8-K: Fuel Tech Reports Q2 Loss, Eyes Data Center Growth

Fuel Tech, Inc. reported a net loss of $(689,000) for the second quarter ended June 30, 2025, on revenues of $5.6 million, while expressing confidence in future growth driven by data center demand and a strong balance sheet.

Summary

• Consolidated revenues for Q2 2025 declined to $5.6 million from $7.0 million in Q2 2024, primarily due to lower Air Pollution Control (APC) revenues.
• Consolidated gross margin expanded to 45.5% in Q2 2025 from 41.9% in Q2 2024, reflecting increases in both APC and FUEL CHEM segment gross margins.
• Net loss in Q2 2025 was $(689,000), or $(0.02) per share, compared to a net loss of $(421,000), or $(0.02) per share, in Q2 2024.
• Adjusted EBITDA loss was $(0.9) million in Q2 2025 compared to an Adjusted EBITDA loss of $(0.5) million in Q2 2024.
• At June 30, 2025, the balance sheet included nearly $31 million in cash, cash equivalents, and investments, with no long-term debt.
• APC segment revenue decreased to $2.5 million from $3.9 million, while FUEL CHEM segment revenue was flat at $3.1 million.
• Management anticipates robust FUEL CHEM segment results for the full third quarter of 2025 and full-year segment revenue to reach its highest level since 2022.
• The company is confident in being awarded between $2.5 million and $3.0 million in additional APC contracts from new and existing U.S. and international customers before the end of August.

Sentiment

Score: 4

Explanation: While the company reported increased net losses and revenue decline for the quarter, it maintained a strong cash position with no debt and expressed confidence in securing new contracts, particularly in the growing data center market. Gross margins improved across segments. The outlook for the second half of the year and 2025 for the FUEL CHEM segment is positive, but the current quarter's financial performance is a concern.

Positives

• Consolidated gross margin expanded to 45.5% in Q2 2025 from 41.9% in Q2 2024.
• APC segment gross margin expanded to 43.9% from 39.1%.
• FUEL CHEM segment gross margin expanded to 46.8% from 45.5%.
• Strong financial position with nearly $31 million in cash, cash equivalents, and investments at June 30, 2025.
• No long-term debt on the balance sheet.
• Anticipates robust FUEL CHEM segment results for Q3 2025 and full-year segment revenue to reach its highest level since 2022.
• Confident in being awarded $2.5 million to $3.0 million in additional APC contracts by the end of August.
• Interest income rose to $0.5 million from $0.3 million, partly due to a one-time $0.3 million Employee Retention Credit (ERC) benefit.

Negatives

• Consolidated revenues declined to $5.6 million in Q2 2025 from $7.0 million in Q2 2024.
• Net loss increased to $(689,000) in Q2 2025 from $(421,000) in Q2 2024.
• Adjusted EBITDA loss widened to $(0.9) million in Q2 2025 from $(0.5) million in Q2 2024.
• Selling, General & Administrative (SG&A) expenses as a percentage of revenues rose to 60.2% in Q2 2025 from 46.1% in Q2 2024, reflecting lower revenues.
• APC segment revenue decreased to $2.5 million from $3.9 million.
• Consolidated APC segment backlog at June 30, 2025, was $7.8 million, a decrease from $10.3 million at March 31, 2025.

Risks

• Contracts may be awarded to competitors offering different or lower-priced technologies.
• Projects may be suspended, delayed, or cancelled.
• General risks detailed in Fuel Tech's Annual Report on Form 10-K under the caption 'Risk Factors' and subsequent filings under the Securities Exchange Act of 1934.

Future Outlook

Management anticipates robust FUEL CHEM segment results for the full third quarter of 2025 and full-year segment revenue to reach its highest level since 2022. The company expects to be awarded between $2.5 million and $3.0 million in additional APC contracts from new and existing U.S. and international customers before the end of August. A demonstration of TIFI technology is expected to commence in the fourth quarter of 2025, and an extended DGI demonstration is expected to last until the second quarter of 2026.

Management Comments

• "Our second quarter results, along with ongoing developments across our two business segments and our Dissolved Gas Infusion business, strengthen our confidence in delivering improved overall performance in the second half of the year."
• "We are actively pursuing new contract opportunities across our APC and FUEL CHEM business segments."
• "For the APC segment, in particular, we are addressing both traditional end markets and the significant prospects offered by the rising demand for data centers."
• "We have multiple bids outstanding for our SCR technology to address the emissions control requirements of AI-related data centers to be built in the U.S. over the next several years."
• "We remain closely engaged with these potential partners and are excited about the opportunities that lie ahead."
• "We are supported in our efforts by a strong financial position. At June 30, 2025, our balance sheet included nearly $31 million in cash, cash equivalents and investments and no long-term debt."
• "Before the end of the month of August, we are confident that we will be awarded between $2.5 and $3.0 million in additional contracts from new and existing U.S. and international customers."

Industry Context

The company is actively targeting the rising demand for data centers, particularly for AI-related facilities in the U.S., by offering its SCR technology for emissions control. This strategic focus aligns with the growing need for energy-efficient and environmentally compliant infrastructure in the rapidly expanding digital economy, positioning the company to capitalize on a significant emerging market.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results to assess against global benchmarks.

Stakeholder Impact

• Shareholders: Negative impact from increased net loss and revenue decline, but potential positive impact from future contract awards and strong balance sheet.
• Customers: Continued service and technology offerings, with new demonstrations and expansion efforts, particularly in the data center market.
• Employees: No direct impact on employment mentioned, but ongoing business activities and pursuit of new contracts suggest continued operations.

Next Steps

• Management will host a conference call on Wednesday, August 6, 2025, at 10:00 am ET / 9:00 am CT to discuss the results and business activities.
• Expected award of $2.5 million to $3.0 million in additional APC contracts from new and existing U.S. and international customers before the end of August.
• Commencement of a demonstration of TIFI Targeted In-Furnace Injection technology in the fourth quarter of 2025 at a coal-fired unit in the Midwest.
• Extended demonstration of Dissolved Gas Infusion (DGI) technology at a fish hatchery in the Western U.S. is expected to last until the second quarter of 2026.
• Continuing to pursue the expansion of the FUEL CHEM client base.

Key Dates

Recommendation

The company reported a decline in revenue and an increased net loss for the quarter, which are negative indicators. However, it maintains a strong balance sheet with significant cash and no long-term debt. Management expresses confidence in securing new contracts, particularly in the high-growth data center sector, and anticipates improved performance in the second half of the year. The expansion of gross margins is also a positive sign. Given the mixed results—current underperformance offset by a solid financial position and promising future opportunities—a 'hold' recommendation is appropriate, awaiting further clarity on the execution of new contracts and the impact of strategic initiatives.

Keywords

Emissions control, Water treatment, Air pollution control, FUEL CHEM, DGI, Data centers, SCR technology, NOx reduction, Industrial applications, Utility applications, Environmental technology, Clean energy