Richard Greulich

Richard Greulich from REG Capital Advisors sought clarification on the global sales pipeline figure of $75 million-$100 million mentioned in the previous quarter's conference call, specifically whether it included data center opportunities.

Answer

Chairman, President, and CEO Vincent Arnone clarified that the previously mentioned $75 million-$100 million pipeline *was* specifically for data center opportunities, with an additional $10 million-$20 million for 'more regular, ordinary, recurring APC business.' He further stated that the current $80 million-$100 million pipeline discussed today is *only* for data center opportunities, separate from another $10 million-$20 million in standard APC business.

Richard Greulich asked about the significant increase in the company's sales pipeline, its operational capacity to meet a surge in demand from data centers, and the typical revenue per unit for these projects.

Answer

Chairman, CEO & President Vince Arnone confirmed the sales pipeline growth to over $100 million is driven by AI data center bids. He assured that Fuel Tech can scale production through its supply chain partners to meet demand. Arnone also specified that data center projects consist of multiple units, with revenue ranging from approximately $1 million to $2.5 million per unit.

Asked about the increase in the global sales pipeline noted in the 10-Q, the company's capacity to handle a large influx of data center orders, the nature of these orders (multiple units per site), and the revenue per unit.

Answer

The company confirmed the pipeline increase to over $100M is driven by data center bids. They can scale production by leveraging their supply chain partners. They affirmed that bids are for multiple units per site (up to 25-30) and that revenue per unit ranges from just over $1 million to $2.5 million.

Richard Grelich of REG Capital Advisors inquired about a $250,000 change in the contract loss provision during the quarter, asking if it stemmed from a new negotiation. He also asked whether management believes a 30% overall gross margin is an achievable and acceptable target for both the company and its customers in the long term.

Answer

CFO Phil Podgorski and CEO Alex Shen clarified that the additional loss reserve was related to a one-time, one-off project that is nearly complete and expected to be resolved by the next quarter. Regarding the 30% gross margin target, management avoided committing to a specific number, stating that their pricing requests are compliant with defense contracting regulations (FAR/CAS) and are not outside the realm of acceptability for their customers. They emphasized that achieving higher margins is earned through superior performance, such as 100% on-time delivery and quality, which ultimately provides value and reduces costs for their clients, making higher prices justifiable.

Asked for clarification on the accounting impact of the legacy pricing renegotiations, specifically regarding the provision for contract losses, the quantifiable amount in the quarter, and the outlook for future similar agreements.

Answer

Management confirmed the positive income statement impact comes from reversing contract loss provisions, which amounted to between $100k and $250k in Q4. This success with one "tranche" of contracts provides encouragement for resolving the remaining legacy pricing issues in a similar piecemeal fashion.

Richard Greulich asked for the latest consolidated backlog figure and its breakdown between the Ranor and Stadco subsidiaries.

Answer

Executive Alexander Shen reported that the consolidated backlog was $45.5 million as of December 31, 2024. He noted the split is approximately 50-50 between the Ranor and Stadco subsidiaries, though it can fluctuate.