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    ARQ
    Earnings call· Jun 2026(Q2 FY26)

    Arq Q2 FY26 earnings call ARQ

    Aug 11, 2026 Source

    Executive summary

    ARQ Q2 FY26 — Strong PAC Performance and Strategic GAC Evaluation

    ARQ delivered strong Q2 FY26 results driven by its foundational PAC business, which demonstrated improved profitability and pricing discipline. The company introduced a new 'PAC for PFAS' product to address immediate customer needs for PFAS removal, while continuing its strategic review of the larger GAC investment, emphasizing capital allocation discipline. New CFO Shimon Steinmetz is focused on operational efficiencies and cost reductions to further enhance profitability.

    Highlights

    4

    • Adjusted EBITDA increased to $5.8 million in Q2 FY26, up from $3.7 million in the prior year period.

    • Gross margin improved by 520 basis points year-over-year, reaching 38.5% in Q2 FY26.

    • The Red River plant turnaround was completed under budget in April, with associated costs of $3.1 million capitalized.

    • Launch of 'PAC for PFAS' product line, offering a near-term, lower-capital solution for PFAS compliance for certain water companies.

    Concerns

    3

    • Estimated cost for GAC Phase 1 conversion is between $40 million and $60 million, with the investment decision still pending.

    • Unrestricted cash at quarter-end was lower than recent quarters due to timing, though it recovered to $3.1 million by July 31, 2026.

    • Selling, general and administrative expenses increased by $900,000 year-over-year to $6.8 million, primarily due to severance and recruiting costs.

    Guidance & targets

    5
    CategoryTargetConfidence
    Full-year 2026 Revenue
    $120M-$125M
    high materiality
    High
    Full-year 2026 Adjusted EBITDA
    $17M-$20M
    high materiality
    High
    Full-year 2026 Capital Expenditure
    $8M-$10M
    medium materiality
    High
    Core PAC Business Adjusted EBITDA Increase
    up to 50%
    high materiality
    High
    PAC for PFAS Contribution
    meaningfully boost performance
    medium materiality
    Medium

    Segment performance

    1
    SegmentRevenueYoYQoQMargin
    PAC Business
    Underlying strength and improving profitability, with continued volume and pricing strength. Performance reflects the absence of GAC start-up costs that weighed on the prior year period. Expected to be cash generative on an annual basis.
    Adjusted EBITDA: $5.8M (Q2 FY26)Adjusted EBITDA (prior year): $3.7M (Q2 FY25)Gross Margin increase: 520 bps YoY
    		up modestly——38.5%

    Operational metrics

    14
    Adjusted EBITDA
    $5.8Mup from $3.7M in Q2 FY25
    Q2 FY26

    Substantial increase over prior year, reflecting underlying strength of PAC business, pricing discipline, and cost/operational initiatives without GAC production drag. Includes add-backs for severance and noncash equity compensation.

    Gross Margin
    38.5%up 520 bps from Q2 FY25
    Q2 FY26

    Reflects continued improvement in PAC profitability in the absence of GAC start-up costs.

    Net Loss
    $700kcompared with $2.4M loss in Q2 FY25
    Q2 FY26

    Reflecting improved operating performance.

    Selling, General and Administrative Expenses
    $6.8Mup $900k vs prior year
    Q2 FY26

    Primarily driven by severance and recruiting costs tied to recent leadership changes.

    Research and Development Costs
    $1Mvs $2.7M in Q2 FY25
    Q2 FY26

    Much of the prior year's spend was attributed to GAC ramp-up.

    Total Cash
    $12.1M
    as of June 30, 2026

    Movement versus year-end primarily reflects capital expenditures, turnaround, and timing of working capital.

    Restricted Cash
    $11.2M
    as of June 30, 2026

    Part of total cash balance.

    Unrestricted Cash
    $3M
    as of July 1, 2026

    Recovered from lower quarter-end balance due to timing of borrowing base and receipts.

    Unrestricted Cash
    $3.1M
    as of July 31, 2026

    Stood at this level by month-end, demonstrating recovery from quarter-end timing issues.

    Total Debt
    $30.9Mup $2.2M vs December 2025
    as of June 30, 2026

    Largely driven by an increase in the amount drawn on the MidCap facility.

    MidCap Revolving Credit Facility
    $21.4M
    as of June 30, 2026

    Related to total debt.

    CTV Loan (Corbin asset)
    $8.1M
    as of June 30, 2026

    Secured against the Corbin asset, related to total debt.

    GAC Phase 1 Capacity
    25 million pounds
    Phase 1

    Target capacity for the GAC Phase 1 conversion project.

    PAC for PFAS ASP and Margins
    substantially greatervs basic PAC business
    future

    Expected attractive volumes, pricing, and margins for the new product.

    Industry KPIs

    2
    MetricValueDetails
    Volume vs price splitup modestly
    Productivity cost savings program5 categories

    Product announcements

    1
    ProductTypeDetails
    PAC for PFASlaunch

    Deals & partnerships

    2
    Asphalt partnerTechnical validation and commercialization of Corbin's blending component product for asphalt roads.

    Partner completed a successful crack test at the National Center for Asphalt Technology. Program is transitioning to the next phase of technical validation and third-party laboratories through Q4 2026, with feedback beginning in Q1 2027.

    Third partiesEvaluating unsolicited interest for asset sale or joint venture covering Corbin and its associated technologies.

    Interest covers a broad range of applications, including silicone wafers, rare earth materials, and other specialty products. Management is actively evaluating the most efficient way to monetize the Corbin asset.

    Capital programs

    2
    Red River Plant Turnaroundcompleted
    Period spend: $3.1M

    Completed in April, under budget. Associated costs were capitalized. Not anticipated to be repeated before April 2028.

    GAC Phase 1 Conversionevaluation ongoing$40M-$60M

    Benefit: 25 million pounds of bituminous GAC capacity

    Cost estimates received from two independent engineering consultants. The range is due to two different designs and a 25% contingency. Decision to invest is not yet made, but management is working to narrow the range and refine the design. Construction timeline is approximately 12 months.

    Risks & headwinds

    3
    GAC investment uncertaintyNear-to-medium term

    Estimated cost for Phase 1 conversion is $40M-$60M.

    Mitigation: Management is refining the design to narrow the cost range and will only invest if it generates a return that justifies the investment. Focus on making existing business more profitable to strengthen ability to finance GAC.

    Unrestricted cash timingQ2 FY26 end

    Unrestricted cash at June 30 was lower than recent quarters, but recovered to $3.1M by July 31, 2026.

    Mitigation: Attributed to timing of borrowing base and receipts, not a liquidity constraint. Company confident in funding operating and CapEx needs and ability to add incremental credit.

    Increased SG&A expensesQ2 FY26

    $900k increase year-over-year to $6.8M.

    Mitigation: Primarily driven by severance and recruiting costs tied to recent leadership changes. New CFO focused on identifying cost reduction opportunities.

    What to watch in Q3 FY26

    5

    Corbin monetization feedback

    Q1 FY27
    CurrentTechnical validation ongoing through Q4 2026
    TargetFeedback beginning in Q1 2027

    Why it matters

    Monetization of Corbin asset and its technologies could provide significant capital or strategic benefits.

    This validation work will be conducted through Q4 2026 with feedback beginning in Q1 2027.

    Q&A highlights

    9

    Does the $40M-$60M GAC CapEx estimate fall within the range where debt could be used for funding, as previously discussed?

    Yes, it does, but evaluation is ongoing. The range is due to two different designs and a 25% contingency. The company is refining the preferred design to narrow the price and scope, prioritizing shareholder value and not pursuing GAC at any cost.

    “It does. But I also want to stress that that evaluation work is still ongoing and that there are really 2 basic reasons for that range.”

    asked by Gerard Sweeney · answered by Robert Rasmus

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Performance of Foundational PAC Business

    ARQ's core Powdered Activated Carbon (PAC) business demonstrated underlying strength and improving profitability in Q2 FY26. Despite being a seasonally softer quarter and impacted by a biennial plant turnaround, the company delivered adjusted EBITDA of $5.8 million, a substantial increase from $3.7 million in the prior year. Gross margin also significantly improved by 520 basis points to 38.5%, reflecting continued PAC profitability and the absence of GAC start-up costs that weighed on the prior period.

    02

    Introduction of PAC for PFAS Product Line

    The company launched 'PAC for PFAS,' a new line of powdered activated carbon products designed to address the PFAS removal market. This solution targets water systems close to meeting EPA PFAS standards, allowing them to achieve compliance using existing equipment and avoiding substantial capital expenditure associated with GAC systems. Initial customer conversations suggest this product could be priced similar to conventional GAC products, with meaningful contribution expected from 2027 onwards.

    03

    Strategic Optimization Review and GAC Investment Decision

    ARQ's strategic optimization review is ongoing, encompassing not only bituminous-based Granular Activated Carbon (GAC) but also broader operational assessments. Cost estimates for GAC Phase 1 conversion, which would provide 25 million pounds of capacity, range from $40 million to $60 million. Management emphasized that sharing this estimate does not mean a decision to invest has been made, nor does it mean walking away from GAC, as the company prioritizes shareholder value and will not invest at any cost.

    04

    Corbin Monetization Progress

    Encouraging progress has been made with the asphalt partner for Corbin, with successful crack tests completed. The program is transitioning to technical validation and third-party laboratory evaluations through Q4 2026, with feedback expected in Q1 2027. ARQ is actively evaluating monetization strategies for the Corbin asset and its associated technologies, including licensing, plant sale, or joint ventures, and has received unsolicited interest for asset sale or JV covering various applications.

    05

    Focus on Financial Efficiency and Cost Reduction

    With the appointment of Shimon Steinmetz as Chief Financial Officer, ARQ is intensifying its focus on driving greater operational and financial efficiency. The new CFO is concentrated on strengthening financial planning and analysis and identifying opportunities to reduce costs and improve profitability. Five different categories of non-people-related cost reductions have already been identified, aiming to generate cash through cost removal.

    06

    Balance Sheet and Liquidity Management

    ARQ ended Q2 FY26 with $12.1 million in total cash, of which $11.2 million was restricted. Unrestricted cash was lower at quarter-end due to timing of📎 borrowing base and receipts but recovered to $3.1 million by July 31, 2026. Total debt stood at $30.9 million. The company is confident in funding its operating and CapEx needs and is exploring ways to enhance existing credit facility terms to reflect the current state of the business.

    AI-generated summary of the company’s earnings call. Not investment advice.