ARQ

Image source: The Motley Fool. Tuesday, Aug. 11, 2026 at 8:30 a.m. ET Head of Investor Relations - Anthony Nathan Chief Executive Officer - Robert Rasmus Chief Financial Officer - Shimon Steinmetz Operator: Greetings. Welcome to the ARQ Q2 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Anthony Nathan, Head of Investor Relations. Thank you, Anthony. You may begin. Anthony Nathan: Thank you, operator. Good morning, everyone, and thank you for joining us today for our second quarter 2026 earnings results call. With me on the call today are Bob Rasmus, ARQ's Chief Executive Officer; and Shimon Steinmetz, ARQ's Chief Financial Officer. This conference call is being webcast live within the Investors section of our website, and a downloadable version of today's presentation is available there as well. A webcast replay will also be available on our site, and you can contact ARQ's Investor Relations team at [email protected]. Let me remind you that the presentation and remarks made today include forward-looking statements as defined in Section 21E of the Securities Exchange Act. These statements are based on information currently available to us and involve risks and uncertainties that could cause actual future results, performance, and business prospects and opportunities to differ materially from those expressed in or implied by these statements. These risks and uncertainties include, but are not limited to, those factors identified on Slide 2 of today's slide presentation, in our Form 10-Q for the quarter ended June 30, 2026, and other filings with the Securities and Exchange Commission. Except as expressly required by the securities laws, the company undertakes no obligation to update those factors or any forward-looking statements to reflect future events, developments, or changed circumstances or for any other reason. In addition, it is especially important to review the presentation in today's remarks in conjunction with the GAAP references in the financial statements. With that, I would like to turn the call over to Bob. Robert Rasmus: Thank you, Anthony, and thanks to everyone for joining us this morning. We'll cover a lot of ground on today's call, so I'd like to begin by providing an overview of the key points we'll address. First, our second quarter results underscore the underlying strength and improving profitability of our foundational PAC business. Despite Q2 typically being a seasonally softer quarter and being further impacted by the biennial plant turnaround completed in April, we delivered adjusted EBITDA well ahead of the prior year period with gross margin up roughly 520 basis points. This quarter is a clear demonstration of the earnings power of our PAC business. A business unencumbered by the GAC challenges that weighed on the prior year period. Powdered activated carbon remains the foundation of our company, providing both operational continuity and the financial base from which we see multiple avenues for growth, which I'll cover in more detail shortly. Second, I'll walk through the progress of our granular activated carbon optimization review. The PFAS opportunity remains a core focus. And while we continue to refine our view on the cost and timing of GAC development, we're also encouraged by progress with customers on what we're calling our path for PFAS strategy, which we believe could offer a near-term solution to the PFAS compliance challenges that some of our water customers face. Demand for products that help water companies reduce PFAS contamination remains strong, and we're seeing broad interest in solutions that let customers achieve compliance now. We believe that by using our new PAC for PFAS, certain water companies may not need to invest the substantial capital required to use granular activated carbon to comply with the EPA's PFAS standards. I want to stress that this is not a one-size-fits-all solution. It applies to water systems, which are currently close to meeting the PFAS standards. In addition to assisting with near-term PFAS compliance, using PAC for PFAS will allow these water companies to utilize existing equipment potentially without the need for new CapEx associated with GAC systems. And third, we continue to see several ways to strengthen our balance sheet and profitability in the near term. These include the potential monetization of Corbin and our coal waste purification technology, which has potentially multiple valuable end market applications. Finally, my excitement around the appointment of Shimon Steinmetz as Chief Financial Officer. I cannot emphasize the importance of having an experienced, committed contributor to the CFO position enough. Shimon has already brought a number of ideas for making the business more efficient and financially productive, which he'll be expanding on shortly. I am looking forward to partnering with Shimon to create value for our shareholders. Turning to our second quarter results. Revenue was approximately $30 million, up modestly year-over-year with continued volume and pricing strength. We expect the modest shortfall in chemicals revenue to reflect timing rather than demand and believe it will be recovered later in the year. Gross margin was approximately 38.5%, up roughly 520 basis points from the prior year quarter. This reflects the continued improvement in PAC profitability in the absence of GAC start-up costs that weighed on the prior year period. Adjusted EBITDA was approximately $5.8 million, a substantial increase over the $3.7 million we reported in the prior year period and well ahead of the first quarter of 2026. This performance reflects the underlying strength of the PAC business, our continued pricing discipline and the benefit of our cost and operational initiatives delivered without the drag of GAC production. The biennial Red River plant turnaround was completed in April and, importantly, under budget. Today, we are reiterating our full year CapEx guidance of between $8 million and $10 million. Overall, this was a strong and encouraging quarter in what is typically our seasonal low point. Having covered our core markets, let me turn to where we see potential for growth. I know many of you are keen to hear about the status of our strategic optimization review. But before I get to that, I want to spend some time on an exciting PAC growth initiative, one that speaks directly to the PFAS opportunity and which our sales team has labeled PAC for PFAS. PAC for PFAS is a new line of powdered activated carbon products designed to address the PFAS removal market. As a reminder, that market remains strong with mandatory PFAS monitoring and public reporting for U.S. water companies beginning in April 2027. We've been looking for ways to help customers prepare for the broader compliance changes slated for 2029 to 2031. At that time, all water companies will need to bring PFAS levels below the new 4 parts per trillion threshold down from the previous 70 parts per trillion threshold. Adapting to these changes will be expensive for many water companies since GAC application typically requires new equipment at meaningful cost. Given the short runway before monitoring reporting begins in Q2 2027, we set out to offer customers what can be both a permanent or an interim solution that enables compliance at a lower capital cost using existing equipment where possible. That's where PAC for PFAS comes in. Utilizing our best-in-class research and technology capabilities and through our specialized product engineering and manufacturing, we've developed a PAC product capable of removing low levels of PFAS contamination. While the upper limit of contamination it can handle hasn't been confirmed, we believe a meaningful number of water companies, particularly those marginally outside the 4 parts per trillion compliance level, stand to benefit. For these customers, the appeal is twofold. First, they can achieve compliance or work toward compliance without the significant capital cost of installing the vessels, systems and equipment that a GAC solution typically requires. And second, for the many utilities already using PAC for taste and odor control, our product can address PFAS and taste and odor together, avoiding the need to double up on treatment. Initial customer conversations suggest this product could be priced similar to our conventional GAC products. To be clear, this doesn't change our view of bituminous granular activated carbon effectiveness at removing PFAS. If successfully adopted, this product could solve a real near-term problem for customers while adding a higher-value product to our portfolio. Customer trials remain ongoing, so I don't expect a material contribution during the remainder of 2026. But I do see potential for this to meaningfully boost our performance in 2027 and beyond. This product was developed by our technology team as part of our goal to create and sell high-performance specialty products custom-designed to meet our end users' needs. It is another excellent example of our technical and sales teams working with customers as partners, not counterparties. By addressing customer problems in real time, we strengthen those relationships to our mutual benefit. To be clear, exciting as this is, I don't believe it has any material impact on our sales potential into the GAC market. Rather, it's an adjacent solution for specific customers, many of whom may well become GAC customers down the road. I'd now like to provide an update on where we stand on our strategic optimization review and GAC. The strategic optimization review remains ongoing. It has expanded to encompass not just bituminous-based granular activated carbon, but also includes a broader operational assessment that has identified near- and medium-term opportunities to increase furnace time and reduce product costs. We are also focusing on how to best utilize our technology advantages and our relationships. The overall goal is to maximize returns to our shareholders. While our review is not yet fully complete, it has uncovered several ideas about increasing the profitability around our foundational PAC business. The outcomes involve several areas: the PAC for PFAS mentioned previously and multiple operational efficiencies designed to increase plant capacity and lower costs. We believe the opportunity to significantly increase EBITDA is real and attainable. So where does bituminous-based GAC fit into this discussion? The PFAS opportunity remains compelling. We continue to see an important role for GAC in providing solutions for our customers. With that in mind and as a possible interim step while we determine the best path to bring our own bituminous-based GAC product online, I am encouraged by the early progress of PAC for PFAS. I believe this could meaningfully add volumes, price, and margins for our PAC business while still helping remove PFAS from our nation's water. The GAC segment of the review is not fully complete, but we do have enough information to share meaningfully more than we could last quarter. We have received cost estimates from 2 independent engineering consultants to finish the conversion and fix the issues previously discussed. Those estimates have a fairly wide range. Given the uncertainty still built into any estimate at this stage, the currently anticipated range for the project is potentially somewhere between $40 million and $60 million. That number could change depending upon the final design. We are working to narrow it, and we will update you as we do. Here is the point I want to make sure lands clearly because it is the most important part of this update. Sharing that number does not mean we have decided to invest in it, and it does not mean we are walking away from GAC either. Both things are true at once. We still believe GAC is a real differentiated opportunity for this company, one that few others have the assets or the position to pursue. And we are not going to invest this kind of capital until we know it will generate a return that justifies the investment. In the meantime, we are focused entirely on making our existing business more profitable. That means continuing to push our PAC business toward a higher earnings run rate, capturing additional capacity and cost improvements we have identified through the same review process, evaluating the monetization of Corbin, and building out PAC for PFAS is a near-term way to serve that demand while we work through the larger GAC decision. As that base gets stronger, our ability to finance GAC on reasonable terms, including through additional debt rather than equity, improves as well. I have been very clear that we will not invest in GAC at any cost. We think the market has been assuming the worst of both worlds: that we will eventually dilute shareholders to fund this and still not generate an attractive return on it. We wanted to give you a clearer picture of both the cost and our approach because we think it tells a more complete story than the market may currently be pricing in. Let me expand on my earlier comments on Corbin monetization. As of midyear, we've made encouraging progress with our asphalt partner, and our blending component product has performed well in trials. The partner completed a successful crack test at the National Center for Asphalt Technology at Auburn University. This program is transitioning to the next phase of technical validation and third-party laboratories, which will include performance and durability evaluations against strict highway safety standards. This validation work will be conducted through Q4 2026 with feedback beginning in Q1 2027. The path towards commercializing new asphalt road products is highly detailed, so we are very pleased with the progress that has been accomplished. As I mentioned, we're actively evaluating the most efficient way to monetize both the Corbin asset and its associated technologies. As it relates to asphalt, in addition to operating the Corbin facility as a supplier of feedstock, we may ultimately license the technology, sell the plant, or pursue some form of joint venture. Separately, we continue to evaluate unsolicited interest from third parties around an asset sale or joint venture covering a broad range of applications, including silicone wafers, rare earth materials and other specialty products. With that, I'll turn it over to Shimon for a detailed financial review, along with an introduction and his initial thoughts since joining the team. Shimon Steinmetz: Thank you, Bob, and thank you, everyone, for joining us today. I'm very excited to join the ARC team. The company is at a pivotal point in its growth, and I see enormous potential in what lies ahead. In terms of where I see the core focus in the initial months of my tenure, I'm particularly concentrated on driving greater operations and financial efficiency across the business, strengthening our financial planning and analysis, and identifying opportunities to reduce costs and improve profitability, all in support of the growth priorities Bob outlined. Meanwhile, turning to what we reported overnight, Arq delivered another strong set of financial results in the second quarter, with revenues of approximately $30 million, up modestly year-over-year. This continues to be driven largely by improved volumes and pricing. Our gross margin in the quarter was approximately 38.5%, up approximately 520 basis points as compared to the second quarter of 2025, reflecting the ongoing improvement of the PAC performance and the lack of GAC start-up offsets. On the biannual plant turnaround we completed in April, the associated cost of $3.1 million was capitalized. The work was completed under budget, and we do not anticipate the need to repeat it before April 2028. We reported a net loss of approximately $700,000 for the quarter compared with a net loss of $2.4 million in the second quarter of 2025, reflecting the improved operating performance just described. We generated adjusted EBITDA of approximately $5.8 million, up meaningfully from $3.7 million in the prior year period. The improvement reflects the continued strength and improving profitability of our PAC business, our pricing and cost initiatives, and the absence of the GAC production costs and challenges that weighed on prior periods. Our adjusted EBITDA also included add-backs for severance associated with recent leadership changes in noncash equity compensation. Selling, general and administrative expenses totaled $6.8 million, reflecting a $900,000 increase versus the prior year period. This was primarily driven by severance and recruiting costs tied to recent leadership changes. Research and development costs for the second quarter were about $1 million versus $2.7 million in the prior year period. Much of this is attributed to the increased spend in the prior year period related to GAC ramp-up. Overall, our second quarter performance was strong for what is typically a softer shoulder quarter, and it demonstrates the earnings power of the PAC business. We remain focused on enhancing the profitability of the PAC business even further and believe it is now genuinely cash generative on an annual basis. Turning to the balance sheet. We ended the second quarter with total cash of $12.1 million, of which approximately $11.2 million was restricted. The movement versus year-end primarily reflects capital expenditures, the turnaround, and the timing of working capital. Unrestricted cash at the quarter end was lower than in recent quarters, and I want to address that directly. This reflects the timing of our borrowing base and receipts rather than any change in our liquidity position. Our borrowing draw settles midweek. And because the quarter ended on a Tuesday, the timing of payroll, other payables, and slow customer receipts around period end resulted in the unrestricted cash carrying balance at June 30 not reflecting our normal level of available cash. To emphasize and illustrate this point, unrestricted cash increased to $3 million as of July 1. And as of July 31, 2026, it stood at approximately $3.1 million. At June 30, we were not constrained by our credit facility, and there was significant availability remaining under our borrowing base. Total debt as of June 30 stood at $30.9 million, including around $21.4 million related to the MidCap revolving credit facility and around $8.1 million related to the CTV loan secured against the Corbin asset. This reflects an increase of about $2.2 million versus December 2025 and is largely driven by an increase in the amount drawn on the MidCap facility. Today, we are also reiterating our 2026 CapEx forecast of between $8 million and $10 million. Finally, we are reaffirming our full year 2026 guidance. We continue to expect revenues to be between $120 million and $125 million and adjusted EBITDA of between $17 million and $20 million for the full year. We continue to expect to fund our operating and CapEx needs via our existing cash, cash generation, and ongoing cost reduction initiatives. We are also confident that the incremental credit could be added to the balance sheet given our strong asset base and growing profitability. And we are already looking at ways to enhance our existing facility terms to better reflect the state of the business today. We will, of course, provide any updates on this process as and when appropriate. With that, I will turn things back to Bob. Robert Rasmus: Thanks, Shimon. Before we turn to questions, let me leave you with three key takeaways. First, our PAC business continues to deliver, and this quarter demonstrated its earnings power. Q2 is typically a seasonally muted quarter, yet we delivered adjusted EBITDA well ahead of the prior year period and gross margin up roughly 520 basis points year-over-year. With the warm summer now underway, I'm confident in the outlook for the third quarter. Second, realizing value across the business will be a core focus in the months and quarters ahead. This includes not only new products like our PAC for PFAS strategy, but expanding our customer mix, streamlining operational performance, and delivering prudent cost savings wherever possible. I believe we can make the existing business meaningfully more efficient and profitable than it is today. Our goal is to increase adjusted EBITDA up to 50%. With Shimon's arrival, I'm confident we now have the right management team in place to deliver on this strategy. Third, our PFAS strategy remains central to our growth initiatives. I believe our discipline around capital allocation and shareholder value takes priority. My goal is to deliver first-class solutions for our customers and, in doing so, deliver strong returns for our shareholders, myself included as a significant shareholder. The PFAS opportunity remains core to our growth potential. We believe PAC for PFAS can serve as both a permanent and an effective interim solution while we finalize our granular activated carbon plans. In conclusion, our foundational PAC business continues to deliver solid results. In addition to PAC for PFAS, we have multiple avenues for growth that we're actively pursuing. We look forward to updating you on our progress across all elements of this strategy. With that, I'll hand it back to our moderator to open for questions. Operator: [Operator Instructions] Our first question comes from Gerry Sweeney with ROTH Capital Partners LLC. Gerard Sweeney: I'm going to start with the GAC. I know the number you put out there; I think it was $40 million to $60 million on the CapEx. Not saying you aren't going to do anything. But with that backdrop and that number, that number, I believe, falls into the realm of where I think previously, you said you could use debt to pursue this as an opportunity. Is that correct? Robert Rasmus: It does. But I also want to stress that evaluation work is still ongoing and that there are really 2 basic reasons for that range. One, there are 2 different designs in the 25% contingency. And what we're doing is we're honing and sharpening the features on our preferred design that will allow us to further refine the price and narrow the scope in what we're doing. But our key focus, as I mentioned, we're only going to do what's in the best value for our shareholders, what creates maximum shareholder value. And that's continuing to focus on transforming our core pack business. And while bituminous-based GAC is attractive, we're not going to pursue it at any price. Gerard Sweeney: I just want to make sure that number fell into some of the equations that we discussed in the past.` Switching over to PAC, the PAC for PFAS. Is there any uniqueness to the product in terms of manufacturing or additives that allow it to go after the PFAS market? And the follow-up to that would be, yes or no, how much capacity do you have to sell into the PFAS market versus maybe the foundational market? Robert Rasmus: So I'm going to answer your second question first, Gerry. We look at the PAC business as a whole. And what we're doing and what we have done as part of the strategic optimization review is how do we increase the overall capacity? How do we most effectively utilize our furnace time to sell the maximum and manufacture and sell the maximum pack volumes as it relates to that? The PAC for PFAS is really a tailored solution for a specific segment of the market. And that specific target market is substantial, and it's really tailored and targeted to those entities that are close but not yet in compliance that can use the specialty formulated product to comply. The product is potentially meaningful to ARC due to the attractive volumes, pricing, and margins. We would expect and expect the ASP on PAC for PFAS and margins to be substantially greater than our ASP and our margins on our basic PAC business. Gerard Sweeney: How much capacity do you have to sell into the PFAS for PAC market? Robert Rasmus: Yes. Well, in some respects, it's TBD, but the reality is if we are so successful that we run up against our capacity constraints, which we still have significant unused capacity, we would then substitute PAC for PFAS by eliminating some of our lower-margin product production. Gerard Sweeney: And then obviously, great results. How much of a drag in the quarter was the turnaround? And then I'll add to this, I'll jump back in line. But how much of a drag was the turnaround? And obviously, going into Q3, which is the peak season, we should be looking at a very strong quarter. Shimon Steinmetz: Thank you, Gerry. This is Simon. The turnaround costs were $3.1 million of which we capitalized. So you won't even see that impact on the income statement. We capitalized the operational expenses and are going to amortize over the next 2 years, right? The impact of the turnaround that was expensed that will not repeat next quarter is about -- the impact of that is about $300,000 that was expensed. Robert Rasmus: Okay. So I mean, there was some cost, but it wasn't big. I mean, result 38%, we'll take that all day long. And going into Q3 should be seasonally strong as well, especially on the volume front. Shimon Steinmetz: And the other impact is we essentially shut down the plant for 3 to 4 weeks, too. So that does have an effect, too, that isn't directly attributable to the financial statements. Gerard Sweeney: Well, congrats on a great quarter and glad to see the PAC for PFAS moving forward. And some of my channel checks thought it was a very interesting opportunity. So I appreciate it. Operator: Our next question comes from Jason Tilchen with Canaccord Genuity. Jason Tilchen: I start just a bit of a follow-up on the last question. Are there any gating factors in terms of commitments of existing PAC production capacity that historically has been viewed as a positive, but maybe could hinder the pace of shifting some of your production of existing PAC into the PAC for PFAS side of things? Robert Rasmus: No, Jason. We have plenty of capacity that we can use, and we've created additional capacity as a result of the strategic optimization review. So that, combined with the cost reduction initiatives we've undertaken on the operational side, gives us plenty of room to be able to service the PAC for PFAS market. Jason Tilchen: And in terms of that additional capacity that you've identified through this review process, is there a sense of the materiality of the investment required and/or the timing for when that would sort of be available to you? Robert Rasmus: No, excellent question that, yes, it's de minimis capital expenditure that is required for both PAC for PFAS and to realize the efficiencies. That's why Shimon, in his remarks, reaffirmed our guidance on the CapEx for the year in the range of $8 million. Jason Tilchen: And then one other one for me. Trying to tie together some of the comments that were made. I believe you said that there's no GAC production expected in 2027 at this point, and there's a 12-month construction timeline that was put out in the deck as sort of a rough timeline. Is the right interpretation there that you're not going to make any decision before the end of this year as you continue to evaluate the path for PFAS test pilot with clients and customers? Or is it more so that you're just taking a conservative approach to the process and it's possible that a decision could be made sooner and all that? Robert Rasmus: We're taking a conservative approach to the process, and that's why we've guided people, saying, expect no bituminous GAC sales or production in 2027. As I mentioned earlier, we're working on honing and sharpening the design, narrowing down the cost, and then evaluating what process going forward maximizes shareholder value. So is there a potential a decision could be made later this year? Yes. Is there a potential the decision could be pushed into '27? Yes. Operator: Our next question comes from Aaron Spychalla with Craig-Hallum. Aaron Spychalla: Maybe first, just following up on the PAC for PFAS. Can you just kind of talk about -- would these be contract sales, spot sales? And just what are kind of those gating factors or kind of timeline for customer evaluation? And then just as a follow-up, I mean, any kind of investments in R&D that might be needed coming out of that? Robert Rasmus: Yes. No, these would anticipate that these would be contract sales, not necessarily spot sales. So there will be strong, repeatable business as it relates to that. The R&D function has already been performed. The product was really developed from 2 ways: one, from discussions with our sales force, with our customers and potential customers, but also then in consultation with and developed by our technology team, as I've always said, and you've heard me say, we have a best-in-class technology team. So that work has already been done. What we're doing now is doing the testing phase with customers and a target market group there, and we're very encouraged by that initial testing. Aaron Spychalla: And sorry if I missed it, but just any thoughts on timeline for testing and when that might be the larger volumes? Robert Rasmus: Yes. No, the testing is ongoing. We've already completed some tests, and we're working with customers. We expect some sales in the second half of 2026, but then meaningful contribution in terms of volumes, ASP and gross margin in 2027. Aaron Spychalla: All right. And then on the GAC $40 million to $60 million, is that just Phase 1 or in the past, you've kind of talked about maybe looking at Phase 1 and Phase 2? Just trying to understand what broader kind of needs or costs might look like as you pursue maybe a further build-out? Robert Rasmus: That is Phase 1. And again, just for clarity for everyone, Phase 1 is 25 million pounds of bituminous GAC capacity. Some of that expenditure would benefit a potential Stage 2, but it would all be required for Stage 1. Aaron Spychalla: And then just one last question on free cash flow. So with the turnaround behind you now is looking at the business close to the $20 million EBITDA run rate? Can you just frame how you think about free cash flow conversion from EBITDA moving forward? Robert Rasmus: Sure. So the way I look at it is really on a 2-year basis because you have to factor in the biennial plant turnaround. As Shim mentioned in his remarks, we anticipate that continuing to happen every 2 years. So if you look at CapEx, $8 million to $10 million a year, you adjust that up a little bit for some growth and/or inflation. So you say $20 million at the high end, or $22 million or $24 million even at the high end over a 2-year period. And depending upon whether you want to use $20 million of EBITDA or $30 million a year. So you're generating $40 million to $60 million of EBITDA, and you're spending roughly $24 million at the extreme high end, I believe, in terms of CapEx over that period. So you're generating somewhere between $16 million and $26 million of free cash flow. Operator: Our next question comes from Tim Moore with Clear Street. Tim Moore: It was nice to see the adjusted EBITDA margin rebound to the high level without the GAC drag. My first question is directed to Shim. We know you haven't been in the role for a lot of time, and some of this question is probably not fair, but you might have gotten a look inside the company since your hiring announcement in late May. Can you just give us an initial preliminary sense of maybe your first take on commercialization, the growth acceleration potential? Bob's talked about some of the strategies and just kind of what you're seeing with the start of the company. Shimon Steinmetz: Sure. Thank you very much for the question. As you mentioned, I was named 2 months ago, but I've really only been in the seat for about 10 days now. That being said, what excites me most is really the demand and the strength in the existing tech business, as that product still has tremendous demand, as we've seen this quarter with the upsized volume and pricing ability in the quarter. On top of that, this new launch of PAC for PFAS opens additional strength in that core capability with some pricing protection. That's a higher-margin business. So ultimately, as the high-demand PAC business stabilizes, we'll still have pricing power with the PAC for PFAS element. Obviously, I don't have to say the people are very excited. In all my management meetings and discussions and learning where things are and how the business is running, the executive management team is fully engaged. They understand the setback of the GAC plant and are fully aligned, looking for new products, new cost opportunities, et cetera, to get the business back in fighting shape. And that brings me to the last opportunity. There are significant opportunities to take cost out of the business. We have already identified about 5 different categories of non-people-related cost reductions that are timely. We need to negotiate them. We need to sharpen the pencil and find them. But I believe there's significant opportunity to generate cash just through cost removal. Tim Moore: That's really helpful color, and it was really good to hear that inside of here, even though you've only been there less than 2 weeks. I just wanted to follow up on one of Bob's prepared remarks. He mentioned, I think, the goal of a 50% increase in EBITDA. And then he just ran us through the EBITDA potential range, maybe $30 million to $40 million in the free cash flow conversion. I just want to clarify that 50% increase in that $30 million to $40 million EBITDA; that's entirely without GAC. I just want to clarify that. Robert Rasmus: And I want to clarify your question, Tim. One, what I was saying, the $30 million is the goal that we have for next year in terms of cost takeout as well as product expansion. That represents a 50% increase over the high end of the target for this year, the guidance that we've given people, which is about a 45% increase over the prior year as it relates to that. I don't think I mentioned $40 million other than as it relates to over a 2-year basis on that, not a single year. Tim Moore: That's fine. I like targets, and that could be a good target. I just want to clarify that's without GAC, if you could get to $40 million maybe over 2 years? Robert Rasmus: Yes. No, absolutely. Our focus and absolute focus is on creating maximum shareholder value. And our core PAC business has been transformed into a growing business. The key is that our growth is not reliant on bituminous-based GAC, which used to be the case. And so when we talk about these numbers, that gives no value, no earnings potential, no contribution from bituminous-based GAC. Operator: Our last question comes from Peter Gastreich with Water Tower Research. Peter Gastreich: Congratulations on the results. It's great to hear you firming up on the strategy on the PAC for PFAS and some of the other levers. I'd like to start with the industry landscape. So Palagon just announced up to a 25% global increase effective next month. And I know Bob won't want to comment on competitors' actions, but just curious if you'd be able to look at this from a high-level read on the drivers for the industry. So from a market perspective, is this purely market tightness? Is it rising costs? Is there any impact from imported material here? Is it all of the above? Just kind of curious what your lay of the land would be into the end of this year. Robert Rasmus: So a couple of things, as you say, I don't want to comment on the rationale for our competitors. But we've done an excellent job as a company of raising our ASP over the last 12 quarters. We have seen costs increase; hence, our focus on reducing those costs across the board. We've also seen tightness in the marketplace. And as it relates to certain segments of the marketplace, despite the fact that we still haven't made a go or no-go decision as it relates to GAC, that market remains extremely effective. Bituminous-based GAC is still the best available technology for remediating PFAS and letting the water utilities reach the 4 parts per trillion level. And the PAC for PFAS, as mentioned, is both an interim opportunity and potentially a permanent solution for certain people. But that, again, going back and not meaning to digress, I think it relates to market tightness, and I think it relates to overall inflation from a cost indication. Peter Gastreich: My second question is a technical question, kind of following up on the PAC for PFAS. If I understand this correctly, so basically, the PAC for PFAS partially addresses the problem; say, does that mean that it can bring PFAS down to a certain parts per million doesn't bring us quite to the level of compliance, but it gets us partway there. Is that the right way to look at it? Robert Rasmus: No, that's not. What PAC for PFAS does for a certain segment of the market that is close to but not currently in compliance, they can use our PAC for PFAS product to get them into compliance. That has 2 benefits. One, obviously, is compliance in advance of the EPA regulations in terms of permissible PFAS in the water system. The other is they can use existing equipment and don't have to do the CapEx, which sometimes can be substantial, to put in GAC systems to be able to meet those standards. That's for a certain segment of the marketplace. There is another very large segment of the marketplace that could use PAC for PFAS. But at some point, the quantities needed for that segment to comply make it more cost-effective to utilize the GAC. What we're focusing on is that market and those customers and potential customers that are close but not yet in compliance, where PAC for PFAS is an economically attractive alternative to using bituminous-based GAC. Peter Gastreich: And are there competitors positioned to supply this as well? Robert Rasmus: We think that we are fairly unique in that. Peter Gastreich: So just one more question here, 2 more questions just for clarification. So for the GAC CapEx range, just to be clear, is it $40 million to $50 million, 5-0 or $40 million to $60 million, 6-0? Robert Rasmus: $40 million to $60 million, 6-0, and that's based on the 2 designs. But as I say, we have a preferred design, and we're working to finalize that and sharpen the pencil on it as it relates to that design. Peter Gastreich: And for that design, in that range, is this a single capacity in mind? Or is there a capacity range within that figure as well? Robert Rasmus: What we're looking at is 25 million pounds of GAC capacity. Some of that expenditure, as I mentioned earlier, will go to benefit a potential second line if and when we decide to do that. But all of that expense, whether it's 40 million, 50 million or 60 million, would be required to reach that 25 million pound capacity. Operator: We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Bob Rasmus for closing comments. Robert Rasmus: Thanks, Dylan. I know granular activated carbon has been a key focus for investors and rightly sold, but I think the market may be looking at us the wrong way. When we first showed a path to $30 million of EBITDA with granular activated carbon as the driver, our valuation reflected roughly 10x that forecast. We are now nearly 2/3 of the way there, yet we are trading at a multiple less than 5x this year's guidance and approximately 3x our $30 million goal. We acknowledge the varying growth trajectories of each business, but we believe there is a mismatch, one driven simply by the fact that we are delivering that EBITDA through a different product mix. We have transformed ARC so that our growth is not reliant on granular activated carbon. Our focus has been on and will be on optimizing our foundational PAC business, and our guidance, performance and expectations for 2026 reflect substantial improvements in that core business, both in relative and absolute terms. And based on our strategic optimization review, we believe we can make the PAC business meaningfully more efficient and profitable than it is today and more profitable than we expect for 2026. That improvement will come through new products- that's products plural, not just PAC for PFAS- as well as expanding our customer mix, streamlining operations, increasing effective furnace capacity, and finding cost savings wherever possible. As mentioned earlier, our goal is to increase adjusted EBITDA in our core PAC business by up to 50% while still retaining the granular activated carbon optionality. I want to thank everyone for their time today and their continued interest in ARC, and we look forward to providing the market further updates. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Before you buy stock in Arq, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Arq wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $421,511!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,381,960!* That performance is why people listen. With a track record of beating the S&P 500 by nearly 5x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of August 17, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Arq (ARQ) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Arq, Inc. (ARQ) reported break-even quarterly earnings per share versus the Zacks Consensus Estimate of $0.01. This compares to a loss of $0.01 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -100.00%. A quarter ago, it was expected that this company would post a loss of $0.02 per share when it actually produced a loss of $0.02, delivering no surprise. Over the last four quarters, the company has not been able to surpass consensus EPS estimates. Arq, Inc., which belongs to the Zacks Chemical - Specialty industry, posted revenues of $29.88 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 2.59%. This compares to year-ago revenues of $28.58 million. The company has topped consensus revenue estimates two times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Arq, Inc. shares have lost about 36.4% since the beginning of the year versus the S&P 500's gain of 13.3%. While Arq, Inc. has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Arq, Inc. was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.06 on $35.79 million in revenues for the coming quarter and $0.05 on $124.58 million in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Chemical - Specialty is currently in the top 36% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Flexible Solutions International Inc. (FSI), another stock in the same industry, has yet to report results for the quarter ended June 2026. This company is expected to post quarterly earnings of $0.01 per share in its upcoming report, which represents a year-over-year change of -93.3%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Flexible Solutions International Inc.'s revenues are expected to be $11.72 million, up 3.1% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Arq, Inc. (ARQ) : Free Stock Analysis Report Flexible Solutions International Inc. (FSI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Second quarter results demonstrated the underlying earnings power of the foundational Powdered Activated Carbon (PAC) business, achieving a 520 basis point gross margin expansion despite seasonal softness and a biennial plant turnaround. Management attributed the year-over-year EBITDA growth to continued pricing discipline, volume strength, and the absence of Granular Activated Carbon (GAC) startup costs that hindered prior periods. The company introduced a 'PAC for PFAS' strategy, offering a specialized product for water utilities that are marginally outside compliance levels, allowing them to meet EPA standards without significant capital investment in GAC vessels. A strategic optimization review has expanded beyond GAC to identify near-term operational efficiencies aimed at increasing furnace time and reducing product costs across the entire portfolio. Management is actively evaluating the monetization of the Corbin asset and its coal waste purification technology through potential licensing, joint ventures, or asset sales to strengthen the balance sheet. The appointment of Shimon Steinmetz as CFO is intended to drive greater financial planning, analysis, and non-people-related cost reductions to improve overall profitability. Management reaffirmed full-year 2026 guidance for revenue between $120 million and $125 million and adjusted EBITDA between $17 million and $20 million. The company set a strategic goal to increase adjusted EBITDA in the core PAC business by up to 50% through new product launches, customer mix expansion, and operational streamlining. A potential investment of $40 million to $60 million is estimated to complete the GAC conversion, though management emphasized they will only proceed if the return justifies the capital cost. PAC for PFAS is expected to provide a meaningful contribution to volumes, pricing, and margins starting in 2027, serving as both an interim and permanent solution for specific water utility segments. The company expects to fund 2026 operating and capital needs through existing cash and cash generation, with the potential to add incremental credit as the asset base and profitability grow. The biennial Red River plant turnaround was completed in April under its $3.1 million budget; these costs were capitalized and will be amortized over the next two years. Unrestricted cash balances at quarter-end were lower due to the timing of the borrowing base settlement and payroll, but management noted cash increased to $3.1 million by July 31, 2026. Management explicitly stated they are taking a conservative approach to GAC, guiding for no bituminous GAC sales or production in 2027 regardless of the final investment decision timeline. The Corbin asset's asphalt blending component successfully completed crack testing at Auburn University, moving into a technical validation phase through Q4 2026. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management confirmed that the current cost estimate range for GAC falls within a level that could potentially be pursued using debt rather than equity. They emphasized that sharing the cost range does not constitute a final decision to invest, as they are still refining the preferred design and contingency factors. The product is a tailored solution for customers close to compliance; management expects its average selling price and margins to be substantially higher than basic PAC. ARQ has significant unused capacity to service this market and can substitute lower-margin production if capacity constraints are reached. Management views free cash flow on a two-year cycle to account for the biennial turnaround, estimating $16 million to $26 million in free cash flow over such a period. The Q2 turnaround resulted in approximately $300,000 in expensed costs and a 3-to-4 week plant shutdown, which will not recur in the seasonally stronger Q3. Management noted general market tightness and inflationary pressures are driving industry-wide price increases, such as those announced by competitors. They believe ARQ is uniquely positioned with the PAC for PFAS product to offer an economically attractive alternative to GAC for specific customer segments.

This article first appeared on GuruFocus. Revenue: Approximately $30 million, up modestly year-over-year. Gross Margin: Approximately 38.5%, up roughly 520 basis points from the prior year quarter. Net Loss: Approximately $700,000, compared with a net loss of $2.4 million in Q2 2025. Adjusted EBITDA: Approximately $5.8 million, up from $3.7 million in the prior year period. SG&A Expenses: Totaled $6.8 million, a $900,000 increase versus the prior year period, primarily driven by severance and recruiting costs. R&D Costs: Approximately $1 million, down from $2.7 million in the prior year period. Cash Position: Total cash of $12.1 million, with approximately $11.2 million restricted. Total Debt: $30.9 million, including $21.4 million related to the mid-cap revolving credit facility and $8.1 million related to the CTV loan. Full Year 2026 Guidance: Revenues expected between $120 million and $125 million; adjusted EBITDA between $17 million and $20 million. CapEx Guidance: Reiterated at between $8 million and $10 million for 2026. Warning! GuruFocus has detected 4 Warning Signs with ARQ. Is ARQ fairly valued? Test your thesis with our free DCF calculator. Release Date: August 11, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Adjusted EBITDA increased significantly to $5.8 million in Q2 2026, up from $3.7 million in the prior year period, despite a seasonally softer quarter. Gross margin improved by approximately 520 basis points year-over-year, reaching 38.5%, driven by the strong performance of the PAC business. The company is developing a new 'PAC for PFAS' product line, which could provide a near-term, lower-cost solution for water companies to meet PFAS compliance standards, potentially boosting volumes, pricing, and margins. The strategic optimization review has identified multiple operational efficiencies to increase plant capacity and reduce costs, with minimal capital expenditure required. The company is actively evaluating the monetization of its Corbin asset and coal waste purification technology, which could provide additional value through asset sales, licensing, or joint ventures. The biennial Red River plant turnaround was completed under budget, and the company reaffirmed its full-year 2026 guidance for revenue and adjusted EBITDA. The estimated cost to complete the bituminous-based GAC conversion is between $40 million and $60 million, a significant capital investment that has not yet been approved. The company expects no bituminous GAC production or sales in 2027, delaying potential revenue from this high-value product. Unrestricted cash at quarter-end was lower than in recent quarters, reflecting timing issues with the borrowing base and receipts, though the company notes this is not a liquidity concern. Selling, general, and administrative expenses increased by $900,000 year-over-year, primarily due to severance and recruiting costs tied to recent leadership changes. The PAC for PFAS product is still in the testing phase, with no material contribution expected in 2026, and the upper limit of contamination it can handle has not been confirmed. The company's net loss, while improved, was still $700,000 for the quarter, indicating ongoing profitability challenges. Q: What is the estimated capital expenditure range for completing the bituminous-based granular activated carbon (GAC) project, and does this signal a final investment decision?A: Bob Rasmus, CEO, provided a crucial update, stating that cost estimates from two independent engineering consultants put the project cost between $40 million and $60 million for the 25-million-pound phase one capacity. He emphasized that sharing this number does not mean the company has decided to invest, nor does it mean they are walking away from GAC. The company is taking a disciplined approach and will only proceed if the investment generates a return that justifies the capital, with a decision possible later this year or in 2027. Q: Can you elaborate on the new "PAC for PFAS" product strategy and its potential impact on the market?A: Bob Rasmus, CEO, explained that "PAC for PFAS" is a new line of powdered activated carbon designed to help water companies achieve EPA PFAS compliance (4 parts per trillion) without the substantial capital expenditure required for GAC systems. It targets customers who are close to compliance and can use existing equipment. While trials are ongoing and material contribution isn't expected until 2027, the product is expected to command substantially higher ASPs and margins than the foundational PAC business, serving as both an interim and permanent solution for a specific market segment. Q: How did the company perform in Q2 2026, and what were the key financial drivers?A: Shimon Steinmetz, CFO, reported revenue of approximately $30 million, up modestly year-over-year, with gross margin expanding roughly 520 basis points to 38.5%. Adjusted EBITDA increased substantially to $5.8 million from $3.7 million in the prior year period. This improvement was driven by the continued strength and profitability of the PAC business, pricing discipline, and the absence of GAC start-up costs that weighed on the prior year. The company reaffirmed its full-year 2026 guidance for revenue of $120-$125 million and adjusted EBITDA of $17-$20 million. Q: What is the company's target for increasing profitability in the core PAC business, and is this reliant on GAC?A: Bob Rasmus, CEO, stated that the goal is to increase adjusted EBITDA in the core PAC business by up to 50%, targeting $30 million, which is not reliant on bituminous-based GAC. This growth will come from new products like PAC for PFAS, expanding customer mix, streamlining operations, increasing effective furnace capacity, and finding cost savings. He highlighted a market mismatch where the company is trading at a lower multiple despite being nearly two-thirds of the way to its $30 million EBITDA goal, driven by a different product mix than originally forecast. Q: Can you provide an update on the monetization of the Corbin asset and its associated technologies?A: Bob Rasmus, CEO, noted encouraging progress with the asphalt partner, as a successful track test was completed at the National Center for Asphalt Technology. The program is transitioning to third-party lab validation through Q4 2026. The company is actively evaluating the most efficient way to monetize the asset, which could include licensing the technology, selling the plant, or forming a joint venture. Additionally, they are evaluating unsolicited third-party interest for an asset sale or JV covering applications like silicone wipers and rare earth materials. Q: What was the financial impact of the biennial plant turnaround completed in April?A: Shimon Steinmetz, CFO, clarified that the turnaround cost $3.1 million, which was capitalized and will be amortized over the next two years. The expensed impact that will not repeat next quarter was only about $300,000. Bob Rasmus added that the plant was shut down for three to four weeks, which had an operational impact not directly reflected in the financial statements. The turnaround was completed under budget, and the next one is not anticipated until April 2028. Q: How should investors think about free cash flow conversion given the new EBITDA targets?A: Bob Rasmus, CEO, explained that on a two-year basis, factoring in the biennial turnaround, the company expects to generate $40-$60 million of EBITDA while spending roughly $24 million on CapEx at the high end. This implies free cash flow generation of between $16 million and $26 million over that period. This calculation supports the company's view that it can fund its operating and CapEx needs via existing cash generation and potentially add incremental credit to the balance sheet. Q: What are the initial thoughts from the new CFO on the company's opportunities and cost structure?A: Shimon Steinmetz, CFO, shared that he is focused on driving operational and financial efficiency. He highlighted the strength and demand in the existing PAC business, which has pricing power, and the new PAC for PFAS product as a higher-margin opportunity. He also identified five categories of non-people-related cost reductions that present a significant opportunity to generate cash, emphasizing the executive team's alignment on finding new products and cost opportunities to get the business back in "fighting shape." Q: Is the $40-$60 million GAC CapEx estimate for phase one only, and what does it include?A: Bob Rasmus, CEO, confirmed that the estimate is for phase one, which is 25 million pounds of bituminous GAC capacity. He noted that while some of the expenditure would benefit a potential second phase, all of the $40-$60 million would be required to reach the 25-million-pound capacity. The range reflects two different designs with a 25% contingency, and the company is working to narrow the range by finalizing its preferred design. Q: How does the company view the competitive landscape for PAC for PFAS, and what is the timeline for commercialization?A: Bob Rasmus, CEO, stated that the company believes it is "fairly unique" in its ability to supply this product. The R&D work is complete, and the company is in the testing phase with customers. They expect some sales in the second half of 2026, with a meaningful contribution to volumes, ASP, and gross margin expected in 2027. The product is designed for a specific segment of the market that is close to compliance, offering an economically attractive alternative to GAC. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Generated revenue of approximately $30 million, up 5% Reported Adjusted EBITDA(1) of approximately $5.8 million, up 59% on prior year period 9th consecutive quarter of positive Adjusted EBITDA, driven by foundational PAC business Gross margin improved to 38.5%, an increase of 520 bps over prior year Reaffirmed full-year 2026 guidance of $120-125 million revenue and $17-20 million Adjusted EBITDA GREENWOOD VILLAGE, Colo., Aug. 10, 2026 (GLOBE NEWSWIRE) -- Arq, Inc. (NASDAQ: ARQ) (the "Company" or "Arq"), a producer of activated carbon and other environmentally efficient carbon products for use in purification and sustainable materials, today announced its financial and operating results for the quarter ended June 30, 2026. Financial Highlights Generated revenue of $29.9 million in Q2 2026 versus $28.6 million in Q2 2025, driven by increased pricing and volumes Gross margin of 38.5% in Q2 2026, up significantly versus 33.3% in Q2 2025 Net loss of $0.7 million in Q2 2026 vs. Net loss of $2.4 million in Q2 2025 (as adjusted) Adjusted EBITDA(1) of $5.8 million in Q2 2026 vs. $3.7 million in Q2 2025, driven by continued strength and improving profitability of core PAC business, and no drag from previous period granular activated carbon ("GAC") production expense Exited Q2 2026 with cash and restricted cash of $12.1 million, including $11.2 million in restricted cash, with quarter-end unrestricted cash reflecting the timing of borrowings and receipts. Unrestricted cash improved to $3.0 million as of July 1, 2026, and as of July 31, 2026, stood at approximately $3.1 million Reaffirmed full year 2026 guidance of revenue between $120 - $125 million and Adjusted EBITDA of $17 - $20 million (1) Adjusted EBITDA is a non-GAAP financial measure. Please refer to the section titled “Note on Non-GAAP Financial Measures” included at the end of this press release for the definitions of non-GAAP financial measures and reconciliations to GAAP measures included in this press release. Recent Business & Other Highlights Biennial Red River Plant turnaround ("TAR") completed in April 2026, materially under budget Reiterated full-year 2026 capex guidance of $8 to $10 million Advanced PAC for PFAS™, a highly engineered powdered activated carbon ("PAC") product that can help utilities address PFAS contamination while potentially eliminating the capital cost of new GAC equipment. Customer testing ongoing and potential for material volume, pricing, and margin contribution from 2027 onward Strategic optimization review ongoing, including a broader operational assessment that has identified near-term opportunities to increase furnace throughput, reduce unit costs, and further refine GAC expansion plan Continued progress towards monetizing the Corbin Facility and related technologies; paving tests for Arq's asphalt product with a leading U.S. asphalt company remain ongoing, and recent trials suggest that the inclusion of Corbin Wetcake as an additive has positive impacts on multiple performance metrics Appointed seasoned finance executive Shimon Steinmetz as Chief Financial Officer in May 2026, started July 2026 Management Commentary "The second quarter demonstrated the earning power of our foundational PAC business," said Bob Rasmus, CEO of Arq. "Even in what is typically our seasonally softer quarter, and one that included our biennial Red River Plant turnaround, we delivered Adjusted EBITDA well ahead of the prior-year period, driven by continued pricing discipline and the underlying strength of our core operations. The turnaround was completed under budget and, importantly, without disrupting our ability to serve customers. With a warm start to the summer and favorable seasonal demand dynamics, we remain confident in the outlook for our PAC business through the remainder of the year." Mr. Rasmus continued, "Our strategic optimization review remains ongoing. I have been clear that we will remain highly disciplined on any further capital spending. The PFAS opportunity remains compelling, and we continue to see an important role for Arq in providing solutions for our customers. With that in mind, as a possible interim step while we determine the best path to bringing our own GAC line online, I am encouraged by the early progress of our PAC for PFAS™ strategy, which I believe could meaningfully add to the volumes, pricing, and margins of our PAC business, while helping remove PFAS from our nation's water." Mr. Rasmus concluded, "This quarter again demonstrated the profitability and resilience of our core PAC business. Taken together with the encouraging progress in our PFAS-related solutions, we have multiple avenues open to us to create meaningful shareholder value. As a Board and management team that owns a significant stake in the company, we remain closely aligned with our shareholders and confident in the opportunities ahead for further growth.” Second Quarter 2026 Results Revenue totaled $29.9 million for the second quarter of 2026, reflecting an increase of 5% compared to $28.6 million in the prior year period. The increase was driven predominantly by increased pricing and volumes. Cost of revenue totaled $18.4 million for the second quarter of 2026, a decrease of approximately 4% compared to $19.1 million in the prior year period, with the biennial Red River Plant turnaround completed during the quarter. The Company capitalized approximately $3.1 million related to these planned major maintenance activities. Gross margin totaled 38.5% for the second quarter of 2026, up significantly from 33.3% in the prior year period. Selling, general and administrative expenses totaled $6.8 million, compared to $5.9 million in the prior year period. This increase of approximately $0.9 million was primarily driven by severance and recruiting costs associated with recent leadership changes. Research and development costs totaled $1.0 million for the second quarter of 2026, a decrease of 64% compared to $2.7 million in the prior year period. This was primarily driven by certain expenses relating to the GAC ramp-up that were incurred during the second quarter of 2025 and that were not repeated during the second quarter of 2026. Operating loss was $0.1 million for the second quarter of 2026, compared to operating loss of $1.8 million in the prior year period. Net loss was $0.7 million in the second quarter of 2026, or $0.02 per diluted share, compared to net loss of $2.4 million or $0.06 per diluted share in the prior year period, as adjusted. The reduction in both cases was driven by the factors above. Adjusted EBITDA was $5.8 million for the second quarter of 2026, compared to Adjusted EBITDA of $3.7 million in the prior year period. The increase was primarily driven by the continued strength and improving profitability of the core PAC business, including enhanced pricing and cost discipline, current period charges for severance associated with recent leadership changes and non-cash equity compensation, and the absence of negative offsets from GAC production. See the section below titled "Note on Non-GAAP Financial Measures" regarding the use of the non-GAAP financial measure Adjusted EBITDA and a reconciliation to the most comparable GAAP financial measure. Strategic Optimization Review Update Arq's strategic optimization review remains ongoing as the Company works to increase profitability and maximize the value of its asset base. The review has extended beyond the Red River Plant GAC facility to a broader operational assessment of the existing business, focused on maximizing furnace throughput and reducing unit costs, work that has already identified meaningful near-term opportunities to increase capacity and profitability. The GAC component of the review is not fully complete but the Company has received cost estimates from two independent engineering consultants to finish the conversion and fix the issues previously discussed. Those estimates still include a wide range of contingencies that are subject to ongoing revision, with a construction and commissioning timeframe of around 12 months. The Company is continuing to evaluate and refine the GAC optimization process to ensure that the project will generate targeted returns. GAC market fundamentals remain favorable ahead of the U.S. Environmental Protection Agency's April 2027 PFAS monitoring deadline, when water companies with PFAS contamination above the new 4 parts per trillion threshold must begin reporting PFAS numbers publicly. Against that backdrop, the Company is advancing a new high-value strategy "PAC for PFAS™”: a highly engineered PAC product capable of removing PFAS contaminants in certain situations. The Company believes that this new product can support compliance for utilities marginally outside the threshold without the capital cost of new GAC equipment, and address PFAS and taste and odor at once for those already using PAC. Customer testing is ongoing, but the Company believes that PAC for PFAS™ could offer an attractive interim solution for customers and for Arq, which could lead to material near-term growth in volume and pricing from 2027 onward, ahead of any future GAC products. Arq also remains in discussions with multiple parties to monetize its Corbin Facility and its related technologies, which represent additional optionality and a potential funding source. In asphalt, paving tests with a leading U.S. asphalt company continue, and recent trials at the NCAT Test Track, which simulates multiple years of wear in a fraction of the time, indicate that the inclusion of Corbin Wetcake as an additive has positive impacts on multiple performance metrics. Capex and Balance Sheet Capital expenditures totaled $1.2 million for the second quarter of 2026, compared to $1.9 million in the prior year period. The decrease was driven by increased spend on completion and commissioning of the GAC facility during the second quarter of 2025. Cash as of June 30, 2026, totaled $12.1 million, including $11.2 million of restricted cash, compared to $15.0 million as of December 31, 2025. Unrestricted cash at quarter-end reflected the timing of borrowings and receipts around period-end. Unrestricted cash improved to $3.0 million as of the end of the first week of July, and as of July 31, 2026, stood at approximately $3.1 million. Total debt, inclusive of financing leases, as of June 30, 2026, totaled $30.7 million compared to $28.5 million as of December 31, 2025. The increase was driven primarily by increased borrowings on the Company’s revolving credit facility with MidCap Financial, which totaled $21.4 million as of June 30, 2026. Conference Call and Webcast Information Arq will host a conference call to discuss the Company's financial performance on Tuesday, August 11, 2026 at 8:30 a.m. Eastern Time. The conference call webcast information will be available via the Investor Resources section of Arq's website at www.arq.com. Interested parties may participate in the conference call by registering at https://www.webcast-eqs.com/Arq_Q2_2026. Alternatively, the live conference call may be accessed by dialing (877) 407-0890 or +1 (201) 389-0918 and referencing Arq. A supplemental investor presentation will be available on the Company's Investor Resources section of the website prior to the start of the conference call. A replay of the event will be made available shortly after the event and accessible via the same webcast link referenced above. Alternatively, the replay may be accessed by dialing (877) 660-6853 or (201) 612-7415 and entering Access ID 13761157. The dial-in replay will expire after August 18, 2026. About Arq Arq (NASDAQ: ARQ) is a diversified, environmental technology company with products that enable a cleaner and safer planet while actively reducing our environmental impact. As the only vertically integrated producer of activated carbon products in North America, we deliver a reliable domestic supply of innovative, hard-to-source, high-demand products. We apply our extensive expertise to develop groundbreaking solutions to remove harmful chemicals and pollutants from water, land and air. Learn more at: www.arq.com. Caution on Forward-Looking Statements This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, which provides a “safe harbor” for such statements in certain circumstances. When used in this press release, the words “can,” “will,” "may," “intends,” “expects,” "continuing," “believes,” similar expressions and any other statements that are not historical facts are intended to identify those assertions as forward-looking statements. All statements that address activities, events or developments that the Company intends, expects or believes may occur in the future are forward-looking statements. These forward-looking statements include, but are not limited to, statements or expectations regarding: the future of our GAC Facility and Corbin Facility and the anticipated timing, results, and conclusions of our overall business optimization review and the actions we may take upon the completion of such review, including efforts to maximize throughput and optimize unit costs; the anticipated commercial success and efficacy of our new product applications, including PAC for PFAS™; the anticipated benefits of transitioning away from using Corbin Wetcake to a bituminous proven performance coal as a feedstock for our GAC products in the future; financial guidance for fiscal year 2026; the anticipated effects from fluctuations in the pricing of our AC products, including through expansion into higher-value end markets; expected supply and demand for our AC products and services, including our GAC and PAC for PFAS™ products; the seasonal impact on our customers and their demand for our products; the future profitability and sustainability of our PAC business; our ability to fund our business over the next twelve months; our ability to monetize our Corbin Facility and access new markets for our feedstocks and other products, including renewable natural gas, asphalt, purified coal, rare earth minerals and synthetic graphite markets; any future plant development projects, that may be necessary to remediate design flaws in our GAC Facility, and our ability to finance any such projects; the effectiveness of our technologies and products and the benefits they provide; probability of any loss occurring with respect to certain guarantees made by Tinuum Group; the timing and amounts of or changes in future revenue, funding for our business and projects, margins, expenses, earnings, tax rates, cash flows, royalty payment obligations, working capital, liquidity and other financial and accounting measures; the performance of obligations secured by our surety bonds; the amount, use and timing of future capital expenditures needed to fund our business plan and total anticipated capital expenditures for the current fiscal year; the adoption and scope of regulations to control certain chemicals in drinking water and other environmental concerns and the impact of such regulations on our customers' and our businesses, including any increase or decrease in demand and sales of our AC products resulting from such regulations; our near-term priorities and objectives and our long-term outlook regarding the growth of our business; and the impact of prices of competing power generation sources such as natural gas and renewable energy on demand for our products.. These forward-looking statements included in this press release involve risks and uncertainties. Actual events or results could differ materially from those discussed in the forward-looking statements as a result of various factors including, but not limited to, the timing and scope of new and pending regulations and any legal challenges to or extensions of compliance dates of them; the U.S. government’s failure to promulgate new regulations or enforce existing regulations that benefit our business; changes in laws and regulations, accounting rules, prices, economic conditions and market demand; availability, cost of and demand for alternative energy sources and other technologies and their impact on coal-fired power generation in the U.S.; technical, start up and operational difficulties; competition within the industries in which the Company operates; risks associated with our debt financing; our inability to effectively and efficiently commercialize new products, including our GAC products; our inability to effectively identify solutions to the design flaws in GAC Facility at our Red River Plant or execute on any remedial measures or modifications thereto; disruptions at any of our facilities, including by natural disasters or extreme weather; risks related to our information technology systems, including the risk of cyberattacks on our networks; failure to protect our intellectual property from infringement or claims that we have infringed on the intellectual property of others; our inability to obtain future financing or financing on terms that are favorable to us; our inability to ramp up our operations to effectively address recent and expected growth in our business; loss of key personnel; ongoing effects of the inflation and macroeconomic uncertainty, including from increased domestic and international tariffs and armed conflicts around the world, and such uncertainty's effect on market demand and input costs; availability of materials and equipment for our business; intellectual property infringement claims from third parties; the impacts of any current or future write-downs or write-offs, restructuring, impairment or other charges; our failure to realize the anticipated benefits of acquisitions, joint ventures, and divestitures we may engage in; pending litigation; factors relating to our business strategy, goals and expectations, including our ability to execute on our GAC business plan; our ability to maintain relationships with customers, suppliers and others with whom the Company does business and meet supply requirements; our results of operations and business generally; risks related to diverting management's attention from our ongoing business operations; costs related to the ongoing manufacturing of our products, including costs necessary to resume GAC production; opportunities for additional sales of our AC products and end-market diversification, including for our Corbin Wetcake; the rate of coal-fired power generation in the U.S.; the timing and cost of any future capital expenditures and the resultant impact to our liquidity and cash flows; and the other risk factors described in our filings with the SEC, including those described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2025. You are cautioned not to place undue reliance on the forward-looking statements and to consult filings we have made and will make with the SEC for additional discussion concerning risks and uncertainties that may apply to our business and the ownership of our securities. In addition to causing our actual results to differ, the factors listed above may cause our intentions to change from those statements of intention set forth in this press release. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions, or otherwise. The forward-looking statements speak only as to the date of this press release, and we disclaim any duty to update such statements unless required by law. Source: Arq, Inc. Investor Contact:Anthony Nathan, ArqMarc Silverberg, [email protected] (1) Adjusted to reflect a retrospective change in accounting method for planned major maintenance costs. (1) Adjusted to reflect a retrospective change in accounting method for planned major maintenance costs. (1) Adjusted to reflect a retrospective change in accounting method for planned major maintenance costs. Note on Non-GAAP Financial Measures To supplement our financial information presented in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP"), we provide certain supplemental financial measures, including EBITDA and Adjusted EBITDA, which are measurements that are not calculated in accordance with U.S. GAAP. EBITDA is defined as earnings before interest, taxes, depreciation and amortization, and Adjusted EBITDA is defined as EBITDA reduced by non-cash gains, increased by share-based compensation expense, executive transition and severance (2), GAC Facility pre-production feedstock, other non-cash losses and non-recurring costs and fees. EBITDA and Adjusted EBITDA should be considered in addition to, and not as a substitute for, net loss in accordance with U.S. GAAP as a measure of performance. See below for a reconciliation from net loss, the nearest U.S. GAAP financial measure, to EBITDA and Adjusted EBITDA. We believe that the EBITDA and Adjusted EBITDA measures are less susceptible to variances that affect our operating performance. We include these non-GAAP measures because management uses them in the evaluation of our operating performance, and believe they help to facilitate comparison of operating results between periods. We believe the non-GAAP measures provide useful information to both management and users of the financial statements by excluding certain expenses, gains, and losses which can vary widely across different industries or among companies within the same industry and may not be indicative of core operating results and business outlook. EBITDA and Adjusted EBITDA: The following table reconciles net loss, our most directly comparable as-reported financial measure calculated in accordance with U.S. GAAP, to EBITDA and Adjusted EBITDA. Arq, Inc. and SubsidiariesReconciliation of Net Loss to Adjusted EBITDA(Unaudited) (1) Adjusted to reflect a retrospective change in accounting method for planned major maintenance costs.(2) Represents expenses related to executive severance and separation, as well as legal fees and recruiting costs associated with the CFO, COO and CAO transitions. In addition to these amounts, we also incurred approximately $0.2 million of share-based compensation associated with executive transition and severance during the three months ended June 30, 2026, which is included in the Share-based compensation adjustment above.(3) Represents expenses related to feedstock utilized in pre-production testing of our GAC Facility during the three months ended June 30, 2025 included within "Research and development" expense in the Condensed Consolidated Statements of Operations.

Image source: The Motley Fool. Thursday, May 7, 2026 at 8:30 a.m. ET Chief Executive Officer — Robert Rasmus Chief Accounting Officer — Stacia Hansen Head of Investor Relations — Anthony Nathan Need a quote from a Motley Fool analyst? Email [email protected] Operator: Greetings, and welcome to the Arq's Q1 2026 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. It is now my pleasure to introduce Anthony Nathan, Head of Investor Relations. Thank you. You may begin. Anthony Nathan: Thank you, operator. Good morning, everyone, and thank you for joining us today for our first quarter 2026 earnings results call. With me on the call today are Bob Rasmus, Arq's Chief Executive Officer; and Stacia Hansen, Arq's Chief Accounting Officer. This conference call is being webcasted live within the Investors section of our website, and a downloadable version of today's presentation is available there as well. A webcast replay will also be available on our site, and you can contact Arq's Investor Relations team at [email protected]. Let me remind you that the presentation and remarks made today include forward-looking statements as defined in Section 21E of the Securities Exchange Act. These statements are based on information currently available to us and involve risks and uncertainties that could cause actual future results, performance and business prospects and opportunities to differ materially from those expressed in or implied by these statements. These risks and uncertainties include, but are not limited to, those factors identified on Slide 2 of today's slide presentation, in our Form 10-K for the year ended December 31, 2025, and other filings with the Securities and Exchange Commission. Except as expressly required by the securities laws, the company undertakes no obligation to update those factors or any forward-looking statements to reflect future events, developments or changed circumstances or for any other reason. In addition, it is especially important to review the presentation and today's remarks in conjunction with the GAAP references in the financial statements. With that, I would like to turn the call over to Bob. Robert Rasmus: Thank you, Anthony, and thanks to everyone for joining us this morning. We will cover a lot of ground on today's call, so I'd like to begin by providing an overview of the key points we'll address. First, our first quarter performance establishes a solid foundation for the year ahead. Our foundational PAC business continues to perform well and the relative absence of GAC production costs aside from certain trailing costs, and I'll give you more on that in a moment, contributed to improved profitability relative to recent quarters. Based on our first quarter and visibility through today, we are pleased to reiterate the full year 2026 financial outlook we introduced last quarter. Second, last quarter, we announced a strategic optimization review of our GAC operations to ensure we are deploying our financial and operating resources in a way that maximizes stakeholder value over the near and long term. We have made good progress on that effort, and we look forward to sharing our latest updates today. And third, we remain active across several other priorities, including optimizing our capital structure, proactively maintaining our asset base and maximizing the value of our resources for the benefit of all stakeholders. On that point, our leadership team and Board continue to demonstrate their confidence in Arq by further aligning themselves with shareholders through additional ownership purchases made in recent weeks and months. The first quarter provided a solid foundation for the year ahead and underscored the continued transformation of our PAC business. Revenues for the first quarter of $29.1 million were 7% higher year-on-year and gross margin in January and February were exceptionally strong, reflecting a business no longer carrying the full burden of GAC production costs. Our first quarter performance was impacted by a noncash revaluation adjustment of around $800,000 related to inventory produced in 2025. This revaluation increased COGS, reduced gross margin and ultimately lowered adjusted EBITDA. In addition, there was approximately $600,000 of carryover GAC-related expense. Those costs will no longer affect the company going forward. Both of these items negatively impacted adjusted EBITDA for the quarter. Despite the negative effects of this revaluation and certain trailing costs from GAC during the quarter, our underlying margin performance was strong, reflecting the continued transformation and improving performance of our core PAC business. January and February gross margins of 38% and 47%, respectively, are particularly encouraging, signaling a normalization of operations as PAC performance is no longer fully impacted by GAC production costs. Immediately post quarter end, we experienced the impact of a planned 2-week biannual plant turnaround or routine maintenance. The turnaround, which involved a temporary shutdown of our Red River plant formally began April 5, although preparations began far in advance of that date and successfully concluded under budget in April. I'll share more detail on that shortly. With that context and recognizing that Q1 is typically a solid though not our strongest quarter, we expect Q2 to be a transitional period with performance broadly in line with prior years. Importantly, this outlook is already reflected in the 2026 financial guidance we previously provided and are confidently reiterating today. This outlook includes full year 2026 revenue of between $120 million and $125 million and adjusted EBITDA of between $17 million and $20 million. As I noted, we completed our scheduled biannual plant turnaround or TAR in mid-April. The work was completed under budget, which is a credit to Eric Robinson, our Senior VP of Operations and the entire Red River operations team. This outcome reflects our broader strategy of using the maintenance process to identify potential issues early and address them proactively. While completing the work under budget is important, the more important objective is ensuring the continued safety of our employees and the reliability of our plant, which will always remain our highest priority. With the successful completion of the TAR under budget, we are maintaining our previously communicated CapEx guidance of $8 million to $10 million for full year 2026. That said, the outperformance does provide us with some incremental flexibility within that range. Turning now to our full year outlook, where the trend for 2026 remains favorable. We continue to expect the PAC business to generate free cash flow in 2026 and beyond, which supports our confidence in reiterating our full year guidance. I would also note that while warmer-than-normal winter conditions created some headwinds for mercury emissions-focused products in Q1, demand for our core PAC products has remained resilient despite ongoing volatility in oil and natural gas-derived products, including volatility tied to events in the Middle East. As many of you know, mercury emission solutions for coal-fired power plants remains our largest single market sector by total sales volumes. However, that percentage has steadily declined as we continue diversifying our end market exposure. Importantly, demand from these markets tends to be inversely correlated with natural gas prices. That is why hot summers, cold winters and higher natural gas prices are generally positive for PAC demand and pricing. Turning to our GAC operations. As discussed on our last call, we initiated a strategic optimization review to determine the most practical path to achieving economically attractive GAC production. That work remains ongoing with continued progress in refining design plans, capital requirements and timing. As part of this effort, we are working with an independent equipment provider and an engineering design firm. These partners were selected following extensive diligence, particularly in light of the challenges we experienced with our original design firm. Both have performed above our already high expectations and are bringing a level of rigor and expertise that is informing our thinking in a meaningful way. We are moving with urgency, but also with discipline. When we present a plan to the market, it will be fully scoped, properly costed, clearly timed, fully supported and will answer all of our questions and those we know our stakeholders will also ask. That includes a clear view on return profile, funding approach and the broader implications for the business. In parallel, we are evaluating incremental growth alternatives, such as adding reactivation or acid washing capacity to ensure we are prioritizing the highest return opportunities. Our current aim is to have initial results of our strategic optimization review in the third quarter of this year. Against this backdrop, granular activated carbon market fundamentals remain very strong. We are beginning to see pricing move higher driven by tightening supply dynamics and the EPAs approaching PFAS monitoring deadline in April 2027. Importantly, customers are increasingly encouraging us to advance development. We recognize the central questions are around cost and timing. We are equally focused on bringing this work to a conclusion, and we'll provide a comprehensive update once the optimization process is complete. Related to the optimization process and as outlined on our last call, we remain in active discussions with multiple parties regarding potential pathways to monetize our carbon facility and associated technologies. The potential appeal of the facility to provide alternative carbon products, including asphalt emulsion blending components and a feedstock for synthetic graphite as well as for rare earth elements, remains intact. We are particularly encouraged by our asphalt-related work, where testing with a leading U.S. asphalt company continues to progress. Our collaboration partner has found that Corbin wet cake offers differentiated performance characteristics and the work is now advancing to the next stage of testing. At the same time, we remain appropriately measured. As we said in March, asphalt is the most advanced of these alternative applications, but it would be premature to expect significant revenue from it in the near term. Separately, since our last update, we have received indications of interest from various third parties regarding potential opportunities to monetize the asset, which we continue to evaluate. While this is not our top priority, multiple potential monetization paths represent attractive optionality. If we identify a financially compelling solution that benefits shareholders, we will update the market accordingly. Next, I want to step back and frame how we are thinking about the business and our responsibilities to shareholders. That perspective is grounded in our role as stewards of capital and the fact that following meaningful recent purchases, our Board and management now collectively own more than 20% of the company. That ownership shapes our approach to capital allocation. Every decision is made through the lens of maximizing and protecting long-term shareholder value. From that vantage point, there appears to be a disconnect between the intrinsic value of our PAC business and how it is reflected in the public market. This may be influenced by a perception that PAC is a lower growth business facing near-term headwinds. Our operating performance suggests otherwise, with PAC delivering consistent growth and evolving into a material profitable business with multiple avenues for upside. We see a clear path to improving pricing through expansion into higher-value end markets. Beyond traditional industrial and water applications, we are focused on opportunities tied to micropollutant control and PFAS-related solutions. High-grade PAC has the potential to serve as an effective bridging solution for low-level PFAS remediation, helping those utilities with PFAS concentrations below a certain range to reduce to at or below the 4-part per trillion threshold ahead of the EPA's April 2027 monitoring deadline. This is a compelling use case given the meaningful pricing differential between PAC and granular activated carbon. While we are pleased with our Q1 performance, we view it as a starting point. The year will not be linear, but we have established a solid foundation and remain on track to achieve our full year guidance. Against that backdrop, our current market positioning does not appear to fully reflect the strength, stability and strategic value of the business, particularly given the steady noncyclical and nondiscretionary nature of the end markets we serve through PAC. It also may not fully capture the significance of the more than $500 million of assets we have in place at Red River, which provides exposure to a substantial domestic opportunity with potential for international expansion as well as upside associated with granular activated carbon. As a result, one of our central priorities is to preserve the company's strategic flexibility and operational independence as we continue to execute. We highlight this to underscore what may be underappreciated. We have built a consistently profitable noncyclical core business, while market perceptions may continue to be influenced by concerns around potential dilution tied to GAC expansion or uncertainty regarding our path into that market. We recognize the importance of continuing execution against our financial and operating plan. That focus drives us each day, and we look forward to updating the market on our progress as we advance our near- and long-term objectives. I'll now turn the call over to Stacia to review our first quarter performance in greater detail. Stacia? Stacia Hansen: Thanks, Bob. Revenue for the first quarter of 2026 totaled $29 million, up around 7% compared to the prior year period. This was driven principally by increased sales volumes. Our gross margin for the quarter was 34% compared to 36% reported in the prior year period. As noted earlier, this was primarily driven by decreases in pricing due to product mix and inventory revaluation charge and carryover GAC costs, which was partially offset by increases in sales volumes. As Bob mentioned, gross margin was strong in January and February, which we believe is demonstrative of the materially improved start to the year after the challenges associated with GAC production costs. Net loss was $800,000 in the first quarter of 2026 compared to net income of $200,000 in Q1 of 2025. This was primarily a result of the drivers discussed earlier. We generated positive adjusted EBITDA of approximately $2.7 million in the first quarter of 2026 compared to an adjusted EBITDA of $4.1 million in the same period during 2025, driven by reduced net income in the current year period. Selling, general and administrative expenses totaled $7.4 million in Q1 of 2026 versus $6.1 million in the prior year period. This increase was a consequence of increases in insurance, recruiting and legal fees. Overall, our performance demonstrates our ability to operate the PAC business in a way that contributes positively to our economic position. We remain extremely confident that our PAC business will continue to be cash generative through fiscal year 2026 and beyond. Turning to the balance sheet. We ended the first quarter with total cash of $15.9 million, of which approximately $4.7 million is unrestricted. Total debt inclusive of financing leases as of March 31, 2026, totaled $30.2 million as compared to $28.5 million as of December 31, 2025. The increase was primarily driven by increased borrowings on our company's revolving credit facility with MidCap Financial, which totaled $20.9 million as of March 31, 2026. As many of you will have seen, we updated our terms of our credit facility with MidCap Financial late in March to accommodate covenant tightness as a result of lingering GAC production impacts carrying over from Q4 2025. We have found MidCap to be a very supportive and proactive financing partner, and they understand our business well. As we look to our future growth plans and once the capital requirements are better defined, we anticipate that additional debt will be a significant part of our overall financing package. We believe that enlarged and sustained profitability from our PAC business, there is potential to materially increase overall debt. While it's premature to get into specifics, our overall philosophy is that we are prepared to take on more debt and the maximum level at which we'd be comfortable with would be around 3x adjusted EBITDA. This is the level we believe feasible based on our latest discussions with advisers. Based on the top end of our 2026 guidance, this would suggest that securing debt of around $60 million is feasible. In addition to a larger debt facility, we are also reviewing possible alternative funding sources or solutions, including royalty agreements, customer prepayments, take-or-pays, et cetera. As always, equity remains our least preferred option. As Bob mentioned, we remain extremely confident in our financial guidance for fiscal year 2026. which we issued for the first time in March. As a recap, for fiscal year 2026, we expect revenue of $120 million to $125 million and PAC volumes of between 122 million and 125 million pounds at an average sell price between $0.88 and $0.91 per pound. We also remain extremely confident in our adjusted EBITDA guidance of between $17 million and $20 million, which would represent a 30% improvement in 2025 at the bottom end of the range. With that, I will turn things back to Bob. Robert Rasmus: Thanks, Stacia. Before we turn to questions, let me leave you with a few points that we believe should frame how investors think about Arq. First, our PAC business is performing well and in line with our expectations. While our reported results were impacted by noncash inventory revaluation, lingering GAC production costs, absent those items, adjusted EBITDA would have been materially higher. Importantly, this does not change our view of the business. We remain confident in our strategy and our full year guidance, and PAC continues to provide a profitable cash-generative foundation for the company. Second, we remain focused on realizing value from our Corbin facility and associated technologies. While it is still early in defining the ultimate path, we continue to see a credible opportunity for an attractive financial outcome. Progress in asphalt testing is encouraging and interest from third parties reinforces the underlying value and optionality of Corbin. Third, our GAC optimization work is advancing with urgency. Our focus is on delivering a clear fully developed plan that outlines the operational path, expected cost and timing and a financing approach designed to support execution while minimizing dilution. Stepping back, we believe we are making the right decisions to maximize long-term value. That perspective is reinforced by the fact that I, along with members of our Board and management team, are significant shareholders. We have a profitable core business, multiple compelling avenues for growth and a clear responsibility to pursue those opportunities with discipline, protecting shareholder value and avoiding unnecessary dilution. With that, I'll hand it back to our moderator to open for questions. Operator: [Operator Instructions] Your first question is from Gerry Sweeney from ROTH Capital Partners. Gerard Sweeney: Strategic review, I know you're probably limited on what you could probably say on that front. But just curious as to maybe the timing, would we get an update with 3Q or before? And then involved in that update, I'm just curious if the strategy around -- a potential strategy around reactivation and asset wash are involved in that strategic review. Or are they separate opportunities? Robert Rasmus: Sure. A couple of things on that in terms of your questions, Gerry. One, definitely in the third quarter or prior, certainly before the third quarter earnings call as it relates to that. As we've mentioned in our prepared remarks, the market fundamentals for granular activated carbon remain extremely strong. Prices continue to rise as does demand. There's a clear supply-demand imbalance we expect to persist well into the future. As far as evaluating reactivation and asset washing, we're doing that in conjunction with the valuation and the optimization of our GAC plant design and costing. We want to ensure we make the best decisions as it relates to capital allocation and maximizing shareholder returns. And I want to also add that reactivation and/or asset washing would likely be pursued in tandem with granular activated carbon. Gerard Sweeney: Got it. And I mean, we've discussed reactivation in the past. I mean there's a recurring revenue nature to it, and it's also I think, covers ultimate destruction of PFAS. But if you go down that path, does that change your production capacity at Red River? Or does that use up some of the existing capacity? Or can you build it next to or in tandem with the existing capacity? Robert Rasmus: The reactivation would be in addition to and possibly not even located at Red River. Gerard Sweeney: Interesting. Got you. Okay. And then just one other question. Flipping over to the PAC business. Obviously, it's doing exceptionally well and continues to do better. At what point does the market for some of these alternative opportunities for PAC start to outstrip the traditional mercury opportunity? Or will Mercury just remain probably the main driver for the foreseeable future? Robert Rasmus: Mercury is the largest percentage of volume of our sales, but that has decreased remarkably or markedly, I should say, over the last 3 years. It's a great business for us. It's a core business for us, but we also see the expansion into these alternatives such as PAC before GAC and other alternative uses for our PAC product as being higher priced and higher margin. So our goal, if the cannibalization were to occur, and we still have some volumes we can continue to add, it would be from cannibalizing lower margin for higher-margin business. Operator: Your next question is from Jason Ross Tilchen from Canaccord Genuity. Jason Tilchen: I guess to start, just a little bit of a follow-up there. You mentioned there's a clear path to increasing price and margin for the PAC business through expanding into these specialty end uses. Can you just talk maybe on the operational side, what sort of are the blocking and tackling steps that are needed to reduce these specialized variation to go down that path? And how much investment would potentially be needed? What sort of time line, any of those sort of parameters would be helpful. Robert Rasmus: Sure. I'll take the last portion of your question first. No additional investment would be needed. So that's a key characteristic. And I think you framed your question extremely well in talking about blocking and tackling. The enhancement or the expansion into alternative products is really basic blocking and tackling. And that's one of the things that Eric Robinson, our new Senior VP of Operations, has contributed to the team, and we continue to work on, is maximizing our furnace time, maximizing our furnace uptime, minimizing the changeover between product runs, doing more campaign style runs as opposed to going back and forth between products. So as you said and articulated, it's basic blocking and tackling in terms of enhancement and getting into those alternative markets and does not require additional investment other than granular activated carbon. Jason Tilchen: Okay. That's really helpful. And just in terms of the current contract mix, how much opportunity is there like near term? What sort of would the time line be as you look to shift into some of these more tailored solutions? Robert Rasmus: We always want to do it as soon as possible, and we're in discussions every day. Jeanette McQueeney and her sales team are having conversations about these additional products and working in conjunction with Joe Wong and our research and development team in terms of development, making sure that we're meeting the customer specifications and inquiries as it relates to that. So it's on an ongoing nature. Operator: Your next question is from Aaron Spychalla from Craig-Hallum. Aaron Spychalla: Maybe first on GAC. You kind of talked about the strong market backdrop. Can you just maybe give a little bit more details on the drivers behind that? And then conversations you're having with current customers that have already been kind of booked and as you're awaiting kind of bringing on that production? And any changes in the competitive landscape that you're seeing? Robert Rasmus: Sure. So I think there's about 3 or 4 really, Aaron, questions as it relates to GAC. In terms of the overall market, as we talked about in our prepared remarks, it's just fundamental supply-demand imbalance. There's an excess of demand versus the existing supply. There's no new supply looking to come on market that we're aware of other than ourselves coming forward that the increase in demand is accelerating given that the municipalities have to start monitoring and reporting in April of 2027 their PFAS composition in the water supply, even though they don't need to comply until 2031. All of those are contributing to the factors of the supply-demand imbalance. We're also seeing additional demand as it relates to renewable natural gas. As it relates to conversations with potential customers and contracted customers, on one hand, the contracted customers clearly aren't happy that we are not being in active production right now of granular activated carbon. That being said, they are actively encouraging us and actively calling and actively wanting us to get back into the production business as soon as possible. We've been able to maintain great relationships with those customers and potential customers. And a large part of that is due to the quality of our sales team, the quality of our product and the supply-demand imbalance. Aaron Spychalla: Great. And then on the asphalt progressing to small infield testing, can you just talk about time lines there and what potential next steps could look like from that? Robert Rasmus: Sure. So one of the key features that the testing has shown, and again, this is testing that has been undertaken by the asphalt and paving company, not third-party testing independent of ourselves and the asphalt and paving company is that it shows that our product when using Arq wet taking as an additive to asphalt emotion contributes to longer-lasting blackness of the asphalt and additional traction. And on one hand, you might say that the -- adding to the long-lived nature of the blackness is kind of a, if you will, a decorative. It's really not. It's very important because it allows the painted markings on the road to stand out longer and requires less maintenance. The other is that it shows that using Arq wet cake as an additive to asphalt emotion leads to improved traction, especially in rain and wet conditions. And so we're very pleased as it relates to that, that the idea is to move into actually live testing with state and local and, if you will, municipalities and parking lots and things of that nature. Federal testing is a longer-lasting item. Operator: [Operator Instructions] And your next question is from Peter Gastreich from Water Tower Research. Peter Gastreich: Congratulations on the results. Just wanted to ask also further on the alternative pack uses that you mentioned outside of power generation. So presumably, utilization rates are going up across the entire industry. Are domestic suppliers meeting that incremental demand? Or are we seeing imports coming in to balance the market? Robert Rasmus: So I can't speak completely for the competitors in terms of product expansion, but we are seeing a greater restriction on imports and that we're seeing additional demand for domestic sourcing. Certain product that had been imported from Australia in the past is now not necessarily restricted, but is not being imported now. You've also had disruptions as it relates to char coconut product. That continues to be a lower amount of imports and a lower amount of domestic consumption for PAC in the U.S. Peter Gastreich: And are tariffs having an impact on the market as you see right now? Robert Rasmus: Tariffs did have some impact in the past, but I think it's more people are looking for reliable supplier, which we are. People are looking for a wholly domestic supplier, which we are the only fully vertically integrated fully domestic supplier of powdered activated carbon. And so people appreciate our reliability and the fact that we've been a trusted partner and a reliable partner. Peter Gastreich: Okay. Great. You had an uplift in SG&A by about $1.3 million year-on-year and Q-on-Q. You just mentioned that you've got insurance recruiting and legal expenses that are having that impact. How much of that uplift should be considered onetime? And can any of these carry over into subsequent quarters? Robert Rasmus: So a couple of things. I'm going to answer your question and answer a related question that you didn't ask on that. As it relates to SG&A, you are correct, related to additional legal and other costs and insurance. But there was also some, if you will, approximately $640,000 in the first quarter, and it relates to the maintenance of Corbin for optionality purposes. The big ticket items comprising that $640,000 are broken down as follows: roughly $195,000 for payroll, which includes some severance $225,000 for utilities to winterize and/or essentially mothball the facility, lease and various tax payments totaling about $125,000 and another $75,000 to $100,000 for security and contract labor. The payroll component will go away as of June 30 as it relates to that. The $225,000 that we spent in the quarter on utilities essentially drops down to about $5,000 per month going forward. So we expect the total Corbin mothballing or maintenance costs to be about $1.2 million. So we spent roughly $640,000, $650,000 in the first quarter. We believe there's no expectation to increase that $1.2 million number. So essentially, it's going to be about $200,000 per quarter going forward for Corbin. So depending upon how you want to look at it, you could say that $400,000 of that was onetime expense. And all of that $640,000, $650,000 relating to Corbin hit SG&A. Previously, that would have gone through COGS in prior quarters because it would have been part of our GAC production process. The other, it's not directly related to SG&A, but could be considered a onetime charge is the carryover cost that both Stacia and I mentioned as it relates to GAC production carryover. As you know, we made the decision to pause production and we made the decision to completely saying we were going to optimize and conduct a further review in late February, early March. At that time, we still had some large ticket items such as the rental of the thermal oxidizer, rental of heating blankets, et cetera. That was about -- all those totaled about $550,000 to $600,000 in what I'll call carryover GAC production costs. We shouldn't have any of those going forward in 2026. So you could consider those possibly as a onetime expense item as well. Sorry for being so long-winded. Peter Gastreich: No, great. I really appreciate the detail. I'll just ask one more question before getting back in the queue. So your restricted cash bumped up a bit to $11.2 million while your unrestricted fell. I just want to ask what drove that? And what considerations do you have for restricted cash? Robert Rasmus: So the restricted cash, I think, ended up about $11.2 million, $11.8 million. I know it had an $11 million handle as it relates to that. Part of that went to additional bonding requirements associated with reclamation obligations going forward. Cash drop is a normal course of financing -- not financing activities, but a normal course of our activities and just represents the normal quarter end results where we are from a liquidity position. Operator: There are no further questions at this time. I will now hand the floor back to Bob Rasmus, President and CEO, for closing remarks. Robert Rasmus: Thanks, Jenny. Before we finish the call, I want to reemphasize our key near-term priorities and objectives. We want to continue the optimization of our foundational PAC business to further enhance its performance. We want to continue to expand into adjacent PAC market opportunities as part of that optimization, and we want to complete the strategic optimization review of our granular activated carbon business. Thank you for your interest in Arq, and we look forward to our next update. Operator: Thank you. This does conclude today's conference call. We thank you for your participation. You may now disconnect your lines. Before you buy stock in Arq, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Arq wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Arq (ARQ) Q1 2026 Earnings Call Transcript was originally published by The Motley Fool

Generated revenue of approximately $29 million Reported Adjusted EBITDA(1) of approximately $3 million GAC strategic optimization review ongoing with initial results expected by Q3 2026 GREENWOOD VILLAGE, Colo., May 06, 2026 (GLOBE NEWSWIRE) -- Arq, Inc. (NASDAQ: ARQ) (the "Company" or "Arq"), a producer of activated carbon and other environmentally efficient carbon products for use in purification and sustainable materials, today announced its financial and operating results for the quarter ended March 31, 2026. Financial Highlights Generated revenue of $29.1 million in Q1 2026 versus $27.2 million in Q1 2025, driven by increased sales volumes partially offset by decreased pricing caused by product mix Gross margin of 34.2% in Q1 2026 versus 36.4% in Q1 2025, driven by decreases in pricing caused by product mix, an inventory revaluation charge and other costs, partially offset by increased sales volumes Reported Net loss of $0.8 million in Q1 2026 vs. Net income of $0.2 million in Q1 2025 Adjusted EBITDA(1) of $2.7 million in Q1 2026 vs. $4.1 million in Q1 2025, driven by factors outlined above Adjusted EBITDA for Q1 2026 included the negative impact of $0.8 million non-cash inventory revaluation charge for inventory produced in 2025 Exited Q1 2026 with cash and restricted cash of $15.9 million, including $11.2 million in restricted cash Reaffirmed full year 2026 guidance of revenue between $120 - $125 million and Adjusted EBITDA of $17 - $20 million (1) Adjusted EBITDA is a non-GAAP financial measure. Please refer to the paragraph titled “Non-GAAP Measures” for the definitions of non-GAAP financial measures and reconciliations to GAAP measures included in this press release. Recent Business & Other Highlights Successfully completed biennial plant turnaround and maintenance (TAR) under budget in April 2026 Advanced GAC optimization review process with a well-regarded engineering firm and a new equipment design firm Progressed asphalt testing with leading U.S. asphalt company, with Corbin wetcake demonstrating differentiated performance characteristics and advancing to small in-field paving tests Board and management team ownership increased to more than 20% of the company following meaningful recent purchases Strategic Optimization Update Arq’s strategic optimization review remains ongoing as the Company evaluates the most practical path to economically attractive GAC production. Arq continues to work in combination with both an equipment and an engineering firm to further refine process design, capital requirements, and timing. Both firms were selected following extensive diligence to validate their independence, capabilities, and relevant industry expertise. In parallel, the Company is evaluating incremental activated carbon growth alternatives, such as adding reactivation or acid washing capacity, to ensure we are prioritizing the highest-return opportunities. The Company's current goal is to complete the strategic optimization review and have a go-forward GAC strategy in place by Q3 2026. GAC market fundamentals remain strong and continue to support a favorable pricing environment. The Company is also engaged in active discussions with multiple parties regarding potential opportunities to monetize its Corbin Facility and related technologies. In asphalt, testing with a leading U.S. partner continues to progress, with Corbin wetcake demonstrating differentiated performance characteristics and the work advancing to small-scale in-field paving trials. Management Commentary “The first quarter provided a solid foundation for the year ahead and underscored the continued transformation of our PAC business," said Bob Rasmus, CEO of Arq. "Sales increased year-over-year, and gross margins in January and February were exceptionally strong reflecting a business no longer carrying the full burden of GAC production costs. While a March inventory revaluation charge and the carry-over of the remaining GAC costs impacted reported results, underlying performance in the first two months reflects a clear normalization of margins. We also completed our biennial plant maintenance in April ahead of time and under budget. We remain confident in reiterating our full year 2026 guidance of revenue between $120 - $125 million and Adjusted EBITDA of $17 - $20 million.” Mr. Rasmus continued, “Our GAC optimization review remains underway with two design partners. While we are moving with urgency, we want to take the time necessary to deliver a functional design, a construction and production time frame and a fully costed plan. That work includes evaluating the project’s return profile, the most appropriate funding approach, and potential incremental growth opportunities, including additional reactivation or acid washing capacity at our existing Red River facilities. More broadly, GAC market fundamentals remain highly attractive as the EPA's April 2027 PFAS monitoring deadline approaches. At the same time, our PAC business has evolved into a consistently growing and meaningfully profitable platform with further upside through pricing in higher-value markets, and we continue to make encouraging progress in discussions around our Corbin asset, particularly in asphalt applications." Mr. Rasmus concluded, “Taken together, we believe we have a profitable core business, multiple compelling avenues for growth, and a clear responsibility to pursue those opportunities in a manner that maximizes shareholder value. We are more aligned with shareholders than ever, with our Board and management team now collectively owning more than 20% of the Company following meaningful recent share purchases. We believe that alignment is important and reflects our confidence in the business, our strategy, and the opportunities ahead.” First Quarter 2026 Results Revenue totaled $29.1 million for the first quarter of 2026, reflecting an increase of 7% compared to $27.2 million in the prior year period. The increase was driven predominantly by enhanced sales volumes. Cost of revenue totaled $19.1 million for the first quarter of 2026, an increase of approximately 10% compared to $17.3 million in the prior year period. This increase was primarily driven by $1.1 million of costs associated with additional chemical sales, $0.8 million of non-cash inventory revaluation and certain GAC carry-costs described above. Gross margin totaled 34.2% for the first quarter of 2026, compared to 36.4% in the prior year period. The reduction in gross margin was primarily driven by decreases in pricing caused by product mix, the inventory revaluation noted previously, and trailing costs subsequent to pausing production at our GAC facility, partially offset by increased sales volumes. Selling, general and administrative expenses totaled $7.4 million, compared to $6.1 million in the prior year period. The increase was primarily driven by increases in insurance, recruiting and legal fees. Research and development costs remained flat for the first quarter of 2026 compared to the first quarter of 2025. Operating loss was $1.0 million for the first quarter of 2026, compared to operating income of $0.7 million in the prior year period. Net loss was $0.8 million in the first quarter of 2026, or $0.02 per diluted share, compared to net income of $0.2 million in the prior year period. The reduction in both cases was driven by the factors above. Adjusted EBITDA was $2.7 million for the first quarter of 2026, compared to Adjusted EBITDA of $4.1 million in the prior year period. The reduction was primarily driven by lower net income in the current year period. See note below regarding the use of the non-GAAP financial measure Adjusted EBITDA and a reconciliation to the most comparable GAAP financial measure. Capex and Balance Sheet Capital expenditures totaled $0.7 million for the first quarter of 2026, compared to $3.7 million in the prior year period. The decrease was driven by increased spend on completion and commissioning of the GAC facility during the first quarter of 2025. Cash as of March 31, 2026, totaled $15.9 million, including $11.2 million of restricted cash, compared to $15.0 million as of December 31, 2025. Total debt, inclusive of financing leases, as of March 31, 2026, totaled $30.2 million compared to $28.5 million as of December 31, 2025. The increase was driven primarily by increased borrowings on the Company’s revolving credit facility with MidCap Financial, which totaled $20.9 million as of March 31, 2026. Conference Call and Webcast Information Arq will host a conference call to discuss the Company's financial performance on Thursday, May 7, 2026 at 8:30 a.m. Eastern Time. The conference call webcast information will be available via the Investor Resources section of Arq's website at www.arq.com. Interested parties may participate in the conference call by registering at https://www.webcast-eqs.com/arq2026q1. Alternatively, the live conference call may be accessed by dialing (800) 431-2204 or +1 (438) 792-9840 and referencing Arq. A supplemental investor presentation will be available on the Company's Investor Resources section of the website prior to the start of the conference call. A replay of the event will be made available shortly after the event and accessible via the same webcast link referenced above. Alternatively, the replay may be accessed by dialing (877) 660-6853 or (201) 612-7415 and entering Access ID 13760084. The dial-in replay will expire after May 14, 2026. About Arq Arq (NASDAQ: ARQ) is a diversified, environmental technology company with products that enable a cleaner and safer planet while actively reducing our environmental impact. As the only vertically integrated producer of activated carbon products in North America, we deliver a reliable domestic supply of innovative, hard-to-source, high-demand products. We apply our extensive expertise to develop groundbreaking solutions to remove harmful chemicals and pollutants from water, land and air. Learn more at: www.arq.com. Caution on Forward-Looking Statements This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, which provides a “safe harbor” for such statements in certain circumstances. When used in this press release, the words “can,” “will,” "may," “intends,” “expects,” "continuing," “believes,” similar expressions and any other statements that are not historical facts are intended to identify those assertions as forward-looking statements. All statements that address activities, events or developments that the Company intends, expects or believes may occur in the future are forward-looking statements. These forward-looking statements include, but are not limited to, statements or expectations regarding: the future of our GAC Facility and Corbin Facility and the anticipated timing, results, and conclusions of our GAC business optimization review and the actions we may take upon the completion of such review; the anticipated benefits of transitioning away from using Corbin Wetcake to a bituminous proven performance coal as a feedstock for our GAC products; financial guidance for fiscal year 2026; the anticipated effects from fluctuations in the pricing of our AC products, including through expansion into higher-value end markets; expected supply and demand for our AC products and services, including our GAC products; the seasonal impact on our customers and their demand for our products; the future profitability and sustainability of our PAC business; our ability to fund our business over the next twelve months; our ability to access new markets for our feedstocks and other products, including renewable natural gas, asphalt, purified coal, rare earth minerals and synthetic graphite markets; any future plant development projects, including incremental growth alternatives, such as adding reactivation or acid washing capacity, and those that may be necessary to remediate design flaws in our GAC Facility, and our ability to finance any such projects; the effectiveness of our technologies and products and the benefits they provide; probability of any loss occurring with respect to certain guarantees made by Tinuum Group; the timing and amounts of or changes in future revenue, funding for our business and projects, margins, expenses, earnings, tax rates, cash flows, working capital, liquidity and other financial and accounting measures; the performance of obligations secured by our surety bonds; the amount, use and timing of future capital expenditures needed to fund our business plan and total anticipated capital expenditures for the current fiscal year; the adoption and scope of regulations to control certain chemicals in drinking water and other environmental concerns and the impact of such regulations on our customers' and our businesses, including any increase or decrease in demand and sales of our AC products resulting from such regulations; our near-term priorities and objectives and our long-term outlook regarding the growth of our business; and the impact of prices of competing power generation sources such as natural gas and renewable energy on demand for our products. These forward-looking statements included in this press release involve risks and uncertainties. Actual events or results could differ materially from those discussed in the forward-looking statements as a result of various factors including, but not limited to, the timing and scope of new and pending regulations and any legal challenges to or extensions of compliance dates of them; the U.S. government’s failure to promulgate new regulations or enforce existing regulations that benefit our business; changes in laws and regulations, accounting rules, prices, economic conditions and market demand; availability, cost of and demand for alternative energy sources and other technologies and their impact on coal-fired power generation in the U.S.; technical, start up and operational difficulties; competition within the industries in which the Company operates; risks associated with our debt financing; our inability to effectively and efficiently commercialize new products, including our GAC products; our inability to effectively identify solutions to the design flaws in GAC Facility at our Red River Plant or execute on any remedial measures or modifications thereto; disruptions at any of our facilities, including by natural disasters or extreme weather; risks related to our information technology systems, including the risk of cyberattacks on our networks; failure to protect our intellectual property from infringement or claims that we have infringed on the intellectual property of others; our inability to obtain future financing or financing on terms that are favorable to us; our inability to ramp up our operations to effectively address recent and expected growth in our business; loss of key personnel; ongoing effects of the inflation and macroeconomic uncertainty, including from increased domestic and international tariffs and armed conflicts around the world, and such uncertainty's effect on market demand and input costs; availability of materials and equipment for our business; intellectual property infringement claims from third parties; the impacts of any current or future write-downs or write-offs, restructuring, impairment or other charges; our failure to realize the anticipated benefits of acquisitions, joint ventures, and divestitures we may engage in; pending litigation; factors relating to our business strategy, goals and expectations, including our ability to execute on our GAC business plan; our ability to maintain relationships with customers, suppliers and others with whom the Company does business and meet supply requirements; our results of operations and business generally; risks related to diverting management's attention from our ongoing business operations; costs related to the ongoing manufacturing of our products, including costs necessary to resume GAC production; opportunities for additional sales of our AC products and end-market diversification, including for our Corbin Wetcake; the rate of coal-fired power generation in the U.S.; the timing and cost of any future capital expenditures and the resultant impact to our liquidity and cash flows; and the other risk factors described in our filings with the SEC, including those described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2025. You are cautioned not to place undue reliance on the forward-looking statements and to consult filings we have made and will make with the SEC for additional discussion concerning risks and uncertainties that may apply to our business and the ownership of our securities. In addition to causing our actual results to differ, the factors listed above may cause our intentions to change from those statements of intention set forth in this press release. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions, or otherwise. The forward-looking statements speak only as to the date of this press release, and we disclaim any duty to update such statements unless required by law. Source: Arq, Inc. Investor Contact: Anthony Nathan, Arq Marc Silverberg, ICR [email protected] Note on Non-GAAP Financial Measures To supplement our financial information presented in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP"), we provide certain supplemental financial measures, including EBITDA and Adjusted EBITDA, which are measurements that are not calculated in accordance with U.S. GAAP. EBITDA is defined as earnings before interest, taxes, depreciation and amortization, and Adjusted EBITDA is defined as EBITDA reduced by non-cash gains, increased by share-based compensation expense, other non-cash losses and non-recurring costs and fees. EBITDA and Adjusted EBITDA should be considered in addition to, and not as a substitute for, net (loss) income in accordance with U.S. GAAP as a measure of performance. See below for a reconciliation from net (loss) income, the nearest U.S. GAAP financial measure, to EBITDA and Adjusted EBITDA. We believe that the EBITDA and Adjusted EBITDA measures are less susceptible to variances that affect our operating performance. We include these non-GAAP measures because management uses them in the evaluation of our operating performance, and believe they help to facilitate comparison of operating results between periods. We believe the non-GAAP measures provide useful information to both management and users of the financial statements by excluding certain expenses, gains, and losses which can vary widely across different industries or among companies within the same industry and may not be indicative of core operating results and business outlook. EBITDA and Adjusted EBITDA: The following table reconciles net (loss) income, our most directly comparable as-reported financial measure calculated in accordance with U.S. GAAP, to EBITDA and Adjusted EBITDA.

This article first appeared on GuruFocus. Release Date: March 10, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Arq Inc (NASDAQ:ARQ) has decided to pause its GAC production project to conduct a comprehensive engineering and production process optimization review, which is expected to maximize shareholder value and long-term success. The company's PAC business continues to perform well, providing a growing and profitable foundation with a 10% year-over-year revenue increase to approximately $120 million. Arq Inc (NASDAQ:ARQ) has appointed Eric Robinson as Senior Vice President of Operations, bringing in expertise to optimize activated carbon facilities, which is expected to enhance operational efficiency. The company has strong visibility into future demand for its PAC business, with 96% contract visibility for 2026 and 75% for 2027, demonstrating customer stability and loyalty. Arq Inc (NASDAQ:ARQ) is providing financial guidance for the first time, projecting 2026 revenue of $120 to $125 million and adjusted EBITDA of $17 to $20 million, based on its proven PAC business performance. Arq Inc (NASDAQ:ARQ) has paused its GAC production due to significant technical challenges, including original design flaws and moisture content issues, which have led to cost overruns and timing delays. The company is taking a $45 million write-down on its Corbin assets, reflecting the decision to idle Corbin operations and switch GAC feedstock to purchased bituminous coal. The GAC production pause means there will be no GAC production in 2026, impacting potential revenue from this segment. Arq Inc (NASDAQ:ARQ) has faced repeated challenges with its GAC startup, including inefficient furnace utilization and operational inefficiencies, which have cost several million dollars in 2025. The company is undergoing leadership changes, including the departure of its Chief Financial Officer, which may indicate internal restructuring challenges. Warning! GuruFocus has detected 3 Warning Signs with ARQ. Is ARQ fairly valued? Test your thesis with our free DCF calculator. Q: Is there anything that would prevent Arq Inc. from pursuing GAC production given the high demand? A: Bob Rasmus, CEO: No, the market fundamentals are strong with an undersupply versus demand imbalance expected to persist. We are well-positioned to capture this market once we refine the necessary modifications. Q: Can you provide more details on the regulatory environment affecting the PAC business? A: Bob Rasmus, CEO: We have excellent visibility with 96% of 2026 volumes contracted. There is no regulatory uncertainty affecting our existing PAC business, as any new regulations have been pushed back without affecting current operations. Q: What are the financial implications of the guidance provided for 2026? A: Bob Rasmus, CEO: The guidance implies free cash flow generation of $4 to $8 million, with a biennial plant turnaround scheduled for April costing about $3 million. We expect the PAC business to generate even more free cash flow next year. Q: Can you elaborate on the issues with the thermal oxidizer and off-gas system? A: Bob Rasmus, CEO: We need more than just a thermal oxidizer; a complete air quality control system is required due to heavier tar fractions in the off-gas. This includes a new thermal oxidizer, water quencher, heat exchanger, and more, which is why we've paused to refine recommendations. Q: How confident are you in the switch to third-party feedstock for GAC production? A: Bob Rasmus, CEO: We are confident in the switch, having tested over 55 potential feedstocks and narrowed it down to five interchangeable ones. This is a proven process in the industry. For the complete transcript of the earnings call, please refer to the full earnings call transcript.