33&type=chunk)

PART I. - FINANCIAL INFORMATION This part provides key financial information and other disclosures for the reporting period [Item 1. Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)%3A) This section presents Arq, Inc.'s unaudited condensed consolidated financial statements and detailed explanatory notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, including assets, liabilities, and equity Condensed Consolidated Balance Sheets (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :--------------- | :---------------- | | Total Assets | $283,671 | $284,368 | | Total Liabilities | $65,498 | $67,092 | | Total Stockholders' Equity | $218,173 | $217,276 | | Cash | $6,336 | $13,516 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's revenues, expenses, and net income or loss Condensed Consolidated Statements of Operations (in thousands, except per share data) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $27,247 | $21,740 | | Operating income (loss) | $662 | $(2,980) | | Net income (loss) | $203 | $(3,419) | | Basic Income (loss) per common share | $0.00 | $(0.09) | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) This section outlines changes in stockholders' equity over the reporting period Condensed Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Category | Balances, January 1, 2025 | Balances, March 31, 2025 | | :-------------------------- | :------------------------ | :----------------------- | | Total Stockholders' Equity | $217,276 | $218,173 | | Stock-based compensation | — | $736 | | Net income | — | $203 | Condensed Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Category | Balances, January 1, 2024 | Balances, March 31, 2024 | | :-------------------------- | :------------------------ | :----------------------- | | Total Stockholders' Equity | $178,400 | $175,164 | | Stock-based compensation | — | $782 | | Net loss | — | $(3,419) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash (used in) provided by operating activities | $(5,803) | $526 | | Net cash used in investing activities | $(3,598) | $(9,647) | | Net cash provided by (used in) financing activities | $1,969 | $(1,013) | | Decrease in Cash and Restricted Cash | $(7,432) | $(10,134) | | Cash and Restricted Cash, end of period | $14,803 | $44,019 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures for the condensed consolidated financial statements [Note 1 - Organization and Basis of Presentation](index=7&type=section&id=Note%201%20-%20Organization%20and%20Basis%20of%20Presentation) Describes the company's business and the basis for financial statement presentation - Arq, Inc. is an environmental technology company primarily engaged in selling activated carbon (AC) products for air, water, and soil treatment, including PAC and GAC, to various markets[23](index=23&type=chunk)[24](index=24&type=chunk) - The company's revenue is generally higher in the first and third fiscal quarters due to weather-dependent power generation and increased demand for water purification products during warmer months[36](index=36&type=chunk)[38](index=38&type=chunk) - The company is currently evaluating the impact of new accounting standards ASU 2023-09 (Income Taxes) and ASU 2024-03 (Income Statement Expenses) on its financial statement disclosures[40](index=40&type=chunk)[41](index=41&type=chunk) [Note 2 - Inventories, net](index=9&type=section&id=Note%202%20-%20Inventories%2C%20net) Details the composition and valuation of the company's inventory balances Inventories, net (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :------------------ | :--------------- | :---------------- | | Product inventory, net | $13,792 | $11,166 | | Raw material inventory | $7,957 | $8,148 | | **Total inventories, net** | **$21,749** | **$19,314** | [Note 3 - Revenue](index=9&type=section&id=Note%203%20-%20Revenue) Provides details on revenue recognition and related receivables Receivables, net (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :------------------ | :--------------- | :---------------- | | Trade receivables, net | $14,120 | $13,265 | | Other | $1,248 | $1,611 | | **Receivables, net** | **$15,368** | **$14,876** | - All material performance obligations related to revenue recognized were satisfied at a point in time for the three months ended March 31, 2025 and 2024[43](index=43&type=chunk) - The Company did not have material unbilled receivables or contract liabilities outstanding as of March 31, 2025, and December 31, 2024[45](index=45&type=chunk)[47](index=47&type=chunk) [Note 4 - Debt Obligations](index=10&type=section&id=Note%204%20-%20Debt%20Obligations) Outlines the company's various debt instruments and related terms Total Debt Obligations (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :--------------- | :---------------- | | Revolving credit agreement | $16,184 | $13,828 | | CTB Loan due January 2036 | $8,840 | $8,983 | | Finance lease obligations | $1,121 | $1,269 | | Other | $951 | $1,004 | | Unamortized debt discounts & costs | $(256) | $(262) | | Less: Current maturities | $(17,754) | $(15,452) | | **Total long-term debt obligations** | **$9,086** | **$9,370** | - The company entered into a five-year **$30.0 million** secured Revolving Credit Facility in December 2024, with net borrowings of **$16.2 million** as of March 31, 2025, bearing interest at SOFR + **4.50%** (**2.50%** SOFR floor)[49](index=49&type=chunk)[50](index=50&type=chunk)[53](index=53&type=chunk) - On May 6, 2025, the Revolving Credit Agreement was amended to decrease minimum liquidity requirements for specific periods in 2025, starting at **$1.0 million** (May 6 - June 30, 2025) and returning to **$5.0 million** by December 1, 2025[53](index=53&type=chunk) - The CTB Loan, assumed on February 1, 2023, has a principal amount of **$10.0 million**, matures on January 27, 2036, and bears interest at **6.0%** per annum through January 2026[54](index=54&type=chunk)[55](index=55&type=chunk) [Note 5 - Leases](index=12&type=section&id=Note%205%20-%20Leases) Details the company's operating and finance lease assets and obligations Lease ROU Assets and Obligations (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :--------------- | :---------------- | | Operating lease ROU assets, net | $10,137 | $9,312 | | Total operating lease obligation | $10,367 | $9,541 | | Finance lease ROU assets, net | $707 | $824 | | Total finance lease obligations | $1,121 | $1,269 | Total Lease Cost (in thousands) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------ | :-------------------------------- | :-------------------------------- | | Finance lease cost | $154 | $261 | | Operating lease cost | $837 | $911 | | Short-term lease cost | $274 | $336 | | Variable lease cost | $9 | $108 | | **Total lease cost** | **$1,274** | **$1,616** | - The weighted-average remaining lease term for operating leases was **6.7 years** as of March 31, 2025, compared to **7.6 years** as of March 31, 2024[66](index=66&type=chunk) [Note 6 - Commitments and Contingencies](index=13&type=section&id=Note%206%20-%20Commitments%20and%20Contingencies) Discloses the company's contractual commitments and potential contingent liabilities - As of March 31, 2025, the company had outstanding surety bonds totaling **$11.2 million**, primarily related to the Five Forks Mine (**$7.5M**), Corbin Facility (**$3.0M**), and Mine 4 (**$0.7M**)[67](index=67&type=chunk)[68](index=68&type=chunk) - The company posted **$8.5 million** in cash collateral as long-term restricted cash for surety bond providers as of March 31, 2025[69](index=69&type=chunk) - The company has a contractual obligation of **$1.7 million** for its share of certain contingent liabilities of Tinuum Group[73](index=73&type=chunk) - The company commenced legal proceedings against the design firm for the GAC Facility, seeking damages for alleged negligence and contractual breaches that led to material cost increases and project delays[75](index=75&type=chunk) [Note 7 - Supplemental Financial Information](index=14&type=section&id=Note%207%20-%20Supplemental%20Financial%20Information) Presents additional financial details not covered in primary statements or other notes Prepaid expenses and other current assets (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :--------------- | :---------------- | | Prepaid expenses | $1,945 | $2,021 | | Prepaid lender fees, net | $1,503 | $982 | | Prepaid income taxes and refunds | $159 | $233 | | Other | $1,174 | $1,414 | | **Total** | **$4,781** | **$4,650** | Other long-term assets, net (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :--------------- | :---------------- | | Spare parts, net | $11,736 | $11,178 | | Right of use assets, operating leases, net | $10,137 | $9,312 | | Intangible assets, net | $7,464 | $7,569 | | Mine development costs, net | $6,921 | $7,010 | | Upfront Customer Consideration | $5,332 | $5,459 | | Mine reclamation asset, net | $1,591 | $1,620 | | Other | $2,587 | $2,581 | | **Total** | **$45,768** | **$44,729** | Asset Retirement Obligations (AROs) (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :--------------- | :---------------- | | AROs, beginning of period | $6,279 | $6,163 | | Accretion | $126 | $666 | | Liabilities settled | $(11) | $(77) | | Changes due to scope and timing | $0 | $(473) | | **AROs, end of period** | **$6,394** | **$6,279** | | Less current portion | $1,037 | $1,037 | | **AROs, long-term** | **$5,357** | **$5,242** | [Note 8 - Stockholders' Equity](index=16&type=section&id=Note%208%20-%20Stockholders%27%20Equity) Details changes in equity, stock repurchase programs, and tax asset protection plans - As of March 31, 2025, the company had **$7.0 million** remaining under its stock repurchase program; no shares were repurchased during the three months ended March 31, 2025 or 2024[84](index=84&type=chunk) - The Tax Asset Protection Plan (TAPP) is designed to protect the company's ability to utilize net operating losses and tax credits by deterring beneficial ownership of **4.99%** or more of common stock[85](index=85&type=chunk)[87](index=87&type=chunk) - The TAPP's final expiration date was extended to December 31, 2026, or December 31, 2025, if stockholder approval of the Eighth Amendment is not obtained[88](index=88&type=chunk) [Note 9 - Stock-Based Compensation](index=16&type=section&id=Note%209%20-%20Stock-Based%20Compensation) Explains the company's stock-based compensation plans and related expenses Total Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | RSA expense | $519 | $446 | | PSU expense | $157 | $276 | | Stock option expense | $60 | $60 | | **Total stock-based compensation expense** | **$736** | **$782** | Unrecognized Stock-Based Compensation Cost (in thousands) | Category | Unrecognized Compensation Cost (as of Mar 31, 2025) | Expected Weighted Average Period of Recognition (in years) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------------------- | | RSA expense | $2,837 | 1.9 | | PSU expense | $1,908 | 1.2 | | Stock option expense | $314 | 1.3 | | **Total unrecognized stock-based compensation expense** | **$5,059** | **1.6** | - During Q1 2025, **136,113** RSAs were granted, **185,860** vested, and **15,254** were forfeited, resulting in **667,554** non-vested RSAs at period-end[94](index=94&type=chunk) - For Q1 2025, **122,630** PSUs were granted, **28,819** vested/settled, and **5,643** forfeited/canceled, with **965,213** PSUs outstanding at March 31, 2025[95](index=95&type=chunk) - As of March 31, 2025, **1,000,000** stock options were outstanding with a weighted-average exercise price of **$3.00** and an aggregate intrinsic value of **$1,170 thousand**[100](index=100&type=chunk) [Note 10 - Income Taxes](index=18&type=section&id=Note%2010%20-%20Income%20Taxes) Details the company's income tax expense, effective tax rate, and related disclosures Income Tax Expense and Effective Tax Rate (in thousands, except for rate) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------- | :-------------------------------- | :-------------------------------- | | Income tax expense | $0 | $0 | | Effective tax rate | 0% | 0% | - The company recognized **zero** income tax expense and a **zero** effective tax rate for Q1 2025 based on its operating forecast for the year, and for Q1 2024 due to a full valuation allowance against the pretax loss[101](index=101&type=chunk)[102](index=102&type=chunk) [Note 11 - Segment Reporting](index=19&type=section&id=Note%2011%20-%20Segment%20Reporting) Provides financial information by reportable segment and geographic area - The company operates in one reportable segment, Advanced Purification Technologies (APT), which manufactures and sells AC-based environmental remediation products[104](index=104&type=chunk) Revenue by Country (in thousands) | Country | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------ | :-------------------------------- | :-------------------------------- | | United States | $24,605 | $19,300 | | Canada | $2,642 | $2,440 | | **Total** | **$27,247** | **$21,740** | [Note 12 - Subsequent Events](index=19&type=section&id=Note%2012%20-%20Subsequent%20Events) Discloses significant events occurring after the balance sheet date - No significant matters occurred subsequent to March 31, 2025, unless disclosed elsewhere in the notes to the Condensed Consolidated Financial Statements[110](index=110&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's perspective on financial condition, operations, and performance factors, including liquidity - The company recognized net income of **$0.2 million** for Q1 2025, a significant improvement from a net loss of **$3.4 million** in Q1 2024, primarily due to higher revenue from increased volumes, average selling price, and product mix[117](index=117&type=chunk) - Management expects cash on hand and borrowing availability under the Revolving Credit Facility to provide sufficient liquidity to fund operations for the next 12 months[145](index=145&type=chunk) [Overview](index=20&type=section&id=Overview) Provides a general introduction to the company's business and strategic focus - Arq, Inc. is an environmental technology company focused on selling consumable air, water, and soil treatment solutions primarily based on activated carbon (AC), including PAC and GAC[112](index=112&type=chunk)[113](index=113&type=chunk) - The company expects to begin manufacturing high-quality GAC products using Arq Powder as feedstock during the second half of 2025 and is exploring new markets for Arq Powder as an additive[113](index=113&type=chunk) [Drivers of Demand and Key Factors Affecting Profitability](index=20&type=section&id=Drivers%20of%20Demand%20and%20Key%20Factors%20Affecting%20Profitability) Analyzes factors influencing demand and profitability, including market and regulatory trends - Profitability is influenced by manufacturing and sales volumes, price and product mix, coal-fired dispatch, water treatment demand, environmental regulations, and GAC product acceptance[114](index=114&type=chunk) - Higher natural gas prices in Q1 2025 (**$4.15/MMBtu** vs **$2.13/MMBtu** in Q1 2024) led to increased coal-fired generation and higher demand for the company's products[115](index=115&type=chunk)[120](index=120&type=chunk) - New EPA regulations on PFAS in municipal water, phasing in over five years, are anticipated to drive a material increase in GAC demand in the water purification market[116](index=116&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, including revenue, expenses, and net income - The company reported net income of **$0.2 million** for Q1 2025, a significant improvement from a net loss of **$3.4 million** for Q1 2024[117](index=117&type=chunk) - The primary factor impacting Q1 2025 results was higher revenue due to increased volumes, average selling price, and favorable product mix[117](index=117&type=chunk) [Revenue and Cost of revenue](index=21&type=section&id=Revenue%20and%20Cost%20of%20revenue) Analyzes revenue and cost of revenue, including drivers of change and gross margin Revenue and Cost of Revenue (in thousands, except percentages) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Revenue | $27,247 | $21,740 | $5,507 | 25% | | Cost of revenue, exclusive of D&A | $17,332 | $13,713 | $3,619 | 26% | - Revenue increased by **$5.5 million (25%)** in Q1 2025, driven by increased volumes (**$2.2M**), higher pricing (**$1.6M**), and favorable product mix (**$1.2M**), partly due to higher natural gas prices[120](index=120&type=chunk) - Gross margin (exclusive of D&A) remained flat, as higher pricing and favorable customer mix were offset by GAC line start-up costs and a prior year accounting adjustment[121](index=121&type=chunk) [Operating Expenses](index=21&type=section&id=Operating%20Expenses) Details the components of operating expenses and their period-over-period changes Operating Expenses (in thousands, except percentages) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Selling, general and administrative | $6,053 | $7,666 | $(1,613) | (21)% | | Research and development | $874 | $1,625 | $(751) | (46)% | | Depreciation, amortization, depletion and accretion | $2,181 | $1,716 | $465 | 27% | | Loss on sale of assets | $145 | $0 | $145 | * | | **Total operating expenses** | **$9,253** | **$11,007** | **$(1,754)** | **(16)%** | [Selling, General and Administrative](index=22&type=section&id=Selling%2C%20General%20and%20Administrative) Analyzes selling, general, and administrative expenses and their drivers Selling, General and Administrative Expenses (in thousands, except percentages) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Payroll and benefits | $1,861 | $2,649 | $(788) | (30)% | | Legal and professional fees | $1,567 | $1,633 | $(66) | (4)% | | General and administrative | $2,625 | $3,384 | $(759) | (22)% | | **Total SG&A** | **$6,053** | **$7,666** | **$(1,613)** | **(21)%** | - The decrease in payroll and benefits was primarily due to decreased wages, lower stock-based compensation expense, and reduced employer-related payroll tax expense[125](index=125&type=chunk) - General and administrative expenses decreased by approximately **$0.8 million**, mainly due to lower franchise taxes, rent, third-party services, and recruiting expenses[127](index=127&type=chunk) [Research and development](index=22&type=section&id=Research%20and%20development) Details research and development expenses and their changes - Research and development expense decreased by **$0.751 million (46%)** in Q1 2025, primarily due to lower expenses for GAC product qualification testing conducted in the prior year[123](index=123&type=chunk)[128](index=128&type=chunk) [Depreciation, amortization, depletion and accretion](index=22&type=section&id=Depreciation%2C%20amortization%2C%20depletion%20and%20accretion) Analyzes depreciation, amortization, depletion, and accretion expenses - Depreciation, amortization, depletion and accretion expense increased by approximately **$0.5 million (27%)** in Q1 2025, primarily due to increased absorption in inventory of **$0.7 million**[123](index=123&type=chunk)[129](index=129&type=chunk) [Loss on sale of assets](index=22&type=section&id=Loss%20on%20sale%20of%20assets) Reports on losses recognized from the disposal of assets - A loss of **$0.145 million** was recognized in Q1 2025 from the disposal of construction assets no longer in use[123](index=123&type=chunk)[130](index=130&type=chunk) [Other (Expense) Income, net](index=23&type=section&id=Other%20(Expense)%20Income%2C%20net) Details non-operating income and expenses, including interest and equity method earnings Other (Expense) Income, net (in thousands, except percentages) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Earnings from equity method investments | $155 | $0 | $155 | * | | Interest expense | $(724) | $(791) | $67 | (8)% | | Other | $110 | $352 | $(242) | (69)% | | **Total other expense** | **$(459)** | **$(439)** | **$(20)** | **5%** | - Earnings from equity method investments of **$0.155 million** in Q1 2025 represented cash distributions from Tinuum Group, which continued its wind-down operations[132](index=132&type=chunk) - Interest expense decreased slightly due to a lower average interest rate, despite a higher average outstanding balance[133](index=133&type=chunk) - The decrease in 'Other' income was primarily driven by a **$0.3 million** decrease in interest income due to lower average balances in cash sweep accounts[134](index=134&type=chunk) [Income tax expense](index=23&type=section&id=Income%20tax%20expense) Analyzes income tax expense and the effective tax rate for the period - The company reported **zero** income tax expense and a **zero** effective tax rate for both Q1 2025 (pretax income of **$0.2M**) and Q1 2024 (pretax loss of **$3.4M**)[135](index=135&type=chunk) - The zero effective tax rate for Q1 2025 was based on the operating forecast for the year, while for Q1 2024, it was due to a full valuation allowance against the pretax loss[135](index=135&type=chunk) [Non-GAAP Financial Measures](index=24&type=section&id=Non-GAAP%20Financial%20Measures) Presents and reconciles non-GAAP financial measures like EBITDA and Adjusted EBITDA EBITDA and Adjusted EBITDA (in thousands) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income (loss) | $203 | $(3,419) | | Depreciation, amortization, depletion and accretion | $2,181 | $1,716 | | Amortization of Upfront Customer Consideration | $127 | $127 | | Interest expense, net | $671 | $432 | | **EBITDA (loss)** | **$3,182** | **$(1,144)** | | Stock-based compensation expense | $736 | $782 | | Loss on sale of assets | $145 | $0 | | **Adjusted EBITDA (loss)** | **$4,063** | **$(362)** | - Adjusted EBITDA significantly improved from a loss of **$362 thousand** in Q1 2024 to a positive **$4,063 thousand** in Q1 2025[139](index=139&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses the company's ability to meet short-term and long-term financial obligations - Cash and restricted cash decreased from **$22.2 million** at December 31, 2024, to **$14.8 million** at March 31, 2025[140](index=140&type=chunk) - Principal liquidity sources include **$6.3 million** cash on hand (excluding **$8.5M** restricted cash), **$13.8 million** available under the **$30.0 million** Revolving Credit Facility, and cash from operations[146](index=146&type=chunk) - Principal liquidity uses include capital expenditures (Red River Plant expansion, Corbin Facility commissioning), business operating expenses, lease obligations, and debt obligations[146](index=146&type=chunk) - Management expects current cash on hand and Revolving Credit Facility availability to provide sufficient liquidity to fund operations for the next 12 months[145](index=145&type=chunk) [Current Resources and Factors Affecting Our Liquidity](index=25&type=section&id=Current%20Resources%20and%20Factors%20Affecting%20Our%20Liquidity) Identifies current liquidity sources and factors influencing the company's cash position - As of March 31, 2025, principal liquidity sources included **$6.3 million** cash on hand (excluding **$8.5 million** restricted cash) and **$13.8 million** availability under the **$30.0 million** Revolving Credit Facility[146](index=146&type=chunk) - Principal uses of liquidity include capital expenditures, business operating expenses, payments on lease obligations, and payments on debt obligations[146](index=146&type=chunk) [Cash Flows](index=25&type=section&id=Cash%20Flows) Summarizes cash flows from operating, investing, and financing activities Cash Flows Summary (in thousands) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Cash flow from operating activities | $(5,803) | $526 | | Cash flow from investing activities | $(3,598) | $(9,647) | | Cash flow from financing activities | $1,969 | $(1,013) | | **Net change in cash and restricted cash** | **$(7,432)** | **$(10,134)** | - Cash flow used in operating activities increased by **$6.3 million** in Q1 2025, primarily due to increased inventory and receivables balances[141](index=141&type=chunk) - Cash used in investing activities decreased by **$6.0 million** in Q1 2025, mainly due to a **$5.9 million** decrease in property, plant, and equipment additions related to the Red River Plant expansion[142](index=142&type=chunk) - Cash provided by financing activities increased by **$3.0 million** in Q1 2025, driven by net borrowings on the Revolving Credit Facility (**$2.4M**) and decreased common stock repurchases for tax withholdings (**$0.6M**)[143](index=143&type=chunk) [Material Cash Requirements](index=25&type=section&id=Material%20Cash%20Requirements) Outlines significant future cash obligations, including capital expenditures and debt - The ability to generate sufficient cash flow depends on executing contracts, increasing market share for APT consumables, expanding the AC business, and improving gross margin from customer and product mix[144](index=144&type=chunk) [Capital expenditures](index=26&type=section&id=Capital%20expenditures) Details planned and ongoing capital investments and their funding - Capital expenditures are ongoing for the Red River Plant expansion to commence GAC product production, with commissioning expected by the end of Q2 or early Q3 2025[147](index=147&type=chunk) - The Corbin Facility was commissioned in January 2025, but operations were reduced in April 2025, with plans to resume normal operations after the Red River Project completion[149](index=149&type=chunk) - Project completion is anticipated to be funded by cash on hand, Revolving Credit Facility availability, and ongoing cost reduction initiatives[147](index=147&type=chunk) [Surety Bonds](index=26&type=section&id=Surety%20Bonds) Discusses outstanding surety bonds and related collateral requirements - As of March 31, 2025, the company had **$11.2 million** in outstanding surety bonds, primarily for the Five Forks Mine and Corbin Facility, with **$8.5 million** in restricted cash pledged as collateral[150](index=150&type=chunk) [Long Term Requirements](index=26&type=section&id=Long%20Term%20Requirements) Refers to long-term cash requirements detailed in the financial statement notes - A discussion of the company's long-term cash requirements can be found in Note 4 of the Condensed Consolidated Financial Statements[151](index=151&type=chunk) [Critical Accounting Policies and Estimates](index=26&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Discusses accounting policies and estimates requiring significant management judgment - There have been no changes in the company's critical accounting policies and estimates from those reported in the 2024 Form 10-K[152](index=152&type=chunk) [Recently Issued Accounting Standards](index=26&type=section&id=Recently%20Issued%20Accounting%20Standards) Provides information on new accounting standards applicable to the company - Information regarding recently issued accounting standards applicable to the company is provided in Note 1 of the Condensed Consolidated Financial Statements[153](index=153&type=chunk) [Forward-Looking Statements Found in this Quarterly Report](index=26&type=section&id=Forward-Looking%20Statements%20Found%20in%20this%20Quarterly%20Report) Highlights forward-looking statements and associated risks and uncertainties - This Quarterly Report contains forward-looking statements that involve risks and uncertainties, and actual events or results could differ materially from those discussed[154](index=154&type=chunk)[155](index=155&type=chunk) - Key risk areas include regulatory changes, economic conditions, competition, debt financing, commercialization of new products (GAC), operational difficulties, cybersecurity, intellectual property, and macroeconomic uncertainty[155](index=155&type=chunk)[157](index=157&type=chunk) - The company disclaims any duty to update forward-looking statements unless required by law[155](index=155&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Quantitative and qualitative disclosures about market risk are not required for smaller reporting companies - The information under this Item is not required to be provided by smaller reporting companies[156](index=156&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Reports on disclosure controls effectiveness and confirms no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=28&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Assesses the effectiveness of the company's disclosure controls and procedures - Management, including the principal executive officer and principal financial officer, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[158](index=158&type=chunk) [Changes in Internal Control Over Financial Reporting](index=28&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) Reports on any material changes in internal control over financial reporting - There have been no changes in the company's internal control over financial reporting during the fiscal quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting[159](index=159&type=chunk) PART II. - OTHER INFORMATION This part provides key financial information and other disclosures for the reporting period [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) Refers to Note 6 for information regarding the company's legal proceedings - Information regarding legal proceedings, claims, and other matters related to the conduct of the company's business can be found in Note 6 'Commitments and Contingencies' to the Condensed Consolidated Financial Statements[161](index=161&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) No material updates to risk factors previously disclosed in the 2024 Form 10-K - There have been no material updates to the company's risk factors as disclosed in the 2024 Form 10-K[162](index=162&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Updates on the stock repurchase program and details shares withheld for tax obligations [Share Repurchases](index=29&type=section&id=Share%20Repurchases) Details the company's stock repurchase program and activity - As of March 31, 2025, **$7.0 million** remained available under the company's **$20.0 million** stock repurchase program[163](index=163&type=chunk) - No shares were repurchased under the stock repurchase program during the three months ended March 31, 2025 or 2024[163](index=163&type=chunk) [Tax Withholding](index=29&type=section&id=Tax%20Withholding) Reports on common shares withheld for employee tax obligations related to stock awards Common Shares Withheld for Tax Obligations (Q1 2025) | Period | Total Number of Common Shares Purchased | Average Price Paid per Common Share | | :------------------------------------ | :---------------------------------- | | January 1 to January 31, 2025 | — | $— | | February 1 to February 29, 2025 | — | $— | | March 1 to March 31, 2025 | 214 | $4.68 | [Item 4. Mine Safety Disclosures](index=29&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Information concerning mine safety violations or other regulatory matters - Information concerning mine safety violations or other regulatory matters is included in Exhibit 95.1 to this Quarterly Report[166](index=166&type=chunk) [Item 5. Other Information](index=29&type=section&id=Item%205.%20Other%20Information) Discloses Revolving Credit Facility amendment and confirms no Rule 10b5-1 trading plan changes [Amendment No. 1 to Revolving Credit Facility](index=29&type=section&id=Amendment%20No.%201%20to%20Revolving%20Credit%20Facility) Details the amendment to the Revolving Credit Facility, including liquidity covenants - On May 6, 2025, the company entered into the First Amendment to the Revolving Credit Agreement, which amends the borrowing availability calculation and updates the minimum liquidity covenant[167](index=167&type=chunk) Revised Minimum Liquidity Requirements | Applicable Dates | Minimum Liquidity Required | | :----------------------------------- | :------------------------- | | May 6, 2025 through June 30, 2025 | $1.0 million | | July 1, 2025 through July 31, 2025 | $0.0 million | | August 1, 2025 through August 31, 2025 | $1.0 million | | September 1, 2025 through September 30, 2025 | $1.5 million | | October 1, 2025 through October 31, 2025 | $2.0 million | | November 1, 2025 through November 30, 2025 | $3.0 million | | December 1, 2025 and at all times thereafter | $5.0 million | [Rule 10b5-1 Trading Plans](index=30&type=section&id=Rule%2010b5-1%20Trading%20Plans) Reports on Rule 10b5-1 trading plans adopted or terminated by directors or officers - No director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended March 31, 2025[169](index=169&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Quarterly Report, including key agreements and certifications - The report includes various exhibits such as Amended and Restated Bylaws, Certificate of Incorporation, Credit, Security and Guaranty Agreement, certifications, and XBRL data[171](index=171&type=chunk) - Exhibit 10.2, Amendment No. 1 to Credit, Security and Guaranty Agreement, is filed herewith[171](index=171&type=chunk) [Signatures](index=32&type=section&id=Signatures) Certifies the report with signatures from key executive officers - The report was duly signed on May 7, 2025, by Robert Rasmus, Chief Executive Officer, and Jay Voncannon, Chief Financial Officer[174](index=174&type=chunk)

Financial Data and Key Metrics Changes - In 2024, the company reported a 10% year-over-year increase in revenue to approximately $109 million, driven by strong improvements in average selling price (ASP) [9][34] - The average selling price increased by approximately 14% in the fourth quarter [6][35] - Gross margin for the full year was reported at 36.2%, with a slight decrease in the fourth quarter to 36.3% compared to 49.8% in the prior year [34][36] - The company achieved positive adjusted EBITDA of approximately $3.3 million in Q4 2024, down from $7.2 million in Q4 2023 [36] Business Line Data and Key Metrics Changes - The foundational PAC business has transformed from a loss-making segment to one where every contract is profitable as of 2025 [8] - Selling, general, and administrative expenses (SG&A) decreased from approximately $34 million in 2023 to approximately $29 million in 2024, a reduction of about 15% year-over-year [12] - Research and development costs for Q4 decreased by 39% compared to the prior year period [37] Market Data and Key Metrics Changes - The company is experiencing strong demand in the granular activated carbon (GAC) market, with expectations for significant growth driven by regulatory changes related to PFAS [27][30] - The company is currently contracted for approximately 16 million pounds of GAC, with a strategic approach to delay full contracting to align with production ramp-up [24][66] Company Strategy and Development Direction - The company aims to maximize profitability and future opportunities by diversifying its PAC business and expanding into new markets such as water, cement, and industrial sectors [8][30] - The GAC segment is viewed as a future growth engine, with plans to ramp up production to a nameplate capacity of 25 million pounds by the second half of 2025 [22][30] - The company is focused on innovation, operational excellence, and customer engagement to drive long-term value [43] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing sustainable improvements in profitability for the foundational PAC business, despite recognizing that growth may moderate over time [11][10] - The company is optimistic about the future, with a strong balance sheet and improved investor confidence following successful debt refinancing [16][44] - Management acknowledged challenges in 2024, particularly related to CapEx for GAC expansion, but remains focused on driving the project to completion [17][20] Other Important Information - The company successfully raised approximately $42 million in new net equity investment during 2024, and its overall market capitalization more than doubled [14] - The company has a fully integrated domestic supply chain, which positions it favorably against competitors who rely on imported materials subject to tariffs [83] Q&A Session Summary Question: Can you review the ramp-up process for Red River and key milestones? - Management detailed the commissioning process broken down into six functional zones, emphasizing that they have successfully produced granular activated carbon and are fine-tuning the process for efficiency [49][53] Question: How are rising natural gas prices affecting pack sales? - Management noted that higher natural gas prices could lead to a shift from natural gas to coal-fired generation, impacting volumes, but they are expanding into higher-margin adjacent markets [55][56] Question: What are the CapEx expectations for 2025? - Management expects CapEx for 2025 to be between $8 million to $12 million, excluding potential Phase II costs, with plans to use cash flow from the PAC business to fund future expansions [58][59] Question: What is the pricing differential between granular and pack markets? - Management indicated that pricing for granular activated carbon is significantly higher than pack pricing, with a differential of 20% to 40% in adjacent markets [66][70] Question: Are there any tariff implications for the U.S. activated carbon market? - Management stated that tariffs could benefit the company due to its fully domestic supply chain, while competitors relying on imports may face increased costs [83] Question: What is the expected timeline for moving forward with Line Two? - Management anticipates gaining visibility on contracting and demand in the second half of the year, which will inform decisions regarding Line Two [95]