ARQ
Nasdaq: ARQ
Q3 2024 Earnings Call
November 7, 2024
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," "believes," similar expressions and any other statements that are not historical facts are intended to identify those assertions as forward-looking statements. All statements that address activities, events or developments that Arq, Inc. ("we," "us," "our," "Arq" or the "Company") intends, expects or believes may occur in the future are forward-looking statements. These forward-looking statements may relate to such matters as business strategy, our goals for the remainder of fiscal year 2024, expectations about future market size, penetration rates demand and pricing for our PAC and GAC products and our ability to enter into new markets, the strategic GAC project at our Red River facility, including timing to completion and initial deliveries, contracting progress, expected capital expenditures, expected production capacity, potential future increases in expected production capacity and further facility expansion opportunities including the addition of further production lines, the benefits associated with bringing general contracting functions in-house with respect to our Red River facility, expectations surrounding our ongoing corporate transformation, the estimated costs and timing associated with potential capital improvements at our facilities, financing sources for such projects and potential production outputs thereafter, expected market supply of GAC products and the cost savings and environmental benefits of our GAC products, and the timing and scope of future regulatory developments and the related impact of such on the demand for our products. The forward-looking statements included in this presentation involve risks and uncertainties. Actual events or results could differ materially from those discussed in the forward- looking statements as a result of various factors including, but not limited to, timing and scope of new and pending regulations and any legal challenges to or extensions of compliance dates of them; the U.S. government's failure to promulgate regulations that benefit our business; changes in laws and regulations, accounting rules, prices, economic conditions and market demand; impact of competition; availability, cost of and demand for alternative energy sources and other technologies; technical, start up and operational difficulties; competition within the industries in which we operate; our inability to commercialize our products on favorable terms; our inability to effectively and efficiently commercialize new products; changes in construction costs or availability of construction materials; our inability to effectively manage construction and startup of the GAC facility at our Red River facility or Corbin facility; our inability to obtain required financing or financing on terms that are favorable to us; our inability to ramp up our operations to effectively address recent and expected growth in our business; loss of key personnel; ongoing effects of inflation and macroeconomic uncertainty, including from the lingering effects of the pandemic and ongoing armed conflicts around the world, and such uncertainty's effect on market demand and input costs; availability of materials and equipment for our business; intellectual property infringement claims from third parties; pending litigation; other factors relating to our business strategy, goals and expectations concerning the Arq Acquisition (including future operations, future performance or results); our ability to maintain relationships with customers, suppliers and others with whom we do business and meet supply requirements, or our results of operations and business generally; risks related to diverting management's attention from our ongoing business operations; costs related to the Arq Acquisition; opportunities for additional sales of our AC products and end-market diversification; our ability to meet customer supply requirements; the rate of coal-fired power generation in the U.S.; the timing and cost of capital expenditures and the resultant impact to our liquidity and cash flows; and the other risk factors described in our filings with the SEC, including our most recent Annual Report on Form 10-K. You are cautioned not to place undue reliance on the forward-looking statements made in this presentation and to consult filings we have made and will make with the SEC for additional discussion concerning risks and uncertainties that may apply to our business and the ownership of our securities. The forward-looking statements contained in this presentation are presented as of the date hereof, and we disclaim any duty to update such statements unless required by law.
Non-GAAP Financial Measures
Included in this presentation are certain financial measures that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP") designed to supplement, and not substitute, the Company's financial information presented in accordance with GAAP. The non-GAAP measures as defined by the Company may not be comparable to similar non-GAAP measures presented by other companies. The presentation of such measures, which may include adjustments to exclude unusual or non-recurring items, should not be construed as an inference that the Company's future results or leverage will be unaffected by other unusual or non-recurring items. Please see the attached appendix for how we define these non-GAAP measures, a discussion of why we believe they are useful to investors, and certain limitations and reconciliations thereof to the most directly comparable GAAP measures.
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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 Growth Projects
(1) Adjusted EBITDA is a non-GAAP measure. Please see "Financial Detail" slides for reconciliation information .
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Q3 2024 Financial Highlights
Revenue
40
34.8
35
29.8
30
25
20
15
10
Q3 2023
Q3 2024
Gross Margin (%)
30.6%
38.6%
Q3 2023
Q3 2024
Adjusted EBITDA1
Net Income
5.1
1.6
0.9
(2.2)
Q3 2023
Q3 2024
Q3 2023
Q3 2024
Cash
70 Unrestricted
60
Restricted
57.4
50
37.2
8.7
40
8.7
30
48.7
20
28.5
10
0
Jun 30, 2024
Sep 30, 2024
Continued Revenue Growth YoY
Expanding Gross Margins YoY
Cash & Balance Sheet Flexibility
1) Adjusted EBITDA is a non-GAAP measure. Please see "Financial Detail" slides for reconciliation information.
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Steady Price Increases Underpin Sustainable PAC Business Performance
YoY ASP % Change
30%
25%
20%
15%
10%
5%
0%
Q1 2023
Q2 2023
Q3 2023
Q4 2023
Q1 2024
Q2 2024
Q3 2024
Q3 2024:
Strong visibility in PAC contract renewals extends runway and sustainability in 2025 and beyond
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Attractive & Consistent Growth in Gross Margin
Material and consistent gross margin improvement due to ASP growth and focused cost cutting initiatives
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Gross Margin %
49.8%
+1950
+720
+800
bps YoY
bps YoY
bps YoY
38.6%
36.9%
32.2%
30.6%
25.0%
17.4%
Q1 2023
Q2 2023
Q3 2023
Q4 2023
Q1 2024
Q2 2024
Q3 2024
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Key Drivers of Arq's Corporate Transformation
Red River Project
Corbin Project
What We're Doing
attractive pricing vs PAC products
feedstock for Red River
What it Delivers
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Red River GAC Development Update
Development remains on time & on budget; upsize announced
Note: Above photos as of October 2024
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Capital & Funding Update
September 2024 Equity Offering
Term Loan Refinancing Update - What Changed?
1 Total shares purchased to date 975,000. Material amount of outstanding equity awards includes stock that has no value until Arq's share price maintains $10 and $15 per share.
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Growth Beyond Red River Phase I
Key Triggers Needed to Pursue Phase II
Other Notable Points
Illustrative Red River GAC Buildout
Assumes Phases I & II are built ~1-year apart; potential of 125 million lbs.
140
120
100
lbs.
80
Million
60
40
20
0
2025
2026
2027
Potential
Phase I
Phase II
Phase III
Phase IV
Phase V
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Disclaimer
Arq Inc. published this content on November 07, 2024, and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on November 07, 2024 at 11:59:02.770.