Name: Arq, Inc. Q3 2025 Earnings Call
Start: 2025-11-05T21:36:36.000Z

Executive Summary

Q3 2025 revenue was $35.1M (+1% YoY) with initial commercial GAC sales; gross margin fell to 28.8% on low, early‑ramp volumes and higher fixed production costs; Adjusted EBITDA was $5.2M, marking the sixth straight positive quarter .
The foundational PAC business remained strong with ASP up ~7% YoY; SG&A dropped 43% YoY, while R&D rose on GAC pre‑production testing; net loss was $0.7M vs $1.6M net income YoY .
Guidance shifts: capex FY2025 maintained at $8–$12M; Phase I GAC nameplate timing pushed to around mid‑2026; Phase II FID now targeted to coincide with Phase I nameplate capacity around mid‑2026, a delay from prior year‑end 2025 target .
Key stock reaction catalysts: first commercial GAC sales achieved (positive), but the timeline slip to mid‑2026 and margin compression from early‑ramp inefficiencies are likely overhangs; management is exploring feedstock blending/replacement to stabilize GAC operations .

What Went Well and What Went Wrong

PAC pricing resilience: ASP +7% YoY sustained demand, underpinning revenue mix and ongoing PAC turnaround; “Our PAC business continuing to exceed operational and financial expectations” (CEO) .
Initial commercial GAC milestone: “Achieved first commercial GAC production and sales at Red River, generating initial GAC revenues” (press release) .
Cost discipline and profitability progress: SG&A fell 43% YoY; sixth consecutive quarter of positive Adjusted EBITDA ($5.2M) despite ramp headwinds .

Margin compression: Gross margin dropped to 28.8% from 38.6% YoY due to low, early‑ramp GAC volumes and higher fixed costs (labor, utilities, rentals) at Red River and Corbin .
Earnings deterioration: Net loss of $0.7M vs $1.6M net income YoY; operating loss of $0.8M vs $2.0M operating income YoY .
GAC timeline delay: Nameplate capacity now expected around mid‑2026, reflecting design issues and feedstock variability; Phase II FID deferred to align with Phase I nameplate timing .

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$27.247	$28.584	$35.074
Gross Margin %	36.4%	33.3%	28.8%
Net Income ($USD Millions)	$0.203	$(2.133)	$(0.653)
Diluted EPS ($USD)	$0.00	$(0.05)	$(0.02)
Adjusted EBITDA ($USD Millions)	$4.063	$3.668	$5.168
Operating Income ($USD Millions)	$0.662	$(1.555)	$(0.839)

KPIs

KPI	Q1 2025	Q2 2025	Q3 2025
ASP YoY (%)	+13%	+9%	+7%
Capex ($USD Millions)	$3.710	$1.900	$2.200
Cash and Restricted Cash ($USD Millions)	$14.803	$15.424	$15.493
Total Debt ($USD Millions)	$26.8	$28.7	$25.9

Notes:

Non‑GAAP Adjusted EBITDA includes stock-based comp, GAC pre‑production feedstock adjustments, and other items; reconciliations provided in press materials .
Sequential comparison: revenue rose from $28.6M to $35.1M; gross margin declined from 33.3% to 28.8%, reflecting ramp inefficiencies .

Metric	Period	Previous Guidance	Current Guidance	Change
Capex	FY 2025	$8–$12M	$8–$12M	Maintained
GAC Phase I Nameplate Capacity Timing (25M lbs)	Ramp to Nameplate	“Reach full nameplate within next six months” (Aug 6, 2025) or “3–6 month ramp after first commercial production”	“Expect to achieve nameplate around mid‑2026”	Lowered/Delayed
Phase II GAC FID Timing	Second Line	“Targeting FID prior to year‑end 2025”	“FID timing to coincide with Phase I nameplate around mid‑2026”	Delayed
GAC Production Status	Q3 2025	Commissioning completed; commenced ramp-up	Initial commercial GAC production and sales achieved	Milestone Achieved
Dividends/Tax Rate/OI&E	FY 2025	Not provided	Not provided	N/A

Topic	Previous Mentions (Q-2: Q1 2025)	Previous Mentions (Q-1: Q2 2025)	Current Period (Q3 2025)	Trend
PAC pricing & margins	ASP +13% YoY; GM 36.4%	ASP +9% YoY; GM 33.3%	ASP +7% YoY; GM 28.8%	Pricing sustained; margins compressed from GAC ramp
GAC ramp timeline	First commercial production end Q2/early Q3; 3–6mo ramp to 25M lbs	Commissioning achieved; nameplate in ~6 months	Initial commercial sales; nameplate mid‑2026 due to design issues	Delayed materially
Regulatory/macro demand	Long‑term opportunity; tariffs neutral/positive	EPA changes may drive 3–5x demand; strong market	Supply constraints; strong inbound spot demand; power-gen volumes aided by higher nat gas prices	Supportive demand backdrop
R&D/alternative products	Working through GAC binding/shaping; commissioning	Asphalt testing begun	Purified coal MOU; asphalt testing continues; rare earths/synthetic graphite fund discussions	Progressing, diversifying optionality
Tariffs/macro	Tariffs neutral to positive on operations	—	Risk disclosures reiterate tariff impacts among macro risks	Unchanged/monitored

Note: Q3 2025 call details were announced, but a transcript was not available in our document set; call scheduling and replay info provided .

“Achieving the first commercial GAC production and sales at Red River represents a major milestone… our PAC business continuing to exceed operational and financial expectations… validates our strategic direction.” — Bob Rasmus, CEO .
“The delay in achieving nameplate GAC capacity is extremely frustrating… design issues and flaws… combined with the inherent variability of our Arq wetcake… exploring options to blend or replace Corbin GAC feedstock with lower‑moisture coal to reduce variability and improve production rates and operating costs.” — Bob Rasmus, CEO .
“Beyond our core activated carbon business, we're advancing opportunities in alternative products… asphalt testing continues… MOU for purified coal… advancing rare earth materials and synthetic graphite.” — Bob Rasmus, CEO .

No Q3 2025 transcript available in our sources; the company hosted the call on Nov 6, 2025 with webcast and replay links; any Q&A clarifications are not accessible in transcript form .
Notable clarifications from press materials: Adjusted EBITDA was negatively impacted by “several million dollars” of non‑recurring handling/post‑commissioning ramp costs and low early‑ramp volumes ; management is evaluating feedstock blending/replacement to stabilize GAC operations .

Wall Street consensus (S&P Global) for ARQ was unavailable for Q3 2025 and the selected forward periods; comparisons to estimates cannot be made at this time.

PAC remains the cash‑generative foundation: ASPs sustained and SG&A down sharply; this underpins ongoing positive Adjusted EBITDA despite GAC ramp issues .
The GAC milestone is strategically important, but the push‑out to mid‑2026 for nameplate capacity is a material negative surprise; expect margin headwinds until volumes scale and fixed cost absorption improves .
Near‑term stock drivers: evidence of ramp stabilization (feedstock blending/replacement progress), sequential margin recovery, and contracting momentum vs spot demand indications .
Capex discipline maintained ($8–$12M for FY2025) with liquidity of $15.5M cash/restricted cash at quarter‑end; watch revolver usage and working capital dynamics during ramp .
Alternative products (purified coal, asphalt, rare earths/synthetic graphite) provide optionality but are not yet revenue drivers; monitor milestones and funding developments .
Without consensus estimates, framing will center on sequential trends: Q3 revenue improved vs Q2, but gross margin compressed; sustained positive Adjusted EBITDA highlights resilience .
Medium-term thesis hinges on successful GAC process improvements, feedstock strategy, and market pricing tailwinds; any acceleration of ramp or contracted volumes would be a positive inflection .