Skip to content
    FTEK
    Earnings call· Jun 2026(Q2 FY26)

    FUEL TECH Q2 FY26 earnings call FTEK

    Aug 5, 2026 Source

    Executive summary

    FuelTech Q2 FY26 — Strong Revenue Growth and Backlog Expansion

    FuelTech delivered strong Q2 FY26 results with double-digit revenue growth in both its APC and FuelChem segments, alongside a significant expansion in its APC backlog. The company is making progress towards DGI commercialization and maintains an optimistic full-year outlook, despite a decline in gross margin and increased net loss. A leadership transition was also announced, with a new CEO appointed to lead future growth initiatives.

    Highlights

    5

    • Consolidated revenues rose 17% to $6.5 million.

    • APC segment revenue grew 11% and FuelChem segment revenue grew 21%.

    • Consolidated APC backlog reached $14.3 million at June 30, 2026, the largest since 2018.

    • New APC contracts valued at $2.6 million were announced, bringing the effective backlog to $17 million.

    • Ended the quarter in a strong financial position with $29.6 million in cash, cash equivalents, and investments, and no debt.

    Concerns

    4

    • Consolidated gross margin declined to 41% of revenues from 46% in the prior year period.

    • Net loss increased to $1.2 million ($0.04 per diluted share) compared to $689,000 ($0.02 per diluted share) in the prior year.

    • Adjusted EBITDA loss increased to $1.2 million compared to $948,000 in the prior year period.

    • One data center opportunity did not continue to develop, and the timing of another was delayed.

    Guidance & targets

    10
    CategoryTargetConfidence
    Revenues
    exceed the level of 2025
    high materiality
    High
    FuelChem Revenues
    approximating 2025 revenues
    medium materiality
    High
    APC Revenues
    exceeding 2025 performance
    medium materiality
    High
    SG&A Expenses
    $14.5M-$15M
    medium materiality
    High
    DGI Rental Revenue
    $100,000
    low materiality
    High
    APC Sales Pipeline Conversion
    $3M-$5M
    medium materiality
    Medium
    Data Center Award Conversion
    one inquiry can convert to a commercial award
    high materiality
    Medium
    Data Center Revenues
    material revenues
    high materiality
    Medium
    FuelChem Commercial Account Revenue
    $2.5M-$3M annualized
    medium materiality
    Medium
    DGI Hatchery System Revenue
    $500,000-$1,000,000
    low materiality
    Medium

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Consolidated
    Consolidated gross margin declined from 46% in the prior year period.
    		$6.5M17%—41%
    FuelChem
    Segment margin declined slightly from 47% in Q2 2025 due to demonstration costs, increased freight, and additional labor for unit maintenance.
    		$3.7M21%—45%
    APC
    Segment gross margin decreased from 44% in the prior year, reflecting project mix, contract timing, and execution costs.
    		$2.8M11%—36%

    Operational metrics

    18
    Consolidated Gross Margin
    41%down from 46% YoY
    Q2 FY26

    Consolidated gross margin for the second quarter.

    Adjusted EBITDA Loss
    $1.2Mvs $948,000 loss YoY
    Q2 FY26

    Adjusted EBITDA loss for the second quarter.

    SG&A Expenses as % of Revenue
    55%down from 60% YoY
    Q2 FY26

    SG&A expenses as a percentage of revenue, reflecting higher consolidated sales growth.

    SG&A Expenses
    $3.6Mvs $3.3M YoY
    Q2 FY26

    SG&A expenses for the second quarter.

    R&D Expenses
    $646,000vs $490,000 YoY
    Q2 FY26

    R&D investments largely reflect ongoing investment in water and wastewater treatment technologies, specifically DGI systems.

    Cash, Cash Equivalents and Investments
    $29.6M
    Q2 FY26

    Strong financial position at quarter end.

    Cash per Share
    $1.05
    Q2 FY26

    Calculated based on $31.2 million shares outstanding.

    Working Capital
    $20.1M
    Q2 FY26

    Working capital at quarter end.

    Working Capital per Share
    $0.65
    Q2 FY26

    Calculated based on $31.2 million shares outstanding.

    Stockholders' Equity
    $37.4M
    Q2 FY26

    Stockholders' equity at quarter end.

    Stockholders' Equity per Share
    $1.20
    Q2 FY26

    Calculated based on $31.2 million shares outstanding.

    Shares Outstanding
    $31.2M
    Q2 FY26

    Shares outstanding at quarter end.

    APC New Contracts Value
    $2.6M
    Q3 FY26

    New APC contracts announced last week, addressing emissions reduction requirements.

    Data Center Sales Pipeline Value
    $75M-$100M
    current

    Sales pipeline for data center opportunities, representing pollution control scope of supply.

    Data Center Unit Pricing
    $1M-$4M
    current

    Pricing for pollution control systems (primarily SCR) for data center on-site power generation.

    Data Center Project Unit Count
    few systems up to 30-40 units
    current

    Range of systems per data center project opportunity.

    FuelChem Demonstration Program Potential Annualized Revenue
    $2.5M-$3M
    annualized

    Potential revenue contribution from a temporarily halted demonstration program expected to restart in mid-Q4 2026.

    DGI Hatchery System Potential Value
    $500,000-$1,000,000
    future

    Estimated sale value for a full DGI system for a Western U.S. fish hatchery, for which a proposal is being prepared.

    Orderbook & backlog

    4
    Consolidated APC Backlog$14.3MJune 30, 2026

    vs $7M at December 31, 2025

    Largest quarter-end backlog since 2018. Approximately $10.5 million of this is expected to be recognized in the next 12 months.

    Effective Backlog (inclusive of new awards)$17Mlast week

    Includes new APC contracts valued at $2.6 million.

    Domestic Project Backlog$11.3MJune 30, 2026

    Portion of consolidated APC backlog.

    Foreign Project Backlog$3MJune 30, 2026

    Portion of consolidated APC backlog.

    Product announcements

    1
    ProductTypeDetails
    Dissolved Gas Infusion (DGI)milestone

    Deals & partnerships

    2
    Two industrial customers (one new, one long-term recurring)New APC contracts for SCR technology to address emissions reduction requirements.$2.6M

    New APC contracts announced last week, one with a new customer in the gas infrastructure market and another with a long-term recurring customer.

    Partners in MexicoRekindled discussions to expand the provision of chemical technology in Mexico.

    Opportunity tied to the Mexican government's emphasis on emissions and pollution control related to heavy fuel oil use for power generation.

    Risks & headwinds

    6
    Data Center Market ConstraintsOngoing

    Demand continues to exceed supply, but projects are increasingly constrained.

    Mitigation: FuelTech is a subcontractor, supporting direct customers with pollution control systems, limiting exposure to broader project funding and timing issues.

    Power Availability for Data CentersOngoing

    Single largest bottleneck for data center development.

    Mitigation: Seeing more data center development using aero-derivative turbines and reciprocating engines, which require FuelTech's SCR technology.

    Permitting and Zoning Delays for Data CentersOngoing

    Increasingly difficult to get projects energized and operational.

    Mitigation: FuelTech's role as a subcontractor limits direct exposure to these delays.

    Supply Chain Shortages for Data CentersOngoing

    Shortages for electrical equipment and skilled labor.

    Mitigation: FuelTech's role as a subcontractor limits direct exposure to these shortages.

    Legal Challenges to NSPS RegulationsOngoing

    Could affect the timing or final requirements of the rule.

    Mitigation: Monitoring the situation; state-specific permitting requirements can vary and often require stringent NOx emissions regardless of federal rule.

    FuelChem Demonstration HaltQ2 FY26

    Temporary halt of a six-month commercially priced demonstration program.

    Mitigation: Halt was due to plant operations, not FuelChem performance; customer plans to restart in mid-Q4 2026.

    What to watch in Q3 FY26

    5

    Data Center Award Conversion

    before end of Q3
    CurrentOne opportunity delayed, one did not develop
    TargetOne inquiry converts to commercial award

    Why it matters

    A data center award would be a significant new revenue stream and validate FuelTech's position in this growing market.

    That said, there is a possibility that one of our inquiries can convert to a commercial award based on our conversations with the various parties involved before the end of Q3.

    Q&A highlights

    4

    When should significant revenues from data center opportunities be expected, given the large potential?

    Revenues are dependent on contract award timing and delivery schedules. There's a possibility for material revenues in 2027 if a current opportunity converts, with delivery timeframes in early to mid-2027.

    “So I'd say as we sit here today, there is a possibility for material revenues in 2027, pending contract award, of course.”

    asked by Samir Joshi · answered by Vincent Arnone

    2 min read6 chapters

    Detailed Narrative

    01

    CEO Transition and New Leadership

    Vincent Arnone announced his retirement as President and CEO, effective August 10, 2026, concluding a 27-year tenure with the company, including 11 years as CEO. Ramesh Naghahali has been appointed as his successor, bringing extensive experience in environmental technologies, power generation, water infrastructure, and engineered systems from previous senior leadership roles at companies like General Electric and Xylem. Arnone will remain on the Board as a non-independent director.

    02

    Data Center Market Opportunity and Constraints

    The U.S. data center market is experiencing a historic boom, driven by AI and cloud computing, with demand exceeding supply. However, the industry faces significant constraints including power availability, permitting delays, local opposition, and supply chain shortages for electrical equipment and skilled labor. FuelTech's sales pipeline for these opportunities is strong, approximating $75M-$100M per project for integrating SCR technology with power generation sources, with unit pricing ranging from $1M-$4M.

    03

    DGI Commercialization Progress

    FuelTech's Dissolved Gas Infusion (DGI) technology is progressing towards commercialization. A successful extended demo at a Western U.S. fish hatchery demonstrated strong performance, leading to a client request for a proposal for a full hatchery system, estimated to be worth $500K-$1M. An extended trial at a Southeast U.S. municipal wastewater facility is generating approximately $100K in rental revenue for 2026 and has significantly reduced odor complaints.

    04

    Regulatory Environment and NOx Emissions

    The EPA's new source performance standards (NSPS) for new gas turbines, published January 15, require varying NOx levels based on turbine size and operating capacity. Turbines greater than 85 megawatts will need to meet 5 ppm NOx, likely requiring SCR in almost all cases. While legal challenges to NSPS exist, state-specific permitting requirements can vary, and the use of multiple small turbines can classify them as a major source, often requiring more stringent NOx emissions.

    05

    FuelChem Segment Performance and Outlook

    The FuelChem segment delivered a solid quarter with revenues rising 21% to $3.7 million, benefiting from increased operational dispatch at legacy accounts during warm summer months. A previously halted commercial demonstration program is expected to restart in mid-Q4 2026, with potential for $2.5M-$3M in annualized revenue for 2027 if converted to a commercial account. The company is also pursuing another coal-fired unit opportunity.

    06

    Mexico Market Re-engagement

    FuelTech has rekindled conversations with partners in Mexico regarding opportunities for its chemical technology. This market is driven by the Mexican government's emphasis on emissions and pollution control, particularly concerning the use of heavy fuel oil for power generation. The readily available and inexpensive heavy fuel oil provides a transitional power source, creating a potential market for FuelTech's solutions.

    AI-generated summary of the company’s earnings call. Not investment advice.