Executive Summary

Revenue rose 24% year over year to $25.4M, gross margin expanded to 32%, and adjusted EBITDA improved to $0.5M, evidencing continued pricing power and mix optimization .
ASP increased ~16% YoY for the fifth consecutive quarter; PAC profitability improved while GAC commercialization advanced, with 52% of Red River’s 25M lbs nameplate capacity now contracted nearly six months ahead of first production; first deliveries guided to Q1 2025 from Q4 2024 previously .
Liquidity stood at $37.2M in cash and restricted cash; 2024 capex guidance maintained at $60–$70M, with Red River and Corbin builds driving H1 capex of $28.9M and total debt at ~$20.4M .
Estimate comparison is not available; S&P Global Wall Street consensus data for ADES could not be retrieved (unavailable). Values retrieved from S&P Global for estimates were unavailable.

What Went Well and What Went Wrong

What Went Well

ASP growth drove margin expansion: gross margin improved to 32% in Q2 (vs. 25% LY) on higher pricing, favorable mix, and disciplined focus on profitability over volume .
Strategic GAC contracting momentum: total contracted volume reached 13M lbs/year (52% of capacity), validating demand across water, biogas, and air filtration applications .
Management execution and confidence: “Our second quarter results represent yet another period of solid execution… we are confident that our PAC portfolio will generate positive cash flow in 2024…” — CEO Bob Rasmus .

What Went Wrong

Timing shift in GAC ramp: first deliveries moved from Q4 2024 to Q1 2025 due to construction delays from unprecedented rain, though management reiterated target and economics .
Power generation headwinds: lower natural gas prices and mild winter/spring tempered volumes among coal-fired utility customers, impacting demand in H1 2024 .
Interest expense remained a drag: $0.8M in Q2, broadly flat YoY, tied to the $10.0M term loan from the Arq acquisition; refinancing remains in progress .

Financial Results

Metric	Q4 2023	Q1 2024	Q2 2024
Revenue ($USD Millions)	$28.104	$21.740	$25.405
Diluted EPS ($USD)	$0.10	$(0.09)	$(0.06)
Gross Margin %	49.8%	37%	32%
Operating Income (Loss) ($USD Millions)	$3.104	$(2.980)	$(1.420)
Adjusted EBITDA ($USD Millions)	$7.179–$7.216	$(1.144)	$0.453
Net Income (Loss) ($USD Millions)	$3.290	$(3.419)	$(1.968)

KPIs

KPI	Q4 2023	Q1 2024	Q2 2024
ASP YoY Change (%)	—	+16%	+16%
GAC Contracted Volume (M lbs/year)	—	5	13
Red River Capacity Contracted (%)	—	20%	52%
Cash + Restricted Cash ($USD Millions)	$54.153	$44.019	$37.197
Total Debt incl. leases ($USD Millions)	$20.927	$20.696	$20.397
Capex (period) ($USD Millions)	FY 2023: $27.516	Q1: $9.596	H1: $28.851

Note: “—” denotes not disclosed.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
2024 Capex	FY 2024	$55–$60M (Mar 12, 2024)	$60–$70M (May 8, 2024; maintained Aug 12, 2024)	Raised, then maintained
Red River First Production/Deliveries	Project start	Q4 2024 first production	Q1 2025 first deliveries; delays due to unprecedented rain	Shifted later
GAC Contracting	Nameplate 25M lbs	~20% contracted (5M lbs)	52% contracted (13M lbs)	Raised
Term Loan Refinancing	Liquidity	Advisors appointed	Non-binding term sheet signed to materially expand facility	Progressing

Earnings Call Themes & Trends

Note: An earnings call transcript for Q2 2024 was not available in the document system; themes are synthesized from Q2 press release and 10-Q.

Topic	Previous Mentions (Q4 2023 and Q1 2024)	Current Period (Q2 2024)	Trend
PFAS Regulation Tailwinds	EPA regulatory tightening acknowledged; demand implications discussed	April 10 EPA PFAS rule confirmed; anticipated multi-year GAC demand uplift	Strengthening tailwind
Pricing/ASP Discipline	Pricing/mix improvements in Q4 drove 50% gross margin	Fifth straight quarter of double-digit ASP growth (~16%)	Sustained momentum
Power Generation Demand & Nat Gas	Mild winter/power gen softness noted in Q1	Low HH gas prices ($2.08/MMBtu) weighed on utility demand	Persistent headwind
Red River/Corbin Execution	Red River build advancing; Corbin commissioning to feed Red River	Corbin commissioning underway; Red River first deliveries Q1 2025; rain-related delays	Progressing with minor delays
Financing/Liquidity Plan	Planned refinancing and expansion of term loan	Signed non-binding term sheet to materially expand facility	Advancing

Management Commentary

“Our second quarter results represent yet another period of solid execution… we are confident that our PAC portfolio will generate positive cash flow in 2024, providing a solid foundation to build upon with our higher-margin GAC revenue and cash flow in 2025 and beyond.” — CEO Bob Rasmus .
“We are particularly encouraged by the variety of both existing and prospective customers engaged, including those in the water, biogas, and air filtration industries…” — CEO Bob Rasmus .
“Our first quarter results evidence the clear momentum… we delivered year-over-year revenue growth of 4% despite a 6% decline in volumes…” — CEO Bob Rasmus .
“We grew revenue by 20%, nearly doubled our gross margins to 50%, generated positive cash flow from our PAC business, and achieved positive net income for the first time in 8 quarters.” — CEO Bob Rasmus (Q4) .

Q&A Highlights

The Q2 2024 earnings call transcript was not available via the document tools. We reviewed the press release and 10-Q for clarifications, including the shift to Q1 2025 first deliveries due to weather-related construction delays and ongoing refinancing progress .

Estimates Context

S&P Global Wall Street consensus estimates for Q2 2024 EPS and revenue could not be retrieved due to a Capital IQ mapping issue for ADES; therefore, beat/miss vs. consensus cannot be assessed. Values retrieved from S&P Global were unavailable.
Given strong ASP growth and margin improvement, sell-side models may need to reflect sustained pricing/mix benefits and the Q1 2025 delivery timing for GAC start-up; however, without consensus access, we cannot quantify revisions .

Key Takeaways for Investors

Pricing power and mix continue to drive profitability: Q2 gross margin expanded to 32%, with ASP up ~16% YoY, marking five consecutive quarters of double-digit ASP growth .
GAC commercialization de-risked by contracting progress: 13M lbs/year (52% of capacity) now contracted ahead of first deliveries, broadening end-market exposure (water, biogas, air filtration) .
Timeline adjustment modest: first GAC deliveries shift to Q1 2025 due to weather delays, but management reiterates attractive project economics and maintains 2024 capex guidance at $60–$70M .
Liquidity sufficient for near-term execution: $37.2M cash/restricted cash at quarter-end, with an advancing refinancing plan (non-binding term sheet signed) to materially expand capacity .
Utility demand headwinds likely to persist while PAC still improving: low nat gas prices and seasonality tempered volumes, but PAC pricing/mix and cost discipline offset with margin gains .
Watch milestones: additional GAC contracts toward full nameplate, refinancing closing/terms, Corbin ramp in Q4 2024, Red River commissioning pace, and PFAS-driven municipal demand developments .
Trading implications: Near-term narrative hinges on contracting cadence and liquidity/refinancing progress; medium-term thesis centers on GAC scale-up, regulatory tailwinds, and durable pricing power in PAC .

Arq, Inc. (ADES)·Q2 2024 Earnings Summary