Arq(ARQ) - 2024 Q4 - Annual Report

Revenue and Growth - Total revenue for the year ended December 31, 2024, was $108,959,000, representing a 10$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 lower volumes sold which decreased revenue by $2.2 million[194]. Costs and Expenses - Cost of revenue for 2024 was$69,515,000, up 3% from $67,323,000 in 2023[193]. - Operating expenses decreased by 8$41,403,000 in 2024 from $45,195,000 in 2023, with selling, general and administrative expenses down 16$4,050,000 in 2024, driven by higher payroll costs and product qualification testing[199]. Investments and Earnings - Earnings from equity method investments dropped 92% to $127,000 in 2024 from$1,623,000 in 2023[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 Valuation - 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]. - The effective tax rate for 2024 was 3$0.2 million[212]. - Changes in estimates for deferred tax assets could materially impact the effective tax rate and financial condition[250]. Debt and Obligations - Interest expense increased due to paid-in-kind interest on a $10 million term loan, which was fully paid in December 2024[209]. - 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 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]. - Outstanding borrowings under the Revolving Credit Facility were$13.8 million as of December 31, 2024[239]. Business Development and Strategy - 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]. - The company plans to utilize 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]. - 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 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]. Asset Management - 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[249]. - The company’s asset retirement obligation related to the Five Forks Mine is recorded at $4.5 million as of December 31, 2024[239].