Advanced Emissions Solutions(ADES) - 2025 Q1 - Quarterly Results

Arq Reports First Quarter 2025 Results Executive Summary & Key Highlights 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 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 - All Powdered Activated Carbon (PAC) contracts are now net cash producers after successfully resolving all negative margin agreements by December 31, 2024[5] - 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] - Appointed Jay Voncannon, with 35 years of financial experience, as Chief Financial Officer[5] - 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] CEO Commentary 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] - 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] - 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] First Quarter 2025 Financial Results Revenue and Cost of Revenue 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] Gross Margin 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] Operating Expenses 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 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] Research and Development Costs 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] Operating Income (Loss) 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 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] Capital Expenditures and Balance Sheet Capital Expenditures 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 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] Total Debt 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] Corporate Information Conference Call and Webcast Information 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] - Webcast access is available through the investor relations section of Arq's website, with dial-in access and replay services also provided[16][17] About Arq 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] - 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] Caution on Forward-Looking Statements 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] - 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][20] - The company undertakes no obligation to update such statements unless legally required[20] Investor Contact 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] Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets 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 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 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 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 - 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] - 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] Reconciliation of Net Income (Loss) to Adjusted EBITDA (Loss) 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]