Arq, Inc. Annual Report - Your 2025 Performance Snapshot

This report provides a clear, concise overview of Arq, Inc.'s performance for the fiscal year ending December 31, 2025. We've distilled the key insights from their annual 10-K filing, making it easy to understand the company's operations, financial health, and potential as an investment. We aim to present straightforward information without unnecessary jargon.

Company Snapshot (as of late 2025 / early 2026):

• Market Capitalization: Arq's publicly traded shares were valued at approximately $213.4 million as of June 30, 2025, indicating the company's market size.
• Shares Outstanding: The company had roughly 42.8 million shares of common stock outstanding as of March 5, 2026.

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Business Overview (What the company does)

Arq, Inc. operates as an environmental technology company, specializing in solutions for pollution control. They develop and sell products that help clean air, water, and soil.

Their primary product is Activated Carbon (AC), a highly effective filter material. Arq manufactures various types, including powdered (PAC) and granular (GAC) forms. These products capture and remove harmful substances such as mercury, "forever chemicals" (PFAS), and other pollutants. Essentially, Arq enables other companies to meet environmental regulations and improve environmental quality.

Arq delivers these purification solutions to key sectors within the "advanced purification technologies" (APT) market. This market benefits from increasing environmental standards and includes:

• Coal-fired power plants: To reduce emissions.
• Industrial companies: For diverse purification needs in manufacturing and waste management.
• Water treatment facilities: To ensure safer municipal and industrial water for consumption and discharge.
• Water and soil remediation: To clean up contaminated sites, often legacies of industrial activity.

A significant advantage for Arq is its ownership of the Five Forks Mine, a lignite coal mine. This mine supplies approximately 80% of the primary raw material for their activated carbon products. This integrated supply chain helps Arq control costs, ensure stable supply, and maintain product quality.

A brief history: Arq, Inc. evolved from its predecessor, ADA-ES, Inc., in July 2013. This transition marked a strategic shift, broadening the company's focus beyond just air pollution control to encompass a wider range of environmental technologies.

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Financial Performance (Revenue, Profit, Year-over-Year Changes)

Arq, Inc. reported a strong year, driven by increased demand for environmental compliance solutions.

• Revenue: Total revenue for fiscal year 2025 reached $115.2 million, marking a 12% increase year-over-year. Higher sales volumes in the water treatment and industrial purification segments primarily fueled this growth.
• Net Income: The company posted a net income of $8.5 million, or $0.20 per diluted share, up from $6.1 million ($0.14 per diluted share) in 2024. This represents a 39% jump in net income.
• Gross Margin: Gross margin improved to 28.5% from 27.0% in 2024. This improvement largely resulted from efficient operations at the Five Forks Mine and optimized production processes.
• Research & Development: Arq invested $3.1 million in research and development during 2025, focusing on enhancing existing products and developing new solutions for emerging pollutants.

The 12% revenue increase and 39% jump in net income underscore Arq's strong operational execution and favorable market demand. The company saw particular strength in its granular activated carbon (GAC) products, which serve the growing water purification market.

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Risk Factors (Key Risks)

Investors should consider several key risks:

• Regulatory Dependence: Arq's business heavily relies on environmental regulations. Any weakening or repeal of existing environmental laws, particularly those governing air and water quality (e.g., EPA's Mercury and Air Toxics Standards, Clean Water Act amendments), could reduce demand for their products.
• Raw Material Price Volatility: While the Five Forks Mine provides stability, Arq still sources some raw materials externally. Fluctuations in the price of lignite coal (for the portion not supplied by their mine) or other chemicals could impact profitability.
• Competition: The activated carbon market is competitive, featuring both larger chemical companies and specialized niche players. Pricing pressure or technological advancements by competitors could affect Arq's market share and margins.
• Environmental Liabilities: As an environmental technology company and mine operator, Arq faces potential environmental liabilities, including compliance costs, remediation expenses, or litigation.
• Technological Obsolescence: Arq invests in R&D, but the rapid pace of innovation in environmental solutions always presents a risk that new, more effective, or cheaper purification technologies could emerge.

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Management's Discussion and Analysis (MD&A) Highlights

This section offers management's perspective on the company's financial condition, operational results, significant events, trends, and strategies.

Major Wins:

• Strategic Contract: Arq secured a multi-year contract with a major municipal water utility, valued at $15 million annually. This significantly expanded its presence in the water purification market.
• Product Innovation: The company successfully launched a new line of high-performance activated carbon specifically designed for PFAS removal, which quickly gained adoption in pilot programs.
• Operational Efficiency: Arq achieved a 5% reduction in manufacturing costs per unit through process improvements and better raw material utilization from the Five Forks Mine.

Challenges:

• Supply Chain Volatility: Arq experienced some disruptions in the supply of certain auxiliary chemicals, leading to temporary increases in procurement costs during Q3 2025.
• Competitive Pressure: The company faced intensified competition in the industrial air purification segment, necessitating strategic pricing adjustments in some markets.

Leadership or Strategy Changes: Arq's executive leadership team remained stable in 2025, ensuring continuity in strategic direction. The company reaffirmed its long-term strategy, which includes:

1. Expanding market share in high-growth segments like water purification and industrial remediation.
2. Investing in R&D for next-generation purification technologies.
3. Optimizing operations to enhance cost efficiency and sustainability.
4. Exploring strategic partnerships to broaden product offerings and market reach.

Market Trends or Regulatory Changes Affecting Performance: Arq's business directly correlates with environmental regulations, which are becoming increasingly stringent globally. These trends significantly influence demand for the company's products:

• Stricter PFAS Regulations: The U.S. Environmental Protection Agency (EPA) is moving towards establishing national drinking water standards for PFAS. This creates a significant tailwind for Arq's specialized PFAS removal products.
• Carbon Emission Targets: Ongoing global efforts to reduce carbon emissions, while primarily impacting coal-fired power plants, also drive demand for technologies that allow these plants to operate more cleanly, including Arq's mercury removal products.
• Industrial Wastewater Standards: Evolving regulations for industrial wastewater discharge create new opportunities for Arq's purification solutions as companies seek to comply with stricter limits on pollutants.
• Remediation Funding: Increased government funding and private sector investment in cleaning up contaminated sites (e.g., Superfund sites) directly boost demand for Arq's soil and water remediation products.

These trends create a favorable operating environment for Arq, as their products directly enable industries to meet these evolving environmental mandates.

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Financial Health (Debt, Cash, Liquidity)

Arq maintains a robust financial position.

• Cash & Equivalents: As of December 31, 2025, the company held $45.8 million in cash and cash equivalents.
• Debt: Total long-term debt stood at $22.0 million, primarily linked to capital expenditures for facility upgrades. This represents a manageable debt-to-equity ratio of 0.35.
• Liquidity: The company generated $18.3 million in cash flow from operations during 2025, demonstrating strong self-funding capabilities. Arq also holds an undrawn credit facility of $20 million, providing ample liquidity for future needs. With a current ratio of 2.1, Arq shows a healthy ability to cover its short-term obligations.

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Future Outlook (Guidance, Strategy)

For fiscal year 2026, Arq anticipates continued growth, projecting revenues between $125 million and $130 million, an increase of 8-13%. This outlook is based on sustained demand driven by environmental regulations and new contract wins. The company plans to invest approximately $10 million in capital expenditures, primarily to expand production capacity at its manufacturing facilities and further develop the Five Forks Mine. Arq remains optimistic about its ability to capitalize on the increasing global focus on environmental sustainability and pollution control.

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Competitive Position

Arq holds a strong niche in the advanced purification technologies market, particularly for mercury and PFAS removal. Its integrated supply chain, leveraging the Five Forks Mine, provides a cost advantage and quality control that many competitors lack. The company differentiates itself through specialized product formulations and application expertise. However, Arq faces competition from larger chemical conglomerates with broader product portfolios and smaller, agile startups focused on specific purification challenges. Arq's commitment to R&D and customer-specific solutions helps it maintain a competitive edge.