[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]

Revenue and Growth - Total revenue for the year ended December 31, 2024, was $108,959,000, representing a 10% increase from $99,183,000 in 2023[193]. - The increase in revenue was primarily driven by a favorable product mix contributing approximately $6.9 million and improved pricing adding about $4.9 million, partially offset by a $2.2 million decrease due to lower volumes sold[194]. Expenses and Costs - Operating expenses decreased by 8% from $45,195,000 in 2023 to $41,403,000 in 2024, with significant reductions in selling, general and administrative costs by 16%[199]. - Research and development expenses increased by 22% from $3,314,000 in 2023 to $4,050,000 in 2024, primarily due to increased payroll costs and product qualification testing[199]. - The gross margin for consumables, exclusive of depreciation and amortization, improved due to increased pricing, despite higher manufacturing costs[195]. Investments and Acquisitions - The company acquired 100% of the equity interests of Arq Limited subsidiaries in February 2023 to enhance access to U.S. bituminous coal feedstock and advanced GAC products[179]. - Earnings from equity method investments significantly decreased by 92% from $1,623,000 in 2023 to $127,000 in 2024[207]. - Earnings from equity method investments decreased by 92% from $1,623,000 in 2023 to $127,000 in 2024, primarily due to the wind-down of Tinuum Group and Tinuum Services[208]. Cash Flow and Liquidity - Cash and restricted cash decreased from $54.2 million in 2023 to $22.2 million in 2024, a decrease of $31.9 million[227]. - Cash flows from operating activities improved to $10.5 million in 2024 from a cash outflow of $16.7 million in 2023, driven by a decrease in net loss and a net increase in working capital[228]. - Cash flows used in investing activities increased significantly to $85.1 million in 2024 from $28.5 million in 2023, mainly due to capital expenditures for the Red River Plant expansion[229]. - Cash flows from financing activities increased by $19.8 million in 2024, primarily due to proceeds from a public offering totaling $26.7 million[230]. - The company expects sufficient liquidity to fund operations for the next 12 months based on current cash levels and borrowing availability[232]. Tax and Debt - The effective tax rate for 2024 was 3%, with a reported income tax benefit of $0.2 million[212]. - The loss on extinguishment of debt increased due to the write-off of deferred financing costs associated with the termination of the CFG Loan[210]. - As of December 31, 2024, the company had a valuation allowance of $101.6 million on deferred tax assets, up from $98.8 million in 2023[216]. Capital Expenditures and Projects - The company is targeting the completion of the Red River Plant expansion in Q1 2025, incurring substantial capital expenditures exceeding initial forecasts[233]. - Capital expenditures for 2025 will primarily focus on the Red River Project, contingent on environmental permit approvals and project progression[234]. Obligations and Liabilities - As of December 31, 2024, the company had outstanding surety bonds totaling $11.1 million, with restricted cash of $8.5 million held as collateral[235]. - Contractual obligations as of December 31, 2024, total $29.9 million, with $5.2 million due within one year[239]. - The company’s asset retirement obligation related to the Five Forks Mine is recorded at $4.5 million as of December 31, 2024[239]. - Outstanding borrowings under the Revolving Credit Facility were $13.8 million as of December 31, 2024[239]. Accounting and Financial Reporting - The company applies the acquisition method for business combinations, requiring significant estimates and assumptions regarding fair values[242]. - Reclamation costs related to asset retirement obligations are allocated to expense over the life of the related mine assets[247]. - The company recognizes deferred tax assets based on the likelihood of realization, considering future taxable income and tax-planning strategies[250]. - Recent accounting standards and their implications are discussed in the consolidated financial statements[251]. Company Changes - The company changed its name to Arq, Inc. in February 2024, with its common stock trading on the Nasdaq Global Market under the ticker symbol "ARQ"[180]. - The company anticipates using Arq Powder as a feedstock for high-quality GAC products by the end of Q1 2025, aiming for a lower carbon footprint compared to competitors[179].

Capital Expenditure and Project Updates - Arq, Inc. announced preliminary fiscal year 2024 capital expenditure results related to the granular activated carbon (GAC) expansion project at the Red River facility[4]. - The preliminary estimates are not audited and may be subject to material adjustments[5]. - The company is progressing on customer engagement and has commenced certain legal proceedings related to the GAC expansion project[6]. - Forward-looking statements include expectations regarding costs and timing for capital improvements and anticipated production capacities for GAC products[8]. - Risks associated with the GAC project include management's ability to maintain relationships with customers and suppliers, construction costs, and operational difficulties[8]. Company Name Change - The company changed its name from Advanced Emissions Solutions, Inc. to Arq, Inc. on February 1, 2024[10].

Financial Performance - For the three months ended September 30, 2024, the company reported revenue of $34.774 million, a 17% increase from $29.829 million in the same period of 2023[89]. - The cost of revenue for the three months ended September 30, 2024 was $21.339 million, up 3% from $20.707 million in the prior year[89]. - The company recognized a net income of $1.6 million for the three months ended September 30, 2024, compared to a net loss of $2.2 million for the same period in 2023[88]. - Total revenue for the nine months ended September 30, 2024, was $81,919,000, representing a 15% increase from $71,079,000 in the same period of 2023, with a change of $10,840,000[104]. - EBITDA for the nine months ended September 30, 2024, was $4,369,000, compared to a loss of $7,093,000 in the same period of 2023[122]. Cost and Expenses - Operating expenses for the three months ended September 30, 2024 were $11.407 million, a slight decrease from $11.647 million in the same period of 2023[92]. - Operating expenses decreased by 7% from $34,300,000 in 2023 to $32,012,000 in 2024, with significant reductions in selling, general, and administrative expenses by 18%[106]. - Research and development expenses increased by 23% to $787,000 for the three months ended September 30, 2024, primarily due to product qualification testing[97]. - Research and development expenses increased by 56% from $2,145,000 in 2023 to $3,341,000 in 2024, reflecting ongoing product qualification testing[111]. - Interest expense increased by 13% from $2,155,000 in 2023 to $2,426,000 in 2024, primarily due to higher interest related to the CFG Loan[116]. Cash Flow and Liquidity - Cash on hand as of September 30, 2024, was $48.7 million, excluding $8.7 million of restricted cash, with net proceeds from common stock issuance totaling $42.4 million[124]. - Cash flow from operating activities for the nine months ended September 30, 2024 was $5.3 million, a net increase of $26.4 million from cash used in operating activities of $21.1 million for the same period in 2023[126]. - The company anticipates that cash on hand and proceeds from additional debt financing will provide sufficient liquidity to fund operations for the next 12 months[129]. Market and Demand - The average selling price increase contributed approximately $2.7 million to revenue growth, while a favorable product mix added $1.2 million[90]. - The company experienced a decrease in demand from coal-fired power generation customers due to lower natural gas prices and mild temperatures, impacting sales negatively[87]. - The U.S. EPA's new PFAS regulations are anticipated to drive a material increase in GAC demand in the water purification market over the next five years[87]. - The increase in revenue was primarily driven by a favorable product mix and higher pricing, contributing approximately $5.4 million and $3.9 million, respectively, while lower volumes sold offset these gains by about $0.4 million[105]. Future Plans and Investments - The company expects to begin using Arq Powder as a feedstock for manufacturing high-quality GAC products in the first quarter of 2025[85]. - The company expects to spend between $60 and $70 million on construction and commissioning of its plants during 2024, with $20 to $25 million expected to be spent in the fourth quarter[130]. - The company is targeting the first quarter of 2025 for its first GAC deliveries, requiring substantial capital expenditure for additional equipment and project costs[130]. - The company plans to expand its overall AC business into additional adjacent markets to increase market share and gross margin[129]. Risks and Challenges - The company faces risks related to the integration of Legacy Arq's business and the commercialization of its products and technology[135].

Financial Performance - Revenue for Q3 2024 totaled $34.8 million, representing a 17% increase from $29.8 million in the prior year period[6] - Net income for Q3 2024 was $1.6 million, compared to a net loss of $2.2 million in the prior year period[6] - Adjusted EBITDA for Q3 2024 was $5.1 million, up from $0.9 million in the prior year[2] - Revenue for the three months ended September 30, 2024, was $34,774,000, representing a 16.5% increase from $29,829,000 for the same period in 2023[14] - Net income for the three months ended September 30, 2024, was $1,617,000, compared to a net loss of $(2,175,000) for the same period in 2023[14] - Operating income for the nine months ended September 30, 2024, improved to $(2,372,000) from $(16,439,000) in the same period of 2023[14] - Adjusted EBITDA for the three months ended September 30, 2024, was $5,134,000, compared to a loss of $(9,788,000) for the same period in 2023[18] Margins and Costs - Gross margin improved to 38.6% in Q3 2024, an increase of approximately 800 basis points from 30.6% in the prior year[2] - Average selling prices (ASP) increased by approximately 15% in Q3 2024, marking the sixth consecutive quarter of double-digit year-over-year growth in ASP[2] - Research and development expenses for the three months ended September 30, 2024, were $787,000, up from $639,000 in the same period of 2023[14] - The company incurred $2,185,000 in stock-based compensation expense for the nine months ended September 30, 2024, compared to $1,810,000 for the same period in 2023[15] Cash and Equity - Cash and restricted cash as of September 30, 2024, totaled $57.4 million, up from $37.2 million as of June 30, 2024[8] - Cash and restricted cash at the end of the period was $57,380,000, down from $61,321,000 at the end of September 2023[15] - Net cash provided by operating activities for the nine months ended September 30, 2024, was $5,268,000, compared to $(21,145,000) for the same period in 2023[15] - Total stockholders' equity increased to $218,116,000 as of September 30, 2024, up from $178,400,000 at the end of 2023[13] Capital Expenditures and Future Plans - Capital expenditures for the nine months ended September 30, 2024, totaled $42.2 million, compared to $17.0 million in the prior year[8] - The company raised approximately $27 million in net equity proceeds in September 2024, increasing year-to-date net equity raised to approximately $42 million[2] - The Red River facility is on track for first deliveries in Q1 2025, with a targeted nameplate capacity of 25 million pounds per year[4] - There is potential to increase the Red River's nameplate capacity by 10-20% without additional capital expenditures, expected to be achievable by Q3 2025[5] Liabilities - The company reported a decrease in total liabilities and stockholders' equity to $279,965,000 as of September 30, 2024, from $235,502,000 at the end of 2023[13]

Revenue and Growth - Revenue for Q2 2024 was $25.4 million, a 24% increase from $20.4 million in the prior year period, driven by higher average selling prices and favorable product mix [3]. - Total revenue for Q2 2024 was $25,405, a 24.5% increase from $20,445 in Q2 2023 [20]. - Average selling price (ASP) increased by approximately 16% in Q2 2024, marking the fifth consecutive quarter of double-digit year-over-year growth [3]. - Total contracted volume for granular activated carbon (GAC) reached 13 million pounds per year, representing 52% of Red River's expanded nameplate capacity of 25 million pounds [4]. Profitability and Loss - Net loss narrowed to $2.0 million in Q2 2024, compared to a net loss of $5.9 million in the prior year period [3]. - Net loss for Q2 2024 was $1,968, compared to a net loss of $5,856 in Q2 2023, representing a 66.4% improvement [20]. - Operating loss decreased to $1,420 in Q2 2024 from $6,087 in Q2 2023, indicating a significant reduction in operating expenses [20]. - The net loss for the six months ended June 30, 2024, was $5.387 million, significantly improved from a loss of $13.364 million in the same period of 2023 [24]. EBITDA and Adjusted Metrics - Adjusted EBITDA was $0.5 million in Q2 2024, a significant improvement from an adjusted EBITDA loss of $3.0 million in the prior year [3]. - Adjusted EBITDA for the six months ended June 30, 2024, was a loss of $691,000, compared to a loss of $10.675 million for the same period in 2023 [24]. - EBITDA for the three months ended June 30, 2024, was $453,000, a significant improvement from a loss of $2.993 million in the same period of 2023 [24]. Cash and Liquidity - Cash and restricted cash as of June 30, 2024, totaled $37.2 million, down from $44.0 million as of March 31, 2024 [12]. - Cash and restricted cash at the end of Q2 2024 was $37,197, down from $67,583 at the end of Q2 2023, reflecting a decrease of 45% [21]. - The company reported a decrease in cash used in operating activities to $2,424 in the first half of 2024, down from $21,159 in the first half of 2023 [21]. Capital Expenditures and Investments - Capital expenditures for the first half of 2024 totaled $28.8 million, with full-year guidance remaining at $60 - $70 million [12]. - The company signed a non-binding term sheet to refinance its existing Term Loan, which would expand the size of the facility and enhance liquidity [5]. Assets and Liabilities - Total assets increased to $248,582 as of June 30, 2024, up from $235,502 as of December 31, 2023, marking a growth of 5.1% [18]. - Total liabilities rose to $58,982 as of June 30, 2024, compared to $57,102 as of December 31, 2023, an increase of 3.3% [18]. Research and Development - Research and development expenses increased to $929 in Q2 2024 from $774 in Q2 2023, a rise of 20.1% [20]. Other Financial Metrics - Depreciation, amortization, depletion, and accretion for the three months ended June 30, 2024, was $1.658 million, down from $2.428 million in the prior year [24]. - Interest expense for the three months ended June 30, 2024, was $606,000, compared to $308,000 in the same period of 2023 [24]. - Cash distributions from equity method investees for the six months ended June 30, 2024, were $462,000, while there were no distributions in the same period of 2023 [24]. - The company incurred $0.6 million and $4.9 million in transaction and integration costs related to the legacy Arq acquisition for the three and six months ended June 30, 2023, respectively [24]. - Legacy Arq payroll and benefit costs included in net loss were $0.8 million and $1.7 million for the three and six months ended June 30, 2023, respectively [24]. - The weighted-average number of common shares outstanding increased to 34,356 in Q2 2024 from 27,360 in Q2 2023, reflecting a 25.5% increase [20]. - The company reported a total stockholders' equity of $189,600 as of June 30, 2024, up from $178,400 as of December 31, 2023, an increase of 6.6% [18]. - The Corbin facility commenced commissioning in early Q2 2024, with production expected to ramp up in Q4 2024 [5]. - The company reported a gain on the sale of Marshall Mine, LLC, of $2.695 million in the six months ended June 30, 2023 [24].

Financial Performance - For the three months ended June 30, 2024, revenue increased by 24% to $25.4 million compared to $20.4 million in the same period of 2023[96] - The company reported a net loss of $2.0 million for the three months ended June 30, 2024, an improvement from a net loss of $5.9 million in the same period of 2023[94] - For the six months ended June 30, 2024, revenue increased by 14% to $47.1 million compared to $41.3 million in the same period of 2023[106] - EBITDA loss for the six months ended June 30, 2024, was $691,000 compared to a loss of $7.98 million in 2023, indicating improved operational performance[125] Revenue Drivers - The average selling price of products increased, contributing approximately $1.2 million to revenue growth, while product volumes increased by $0.8 million, primarily from non-power generation and municipal water customers[97] - Revenue for the six months ended June 30, 2024, increased by approximately $2.8 million due to favorable product mix and higher pricing, despite a $1.0 million decrease from lower volumes sold[107] Expenses and Costs - Operating expenses decreased by 14% to $9.6 million for the three months ended June 30, 2024, compared to $11.2 million in the same period of 2023[99] - Operating expenses decreased by 9% from $22.7 million in 2023 to $20.6 million in 2024, with significant reductions in selling, general, and administrative expenses by 24%[108] - Cost of revenue for the six months ended June 30, 2024 decreased by 5% to $30.9 million compared to $32.5 million in the same period of 2023[106] Research and Development - Research and development expenses increased by 20% to $929,000 for the three months ended June 30, 2024, compared to $774,000 in the same period of 2023[99] - Research and development expenses rose by 70% from $1.5 million in 2023 to $2.6 million in 2024, primarily due to product qualification testing[108] Cash Flow and Liquidity - Cash and restricted cash decreased from $54.2 million at the end of 2023 to $37.2 million by June 30, 2024[128] - Cash used in operating activities improved significantly, decreasing from $21.2 million in 2023 to $2.4 million in 2024, reflecting a net loss reduction from $13.4 million to $5.4 million[130] - The company had cash on hand of $28.5 million as of June 30, 2024, excluding $8.7 million of restricted cash[128] - The company anticipates sufficient liquidity from cash on hand and additional debt financing to fund operations for the next 12 months[133] Capital Expenditures and Investments - Cash flows used in investing activities increased by $18.4 million for the six months ended June 30, 2024, primarily due to an increase in property, plant, and equipment additions from the Red River Plant expansion[131] - The company expects to spend between $55 million and $60 million on the Red River Plant expansion during 2024, depending on project pace[134] - The company plans to incur substantial capital expenditures for additional equipment and labor to meet the target for GAC deliveries in the first quarter of 2025[134] Market and Regulatory Environment - The company experienced a decrease in demand from coal-fired power generation customers due to lower natural gas prices, which are expected to remain consistent through 2024[93] - The U.S. EPA's new PFAS National Primary Drinking Water Regulation is expected to drive a material increase in GAC demand in the water purification market over the next five years[93] - The company expects to increase its market share for APT consumables and improve gross margins through better customer and product mix[133] - The company faces risks related to competition, regulatory changes, and macroeconomic conditions that could impact future performance[139] Debt and Financing - Interest expense increased by 18% from $1.4 million in 2023 to $1.6 million in 2024, mainly due to new loans related to the Arq Acquisition[120] - Cash flows provided by financing activities decreased by $8.5 million for the six months ended June 30, 2024, primarily due to the absence of proceeds from the CFG Loan received in the prior year[132] - The company received proceeds of $15.0 million from the issuance of common stock during the six months ended June 30, 2024, net of offering costs[132] Internal Controls - The company is in the process of documenting and testing internal controls over financial reporting for the acquired Legacy Arq, which will be included in the annual report for the year ending December 31, 2024[142] Future Outlook - The company expects to begin using Arq Powder as a feedstock for manufacturing high-quality GAC products by the end of 2024, which is anticipated to open new market opportunities[92]

Financial Performance - For the three months ended March 31, 2024, the company reported a net loss of $3.4 million, an improvement from a net loss of $7.5 million in the same period of 2023[96]. - Revenue for the three months ended March 31, 2024, increased to $21.74 million, a 4% increase from $20.81 million in the same period of 2023[98]. - EBITDA loss for the three months ended March 31, 2024 was $(1.1) million, compared to $(5.0) million for the same period in 2023, indicating a significant improvement in operational performance[118]. - Adjusted EBITDA loss for the three months ended March 31, 2024 was $(1.1) million, compared to $(7.7) million for the same period in 2023, reflecting a positive trend in financial results[118]. Cost Management - Cost of revenue decreased by 20% to $13.71 million for the three months ended March 31, 2024, compared to $17.18 million in the same period of 2023[98]. - Operating expenses decreased by 4% to $11.01 million for the three months ended March 31, 2024, compared to $11.46 million in the same period of 2023[102]. - Selling, general, and administrative expenses decreased by 32% to $7.67 million for the three months ended March 31, 2024, compared to $11.28 million in the same period of 2023[102]. Research and Development - Research and development expenses increased by 122% to $1.63 million for the three months ended March 31, 2024, compared to $0.73 million in the same period of 2023[102]. Liquidity and Cash Flow - Cash on hand as of March 31, 2024, was $35.2 million, excluding $8.8 million of restricted cash, indicating a solid liquidity position[120]. - Cash flows from operating activities improved by $18.2 million, moving from $(17.7) million in Q1 2023 to $0.5 million in Q1 2024[121]. - The company anticipates that cash on hand and additional debt financing will provide sufficient liquidity to fund operations for the next 12 months[126]. Capital Expenditures - Capital expenditures planned for 2024 are between $55 million and $60 million for the Red River Plant expansion, with an additional $5 million to $10 million for the commissioning of the Corbin Facility[127]. - The company expects to finance the Red River Plant expansion through cash on hand, cash generation, and potential customer prepayments for GAC contracts[127]. - The company is targeting the end of 2024 for the completion of the Red River Plant expansion, which is necessary to commence production of new GAC products[127]. Regulatory and Market Outlook - The company expects the implementation of new PFAS regulations by the EPA to drive a material increase in GAC demand in the water purification market over the next five years[95]. - The company anticipates beginning to use Arq Powder as a feedstock for manufacturing high-quality GAC products by the end of 2024[94]. Internal Controls - Legacy Arq was acquired on February 1, 2023, and is excluded from the internal control assessment as of December 31, 2023[136]. - The company is documenting and testing Legacy Arq's internal controls, which will be included in the annual report for the year ending December 31, 2024[136]. - No changes in internal control over financial reporting occurred during the fiscal quarter ended March 31, 2024, that materially affected internal controls[136]. Interest Expense - Interest expense increased by 48% to $0.79 million for the three months ended March 31, 2024, compared to $0.53 million in the same period of 2023[112].