ARQ

• Core PAC Business Performance

  • Q2 2026 results demonstrate the strong underlying earnings power of the PAC business, even in a typically seasonally soft quarter and after a scheduled biennial plant turnaround completed in April 2026.
  • The plant turnaround was completed under budget, with only $300,000 in expenses impacting the current quarter income statement; the majority of $3.1 million in turnaround costs were capitalized and will be amortized over two years.
  • PAC continues to see strong volume and pricing discipline, driving margin expansion and improved profitability.

• PFAS Growth Strategy: PAC for PFAS

  • Launched a new tailored PAC product line, PAC for PFAS, designed to help water utilities meet new EPA PFAS compliance standards (4 parts per trillion threshold, effective 2029-2031) for systems that are close to compliance but not yet meeting the standard.
  • This product allows utilities to use existing treatment equipment, eliminating the need for large capital expenditures required for GAC systems, and can work with existing PAC treatment for taste and odor to avoid dual processing.
  • PAC for PFAS is expected to have substantially higher average selling prices and margins than standard PAC products. Customer trials are ongoing, with no material revenue contribution expected in 2026, but meaningful contribution projected starting in 2027.
  • Management emphasizes this is an adjacent solution, not a replacement for GAC, and many of these customers may convert to GAC in the future.

• GAC Strategic Optimization Review

  • The ongoing review of bituminous-based GAC development has expanded to include a broader operational assessment of the entire business, identifying opportunities to increase furnace capacity and reduce costs for PAC.
  • Independent engineering estimates for completing GAC plant conversion range from $40 million to $60 million for phase 1, which will deliver 25 million pounds of annual GAC capacity; this range reflects two different design options, and management is working to narrow the estimate.
  • No final decision has been made to either proceed with or abandon the GAC project. Management will only approve investment if it can deliver returns that justify the capital cost, and is focusing on strengthening the core PAC business first.

• Corbin Monetization

  • Progress is ongoing with the asphalt blending component product developed from Corbin coal waste purification technology, with successful track testing completed at Auburn University's National Center for Asphalt Technology.
  • The product is moving to third-party laboratory technical validation through Q4 2026, with results expected in Q1 2027. Management is evaluating multiple monetization options including licensing, plant sale, or joint venture, and has received unsolicited third-party interest for other applications including rare earth materials and specialty products.

• New CFO Appointment

  • Shimon Steinmetz has joined as CFO, with an initial focus on driving operational and financial efficiency, strengthening financial planning and analysis, and identifying cost reduction opportunities to improve profitability.

• Management reaffirms full-year 2026 revenue guidance of $120 million to $125 million, and adjusted EBITDA guidance of $17 million to $20 million, unchanged from prior forecasts.
• Full-year 2026 capital expenditure guidance is maintained at $8 million to $10 million, as additional capacity and PAC for PFAS production require minimal incremental CapEx.
• Management has stated a goal to increase adjusted EBITDA in the core PAC business by up to 50% (to $30 million annual EBITDA) within the next year, excluding any contribution from GAC.
• Management guidance indicates no bituminous GAC production or sales are expected in 2027, as the project evaluation and decision process is ongoing. A final investment decision could come either late 2026 or in 2027.

ARC has two core activated carbon product segments: Powdered Activated Carbon (PAC) and Granular Activated Carbon (GAC). For Q2 2026, total company revenue was $30 million, up modestly year-over-year. PAC is the foundational segment, contributing 100% of profitable revenue this quarter, as there was no GAC production during the period. Total gross margin for the company was 38.5%, up 520 basis points year-over-year, driven entirely by PAC performance, as there were no GAC startup costs that dragged down results in the prior year period. Adjusted EBITDA for the total company was $5.8 million, up from $3.7 million in Q2 2025, with PAC delivering all of this adjusted EBITDA. Net loss for the quarter was $700,000, a significant improvement from the $2.4 million net loss in Q2 2025. GAC is still in the development phase, with no commercial production contributing to revenue or earnings in the quarter.

• The final cost to complete GAC plant conversion remains uncertain, with current estimates spanning a wide $40 million to $60 million range. If management approves the project, cost overruns could impact returns and require additional capital.
• Uncertainty around the GAC investment decision has led to depressed market valuation, with the company trading at a much lower earnings multiple than prior forecasts that centered on GAC growth.
• Lower unrestricted cash at quarter end ($0.9 million at June 30, 2026) reflects timing of receipts and period-end closing, but liquidity could be constrained if operating cash generation does not meet expectations.
• PAC for PFAS customer trials are still ongoing, and market adoption may be lower than expected, or the product may not perform as expected in full-scale use, delaying or eliminating projected 2027 revenue and margin gains.
• Commercialization of Corbin technology is still in the testing and validation phase, and may not meet required performance standards for highway use, delaying or preventing monetization.

Q: Given the $40-$60 million CapEx estimate for GAC, does this still fit the prior plan of funding the project via debt rather than equity, and what is the current status of the evaluation? / A: The estimate range reflects two different design options with contingency, and management is refining the cost estimate for the preferred design. Management's core focus remains on strengthening the core PAC business, and will only approve GAC investment if it delivers clear shareholder value, and will not pursue the project at any cost. The estimate does fall within the prior framework of potential debt financing, but the evaluation is still ongoing.

Q: What is the capacity available for PAC for PFAS, and are there any gating factors that would slow shifting production to this higher-margin product? / A: The strategic optimization review has already identified additional PAC capacity with de minimis incremental CapEx, so there is plenty of available capacity to serve the PAC for PFAS market. If demand outgrows existing capacity, ARC would substitute PAC for PFAS for lower-margin standard PAC production, as the new product delivers higher margins and returns.

Q: Is the 50% EBITDA growth target for PAC entirely exclusive of any GAC contribution? / A: Yes, the target of 50% adjusted EBITDA growth (to $30 million annual EBITDA) for the core PAC business excludes any contribution from GAC. ARC's growth is no longer reliant on GAC development, and the company retains GAC as an optional growth opportunity while delivering profitable growth through PAC expansion and operational improvements.

Q: What is the capability of PAC for PFAS, and is ARC unique in offering this solution? / A: PAC for PFAS is designed to bring water systems that are already close to the new 4 ppt PFAS compliance standard into full compliance, allowing them to avoid large CapEx for new GAC systems. For systems with higher contamination levels, GAC will still be more cost-effective. Management states ARC is fairly unique in offering this tailored PAC solution, which is already developed and in customer testing.