Arq Navigates Q1 Loss, Bets on Core Strength and Strategic Pivot

GREENWOOD VILLAGE, CO – May 06, 2026 – Arq, Inc. (NASDAQ: ARQ) today reported a mixed first quarter for 2026, posting a 7% year-over-year revenue increase to $29.1 million while simultaneously recording a net loss of $0.8 million. The results highlight a company at a strategic crossroads, buoyed by a robust core business in powdered activated carbon (PAC) but weighed down by challenges in its ambitious granular activated carbon (GAC) expansion.

Despite the quarterly loss, Arq’s leadership reaffirmed its full-year 2026 guidance, signaling strong confidence in its underlying operational health and future growth prospects. The company is navigating the headwinds by leaning on its profitable PAC division, undertaking a critical strategic review of its GAC operations, and exploring new revenue streams, including a promising application for its carbon products in the asphalt industry.

A Tale of Two Carbons

A closer look at Arq’s Q1 performance reveals a clear divergence between its established business and its growth initiatives. The company’s PAC business, which serves purification markets, demonstrated significant strength. According to CEO Bob Rasmus, this division is showing its true potential now that it is "no longer carrying the full burden of GAC production costs."

“The first quarter provided a solid foundation for the year ahead and underscored the continued transformation of our PAC business," Rasmus stated. He pointed to exceptionally strong gross margins in the first two months of the quarter, which hit 38% and 47% respectively, as evidence of the business’s underlying profitability. "Underlying performance in the first two months reflects a clear normalization of margins," he added.

However, these strong results were overshadowed by charges incurred in March. The quarter's overall gross margin fell to 34.2% from 36.4% in the prior year, and Adjusted EBITDA declined to $2.7 million from $4.1 million. The primary culprits were a non-cash inventory revaluation charge of $0.8 million related to GAC produced in 2025 and approximately $0.6 million in other carry-over costs from the now-paused GAC facility. These one-time and trailing costs turned what would have been a profitable quarter into a net loss of $0.8 million, or $0.02 per share, a reversal from the $0.2 million net income seen in Q1 2025.

GAC at a Crossroads Amid Market Tailwinds

The challenges stem from Arq’s GAC facility, a project that has faced significant delays and design flaws after an investment exceeding $100 million. Production at the facility remains paused, with none expected in 2026, as the company conducts a comprehensive "strategic optimization review." Arq has enlisted a "well-regarded engineering firm and a new equipment design firm" to chart the most economically viable path forward for GAC production.

"While we are moving with urgency, we want to take the time necessary to deliver a functional design, a construction and production time frame and a fully costed plan," Rasmus explained. The company expects to finalize this go-forward strategy by the third quarter of 2026. The review also includes evaluating incremental growth opportunities, such as adding reactivation or acid washing capacity at its existing Red River facilities.

The stakes for getting the GAC business right are enormous. The market for activated carbon is booming, largely driven by new, stringent environmental regulations. The U.S. Environmental Protection Agency (EPA) recently established the first-ever national standard for Per- and Polyfluoroalkyl Substances (PFAS), often called "forever chemicals," in drinking water. Public water systems must begin monitoring for these contaminants by April 2027 and implement treatment solutions to meet the new standards by 2029.

GAC is widely considered the most effective and studied technology for removing PFAS from water. This regulatory mandate is expected to create a surge in demand, with the global GAC market projected to grow from approximately $2.15 billion in 2026 to over $3.5 billion by 2035. As Rasmus noted, "GAC market fundamentals remain highly attractive," creating a powerful incentive for Arq to resolve its production issues and capitalize on the favorable pricing environment.

New Frontiers and Insider Confidence

While Arq works to fix its GAC strategy, it is not standing still. The company is actively pursuing alternative applications for its carbon materials, with significant progress in the asphalt sector. Arq is collaborating with a leading U.S. asphalt company to test its "Corbin wetcake" as a performance-enhancing additive. The material has reportedly demonstrated "differentiated performance characteristics" and is now advancing to small-scale in-field paving trials.

Success in this area could open up a substantial new market. The global asphalt additive market, valued at over $4.4 billion, is steadily growing as the construction industry seeks more durable and sustainable infrastructure solutions. Research has shown that certain forms of activated carbon can improve asphalt properties like water stability and rutting resistance, making Arq’s innovation a potentially valuable product in a large, established industry.

Perhaps the most telling indicator of the company's internal outlook is the significant increase in ownership by its own leadership. Following a series of "meaningful recent share purchases," Arq’s board and management team now collectively own more than 20% of the company. Recent SEC filings confirm substantial buys from CEO Bob Rasmus and Chairman Richard Campbell-Breeden, among others. This level of insider buying is a powerful vote of confidence in the long-term strategy and future value of the business.

"We are more aligned with shareholders than ever," Rasmus concluded. "We believe that alignment is important and reflects our confidence in the business, our strategy, and the opportunities ahead." By reaffirming its full-year guidance of $120 - $125 million in revenue and $17 - $20 million in Adjusted EBITDA—a forecast that assumes no contribution from GAC—Arq is making a clear statement. The company believes its core PAC business is strong enough to carry it through this transitional period as it works to unlock the immense potential of its GAC assets and pioneer new markets.