Arq, Inc.

Greetings. Welcome to the Arq Q2 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Anthony Nathan, head of investor relations. Thank you, Anthony. You may begin.

Thank you, operator. Good morning, everyone, and thank you for joining us today for our second quarter 2026 earnings results call. With me on the call today are Bob Rasmus, Arq's chief executive officer, and Shimon Steinmetz, Arq'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 Arq's investor relations team at investors@arq.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 June 30th, 2026 and other filings with its 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 in 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. We'll cover a lot of ground on today's call, so I'd like to begin by providing an overview of the key points we'll address. First, our second quarter results underscore the underlying strength and improving profitability of our foundational PAC business. Despite Q2 typically being a seasonally softer quarter and being further impacted by the biennial plant turnaround completed in April, we delivered adjusted EBITDA well ahead of the prior year period, with gross margin up roughly 520 basis points. This quarter is a clear demonstration of the earnings power of our PAC business, a business unencumbered by the GAC challenges that weighed on the prior year period. Powdered activated carbon remains the foundation of our company, providing both operational continuity and a financial base from which we see multiple avenues for growth, which I'll cover in more detail shortly. Second, I'll walk through the progress of our granular activated carbon optimization review. The PFAS opportunity remains a core focus and while we continue to refine our view on the cost and timing of GAC development, we're also encouraged by progress with customers on what we're calling our path for PFAS strategy, which we believe could offer a near-term solution to the PFAS compliance challenges which some of our water customers face. Demand for products that help water companies reduce PFAS contamination remains strong, and we're seeing broad interest in solutions that let customers achieve compliance now. We believe that by using our new PAC for PFAS, certain water companies may not need to invest the substantial capital required to use granular activated carbon to comply with the EPA's PFAS standards. I want to stress that this is not a one size fits all solution. It applies to water systems which are currently close to meeting the PFAS standards. In addition to assisting the near-term PFAS compliance, using PAC for PFAS will allow these water companies to utilize existing equipment, potentially without the need for new CapEx associated with GAC systems. And third, we continue to see several ways to strengthen our balance sheet and profitability in the near term. These include the potential monetization of Corbin and our coal waste purification technology, which has potentially multiple valuable end market applications. Finally, my excitement around the appointment of Shimon Steinmetz as Chief Financial Officer. I cannot emphasize enough the importance of having an experienced, committed contributor to the CFO position. Shimon has already brought a number of ideas for making the business more efficient and financially productive, which he'll be expanding on shortly. I am looking forward to partnering with Shimon to create value for our shareholders. Turning to our second quarter results, revenue was approximately $30 million, up modestly year over year, with continued volume and pricing strength. We expect the modest shortfall in chemicals revenue to reflect timing rather than demand and believe it will be recovered later in the year. Gross margin was approximately 38.5% up roughly 520 basis points from the prior year quarter. This reflects the continued improvement in path profitability in the absence of GAC startup costs that weighed on the prior year period. Adjusted EBITDA was approximately $5.8 million. a substantial increase over the $3.7 million we reported in the prior year period and well ahead of the first quarter of 2026. This performance reflects the underlying strength of the PAC business, our continued pricing discipline, and the benefit of our cost and operational initiatives delivered without the drag of GAC production. The biennial Red River plant turnaround was completed in April and, importantly, under budget. Today, we are reiterating our full-year CapEx guidance of between $8 and $10 million. Overall, this was a strong and encouraging quarter in what is typically our seasonal low point. Having covered our core markets, let me turn to where we see potential for growth. I know many of you are keen to hear about the status of our strategic optimization review, but before I get to that, I want to spend some time on an exciting PAC growth initiative, one that speaks directly to the PFAS opportunity and which our sales team has labeled PAC for PFAS. PAC for PFAS is a new line of powdered activated carbon products designed to address the PFAS removal market. As a reminder, that market remains strong with mandatory PFAS monitoring and public reporting for U.S. water companies beginning in April 2027. We've been looking for ways to help customers prepare for the broader compliance changes slated for 2029 to 2031. At that time, all water companies will need to bring PFAS levels below the new four part per trillion threshold down from the previous 70 part per trillion threshold. Adapting to these changes will be expensive for many water companies since GAC application typically requires new equipment at meaningful cost. Given the short runway before monitoring reporting begins in Q2 2027, we set out to offer customers what can be both a permanent or an interim solution that enables compliance at a lower capital cost using existing equipment where possible. That's where PAC for PFAS comes in. Utilizing our best-in-class research and technology capabilities and through our specialized product engineering and manufacturing, we've developed a PAC product capable of removing low levels of PFAS contamination. While the upper limit of contamination it can handle hasn't been confirmed, we believe a meaningful number of water companies particularly those marginally outside the four-part petroleum compliance level stand to benefit. For these customers, the appeal is twofold. First, they can achieve compliance or work toward compliance without the significant capital cost of installing the vessels, systems, and equipment that a GAC solution typically requires. And second, For the many utilities already using PAC for taste and odor control, our product can address PFAS and taste and odor together, avoiding the need to double up on treatment. Initial customer conversations suggest this product could be priced similar to our conventional GAC products. To be clear, this doesn't change our view of bituminous granular activated turbines' effectiveness at removing PFAS. have successfully adopted, this product could solve a real near-term problem for customers while adding a higher value product to our portfolio. Customer trials remain ongoing, so I don't expect a material contribution during the remainder of 2026. But I do see potential for this to meaningfully boost our performance in 2027 and beyond. This product was developed by our technology team as part of our goal to create and sell high-performance specialty products custom designed to meet our end users' needs. It is another excellent example of our technical and sales teams working with customers as partners, not counterparties. By addressing customer problems in real time, we strengthen those relationships to our mutual benefit. To be clear, exciting as this is, I don't believe it has any material impact on our sales potential into the GAC market. Rather, it's an adjacent solution for specific customers, many of whom may well become GAC customers down the road. I'd now like to provide an update on where we stand on our Strategic Optimization Review and GAC. The Strategic Optimization Review remains ongoing. It has expanded to encompass not just bituminous-based granular activated turbines, but also includes a broader operational assessment that has identified near and medium-term opportunities to increase furnace time and reduce product costs. We also are focusing on how to best utilize our technology advantages and our relationships. The overall goal is to maximize returns to our shareholders. While our review is not yet fully complete, it has uncovered several ideas about increasing the profitability around our foundational PAC business. The outcomes involve several areas. The PAC for PFAS mentioned previously and multiple operational efficiencies designed to increase plant capacity and lower costs. We believe the opportunity to significantly increase EBITDA is real and attainable. So where does bituminous-based GAC fit into this discussion? The PFAS opportunity remains compelling. We continue to see an important role for IROC in providing solutions for our customers. With that in mind, and as a possible interim step while we determine the best path to bringing our own bituminous-based GAC product online, I am encouraged by the early progress of PATH for PFAS. I believe this could meaningfully add to volume, price, and margins for our PAC business while still helping remove PFAS from our nation's water. The GAC segment of the review is not fully complete, but we do have enough information to share meaningfully more than we could last quarter. We have received cost estimates from two independent engineering consultants to finish the conversion and fix the issues previously discussed. Those estimates have a fairly wide range. Given the uncertainty still built into any estimate at this stage, the currently anticipated range for the project is potentially somewhere between $40 and $60 million. That number could change depending upon the final design. We are working to narrow it and we will update you as we do. Here is the point I want to make sure lands clearly, because it is the most important part of this update. Sharing that number does not mean we have decided to invest in it, and it does not mean we are walking away from GAC either. Both things are true at once. We still believe GAC is a real differentiated opportunity for this company, one that few others have the assets or the position to pursue. and we are not going to invest this kind of capital until we know it will generate a return that justifies the investment. In the meantime, we are focused entirely on making our existing business more profitable. That means continuing to push our PAC business toward a higher earnings run rate, capturing additional capacity and cost improvements we have identified through this same review process, evaluating the monetization of Corbin, and building out PAC for PFAS is a near-term way to serve that demand while we work through the larger GAC decision. As that base gets stronger, our ability to finance GAC on reasonable terms, including through additional debt rather than equity, improves as well. I have been very clear that we will not invest in GAC at any cost. We think the market has been assuming the worst of both worlds, that we will eventually dilute shareholders to fund this and still not generate an attractive return on it. We wanted to give you a clearer picture of both the cost and our approach because we think it tells a more complete story than the market may currently be pricing in. Let me expand on my earlier comments on Corbin Monetizations. As of mid-year, we've made encouraging progress with our asphalt partner and our blending component product has performed well in trials. The partner completed a successful track test at the National Center for Asphalt Technology at Auburn University. This program is transitioning to the next phase of technical validation in third-party laboratories, which will include performance and durability evaluations against strict highway safety standards. This validation work will be conducted through Q4 2026 with feedback beginning in Q1 2027. The path towards commercializing new asphalt road products is highly detailed, so we are very pleased with the progress that has been accomplished. As I mentioned, we're actively evaluating the most efficient way to monetize both the carbon asset and its associated technologies. As it relates to asphalt, in addition to operating the Corbin facility as a supplier of feedstock, we may ultimately license the technology, sell the plant or pursue some form of joint venture. Separately, we continue to evaluate unsolicited interest from third parties around an asset sale or joint venture covering a broad range of applications including silicone rapers, Rare Earth Materials, and other specialty products. With that, I'll turn it over to Shimon for a detailed financial review, along with an introduction and his initial thoughts since joining the team.