FUEL TECH, INC. Q4 FY2024 earnings call

• Vince noted 2024 revenues were at the lower end of guidance, with FUEL CHEM higher but offset by APC delays. - FUEL CHEM started 2025 strong with base accounts operating fully and new commercial accounts added. Pursuing a new FUEL CHEM account demonstration in Q3 2025. - APC had recent $1.6 million awards and expects $4 million to $5 million more in Q2 2025. Strong APC opportunity portfolio in 2025. - DGI had a new demonstration scheduled for Q2 2025 and multiple potential opportunities. - Data center opportunities: significant investment in data center power generation, Fuel Tech has experience with SCR for natural gas turbines in data centers. - Regulatory updates: Good Neighbor Rule status and EPA actions discussed, but current APC opportunities not contingent on new regulations.

For the fourth quarter of 2024, consolidated revenues were $5.3 million. The FUEL CHEM segment had revenue of $3.5 million, essentially unchanged from the prior year period. The APC segment declined to $1.8 million from $2.8 million in the fourth quarter of 2023. For the full year 2024, consolidated revenue was $25.1 million, at the lower end of the guidance range of $25 million to $26 million. FUEL CHEM revenue increased 2%, while APC revenue decreased 17%. FUEL CHEM contributed a portion of the $25.1 million total revenue, with APC contributing the remaining portion.

• Management expects total revenues for 2025 to exceed $30 million, with both FUEL CHEM and APC segments exceeding their 2024 performance. - Excludes material contributions from DGI, new EPA regulations, and major new business developments for FUEL CHEM.

• Tariffs affecting supply chain, particularly on steel and aluminum used in equipment fabrication, which could lead to price increases passed to end customers. - Potential unplanned plant outages at FUEL CHEM customer sites that could impact revenues. - Regulatory uncertainties, including potential changes in the Good Neighbor Rule and other emissions regulations that could affect APC opportunities.

Q: Thanks for providing the outlook of exceeding $30 million in revenues for 2025. Are the additional FUEL CHEM customer and APC orders included in this outlook?

A: On APC, yes, they are included. For the additional FUEL CHEM account, not much contribution expected in 2025 as it's expected to come late in the year. FUEL CHEM's improvement is due to base accounts running normally and new accounts added in 2024.

Q: Do you have an estimate on extended plant outages affecting FUEL CHEM revenues?

A: Impossible to forecast unplanned outages. Planned outages at utility units can be forecasted, but unplanned equipment issues at plant sites cannot.

Q: Should we expect APC revenues in 1Q to be the most in years?

A: No, Chemtech (FUEL CHEM) is experiencing the best first quarter in years, not APC. APC expects additional order activity in the next month to two months but not an unusual Q1 for APC.

Q: On gross margins, should we expect better margins in 2025?

A: FUEL CHEM margins should return to historical 49%-50% range after 2024 impacts. APC margins depend on product mix and ancillary activities, expected to be 35%-38% range.

Q: On DGI, are we expecting revenues in 2025?

A: Yes, expecting commercial revenues in 2025 from DGI, whether rental or capital sale, though specific amounts are hard to forecast.

Q: Any impact of tariffs on supply chain?

A: Tariffs on steel and aluminum used in equipment fabrication could lead to price increases passed to end customers, with smaller componentry from overseas also potentially affecting costs passed on.

Q: On FUEL CHEM, any new opportunities?

A: New FUEL CHEM account in 2025 end of year in a region similar to prior new account, driven by need for power generation uptime during high demand. Municipal waste combustion units have state-specific regulatory drivers for opportunities in the first half of 2025.

Q: On data center opportunities, how quickly can products be delivered?

A: Bids for data center opportunities have delivery schedules around 3-6 months from order, with a 40-week timeframe from order to delivery for units, potentially less depending on solution intricacy.

Q: On DGI rental, how does that work?

A: DGI rental could benefit end markets with dissolved oxygen delivery needs, such as wastewater treatment, as a precursor to capital sale or providing expedient benefit to customers with immediate needs.