ARQ Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

Revenue: Approximately $30 million, a modest year-over-year increase driven by improved volume and pricing.

Gross Margin: 38.5%, up 520 basis points from the prior year, reflecting improved profitability in the PAC business.

Adjusted EBITDA: Approximately $5.8 million, significantly up from $3.7 million in Q2 2025.

Net Loss: Approximately $700,000, an improvement from a net loss of $2.4 million in the prior year.

CapEx Guidance: Reiterated at $8 million to $10 million for the year.

Cash Position: Total cash of $12.1 million, with $11.2 million restricted; unrestricted cash was temporarily lower due to timing issues.

2Strategic Updates and Business Highlights

PAC Business Strength: The PAC segment is highlighted as the foundation of ARQ's business, showing strong earnings potential without the drag from GAC production.

PAC for PFAS Initiative: Introduction of a new line of PAC products aimed at helping water companies comply with upcoming PFAS regulations. This product is designed to be a cost-effective interim solution for utilities nearing compliance.

GAC Optimization Review: Ongoing review of granular activated carbon (GAC) operations, with potential costs for GAC production estimated between $40 million and $60 million. The company is focused on maximizing shareholder value and will not proceed without a justified return on investment.

Corbin Asset Monetization: Progress is being made on monetizing the Corbin asset, with potential avenues including licensing or joint ventures.

3Forward Guidance and Outlook

Full-Year Guidance: Revenue expected between $120 million and $125 million, with adjusted EBITDA between $17 million and $20 million for 2026.

Growth Potential: Management is optimistic about achieving a 50% increase in adjusted EBITDA through operational efficiencies and new product introductions, particularly PAC for PFAS.

4Bad News, Challenges, or Points of Concern

GAC Production Uncertainty: No GAC production is expected in 2027, with ongoing evaluations delaying any decisions on future investments in GAC.

Cash Flow Timing Issues: Unrestricted cash was lower than usual due to timing of payroll and customer receipts, though this is expected to normalize.

Market Pressures: Competitive pressures and rising costs in the industry were acknowledged, with a need for ARQ to continue managing operational efficiencies.

5Notable Q&A Insights

GAC Investment Considerations: Management emphasized a cautious approach to GAC investments, stressing that any decision will prioritize shareholder value.

PAC for PFAS Capacity: There is sufficient capacity to meet demand for PAC for PFAS without significant capital investment, with expectations for initial sales in the second half of 2026 and more substantial contributions in 2027.

Market Dynamics: Management noted that while competitors are raising prices, ARQ has successfully increased its average selling price (ASP) over the last 12 quarters, indicating a strong market position.

Cost Reduction Opportunities: Newly appointed CFO Shimon Steinmetz highlighted potential cost savings across various categories, which could enhance profitability. Overall, ARQ's Q2 2026 results reflect a strong performance in its PAC business, with strategic initiatives aimed at addressing regulatory challenges and optimizing operations, despite uncertainties surrounding GAC production and market pressures.