Arq, Inc. Q2 FY2025 earnings call

• PAC Business: Delivered strong Q2 results with higher volumes and ASP growth. Achieved fifth consecutive quarter of positive adjusted EBITDA, showing a turnaround. Identified opportunities to reduce operational and corporate costs. • GAC Progress: First GAC line successfully commissioned, beginning ramp-up to nameplate capacity within 6 months. GAC market shows strength with supply shortages and growth potential from RNG and PFAS applications. • Market Diversification: Strategic diversification of PAC customers and end markets to reduce exposure to single sectors, improving margins and financial performance. • Regulatory Environment: Current administration favorable; EPA PFAS regulation extension seen as pragmatic. Working with DOE on critical elements, rare earth minerals, and synthetic graphite. • Asphalt Emulsion: Engaged in testing program with leading U.S. asphalt company, leveraging unique feedstock for potential revenue.

In the second quarter, the PAC business generated revenue of $29 million. It achieved a 9% increase in average selling price (ASP) and its fifth consecutive quarter of positive adjusted EBITDA, which was more than 3 times the same quarter last year. The first granular activated carbon (GAC) line at Red River has been successfully commissioned and is beginning to ramp up towards its nameplate capacity of 25 million pounds. The PAC business contributed 100% of its sales contracts as net contributors in 2025, while the GAC line represents a new higher-growth, higher-margin business segment.

• GAC: First GAC line expected to reach nameplate capacity within 6 months. Goal to make final investment decision on second GAC line by end of 2025. • PAC: PAC business is generally cash generative on an annualized basis. • Capacity Ramp-up: Focus on successful ramp-up of Phase 1 GAC line to nameplate capacity and potentially higher, with anticipation of completing negotiations for additional Phase 1 contracts.

• Market Uncertainty: Broader market uncertainty could impact business performance. • Regulatory Changes: Uncertainties in environmental regulations, including potential changes, could affect operations and market opportunities.

Q: Gerry Sweeney from ROTH Capital Partners asked about key milestones in the commissioning process of the Red River GAC line and the next 6 months.

A: Robert E. Rasmus stated the operations team is focused on reaching full 25 million pounds nameplate capacity or higher within 6 months, with tweaks to operations identified during commissioning to improve production rates.

Q: Aaron Spychalla from Craig-Hallum asked about PAC progress and market diversification.

A: Robert E. Rasmus mentioned further ASP improvements and market expansion into higher-priced and higher-margin markets, emphasizing a portfolio approach to avoid over-reliance on single industries.

Q: Tim Moore from Clear Street asked about production from Phase 1 and Line 2 timeline.

A: Robert E. Rasmus said they aspire to produce more than nameplate capacity and expect Line 2 lead time to be faster due to lessons learned from Phase 1.

Q: Peter Gastreich from Water Tower Research asked about RNG interest and asphalt emulsion opportunity.

A: Robert E. Rasmus said RNG interest has seen some increase but fundamentals are strong, and asphalt emulsion is a unique opportunity with significant potential, involving testing with a leading U.S. asphalt company.