Arq, Inc.

Greetings and welcome to the ARC First Quarter 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. If anyone should require operator assistance during the conference, please press star and then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Anthony Nathan. Thank you. You may begin.

Thank you, Operator. Good morning, everyone, and thank you for joining us today for our first quarter 2025 earnings results call. With me on the call today are Bob Rasmus, ARC's Chief Executive Officer and President, Joe Wong, ARC's Chief Technology Officer, Stacia Hansen, ARC's Treasurer and Chief Accounting Officer, as well as Jay von Kannon, ARC's Chief Financial Officer. This conference call is being webcasted 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 ARC's investor relations team at investors at arc.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 10Q for the quarter ended March 31st, 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. The first quarter of 2025 was another busy and productive period marked by continued progress in both our legacy PAC business and our GAC growth initiative. As I've discussed on previous calls, we set out to transform our PAC business, and our Q1 results clearly demonstrate that we've achieved this goal. With four consecutive quarters of positive adjusted EBITDA now behind us, our focus has shifted to further cost optimization and strategic price management to enhance profitability. I'm confident that our foundational PAC business can deliver double-digit millions in annual EBITDA, providing a robust foundation for our overall operations. This strong base allows us to pursue highly profitable growth initiatives in GAC, asphalt, rare earth minerals, and other initiatives. Let me summarize our first quarter 2025 results which we reported earlier today. I'm pleased to share that we delivered another strong quarter characterized by robust volumes, continued pricing strength, and sustained margin improvement. We delivered revenue of $27.2 million in the quarter an improvement of 25% over the prior year period. This was primarily driven by a 13% growth in our ASP, positive changes in product and customer mix, and higher volumes. I'd also highlight that this marks our eighth consecutive quarter of achieving double-digit year-over-year percentage growth in ASP. Taken together, these results showcase the ongoing growth and sustained turnaround of our PAC business. Demand for our PAC products remains robust. While recent administration policies may extend coal-fired power plant operations, we continue to strategically diversify beyond mercury emission solutions. This approach not only reduces our potential exposure to coal-fired power plant demand fluctuations, but has proven effective in driving higher ASPs through access to premium pricing markets. Beyond pricing improvements, we continue to maintain an unwavering focus on cost management. Building on our 2024 initiatives, we've identified additional opportunities to reduce both operating costs and SG&A as evidenced once again in our first quarter results. As previously noted, we believe our SG&A remains higher than appropriate for our size and are actively pursuing additional reductions. These efforts will not only further enhance near-term profitability, but position us as a more efficient organization ready to capitalize on future growth. As a result of this double benefit relating to improved revenues and SG&A cost management, we were able to deliver gross margins of 36.4%, roughly in line with the previous year. Gross margin for the first quarter of 2025 was relatively flat from the first quarter of 2024. While the quarter benefited from higher revenue pricing and favorable customer mix, this was offset by startup costs associated with the GAC line and a one-time accounting adjustment in Q1 2024. We generated adjusted EBITDA of $4.1 million in positive net income, reflecting a phenomenal result and, again, clear evidence of the turnaround we've executed. I'd note that this strong Q1 momentum has carried on into April, traditionally a slower shoulder month. volumes have been particularly encouraging, up more than 25% versus last April. Additionally, we recently secured a landmark life of asset contract, the second largest by value in company history, with one of our major customers. This agreement delivers two key benefits, enhanced visibility into our PAC business and validation of our position as a trusted industry partner. Our high customer retention rates, 95% in 2024 for our power generation and industrial customers, reflects the strength of our collaborative approach and the exceptional work of our sales and technical teams. In summary, our PAC business has evolved into a robust, sustainably profitable foundation that positions us well to pursue higher growth opportunities and granular activated carbon and other initiatives. Turning to our GAC business, let's start with a commissioning update. As announced yesterday evening, while we have and continue to make progress, we still have some hurdles relating to completed commissioning of our first GAC production line at Red River. I understand that this is certainly a disappointment to investors as well as to me and the team at ARC. As is normal with any plant commissioning process, we have faced certain mechanical issues. When they have arisen, we have successfully dealt with those mechanical equipment issues. The ongoing delay in commissioning completion primarily relates to the shaping and binding of our product before kiln activation. While the ongoing turnaround of our foundational pack business is important and, in my opinion, impressive, granular activated carbon production is key to turbocharging our future growth. In order to provide as much transparency as possible for investors, we want to provide more technical detail on the status of our commissioning process. I appreciate how important it is for all investors to understand the remaining issue and for us to describe how we're going about fixing them. To that end, I have asked our Chief Technology Officer, Joe Wong, to briefly outline the situation. Joe?