Earnings call transcript: Arq Inc sees revenue growth in Q2 2025

Arq Inc reported its second-quarter earnings for 2025, revealing a mixed performance. The company posted a revenue of $29 million, marking a 13% year-over-year increase, while its earnings per share (EPS) fell short of expectations at -$0.05, compared to a forecast of -$0.03. Despite the earnings miss, revenue exceeded forecasts by approximately 7.48%. Following the announcement, Arq Inc’s stock saw a modest increase, rising 1.17% to $6.54. The stock has shown remarkable momentum, gaining over 20% in the past week and maintaining strong returns over the past three months, according to InvestingPro data.

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Key Takeaways

• Revenue grew by 13% year-over-year, reaching $29 million.
• EPS was -$0.05, below the forecast of -$0.03.
• The stock price increased by 1.17% in post-earnings trading.
• Gross margin improved to approximately 33%.
• Adjusted EBITDA showed a threefold improvement from the previous year.

Company Performance

Arq Inc demonstrated solid revenue growth in Q2 2025, driven by increased average selling prices and operational efficiencies. The company successfully commissioned its first Granular Activated Carbon (GAC) line, contributing to its performance. Despite a net loss of $2.1 million, the company highlighted significant improvements in adjusted EBITDA, which reached $3.7 million, a threefold increase from the previous year.

Financial Highlights

• Revenue: $29 million, up 13% year-over-year
• EPS: -$0.05, compared to a forecast of -$0.03
• Gross Margin: Approximately 33%
• Adjusted EBITDA: $3.7 million, a threefold increase from the previous year
• SG&A expenses reduced by 16% to $5.9 million
• R&D costs increased by 190% to $1.8 million

Earnings vs. Forecast

Arq Inc’s actual EPS of -$0.05 missed the forecast of -$0.03, resulting in a 66.67% negative surprise. However, the revenue of $29 million exceeded the forecast of $26.61 million by 7.48%. This mixed performance reflects both challenges and opportunities for the company as it continues to navigate market conditions.

Market Reaction

Following the earnings announcement, Arq Inc’s stock price rose by 1.17% to $6.54. This movement reflects investor optimism about the company’s revenue growth and operational improvements, despite the EPS miss. The stock remains within its 52-week range, with a high of $8.11 and a low of $3.34. With a beta of 3.26, ARQ shows significant volatility compared to the market. Analyst consensus is strongly bullish, with price targets ranging from $9.50 to $10.00, suggesting potential upside from current levels.

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Outlook & Guidance

Arq Inc remains focused on expanding its GAC production capacity and exploring new market opportunities. The company plans to ramp up its GAC line to full capacity within six months and is considering a second GAC line investment. It also anticipates a capital expenditure of $8-12 million for 2025. Future guidance suggests continued revenue growth, with projections for the upcoming quarters and fiscal years.

Executive Commentary

CEO Bob Rasmus stated, "We have used that foundational PAC business as a low-cost vehicle... to fundamentally improve the growth trajectory of our company." He also noted, "The GAC market continues to see demand well in excess of supply," highlighting the company’s strategic positioning in a growing market.

Risks and Challenges

• Market volatility and economic uncertainty may impact demand.
• Competition in the GAC market could affect pricing and margins.
• Regulatory changes could influence operational costs and market dynamics.
• Supply chain disruptions may pose challenges to production and distribution.
• The company’s reliance on a few key markets could limit diversification opportunities.

Q&A

During the earnings call, analysts inquired about the commissioning of the GAC line and its impact on future growth. Discussions also focused on the potential of the RNG market and the company’s confidence in financing future expansions without equity dilution.

Full transcript - Arq Inc (ARQ) Q2 2025:

Conference Operator: Greetings, and welcome to the ARC Q2 twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. 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.

Anthony Nathan, Head of Investor Relations, ARC: Thank you, operator. Good morning, everyone, and thank you for joining us today for our second quarter twenty twenty five earnings results call. With me on the call today are Bob Rasmus, ARC’s Chief Executive Officer Jay Von Cannon, ARC’s Chief Financial Officer and Stacia Hansen, ARC’s Chief Accounting Officer. This conference call is being webcasted live within the Investors 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 ARC’s Investor Relations team at investorsarc dot com.

Let me remind you that the presentation and remarks made today include forward looking statements as defined in Section 21E of the Securities 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 by 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 06/30/2025, 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.

Bob Rasmus, Chief Executive Officer, ARC: 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 ARC 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 25,000,000 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 pack business.

Despite Q2 typically being a shoulder quarter, we delivered revenue of $29,000,000 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 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% to 5% annual growth from existing demand drivers. And 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 5x 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.

And 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 45,000,000 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 US RNG production currently estimated to be around 600,000,000 cubic feet per day, that would indicate that every 100,000,000 cubic feet per day incremental RNG growth would require nearly 8,000,000 additional pounds of granular activated carbon. With industry projections suggesting RNG could grow two to 10 times by 02/1930, this represents potential incremental demand of 45,000,000 to 400,000,000 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 £25,000,000 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 path 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 time line. 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 2025. To be clear, this is a goal, not formal guidance. The criteria for this decision remained unchanged, achieving smooth operational performance from phase one, 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 the successful ramp up of Phase one to nameplate capacity of £25,000,000 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 one 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 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 to 02/1931, 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 maintaining color as 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.

Jay Von Cannon, Chief Financial Officer, ARC: Thanks, Bob, and thanks, everyone, for joining us today. ARC continued to deliver strong financial results during the second quarter with revenue growing 13% year over year to $29,000,000 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 2024. As Bob mentioned, the turnaround of the PAC business through the combined effort of the entire ARC 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 $1,900,000 of cost associated with the preproduction feedstock used in the commissioning of our GAC line. We generated positive adjusted EBITDA of approximately $3,700,000 compared to adjusted EBITDA of $1,100,000 in the prior year period. I would note that consistent with many market participants, we have added back stock based compensation in Q2 twenty twenty five as a part of our adjusted EBITDA calculation and revised the Q2 twenty twenty four adjusted EBITDA calculation for comparability. We incurred a net loss of $2,100,000 versus a net loss of $2,000,000 in 2024, primarily attributable to the cost incurred in preproduction feedstock used in the commissioning of our GAC line.

100% of our pack sales contracts are now net contributors in 2025. Focusing our efforts on profitability over volume led to this milestone, a significant achievement in our pack portfolio given that twenty four percent of volumes were loss making as of December 2022. Selling, general and administrative expenses totaled $5,900,000 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 190% or $1,800,000 compared to Q2 ’twenty four.

Much of this increase is primarily attributable to the commissioning of the GAC line we discussed earlier. Overall, our performance in Q2 twenty twenty five 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 PACS 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 financial 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 Hansen.

Conference Operator: Thanks, Jay. Turning to the balance sheet. We ended the second quarter with total cash of $15,000,000 of which approximately $7,000,000 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 ARC wet cake inventory and critical spare parts. Today, we are reiterating our 2025 CapEx forecast of between 8,000,000 and $12,000,000 We continue to expect to fund our operating and CapEx needs via our existing cash, 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.

Bob Rasmus, Chief Executive Officer, ARC: 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 3x improvement versus the 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 25,000,000 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 II needs. Therefore, no additional permitting or capital investment is needed at Corbin. In summary, our foundational pack 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.

Conference Operator: Thank you. We will now be conducting a question and answer session. The first question is from Gerry Sweeney from ROTH Capital Partners. Please go ahead.

Gerry Sweeney, Analyst, ROTH Capital Partners: Good morning, Bob, Station and team. Thanks for taking my call.

Bob Rasmus, Chief Executive Officer, ARC: Happy to do it, Gerry.

Gerry Sweeney, Analyst, ROTH Capital Partners: Red River, I figured we’d start there. Obviously, commissioning process is underway. Can you maybe elaborate a little bit on the key milestones that you’re going go through that process? And I think we had spoken earlier that in the commissioning process you tweaked, think, for lack of better word, parts of the process around the heating, etcetera, and you had to bring in some permanent equipment. So I just want to see how the next six months sort of develop from your perspective.

Bob Rasmus, Chief Executive Officer, ARC: Sure. As mentioned in our remarks, the operations team is going to be singularly focused on getting up to full 25,000,000 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 £25,000,000 or above.

This process isn’t going to be linear, in that it’s going to be in increments or in jumps, if you will, as we identify things. And 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. So it’s a lot of little things. It’s kind of it takes a lot of pennies and nickels to make $1 It’s the same way in getting up to full production.

Gerry Sweeney, Analyst, ROTH Capital Partners: Got it. Then switching gears, well, actually, we’ll stay with the Red River. Well, let me think here. Phase two, Line two, we 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 or total cost to add line two?

Bob Rasmus, Chief Executive Officer, ARC: 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 gonna 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. And that’s part of the process that we’ll be undertaking and reviewing over the next four to five months. I’m sure I’m confident saying it’s not going be more than the current line.

And then hopefully, I would expect it to be less.

Gerry Sweeney, Analyst, ROTH Capital Partners: Got it. And then end markets very well versed on the water market. We understand that through our context. But on the RNG side, what is the timeline to moving from, I guess, initial sales for testing to contracts? And 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 percentage of sales?

Bob Rasmus, Chief Executive Officer, ARC: Sure. A couple of things. The answer, not to be obtuse on the timing, it varies. Anywhere really from one to six to eight months. It depends upon, the customer.

It depends upon their testing you know, 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 in the actual field testing, not just lab or other types of testing. We’re very confident in that as 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.

And I think that portfolio approach is in the best way and the best interest of shareholders. So it’s going to be a mix between water, R and D and other industries.

Gerry Sweeney, Analyst, ROTH Capital Partners: Got it. And then final question for me, 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 and D and maybe a little bit SG and A. But gross margins, 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, etcetera.

But what was the impact on the gross margins from the commissioning aspect?

Jay Von Cannon, Chief Financial Officer, ARC: We moved the $1,900,000 was originally in cost of sales. We moved that into R and D expense. So the 1,900,000.0 reclassified to R and D associated with the preproduction inventory that we were running through. There’s 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. But we think margins are probably above 33 for the PAC business a go forward basis. But and what we anticipate because we didn’t commission until early August. So we probably got another month of that preproduction inventory running through that will flow through in the third quarter in July as well.

Gerry Sweeney, Analyst, ROTH Capital Partners: Got it. So there’s some leftover preproduction inventory. On the gross margin side, we’re probably I get it. There’s probably some labor. There’s some

Jay Von Cannon, Chief Financial Officer, ARC: Yeah. Yeah. There there’s that that yeah. Exactly.

Gerry Sweeney, Analyst, ROTH Capital Partners: Yes. Is correct.

Anthony Nathan, Head of Investor Relations, ARC: That is correct.

Gerry Sweeney, Analyst, ROTH Capital Partners: Higher ASPs, and we’re also going in the third quarter where we have volumes, so absorption of overhead. That’s right. That’s right. You got it. Okay.

Great. Well, congrats on commissioning. As you guys know, think the water end market is huge for GAC and obviously R and T is going to be additive to it. Excited for the next couple of years.

Bob Rasmus, Chief Executive Officer, ARC: So are thanks. We. Thank you, Jared.

Conference Operator: The next question is from Aaron Spicela from Craig Hallum. Please go ahead.

Aaron Spicela, Analyst, Craig Hallum: Yes. 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?

Bob Rasmus, Chief Executive Officer, ARC: Yes. No, a couple of things. One, there’s a possibility as we continue to lessen reliance on the mercury market, as we mentioned during our remarks, and we expand into higher other markets, which are higher priced and have higher margins as it relates to that. So while we’ve averaged over 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. And we still see momentum and have visibility towards increasing our average selling price as we expand into the newer markets.

Aaron Spicela, Analyst, Craig Hallum: All right. Thanks for that. And then appreciate all the color on the RNG. Sounds like a really good opportunity. Can you just any preliminary results as you’ve kind of started that in situ testing just on how your product stacks up?

Any feedback there that you might have received already?

Bob Rasmus, Chief Executive Officer, ARC: Yes. 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. So we’re quite encouraged. And 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. And another 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.

Aaron Spicela, Analyst, Craig Hallum: Understood. I will stop there and turn it over. Thanks for taking the questions.

Bob Rasmus, Chief Executive Officer, ARC: Yes. Thanks, Aaron.

Conference Operator: The next question is from Tim Moore from Clear Street. Please go ahead.

Tim Moore, Analyst, Clear Street: Thanks and 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% to 20% more production from Phase one? And when do you think you might know that? Is that more like an October, November time frame before your next earnings call?

Bob Rasmus, Chief Executive Officer, ARC: We definitely have aspirations for producing more than the 25,000,000 pounds We’ll only know that once we get to full nameplate capacity of 25,000,000 pounds. I’m not going to say October. We’ll know that in the next six months, as we said. So I’m not going to let my self care boxed in to the October time frame on that. But we still remain confident in the ability to produce more than the nameplate capacity.

Tim Moore, Analyst, Clear Street: Thanks, Bob. I like how you mentioned not running before you can walk. I And 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 twelve months? Or do you think it can be quicker to the lessons learned, sourcing best practices, setup optimization?

Just wondering, I got to imagine it would

Gerry Sweeney, Analyst, ROTH Capital Partners: be faster than commissioning what you did for Phase one. Just kind

Tim Moore, Analyst, Clear Street: of curious on the time lines.

Bob Rasmus, Chief Executive Officer, ARC: It sure is better be faster than we did for Phase one with otherwise, we didn’t learn anything on that. But 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.

Tim Moore, Analyst, Clear Street: That’s very helpful. And then the only other question I get a lot on, 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 two. So 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.

Bob Rasmus, Chief Executive Officer, ARC: Yes. 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, 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. And then you add the fact that it isn’t just spending all that money in one fell swoop. It’s over time. It’s incremental.

So when Jay and I discuss it and along with Stitch and the rest of the team, we feel very comfortable the ability to finance it out of cash flow, cost cutting initiatives and debt availability.

Jay Von Cannon, Chief Financial Officer, ARC: Yes. 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 opportunity.

Tim Moore, Analyst, Clear Street: That’s terrific, Jay and Bob. Thanks for adding that color. I think that was an important point. So that’s it for my questions.

Aaron Spicela, Analyst, Craig Hallum: Thanks.

Conference Operator: The next question is from Peter Gasterich from Water Tower Research. Please go ahead.

Aaron Spicela, Analyst, Craig Hallum: Thank you. So good morning, Bob and team. Congratulations on your results and your GHC Phase one start up. You know, also, it’s great to see that you’ve already got Phase two FID within your sites for later this year. Just a couple of questions from me on 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, though, following the big beautiful bill, did you notice a further enhancement of interest from renewable natural gas customers? I understand the demand already looks good before that, but I’m just curious whether there was any noticeable increase after that policy clarity came through for RNG producers.

Bob Rasmus, Chief Executive Officer, ARC: 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. And if you look at it, that 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, we’re strong, and we expect to remain strong irrespective of any potential benefits of the big beautiful bill. So 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.

Aaron Spicela, Analyst, Craig Hallum: Okay. Great. That makes sense. And 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 ARC?

Or will you have competition either for that or similar or a competing product? And what kind of time frame before you make a decision on this one? So

Bob Rasmus, Chief Executive Officer, ARC: a number of questions embedded in that, but all relating to Asphalt Emotion. I’ll see if I can, make sure I answer them all. It is unique to IREC in terms of our unique patent protected process of converting, bicuminous coal waste into what we call ARC wet cake into a feedstock. That, the quality of that and the way we formulate that, it leads to unique properties that I mentioned, which leads to extra durability, less prone to freeze thaw degradation, enhanced color, quicker setting, enhanced hardness. So it is unique to ARC.

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 promotion market could take up all of our current production capacity at Corbin and then some, if we wanted to. So 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?

Conference Operator: There are no further questions at this time. I would like to turn the floor back over to Bob Rasmus for closing comments.

Bob Rasmus, Chief Executive Officer, ARC: Thanks, Sachi. In conclusion, much more has changed in the last two years than just our name and ticker symbol. On the financial side, we have 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 pack 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 $25,000,000 GAC line by year end. The market has also validated our ongoing transformation. Two years ago, just one analyst covered our stock. Today, they’re six. Our market cap is growing more than sixfold in that same period since I became CEO.

These results are a testament to the hard work and dedication of our entire team. And while they are impressive, we still see significant opportunities to improve and grow. We appreciate your taking the time and your interest in ARC, and we look forward to discussing further developments on our next quarterly call.

Conference Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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