Arq, Inc.

Greetings and welcome to the ARC Q2 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. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. 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.

Thank you, operator. Good morning, everyone, and thank you for joining us today for our second quarter 2025 earnings results call. With me on the call today are Bob Rasmus, ARC's chief executive officer, Jay von Kannon, ARC's chief financial officer, and Stacia Hansen, ARC's chief accounting 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 and 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 in 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 June 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 change circumstances or for any other reason. In addition, it is especially important to review the presentation and today's remarks in conjunction with the gap 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. 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 million 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 path business. Despite Q2 typically being a shoulder quarter, we delivered revenue of $29 million 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 three times 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 a 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 first half of 2025. While mercury related applications are an important component of our path 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 three 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 five times 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 million 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 million cubic feet per day, that would indicate that every 100 million cubic feet per day of incremental RNG growth would require nearly 8 million additional pounds of granular activated carbon. With industry projections suggesting RNG could grow 2 to 10 times by 2030, this represents potential incremental demand of 45 to 400 million pounds. 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 million pound 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 main plate 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 timeline. 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 end of 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 a successful ramp of phase one to name plate capacity of 25 million pounds 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 2031 therefore should not be seen as an environmental policy dilution, but rather a realistic acknowledgement 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 Corbin 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.