Core Viewpoint - Arq, Inc. has published its 2024 Sustainability Report, highlighting its strong financial performance and commitment to environmental, social, and governance (ESG) excellence while advancing its mission of enabling a cleaner planet [1][2]. Financial Performance - In 2024, Arq achieved approximately $109 million in revenue and demonstrated consecutive quarters of positive adjusted EBITDA growth, indicating a successful year financially [2]. Environmental Leadership - The report emphasizes Arq's unique market position to capitalize on opportunities arising from new environmental regulations, particularly the EPA's 2024 PFAS drinking water standards, which require a reduction from 70 parts per trillion to 4 parts per trillion by the end of the decade [4]. - Arq anticipates a potential supply gap of 370 million pounds by 2030, positioning the company for sustained growth in activated carbon solutions [4]. Social Responsibility and People Excellence - The company maintains industry-leading safety performance with zero fatalities across all facilities and has 202 dedicated employees [5]. - Arq has implemented comprehensive wellness and professional development programs to support employee growth and expanded community engagement through volunteer initiatives and educational partnerships [5]. Governance and Transparency - The report reflects Arq's commitment to transparency and stakeholder engagement, providing detailed performance metrics and progress updates across ESG dimensions [6]. - Enhanced Board oversight of ESG initiatives is facilitated through the Nominating and Governance Committee, and the company has achieved a 100% completion rate for comprehensive ethics training among employees [5][6]. Innovation and Technology Leadership - Arq holds over 140 granted patents and patent applications in activated carbon and adjacent technologies, showcasing its strong R&D capabilities [5]. - The company has established a world-class R&D environment with comprehensive product testing across more than 100 potential applications [5]. Strategic Market Position and Outlook - Arq's diversified customer base spans municipal water treatment, industrial air purification, and renewable natural gas applications, validating its strategic approach [5]. - The company is nearing mechanical completion and has commenced initial equipment commissioning at its Red River facility, which is crucial for addressing PFAS contamination challenges [5].

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

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

Core Insights - Company reported a 13% year-over-year increase in revenue, reaching $28.6 million in Q2 2025, driven by higher average sales prices and increased volumes sold [6][9] - Achieved a significant milestone with the commissioning of the first Granular Activated Carbon (GAC) line at Red River, contributing to a positive financial outlook [5][7] - Company has maintained five consecutive quarters of positive Adjusted EBITDA, which reached $3.7 million in Q2 2025, compared to $1.1 million in the prior year [14][39] Financial Highlights - Revenue for Q2 2025 was $28.6 million, up from $25.4 million in Q2 2024, primarily due to a 9% increase in average sales price [6][9] - Gross margin improved to 33.3% in Q2 2025 from 32.2% in the prior year, attributed to better pricing and higher volume, despite start-up costs for the GAC line [11][14] - Total debt increased to $28.7 million as of June 30, 2025, compared to $24.8 million at the end of 2024, mainly due to a rise in the revolving credit facility balance [18] Operational Highlights - The successful commissioning of the GAC line at Red River marks a pivotal point in the company's transition to higher growth and margin businesses [5][7] - The company plans to make a final investment decision for a second GAC line by the end of 2025, targeting a production capacity of 25 million pounds [7][8] - Company is exploring additional growth opportunities in renewable natural gas, having already sold initial GAC products to RNG customers [8] Cost Management - Selling, general, and administrative expenses decreased by 16% to $5.9 million in Q2 2025, down from $7.0 million in the prior year, due to lower payroll and benefits [12] - Research and development costs rose to $2.7 million in Q2 2025, up from $0.9 million in the prior year, primarily due to non-recurring expenses related to GAC facility testing [13] Cash Flow and Capital Expenditures - Cash and restricted cash totaled $15.4 million as of June 30, 2025, down from $22.2 million at the end of 2024, largely due to capital expenditures for the GAC facility [17] - Capital expenditures for the full year 2025 are expected to remain between $8 million and $12 million [16]

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

Core Insights - Arq, Inc. achieved 8 consecutive quarters of double-digit year-over-year average sales price (ASP) growth, with a strong gross margin of 36.4% and positive adjusted EBITDA for four consecutive quarters, indicating a solid financial performance [1][5][14] - The company signed the second largest PAC contract in its history, showcasing the sustainability and value of its foundational business [1][6] - The timeline for the first commercial GAC production at the Red River facility has been updated to the end of Q2 or early Q3 2025 [1][6] - Jay Voncannon has been appointed as Chief Financial Officer, bringing 35 years of finance experience to oversee the company's transformation and growth [1][6] Financial Highlights - Revenue for Q1 2025 was $27.2 million, a 25% increase from $21.7 million in the prior year, driven by higher ASP, positive product mix changes, and increased volumes sold [5][8] - ASP increased by approximately 13% in Q1 2025 compared to the prior year, marking the eighth consecutive quarter of double-digit year-over-year growth [5][8] - Gross margin was 36.4% in Q1 2025, slightly down from 36.9% in the prior year, influenced by improved pricing and customer mix, offset by start-up costs related to the GAC line [10][13] - Net income for Q1 2025 was $0.2 million, a significant improvement from a net loss of $3.4 million in the prior year [13][14] - Adjusted EBITDA for Q1 2025 was $4.1 million, compared to an adjusted EBITDA loss of $0.4 million in the prior year, reflecting four consecutive quarters of positive adjusted EBITDA [14][15] Operational Highlights - All powder activated carbon (PAC) contracts are now net cash producers following the resolution of negative margin agreements as of December 31, 2024 [5] - The company completed mechanical construction of the GAC facility in January 2025, with small non-commercial scale volumes produced, but not yet at the consistency required for commercial production [6][7] - The company maintains a guidance of a 3-6 month ramp-up phase to reach a 25-million-pound nameplate capacity at Red River after the first commercial production [6] Capital Expenditures and Balance Sheet - Capital expenditures for 2025 are forecasted to remain between $8 million and $12 million, with $3.7 million spent in Q1 2025 [16] - As of March 31, 2025, cash and restricted cash totaled $14.8 million, down from $22.2 million as of December 31, 2024, primarily due to capital expenditures and inventory buildup [16] - Total debt, including financing leases, was $26.8 million as of March 31, 2025, an increase from $24.8 million as of December 31, 2024, driven by the revolving credit facility [17]