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FUEL TECH, INC. (FTEK)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 was soft: revenue declined to $5.283M and gross margin compressed to 42.3%; EPS was $(0.06), driven largely by weaker APC execution and mix .
  • Segment mix: APC revenue fell to $1.751M with gross margin 35.9%, while FUEL CHEM held at $3.532M with gross margin 45.5% .
  • Backlog and pipeline: APC backlog ended at $6.2M (excludes $1.6M awards in Q1’25), with management expecting additional $4–$5M of new APC awards early Q2’25 .
  • 2025 outlook: management guides FY2025 revenue to exceed $30M (both segments up y/y); FUEL CHEM margin expected to normalize to ~49–50% as base accounts resume normal operations; SG&A up modestly; R&D roughly flat .
  • Stock-relevant catalysts: municipal waste compliance projects, data center power buildout requiring NOx controls (SCR/ULTRA/SNCR), and first commercial DGI revenues possible in 2025, albeit small initially .

What Went Well and What Went Wrong

What Went Well

  • FUEL CHEM resilience: revenue steady at $3.5M; management expects 2025 margin normalization to ~49–50% as outages abate and a new coal unit contract contributes (“best first quarter in years”) .
  • Orders momentum: $1.6M APC awards in Feb 2025 and anticipated $4–$5M near-term; multiple municipal waste opportunities driven by state mandates .
  • Strategic pipeline: data center power buildouts (primary power) require NOx controls; Fuel Tech is bidding with gas turbine OEMs and sees larger-ticket opportunities versus recent years .

Quotes:

  • “We expect that total revenues for 2025 will exceed $30 million with both business segments exceeding their performance in 2024.”
  • “Chemtech is actually experiencing the best first quarter that we have seen in years.”
  • “We are pursuing some larger contract value inquiries related to…data centers… owners and operators… preparing to invest billions of dollars on infrastructure.”

What Went Wrong

  • APC underperformed: Q4 APC revenue declined to $1.8M and gross margin fell to 35.9% from 55.0% y/y due to timing/product mix .
  • Profitability pressure: Q4 net loss widened to $(1.883M), EPS $(0.06); Adjusted EBITDA loss $(1.828M) reflecting lower revenue and higher SG&A .
  • Gross margin compression: consolidated GM fell to 42.3% from 51.1% y/y; FUEL CHEM GM dipped to 45.5% (demonstrations priced below commercial rates and unplanned outages) .

Financial Results

Consolidated Performance vs Prior Quarters

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$7.042 $7.851 $5.283
Gross Margin (%)41.9% 43.4% 42.3%
Net Income (Loss) ($USD Millions)$(0.421) $0.080 $(1.883)
Diluted EPS ($USD)$(0.01) $0.00 $(0.06)
Adjusted EBITDA ($USD Millions)$(0.529) $(0.035) $(1.828)

Year-over-Year (Q4 2024 vs Q4 2023)

MetricQ4 2023Q4 2024
Revenue ($USD Millions)$6.345 $5.283
Gross Margin (%)51.1% 42.3%
Net Income (Loss) ($USD Millions)$(0.539) $(1.883)
Diluted EPS ($USD)$(0.02) $(0.06)
Adjusted EBITDA ($USD Millions)$(0.646) $(1.828)

Segment Breakdown

Segment MetricQ4 2023Q4 2024
APC Revenue ($USD Millions)$2.791 $1.751
APC Gross Margin (%)55.0% 35.9%
FUEL CHEM Revenue ($USD Millions)$3.554 $3.532
FUEL CHEM Gross Margin (%)48.0% 45.5%

KPIs and Balance Sheet

KPIQ4 2024Notes
APC Backlog ($USD Millions)$6.2 Excludes $1.6M awards announced Feb 2025
Backlog to be Recognized (next 12 months) ($USD Millions)$4.5 CFO commentary
Cash & Cash Equivalents ($USD Millions)$8.510 12/31/2024
Short-term Investments ($USD Millions)$10.184 12/31/2024
Long-term Investments ($USD Millions)$10.875 12/31/2024
Working Capital ($USD Millions)$23.8 $0.77 per share
Stockholders’ Equity ($USD Millions)$42.0 $1.37 per share; no debt

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2025None disclosed>$30 New
FUEL CHEM Gross Margin (%)FY 2025Depressed in 2024 due to outages/demos ~49–50 Raised vs 2024 actual
SG&A ($USD Millions)FY 2025$13.8 in 2024 actual Modest increase y/y Raised modestly
R&D ($USD Millions)FY 2025$1.6 in 2024 actual Similar to 2024 Maintained
Operating Income Breakeven ThresholdN/AN/ARequires ~$33–$35 revenue to reach breakeven OI Informational

Note: Company reiterated FY2024 revenue finished at lower end of $25–$26M guidance range ($25.133M actual) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
FUEL CHEM performanceDormant customers returned; demo at new coal unit; annualized potential $1.5–$2.0M New commercial TIFI program commenced; projected $1.5–$2.0M annual at full-time; GM ~historic Best start to 2025 in years; margin normalization to 49–50% expected Improving
APC pipeline$5.0M new APC bookings announced Aug 2024 $2.0M new APC orders announced Nov 2024 $1.6M awards Feb 2025; expect $4–$5M additional awards early Q2 2025 Strengthening
Data centersNot highlightedNot highlightedPursuing larger NOx control contracts with gas turbine OEMs; existing regs require controls on primary power Emerging growth vector
Regulatory/macro–Good Neighbor rule stayed/remanded; monitoring MWC rule delayed to Dec 2025; states driving 2025 opportunities Mixed; state-driven demand
DGI commercializationFish hatchery demo planned; multiple end-markets WEFTEC interest; demos with food processor & municipal wastewater; fish hatchery demo Q2’25 9–12 month fish hatchery demo commencing; expect some 2025 commercial revenues (rentals or capital sale) Progressing
Tariffs/supply chain––Potential steel/aluminum tariff pass-through to customers; limited direct sourcing Manageable pass-through

Management Commentary

  • CEO: “We expect that total revenues for 2025 will exceed $30 million with both business segments exceeding their performance in 2024.”
  • CEO on data centers: “We are pursuing some larger contract value inquiries… in support of the rapid development of data centers… preparing to invest billions of dollars… including emissions control solutions.”
  • CFO: “Backlog should improve steadily through the first half of 2025… SG&A expenses [2025] to increase modestly… R&D similar year-on-year.”
  • CEO on FUEL CHEM margins: “We should see a return… prior to 2024… 49% to 50% range.”

Q&A Highlights

  • Revenue outlook and composition: FY2025 >$30M includes anticipated APC awards; incremental FUEL CHEM account expected but limited 2025 top-line contribution .
  • Margin trajectory: FUEL CHEM gross margin to normalize to ~49–50%; APC margin to remain ~35–38% depending on product mix and ancillary services .
  • Breakeven threshold: Operating income breakeven implied at ~$33–$35M revenue, contingent on margin profile .
  • Data center demand: Primary power permits require NOx controls; Fuel Tech bidding with gas turbine OEMs; typical delivery ~40 weeks with multi-unit monthly cadence thereafter .
  • DGI monetization: 2025 commercial revenue possible via rentals or capital sales; magnitude uncertain but management hopes for “hundreds of thousands” .
  • Tariffs: Steel/aluminum tariffs likely passed through; limited direct sourcing exposure .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable at time of retrieval due to data access limits; therefore, explicit beat/miss vs consensus cannot be provided. We attempted to fetch S&P Global estimates but received daily limit errors. As a result, we anchor analysis on reported results and management guidance [functions.GetEstimates errors].

Key Takeaways for Investors

  • Near-term execution pivot: APC backlog is rebuilding on $1.6M awards with $4–$5M additional awards expected; second-half 2025 revenue skew likely as awards are executed .
  • FUEL CHEM recovery: Base accounts normalized; margin reversion to ~49–50% should support consolidated margin resilience; watch for incremental Midwest coal account conversion timing .
  • New secular driver: AI/data center power buildout creates multi-year NOx control opportunity; Fuel Tech’s SCR/ULTRA/SNCR offerings and OEM relationships position it to win larger contracts .
  • Profitability path: Management indicates OI breakeven around $33–$35M revenue; with FY2025 guide >$30M, upside to awards/mix could move toward inflection .
  • DGI proof points: 9–12 month fish hatchery demo underway; initial 2025 commercial revenues possible (rentals/capital), with optionality across wastewater/industrial end-markets .
  • Risk monitors: APC mix/margin variability, tariff pass-through efficacy, municipal waste rule timing (Dec 2025) vs state-driven mandates, and potential project timing delays remain key variables .
  • Trading implications: Shares are sensitive to contract wins and data center headlines; near-term catalysts include closing the $4–$5M APC awards, additional municipal waste conversions, and early DGI revenue prints .