Fuel Tech, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Business Development: Anticipates $2.5 million to $3 million in new APC awards by end of August and $3 million to $5 million by end of 2025. FUEL CHEM expects $15M-$16M in revenue for 2025, with potential from a coal-fired unit demonstration.
• DGI Demonstration: Extended demonstration at a fish hatchery to evaluate benefits of DGI; hopeful to recognize commercial revenue in 2025.
• International Opportunities: In discussions with Mexico partner to expand chemical technology; Mexico's new government targets environmental policies related to pollutant reduction.
• Financials: Consolidated revenues were $5.6 million in Q2 2025 vs. $7 million prior year. Gross margin rose to 46% from 42% prior year. SG&A expenses increased slightly. Interest income up due to onetime recognition of employee retention credit funds.

Segment Performance

• FUEL CHEM Segment: Revenues were flat at $3.1 million for the quarter compared to prior year. Gross margin increased to 47% from 46% in Q2 2024. Expected to reach $15 million to $16 million in revenue for 2025. There's potential for incremental revenue from a new demonstration at a coal-fired unit, with an annual revenue potential of $2 million to $2.5 million if successful.
• APC Segment: Revenues declined to $2.5 million in Q2 2025 from $3.9 million prior year due to timing of project execution. Expecting $2.5 million to $3 million in new APC contracts by end of August and $3 million to $5 million by end of 2025.
• Dissolved Gas Infusion (DGI): Commenced an extended demonstration at a fish hatchery in Western U.S. lasting until Q2 2026. Hoping to recognize commercial revenue from DGI in 2025.

Guidance

• Reduced 2025 revenue guidance from approximately $30 million to $28 million to $29 million due to uncertainty in APC award timing. FUEL CHEM expected to exceed 2024 revenue. Excludes material contributions from DGI, data center contracts, and new FUEL CHEM business development.

Risks

• Uncertainty in timing of APC award receipts and execution. Potential impact of EPA rule rollbacks on NOx emissions requirements, but management sees no immediate headwinds or tailwinds from regulatory changes.

Question and Answer

• Q: Regarding FUEL CHEM revenues and DGI demonstration A: FUEL CHEM expects $15M-$16M in 2025 revenue; DGI demonstration is considered R&D expense, and the company hopes to recognize commercial revenue from DGI in 2025.
• Q: Data center APC opportunity A: Pipeline of bids for AI data centers is approximately $100 million, with per unit revenue ranging from a little over $1 million to $2.5 million.
• Q: Mexico opportunities for FUEL CHEM A: Engaged with Mexico partner for expanding chemical technology; government pressure on emissions is positive, and equipment is ready for quick deployment in Mexico