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3I

374Water Inc. (SCWO)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue surged to $0.595M, up ~1,516% year-over-year (vs. $0.037M) on Orlando WDS, treatability studies, and equipment services; net loss widened to $4.58M as operating expenses stepped up for commercialization and manufacturing .
  • Management highlighted milestones: AS6 delivered to Clean Earth for DoD DIU/ESTCP PFAS destruction campaigns (began mid-August), AS6 manufacturing completed for OC San with FAT underway, and AS1 manufacturing targeted for deployment into mobile WDS work; biosolids PFAS destruction demonstrated to non-detect levels .
  • FY25 revenue outlook reiterated qualitatively—Q1 call indicated $4–$6M, while Q2 call said “line of sight to 2 to 4 to 6,000,000,” effectively maintaining the trajectory but introducing ambiguity on the lower bound; no margin or EPS guidance provided .
  • Potential stock catalysts: successful OC San FAT/shipment, DoD DIU demonstration results and pre-approved vendor status, definitive TSDF agreements for WDS, and continued proof points on PFAS biosolids destruction (non-detect), supported by evolving EPA actions .

What Went Well and What Went Wrong

What Went Well

  • Demonstrated PFAS destruction in biosolids to non-detect levels at Orlando; management: “producing effluent with PFAS concentrations at non-detectable levels” .
  • Operational momentum: AS6 delivered to Clean Earth (Detroit) for DoD DIU/ESTCP with August–October campaigns; AS6 completed for OC San with FAT underway; AS1 manufacturing targeted for near-term mobile WDS revenue .
  • Strategic build-out: signed WDS term sheet with a leading environmental services provider (Crystal Clean), added seasoned industry leaders to Board (Stephen J. Jones, James Pawloski) to accelerate commercialization .

What Went Wrong

  • Gross deficit persisted (-$0.276M) despite revenue growth, indicating negative unit economics at current scale; Q2 operating expenses rose 45% YoY to $4.36M on headcount, CTO hire, and G&A increases .
  • Cash declined to $2.15M at quarter-end from $10.65M at FY24 end; company established an ATM and is pursuing capital options to fund WDS and growth initiatives .
  • Guidance clarity: Q1 articulated $4–$6M FY25 revenue; Q2 phrasing (“2 to 4 to 6,000,000”) could be interpreted as broader range—management did not provide margin targets and declined to affirm positive gross margin as a target .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD)$36,821 $543,100 $594,967
Net Loss ($USD)$(2,932,320) $(3,683,800) $(4,580,448)
EPS (Basic & Diluted) ($USD)$(0.02) $(0.03) $(0.03)
Gross Profit/(Deficit) ($USD)$(6,722) $138,283 $(276,366)
Operating Expenses ($USD)$3,012,378 $3,909,179 $4,361,584
Cash & Equivalents ($USD, period end)$5,083,482 $6,883,845 $2,149,015

Revenue composition (drivers, Q2 2025):

DriverQ2 2025 ($USD)
WDS – Orlando phase one (services)~$271,000
Bench-scale treatability studies~$202,000
Equipment revenues~$85,000
Total Revenue$594,967

KPIs (operational/financial):

KPIQ2 2025
PFAS destruction efficacy (biosolids)≥99.99%, often non-detect
Identified opportunities pipeline~$1.8B
Working Capital$4.6M
Weighted Avg Shares (Basic & Diluted)145,067,430

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025$4–$6M (Q1 call) “Line of sight to 2 to 4 to 6,000,000” (Q2 call) Maintained trajectory; lower bound phrasing introduced ambiguity
Gross MarginFY 2025Not guidedCEO declined to affirm positive GM target; “ambition, not a real target” Clarified: no margin guidance
OC San – AS6 Deployment2H 20252H deployment expected AS6 manufacturing complete; internal FAT complete; OC San FAT underway through Sept; shipment targeted late Sept Timeline refined; execution progressing
WDS – Crystal Clean TSDF2025Term sheet signed “Quite close” to definitive agreement; ~4 months to operational once ground breaks Execution update; timeline indication
AS1 – Mobile WDS2025Manufacture AS1 for deployment First AS1 coming off the line; ready for deployment to revenue-generating WDS later this month Near-term revenue use case

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
WDS commercializationIntroduced WDS plan; NC AFFF contract; team build-out Launched WDS; Crystal Clean term sheet; Orlando 90-day campaign Advancing TSDF agreement; mobile/fleet strategy; AS1 near-term deployment Acceleration to execution
DoD/DIU/ESTCP programsAnticipated DIU demo Detroit DIU mobilization planned AS6 delivered; campaigns underway Aug–Oct; aim for pre-approved DoD vendor status From plan to field execution
OC San deployment2025 planned Schedule adjustments for upgrades/permits AS6 manufactured; FATs underway; shipment targeted late Sept Progressing toward install
PFAS regulatory tailwindsEmphasized EPA/NDAA momentum EPA major actions cited; demand tailwinds EPA actions reiterated; biosolids non-detect proof points Strengthening narrative
Product roadmap (AS1/6/30/100+)Announced multi-model plan AS1/AS6 near-term; AS30 design; AS100+ long-cycle AS1 deployment imminent; modular AS6; AS30 design before year-end Advancing readiness
Capital needsRaised $12.2M in Q1 2025 (reported in March PR) Reviewing capital, partners ATM facility; pursuing additional capital for WDS growth Active funding strategy

Management Commentary

  • “We recently completed the successful waste destruction of PFAS in biosolids… producing effluent with PFAS concentrations at non-detectable levels.” — Chris Gannon (CEO) .
  • “We completed manufacturing the AS6 system in late July and have completed our internal FAT… We begin the OC San FAT this week and estimate this will take us through much of September… remain optimistic on our late September shipment.” — Chris Gannon (CEO) .
  • “Based on initial internal assumptions and modeling, we estimate our AS6 has the potential to generate $3 to $5 million in recurring annual revenue and margins of 30% to 50%.” — Russell Kline (CFO) .
  • “We believe we are well positioned to meet our growth targets for 2025 and drive material revenue growth in 2026 and beyond.” — Chris Gannon (CEO) .

Q&A Highlights

  • North Carolina AFFF destruction: CEO referenced initial contract “about $1 million,” later clarified to “$400,000” initial with potential multi-million follow-on; indicates phased approach with upside if subsequent rounds awarded .
  • TSDF WDS rollout: Target 8–10 initial facilities across North America (including Canada/Alaska); Crystal Clean definitive agreement “quite close,” ~4 months to operational post ground-break .
  • DoD pipeline: Detroit DIU/ESTCP campaigns treating multiple PFAS waste streams (GAC, IX, still bottoms); goal to become pre-approved DoD vendor, enabling recurring WDS awards .
  • Go-to-market capacity and team: Four direct BD professionals plus corporate development focused on TSDF partnerships .
  • Gross margin guidance: Management declined to commit to positive GM target, framing as ambition rather than formal guidance .

Estimates Context

  • Street coverage appears limited; S&P Global did not provide usable consensus for Q2 2025 EPS or revenue (Primary EPS Consensus Mean and Revenue Consensus Mean not populated; # of estimates not available). Values retrieved from S&P Global.*
  • Implication: No formal “beat/miss” vs consensus can be determined; focus shifts to YoY/Sequential trajectory and execution milestones .
MetricQ2 2025 ActualQ2 2025 Consensus# of Estimates
Revenue ($USD)$594,967 N/A*N/A*
EPS (Basic & Diluted) ($USD)$(0.03) N/A*N/A*

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue inflected on early WDS/services and studies, but gross deficit and higher OpEx drive wider losses—scale and mix shift (toward WDS and higher-capacity units) are key to margin traction .
  • Execution milestones matter more than near-term consensus: OC San FAT/shipment, DIU/ESTCP outcomes, and first definitive TSDF agreements likely to re-rate commercialization risk .
  • PFAS regulatory momentum (EPA/NDAA) and non-detect biosolids results underpin demand tailwinds and differentiation versus legacy disposal methods .
  • Capital strategy (ATM and potential raises) is a watch item; cash of $2.15M suggests reliance on additional financing to scale WDS and fleet deployments—dilution risk vs acceleration benefits .
  • Pipeline scale (~$1.8B identified opportunities) highlights TAM; near-term conversion depends on TSDF network build-out and mobile WDS fleet readiness (AS1/AS6 modularity) .
  • Trading lens: headline catalysts include definitive TSDF agreements, DIU validation data release, OC San shipment/commissioning, and additional WDS contract awards—each can drive sentiment and liquidity.
  • Medium-term thesis: If AS30/AS100+ design and TSDF network materialize, recurring WDS economics (30–50% margins on AS6 per CFO modeling) could pivot unit economics and support multi-year revenue scaling .

Additional Source Details

  • Q2 2025 8-K and Exhibit 99.1 press release, including full financial statements and operational updates .
  • Q2 2025 earnings call transcript (prepared remarks and Q&A) .
  • Supporting press releases around Q2: AS6 delivered to Detroit for DoD DIU/ESTCP , PFAS destruction in biosolids to non-detect .
  • Prior quarters for trend: Q1 2025 8-K and call ; Q4 2024 8-K context .