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Arq, Inc. (NASDAQ:ARQ) Q4 2024 Earnings Conference Call March 6, 2025 8:30 AM ET Company Participants Anthony Nathan - Investor Relations Robert Rasmus - Chief Executive Officer Stacia Hansen - Chief Accounting Officer Conference Call Participants Gerry Sweeney - ROTH Capital Partners George Gianarikas - Canaccord Genuity Peter Gastreich - Water Tower Research Tim Moore - Clear Street Operator Greetings and welcome to the ARQ Q4 and Full Year 2024 Earnings Call. At this time, all participants are in a liste ...

Nasdaq: ARQ Non-GAAP Financial Measures Included in this presentation are certain financial measures that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP") designed to supplement, and not substitute, the Company's financial information presented in accordance with GAAP. The non-GAAP measures as defined by the Company may not be comparable to similar non-GAAP measures presented by other companies. The presentation of such measures, which may include adjustments to e ...

Arq, Inc. (ARQ) came out with a quarterly loss of $0.03 per share in line with the Zacks Consensus Estimate. This compares to earnings of $0.10 per share a year ago. These figures are adjusted for non-recurring items.A quarter ago, it was expected that this company would post earnings of $0.05 per share when it actually produced earnings of $0.04, delivering a surprise of -20%.Over the last four quarters, the company has not been able to surpass consensus EPS estimates.Arq, Inc., which belongs to the Zacks ...

Revenue and Growth - Total revenue for the year ended December 31, 2024, was $108,959,000, representing a 10% increase from $99,183,000 in 2023[193]. - The increase in revenue was primarily driven by a favorable product mix contributing approximately $6.9 million and improved pricing adding about $4.9 million, partially offset by lower volumes sold which decreased revenue by $2.2 million[194]. Costs and Expenses - Cost of revenue for 2024 was $69,515,000, up 3% from $67,323,000 in 2023[193]. - Operating expenses decreased by 8% to $41,403,000 in 2024 from $45,195,000 in 2023, with selling, general and administrative expenses down 16%[199]. - Research and development expenses increased by 22% to $4,050,000 in 2024, driven by higher payroll costs and product qualification testing[199]. Investments and Earnings - Earnings from equity method investments dropped 92% to $127,000 in 2024 from $1,623,000 in 2023[207]. - Earnings from equity method investments decreased by 92% from $1,623,000 in 2023 to $127,000 in 2024, primarily due to the wind-down of Tinuum Group and Tinuum Services[208]. Cash Flow and Liquidity - Cash and restricted cash decreased from $54.2 million in 2023 to $22.2 million in 2024, a decrease of $31.9 million[227]. - Cash flows from operating activities improved to $10.5 million in 2024 from a cash outflow of $16.7 million in 2023, driven by a decrease in net loss and a net increase in working capital[228]. - Cash flows used in investing activities increased significantly to $85.1 million in 2024 from $28.5 million in 2023, mainly due to capital expenditures for the Red River Plant expansion[229]. - Cash flows from financing activities increased by $19.8 million in 2024, primarily due to proceeds from a public offering totaling $26.7 million[230]. - The company expects sufficient liquidity to fund operations for the next 12 months based on current cash levels and borrowing availability[232]. Tax and Valuation - As of December 31, 2024, the company had a valuation allowance of $101.6 million on deferred tax assets, up from $98.8 million in 2023[216]. - The effective tax rate for 2024 was 3%, with a reported income tax benefit of $0.2 million[212]. - Changes in estimates for deferred tax assets could materially impact the effective tax rate and financial condition[250]. Debt and Obligations - Interest expense increased due to paid-in-kind interest on a $10 million term loan, which was fully paid in December 2024[209]. - The loss on extinguishment of debt increased due to the write-off of deferred financing costs associated with the termination of the CFG Loan[210]. - As of December 31, 2024, the company had outstanding surety bonds totaling $11.1 million, with restricted cash of $8.5 million held as collateral[235]. - Contractual obligations as of December 31, 2024, total $29.9 million, with $5.2 million due within one year[239]. - Outstanding borrowings under the Revolving Credit Facility were $13.8 million as of December 31, 2024[239]. Business Development and Strategy - The company acquired 100% of the equity interests of Arq Limited subsidiaries in February 2023 to enhance access to U.S. bituminous coal feedstock and advanced GAC products[179]. - The company plans to utilize Arq Powder as a feedstock for high-quality GAC products by the end of Q1 2025, aiming for a lower carbon footprint compared to competitors[179]. - The company changed its name to Arq, Inc. in February 2024, with its common stock trading on the Nasdaq Global Market under the ticker symbol "ARQ"[180]. - The company is targeting the completion of the Red River Plant expansion in Q1 2025, incurring substantial capital expenditures exceeding initial forecasts[233]. - Capital expenditures for 2025 will primarily focus on the Red River Project, contingent on environmental permit approvals and project progression[234]. Asset Management - The company applies the acquisition method for business combinations, requiring significant estimates and assumptions regarding fair values[242]. - Reclamation costs related to asset retirement obligations are allocated to expense over the life of the related mine assets[247]. - The company recognizes deferred tax assets based on the likelihood of realization, considering future taxable income and tax-planning strategies[249]. - The company’s asset retirement obligation related to the Five Forks Mine is recorded at $4.5 million as of December 31, 2024[239].

Financial Performance and Projections - Arq, Inc. announced preliminary fiscal year 2024 capital expenditure results related to the granular activated carbon (GAC) expansion project at the Red River facility[4] - The preliminary estimates are not audited and may be subject to material adjustments[5] - Forward-looking statements include expectations regarding costs and timing for capital improvements and anticipated production capacities for GAC products[8] Customer and Legal Engagement - The company is progressing on customer engagement and has commenced certain legal proceedings related to the GAC expansion project[6] Risks and Challenges - Risks include management's ability to maintain relationships with customers and suppliers, construction costs, and operational difficulties[8] Corporate Identity - The company changed its name from Advanced Emissions Solutions, Inc. to Arq, Inc. on February 1, 2024[10]

Core Insights - The company achieved a 10% year-over-year revenue growth in FY 2024, reaching $109.0 million, primarily driven by a turnaround in the PAC business and a 14% increase in Average Sales Price (ASP) in Q4 2024 [1][5][7] - Gross margins improved by approximately 410 basis points year-over-year to 36.2%, with three consecutive quarters of positive Adjusted EBITDA, indicating sustained improvement in the PAC business [1][5][9] - The company successfully completed a $30 million asset-backed lending facility, enhancing financial flexibility and reducing financing costs [1][5][24] Financial Highlights - Revenue for FY 2024 was $109.0 million, up from $99.2 million in the previous year, driven by higher ASP and product diversification [5][7] - Gross margin for FY 2024 was 36.2%, compared to 32.1% in FY 2023, attributed to increased revenue and cost reductions [9] - The net loss for FY 2024 was $5.1 million, significantly improved from a net loss of $12.2 million in the prior year [12] Operational Highlights - The company reported an Adjusted EBITDA of $7.7 million for FY 2024, a turnaround from an Adjusted EBITDA loss of $2.6 million in the previous year [13] - Capital expenditures for FY 2024 totaled $85.2 million, primarily for the development of the Red River facility [22] - The first production of granular activated carbon (GAC) at the Red River facility is expected by the end of Q1 2025, with a ramp-up to a nameplate capacity of 25 million pounds anticipated in H2 2025 [1][5][22] Management Commentary - The CEO emphasized the successful transformation of the PAC business into a cash flow contributor, highlighting the positive trajectory of the company's performance [6] - The CEO acknowledged frustrations regarding capital expenditure overruns but expressed confidence in the long-term profitability and returns profile [6] - The imminent start of GAC production is viewed as a major milestone, with expectations for rapid ramp-up to full capacity [6]

Company Overview - Arq, Inc. is a producer of activated carbon and environmentally efficient carbon products aimed at purification and sustainable materials [1][3] - The company is the only vertically integrated producer of activated carbon products in North America, ensuring a reliable domestic supply of innovative products [3] Upcoming Event - Bob Rasmus, CEO of Arq, will participate in the Water Tower Research Fireside Chat Series on March 10, 2025, at 11:00 AM Eastern Standard Time [1] - The event is open access for all investors, and registration is available through a provided link [2] Environmental Impact - Arq focuses on developing solutions to remove harmful chemicals and pollutants from water, land, and air, contributing to a cleaner and safer planet [3]

Core Viewpoint - Arq, Inc. is set to announce its fourth quarter and full-year 2024 earnings results on March 5, 2025, followed by a conference call on March 6, 2025, to discuss financial performance [1][2]. Earnings Conference Call - The financial results will be released after market close on March 5, 2025, with a conference call scheduled for March 6, 2025, at 8:30 a.m. Eastern Time [2]. - A supplemental investor presentation will be available on the Company's website prior to the conference call [4]. Conference Call Access - Interested parties can access the conference call via a webcast link or by dialing specific phone numbers [3][4]. - A replay of the conference call will be available shortly after the event, with specific access details provided [4]. Upcoming Investor Conferences - Arq management will participate in several upcoming investor conferences, including: - Canaccord Genuity Sustainability Virtual Summit on February 26, 2025 [5]. - 37th Annual ROTH Conference from March 16-18, 2025, in Dana Point, CA [5]. - Gabelli Funds' 16th Annual Specialty Chemicals Symposium on March 20, 2025, virtually [5]. Company Overview - Arq, Inc. is a diversified environmental technology company focused on producing activated carbon and other sustainable materials [6]. - The company is the only vertically integrated producer of activated carbon products in North America, emphasizing its role in providing innovative solutions for environmental purification [6].

Core Viewpoint - Arq, Inc. is set to announce its fourth quarter and full-year 2024 earnings results on March 5, 2025, followed by a conference call on March 6, 2025, to discuss financial performance [1][2]. Earnings Conference Call - The financial results will be released after market close on March 5, 2025, and a conference call will take place on March 6, 2025, at 8:30 a.m. Eastern Time [2]. - A supplemental investor presentation will be available on the Company's website prior to the conference call [4]. Conference Call Access - Interested parties can access the conference call via a webcast link or by dialing specific phone numbers [3][4]. - A replay of the conference call will be available shortly after the event and can be accessed through the same webcast link or by dialing designated numbers [4]. Upcoming Investor Conferences - Arq management will participate in several upcoming investor conferences, including: - Canaccord Genuity Sustainability Virtual Summit on February 26, 2025 [5]. - 37th Annual ROTH Conference from March 16-18, 2025, in Dana Point, CA [5]. - Gabelli Funds' 16th Annual Specialty Chemicals Symposium on March 20, 2025, in New York, NY, attending virtually [5]. Company Overview - Arq, Inc. is a diversified environmental technology company focused on producing activated carbon and other sustainable materials [6]. - The company is the only vertically integrated producer of activated carbon products in North America, providing a reliable domestic supply of high-demand products [6].