Canaccord Genuity Keeps Buy Rating on Arq, Reduces Price Target to $8

Earnings Performance: Arq Inc reported a 7% increase in average selling prices year-over-year and achieved its first commercial production of granular activated carbon (GAC), despite incurring a net loss of approximately $700,000 for the quarter due to high fixed production costs.

Cost Management: The company successfully reduced SG&A expenses by 43% compared to the previous year and generated $16.7 million of adjusted EBITDA from its pack business, a significant turnaround from a negative $8.7 million two years ago.

Production Challenges: The ramp-up of the GAC line has faced delays due to design issues, with full capacity now expected by mid-2026, impacting gross margins and leading to several million dollars in inefficiencies.

Future Opportunities: Arq Inc is exploring alternative revenue streams, including asphalt blending and rare earth materials, to diversify its offerings and enhance future profitability while maintaining strong relationships with customers amid production delays.

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