Slide 1: Q3 2024 Earnings Call
Nasdaq: ARQ Q3 2024 Earnings Call November 7, 2024
Slide 2: Disclaimer
Disclaimer This presentation includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, which provides a “safe harbor” for such statements in certain circumstances. When used in this presentation, the words “can,” “will,” “intends,” “expects,” “beli
Slide 3: Recent Financial Highlights & Business Updates
Recent Financial Highlights & Business Updates Ongoing PAC portfolio optimization drives significant gross margin, net income and Adjusted EBITDA improvement; Red River GAC expansion remains on time & budget; Red River capacity upside potential Q3 2024 Financial Update Business & Market Strategic Gr
Slide 4: Q3 2024 Financial Highlights
Q3 2024 Financial Highlights Revenue Gross Margin (%) Adjusted EBITDA1 Net Income Cash 70 Unrestricted 40 1.6 Restricted 57.4 34.8 38.6% 5.1 60 35 8.7 29.8 30.6% 50 30 40 37.2 25 8.7 30 20 48.7 0.9 20 15 28.5 (2.2) 10 10 0 Q3 2023 Q3 2024 Q3 2023 Q3 2024 Q3 2023 Q3 2024 Q3 2023 Q3 2024 Jun 30, 2024
Slide 5: Steady Price Increases Underpin Sustainable PAC Business Performance
Steady Price Increases Underpin Sustainable PAC Business Performance YoY ASP % Change Q3 2024: 30% o 6th consecutive quarter of 25% double digit % ASP YoY increase 20% o 15% ASP increase YoY (16% 15% average increase since Q1 2023) 10% o In Q3 2024, amended sole 5% remaining loss-making contract whi
Slide 6: Attractive & Consistent Growth in Gross Margin
Attractive & Consistent Growth in Gross Margin Material and consistent gross margin improvement due to ASP growth and focused cost cutting initiatives Gross Margin % 49.8% o Gross margin improved ~800 basis 50% +1950 +720 +800 points YoY (from 30.6% to 38.6%) 45% bps YoY bps YoY bps YoY o Gross marg
Slide 7: Key Drivers of Arq's Corporate Transformation
Key Drivers of Arq’s Corporate Transformation What We’re Doing What it Delivers Red River Project • Adding production of GAC + expanding plant to deliver incremental 25mm pounds of GAC product Targeted payback of ~3 • Entered into supply contracts for 60% of nameplate capacity at years attractive
Slide 8: Red River GAC Development Update
Red River GAC Development Update Development remains on time & on budget; upsize announced • Following several key recent hires, all aspects of construction process at Red River brought in-house • No material costs expected in connection with termination of previous general contractor • Leveraging o
Slide 9: Capital & Funding Update
Capital & Funding Update September 2024 Equity Offering • Raised approximately $27 million of net proceeds via Term Loan Refinancing Update – What Changed? issuance of common stock • Provides funding surety for completion of Red River, • Previously disclosed term sheet for diversifies investor base,
Slide 10: Growth Beyond Red River Phase I
Growth Beyond Red River Phase I Key Triggers Needed to Pursue Phase II Illustrative Red River GAC Buildout Assumes Phases I & II are built ~1-year apart; potential of 125 million lbs. • Successful commissioning of Red River Phase I 140 • Achieving Phase I annual nameplate production levels of 25 mil
Slide 11: Key Near Term Objectives
Key Near Term Objectives 1 2 3 4 PAC Optimization GAC Customers Corbin Facility Red River GAC Facility • Drive additional • Continue active • Run at steady-state • Achieve first GAC market penetration dialogue with new capacity deliveries in Q1 2025 (i.e. adjacent sectors) and existing GAC customers
Slide 12: Financial Detail
Financial Detail
Slide 13: Condensed Consolidated Balance Sheet
Condensed Consolidated Balance Sheet1 As of (in thousands, except share data) September 30, 2024 December 31, 2023 ASSETS Current assets: Cash $ 48,662 $ 45,361 Receivables, net 16,590 16,192 Inventories, net 18,487 19,693 Prepaid expenses and other current assets 3,530 5,215 Total current assets 87
Slide 14: Condensed Consolidated Statements of Operations
Condensed Consolidated Statements of Operations1 Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except per share data) 2024 2023 2024 2023 Revenue $ 34,774 $ 29,829 $ 81,919 $ 71,079 Cost of revenue, exclusive of depreciation and amortization 21,339 20,707 52,279 53,
Slide 15: Condensed Consolidated Statements of Cash Flows
Condensed Consolidated Statements of Cash Flows1 Nine Months Ended September 30, (in thousands) 2024 2023 Cash flows from operating activities Net loss $ (3,770) $ (15,539) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation, amortization, depletion
Slide 16: Condensed Consolidated Statements of Cash Flows - Cont.
Condensed Consolidated Statements of Cash Flows - Cont. 1 Nine Months Ended September 30, (in thousands) 2024 2023 Cash flows from investing activities Acquisition of property, plant, equipment, and intangible assets, net $ (42,210) $ (17,008) Acquisition of mine development costs (167) (1,856) Proc
Slide 17: Note on Non-GAAP Financial Measures
Note on Non-GAAP Financial Measures To supplement our financial information presented in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP"), we provide certain supplemental financial measures, including EBITDA and Adjusted EBITDA, which are measurements that are not calculat
Slide 18: Adjusted EBITDA (Loss) Reconciliation to Net Loss
Adjusted EBITDA (Loss) Reconciliation to Net Loss Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Net income (loss) (1) $ 1,617 $ (2,175) $ (3,770) $ (15,539) Depreciation, amortization, depletion and accretion 2,716 2,711 6,090 7,276 Amortization
Slide 19: Appendix
Appendix
Slide 20: Company Overview
Company Overview Arq is a diversified, environmental technology company producing activated carbon products which reduce or reverse environmental liabilities, including PFAS or “forever chemicals”. Our products enable a cleaner and safer planet. General applications of our products PFAS Soil, Water
Slide 21: What is Activated Carbon?
What is Activated Carbon? • Also known as activated charcoal • Activated carbons are largely engineered sorbent materials which purify, filter and remove pollutants from air, water and soil • When activated, able to “adsorb” a wide range of harmful compounds from air, gas & liquids • “Activation” pr
Slide 22: Products & Market Applications
Products & Market Applications GAC from bituminous coal best at remediating PFAS and forever chemicals Applications Market Focus • Potable Water • PFAS Remediation Granular Municipal water, PFAS Growth Activated remediation, soil & • Wastewater Treatment Business Carbon groundwater remediation, • Bi
Slide 23: Our Key GAC Differentiators
Our Key GAC Differentiators Activated carbon is a technical sale – our unique products, process and supply chain are key differentiators We will be the only GAC producer: …with a vertically …using bituminous …and with estimated integrated domestic coal waste feedstock, lower Scope 1 & 2 supply chain
Slide 24: Biogas & Renewable Natural Gas Purification
Biogas & Renewable Natural Gas Purification • Biogas is produced when organic material • The RNG is passed directly through a GAC column to achieve decomposes in anaerobic conditions. Biogas can be this purification processed to remove impurities – such as CO2, H2S and Siloxane – to produce high-qua
Slide 25: EPA Releases Critical PFAS Regulations
EPA Releases Critical PFAS Regulations On April 10, 2024, EPA announced new National Primary Drinking Water Regulations to reduce PFAS in municipal drinking water over the next 5 years • Arq estimates EPA’s regulations potentially increases municipal water market demand by 3-5x vs. existing ~170 mil
Slide 26: Strong North American GAC Market Fundamentals
Strong North American GAC Market Fundamentals Data suggest demand outpacing supply – Arq anticipates a 3-5x increase in demand over next 5 years not accounting for potential incremental demand growth from other sectors (e.g., biogas) • Arq expects annual GAC market to grow ~75% to >700mm lbs1 • Woul
Slide 27: Ongoing GAC Contract Wins Validate Products and Strategy
Ongoing GAC Contract Wins Validate Products and Strategy Ongoing contract wins demonstrate Technical Robust, growing Diverse end-market Attractive Validity of strategic viability of Arq market, limited demand for GAC economics of GAC investment in high- products available supply (water, PFAS, biogas
Slide 28: Advancing GAC Technology for Enhanced PFAS Removal Efficacy
Advancing GAC Technology for Enhanced PFAS Removal Efficacy Building Market Increasing Increasing Removal Enhancing GAC Adoption Treatment Capacity Speed Purity Advancing testing scale Improving water treatment Decreasing equipment size Reducing extractable from lab to field volume up to 10x or wate
Slide 29: Arq Investment Conclusions
Arq Investment Conclusions Vertically Integrated The only vertically integrated domestic activated carbon supply chain Growth-Focused Legacy PAC assets provide infrastructure for expansion to high-growth GAC Environmentally Beneficial Uniquely use waste to remediate other waste and lower overall car
Slide 30: Arq Investor Relations
Arq Investor Relations Contacts: Anthony Nathan, Arq Marc Silverberg, ICR investors@arq.com 8051 E. Maplewood Ave, Suite 210 Greenwood Village, CO 80111 Nasdaq: ARQ