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Arq, Inc.

ARQ
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Business Summary

Arq, Inc. is an environmental technology company focused on selling consumable air, water, and soil treatment solutions, primarily utilizing activated carbon (AC) . The company's proprietary AC products are designed to reduce contaminants like mercury and per- and polyfluoroalkyl substances (PFAS) to help customers meet environmental regulations . Arq operates in the advanced purification technologies (APT) market, serving coal-fired power generation, industrial, water treatment, and water and soil remediation sectors . Demand for AC products is driven by environmental regulations and increasing consumer awareness of environmental, health, and safety issues, with significant growth opportunities in soil, sediment, and groundwater treatment, particularly for PFAS remediation .

The company's core business model revolves around manufacturing and selling AC products, including powdered activated carbon (PAC) and granular activated carbon (GAC), and other chemicals . Revenue is primarily generated through direct sales to customers via internal sales groups, with contracts typically ranging from one to five years . Revenue is generally recognized when orders are fulfilled and the product is accepted by the customer . The business experiences seasonality, with higher revenue in the first and third fiscal quarters due to weather-dependent power generation and increased demand for water treatment products during warmer and colder months .

Arq's product portfolio includes PAC and GAC, which are specialized sorbent materials used to remove impurities from gas, water, soil, and other streams . PAC and GAC are crucial for treating drinking and wastewater, industrial gas purification, odor removal, automotive emission control, and remediation of contaminated soil and groundwater . The company also developed FluxSorb RC, a colloidal carbon product (CCP) platform for "in situ" treatment of contaminated soil and groundwater . Additionally, through the Legacy Arq acquisition, the company gained Corbin Wetcake, a purified microfine carbon powder derived from bituminous coal fines, which was initially intended for GAC production and is now being explored for use as an additive in asphalt, purified coal, and synthetic graphite industries, as well as for isolating rare earth minerals and critical elements .

For the fiscal year ended December 31, 2025, Arq reported total revenue of $120.336 million , an increase of $11.377 million or 10% from $108.959 million in 2024. Cost of revenue, exclusive of depreciation and amortization, increased by $17.289 million or 25% to $86.804 million in 2025 from $69.515 million in 2024. The company experienced an operating loss of $52.958 million in 2025, compared to an operating loss of $1.959 million in 2024. Net loss for 2025 was $52.610 million , resulting in a diluted EPS of $(1.27) , compared to a net loss of $5.109 million and diluted EPS of $(0.14) in 2024. Cash and restricted cash decreased by $7.195 million to $15.040 million at year-end 2025 from $22.235 million at year-end 2024. Total debt obligations, net of current portion, were $8.452 million as of December 31, 2025, with $18.950 million outstanding under the Revolving Credit Facility and $8.403 million outstanding under the CTB Loan .

The year-over-year revenue increase was driven by record activated carbon revenue, with higher volumes sold contributing $5.5 million and improved pricing contributing $5.4 million to the increase. Favorable product mix also added $0.5 million to revenue . Gross margin, exclusive of depreciation and amortization, decreased in 2025 due to increased fixed production costs associated with the GAC and Corbin Facilities, primarily from lower initial commercial phase GAC production volumes relative to higher fixed costs . Research and development expenses increased by approximately $3.3 million to $7.337 million in 2025, mainly due to feedstock consumed and outside services for initial GAC Facility testing . Depreciation, amortization, depletion, and accretion expense rose by approximately $3.2 million to $11.747 million , largely due to property, plant, and equipment placed in service with the completion of the GAC Facility .

During 2025, Arq successfully commissioned its GAC Facility and produced its first commercial volumes of on-specification GAC product on August 6, 2025 . However, by December 2025, it became evident that achieving nameplate capacity required further modifications due to design flaws in the GAC Facility and the inherent variability of Corbin Wetcake . Consequently, GAC production has been paused, the Corbin Facility idled as a cost-saving measure, and an engineering and production process optimization review initiated . The company also recorded an impairment charge of $44.8 million for the fiscal year ended December 31, 2025, on certain Corbin Facility assets and patents related to Corbin Wetcake manufacturing, primarily due to the decision to idle the facility and cease using Corbin Wetcake as feedstock for GAC products .

Business Outlook

Arq does not expect material GAC revenue in fiscal year 2026 due to the ongoing engineering and production process optimization review and the pause in GAC production . The company's current thermal oxidizer can only support approximately 15 million pounds of annual GAC production, which is below the original design capacity of 25 million pounds or higher, and a 15 million pound per year scenario is not economically attractive on a stand-alone basis . Additional modifications are required to achieve the original design capacity .

The company's growth plans are dependent on successfully ramping up GAC production to nameplate capacity and consistently producing on-specification GAC products . The optimization review will determine production scale, capital requirements, and return profiles before further investment in the GAC Facility . Arq now expects to transition from using Corbin Wetcake to a bituminous proven performance coal feedstock for GAC production, believing it can more effectively overcome design constraints and feedstock variability challenges . Beyond GAC, Arq intends to secure customer interest in Corbin Wetcake as an additive in other markets, such as asphalt components, purified coal, and synthetic graphite industries . The company is also exploring uses for rare earth minerals and critical elements isolated during the Corbin Facility's manufacturing process, with these applications currently in various stages of proof-of-concept or preliminary customer testing .

Operationally, the company's ability to meet customer expectations and achieve operating efficiencies depends on the full-time operation of the Red River Plant . The current business plan relies on identifying solutions to the GAC Facility issues, eventually ramping up to nameplate capacity, and securing adequate feedstock for GAC production . Capital expenditures for 2026 are expected to primarily focus on routine maintenance at the Red River Plant and potential modifications to the GAC Facility, pending the optimization review results . These expenditures are subject to factors like procurement delays, material shortages, contractor availability, liquidity, regulatory compliance, and environmental approvals . The company plans to finance capital expenditures with cash on hand, borrowing availability under the Revolving Credit Facility, and ongoing cost reduction initiatives .

The EPA's April 2024 PFAS National Primary Drinking Water Regulation is expected to drive a material increase in GAC demand in the water purification market . However, the EPA announced in May 2025 its intention to narrow the final rule to only PFOA and PFOS, eliminating six other PFAS substances, and to extend the compliance deadline from April 2029 to April 2031 . The EPA is expected to commence rulemaking for this extension in Spring 2026 .

Risk Factors

Arq faces significant risks, including the dependence of its growth plans on successfully addressing design flaws at its GAC Facility and achieving anticipated production ramp-up, which may require more capital than expected . The company has already experienced construction delays and cost overruns, exceeding the original budget . Current and future indebtedness, including $19.0 million outstanding under the Revolving Credit Facility and $8.4 million under the CTB Loan as of December 31, 2025, could adversely affect its financial condition, with covenants requiring a maximum leverage ratio and minimum liquidity of $5.0 million (resetting April 1, 2026) . There is no guarantee of future demand for Corbin Wetcake, especially since it will no longer be used for GAC production, and its commercial viability in new markets like asphalt or synthetic graphite is uncertain . Disruptions or underutilization at the Red River Plant, the sole manufacturing plant for AC products, could negatively impact the ability to meet customer supply requirements . The company recorded an impairment charge of $44.8 million in 2025 on Corbin Facility assets and related patents, highlighting the risk of future write-downs . Demand for products is significantly dependent on environmental laws and regulations, and delays, repeal, or less strict enforcement of rules like the PFAS regulations or MATS Rule could adversely affect the business . The Corbin Facility is subject to extensive governmental regulations, and even when idled, incurs compliance costs . The market for pollutant reduction products is highly competitive, with some competitors being significantly larger . Reduction in coal consumption by North American electricity generators due to alternative energy sources could decrease demand for Arq's products . The loss of, or significant reduction in, revenue from its five largest customers, which accounted for approximately 50% of total revenue in 2025, and its top three customers, which accounted for approximately 42% , could materially affect the business . Geopolitical conditions can disrupt supply chains, increase raw material and transportation costs, and impact demand . The manufacturing process requires significant raw materials and additives, subject to price fluctuations and supply constraints from a limited number of suppliers . Operational risks inherent in mining operations, including safety issues and lower-than-expected lignite quality at the Five Forks Mine, could cause significant personal injury or damage . Information technology vulnerabilities and cyberattacks pose risks to operational systems and confidential information . The company's ability to utilize its tax assets, including $86.1 million in tax credit carryforwards and $12.5 million in Legacy Arq Tax Assets , could be limited by an "ownership change" as defined by IRC Sections 382 and 383 .

Management Priorities

Management's message emphasizes the company's commitment to environmental technology and its role in providing solutions for air, water, and soil treatment. Despite successfully commissioning the GAC Facility and producing initial commercial volumes, management acknowledges significant design flaws in the GAC Facility and inherent variability of Corbin Wetcake, which have necessitated pausing GAC production and idling the Corbin Facility as a cost-saving measure. The company has launched an engineering and production process optimization review to evaluate potential GAC Facility design modifications and production economics at different scales, with the expectation of transitioning to a bituminous proven performance coal feedstock for GAC products. Management explicitly states that they do not expect material GAC revenue in fiscal year 2026 . Strategic priorities include identifying solutions to the GAC Facility issues, ramping up GAC production to nameplate capacity, and securing adequate feedstock. Additionally, management is exploring new markets for Corbin Wetcake as an additive in industries such as asphalt, purified coal, and synthetic graphite, and investigating uses for rare earth minerals and critical elements isolated during the Corbin Facility's manufacturing process.

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — General
  2. [2] Item 1, Business — General
  3. [3] Item 1, Business — General
  4. [4] Item 1, Business — Products and Markets
  5. [5] Item 1, Business — General
  6. [6] Item 1, Business — Sales and Customers
  7. [7] Item 1, Business — Sales and Customers
  8. [8] Item 1, Business — Seasonality
  9. [9] Item 1, Business — Products and Markets
  10. [10] Item 1, Business — Products and Markets
  11. [11] Item 1, Business — Products and Markets
  12. [12] Item 1, Business — Legacy Arq Products and Markets
  13. [13] Item 7, MD&A — Total Revenue and Cost of Revenue
  14. [14] Item 7, MD&A — Total Revenue and Cost of Revenue
  15. [15] Item 7, MD&A — Total Revenue and Cost of Revenue
  16. [16] Item 7, MD&A — Total Revenue and Cost of Revenue
  17. [17] Item 7, MD&A — Total Revenue and Cost of Revenue
  18. [18] Item 7, MD&A — Total Revenue and Cost of Revenue
  19. [19] Item 7, MD&A — Total Revenue and Cost of Revenue
  20. [20] Item 7, MD&A — Total Revenue and Cost of Revenue
  21. [21] Item 8, Consolidated Statements of Operations
  22. [22] Item 8, Consolidated Statements of Operations
  23. [23] Item 8, Consolidated Statements of Operations
  24. [24] Item 8, Consolidated Statements of Operations
  25. [25] Item 8, Consolidated Statements of Operations
  26. [26] Item 8, Consolidated Statements of Operations
  27. [27] Item 7, MD&A — Cash Flows
  28. [28] Item 7, MD&A — Cash Flows
  29. [29] Item 7, MD&A — Cash Flows
  30. [30] Item 6, Debt Obligations
  31. [31] Item 6, Debt Obligations
  32. [32] Item 6, Debt Obligations
  33. [33] Item 6, Debt Obligations
  34. [34] Item 6, Debt Obligations
  35. [35] Item 7, MD&A — Revenue and cost of revenue
  36. [36] Item 7, MD&A — Revenue and cost of revenue
  37. [37] Item 7, MD&A — Revenue and cost of revenue
  38. [38] Item 7, MD&A — Revenue and cost of revenue
  39. [39] Item 7, MD&A — Revenue and cost of revenue
  40. [40] Item 7, MD&A — Research and development
  41. [41] Item 7, MD&A — Research and development
  42. [42] Item 7, MD&A — Research and development
  43. [43] Item 7, MD&A — Depreciation, amortization, depletion and accretion
  44. [44] Item 7, MD&A — Depreciation, amortization, depletion and accretion
  45. [45] Item 7, MD&A — Depreciation, amortization, depletion and accretion
  46. [46] Item 1, Business — Recent Developments
  47. [47] Item 1, Business — Recent Developments
  48. [48] Item 1, Business — Recent Developments
  49. [49] Item 7, MD&A — Impairment of long-lived assets
  50. [50] Item 7, MD&A — Impairment of long-lived assets
  51. [51] Item 1, Business — Recent Developments
  52. [52] Item 1, Business — Recent Developments
  53. [53] Item 1, Business — Recent Developments
  54. [54] Item 1, Business — Recent Developments
  55. [55] Item 1, Business — Recent Developments
  56. [56] Item 1A, Risk Factors — Our growth plans are dependent on the successful commercial production of our GAC products
  57. [57] Item 1, Business — Recent Developments
  58. [58] Item 1, Business — Recent Developments
  59. [59] Item 1, Business — Legacy Arq Products and Markets
  60. [60] Item 1, Business — Legacy Arq Products and Markets
  61. [61] Item 1A, Risk Factors — Disruptions or underutilization at any of our facilities could negatively impact our ability to meet customer supply requirements
  62. [62] Item 1A, Risk Factors — Disruptions or underutilization at any of our facilities could negatively impact our ability to meet customer supply requirements
  63. [63] Item 7, MD&A — Capital expenditures
  64. [64] Item 7, MD&A — Capital expenditures
  65. [65] Item 7, MD&A — Capital expenditures
  66. [66] Item 7, MD&A — Drivers of Demand and Key Factors Affecting Profitability
  67. [67] Item 1, Business — Federal National Primary Drinking Water Regulation and other PFAS Regulations
  68. [68] Item 1, Business — Federal National Primary Drinking Water Regulation and other PFAS Regulations
  69. [69] Item 1A, Risk Factors — Our growth plans are dependent on the successful commercial production of our GAC products
  70. [70] Item 1A, Risk Factors — Executing on our business plan to produce GAC products at nameplate capacity has required, and may continue to require, significant capital
  71. [71] Item 1A, Risk Factors — Current and future indebtedness could adversely affect our financial condition and impair our ability to operate our business
  72. [72] Item 1A, Risk Factors — Current and future indebtedness could adversely affect our financial condition and impair our ability to operate our business
  73. [73] Item 1A, Risk Factors — Current and future indebtedness could adversely affect our financial condition and impair our ability to operate our business
  74. [74] Item 1A, Risk Factors — Current and future indebtedness could adversely affect our financial condition and impair our ability to operate our business
  75. [75] Item 6, Debt Obligations — Revolving Credit Agreement
  76. [76] Item 6, Debt Obligations — Revolving Credit Agreement
  77. [77] Item 1A, Risk Factors — There could be no future demand for our products, including for our Corbin Wetcake
  78. [78] Item 1A, Risk Factors — Disruptions or underutilization at any of our facilities could negatively impact our ability to meet customer supply requirements
  79. [79] Item 1A, Risk Factors — We have and may in the future be required to take write-downs or write-offs, restructuring and impairment or other charges
  80. [80] Item 1A, Risk Factors — We have and may in the future be required to take write-downs or write-offs, restructuring and impairment or other charges
  81. [81] Item 1A, Risk Factors — Demand for our products and services depends significantly on environmental laws and regulations related to emissions and water quality
  82. [82] Item 1A, Risk Factors — Our Corbin Facility is subject to additional significant governmental regulations
  83. [83] Item 1A, Risk Factors — The market for consumables and other products that provide pollutant reduction is highly competitive
  84. [84] Item 1A, Risk Factors — Reduction of coal consumption by North American electricity power generators could result in less demand for our products and services
  85. [85] Item 1A, Risk Factors — The loss of, or significant reduction in, revenue from our largest customers could adversely affect our business
  86. [86] Item 1A, Risk Factors — The loss of, or significant reduction in, revenue from our largest customers could adversely affect our business
  87. [87] Item 1A, Risk Factors — The loss of, or significant reduction in, revenue from our largest customers could adversely affect our business
  88. [88] Item 1A, Risk Factors — Uncertain geopolitical conditions could adversely affect our business
  89. [89] Item 1A, Risk Factors — The manufacturing and processing of our consumable products requires significant amounts of raw materials
  90. [90] Item 1A, Risk Factors — We face operational risks inherent in mining operations, and our mining operations have the potential to cause safety issues
  91. [91] Item 1A, Risk Factors — Information technology vulnerabilities and cyberattacks on our networks could have a material adverse impact on our business
  92. [92] Item 1A, Risk Factors — Our ability to utilize our tax assets to offset future income tax liability could be limited from an "ownership change"
  93. [93] Item 1A, Risk Factors — Our ability to utilize our tax assets to offset future income tax liability could be limited from an "ownership change"
  94. [94] Item 1A, Risk Factors — Our ability to utilize our tax assets to offset future income tax liability could be limited from an "ownership change"
  95. [95] Item 1A, Risk Factors — Our ability to utilize our tax assets to offset future income tax liability could be limited from an "ownership change"
  96. [96] Item 1A, Risk Factors — Our ability to utilize our tax assets to offset future income tax liability could be limited from an "ownership change"
  97. [97] Item 1, Business — Recent Developments

Analysis on 5/22/2026