Arq, Inc. (ARQ) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2026. Arq, Inc. is an environmental technology company focused on advanced purification technologies (APT), primarily manufacturing activated carbon (AC) products for air, water, and soil treatment. The company operates a lignite mine in Louisiana (Five Forks Mine) and manufacturing facilities in Louisiana (Red River Plant) and Kentucky (Corbin Facility, currently idled).
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Revenue | $29.9 million | $28.6 million | $58.9 million | $55.8 million |
| Net Loss | $(0.7) million | $(2.4) million | $(1.9) million | $(2.4) million |
| Loss Per Share (Diluted) | $(0.02) | $(0.06) | $(0.04) | $(0.06) |
| Operating Loss | $(0.1) million | $(1.8) million | $(1.3) million | $(1.4) million |
| EBITDA | $3.7 million | $1.1 million | $5.5 million | $4.2 million |
| Adjusted EBITDA | $5.8 million | $3.7 million | $8.6 million | $7.7 million |
| Cash & Restricted Cash | $12.1 million (as of June 30, 2026) | |||
| Revolving Credit Facility Borrowed | $21.4 million (of $30.0 million capacity) |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 5% in Q2 and 6% YTD compared to 2025, driven by higher pricing and increased sales volumes in the power generation and water treatment markets due to seasonal demand and elevated natural gas prices.
- Improved Profitability: Net loss narrowed significantly in Q2 (from $2.4M to $0.7M) and YTD (from $2.4M to $1.9M). This improvement was aided by the indefinite idling of the Corbin Facility (reducing production costs) and a favorable product mix shift toward higher-margin AC products.
- Expense Fluctuations: Selling, general, and administrative (SG&A) expenses increased due to severance costs for three departing executives and legal fees related to ongoing litigation. Conversely, Research and Development (R&D) expenses decreased significantly as pre-production testing costs for the GAC Facility in 2025 were not repeated in 2026.
- Accounting Change: The company retrospectively changed its accounting method for planned major maintenance ("turnarounds") from direct-expense to deferral, effective April 1, 2026. This change improved reported net income by capitalizing and amortizing maintenance costs.
Outlook, Risks, and Management Commentary
- GAC Facility Pause: Production of Granular Activated Carbon (GAC) at the Red River Plant was paused in March 2026 due to design flaws in the thermal oxidizer that limit capacity to 15 million pounds annually (below the target of 25 million). Management is conducting an engineering and production optimization review and does not expect GAC production in fiscal years 2026 or 2027.
- Feedstock Transition: The company plans to transition from using "Corbin Wetcake" to a bituminous coal feedstock with proven performance to address GAC facility constraints.
- Liquidity: Management expects cash on hand and borrowing availability under the Revolving Credit Facility to fund operations for the next 12 months. The company maintains a minimum liquidity covenant of $2.5 million (increasing to $5.0 million in Jan 2027).
- Legal Proceedings: Litigation remains ongoing against the engineering firm responsible for the GAC Facility design, with the company seeking damages for negligence and cost overruns.
- Seasonality: Revenue is typically higher in Q1 and Q3 due to weather-driven power generation and water treatment demand.
Investor Verification Checklist
- GAC Facility Resolution: Verify the timeline and capital requirements for the engineering review and potential modifications to the GAC Facility to achieve nameplate capacity.
- Executive Transition: Monitor the impact of recent executive departures (CFO, COO, CAO) on operational stability and future strategic execution.
- Debt Covenants: Confirm continued compliance with the Revolving Credit Facility covenants, specifically the minimum liquidity and leverage ratios.
- Legal Exposure: Track the status of the lawsuit against the GAC design firm and the potential for counterclaims or settlement costs.
- Corbin Facility Strategy: Assess the viability of the Corbin Facility's pivot to alternative markets (e.g., asphalt, synthetic graphite) given the indefinite idling of current operations.