Fuel Tech, Inc. Q3 FY2025 earnings call

• FUEL CHEM segment had solid growth driven by increased dispatch at legacy clients and new account contributions, with new demonstration program expected to positively impact results. - APC business had $3.2 million new awards, backlog at $9.5 million, and pursuing additional contracts. - Acquired complementary IP from Wahlco, Inc. for $350,000, expanding APC portfolio. - Dissolved Gas Infusion had successful exhibition at WEFTEC and extended demonstration at fish hatchery, with plans to expand sales representative network.

Consolidated revenues for the third quarter of 2025 declined slightly to $7.5 million from $7.9 million in the prior year period. APC segment revenue decreased to $2.7 million from $3.2 million, primarily due to timing of project execution on existing contracts. FUEL CHEM segment revenue improved to $4.8 million from $4.6 million. Consolidated gross margin rose to 49% of revenues from 43% in the prior year period. APC segment backlog as of September 30, 2025, was $9.5 million. Cash, cash equivalents and investments at quarter end were nearly $34 million with no long-term debt. Net cash provided by operating activities for the 9 months ended September 30 was $4.6 million compared to a use of cash totaling $1.8 million in the prior year period.

• Expect 2025 revenues to be approximately $27 million, an 8% increase over 2024. - FUEL CHEM's full year 2025 segment revenue expected to be $16.5 million to $17 million, up from prior guidance. - Pursuing $3 million to $5 million of potential additional APC contracts before end of year or early Q1 2026.

• Uncertainties related to regulatory changes, such as EPA rule rollbacks and delays. - Market demand and project execution timing uncertainties affecting revenue and margin. - Dependence on successful commercialization of new technologies and acquisitions.

Q: This acquisition, do you need to make any additional investments to meaningfully monetize this acquisition? And just in terms of the time line for you to see any sort of contribution from this IP, should we expect anything coming in this year itself? Or is this more of a 2026, 2027 type situation?

A: I don't expect that we may need to make a significant amount of incremental investment here internally to capitalize on the IP that we've acquired. We will see some near-term benefits from aftermarket opportunities, but larger scale benefits in terms of capital project awards will come into play in 2026 and beyond.

Q: Under the data center type opportunities, are you working with any folks in the value chain from a distribution perspective? Or are you directly approaching some of these entities with their solutions?

A: We are typically brought into the equation for the data center build-out from one of the engine or turbine OEMs. Recently, we have been contacted by new market entrants like companies managing aircraft engines and some integrators as well.

Q: From a pipeline perspective, how big is the pipeline already?

A: We have 8 to 10 opportunities that we are pursuing today, valued at $80 million to $100 million in total, which are data center opportunities only, with an additional $10 million to $20 million pipeline of more standard APC business.