Slide 1: Advanced Activated Carbons (GAC) for Enhanced PFAS Removal
Nasdaq: ARQ Advanced Activated Carbons (GAC) for Enhanced PFAS Removal Gabelli PFAS Symposium | September 26, 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: Company Overview
Company Overview Arq is a diversified, environmental technology company producing activated carbon with 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, W
Slide 4: Arq At a Glance
Arq At a Glance Producing Top 3 Material Fully Integrated Undergoing Activated Carbon Activated Carbon Environmental Domestic Supply Corporate Since 2008 Supplier 1 Benefits Chain Transformation Strong asset & Approximately 23%1 Utilize waste Enables cost control, Transforming to an customer base; ~
Slide 5: 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 6: Products & Market Applications
Products & Market Applications GAC from bituminous coal best at remediating PFAS and forever chemicals Applications Products & Market Focus • Potable Water • PFAS Remediation Granular Municipal water, PFAS Growth Activated remediation, soil & • Wastewater Treatment Business Carbon groundwater remedi
Slide 7: 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 8: Advancing GAC Technology for PFAS Removal
Advancing GAC Technology for PFAS Removal
Slide 9: 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 10: Building Market Adoption
Building Market Adoption Lab Lab Rapid Small Pilot Column Modelling Scale Column Field Testing Testing (18 tests) ▪ >20 market lead ▪ University & 3rd ▪ Establishing adopters/partners party lab relationships & Full Scale collaborations securing ▪ Rapid GAC Adoption commitments from prototyping ▪ Sim
Slide 11: Increasing Treatment Capacity – Rapid Small Scale Column Test
Increasing Treatment Capacity – Rapid Small Scale Column Test Perfluorooctanoic Acid (PFOA) 100 Arq GAC 1 90 Industry Bituminous 80 Arq GAC 2 Breakthrough (PPT) 70 PPT Breakthrough 70 2x Arq GAC 3 60 50 40 30 20 10 10X 4 PPT Maximum Contaminant Level (MCL) 0 0 20,000 40,000 60,000 80,000 100,000 120
Slide 12: Increasing Removal Speed
Increasing Removal Speed Perfluorooctanoic acid (PFOA) 120 100 Residual Concentration (ng/L) Industry Bituminous-Based GAC We have demonstrated 837 Iodine number 80 11% transport pores that tuning the amount of “transport pore volume” 60 2x in our GACs can increase Arq GAC 1 PFAS mass removal by up
Slide 13: Enhancing GAC Purity – Lowering Extractable Arsenic Levels
Enhancing GAC Purity – Lowering Extractable Arsenic Levels 60 • Feed preparation and purification steps utilized in 50 Arq’s patented bituminous Effluent Arsenic Concentration, ppb Industry Bituminous GAC coal waste purification process 40 result in reduced GAC leachable arsenic 30 concentrations 20
Slide 14: Our Growth Strategy
Our Growth Strategy
Slide 15: Strong PAC Foundation + Attractive GAC Growth Driver
Strong PAC Foundation + Attractive GAC Growth Driver Cash generating foundational PAC business provides springboard into high growth, high margin GAC business Powder Activated Carbon (PAC) Granular Activated Carbon (GAC) • Arq’s foundational business • Arq’s growth business • Established leading mar
Slide 16: Recent Financial Highlights Confirm PAC Business Transformation
Recent Financial Highlights Confirm PAC Business Transformation Q2 2024 1 +24% +16% +700 bps Revenue growth of +24% Average sales price (ASP) >700 bps growth in YoY in Q2 2024, reflecting growth of +16%, gross margins to 32% strong momentum reflecting ongoing YoY due to ongoing cost portfolio optimi
Slide 17: Capital & Funding Update (September 2024)
Capital & Funding Update (September 2024) September 2024 Equity Offering Term Loan Refinancing Update – What Changed? • Raised $25 million of gross proceeds via issuance of common stock1 • Previously disclosed term sheet for contemplated term loan refinancing • Provides funding surety for completion
Slide 18: Key Drivers of Arq’s Corporate Transformation
Key Drivers of Arq’s Corporate Transformation What We’re Doing What it Delivers Red River Project • Shifting production to GAC + expanding plant to deliver incremental 25mm lbs. of GAC product ✓ Targeted payback of ~3 years • Entered into supply contracts for 52% of nameplate capacity at attractive
Slide 19: Red River GAC Development Update (September 2024)
Red River GAC Development Update (September 2024) Development remains on time and on budget Notable Updates • Following recent onboarding of several key hires, took all aspects of construction process at Red River in-house • Leveraging strong in-house capabilities expected to reduce capital requirem
Slide 20: Ongoing GAC Contract Wins Validate Products and Strategy
Ongoing GAC Contract Wins Validate Products and Strategy 52% of nameplate capacity contracted at attractive pricing; expect to be fully contracted prior to production Ongoing contract wins demonstrate Technical Robust, growing Diverse end-market Attractive Validity of strategic viability of Arq mark
Slide 21: 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 22: 2024: Remaining Key Objectives
2024: Remaining Key Objectives 1 2 3 4 PAC Optimization GAC Customers Corbin Facility Red River GAC Facility • Drive additional • Continue active • Commission facility • Achieve first GAC market penetration dialogue with new deliveries in Q1 2025 (i.e. water) and existing GAC • Stockpile bituminous
Slide 23: 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 24: Appendix
Appendix
Slide 25: Significant and Undervalued Asset Base
Significant and Undervalued Asset Base Provides springboard for growth into higher margin products • Estimated replacement value of existing assets >$500 million1 Red River Activated • Shift towards GAC production from Carbon Plant existing facilities and strategic (Coushatta, LA) expansion projects
Slide 26: Recent Financial Highlights & Business Updates
Recent Financial Highlights & Business Updates Ongoing optimization of PAC portfolio drives significant improvement in gross margin while Red River expansion into GAC market continues at pace Q2 2024 Financial Update Business & Market Strategic Growth Projects o Continued growth: Revenue +24% and o
Slide 27: EPA Releases Critical PFAS Regulations
EPA Releases Critical PFAS Regulations On April 10, 2024, EPA announced new National Primary Drinking Water Regulations to reduce PFAS in municipal drinking water over the next 5 years • Arq estimates EPA’s regulations potentially increases municipal water market demand by 3-5x vs. existing ~170 mil
Slide 28: PFAS – “Forever Chemicals” Awareness Gathering Pace
PFAS – “Forever Chemicals” Awareness Gathering Pace Public understanding now catching up with corporate awareness • Per- or poly-fluorinated alkyl substances (PFAS) are a group of industrial chemicals typically used in everyday products to make them non-stick, waterproof or stain resistant Source –
Slide 29: Q2 2024 Financial Highlights
Q2 2024 Financial Highlights ($ million) Continued Revenue Growth YoY Revenue Gross Margin (%) 30 • Revenue +24% to $25.4 million 32% 25.4 • Achieved higher ASP and positive changes in product mix 25 25% • Partially offset by lower volumes 20.4 20 Expanding Gross Margins YoY 15 • Improvements driven
Slide 30: Condensed Consolidated Balance Sheet
Condensed Consolidated Balance Sheet 1 As of As of (in thousands, except share data) June 30, 2024 December 31, 2023 ASSETS Current assets: Cash $ 28,478 $ 45,361 Receivables, net 15,812 16,192 Inventories, net 22,648 19,693 Prepaid expenses and other current assets 4,280 5,215 Total current assets
Slide 31: Condensed Consolidated Statement of Operations
Condensed Consolidated Statement of Operations 1 Three Months Ended June 30, Six Months Ended June 30, (in thousands, except per share data) 2024 2023 2024 2023 Revenue $ 25,405 $ 20,445 $ 47,145 $ 41,250 Cost of revenue, exclusive of depreciation and amortization 17,227 15,336 30,940 32,511 Operati
Slide 32: Condensed Consolidated Statement of Cash Flows
Condensed Consolidated Statement of Cash Flows 1 Six Months Ended June 30, (in thousands) 2024 2023 Cash flows from operating activities Net loss $ (5,387) $ (13,364) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation, amortization, depletion and accretion 3,374
Slide 33: Condensed Consolidated Statement of Cash Flows (cont.)
Condensed Consolidated Statement of Cash Flows (cont.) 1 Six Months Ended June 30, (in thousands) 2024 2023 Cash flows from financing activities Net proceeds from common stock issued in private placement transactions 14,951 15,220 Net proceeds from common stock issuance, related party 800 — Repurcha
Slide 34: Note on Non-GAAP Financial Measures
Note on Non-GAAP Financial Measures To supplement our financial information presented in accordance with accounting principles generally accepted in the United States ("GAAP"), we provide non-GAAP measures of certain financial performance. These non-GAAP measures include EBITDA (EBITDA Loss) and Adj
Slide 35: Adjusted EBITDA Reconciliation to Net Income (Loss)
Adjusted EBITDA Reconciliation to Net Income (Loss) Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2024 2023 2024 2023 Net loss (1) $ (1,968) $ (5,856) $ (5,387) $ (13,364) Depreciation, amortization, depletion and accretion 1,658 2,428 3,374 4,565 Amortization of Upfront Custo
Slide 36: 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