Arq, Inc. — Call Transcript 2025

Greetings and welcome to the Arq Q2 2025 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Anthony Nathan, Head of Investor Relations. Thank you. You may begin. Thank you, Operator. Good morning, everyone, and thank you for joining us today for our Second Quarter 2025 Earnings Results Call. With me on the call today are Bob Rasmus, Arq's Chief Executive Officer, Jay Voncannon, Arq's Chief Financial Officer, and Stacia Hansen, Arq's Chief Accounting Officer. This conference call is being webcast live within the Investor 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 and 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 in these statements. These risks and uncertainties include, but are not limited to, those factors identified on slide two of today's slide presentation in our Form 10-Q for the quarter ended June 30, 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. Thank you, Anthony, and thanks to everyone for joining us this morning. Today's second quarter results and the recent successful completion of commissioning of our first GAC line at Red River are key achievements in the continuing transformation of Arq to a sustainably profitable environmental technology company. I'm extremely pleased to confirm that we have achieved a major milestone with the recent commissioning of our first GAC line, which is now beginning its ramp-up towards nameplate capacity of 25 million pounds, which is anticipated within six months. We made our first granular activated carbon sales ahead of what we consider completion of commissioning, validating both market demand and product quality. While GAC is certainly our growth engine, we delivered another solid quarter from our foundational PAC business. Despite Q2 typically being a shoulder quarter, we delivered revenue of $29 million with higher volumes than the previous year, combined with ASP growth. We narrowly missed our ninth straight quarter of double-digit year-over-year price growth. However, delivering a strong 9% increase in our ASP is still an outstanding result. We achieved our fifth consecutive quarter of positive adjusted EBITDA, which also represented an increase of more than 3x as compared to the same quarter last year. Our results are further confirmation that the foundational PAC business is well and truly turned around. The story remains consistent: our PAC business continues a successful turnaround while we maintain focus on further optimization. We've identified additional opportunities to reduce both operational and corporate costs, which, combined with our steady ASP improvements, should continue to drive enhanced financial performance. With the successful commissioning of our first GAC line, we are adding a higher growth, higher margin business, which we expect to further enhance profitability. Our PAC business remains robust with continued positive pricing momentum and strong demand across both existing and new applications. A key driver of our ASP improvement has been our strategic diversification of customers and end markets. In volume terms, we have reduced our exposure to the mercury emissions market to under 40% of volumes as of the first half of 2025. While mercury-related applications are an important component of our PAC business, their impact on our financial performance has diminished even further than this percentage suggests. Accessing new markets for our powdered activated carbon and expanding into granular activated carbon improves our margins, our overall financial performance, and lessens our exposure to any one particular market sector. Meanwhile, the granular activated carbon market continues to show exceptional strength. We're seeing persistent supply shortages with minimal new capacity entering the market against a backdrop of steady 3%-5% annual growth from existing demand drivers. As a reminder, this growth in demand does not take into account PFAS-related requirements and demand. When we factor in the expected impact of EPA regulatory changes, which could add three to five times today's demand, the growth opportunity becomes even more compelling. While some investors have recently expressed confusion on the implementation timing, two points are clear. First, competitors show no material supply response as new supply typically takes three to four years to develop. Second, customers are locking in supply early ahead of further expected constraints. Beyond water treatment, additional demand drivers like renewable natural gas could further accelerate market growth. Currently, we estimate that RNG applications consume approximately 45 million pounds of granular activated carbon annually, with the GAC being used to scrub carbon dioxide, hydrogen sulfide, nitrogen, and other contaminants before the gas can enter the grid. With total U.S. RNG production currently estimated to be around 600 million cubic feet per day, that would indicate that every 100 million cubic feet per day of incremental RNG growth would require nearly 8 million additional pounds of granular activated carbon. With industry projections suggesting RNG could grow 2x-10x by 2030, this represents potential incremental demand of 45 million-400 million pounds, directly coinciding with the anticipated spike in PFAS-related demand. With that said, I'm proud to report that we've already sold initial phase one GAC product during the third quarter to RNG customers as part of the trials mentioned during our previous earnings call in May. This positions us well to access this attractive high-growth market while still serving PFAS applications. In summary, the overall market remains tight and competitive, creating favorable conditions for both demand and pricing. Turning now to what is perhaps one of the most important operational developments since I became CEO: the successful commissioning of our first 25 million pound GAC line at Red River. I say one of the most important operational developments, not the most important, because I do not want to understate the team's achievements in turning around our foundational PAC business. These achievements reflect our team's remarkable dedication to finding solutions, adapting to unexpected challenges, and continuing to optimize our existing business while ultimately delivering a successfully commissioned plant. However, we only took a short pause to celebrate before focusing on our next task: ramping up production toward nameplate capacity. The extended commissioning period allowed us to address various fine points and minor issues in parallel, which we believe may accelerate our ramp-up timeline. Nevertheless, we maintain our previous six-month guidance out of prudence. The lessons learned during construction and commissioning have positioned us exceptionally well to plan future expansions. I'm pleased to share that our current goal is to make the final investment decision on a second line prior to the end of 2025. To be clear, this is a goal, not formal guidance. The criteria for this decision remained unchanged: achieving smooth operational performance from phase I, securing customer demand for incremental capacity, and establishing a clear path to financing. While delivering all this within four to five months may be challenging, the compelling GAC market opportunity and our potential role within it make it logical to add capacity as quickly and prudently as possible. That said, we will not run before we can walk. Our operational team remains singularly focused on a successful ramp-up of phase one to nameplate capacity of 25 million pounds and potentially higher, as previously discussed. We anticipate completing negotiations for additional contracts to fill remaining phase one capacity in the coming months as customer trial results are finalized. Many of our customers have requirements far exceeding what they've currently contracted with us. Successful execution of phase one will enable us to capture a greater share of their total demand while attracting new customers who wanted proof of delivery before finalizing discussions. As these elements fall into place, we believe we can execute our second line using an updated construction plan and enhanced design aided by phase I lessons learned and backed by a solid order book. With these fundamentals in place, securing credit financing for an identical growth stage should be achievable. As a major shareholder and someone who is fully aligned with shareholders, my preference remains to issue no further equity, and I currently see no reason why that would need to change. Moving on to the regulatory environment, despite broader market uncertainty, the current administration has been favorable for our business. As the only fully integrated domestic producer selling predominantly to U.S. customers, tariff issues have had limited direct impact on our operations and finances. While the EPA's suggested delay in full PFAS regulation implementation caused some investor concern, we view it as a pragmatic approach. My recent discussions with EPA officials revealed both their and our concern about supply meeting demand. The potential extension from 2029-2031, therefore, should not be seen as an environmental policy dilution, but rather a realistic acknowledgment that maintaining deadlines without sufficient GAC supply or other controls would be impractical. You cannot solve a problem without adequate tools. It would be like playing hockey without the right padding or equipment. The EPA's commitment to ensuring Americans have the cleanest air, land, and water aligns closely with our mission, and I firmly believe the administration remains committed to pragmatic environmental regulations. While our business doesn't require further regulatory changes to succeed, any such changes would only strengthen our position. Separately, we continue working closely with the Department of Energy on critical elements, rare earth minerals, and synthetic graphite, all strategic priorities for the current administration. While commercial development of these products isn't near-term, we're actively exploring potential federal-public-private partnerships to advance these efforts. On asphalt emulsion potential, we believe using our carbon feedstock as a blending component to extend freeze-thaw durability, increase hardness, and maintain color is a significant potential future source of revenue. We are currently engaged in a testing program with a leading U.S. asphalt company. With that, I'll now turn it over to Jay for a detailed financial review. Thanks, Bob, and thanks everyone for joining us today. Arq continued to deliver strong financial results during the second quarter, with revenue growing 13% year-over-year to $29 million. This continues to be driven largely by enhanced contract terms, including 9% growth on average selling price and an increase in volumes. Our gross margin in the quarter was approximately 33%, which is slightly higher than the second quarter of 2024. As Bob mentioned, the turnaround of the PAC business through the combined effort of the entire Arq team has been achieved, evidenced by the improved profitability and volume growth. As we discussed in our last quarter call, we expected to continue to work towards commissioning of our new GAC line throughout Q2. We are excited about the recent announcement of that commissioning. We did, however, incur approximately $1.9 million of costs associated with the pre-production feedstock using the commissioning of our GAC line. We generated positive adjusted EBITDA of approximately $3.7 million compared to adjusted EBITDA of $1.1 million in the prior year period. I would note that, consistent with many market participants, we have added back stock-based compensation in Q2 2025 as a part of our adjusted EBITDA calculation and revised the Q2 2024 adjusted EBITDA calculation for comparability. We incurred a net loss of $2.1 million versus a net loss of $2 million in Q2 of 2024, primarily attributable to the cost incurred in pre-production feedstock used in the commissioning of our GAC line. 100% of our PAC sales contracts are now net contributors in 2025. Focusing our efforts on profitability over volume led to this milestone, a significant achievement in our PAC portfolio, given that 24% of volumes were loss-making as of December 2022. Selling, general and administrative expenses totaled $5.9 million, reflecting a reduction of approximately 16% versus the prior year period. This reduction was primarily driven by a reduction in payroll and benefits, as well as general administrative expenses. Research and development costs for the second quarter increased to 190%, or $1.8 million, compared to Q2 2024. Much of this increase is primarily attributable to the commissioning of the GAC line we discussed earlier. Overall, our performance in Q2 2025 demonstrates our ability to operate our PAC business in a way that contributes positively to our economic position in a truly sustainable manner, while further enabling us to pursue and execute on high growth and high margin opportunities within our expanding GAC business. We remain focused on enhancing the profitability of our PAC business even further and believe that it is now genuinely cash-generative on an annualized basis. As Bob noted, this PAC legacy business turnaround secures our foundational business onto which we are adding the higher growth GAC opportunity. To discuss the impacts of the quarter on our balance sheet, let me turn it over to our Chief Accounting Officer, Stacia. Thanks, Jay. Turning to the balance sheet, we ended the second quarter with total cash of $15 million, of which approximately $7 million is unrestricted. The change versus the end of the year was driven primarily by trailing CapEx spend at Red River relating to the GAC line and buildup of Arq wet cake inventory and critical spare parts. Today, we are reiterating our 2025 CapEx forecast of between $8 million and $12 million. We continue to expect to fund our operating and CapEx needs via our existing cash generation and ongoing cost reduction initiatives. As discussed in our first quarter results, during the second quarter, we amended our agreement with MidCap to provide for additional borrowings under that facility if needed. With that, I will turn things back to Bob. Thanks, Jay and Stacia. Before we turn to questions, I'd like to leave you with three key takeaways. First, our PAC business continues to thrive, and we delivered another strong quarter. Without the impact of ongoing commissioning-related costs in Q2, our EBITDA would have been even better. I take great pride in our team not only delivering a fifth consecutive quarter of positive adjusted EBITDA, but also a more than three times improvement versus the second quarter of 2024. We remain focused on further enhancing the existing PAC business and believe the current annualized performance is not only sustainable but has room for further improvement. Second, the successful commissioning of our first GAC production phase at Red River marks a transformative milestone. This achievement enables us to begin ramping up toward nameplate capacity over the next six months while continuing to refine our processes to maximize margins and value. Third, alongside phase one ramp-up, we're actively developing detailed plans for phase two, which would add another 25 million pounds of granular activated carbon capacity at Red River. The second GAC line is already fully permitted at Red River. Our existing feedstock capacity at Corbin is sufficient for our phase two needs. Therefore, no additional permitting or capital investment is needed at Corbin. In summary, our foundational PAC business is delivering solid results. Our growth-oriented GAC business has achieved its most important milestone to date, and we're actively planning the next exciting stage of growth. We look forward to updating you on our progress across all elements of this strategy. With that, I'll hand it back to our operator to open for questions. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. The first question is from Gerard Sweeney from ROTH Capital Partners. Please go ahead. Good morning, Bob, Stacia and team, thanks for taking my call. Happy to do it, Gerry. Red River, I figure we start there. Obviously, commissioning process is underway. Can you maybe elaborate a little bit on the key milestones that you're going to go through that process? I think we had spoken earlier that in the commissioning process, you tweaked, I think, for lack of a better word, parts of the process around the heating, etc., and you had to bring in some permanent equipment. I just want to see how the next, you know, six months sort of develop from their perspective. Sure. As I mentioned in our remarks, the operations team is going to be singularly focused on getting up to full 25 million nameplate capacity or higher as quickly as possible. That's why we've given that six months' guidance. We identified as part of the process, the initial step was to complete commissioning to get into commercial production to initiate sales, which we've done. During that process, we also recognized additional tweaks or areas where we can improve the operations that will improve from our current commercial production rates and get us up to or close to that 25 million pounds or above. This process isn't going to be linear in that it's going to be in increments or in jumps, as you will, as we identify things. The margin we're getting now based on current production levels versus what we'll get two months from now or when we're at full production rates will be different. It's a lot of little things. It takes a lot of pennies and nickels to make a dollar. It's the same way in getting up to full production. Got it. Switching gears, actually, we'll stay with the Red River. Let me think here. Phase II, line two, you know, in the past, we've discussed costs, but you know, with permitting not needed, maybe some design improvements after line one. What would be the cost per pound or total cost to add line two? That's one of the things that we're working on, and we'll have finalized in the next four to five months. As you mentioned, there are definitely going to be some design enhancements over line one that will both shorten the process and lower the cost on that. What we're doing now is looking at all those enhancements, looking at the lead time, taking into account what the current prices are versus when we made the financial investment decision on line one. That's part of the process that we'll be undertaking and reviewing over the next four to five months. I'm sure, you know, I'm confident in saying it's not going to be more than the current line, and I hopefully and would expect it to be less. Got it. The end market's very well versed on the water market. We understand that to our context. On the RNG side, what is the timeline to moving from initial sales for testing to contracts? The other part of the question is, what's the balance between water-related product and potentially RNG product in terms of maybe percentage of sales or optimal % of sales? Sure. A couple of things. The answer, and not to be obtuse on the timing, is it varies anywhere really from one to six to eight months. It depends upon the customer. It depends upon their testing, final testing requirements. I think the key item there is that this final completion of in-situ testing is the final element to finalize the negotiations. We've essentially agreed on the details. We've agreed on price. We've discussed potential volumes. They just want confirmation, they being the RNG customers, that it works within an actual field testing, not just lab or other types of testing. We're very confident in that as are our potential customers. In terms of optimal customer mix, again, it's a balance. While the RNG market has higher pricing and higher margins than the water market, you don't want to put all your eggs in one basket. You want to have a portfolio of risk across different industries so you're not held captive to one particular industry. I think that portfolio approach is in the best interest of shareholders. It's going to be a mix between water, RNG, and other industries. Got it. Final question for me, and I'll jump back in line. I know on the adjusted EBITDA, you added back, I think, some product costs that were sort of embedded, I guess probably in R&D and maybe a little bit SG&A. Gross margins, it's reading the press release, it sounded like there was a little bit of cost associated with the commercialization and the gross margins as well. I'm not sure if that's maybe some overtime and people working, etc. What was the impact on the gross margins from the commissioning aspect? You know. We moved, the $1.9 million was originally in cost of sales. We moved that into R&D expense. The $1.9 million was reclassified to R&D associated with the pre-production inventory that we were running through. There are probably some additional costs. I think Bob alluded to that as well in his remarks, that is included in cost of sales. It's hard to say how much that is. It wasn't significant enough that we needed to go ahead and make an adjustment for it. We think margins are probably above 33% for the PAC business on a go-forward basis. What we anticipate, because we didn't commission until early August, is that we probably got another month of that pre-production inventory running through that will flow through in the third quarter in July as well. Got it. There's some leftover pre-production inventory. On the gross margin side, we're probably, I get it. There's probably some labor. There's some. Yeah, exactly. Yeah. That is correct. That is correct. Higher ASPs, and we're also going into the third quarter where we had volume ups or absorption overhead. That's right. That's right. You got it. Okay, great. Congrats on commissioning, as you guys know. Thank you. I think the water end market is huge for GAC, and obviously, RNG is going to be added into it. Excited for the next couple of years, so thanks. Thank you, Jerry. The next question is from Aaron Spychalla from Craig-Hallum. Please go ahead. Yeah. Good morning, Bob and Jay and Stacia. Thanks for taking the questions. Maybe first on the PAC progress, can you just talk about the opportunity for further improvements there, on ASP or kind of market diversification in the coming years, just where margins can go in that business? Yeah. A couple of things. One, there's a possibility as we continue to lessen reliance on the mercury emissions market, as we mentioned during our remarks, and we expand into other markets which are higher priced and have higher margins as it relates to that. While we've averaged over a 16% increase in our average selling price over the last eight quarters, at some point, that has to abate. We saw it. We came just short of double digits again this quarter, but 9% is still extremely strong. We still see momentum and have visibility towards increasing our average selling price as we expand into the newer markets. All right. Thanks for that. I appreciate all the color on the RNG. Sounds like a really good opportunity. Can you just share any preliminary results as you've started that in-situ testing, just on how your product stacks up? Any feedback there that you might have received already? Yeah. No. Based on both the initial phases of testing, as I say, there have been at least two, and in some instances, three phases of testing before the in-situ testing. Both ourselves and the potential customers are extremely pleased. The initial indications show that our product performs significantly better than the competition, which is great, but we also want to make sure we get paid for that superior performance as it relates to that. We're quite encouraged. That's one of the reasons we've held back contracting capacity. We could contract all of our remaining capacity, as I've said before, right now in the water market. We'd like to hold it back and have held it back for the RNG market because of its higher pricing and higher margin. Just a digression on contract pricing. I consistently talk about the market for granular activated carbon being undersupplied with excess demand. The best indicator or evidence of that is that the contracts we entered into a year ago or a year ago or more, if we entered into those today, would be at higher pricing. Understood. I will stop there and turn it over. Thanks for taking the questions. Yeah, thanks, Aaron. The next question is from Tim Moore from ClearStreet. Please go ahead. Thanks. Congratulations on that key catalyst of starting the efficient optimized granular activated carbon line. I like Bob's hockey analogy. Do you expect to possibly squeeze out the 10%-20% more production from phase one? When do you think you might know that? Is that more like an October, November timeframe before your next earnings call? We definitely have aspirations for producing more than the 25 million pounds. We'll only know that once we get to full nameplate capacity of 25 million pounds. I'm not going to say October. We'll know that in the next six months, as we said. I'm not going to let myself get boxed into the October timeframe on that. We still remain confident in the ability to produce more than the nameplate capacity. Thanks, Bob. I like how you mentioned you're not running before you can walk. I know this might be premature to ask a bit more about line two, phase two, but is the equipment ordering and construction lead time still about 12 months, or do you think it can be quicker because of lessons learned, sourcing best practices, setup optimization? Just wondering, I got to imagine it would be faster than commissioning what you did for phase I. Just kind of curious on the timeline. It sure is better to be faster than we did for phase I, but otherwise, we didn't learn anything on that. I'm confident that the operations team has learned quite a bit. The lead time for certain pieces of equipment is lengthy, and when you combine it with you have to wait to do final installation and construction and commissioning once it's installed, I think roughly a year lead time is good guidance to give people from initiation of the FID to actually beginning commissioning, beginning production. That's very helpful. The only other question I get a lot on, and I think you already nipped it in the bud, but I think it'd just be helpful for investors. You mentioned really no desire or preference to issue further equity for phase II. Just kind of wondering, it seems like you're highly confident to use what, entirely debt to maybe finance line two. Just kind of curious about that. Yeah. No. When you look at it, one, with the ongoing turnaround and cash flow generation of the PAC business, you combine that with the granular activated carbon business, the cash flow we'll get from that, the availability we have on our debt facilities and the ability to expand that if needed based on the enhanced cash flow that I just mentioned. You add the fact that it isn't just spending all that money in one, you know, fell swoop. It's over time. It's incremental. When Jay and I discuss it, and along with Stacia and the rest of the team, we feel very comfortable with the ability to finance it out of cash flow, cost-cutting initiatives, and debt availability. I would add that the debt markets are still pretty wide open. That could change for sure, but once we have the proven story from phase one and are able to show potential lenders the profile of that business and we're going to be replicating it, I think it's a pretty easy, easy opportunity. Oh, that's terrific, Jay and Bob. Thanks for adding that color. I think that was an important point. That is it for my questions. Thanks. As a reminder, to ask a question, please press star one. The next question is from Peter Gastreich from Water Tower Research. Please go ahead. Thank you. Good morning, Bob and team. Congratulations on your results and your GAC phase I startup. It's great to see that you've already got phase two FID within your sights for later this year. Just a couple of questions from me. The first one will be on RNG, and the second one will be on the asphalt emulsion. Thanks for the color on the RNG market. I'm just sort of curious, following the Big Beautiful Bill, did you notice a further enhancement of interest from renewable natural gas customers? I understand the demand already looked good before that, but I'm just curious whether there was any noticeable increase after that policy clarity came through for RNG producers. We've seen some, but it's difficult to separate that out from what I would call organic or ongoing versus anything that was stimulated by the Big Beautiful Bill. If you look at it, one of the things we always try and look at is take politics out of the equation on that and that the RNG market fundamentals in and of themselves, and as it relates to granular activated carbon, are strong, were strong, and we expect to remain strong irrespective of any potential benefits of the Big Beautiful Bill. It was an extremely attractive market before the Big Beautiful Bill. Does it add to it? Yes. Are we counting on that addition? No, because it was already so attractive and had so much potential. Okay. Great. That makes sense. Thank you. Regarding the asphalt opportunity, can you talk a bit more about the scale or magnitude of this market opportunity? Also, is this a product that is unique to Arq, or will you have competition either from that or similar, you know, or a competing product? What kind of timeframe before you make a decision on this one? Thank you. A number of questions embedded in that, but all relating to asphalt emulsion. I'll see if I can make sure I answer them all. It is unique to Arq in terms of our unique patent-protected process of converting bituminous coal waste into what we call Arq Wet Cake, into a feedstock. The quality of that and the way we formulate that leads to unique properties that I mentioned, which leads to extra durability, less prone to freeze-thaw degradation, enhanced color, quicker setting, enhanced hardness. It is unique to Arq. In terms of the opportunity size, it is quite immense. We're working, as I mentioned in my prepared remarks, with a leading U.S. Asphalt company. We're involved in testing phase right now on that. If successful, quite frankly, the asphalt emulsion market could take up all of our current production capacity at Corbin and then some if we wanted to. It's an enormous opportunity with significant advantages that our unique feedstock product adds to the asphalt market. I think that covers all the components, but if not, what did I miss? You got it. Thanks very much, Bob, and congratulations again. I'll get back in with you. Thanks. There are no further questions at this time. I would like to turn the floor back over to Bob Rasmus for closing comments. Thanks, Stacia. In conclusion, much more has changed in the last two years than just our name and ticker symbol. On the financial side, we had just achieved our fifth consecutive quarter of positive adjusted EBITDA. Our ASP increased an average of 16% year-over-year over the last eight quarters. Our PAC business is now generating cash on a sustainable ongoing basis with further improvements expected. We have used that foundational PAC business as a low-cost vehicle, not just to expand into the high growth, high margin granular activated carbon business, but to fundamentally improve the growth trajectory of our company for many, many years to come. While we were confident in the strategic decision we made to expand into the GAC market, we're even more confident today. The GAC market continues to see demand well in excess of supply. The best evidence, as I mentioned, is the contracts we entered into last year would be at higher prices if finalized today. We have reached the first critical milestone of that expansion by completing commissioning and entering into commercial production of the first GAC line. We're poised to make the FID on the second $25 million GAC line by year-end. The market has also validated our ongoing transformation. Two years ago, just one analyst covered our stack. Today, there are six. Our market cap has grown more than six-fold in that same period since I became CEO. These results are a testament to the hard work and dedication of our entire team. While they are impressive, we still see significant opportunities to improve and grow. We appreciate your taking the time and your interest in Arq, and we look forward to discussing further developments on our next quarterly call. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker 7: Greetings and welcome to the Arq Q2 2025 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Anthony Nathan, Head of Investor Relations. Thank you. You may begin. Greetings and welcome to the Arq Q2 2025 Earnings Call. greetings and welcome to the arq q2 2025 earnings call At this time, all participants are in a listen-only mode. at this time all participants are in a listen-only mode A brief question and answer session will follow the formal presentation. a brief question and answer session will follow the formal presentation Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. should anyone require operator assistance during the conference please press star zero on your telephone keypad As a reminder, this conference is being recorded. as a reminder this conference is being recorded It is now my pleasure to introduce your host, Anthony Nathan, Head of Investor Relations. it is now my pleasure to introduce your host anthony nathan head of investor relations Thank you. thank you You may begin. you may begin

Speaker 3: Thank you, Operator. Good morning, everyone, and thank you for joining us today for our Second Quarter 2025 Earnings Results Call. With me on the call today are Bob Rasmus, Arq's Chief Executive Officer, Jay Voncannon, Arq's Chief Financial Officer, and Stacia Hansen, Arq's Chief Accounting Officer. This conference call is being webcast live within the Investor 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 and Exchange Act. Thank you, Operator. thank you operator Good morning, everyone, and thank you for joining us today for our Second Quarter 2025 Earnings Results Call. good morning everyone and thank you for joining us today for our second quarter 2025 earnings results call With me on the call today are Bob Rasmus, Arq's Chief Executive Officer, Jay Voncannon, Arq's Chief Financial Officer, and Stacia Hansen, Arq's Chief Accounting Officer. with me on the call today are bob rasmus arq's chief executive officer jay voncannon arq's chief financial officer and stacia hansen arq's chief accounting officer This conference call is being webcast live within the Investor section of our website, and a downloadable version of today's presentation is available there as well. this conference call is being webcast live within the investor 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]. 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 and Exchange Act. let me remind you that the presentation and remarks made today include forward-looking statements as defined in section 21e of the securities and 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 in these statements. These risks and uncertainties include, but are not limited to, those factors identified on slide two of today's slide presentation in our Form 10-Q for the quarter ended June 30, 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. 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 in these statements. 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 in these statements These risks and uncertainties include, but are not limited to, those factors identified on slide two of today's slide presentation in our Form 10-Q for the quarter ended June 30, 2025, and other filings with the Securities and Exchange Commission. these risks and uncertainties include but are not limited to those factors identified on slide two of today's slide presentation in our form 10-q for the quarter ended june 30 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. 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. 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. with that i would like to turn the call over to bob

Speaker 2: Thank you, Anthony, and thanks to everyone for joining us this morning. Today's second quarter results and the recent successful completion of commissioning of our first GAC line at Red River are key achievements in the continuing transformation of Arq to a sustainably profitable environmental technology company. I'm extremely pleased to confirm that we have achieved a major milestone with the recent commissioning of our first GAC line, which is now beginning its ramp-up towards nameplate capacity of 25 million pounds, which is anticipated within six months. We made our first granular activated carbon sales ahead of what we consider completion of commissioning, validating both market demand and product quality. While GAC is certainly our growth engine, we delivered another solid quarter from our foundational PAC business. Thank you, Anthony, and thanks to everyone for joining us this morning. thank you anthony and thanks to everyone for joining us this morning Today's second quarter results and the recent successful completion of commissioning of our first GAC line at Red River are key achievements in the continuing transformation of Arq to a sustainably profitable environmental technology company. today's second quarter results and the recent successful completion of commissioning of our first gac line at red river are key achievements in the continuing transformation of arq to a sustainably profitable environmental technology company I'm extremely pleased to confirm that we have achieved a major milestone with the recent commissioning of our first GAC line, which is now beginning its ramp-up towards nameplate capacity of 25 million pounds, which is anticipated within six months. i'm extremely pleased to confirm that we have achieved a major milestone with the recent commissioning of our first gac line which is now beginning its ramp-up towards nameplate capacity of 25 million pounds which is anticipated within six months We made our first granular activated carbon sales ahead of what we consider completion of commissioning, validating both market demand and product quality. we made our first granular activated carbon sales ahead of what we consider completion of commissioning validating both market demand and product quality While GAC is certainly our growth engine, we delivered another solid quarter from our foundational PAC business. while gac is certainly our growth engine we delivered another solid quarter from our foundational pac business Despite Q2 typically being a shoulder quarter, we delivered revenue of $29 million with higher volumes than the previous year, combined with ASP growth. We narrowly missed our ninth straight quarter of double-digit year-over-year price growth. However, delivering a strong 9% increase in our ASP is still an outstanding result. We achieved our fifth consecutive quarter of positive adjusted EBITDA, which also represented an increase of more than 3x as compared to the same quarter last year. Our results are further confirmation that the foundational PAC business is well and truly turned around. The story remains consistent: our PAC business continues a successful turnaround while we maintain focus on further optimization. We've identified additional opportunities to reduce both operational and corporate costs, which, combined with our steady ASP improvements, should continue to drive enhanced financial performance. Despite Q2 typically being a shoulder quarter, we delivered revenue of $29 million with higher volumes than the previous year, combined with ASP growth. despite q2 typically being a shoulder quarter we delivered revenue of $29 million with higher volumes than the previous year combined with asp growth We narrowly missed our ninth straight quarter of double-digit year-over-year price growth. we narrowly missed our ninth straight quarter of double-digit year-over-year price growth However, delivering a strong 9% increase in our ASP is still an outstanding result. however delivering a strong 9% increase in our asp is still an outstanding result We achieved our fifth consecutive quarter of positive adjusted EBITDA, which also represented an increase of more than 3x as compared to the same quarter last year. we achieved our fifth consecutive quarter of positive adjusted ebitda which also represented an increase of more than 3x as compared to the same quarter last year Our results are further confirmation that the foundational PAC business is well and truly turned around. our results are further confirmation that the foundational pac business is well and truly turned around The story remains consistent: our PAC business continues a successful turnaround while we maintain focus on further optimization. the story remains consistent our pac business continues a successful turnaround while we maintain focus on further optimization We've identified additional opportunities to reduce both operational and corporate costs, which, combined with our steady ASP improvements, should continue to drive enhanced financial performance. we've identified additional opportunities to reduce both operational and corporate costs which combined with our steady asp improvements should continue to drive enhanced financial performance With the successful commissioning of our first GAC line, we are adding a higher growth, higher margin business, which we expect to further enhance profitability. Our PAC business remains robust with continued positive pricing momentum and strong demand across both existing and new applications. A key driver of our ASP improvement has been our strategic diversification of customers and end markets. In volume terms, we have reduced our exposure to the mercury emissions market to under 40% of volumes as of the first half of 2025. While mercury-related applications are an important component of our PAC business, their impact on our financial performance has diminished even further than this percentage suggests. Accessing new markets for our powdered activated carbon and expanding into granular activated carbon improves our margins, our overall financial performance, and lessens our exposure to any one particular market sector. With the successful commissioning of our first GAC line, we are adding a higher growth, higher margin business, which we expect to further enhance profitability. with the successful commissioning of our first gac line we are adding a higher growth higher margin business which we expect to further enhance profitability Our PAC business remains robust with continued positive pricing momentum and strong demand across both existing and new applications. our pac business remains robust with continued positive pricing momentum and strong demand across both existing and new applications A key driver of our ASP improvement has been our strategic diversification of customers and end markets. a key driver of our asp improvement has been our strategic diversification of customers and end markets In volume terms, we have reduced our exposure to the mercury emissions market to under 40% of volumes as of the first half of 2025. in volume terms we have reduced our exposure to the mercury emissions market to under 40% of volumes as of the first half of 2025 While mercury-related applications are an important component of our PAC business, their impact on our financial performance has diminished even further than this percentage suggests. while mercury-related applications are an important component of our pac business their impact on our financial performance has diminished even further than this percentage suggests Accessing new markets for our powdered activated carbon and expanding into granular activated carbon improves our margins, our overall financial performance, and lessens our exposure to any one particular market sector. accessing new markets for our powdered activated carbon and expanding into granular activated carbon improves our margins our overall financial performance and lessens our exposure to any one particular market sector Meanwhile, the granular activated carbon market continues to show exceptional strength. We're seeing persistent supply shortages with minimal new capacity entering the market against a backdrop of steady 3%-5% annual growth from existing demand drivers. As a reminder, this growth in demand does not take into account PFAS-related requirements and demand. When we factor in the expected impact of EPA regulatory changes, which could add three to five times today's demand, the growth opportunity becomes even more compelling. While some investors have recently expressed confusion on the implementation timing, two points are clear. First, competitors show no material supply response as new supply typically takes three to four years to develop. Second, customers are locking in supply early ahead of further expected constraints. Beyond water treatment, additional demand drivers like renewable natural gas could further accelerate market growth. Meanwhile, the granular activated carbon market continues to show exceptional strength. meanwhile the granular activated carbon market continues to show exceptional strength We're seeing persistent supply shortages with minimal new capacity entering the market against a backdrop of steady 3%-5 % annual growth from existing demand drivers. we're seeing persistent supply shortages with minimal new capacity entering the market against a backdrop of steady 3%-5 % annual growth from existing demand drivers As a reminder, this growth in demand does not take into account PFAS-related requirements and demand. as a reminder this growth in demand does not take into account pfas-related requirements and demand When we factor in the expected impact of EPA regulatory changes, which could add three to five times today's demand, the growth opportunity becomes even more compelling. when we factor in the expected impact of epa regulatory changes which could add three to five times today's demand the growth opportunity becomes even more compelling While some investors have recently expressed confusion on the implementation timing, two points are clear. while some investors have recently expressed confusion on the implementation timing two points are clear First, competitors show no material supply response as new supply typically takes three to four years to develop. first competitors show no material supply response as new supply typically takes three to four years to develop Second, customers are locking in supply early ahead of further expected constraints. second customers are locking in supply early ahead of further expected constraints Beyond water treatment, additional demand drivers like renewable natural gas could further accelerate market growth. beyond water treatment additional demand drivers like renewable natural gas could further accelerate market growth Currently, we estimate that RNG applications consume approximately 45 million pounds of granular activated carbon annually, with the GAC being used to scrub carbon dioxide, hydrogen sulfide, nitrogen, and other contaminants before the gas can enter the grid. With total U.S. RNG production currently estimated to be around 600 million cubic feet per day, that would indicate that every 100 million cubic feet per day of incremental RNG growth would require nearly 8 million additional pounds of granular activated carbon. With industry projections suggesting RNG could grow 2x-10x by 2030, this represents potential incremental demand of 45 million-400 million pounds, directly coinciding with the anticipated spike in PFAS-related demand. With that said, I'm proud to report that we've already sold initial phase one GAC product during the third quarter to RNG customers as part of the trials mentioned during our previous earnings call in May. Currently, we estimate that RNG applications consume approximately 45 million pounds of granular activated carbon annually, with the GAC being used to scrub carbon dioxide, hydrogen sulfide, nitrogen, and other contaminants before the gas can enter the grid. currently we estimate that rng applications consume approximately 45 million pounds of granular activated carbon annually with the gac being used to scrub carbon dioxide hydrogen sulfide nitrogen and other contaminants before the gas can enter the grid With total U.S. with total u.s RNG production currently estimated to be around 600 million cubic feet per day, that would indicate that every 100 million cubic feet per day of incremental RNG growth would require nearly 8 million additional pounds of granular activated carbon. rng production currently estimated to be around 600 million cubic feet per day that would indicate that every 100 million cubic feet per day of incremental rng growth would require nearly 8 million additional pounds of granular activated carbon With industry projections suggesting RNG could grow 2x-10x by 2030, this represents potential incremental demand of 45 million- 400 million pounds, directly coinciding with the anticipated spike in PFAS-related demand. with industry projections suggesting rng could grow 2x-10x by 2030 this represents potential incremental demand of 45 million- 400 million pounds directly coinciding with the anticipated spike in pfas-related demand With that said, I'm proud to report that we've already sold initial phase one GAC product during the third quarter to RNG customers as part of the trials mentioned during our previous earnings call in May. with that said i'm proud to report that we've already sold initial phase one gac product during the third quarter to rng customers as part of the trials mentioned during our previous earnings call in may This positions us well to access this attractive high-growth market while still serving PFAS applications. In summary, the overall market remains tight and competitive, creating favorable conditions for both demand and pricing. Turning now to what is perhaps one of the most important operational developments since I became CEO: the successful commissioning of our first 25 million pound GAC line at Red River. I say one of the most important operational developments, not the most important, because I do not want to understate the team's achievements in turning around our foundational PAC business. These achievements reflect our team's remarkable dedication to finding solutions, adapting to unexpected challenges, and continuing to optimize our existing business while ultimately delivering a successfully commissioned plant. However, we only took a short pause to celebrate before focusing on our next task: ramping up production toward nameplate capacity. This positions us well to access this attractive high-growth market while still serving PFAS applications. this positions us well to access this attractive high-growth market while still serving pfas applications In summary, the overall market remains tight and competitive, creating favorable conditions for both demand and pricing. in summary the overall market remains tight and competitive creating favorable conditions for both demand and pricing Turning now to what is perhaps one of the most important operational developments since I became CEO: the successful commissioning of our first 25 million pound GAC line at Red River. turning now to what is perhaps one of the most important operational developments since i became ceo the successful commissioning of our first 25 million pound gac line at red river I say one of the most important operational developments, not the most important, because I do not want to understate the team's achievements in turning around our foundational PAC business. i say one of the most important operational developments not the most important because i do not want to understate the team's achievements in turning around our foundational pac business These achievements reflect our team's remarkable dedication to finding solutions, adapting to unexpected challenges, and continuing to optimize our existing business while ultimately delivering a successfully commissioned plant. these achievements reflect our team's remarkable dedication to finding solutions adapting to unexpected challenges and continuing to optimize our existing business while ultimately delivering a successfully commissioned plant However, we only took a short pause to celebrate before focusing on our next task: ramping up production toward nameplate capacity. however we only took a short pause to celebrate before focusing on our next task ramping up production toward nameplate capacity The extended commissioning period allowed us to address various fine points and minor issues in parallel, which we believe may accelerate our ramp-up timeline. Nevertheless, we maintain our previous six-month guidance out of prudence. The lessons learned during construction and commissioning have positioned us exceptionally well to plan future expansions. I'm pleased to share that our current goal is to make the final investment decision on a second line prior to the end of 2025. To be clear, this is a goal, not formal guidance. The criteria for this decision remained unchanged: achieving smooth operational performance from phase I, securing customer demand for incremental capacity, and establishing a clear path to financing. While delivering all this within four to five months may be challenging, the compelling GAC market opportunity and our potential role within it make it logical to add capacity as quickly and prudently as possible. The extended commissioning period allowed us to address various fine points and minor issues in parallel, which we believe may accelerate our ramp-up timeline. the extended commissioning period allowed us to address various fine points and minor issues in parallel which we believe may accelerate our ramp-up timeline Nevertheless, we maintain our previous six-month guidance out of prudence. nevertheless we maintain our previous six-month guidance out of prudence The lessons learned during construction and commissioning have positioned us exceptionally well to plan future expansions. the lessons learned during construction and commissioning have positioned us exceptionally well to plan future expansions I'm pleased to share that our current goal is to make the final investment decision on a second line prior to the end of 2025. i'm pleased to share that our current goal is to make the final investment decision on a second line prior to the end of 2025 To be clear, this is a goal, not formal guidance. to be clear this is a goal not formal guidance The criteria for this decision remained unchanged: achieving smooth operational performance from phase I, securing customer demand for incremental capacity, and establishing a clear path to financing. the criteria for this decision remained unchanged achieving smooth operational performance from phase i securing customer demand for incremental capacity and establishing a clear path to financing While delivering all this within four to five months may be challenging, the compelling GAC market opportunity and our potential role within it make it logical to add capacity as quickly and prudently as possible. while delivering all this within four to five months may be challenging the compelling gac market opportunity and our potential role within it make it logical to add capacity as quickly and prudently as possible That said, we will not run before we can walk. Our operational team remains singularly focused on a successful ramp-up of phase one to nameplate capacity of 25 million pounds and potentially higher, as previously discussed. We anticipate completing negotiations for additional contracts to fill remaining phase one capacity in the coming months as customer trial results are finalized. Many of our customers have requirements far exceeding what they've currently contracted with us. Successful execution of phase one will enable us to capture a greater share of their total demand while attracting new customers who wanted proof of delivery before finalizing discussions. As these elements fall into place, we believe we can execute our second line using an updated construction plan and enhanced design aided by phase I lessons learned and backed by a solid order book. That said, we will not run before we can walk. that said we will not run before we can walk Our operational team remains singularly focused on a successful ramp-up of phase one to nameplate capacity of 25 million pounds and potentially higher, as previously discussed. our operational team remains singularly focused on a successful ramp-up of phase one to nameplate capacity of 25 million pounds and potentially higher as previously discussed We anticipate completing negotiations for additional contracts to fill remaining phase one capacity in the coming months as customer trial results are finalized. we anticipate completing negotiations for additional contracts to fill remaining phase one capacity in the coming months as customer trial results are finalized Many of our customers have requirements far exceeding what they've currently contracted with us. many of our customers have requirements far exceeding what they've currently contracted with us Successful execution of phase one will enable us to capture a greater share of their total demand while attracting new customers who wanted proof of delivery before finalizing discussions. successful execution of phase one will enable us to capture a greater share of their total demand while attracting new customers who wanted proof of delivery before finalizing discussions As these elements fall into place, we believe we can execute our second line using an updated construction plan and enhanced design aided by phase I lessons learned and backed by a solid order book. as these elements fall into place we believe we can execute our second line using an updated construction plan and enhanced design aided by phase i lessons learned and backed by a solid order book With these fundamentals in place, securing credit financing for an identical growth stage should be achievable. As a major shareholder and someone who is fully aligned with shareholders, my preference remains to issue no further equity, and I currently see no reason why that would need to change. Moving on to the regulatory environment, despite broader market uncertainty, the current administration has been favorable for our business. As the only fully integrated domestic producer selling predominantly to U.S. customers, tariff issues have had limited direct impact on our operations and finances. While the EPA's suggested delay in full PFAS regulation implementation caused some investor concern, we view it as a pragmatic approach. My recent discussions with EPA officials revealed both their and our concern about supply meeting demand. With these fundamentals in place, securing credit financing for an identical growth stage should be achievable. with these fundamentals in place securing credit financing for an identical growth stage should be achievable As a major shareholder and someone who is fully aligned with shareholders, my preference remains to issue no further equity, and I currently see no reason why that would need to change. as a major shareholder and someone who is fully aligned with shareholders my preference remains to issue no further equity and i currently see no reason why that would need to change Moving on to the regulatory environment, despite broader market uncertainty, the current administration has been favorable for our business. moving on to the regulatory environment despite broader market uncertainty the current administration has been favorable for our business As the only fully integrated domestic producer selling predominantly to U.S. customers, tariff issues have had limited direct impact on our operations and finances. as the only fully integrated domestic producer selling predominantly to u.s customers tariff issues have had limited direct impact on our operations and finances While the EPA's suggested delay in full PFAS regulation implementation caused some investor concern, we view it as a pragmatic approach. while the epa's suggested delay in full pfas regulation implementation caused some investor concern we view it as a pragmatic approach My recent discussions with EPA officials revealed both their and our concern about supply meeting demand. my recent discussions with epa officials revealed both their and our concern about supply meeting demand The potential extension from 2029-2031, therefore, should not be seen as an environmental policy dilution, but rather a realistic acknowledgment that maintaining deadlines without sufficient GAC supply or other controls would be impractical. You cannot solve a problem without adequate tools. It would be like playing hockey without the right padding or equipment. The EPA's commitment to ensuring Americans have the cleanest air, land, and water aligns closely with our mission, and I firmly believe the administration remains committed to pragmatic environmental regulations. While our business doesn't require further regulatory changes to succeed, any such changes would only strengthen our position. Separately, we continue working closely with the Department of Energy on critical elements, rare earth minerals, and synthetic graphite, all strategic priorities for the current administration. While commercial development of these products isn't near-term, we're actively exploring potential federal-public-private partnerships to advance these efforts. The potential extension from 2029- 2031, therefore, should not be seen as an environmental policy dilution, but rather a realistic acknowledgment that maintaining deadlines without sufficient GAC supply or other controls would be impractical. the potential extension from 2029- 2031 therefore should not be seen as an environmental policy dilution but rather a realistic acknowledgment that maintaining deadlines without sufficient gac supply or other controls would be impractical You cannot solve a problem without adequate tools. you cannot solve a problem without adequate tools It would be like playing hockey without the right padding or equipment. it would be like playing hockey without the right padding or equipment The EPA's commitment to ensuring Americans have the cleanest air, land, and water aligns closely with our mission, and I firmly believe the administration remains committed to pragmatic environmental regulations. the epa's commitment to ensuring americans have the cleanest air land and water aligns closely with our mission and i firmly believe the administration remains committed to pragmatic environmental regulations While our business doesn't require further regulatory changes to succeed, any such changes would only strengthen our position. while our business doesn't require further regulatory changes to succeed any such changes would only strengthen our position Separately, we continue working closely with the Department of Energy on critical elements, rare earth minerals, and synthetic graphite, all strategic priorities for the current administration. separately we continue working closely with the department of energy on critical elements rare earth minerals and synthetic graphite all strategic priorities for the current administration While commercial development of these products isn't near-term, we're actively exploring potential federal-public-private partnerships to advance these efforts. while commercial development of these products isn't near-term we're actively exploring potential federal-public-private partnerships to advance these efforts On asphalt emulsion potential, we believe using our carbon feedstock as a blending component to extend freeze-thaw durability, increase hardness, and maintain color is a significant potential future source of revenue. We are currently engaged in a testing program with a leading U.S. asphalt company. With that, I'll now turn it over to Jay for a detailed financial review. On asphalt emulsion potential, we believe using our carbon feedstock as a blending component to extend freeze-thaw durability, increase hardness, and maintain color is a significant potential future source of revenue. on asphalt emulsion potential we believe using our carbon feedstock as a blending component to extend freeze-thaw durability increase hardness and maintain color is a significant potential future source of revenue We are currently engaged in a testing program with a leading U.S. asphalt company. we are currently engaged in a testing program with a leading u.s asphalt company With that, I'll now turn it over to Jay for a detailed financial review. with that i'll now turn it over to jay for a detailed financial review

Speaker 9: Thanks, Bob, and thanks everyone for joining us today. Arq continued to deliver strong financial results during the second quarter, with revenue growing 13% year-over-year to $29 million. This continues to be driven largely by enhanced contract terms, including 9% growth on average selling price and an increase in volumes. Our gross margin in the quarter was approximately 33%, which is slightly higher than the second quarter of 2024. As Bob mentioned, the turnaround of the PAC business through the combined effort of the entire Arq team has been achieved, evidenced by the improved profitability and volume growth. As we discussed in our last quarter call, we expected to continue to work towards commissioning of our new GAC line throughout Q2. We are excited about the recent announcement of that commissioning. Thanks, Bob, and thanks everyone for joining us today. thanks bob and thanks everyone for joining us today Arq continued to deliver strong financial results during the second quarter, with revenue growing 13% year-over-year to $29 million. arq continued to deliver strong financial results during the second quarter with revenue growing 13% year-over-year to $29 million This continues to be driven largely by enhanced contract terms, including 9% growth on average selling price and an increase in volumes. this continues to be driven largely by enhanced contract terms including 9% growth on average selling price and an increase in volumes Our gross margin in the quarter was approximately 33%, which is slightly higher than the second quarter of 2024. our gross margin in the quarter was approximately 33% which is slightly higher than the second quarter of 2024 As Bob mentioned, the turnaround of the PAC business through the combined effort of the entire Arq team has been achieved, evidenced by the improved profitability and volume growth. as bob mentioned the turnaround of the pac business through the combined effort of the entire arq team has been achieved evidenced by the improved profitability and volume growth As we discussed in our last quarter call, we expected to continue to work towards commissioning of our new GAC line throughout Q2. as we discussed in our last quarter call we expected to continue to work towards commissioning of our new gac line throughout q2 We are excited about the recent announcement of that commissioning. we are excited about the recent announcement of that commissioning We did, however, incur approximately $1.9 million of costs associated with the pre-production feedstock using the commissioning of our GAC line. We generated positive adjusted EBITDA of approximately $3.7 million compared to adjusted EBITDA of $1.1 million in the prior year period. I would note that, consistent with many market participants, we have added back stock-based compensation in Q2 2025 as a part of our adjusted EBITDA calculation and revised the Q2 2024 adjusted EBITDA calculation for comparability. We incurred a net loss of $2.1 million versus a net loss of $2 million in Q2 of 2024, primarily attributable to the cost incurred in pre-production feedstock used in the commissioning of our GAC line. 100% of our PAC sales contracts are now net contributors in 2025. We did, however, incur approximately $1.9 million of costs associated with the pre-production feedstock using the commissioning of our GAC line. we did however incur approximately $1.9 million of costs associated with the pre-production feedstock using the commissioning of our gac line We generated positive adjusted EBITDA of approximately $3.7 million compared to adjusted EBITDA of $1.1 million in the prior year period. we generated positive adjusted ebitda of approximately $3.7 million compared to adjusted ebitda of $1.1 million in the prior year period I would note that, consistent with many market participants, we have added back stock-based compensation in Q2 2025 as a part of our adjusted EBITDA calculation and revised the Q2 2024 adjusted EBITDA calculation for comparability. i would note that consistent with many market participants we have added back stock-based compensation in q2 2025 as a part of our adjusted ebitda calculation and revised the q2 2024 adjusted ebitda calculation for comparability We incurred a net loss of $2.1 million versus a net loss of $2 million in Q2 of 2024, primarily attributable to the cost incurred in pre-production feedstock used in the commissioning of our GAC line. 100% of our PAC sales contracts are now net contributors in 2025. we incurred a net loss of $2.1 million versus a net loss of $2 million in q2 of 2024 primarily attributable to the cost incurred in pre-production feedstock used in the commissioning of our gac line 100% of our pac sales contracts are now net contributors in 2025 Focusing our efforts on profitability over volume led to this milestone, a significant achievement in our PAC portfolio, given that 24% of volumes were loss-making as of December 2022. Selling, general and administrative expenses totaled $5.9 million, reflecting a reduction of approximately 16% versus the prior year period. This reduction was primarily driven by a reduction in payroll and benefits, as well as general administrative expenses. Research and development costs for the second quarter increased to 190%, or $1.8 million, compared to Q2 2024. Much of this increase is primarily attributable to the commissioning of the GAC line we discussed earlier. Overall, our performance in Q2 2025 demonstrates our ability to operate our PAC business in a way that contributes positively to our economic position in a truly sustainable manner, while further enabling us to pursue and execute on high growth and high margin opportunities within our expanding GAC business. Focusing our efforts on profitability over volume led to this milestone, a significant achievement in our PAC portfolio, given that 24% of volumes were loss-making as of December 2022. focusing our efforts on profitability over volume led to this milestone a significant achievement in our pac portfolio given that 24% of volumes were loss-making as of december 2022 Selling, general and administrative expenses totaled $5.9 million, reflecting a reduction of approximately 16% versus the prior year period. selling general and administrative expenses totaled $5.9 million reflecting a reduction of approximately 16% versus the prior year period This reduction was primarily driven by a reduction in payroll and benefits, as well as general administrative expenses. this reduction was primarily driven by a reduction in payroll and benefits as well as general administrative expenses Research and development costs for the second quarter increased to 190%, or $1.8 million, compared to Q2 2024. research and development costs for the second quarter increased to 190% or $1.8 million compared to q2 2024 Much of this increase is primarily attributable to the commissioning of the GAC line we discussed earlier. much of this increase is primarily attributable to the commissioning of the gac line we discussed earlier Overall, our performance in Q2 2025 demonstrates our ability to operate our PAC business in a way that contributes positively to our economic position in a truly sustainable manner, while further enabling us to pursue and execute on high growth and high margin opportunities within our expanding GAC business. overall our performance in q2 2025 demonstrates our ability to operate our pac business in a way that contributes positively to our economic position in a truly sustainable manner while further enabling us to pursue and execute on high growth and high margin opportunities within our expanding gac business We remain focused on enhancing the profitability of our PAC business even further and believe that it is now genuinely cash-generative on an annualized basis. As Bob noted, this PAC legacy business turnaround secures our foundational business onto which we are adding the higher growth GAC opportunity. To discuss the impacts of the quarter on our balance sheet, let me turn it over to our Chief Accounting Officer, Stacia. We remain focused on enhancing the profitability of our PAC business even further and believe that it is now genuinely cash-generative on an annualized basis. we remain focused on enhancing the profitability of our pac business even further and believe that it is now genuinely cash-generative on an annualized basis As Bob noted, this PAC legacy business turnaround secures our foundational business onto which we are adding the higher growth GAC opportunity. as bob noted this pac legacy business turnaround secures our foundational business onto which we are adding the higher growth gac opportunity To discuss the impacts of the quarter on our balance sheet, let me turn it over to our Chief Accounting Officer, Stacia. to discuss the impacts of the quarter on our balance sheet let me turn it over to our chief accounting officer stacia

Speaker 5: Thanks, Jay. Turning to the balance sheet, we ended the second quarter with total cash of $15 million, of which approximately $7 million is unrestricted. The change versus the end of the year was driven primarily by trailing CapEx spend at Red River relating to the GAC line and buildup of Arq wet cake inventory and critical spare parts. Today, we are reiterating our 2025 CapEx forecast of between $8 million and $12 million. We continue to expect to fund our operating and CapEx needs via our existing cash generation and ongoing cost reduction initiatives. As discussed in our first quarter results, during the second quarter, we amended our agreement with MidCap to provide for additional borrowings under that facility if needed. With that, I will turn things back to Bob. Thanks, Jay. thanks jay Turning to the balance sheet, we ended the second quarter with total cash of $15 million, of which approximately $7 million is unrestricted. turning to the balance sheet we ended the second quarter with total cash of $15 million of which approximately $7 million is unrestricted The change versus the end of the year was driven primarily by trailing CapEx spend at Red River relating to the GAC line and buildup of Arq wet cake inventory and critical spare parts. the change versus the end of the year was driven primarily by trailing capex spend at red river relating to the gac line and buildup of arq wet cake inventory and critical spare parts Today, we are reiterating our 2025 CapEx forecast of between $8 millio n and $12 million. today we are reiterating our 2025 capex forecast of between $8 millio n and $12 million We continue to expect to fund our operating and CapEx needs via our existing cash generation and ongoing cost reduction initiatives. we continue to expect to fund our operating and capex needs via our existing cash generation and ongoing cost reduction initiatives As discussed in our first quarter results, during the second quarter, we amended our agreement with MidCap to provide for additional borrowings under that facility if needed. as discussed in our first quarter results during the second quarter we amended our agreement with midcap to provide for additional borrowings under that facility if needed With that, I will turn things back to Bob. with that i will turn things back to bob

Speaker 2: Thanks, Jay and Stacia. Before we turn to questions, I'd like to leave you with three key takeaways. First, our PAC business continues to thrive, and we delivered another strong quarter. Without the impact of ongoing commissioning-related costs in Q2, our EBITDA would have been even better. I take great pride in our team not only delivering a fifth consecutive quarter of positive adjusted EBITDA, but also a more than three times improvement versus the second quarter of 2024. We remain focused on further enhancing the existing PAC business and believe the current annualized performance is not only sustainable but has room for further improvement. Second, the successful commissioning of our first GAC production phase at Red River marks a transformative milestone. This achievement enables us to begin ramping up toward nameplate capacity over the next six months while continuing to refine our processes to maximize margins and value. Thanks, Jay and Stacia. thanks jay and stacia Before we turn to questions, I'd like to leave you with three key takeaways. before we turn to questions i'd like to leave you with three key takeaways First, our PAC business continues to thrive, and we delivered another strong quarter. first our pac business continues to thrive and we delivered another strong quarter Without the impact of ongoing commissioning-related costs in Q2, our EBITDA would have been even better. without the impact of ongoing commissioning-related costs in q2 our ebitda would have been even better I take great pride in our team not only delivering a fifth consecutive quarter of positive adjusted EBITDA, but also a more than three times improvement versus the second quarter of 2024. i take great pride in our team not only delivering a fifth consecutive quarter of positive adjusted ebitda but also a more than three times improvement versus the second quarter of 2024 We remain focused on further enhancing the existing PAC business and believe the current annualized performance is not only sustainable but has room for further improvement. we remain focused on further enhancing the existing pac business and believe the current annualized performance is not only sustainable but has room for further improvement Second, the successful commissioning of our first GAC production phase at Red River marks a transformative milestone. second the successful commissioning of our first gac production phase at red river marks a transformative milestone This achievement enables us to begin ramping up toward nameplate capacity over the next six months while continuing to refine our processes to maximize margins and value. this achievement enables us to begin ramping up toward nameplate capacity over the next six months while continuing to refine our processes to maximize margins and value Third, alongside phase one ramp-up, we're actively developing detailed plans for phase two, which would add another 25 million pounds of granular activated carbon capacity at Red River. The second GAC line is already fully permitted at Red River. Our existing feedstock capacity at Corbin is sufficient for our phase two needs. Therefore, no additional permitting or capital investment is needed at Corbin. In summary, our foundational PAC business is delivering solid results. Our growth-oriented GAC business has achieved its most important milestone to date, and we're actively planning the next exciting stage of growth. We look forward to updating you on our progress across all elements of this strategy. With that, I'll hand it back to our operator to open for questions. Third, alongside phase one ramp-up, we're actively developing detailed plans for phase two, which would add another 25 million pounds of granular activated carbon capacity at Red River. third alongside phase one ramp-up we're actively developing detailed plans for phase two which would add another 25 million pounds of granular activated carbon capacity at red river The second GAC line is already fully permitted at Red River. the second gac line is already fully permitted at red river Our existing feedstock capacity at Corbin is sufficient for our phase two needs. our existing feedstock capacity at corbin is sufficient for our phase two needs Therefore, no additional permitting or capital investment is needed at Corbin. therefore no additional permitting or capital investment is needed at corbin In summary, our foundational PAC business is delivering solid results. in summary our foundational pac business is delivering solid results Our growth-oriented GAC business has achieved its most important milestone to date, and we're actively planning the next exciting stage of growth. our growth-oriented gac business has achieved its most important milestone to date and we're actively planning the next exciting stage of growth We look forward to updating you on our progress across all elements of this strategy. we look forward to updating you on our progress across all elements of this strategy With that, I'll hand it back to our operator to open for questions. with that i'll hand it back to our operator to open for questions

Speaker 7: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. The first question is from Gerard Sweeney from ROTH Capital Partners. Please go ahead. Thank you. thank you We will now be conducting a question and answer session. we will now be conducting a question and answer session If you would like to ask a question, please press star one on your telephone keypad. if you would like to ask a question please press star one on your telephone keypad The confirmation tone will indicate your line is in the question queue. the confirmation tone will indicate your line is in the question queue You may press star two if you would like to remove your question from the queue. you may press star two if you would like to remove your question from the queue For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. for participants using speaker equipment it may be necessary to pick up your handset before pressing the star keys One moment, please, while we pull for questions. one moment please while we pull for questions The first question is from Gerard Sweeney from ROTH Capital Partners . the first question is from gerard sweeney from roth capital partners Please go ahead. please go ahead

Speaker 6: Good morning, Bob, Stacia and team, thanks for taking my call. Good morning, Bob, Stacia and team, thanks for taking my call. good morning bob stacia and team thanks for taking my call

Speaker 2: Happy to do it, Gerry. Happy to do it, Gerry. happy to do it gerry

Speaker 6: Red River, I figure we start there. Obviously, commissioning process is underway. Can you maybe elaborate a little bit on the key milestones that you're going to go through that process? I think we had spoken earlier that in the commissioning process, you tweaked, I think, for lack of a better word, parts of the process around the heating, etc., and you had to bring in some permanent equipment. I just want to see how the next, you know, six months sort of develop from their perspective. Red River, I figure we start there. red river i figure we start there Obviously, commissioning process is underway. obviously commissioning process is underway Can you maybe elaborate a little bit on the key milestones that you're going to go through that process? can you maybe elaborate a little bit on the key milestones that you're going to go through that process I think we had spoken earlier that in the commissioning process, you tweaked, I think, for lack of a better word, parts of the process around the heating, etc., and you had to bring in some permanent equipment. i think we had spoken earlier that in the commissioning process you tweaked i think for lack of a better word parts of the process around the heating etc and you had to bring in some permanent equipment I just want to see how the next, you know, six months sort of develop from their perspective. i just want to see how the next you know six months sort of develop from their perspective

Speaker 2: Sure. As I mentioned in our remarks, the operations team is going to be singularly focused on getting up to full 25 million nameplate capacity or higher as quickly as possible. That's why we've given that six months' guidance. We identified as part of the process, the initial step was to complete commissioning to get into commercial production to initiate sales, which we've done. During that process, we also recognized additional tweaks or areas where we can improve the operations that will improve from our current commercial production rates and get us up to or close to that 25 million pounds or above. This process isn't going to be linear in that it's going to be in increments or in jumps, as you will, as we identify things. Sure. sure As I mentioned in our remarks, the operations team is going to be singularly focused on getting up to full 25 million nameplate capacity or higher as quickly as possible. as i mentioned in our remarks the operations team is going to be singularly focused on getting up to full 25 million nameplate capacity or higher as quickly as possible That's why we've given that six months' guidance. that's why we've given that six months' guidance We identified as part of the process, the initial step was to complete commissioning to get into commercial production to initiate sales, which we've done. we identified as part of the process the initial step was to complete commissioning to get into commercial production to initiate sales which we've done During that process, we also recognized additional tweaks or areas where we can improve the operations that will improve from our current commercial production rates and get us up to or close to that 25 million pounds or above. during that process we also recognized additional tweaks or areas where we can improve the operations that will improve from our current commercial production rates and get us up to or close to that 25 million pounds or above This process isn't going to be linear in that it's going to be in increments or in jumps, as you will, as we identify things. this process isn't going to be linear in that it's going to be in increments or in jumps as you will as we identify things The margin we're getting now based on current production levels versus what we'll get two months from now or when we're at full production rates will be different. It's a lot of little things. It takes a lot of pennies and nickels to make a dollar. It's the same way in getting up to full production. The margin we're getting now based on current production levels versus what we'll get two months from now or when we're at full production rates will be different. the margin we're getting now based on current production levels versus what we'll get two months from now or when we're at full production rates will be different It's a lot of little things. it's a lot of little things It takes a lot of pennies and nickels to make a dollar. it takes a lot of pennies and nickels to make a dollar It's the same way in getting up to full production. it's the same way in getting up to full production

Speaker 6: Got it. Switching gears, actually, we'll stay with the Red River. Let me think here. Phase II, line two, you know, in the past, we've discussed costs, but you know, with permitting not needed, maybe some design improvements after line one. What would be the cost per pound or total cost to add line two? Got it. got it Switching gears, actually, we'll stay with the Red River. switching gears actually we'll stay with the red river Let me think here. let me think here Phase II, line two, you know, in the past, we've discussed costs, but you know, with permitting not needed, maybe some design improvements after line one. phase ii line two you know in the past we've discussed costs but you know with permitting not needed maybe some design improvements after line one What would be the cost per pound or total cost to add line two? what would be the cost per pound or total cost to add line two

Speaker 2: That's one of the things that we're working on, and we'll have finalized in the next four to five months. As you mentioned, there are definitely going to be some design enhancements over line one that will both shorten the process and lower the cost on that. What we're doing now is looking at all those enhancements, looking at the lead time, taking into account what the current prices are versus when we made the financial investment decision on line one. That's part of the process that we'll be undertaking and reviewing over the next four to five months. I'm sure, you know, I'm confident in saying it's not going to be more than the current line, and I hopefully and would expect it to be less. That's one of the things that we're working on, and we'll have finalized in the next four to five months. that's one of the things that we're working on and we'll have finalized in the next four to five months As you mentioned, there are definitely going to be some design enhancements over line one that will both shorten the process and lower the cost on that. as you mentioned there are definitely going to be some design enhancements over line one that will both shorten the process and lower the cost on that What we're doing now is looking at all those enhancements, looking at the lead time, taking into account what the current prices are versus when we made the financial investment decision on line one. what we're doing now is looking at all those enhancements looking at the lead time taking into account what the current prices are versus when we made the financial investment decision on line one That's part of the process that we'll be undertaking and reviewing over the next four to five months. that's part of the process that we'll be undertaking and reviewing over the next four to five months I'm sure, you know, I'm confident in saying it's not going to be more than the current line, and I hopefully and would expect it to be less. i'm sure you know i'm confident in saying it's not going to be more than the current line and i hopefully and would expect it to be less

Speaker 6: Got it. The end market's very well versed on the water market. We understand that to our context. On the RNG side, what is the timeline to moving from initial sales for testing to contracts? The other part of the question is, what's the balance between water-related product and potentially RNG product in terms of maybe percentage of sales or optimal % of sales? Got it. got it The end market's very well versed on the water market. the end market's very well versed on the water market We understand that to our context. we understand that to our context On the RNG side, what is the timeline to moving from initial sales for testing to contracts? on the rng side what is the timeline to moving from initial sales for testing to contracts The other part of the question is, what's the balance between water-related product and potentially RNG product in terms of maybe percentage of sales or optimal % of sales? the other part of the question is what's the balance between water-related product and potentially rng product in terms of maybe percentage of sales or optimal % of sales

Speaker 2: Sure. A couple of things. The answer, and not to be obtuse on the timing, is it varies anywhere really from one to six to eight months. It depends upon the customer. It depends upon their testing, final testing requirements. I think the key item there is that this final completion of in-situ testing is the final element to finalize the negotiations. We've essentially agreed on the details. We've agreed on price. We've discussed potential volumes. They just want confirmation, they being the RNG customers, that it works within an actual field testing, not just lab or other types of testing. We're very confident in that as are our potential customers. In terms of optimal customer mix, again, it's a balance. While the RNG market has higher pricing and higher margins than the water market, you don't want to put all your eggs in one basket. Sure. sure A couple of things. a couple of things The answer, and not to be obtuse on the timing, is it varies anywhere really from one to six to eight months. the answer and not to be obtuse on the timing is it varies anywhere really from one to six to eight months It depends upon the customer. it depends upon the customer It depends upon their testing, final testing requirements. it depends upon their testing final testing requirements I think the key item there is that this final completion of in-situ testing is the final element to finalize the negotiations. i think the key item there is that this final completion of in-situ testing is the final element to finalize the negotiations We've essentially agreed on the details. we've essentially agreed on the details We've agreed on price. we've agreed on price We've discussed potential volumes. we've discussed potential volumes They just want confirmation, they being the RNG customers, that it works within an actual field testing, not just lab or other types of testing. they just want confirmation they being the rng customers that it works within an actual field testing not just lab or other types of testing We're very confident in that as are our potential customers. we're very confident in that as are our potential customers In terms of optimal customer mix, again, it's a balance. in terms of optimal customer mix again it's a balance While the RNG market has higher pricing and higher margins than the water market, you don't want to put all your eggs in one basket. while the rng market has higher pricing and higher margins than the water market you don't want to put all your eggs in one basket You want to have a portfolio of risk across different industries so you're not held captive to one particular industry. I think that portfolio approach is in the best interest of shareholders. It's going to be a mix between water, RNG, and other industries. You want to have a portfolio of risk across different industries so you're not held captive to one particular industry. you want to have a portfolio of risk across different industries so you're not held captive to one particular industry I think that portfolio approach is in the best interest of shareholders. i think that portfolio approach is in the best interest of shareholders It's going to be a mix between water, RNG, and other industries. it's going to be a mix between water rng and other industries

Speaker 6: Got it. Final question for me, and I'll jump back in line. I know on the adjusted EBITDA, you added back, I think, some product costs that were sort of embedded, I guess probably in R&D and maybe a little bit SG&A. Gross margins, it's reading the press release, it sounded like there was a little bit of cost associated with the commercialization and the gross margins as well. I'm not sure if that's maybe some overtime and people working, etc. What was the impact on the gross margins from the commissioning aspect? You know. Got it. got it Final question for me, and I'll jump back in line. final question for me and i'll jump back in line I know on the adjusted EBITDA, you added back, I think, some product costs that were sort of embedded, I guess probably in R&D and maybe a little bit SG&A. i know on the adjusted ebitda you added back i think some product costs that were sort of embedded i guess probably in r&d and maybe a little bit sg&a Gross margins, it's reading the press release, it sounded like there was a little bit of cost associated with the commercialization and the gross margins as well. gross margins it's reading the press release it sounded like there was a little bit of cost associated with the commercialization and the gross margins as well I'm not sure if that's maybe some overtime and people working, etc. What was the impact on the gross margins from the commissioning aspect? i'm not sure if that's maybe some overtime and people working etc what was the impact on the gross margins from the commissioning aspect You know. you know

Speaker 9: We moved, the $1.9 million was originally in cost of sales. We moved that into R&D expense. The $1.9 million was reclassified to R&D associated with the pre-production inventory that we were running through. There are probably some additional costs. I think Bob alluded to that as well in his remarks, that is included in cost of sales. It's hard to say how much that is. It wasn't significant enough that we needed to go ahead and make an adjustment for it. We think margins are probably above 33% for the PAC business on a go-forward basis. What we anticipate, because we didn't commission until early August, is that we probably got another month of that pre-production inventory running through that will flow through in the third quarter in July as well. We moved, the $1.9 million was originally in cost of sales. we moved the $1.9 million was originally in cost of sales We moved that into R&D expense. we moved that into r&d expense The $1.9 million was reclassified to R&D associated with the pre-production inventory that we were running through. There are probably some additional costs. the $1.9 million was reclassified to r&d associated with the pre-production inventory that we were running through. there are probably some additional costs I think Bob alluded to that as well in his remarks, that is included in cost of sales. i think bob alluded to that as well in his remarks that is included in cost of sales It's hard to say how much that is. it's hard to say how much that is It wasn't significant enough that we needed to go ahead and make an adjustment for it. it wasn't significant enough that we needed to go ahead and make an adjustment for it We think margins are probably above 33% for the PAC business on a go-forward basis. we think margins are probably above 33% for the pac business on a go-forward basis What we anticipate, because we didn't commission until early August, is that we probably got another month of that pre-production inventory running through that will flow through in the third quarter in July as well. what we anticipate because we didn't commission until early august is that we probably got another month of that pre-production inventory running through that will flow through in the third quarter in july as well

Speaker 6: Got it. There's some leftover pre-production inventory. On the gross margin side, we're probably, I get it. There's probably some labor. There's some. Got it. got it There's some leftover pre-production inventory. there's some leftover pre-production inventory On the gross margin side, we're probably, I get it. on the gross margin side we're probably i get it There's probably some labor. there's probably some labor There's some. there's some

Speaker 9: Yeah, exactly. Yeah, exactly. yeah exactly

Speaker 6: Yeah. Yeah. yeah

Speaker 9: That is correct. That is correct. That is correct. that is correct That is correct. that is correct

Speaker 6: Higher ASPs, and we're also going into the third quarter where we had volume ups or absorption overhead. Higher ASPs, and we're also going into the third quarter where we had volume ups or absorption overhead. higher asps and we're also going into the third quarter where we had volume ups or absorption overhead

Speaker 9: That's right. That's right. That's right. that's right That's right. that's right

Speaker 6: You got it. Okay, great. Congrats on commissioning, as you guys know. You got it. you got it Okay, great. okay great Congrats on commissioning, as you guys know. congrats on commissioning as you guys know

Speaker 9: Thank you. Thank you. thank you

Speaker 6: I think the water end market is huge for GAC, and obviously, RNG is going to be added into it. Excited for the next couple of years, so thanks. I think the water end market is huge for GAC, and obviously, RNG is going to be added into it. i think the water end market is huge for gac and obviously rng is going to be added into it Excited for the next couple of years, so thanks. excited for the next couple of years so thanks

Speaker 2: Thank you, Jerry. Thank you, Jerry. thank you jerry

Speaker 7: The next question is from Aaron Spychalla from Craig-Hallum. Please go ahead. The next question is from Aaron Spychalla from Craig-Hallum . the next question is from aaron spychalla from craig-hallum Please go ahead. please go ahead

Speaker 8: Yeah. Good morning, Bob and Jay and Stacia. Thanks for taking the questions. Maybe first on the PAC progress, can you just talk about the opportunity for further improvements there, on ASP or kind of market diversification in the coming years, just where margins can go in that business? Yeah. yeah Good morning, Bob and Jay and Stacia. good morning bob and jay and stacia Thanks for taking the questions. thanks for taking the questions Maybe first on the PAC progress, can you just talk about the opportunity for further improvements there, on ASP or kind of market diversification in the coming years, just where margins can go in that business? maybe first on the pac progress can you just talk about the opportunity for further improvements there on asp or kind of market diversification in the coming years just where margins can go in that business

Speaker 2: Yeah. A couple of things. One, there's a possibility as we continue to lessen reliance on the mercury emissions market, as we mentioned during our remarks, and we expand into other markets which are higher priced and have higher margins as it relates to that. While we've averaged over a 16% increase in our average selling price over the last eight quarters, at some point, that has to abate. We saw it. We came just short of double digits again this quarter, but 9% is still extremely strong. We still see momentum and have visibility towards increasing our average selling price as we expand into the newer markets. Yeah. yeah A couple of things. a couple of things One, there's a possibility as we continue to lessen reliance on the mercury emissions market, as we mentioned during our remarks, and we expand into other markets which are higher priced and have higher margins as it relates to that. one there's a possibility as we continue to lessen reliance on the mercury emissions market as we mentioned during our remarks and we expand into other markets which are higher priced and have higher margins as it relates to that While we've averaged over a 16% increase in our average selling price over the last eight quarters, at some point, that has to abate. while we've averaged over a 16% increase in our average selling price over the last eight quarters at some point that has to abate We saw it. we saw it We came just short of double digits again this quarter, but 9% is still extremely strong. we came just short of double digits again this quarter but 9% is still extremely strong We still see momentum and have visibility towards increasing our average selling price as we expand into the newer markets. we still see momentum and have visibility towards increasing our average selling price as we expand into the newer markets

Speaker 8: All right. Thanks for that. I appreciate all the color on the RNG. Sounds like a really good opportunity. Can you just share any preliminary results as you've started that in-situ testing, just on how your product stacks up? Any feedback there that you might have received already? All right. all right Thanks for that. thanks for that I appreciate all the color on the RNG. i appreciate all the color on the rng Sounds like a really good opportunity. sounds like a really good opportunity Can you just share any preliminary results as you've started that in-situ testing, just on how your product stacks up? can you just share any preliminary results as you've started that in-situ testing just on how your product stacks up Any feedback there that you might have received already? any feedback there that you might have received already

Speaker 2: Yeah. No. Based on both the initial phases of testing, as I say, there have been at least two, and in some instances, three phases of testing before the in-situ testing. Both ourselves and the potential customers are extremely pleased. The initial indications show that our product performs significantly better than the competition, which is great, but we also want to make sure we get paid for that superior performance as it relates to that. We're quite encouraged. That's one of the reasons we've held back contracting capacity. We could contract all of our remaining capacity, as I've said before, right now in the water market. We'd like to hold it back and have held it back for the RNG market because of its higher pricing and higher margin. Just a digression on contract pricing. I consistently talk about the market for granular activated carbon being undersupplied with excess demand. Yeah. yeah No. no Based on both the initial phases of testing, as I say, there have been at least two, and in some instances, three phases of testing before the in-situ testing. based on both the initial phases of testing as i say there have been at least two and in some instances three phases of testing before the in-situ testing Both ourselves and the potential customers are extremely pleased. both ourselves and the potential customers are extremely pleased The initial indications show that our product performs significantly better than the competition, which is great, but we also want to make sure we get paid for that superior performance as it relates to that. the initial indications show that our product performs significantly better than the competition which is great but we also want to make sure we get paid for that superior performance as it relates to that We're quite encouraged. we're quite encouraged That's one of the reasons we've held back contracting capacity. that's one of the reasons we've held back contracting capacity We could contract all of our remaining capacity, as I've said before, right now in the water market. we could contract all of our remaining capacity as i've said before right now in the water market We'd like to hold it back and have held it back for the RNG market because of its higher pricing and higher margin. we'd like to hold it back and have held it back for the rng market because of its higher pricing and higher margin Just a digression on contract pricing. just a digression on contract pricing I consistently talk about the market for granular activated carbon being undersupplied with excess demand. i consistently talk about the market for granular activated carbon being undersupplied with excess demand The best indicator or evidence of that is that the contracts we entered into a year ago or a year ago or more, if we entered into those today, would be at higher pricing. The best indicator or evidence of that is that the contracts we entered into a year ago or a year ago or more, if we entered into those today, would be at higher pricing. the best indicator or evidence of that is that the contracts we entered into a year ago or a year ago or more if we entered into those today would be at higher pricing

Speaker 8: Understood. I will stop there and turn it over. Thanks for taking the questions. Understood. understood I will stop there and turn it over. i will stop there and turn it over Thanks for taking the questions. thanks for taking the questions

Speaker 2: Yeah, thanks, Aaron. Yeah, thanks, Aaron. yeah thanks aaron

Speaker 7: The next question is from Tim Moore from ClearStreet. Please go ahead. The next question is from Tim Moore from ClearStreet. the next question is from tim moore from clearstreet Please go ahead. please go ahead

Speaker 4: Thanks. Congratulations on that key catalyst of starting the efficient optimized granular activated carbon line. I like Bob's hockey analogy. Do you expect to possibly squeeze out the 10%-20% more production from phase one? When do you think you might know that? Is that more like an October, November timeframe before your next earnings call? Thanks. thanks Congratulations on that key catalyst of starting the efficient optimized granular activated carbon line. congratulations on that key catalyst of starting the efficient optimized granular activated carbon line I like Bob's hockey analogy. i like bob's hockey analogy Do you expect to possibly squeeze out the 10%- 20% more production from phase one? do you expect to possibly squeeze out the 10%- 20% more production from phase one When do you think you might know that? when do you think you might know that Is that more like an October, November timeframe before your next earnings call? is that more like an october november timeframe before your next earnings call

Speaker 2: We definitely have aspirations for producing more than the 25 million pounds. We'll only know that once we get to full nameplate capacity of 25 million pounds. I'm not going to say October. We'll know that in the next six months, as we said. I'm not going to let myself get boxed into the October timeframe on that. We still remain confident in the ability to produce more than the nameplate capacity. We definitely have aspirations for producing more than the 25 million pounds. we definitely have aspirations for producing more than the 25 million pounds We'll only know that once we get to full nameplate capacity of 25 million pounds. we'll only know that once we get to full nameplate capacity of 25 million pounds I'm not going to say October. i'm not going to say october We'll know that in the next six months, as we said. we'll know that in the next six months as we said I'm not going to let myself get boxed into the October timeframe on that. i'm not going to let myself get boxed into the october timeframe on that We still remain confident in the ability to produce more than the nameplate capacity. we still remain confident in the ability to produce more than the nameplate capacity

Speaker 4: Thanks, Bob. I like how you mentioned you're not running before you can walk. I know this might be premature to ask a bit more about line two, phase two, but is the equipment ordering and construction lead time still about 12 months, or do you think it can be quicker because of lessons learned, sourcing best practices, setup optimization? Just wondering, I got to imagine it would be faster than commissioning what you did for phase I. Just kind of curious on the timeline. Thanks, Bob. thanks bob I like how you mentioned you're not running before you can walk. i like how you mentioned you're not running before you can walk I know this might be premature to ask a bit more about line two, phase two, but is the equipment ordering and construction lead time still about 12 months, or do you think it can be quicker because of lessons learned, sourcing best practices, setup optimization? i know this might be premature to ask a bit more about line two phase two but is the equipment ordering and construction lead time still about 12 months or do you think it can be quicker because of lessons learned sourcing best practices setup optimization Just wondering, I got to imagine it would be faster than commissioning what you did for phase I. just wondering i got to imagine it would be faster than commissioning what you did for phase i Just kind of curious on the timeline. just kind of curious on the timeline

Speaker 2: It sure is better to be faster than we did for phase I, but otherwise, we didn't learn anything on that. I'm confident that the operations team has learned quite a bit. The lead time for certain pieces of equipment is lengthy, and when you combine it with you have to wait to do final installation and construction and commissioning once it's installed, I think roughly a year lead time is good guidance to give people from initiation of the FID to actually beginning commissioning, beginning production. It sure is better to be faster than we did for phase I, but otherwise, we didn't learn anything on that. it sure is better to be faster than we did for phase i but otherwise we didn't learn anything on that I'm confident that the operations team has learned quite a bit. i'm confident that the operations team has learned quite a bit The lead time for certain pieces of equipment is lengthy, and when you combine it with you have to wait to do final installation and construction and commissioning once it's installed, I think roughly a year lead time is good guidance to give people from initiation of the FID to actually beginning commissioning, beginning production. the lead time for certain pieces of equipment is lengthy and when you combine it with you have to wait to do final installation and construction and commissioning once it's installed i think roughly a year lead time is good guidance to give people from initiation of the fid to actually beginning commissioning beginning production

Speaker 4: That's very helpful. The only other question I get a lot on, and I think you already nipped it in the bud, but I think it'd just be helpful for investors. You mentioned really no desire or preference to issue further equity for phase II. Just kind of wondering, it seems like you're highly confident to use what, entirely debt to maybe finance line two. Just kind of curious about that. That's very helpful. that's very helpful The only other question I get a lot on, and I think you already nipped it in the bud, but I think it'd just be helpful for investors. the only other question i get a lot on and i think you already nipped it in the bud but i think it'd just be helpful for investors You mentioned really no desire or preference to issue further equity for phase II. you mentioned really no desire or preference to issue further equity for phase ii Just kind of wondering, it seems like you're highly confident to use what, entirely debt to maybe finance line two. just kind of wondering it seems like you're highly confident to use what entirely debt to maybe finance line two Just kind of curious about that. just kind of curious about that

Speaker 2: Yeah. No. When you look at it, one, with the ongoing turnaround and cash flow generation of the PAC business, you combine that with the granular activated carbon business, the cash flow we'll get from that, the availability we have on our debt facilities and the ability to expand that if needed based on the enhanced cash flow that I just mentioned. You add the fact that it isn't just spending all that money in one, you know, fell swoop. It's over time. It's incremental. When Jay and I discuss it, and along with Stacia and the rest of the team, we feel very comfortable with the ability to finance it out of cash flow, cost-cutting initiatives, and debt availability. Yeah. yeah No. no When you look at it, one, with the ongoing turnaround and cash flow generation of the PAC business, you combine that with the granular activated carbon business, the cash flow we'll get from that, the availability we have on our debt facilities and the ability to expand that if needed based on the enhanced cash flow that I just mentioned. when you look at it one with the ongoing turnaround and cash flow generation of the pac business you combine that with the granular activated carbon business the cash flow we'll get from that the availability we have on our debt facilities and the ability to expand that if needed based on the enhanced cash flow that i just mentioned You add the fact that it isn't just spending all that money in one, you know, fell swoop. you add the fact that it isn't just spending all that money in one you know fell swoop It's over time. it's over time It's incremental. it's incremental When Jay and I discuss it, and along with Stacia and the rest of the team, we feel very comfortable with the ability to finance it out of cash flow, cost-cutting initiatives, and debt availability. when jay and i discuss it and along with stacia and the rest of the team we feel very comfortable with the ability to finance it out of cash flow cost-cutting initiatives and debt availability

Speaker 9: I would add that the debt markets are still pretty wide open. That could change for sure, but once we have the proven story from phase one and are able to show potential lenders the profile of that business and we're going to be replicating it, I think it's a pretty easy, easy opportunity. I would add that the debt markets are still pretty wide open. i would add that the debt markets are still pretty wide open That could change for sure, but once we have the proven story from phase one and are able to show potential lenders the profile of that business and we're going to be replicating it, I think it's a pretty easy, easy opportunity. that could change for sure but once we have the proven story from phase one and are able to show potential lenders the profile of that business and we're going to be replicating it i think it's a pretty easy easy opportunity

Speaker 4: Oh, that's terrific, Jay and Bob. Thanks for adding that color. I think that was an important point. That is it for my questions. Oh, that's terrific, Jay and Bob. oh that's terrific jay and bob Thanks for adding that color. thanks for adding that color I think that was an important point. i think that was an important point That is it for my questions. that is it for my questions

Speaker 2: Thanks. Thanks. thanks

Speaker 7: As a reminder, to ask a question, please press star one. The next question is from Peter Gastreich from Water Tower Research. Please go ahead. As a reminder, to ask a question, please press star one. as a reminder to ask a question please press star one The next question is from Peter Gastreich from Water Tower Research. the next question is from peter gastreich from water tower research Please go ahead. please go ahead

Speaker 1: Thank you. Good morning, Bob and team. Congratulations on your results and your GAC phase I startup. It's great to see that you've already got phase two FID within your sights for later this year. Just a couple of questions from me. The first one will be on RNG, and the second one will be on the asphalt emulsion. Thanks for the color on the RNG market. I'm just sort of curious, following the Big Beautiful Bill, did you notice a further enhancement of interest from renewable natural gas customers? I understand the demand already looked good before that, but I'm just curious whether there was any noticeable increase after that policy clarity came through for RNG producers. Thank you. thank you Good morning, Bob and team. good morning bob and team Congratulations on your results and your GAC phase I startup. congratulations on your results and your gac phase i startup It's great to see that you've already got phase two FID within your sights for later this year. it's great to see that you've already got phase two fid within your sights for later this year Just a couple of questions from me. just a couple of questions from me The first one will be on RNG, and the second one will be on the asphalt emulsion. the first one will be on rng and the second one will be on the asphalt emulsion Thanks for the color on the RNG market. thanks for the color on the rng market I'm just sort of curious, following the Big Beautiful Bill, did you notice a further enhancement of interest from renewable natural gas customers? i'm just sort of curious following the big beautiful bill did you notice a further enhancement of interest from renewable natural gas customers I understand the demand already looked good before that, but I'm just curious whether there was any noticeable increase after that policy clarity came through for RNG producers. i understand the demand already looked good before that but i'm just curious whether there was any noticeable increase after that policy clarity came through for rng producers

Speaker 2: We've seen some, but it's difficult to separate that out from what I would call organic or ongoing versus anything that was stimulated by the Big Beautiful Bill. If you look at it, one of the things we always try and look at is take politics out of the equation on that and that the RNG market fundamentals in and of themselves, and as it relates to granular activated carbon, are strong, were strong, and we expect to remain strong irrespective of any potential benefits of the Big Beautiful Bill. It was an extremely attractive market before the Big Beautiful Bill. Does it add to it? Yes. Are we counting on that addition? No, because it was already so attractive and had so much potential. We've seen some, but it's difficult to separate that out from what I would call organic or ongoing versus anything that was stimulated by the Big Beautiful Bill. we've seen some but it's difficult to separate that out from what i would call organic or ongoing versus anything that was stimulated by the big beautiful bill If you look at it, one of the things we always try and look at is take politics out of the equation on that and that the RNG market fundamentals in and of themselves, and as it relates to granular activated carbon, are strong, were strong, and we expect to remain strong irrespective of any potential benefits of the Big Beautiful Bill. if you look at it one of the things we always try and look at is take politics out of the equation on that and that the rng market fundamentals in and of themselves and as it relates to granular activated carbon are strong were strong and we expect to remain strong irrespective of any potential benefits of the big beautiful bill It was an extremely attractive market before the Big Beautiful Bill. it was an extremely attractive market before the big beautiful bill Does it add to it? does it add to it Yes. yes Are we counting on that addition? are we counting on that addition No, because it was already so attractive and had so much potential. no because it was already so attractive and had so much potential

Speaker 1: Okay. Great. That makes sense. Thank you. Regarding the asphalt opportunity, can you talk a bit more about the scale or magnitude of this market opportunity? Also, is this a product that is unique to Arq, or will you have competition either from that or similar, you know, or a competing product? What kind of timeframe before you make a decision on this one? Thank you. Okay. okay Great. great That makes sense. that makes sense Thank you. thank you Regarding the asphalt opportunity, can you talk a bit more about the scale or magnitude of this market opportunity? regarding the asphalt opportunity can you talk a bit more about the scale or magnitude of this market opportunity Also, is this a product that is unique to Arq, or will you have competition either from that or similar, you know, or a competing product? also is this a product that is unique to arq or will you have competition either from that or similar you know or a competing product What kind of timeframe before you make a decision on this one? what kind of timeframe before you make a decision on this one Thank you. thank you

Speaker 2: A number of questions embedded in that, but all relating to asphalt emulsion. I'll see if I can make sure I answer them all. It is unique to Arq in terms of our unique patent-protected process of converting bituminous coal waste into what we call Arq Wet Cake, into a feedstock. The quality of that and the way we formulate that leads to unique properties that I mentioned, which leads to extra durability, less prone to freeze-thaw degradation, enhanced color, quicker setting, enhanced hardness. It is unique to Arq. In terms of the opportunity size, it is quite immense. We're working, as I mentioned in my prepared remarks, with a leading U.S. Asphalt company. We're involved in testing phase right now on that. If successful, quite frankly, the asphalt emulsion market could take up all of our current production capacity at Corbin and then some if we wanted to. A number of questions embedded in that, but all relating to asphalt emulsion. a number of questions embedded in that but all relating to asphalt emulsion I'll see if I can make sure I answer them all. i'll see if i can make sure i answer them all It is unique to Arq in terms of our unique patent-protected process of converting bituminous coal waste into what we call Arq Wet Cake, into a feedstock. it is unique to arq in terms of our unique patent-protected process of converting bituminous coal waste into what we call arq wet cake into a feedstock The quality of that and the way we formulate that leads to unique properties that I mentioned, which leads to extra durability, less prone to freeze-thaw degradation, enhanced color, quicker setting, enhanced hardness. the quality of that and the way we formulate that leads to unique properties that i mentioned which leads to extra durability less prone to freeze-thaw degradation enhanced color quicker setting enhanced hardness It is unique to Arq. it is unique to arq In terms of the opportunity size, it is quite immense. in terms of the opportunity size it is quite immense We're working, as I mentioned in my prepared remarks, with a leading U.S. we're working as i mentioned in my prepared remarks with a leading u.s Asphalt company. asphalt company We're involved in testing phase right now on that. we're involved in testing phase right now on that If successful, quite frankly, the asphalt emulsion market could take up all of our current production capacity at Corbin and then some if we wanted to. if successful quite frankly the asphalt emulsion market could take up all of our current production capacity at corbin and then some if we wanted to It's an enormous opportunity with significant advantages that our unique feedstock product adds to the asphalt market. I think that covers all the components, but if not, what did I miss? It's an enormous opportunity with significant advantages that our unique feedstock product adds to the asphalt market. it's an enormous opportunity with significant advantages that our unique feedstock product adds to the asphalt market I think that covers all the components, but if not, what did I miss? i think that covers all the components but if not what did i miss

Speaker 1: You got it. Thanks very much, Bob, and congratulations again. I'll get back in with you. You got it. you got it Thanks very much, Bob, and congratulations again. thanks very much bob and congratulations again I'll get back in with you. i'll get back in with you

Speaker 2: Thanks. Thanks. thanks

Speaker 7: There are no further questions at this time. I would like to turn the floor back over to Bob Rasmus for closing comments. There are no further questions at this time. there are no further questions at this time I would like to turn the floor back over to Bob Rasmus for closing comments. i would like to turn the floor back over to bob rasmus for closing comments

Speaker 2: Thanks, Stacia. In conclusion, much more has changed in the last two years than just our name and ticker symbol. On the financial side, we had just achieved our fifth consecutive quarter of positive adjusted EBITDA. Our ASP increased an average of 16% year-over-year over the last eight quarters. Our PAC business is now generating cash on a sustainable ongoing basis with further improvements expected. We have used that foundational PAC business as a low-cost vehicle, not just to expand into the high growth, high margin granular activated carbon business, but to fundamentally improve the growth trajectory of our company for many, many years to come. While we were confident in the strategic decision we made to expand into the GAC market, we're even more confident today. The GAC market continues to see demand well in excess of supply. Thanks, Stacia. thanks stacia In conclusion, much more has changed in the last two years than just our name and ticker symbol. in conclusion much more has changed in the last two years than just our name and ticker symbol On the financial side, we had just achieved our fifth consecutive quarter of positive adjusted EBITDA. on the financial side we had just achieved our fifth consecutive quarter of positive adjusted ebitda Our ASP increased an average of 16% year-over-year over the last eight quarters. our asp increased an average of 16% year-over-year over the last eight quarters Our PAC business is now generating cash on a sustainable ongoing basis with further improvements expected. our pac business is now generating cash on a sustainable ongoing basis with further improvements expected We have used that foundational PAC business as a low-cost vehicle, not just to expand into the high growth, high margin granular activated carbon business, but to fundamentally improve the growth trajectory of our company for many, many years to come. we have used that foundational pac business as a low-cost vehicle not just to expand into the high growth high margin granular activated carbon business but to fundamentally improve the growth trajectory of our company for many many years to come While we were confident in the strategic decision we made to expand into the GAC market, we're even more confident today. while we were confident in the strategic decision we made to expand into the gac market we're even more confident today The GAC market continues to see demand well in excess of supply. the gac market continues to see demand well in excess of supply The best evidence, as I mentioned, is the contracts we entered into last year would be at higher prices if finalized today. We have reached the first critical milestone of that expansion by completing commissioning and entering into commercial production of the first GAC line. We're poised to make the FID on the second $25 million GAC line by year-end. The market has also validated our ongoing transformation. Two years ago, just one analyst covered our stack. Today, there are six. Our market cap has grown more than six-fold in that same period since I became CEO. These results are a testament to the hard work and dedication of our entire team. While they are impressive, we still see significant opportunities to improve and grow. We appreciate your taking the time and your interest in Arq, and we look forward to discussing further developments on our next quarterly call. The best evidence, as I mentioned, is the contracts we entered into last year would be at higher prices if finalized today. the best evidence as i mentioned is the contracts we entered into last year would be at higher prices if finalized today We have reached the first critical milestone of that expansion by completing commissioning and entering into commercial production of the first GAC line. we have reached the first critical milestone of that expansion by completing commissioning and entering into commercial production of the first gac line We're poised to make the FID on the second $25 million GAC line by year-end. we're poised to make the fid on the second $25 million gac line by year-end The market has also validated our ongoing transformation. the market has also validated our ongoing transformation Two years ago, just one analyst covered our stack. two years ago just one analyst covered our stack Today, there are six. today there are six Our market cap has grown more than six-fold in that same period since I became CEO. our market cap has grown more than six-fold in that same period since i became ceo These results are a testament to the hard work and dedication of our entire team. these results are a testament to the hard work and dedication of our entire team While they are impressive, we still see significant opportunities to improve and grow. while they are impressive we still see significant opportunities to improve and grow We appreciate your taking the time and your interest in Arq, and we look forward to discussing further developments on our next quarterly call. we appreciate your taking the time and your interest in arq and we look forward to discussing further developments on our next quarterly call

Speaker 3: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. This concludes today's teleconference. this concludes today's teleconference You may disconnect your lines at this time. you may disconnect your lines at this time Thank you for your participation. thank you for your participation