Arq’s Margin Recovery Extended Into a Second Quarter
Arq reported $5.8 million in adjusted EBITDA, extending its run of positive results on that measure to nine quarters.
Arq, Inc. (ARQ), a producer of activated carbon used in purification and sustainable materials, extended its margin recovery after pausing granular activated carbon production. Gross margin reached 38.5% in the second quarter, following 34.2% in the first quarter and 13.6% in the final quarter of 2025, when granular activated carbon start-up costs weighed on results.
The recovery rested on the company’s foundational powdered activated carbon, or PAC, business. Adjusted EBITDA, a non-GAAP earnings measure, increased to $5.8 million from $3.7 million a year earlier. Arq attributed the improvement to PAC pricing and cost discipline and the absence of negative offsets from granular activated carbon, or GAC, production.
Revenue rose to $29.9 million from $28.6 million a year earlier, predominantly through increased pricing and volumes. Chief Executive Bob Rasmus said the results came during a typically seasonally softer quarter that also included the biennial Red River Plant turnaround. He said the maintenance work finished under budget without disrupting customer service.
The quarter also carried fewer development expenses. Research and development spending fell to $1.0 million from $2.7 million a year earlier because certain GAC ramp-up expenses did not recur. Selling, general and administrative expenses totaled $6.8 million, including severance and recruiting costs associated with leadership changes. The company capitalized approximately $3.1 million of planned major maintenance costs related to the turnaround.
Arq nevertheless remained short of a profit under generally accepted accounting principles. Its second-quarter operating loss was $0.1 million, while its net loss totaled $0.7 million, or $0.02 a share. The positive adjusted earnings therefore accompanied a continuing bottom-line loss.
The GAC project remained unresolved. Arq had paused production and development after independent testing identified equipment constraints, and its optimization review had since expanded into a broader assessment of existing operations. That work identified opportunities to increase furnace throughput and reduce unit costs. For GAC, Arq had received completion and remediation estimates from two independent engineering consultants, with construction and commissioning expected to take around 12 months. The estimates still contained contingencies subject to revision.
Arq also continued discussions with multiple parties about monetizing its Corbin Facility and related technologies, a potential funding source. Asphalt paving tests remained underway with a leading U.S. asphalt company. Recent trials indicated benefits from using Corbin Wetcake as an additive across multiple performance measures.
Quarter-end cash and restricted cash totaled $12.1 million, including $11.2 million that was restricted. The unrestricted balance at quarter-end reflected the timing of borrowings and receipts; unrestricted cash stood at approximately $3.1 million on July 31. Total debt, including financing leases, was $30.7 million at the end of June.
Full-year 2026 guidance remains $120 million to $125 million in revenue and $17 million to $20 million in adjusted EBITDA. Capital expenditure guidance remains $8 million to $10 million. Rasmus said the company would remain disciplined about further capital spending while determining the path for its GAC line.
Meanwhile, Arq advanced PAC for PFAS, an engineered powdered carbon product undergoing customer testing. The product could help some utilities address contamination without buying new GAC equipment and could serve as an interim offering before its own GAC products. Arq said the strategy could make a material contribution to volumes, pricing and margins from 2027 onward, placing a potential growth opportunity within the PAC business while the larger production project remained under review.
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