Arq, Inc.

Good morning, ladies and gentlemen, and welcome to the AHRQ Third Quarter 2025 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Thursday, November 6, 2025. I will now turn the conference over to Anthony Nathan. Please go ahead.

Thank you, Operator. Good morning, everyone, and thank you for joining us today for our third 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 AHRQ's investor relations team at investors at ahrq.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-K for the year ended December 31st, 2024, and other filings with the Securities and Exchange Commission. Except as expressly required by the securities laws, the company undertakes no obligation to update these factors or 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 GATT 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. Our PAC business delivered yet another strong quarter. The continued and ongoing turnaround of our PAC operations yielded strong financial results, driven primarily by continued average selling price strength. of 7% over the prior year, as well as a further 43% reduction in SG&A expenses. We also made progress on the granular activated carbon front, achieving first commercial production, delivering initial product, and generating our first GAC revenues. Third quarter financial performance was achieved despite operating GAC at well below capacity, which significantly reduced our financial results. Our third quarter adjusted EBITDA of $5.2 million included the negative impact of several million dollars of inefficiencies caused by non-recurring items associated with handling and post-commissioning costs for our granular activated carbon ramp, as well as impacts due to inefficiencies driven by low early ramp volumes. We previously noted that early GAC production would carry elevated costs due to the high fixed expenses, meaning the first pounds produced would cost more than those made later. That proved true this quarter, but the impact of these dynamics was larger than expected. We expect profitability to improve as volumes ramp and production efficiencies are achieved. Turning back to our pack business, third quarter prices increased by approximately 7% versus the prior year period and 6% versus last quarter. reinforcing that our foundational PAC platform is not only sustainably profitable, but also capable of fully funding maintenance capital needs for the broader business. Driven by continued price movements, higher volumes in 2025, broader end market diversification, and disciplined SG&A reductions, the company is generating $16.7 million of adjusted EBITDA on a trailing 12-month basis. This marks a significant achievement, both in absolute terms and relative, at the end of September 2023 when trailing 12-month adjusted EBITDA was a negative $8.7 million at the outset of the turnaround. This is more than a $25 million improvement trailing 12-month adjusted EBITDA. I'm proud of what the team has accomplished and even more encouraged by the upside that still lies ahead. Turning now to our strategic investment in granular activated carbon. The operational ramp up has been impacted by previously discussed design issues while processing the carbon feedstock at scale. As a result, based on recent operational observations, we now expect to reach full GAC capacity sometime around mid-2026. While this timing adjustment is disappointing, we believe that this revised target is achievable. With that said, let me address head on the logical question of what has caused this extension. Our operation team is still working through certain design issues that have required refining and updating the process for handling the new Corbin waste-derived feedstock efficiently at scale. This feedstock differs from the traditional lignite coal that we have historically used to produce our pack products. Specifically, the Corbin feedstock has some greater than anticipated variability, which due to design flaws and constraints has required adaptations to processing methodology. You might be wondering how this differs from the Red River commissioning challenges we faced earlier. To clarify, those earlier delays were about getting the plant up and running for the first time. The current issues are about scaling, reaching full efficient production of tens of millions of pounds. The delay in achieving nameplate GAC capacity is extremely frustrating. As we previously noted, design issues and flaws have impacted our production capacity, which combined with the inherent variability of our ARC wet cake has required additional process and methodology changes. While we've solved several issues, we're continuing to explore additional options to further enhance performance and reduce operating costs. One potential solution is to blend or replace Corbin feedstock with low moisture coal. This should reduce feedstock variability as well as improve production rates and operating costs. We are working to resolve these challenges and are applying the same rigor and discipline utilized to successfully turn around the pack business. Importantly, despite the challenges noted, We successfully produced initial on specification commercial granular activated carbon volumes in Q3 and completed our first sales into a supply constrained market. As news of our production startup spread, we received numerous inbound requests for spot purchases. These purchase requests were at pricing levels above our existing contract rates. This is further evidence of the supply constraints and favorable long-term market dynamics. While our strategy remains centered on long-term contracts, these spot inquiries are priced above our initial agreements and could offer attractive diversification opportunities alongside our contracted sales. In addition, we have extended numerous GAC contracts to account for the updated timelines. We're also seeing positive results from ongoing renewable natural gas field testing and remain confident in our ability to capture value in that market once testing concludes. At the same time, the broader GAC water market provides a reliable outlet, and we expect both markets to grow significantly in the years ahead. Our operational focus is now on rapidly increasing volumes to leverage our fixed cost base and achieve consistent, granular activated tariff and profitability. As we previously discussed, we are also evaluating adjacent revenue opportunities that could further improve overall returns. This includes determining whether our Corbin feedstock can be used in profitable alternative applications, creating diversified end use cases for the feedstock to maximize shareholder value. As such, I would like to provide an update on those efforts. We've previously indicated that there are four key product avenues of interest, including asphalt, purified coal, rare earth materials, and synthetic graphite. Starting with asphalt, we're continuing our testing with a major asphalt company. Early indications show it could make asphalt last longer and perform better in cold weather. Second, purified coal. We have signed a non-binding MOU to test using our material as a coal substitute for making silicone wafers used in semiconductors, with our partner covering all the initial costs if we elect to proceed. Next, rare earth minerals. With growing demand for U.S. source materials, we're working with the DOE to explore potential government funding to help us test this at our Corbin facility, with research starting in 2026. And finally, synthetic graphite. This potential product would benefit from the high purity of our arc wet cake, and we are currently pursuing government funding opportunities to evaluate its commercial potential. Importantly, these opportunities aren't mutually exclusive, meaning we could theoretically produce arc wet cake for asphalt blending while generating byproducts for rare earth markets from the same source material. Success with these alternative products could create a stand-alone business line in new markets by turning these products into revenue contributors and thereby further improving profitability and margins. Looking ahead, fundamentals for granular activated carbon remain very strong. With Phase II already essentially permitted, we continue to carefully evaluate future GAC facility expansions. Specifically, FID timing is now anticipated that coincide with reaching GAC Phase I nameplate capacity around mid-2026. We believe that the experiences gained from Phase I, along with the ongoing improvements, will provide a strong foundation for any future granular activated carbon expansion projects. With that, I'll now turn it over to Jay for a detailed financial review.