ARQ — Arq, Inc.

Summary of ARQ Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Revenue: Approximately $120 million for the full year 2025, up 10% year-over-year.
• Adjusted EBITDA: $13.2 million for 2025, a 26% improvement from 2024.
• Q4 Revenue: $29.4 million, an 8% increase year-over-year.
• Gross Margin: 27.9% for the year; 13.6% in Q4, impacted by GAC ramp-up costs.
• Net Loss: $50 million in Q4 2025, compared to a net loss of $1.3 million in Q4 2024.
• Cash Position: Total cash of $15 million, with $6.6 million unrestricted. Total debt increased to $28.5 million from $24.8 million in 2024.

2. Strategic Updates and Business Highlights

• GAC Production Pause: ARQ is pausing its Granular Activated Carbon (GAC) production project to conduct a comprehensive engineering and production process optimization review due to significant design flaws and operational challenges.
• Transition to Bituminous Coal: The company is shifting to purchase domestic bituminous coal feedstock to improve production efficiency and reduce moisture-related issues.
• PAC Business Performance: The PAC (Processed Activated Carbon) business remains profitable and is the foundation for growth, with revenues reaching approximately $120 million in 2025. The company has strong contract visibility for 2026 and beyond.

3. Forward Guidance and Outlook

• 2026 Revenue Guidance: Expected in the range of $120 million to $125 million, solely from the PAC business.
• Adjusted EBITDA Guidance: Projected between $17 million and $20 million for 2026, reflecting strong PAC performance.
• Production Volumes: Anticipated PAC production volumes of 122 million to 125 million pounds, with an average selling price of $0.88 to $0.91 per pound.

4. Bad News, Challenges, or Points of Concern

• GAC Production Challenges: Significant design flaws and operational inefficiencies have led to a pause in GAC production, with no production expected in 2026.
• Write-Down: A $45 million write-down on Corbin assets due to the decision to idle operations related to GAC.
• Increased Costs: GAC start-up costs and operational inefficiencies have negatively impacted financial performance, contributing to the net loss in Q4.

5. Notable Q&A Insights

• Market Demand for GAC: Management emphasized strong market fundamentals for GAC, with a persistent demand-supply imbalance expected to continue.
• Regulatory Environment: No significant regulatory uncertainties affecting the PAC business were reported, despite previous discussions about potential new regulations.
• Free Cash Flow Generation: The PAC business is expected to generate free cash flow, with maintenance CapEx anticipated to be lower in the coming year.
• Contract Visibility: Strong contract visibility for PAC volumes, with 96% contracted for 2026 and 75% for 2027, indicating stable demand and customer loyalty.
• Litigation Status: Ongoing litigation related to engineering design flaws was acknowledged, but specifics were not disclosed.

Overall, while ARQ faces significant challenges with its GAC project, the PAC business remains robust and is expected to drive financial performance in 2026. The company is taking a disciplined approach to capital allocation and operational optimization.