Arq, Inc. (ARQ) Q4 2023 Earnings Call Transcript

Greetings. Welcome to Arq's Fourth Quarter and Full Year 2023 Earnings Call. At this time all participants will be in listen only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I'll now turn the call over to Ryan Coleman with Investor Relations. Thank you. You may now begin.

Thank you, operator. Good morning, everyone. And thank you for joining us today for our fourth quarter and full year 2023 earnings results call. With me on the call today are Bob Rasmus, Arq's Chief Executive Officer and President; as well as Kim Hansen, Arq's VP of Finance. This conference call is being webcast live within the Investors section of our website, and a downloadable version of today's presentation is available there as well. A webcast replay will also be available on our site and you can contact Arq's Investor Relations team at [email protected]. Let me remind you that the presentation and remarks made today include forward-looking statements as defined in Section 21E of the Securities Exchange Act. These statements are based on information currently available to us and involve risks and uncertainties that could cause actual future results, performance and business prospects and opportunities to differ materially from those expressed in or implied by these statements. These risks and uncertainties include, but are not limited to, those factors identified on Slide 2 of today's slide presentation, in our Form 10-K for the year ended December 31, 2023, and other filings with the Securities and Exchange Commission. Except as expressly required by securities laws, the company undertakes no obligation to update those factors or any forward-looking statements to reflect future events, developments or changed circumstances or for any other reason. In addition, it is especially important to review the presentation and today's remarks in conjunction with the GAAP references in the financial statements. With that, I would like to turn the call over to Bob.

Thank you, Ryan. And thanks to everyone for joining us this morning. Let's begin on Slide 3 of our presentation. We finished 2023 with strong momentum and are very pleased with the steps we have taken and continue to take to further improve our business. Our fourth quarter results clearly indicate the improving profitability of our existing business. We delivered a very solid quarter marked by revenue growth of 20% over the prior year, nearly doubled our gross margin to approximately 50% versus last year, generated strong cash flow from our PAC business in the form of $7.2 million of adjusted EBITDA, and we are excited to have achieved positive net income for the first time in eight quarters. As I have emphasized since joining, our absolute focus is on execution and maximizing shareholder value. We remain dedicated to optimizing our PAC business, where in a short period of time, we have successfully enhanced the economics and overall profitability. While we pursue exciting and highly attractive opportunities in the granular activated carbon market, it's crucial that our PAC business stands on its own from an economic perspective. In my remarks on our last earnings call, I stated that we wanted to improve the performance of our foundational PAC business. This was to be achieved by reducing costs, improving operating efficiencies, eliminating unfavorable or loss-making relationships, and focusing our sales efforts on the best opportunities to improve product mix and increase our average sales price. Our goal was to improve economics and overall profitability. Our strong and encouraging fourth quarter performance reflects the results of those efforts. We increased our average selling price by approximately 6% versus last year and 18% sequentially. We eliminated negative margin contracts, of which we expect only one will be remaining by March 31st of this year. We enforced our take-or-pay contracts, recognizing $4.7 million in revenue in the fourth quarter. We also made excellent progress in expanding our penetration of the water PAC market. This is important as this market segment carries a higher ASP than our existing PGI segment. The PAC business is expected to generate net cash in 2024. As I have previously commented, we strive to partner with our customers. This is evident in our attractive retention rates, which as we mentioned last quarter, were greater than 90%. We have maintained our high retention levels even while executing profitability enhancement actions over the last several quarters. To best serve our customers, we rely upon strength across our entire business. I am more confident than ever in the robust portfolio of opportunities we see ahead of us. Our platform provides the ability to better serve our customers with a broad, innovative, and growing product mix that meets their needs while driving value for our shareholders. Advancing a bit to Slide 6, while we had a very strong quarter and are very pleased with the steps we have taken and continue to take to further improve our business, there is one item that did not make me happy. While the timing for completion of our Red River facility remains on track, the cost to complete the first phase has risen. We are today updating our expected CapEx for our strategic investment in our Red River facility. In addition to the $12 million of CapEx total, which we spent on the expansion as of year-end 2023, we now forecast spending $45 million to $50 million on the Red River expansion in 2024 with a small remainder in 2025. This reflects total expected project spending for Red River Phase 1 of between $62 million and $67 million. This represents a midpoint increase in total project spending of approximately 36% versus our last forecast provided in January. So what are the components of the increase? Approximately 45% of the increase is due to increased construction costs. Previous assumptions did not adequately take into account inflation and moving to a six-day-a-week, 10-hour-a-day construction schedule. Another 45% was due to increased equipment costs. The remaining approximately 10% relates to various items, including engineering fees. A logical question to ask is how did this happen? The increased construction costs are attributable, as I mentioned, to inflation and an accelerated schedule. A portion of the rise in equipment cost is a result of design changes, which will increase efficiencies and ultimately volume. The other portion is a result of inaccurate estimate inputs from outside consultants and engineers who are managing the program for Arq. This was an issue that we uncovered in recent weeks and immediately took steps to address the problem. In addition to implementing more comprehensive controls over the process moving forward, I am confident that our recent appointment of Deke Williamson as Arq's Chief Operating Officer will add further certainty to quality, planning, and execution around this critical project. As I previously discussed, I have long known Deke and have firsthand seen his ability to execute projects with world-class quality, precision, and efficiency. We believe that we have now accounted for all changes to our forecasted spending and are comfortable in the updated project estimates we've communicated today. Despite this increase, we remain in a position to fund the project from cash on hand, cash generation, ongoing cost reduction initiatives, potential customer prepayments for GAC contracts, and a planned refinancing and potential expansion of our term loan for which we already have a term sheet in place. Importantly, we have no plans to dilute our existing shareholders by selling equity. While the news of the cost increase is disappointing, it should not detract from the overall attractiveness of the project. Market prices for GAC continue to increase. We remain confident in our ability to contract our capacity prior to production. Also, we previously viewed the addition of granular activated carbon production capability as a pound-for-pound reduction in our PAC capability. With the additional efficiencies resulting from some of the design changes, which is partially responsible for increased equipment costs, we believe GAC volumes will be additive to our overall production capability on a pound-for-pound basis. Even with the cost increase, the overall investment economics remain attractive. I expect a three-year or less payback while generating long-term shareholder value. Turning back to Slide 3. We also continue to transform our business from an industrial manufacturing company to an environmental technology company. Development at our Corbin facility remains within budget and on time for commissioning in early second quarter of 2024. Construction of our incremental 25 million pound GAC line at Red River commenced in October 2023 with commissioning targeted for the fourth quarter of this year. Looking at the broader business and market, I am happy to report that beyond the optimization of our legacy PAC business, we are also making very encouraging progress on multiple fronts of our wider and evolving product offering. We continue to see solid demand for our water-focused PAC products which represent incremental higher value, higher margin opportunities. It's important to note that our interest in European markets is reinforced by the existence of a strategically undersupplied market. At the same time, European regulatory changes are driving higher demand. And of course, we continue at pace with customer engagement for our new GAC products. All of these conversations corroborate our confidence in the market. And we continue to expect to enter into contracts for our Red River facility well in advance of first production, targeted for the fourth quarter of 2024. I'd also like to highlight some very encouraging advances our team is making in the development of new and alternative uses for our Arq Wetcake feedstock. While still early stage, we are increasingly confident in this product's ability to serve as a blending feedstock in the manufacturing of environmentally responsible asphalt while providing environmental advantages, cost advantages, and benefits related to limiting and reducing the effects of temperature swings. This is a great example of our team's relentless focus on innovation and ability to think of new and creative ways to maximize the applications and value of our existing portfolio products and capabilities. With our ongoing optimization of the PAC portfolio, we have driven significant improvement in gross margin and profitability. This now provides the bedrock for our business to grow rapidly, which we will do via the initial GAC expansion at Red River as well as potential further expansions. The market is very supportive and initial pricing discussions indicate that this will be a high return endeavor. With that, I will hand over to Kim to discuss the latest financials in greater detail.

Thanks, Bob. And thanks, everyone, for joining us today. Please turn to Slide 4. As Bob mentioned earlier, we delivered strong financial results during the fourth quarter with revenue growing 20% year-over-year, driven largely by increases in average selling prices, positive changes in product mix, and enforcement of take-or-pay contracts. Our gross margin in the quarter was 49.8%, nearly double the 25.4% reported in the prior year period. As a result, we achieved the second consecutive quarter of positive adjusted EBITDA in the fourth quarter and our first quarter of positive net income since Q4 of 2021. While our business does benefit from seasonal factors, our strong results clearly exhibit the improvements and momentum we're experiencing across the company. Our quarterly revenue of $28.1 million represented an increase of 20% year-over-year. On a full-year basis, our revenue performance was impacted by lower natural gas prices, which negatively impacted demand from our power generation customers. Our fourth quarter saw significant growth in EBITDA and net income, proving the success we are achieving in prioritizing profitability over volume. Adjusted EBITDA improved to $7.2 million compared to a loss of $1.2 million in the prior year. Net income was $3.3 million compared to a net loss of $3.2 million in Q4 of 2022. Overall and on an annualized basis, our performance demonstrates our ability to operate our PAC business in a way that contributes positively to our economic position while further enabling us to execute on high growth and high margin opportunities within our expanding GAC business. Turning to the balance sheet, we ended the year with cash of $54.2 million, with the change versus last year driven by ongoing strategic investments and expansion at Corbin and Red River. As we flagged last quarter, 2023 included a number of nonrecurring items related to the Arq transaction and severance payments that we are not forecasting going forward. As Bob noted earlier, we increased our expectation for CapEx this year, mainly associated with our investment in Red River. Our debt position remains low, and we believe there is potential to expand and enhance this through a planned refinancing of our existing term loan with Community Fund, which we took on at the time of the original Arq acquisition. Given the strength of our asset base, we are confident in our ability to refinance and potentially expand this facility on enhanced terms as needed. If we flip to Slide 5, you can see a clear improvement in financial performance resulting from our focus on optimizing our PAC portfolio. Our average selling price for the fourth quarter improved 18% year-over-year or 16% on an annualized basis. We continue to eliminate negative margin contracts as we focus on profitability over volumes and have now taken these loss-making contracts down from roughly 24% of volumes in 2022 to 14% in 2023. As of March 31st, we will have just one negative margin contract remaining, reflecting approximately 2% of forecasted 2024 volumes. With that, I will turn things back to Bob.

Thanks, Kim. Before moving on, I'd like to take a moment to expand on Kim's remarks, including those related to our balance sheet, cash position, and long-term performance. While we are proud of our fourth quarter results and clear momentum across our business, I want to make sure that we are taking a holistic and long-term approach to how our leadership team is incentivized. As such, the decision was made not to pay any short-term incentive compensation to members of the executive leadership team, including myself, and reduce other payments. With that action, we have saved approximately $2 million in cash, which would have been paid out in the first quarter of this year. We will continue to make the decisions necessary to ensure alignment and enable our team to drive long-term stakeholder value. Switching gears and moving to Slide 7, I'd like to spend a moment to highlight our corporate rebrand, which we completed in February. This important milestone was achieved just one year after our transformational Arq acquisition and reflects the company's evolution from a manufacturing business primarily serving declining industries to an environmental technology company producing activated carbon primarily from bituminous coal waste with products that reduce or even reverse environmental liabilities like PFAS or forever chemicals. We are focused on providing differentiated solutions for faster growing markets. The strategic investments we're making in our GAC expansion are just the first step in our ongoing transformation. With the new brand in place, we are now much better positioned to execute on our ambitions and have a brand and corporate identity that aligns with our corporate vision. Turning to Slide 8, we were very active during the fourth quarter with our strategic GAC expansion and these efforts have continued full steam ahead into the start of 2024. As noted earlier, construction and commissioning at Corbin and Red River continued at pace during the quarter and into the first quarter, and we remain on track with regards to timing for both projects. The LSR agreement signed in the fourth quarter evidences our focus on and intent to expand our geographic exposure. The EU is just as focused as the US when it comes to water regulations and we are engaged in expanding our product reach in this attractive and growing market segment. Prices in Europe are much higher than in North America. In addition, demand which is growing far exceeds supply. This creates a highly attractive market environment and significant growth opportunity for us. Recently, we announced the successful amendment of our existing NORD agreement. The amendment provides material benefits to Arq and is yet another example of our relentless focus on improving profitability and operational efficiencies. Moving to Slide 9, this highlights a busy start to the year and will continue throughout 2024. Beyond the operational milestones, which I have already referenced, we continue to engage in and advance important sales-related discussions. We previously identified and are actively working with a large number of lead adopters to prequalify our GAC products. We have received excellent feedback from our discussions, and we have continued to advance those discussions to either the next level of testing or contract negotiations. We remain confident in our ability to convert our discussions to sales contracts ahead of our fourth quarter completion and continue to expect contracting out our 25 million pound expansion ahead of first production. We will continue to provide you with timely updates as we have them. As we turn to Slide 10, you will see two main market segments of our business across our PAC and GAC portfolio. Our PAC portfolio serves as an important foundation asset and one where we will continue to optimize profitability while expanding into higher value and higher margin markets. The optimization of our PAC business is now almost complete and the results are tangible and visible in our financial performance. We have a strong market position as a result of our first-rate team, facilities, and products, and we expect to be able to drive these strong fundamentals further. We have proven that PAC can be a cash contributor, and I am excited about its ability to contribute to our growth and value creation over the long term. Turning to our evolving granular activated carbon business, this opportunity provides materially more attractive returns and a unique chance to leverage our existing assets and resources. We believe we have the most advanced activated carbon plant in North America and are now trying to deliver new supply into a growing and attractive market benefiting from sustainable tailwinds. Our GAC business will further differentiate Arq as a business and investment, and I'm excited about the growth investments we're making in 2024 and beyond. Turning now to Slide 11, it is important to reiterate our key differentiators. By combining Arq's technology for recycling bituminous coal waste with our state-of-the-art processing facility and existing R&D and sales teams, we are able to offer customers a highly differentiated solution in a fully vertically integrated supply chain. By using coal waste as our GAC feedstock, we enjoy material environmental benefits versus conventional products, which are typically produced by mining virgin coal. We're committed to playing our part in driving greater sustainability in our industry and believe this will continue to become even more important to our customers. But it's not just qualitative differences that we see; our business also drives significant and unique financial advantages. First, by using our own waste product, we reduce our GAC feedstock supply risk. Second, we benefit from more competitive sourcing versus the incumbent approach of mined coal. Third, we lower operating costs, including our ability to be a net provider to the electrical grid at our Red River plant. And finally, we avoid potential negative import factors such as variable freight, tariff, and duty costs. As we move to Slide 12, here we highlight the growing attention of PFAS or forever chemicals, which we expect to serve as critical tailwinds for our GAC business over the near and long term. It's not just us and our customers that are focused on this important topic. Public awareness of PFAS contamination and related dangers is growing, while domestic and global regulation continues to advance. We expect these structural changes to how we live as a society will drive even greater demand for our products and solutions. Moving to Slide 13, we believe the GAC market remains significantly undersupplied at a time when demand is expected to significantly increase. Just a few weeks ago in February, the EPA provided an update which highlighted the scope of their ambition to significantly reduce the presence of PFAS in our communities. These initial proposals are expected to be fleshed out in the coming weeks according to the EPA. Should these proposals, which include a nearly 95% reduction in currently permissible PFAS amounts, become formal regulations, it would serve as a major catalyst for even greater demand for our products and solutions. To provide context, if currently proposed regulations were enacted, this could generate an increase in demand for granular activated carbon products of three to four times within the municipal water market alone above the current approximate 170 million pounds annual usage. And this is not just a US dynamic, as we expect other global geographies, notably the EU, will follow a similar course. Hence, our enthusiasm as it relates to our LSR European opportunity. It's clear that as these rules tighten, many of our customers will need to apply even stricter approaches to their existing facilities, amplifying the physical product and value we can deliver to them. Crucially, we can do so providing an environmentally responsible product, which not only performs better than the benchmark but is also derived from a company with a fully integrated supply chain. We're excited about our 25 million pound GAC expansion and believe our market opportunity extends well above this space over the long term. So as we conclude on Slide 14, I'd like to summarize where I think we are, what I believe are the key objectives for 2024, and what strategic objectives we must keep in mind as we continue to enhance this very compelling business opportunity. First, we have taken actions that aim to fundamentally improve the profitability of our legacy PAC business. While much of the work is now completed and is already evident in our financial results, we'll continue to optimize the portfolio and constantly look for ways to enhance our operations and profitability. Second, we are focused on securing contracts for our strategic GAC development at Red River. My confidence around securing contracts ahead of our completion later this year continues to grow, driven by our strong customer relationships, differentiated offerings, and macro tailwinds. Third, we continue to drive towards commissioning of our Corbin facility by the end of the second quarter, shortly followed by initial production, which will serve as a differentiated advantaged feedstock for our Red River GAC facility. And fourth, we remain focused on efficiently executing on our construction and development plans at Red River with commissioning and first deliveries expected by the end of 2024. I am very proud of what our team has achieved to date, and I'm generally excited for the year ahead. With that, I will turn the call back over to our operator to move us to Q&A.

At this time, I'll turn the call over to Ryan Coleman for additional questions.

Thank you, Rob. We have some investor questions that we'd like to get to as well. Our first question we received: how do you know that cost for the first phase of Red River will not continue to rise between now and completion?

We've completed an extensive process to get to a place of comfort around where we are today. We've looked at all aspects of the project, both internally and externally managed. And while we're comfortable that we've identified all the key pieces that have contributed to the increase we've announced today, there's always uncertainty in managing and executing large projects such as this. We feel we've got a pretty good handle. In fact, we feel we've got a very good handle on the factors that are in our control. But quite frankly, some aren't in our control. We've baked in some level of conservatism to account for this. But again, we don't expect further increases as we believe we've been diligent as described in today's update and we'll continue to do all we need to do to manage and mitigate the potential impacts of any negative outside factors.

Our second question. Could you please elaborate on the planned refinancing of the existing term loan? Are you going to do this whether you need money or not? And what do you mean by potential expansion of the term loan?

Refinancing of our term loan has always been on our to-do list and we will absolutely proceed with refinancing. What I mean by expansion is increasing the size of our current borrowing amount. We currently have very low debt levels. We have attractive future cash flows and a valuable asset base as replacement cost we estimate is well over $500 million. As such, I think it's prudent that we put some additional cash on the balance sheet to fund any needs as it relates to completing Phase 1 of the Red River expansion or it can be used to bring forward Phase 2 if needed.

Our next question. Could you please provide any additional information on GAC margins versus those that you realized in your PAC business?

Pricing for PAC and granular activated carbon varies widely based on the type of product and its uses. What I can tell you is that average GAC pricing is a multiple of average PAC pricing. Does it cost more to produce granular activated carbon than powdered activated carbon? Yes. Does it cost a multiple? Absolutely not, nowhere near. That is what makes the GAC market so attractive. I'd like to provide further specifics but for competitive reasons, I'm going to refrain.

Our fourth question. You mentioned the PAC business will be a net cash provider in 2024. Should we expect similar results throughout 2024 as what you realized in Q4?

The fourth quarter was a great quarter, which included some one-time items like the make whole revenues relating to our take-or-pay contracts. Don't forget, if the volumes had been taken throughout the year, it would have spread out the results. We are facing some headwinds as it relates to natural gas pricing and our PGI segment. However, that should be offset by our continued work on pricing enhancements for the water segment and further penetration of the PAC water market. We're pleased with what we see as our volume growth in the PAC water market. Most importantly, for investors and the company, is that this segment carries a higher price point and higher margins than the PGI business. In addition, we're going to continue to focus on manufacturing efficiencies to reduce our cost and increase margin. And all of these factors combined lead me to be confident in the PAC business being a net cash contributor in 2024.

Thank you. We do have a question from the phone coming from the line of Gerry Sweeney with Roth Capital.

A lot to unpack, lots of details, so I really appreciate it. And also congratulations on obviously a great quarter. I was wondering if we could maybe take a step back, level set, and I'm not sure how much of this information you want to provide, but I'm just curious as to what your total PAC production today is? And I believe GAC will be 25 million pounds. But I just wanted to level set in terms of production and where we are today, if you're up for that?

Historically, we haven't disclosed volumes for competitive reasons. Whenever I mention it, our Head of Sales, Garrett Chandler, gets quite anxious, and he's only 32. We'll keep discussing volumes moving forward. The important takeaway for the PAC business is that even though volumes slightly decreased, our efforts in enhancing pricing and entering new markets, particularly in the water sector, boosted pricing, increased average sales price, and improved margins. Regarding granular activated carbon, we anticipate having 25 million pounds of capacity available once we complete the Red River expansion at the end of this year. As I noted earlier, I believe some of our initiatives will enable us to exceed the 25 million pounds of granular activated carbon production. However, in our calculations for payback within three years or less and the returns from the granular business, we are only factoring in the 25 million pounds of granular activated carbon, without accounting for potential increases in GAC volumes. We expect pricing to align with current discussions with customers, and we anticipate that our foundational PAC business will contribute positively to cash flow.

I thought PAC was somewhat of a trade secret, but you did address my next question about GAC, which was originally projected at 25 million but has potential for more. Focusing on PAC for a moment, it seems like you mentioned that 24% of volumes were negative contracts and that 14% would change to 2% around March or April. Does this suggest that there might be additional upside for the PAC business in the first quarter, before it stabilizes going forward? Am I understanding that correctly?

So at the end of the first quarter, we'll have one remaining negative margin contract, and that will be gone by the end of this year for that one. Two, there's always work to be done. While we're pleased with the progress we've made, we’re far from satisfied or at least I’m far from satisfied, and I hope everybody else is far from satisfied in where we're going. And so while, as I mentioned earlier, there are some headwinds we're facing as it relates to natural gas pricing and demand in the PGI, we're making excellent progress in the water market that we think will offset that and potentially more than offset the headwinds we're facing in the natural gas pricing.

Switching gears to GAC. Corbin's commercialization was completed in the second quarter, and Red River's complete commercialization is expected in the fourth quarter. I believe Corbin's commercialization was actually completed in the second quarter. However, my main focus is on Red River; completing commercialization in the fourth quarter suggests that by the end of the third quarter, I expect the plant will start running some production runs through the processes. What is the next significant hurdle for Red River to achieve that?

Really, the hurdle is I'm going to under-promise and hopefully over-deliver as it relates to Red River. But really, we expect to start commissioning Red River in the fourth quarter and late in the fourth quarter actually start production with first deliveries very late in the fourth quarter or the beginning of the first quarter of next year.

I have conducted several checks on the market. The pricing in the water sector is very favorable. There is a significant amount of opportunity on the horizon, especially considering potential EPA regulations, which will likely occur. Different water groups are adopting varied strategies; some are waiting to see the specifics of those regulations, while others are proactively securing contracts now. I'm interested in understanding the momentum you're observing with incoming contracts and how that relates to the projected 25 million in production.

What you're essentially asking is about my confidence level in securing contracts for GAC and the conditions involved. My confidence stems from several key factors, Gerry. Firstly, the fundamentals indicate that the market is undersupplied and demand is increasing, especially with the impending PFAS regulations. Secondly, the results from our prequalification testing with potential customers have been very encouraging. The feedback has been overwhelmingly positive, and as I noted earlier, all the completed tests have either progressed to the next phase or to contract discussions. Thirdly, our conversations with these customers have shown that they are not only looking for supply to meet their needs but also seeking new sources. They appreciate the quality of our product, its domestic production, and the favorable performance characteristics observed in testing. Our use of feedstock from bituminous coal waste also appeals to them for its environmental benefits, including a lower carbon footprint. All these elements collectively contribute to my confidence in successfully securing contracts for our production before we actually start producing granular activated carbon from Red River, as well as the potential for prepayments. The reliability of supply is crucial, as you've likely learned from your channel checks on GAC. Regarding the terms we are pursuing, we understand that every negotiation involves trade-offs. Our primary aim is to maximize long-term shareholder value. Although we could contract for 100% of our production immediately, we prefer to find the optimal fit, balance, pricing, and customers.

We have one final investor question that we'd like to get to. And that question was: what do you mean by increased operating efficiencies and volumes as a reason why equipment costs rose at Red River?

As I mentioned, we tweaked some of the equipment to maximize potential performance. One benefit, as I said in my prepared remarks, is that GAC production is now additive to PAC production. Previously, GAC production would have been on a pound-for-pound reduction in our PAC production capability. Now GAC is actually additive on a one-for-one basis. Also, I expect some of the operational efficiencies will also increase the amount of GAC from the first phase and future stages of the expansion similar to what I mentioned in Ryan's question that we've used and continue to use 25 million pounds as the output, but we hope and expect that it will be greater than that. And as I mentioned, we have not assumed either the additive increase or anything above 25 million pounds in our return calculations.

Thanks, Bob. And thanks again to those of you who provided questions. I'd like to turn the call over to Bob for any closing remarks.

Thanks, Ryan, and thank you all for listening today and your interest in Arq. With our fourth quarter results, you're beginning to see the fruits of our labors and the effects of the company's transformation. There's still a lot of work to be done. As always, our focus is on execution and maximizing shareholder value. I am optimistic about Arq's continued transformation and the future, and I look forward to talking with you on our next call.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.