Fuel Tech (FTEK) Q4 2025 Earnings Call Transcript

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DATE

Wednesday, March 4, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Chairman, President, and Chief Executive Officer — Vincent J. Arnone
• Chief Financial Officer — Ellen T. Albrecht

TAKEAWAYS

• Revenue -- Consolidated revenue increased 37% to $7.2 million in Q4 and rose 6% to $26.7 million for the full year, driven by both APC and FUEL CHEM segment growth.
• FUEL CHEM Segment -- Annual revenue for FUEL CHEM rose 28% to $17.8 million, attributed to strong legacy unit performance, the full-year contribution of a new commercial unit, and a new demonstration customer.
• APC Segment Awards -- $8.8 million of APC awards were secured in 2025 from customers in the U.S., Europe, and Southeast Asia.
• Backlog -- Consolidated APC segment backlog stood at $7.0 million at year end, up from $6.2 million, with $3.4 million domestic and $3.6 million foreign projects.
• Gross Margin -- Consolidated gross margin for Q4 increased to 45% from 42%, while the annual figure rose to 46% from 42%, with both FUEL CHEM and APC segments higher year over year.
• Operating Loss -- Operating loss narrowed to $1.4 million in Q4 from $2.1 million and to $3.7 million for the year from $4.7 million previously.
• Cash and Investments -- End-of-year cash, cash equivalents, and investments totaled $31.9 million, with no outstanding debt.
• Interest Income -- Interest income reached $288,000 for Q4 and $1.4 million for the year, reflecting investment of cash reserves.
• Data Center Pipeline -- The APC sales pipeline related to data center projects approximates $75 million to $100 million per project, with current participation in opportunities involving more than ten data center integrators and OEMs.
• FUEL CHEM Demonstration -- A six-month demonstration program with a new U.S. customer delivered reduced maintenance downtime and, if converted to commercial, could provide $2.5 million to $3 million annually at historic margins.
• Dissimilar Segment Results -- APC segment revenue decreased annually despite higher Q4 results, reflecting project-award timing and customer-driven delays.
• SG&A Expenses -- 2025 SG&A increased to $14.1 million from $13.8 million, but SG&A as a percentage of revenue decreased to 53% from 55%.
• Dissolved Gas Infusion (DGI) -- Ongoing demonstrations led to a municipal wastewater trial converting to a six-month rental and a fish hatchery test expected to conclude in Q2 2026; the company anticipates the first commercial DGI contract in 2026.
• Walco Asset Acquisition -- The Walco Inc. acquisition expanded Fuel Tech's APC portfolio, adding IP and customer assets, and has generated accelerated project inquiries.
• Guidance -- Management expects 2026 revenues to surpass 2025, with FUEL CHEM steady and APC exceeding prior-year performance, exclusive of any potential data center awards.

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RISKS

• Net loss increased to $2.3 million ($0.08 per diluted share) from $1.9 million ($0.06 per diluted share), and adjusted EBITDA loss widened to $2.7 million from $2.2 million, despite top-line growth.
• Management said, "The timing of these projects is very hard to predict." regarding data center opportunities, acknowledging unpredictability in converting the $75 million to $100 million pipeline to awards.
• APC segment revenue declined annually due to customer delays and project-award timing, with near-term backlog realization dependent on closing now-slipped contracts.

SUMMARY

Fuel Tech (NASDAQ:FTEK) achieved its highest annual revenue since 2018, a 6% increase to $26.7 million, primarily driven by a recovery in FUEL CHEM segment performance and robust Q4 growth across both operating units. The company closed a $8.8 million volume of new APC awards, grew its backlog to $7.0 million, and maintained a debt-free balance sheet with $31.9 million in cash and investments. Management revealed a large data center project pipeline valued at $75 million to $100 million per project, although all described awards remain pending, and the company acknowledged precise award timing remains challenging to forecast.

• Chairman Arnone stated, "we are in various stages of participation in project opportunities with more than ten different data center integrators and turbine and engine OEMs," signaling broadened customer engagement for upcoming projects.
• The FUEL CHEM demonstration program resulted in "a material reduction in downtime and maintenance costs due to a reduction in offline cleaning," supporting the likelihood of full conversion.
• The new NSPS federal emissions standards for gas turbines could drive future APC demand, but management disclosed, "we are not aware of this new regulation having a significant negative impact on decision-making regarding the implementation of pollution controls" at this stage.
• Management highlighted that any near-term material growth will "likely derive from our success in addressing this opportunity," reinforcing its centrality to future expectations.

INDUSTRY GLOSSARY

• APC: Air Pollution Control — technologies and systems designed to reduce or remove pollutants from industrial emissions.
• FUEL CHEM: Segment focused on chemical programs to improve boiler efficiency and reduce emissions.
• DGI: Dissolved Gas Infusion — technology for introducing dissolved oxygen into water systems for various industrial and environmental uses.
• SCR: Selective Catalytic Reduction — process for reducing nitrogen oxide emissions using a catalyst.
• SNCR: Selective Non-Catalytic Reduction — a process to reduce NOx emissions without a catalyst.
• NSPS: New Source Performance Standards — federal EPA regulatory standards for new emission sources such as gas turbines.
• MWC: Municipal Waste Combustion — refers to waste-to-energy facilities subject to specific emission rules.
• OEM: Original Equipment Manufacturer — companies that produce engines or turbines incorporated into larger systems.

Full Conference Call Transcript

Operator: Greetings and welcome to Fuel Tech, Inc.'s 2025 Fourth Quarter and Full Year Conference Call and Financial Results Conference Call and Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Devin Sullivan, Managing Director at The Equity Group. Thank you. You may begin.

Devin Sullivan: Thank you, Rob. Good morning, everyone, and thank you for joining us today. Yesterday, after the close, we issued a press release, a copy of which is available at the company's website, www.ftek.com. Our speakers for today will be Vincent J. Arnone, Chairman, President and Chief Executive Officer, and Ellen T. Albrecht, the company's Chief Financial Officer. After prepared remarks, we will open the call for questions from our analysts and investors.

Before turning things over to Vince, I would like to remind everyone that matters discussed on this call, except for historical information, are forward-looking statements as in Section 21E of the Securities Exchange Act of 1934, as amended, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and reflect Fuel Tech, Inc.'s current expectations regarding future growth, results of operations, cash flows, performance, and business prospects and opportunities, as well as assumptions made by and information currently available to our company's management.

Fuel Tech, Inc. has tried to identify forward-looking statements by using words such as anticipate, believe, plan, expect, estimate, intend, will, and similar expressions, but these words are not the exclusive means of identifying forward-looking statements.

These statements are based on information currently available to Fuel Tech, Inc. and are subject to various risks, uncertainties, and factors including, but not limited to, those discussed in Fuel Tech, Inc.'s Annual Report on Form 10-K’s Item 1A under the caption of Risk Factors and subsequent filings under the 1934 Act, as amended, which could cause Fuel Tech, Inc.'s actual growth, results of operations, financial condition, cash flows, performance, and business prospects and opportunities to differ materially from those expressed in or implied by these statements.

Fuel Tech, Inc. undertakes no obligation to update such factors or to publicly announce the results of any forward-looking statements contained herein to reflect future events, developments, or changed circumstances, or for any other reason. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including those detailed in the company's filings with the SEC. With that said, I would now like to turn the call over to Vincent J. Arnone. Vince, please go ahead.

Vincent J. Arnone: Thank you, Devin. Good morning, and I would like to thank everyone joining us on the call today. 2025 was a year of multiple achievements for Fuel Tech, Inc., marked by an expanded opportunity set in our Air Pollution Control business segment driven largely by anticipated growth in data center development and construction, a resurgence in revenue for our FUEL CHEM operations, revenues for the year exceeded our expectations and reached their highest levels since 2018, and tangible progress at our Dissolved Gas Infusion business. We maintained a strong financial position with cash, cash equivalents, and investments of nearly $32,000,000 at year end and no debt. Our FUEL CHEM segment ended an already strong year on a high note.

Across the country, the useful life of coal-fired units is being extended to satisfy growing energy demand, and many of these units were dispatched at levels that have not been realized in several years. Our results for the FUEL CHEM segment benefited from this phenomenon, in particular for our legacy units. In addition, 2025 results were favorably impacted by the full year performance of a U.S. commercial unit that we added late in 2024 and from a new U.S. customer that is currently operating with us under a six-month commercially priced demonstration program that commenced in 2025.

As we have discussed previously, the annual revenue potential from this commercial opportunity, should it convert from a demonstration, is expected to be approximately $2,500,000 to $3,000,000 based on the customer running the program full time, with the revenue expected to generate historic FUEL CHEM gross margins. I want to share a bit of additional color regarding our FUEL CHEM demonstration program. This customer was interested in our program as a means to improve boiler availability and reliability, and to reduce maintenance downtime for offline boiler cleaning, in particular during periods of high power generation demand. This customer utilizes a source of coal that is high in sodium and is prone to extensive slagging and fouling.

To date, the customer has realized a material reduction in downtime and maintenance costs due to a reduction in offline cleaning, which bodes well for a successful demonstration.

Revenues generated by our APC segment rose in the fourth quarter but declined annually reflecting customer-driven delays and project award timing. We secured $8,800,000 of APC awards during 2025 from new and existing customers in the U.S., Europe, and Southeast Asia. Our near-term sales pipeline of APC contracts, exclusive of data center opportunities, is between $3,000,000 and $5,000,000. While we had hoped to close on these opportunities by year end, discussions remain active and we expect to close before the end of the current second quarter. Even with these delays, we ended the year with a consolidated APC segment backlog of $7,000,000, up from $6,200,000 at the end of 2024.

As we announced last quarter, we expanded our APC portfolio through a small strategic acquisition of complementary intellectual property and customer-related assets from Walco Inc., a well-established environmental equipment and services company with several hundred project installations worldwide. As we continue to integrate WALCO's operations, we have been encouraged by the pace of project inquiries from their client base and others, including a number of near-term needs. The value proposition for us in acquiring WALCO was in securing these high-value assets at a modest price, strengthening our technology portfolio, and attracting a broader base of potential customers. This proposition seems to be playing out thus far.

With respect to the data center opportunity, these facilities will potentially require emissions control solutions to mitigate their environmental footprint, comply with federal, state, and local regulations, and align with corporate sustainability mandates. Our sales pipeline for these opportunities remains strong and approximates $75,000,000 to $100,000,000 per project integrating our SCR technology with power generation sources. Please note that the value of the pollution control scope of supply represents a very small fraction of the estimated total AI infrastructure spend. I want to provide a little more information about our data center opportunity. First, think that we have been clear that any material near-term growth for our company will likely derive from our success in addressing this opportunity.

As such, we have been, and continue to, devote substantial internal and external resources to position Fuel Tech, Inc. with data center developers, and turbine and engine providers, to deliver NOx reduction technologies as part of a data center's power generation platform. One point that I want to highlight is that Fuel Tech, Inc. is a subcontractor in the data center ecosystem. In all instances, we are a subcontractor to the data center integrator or to the turbine or engine OEM. This relationship limits our knowledge of the development of the data center opportunity, its funding, its phase of approval, and its timing.

Our role remains the support and education of our direct customer regarding the design and delivery of a pollution control system that can best fit the application. This does not dilute the opportunity landscape or temper our enthusiasm in any way, but it does make providing specific insights with respect to the timing of awards more challenging. This is what we can currently share about the opportunity. At present, we are in various stages of participation in project opportunities with more than ten different data center integrators and turbine and engine OEMs, including some of the largest companies in the industry.

All of these inquiries are for pollution control systems, primarily SCR, in support of the development of on-site power generation. The size of these projects runs the gamut, as little as two to five units per project to as many as 30 to 40 NOx reduction units, with pricing predominantly in the range of $1,000,000 to $2,500,000 per unit. Regarding timing, the earliest we expect any of these inquiries to convert to a commercial award based on our conversations with the various parties involved is Q2 2026, as the schedule requirements for at least two of the projects would necessitate the receipt of an award by then.

The remainder of the inquiries will develop further as we move throughout the year. To the best of our knowledge, with just one exception, none of the inquiries that we are currently involved with have been awarded. More specifically, we are still very much in the running to capture our share of these opportunities, and we remain optimistic about our prospects for 2026.

On the regulatory front, we have seen that the current administration is currently pursuing both the rollback of specific regulations that had been put in place previously and the implementation of new regulations that are less restrictive than those currently in place. Regarding the rollback of regulations, EPA announced the rescission of rules related to the reduction of greenhouse gases. Regulation of these emissions started in 2009 with the EPA endangerment finding based on a 2007 Supreme Court ruling. EPA has also announced the repeal of the 2024 mercury and air toxic standards for coal-fired units.

It is important to note that both of these proposed rollbacks do not loosen the nitrogen oxide emissions reduction requirements for any sources and could potentially extend the life of some coal- and natural gas-fired units that may not have to reduce their emissions profile. We will take the opportunity, where applicable, to offer retrofit and maintenance solutions to accommodate the extensions of useful life. Now, regarding the implementation of new rules, earlier this year, EPA issued new source performance standards, also known as NSPS, for new gas turbines, which were published in the Federal Register on January 15.

The NSPS was required per EPA consent decree with Sierra Club and the Environmental Defense Fund and were in response to the proposed rules that were issued in November 2024. A new category of gas turbines was created called temporary power turbines and is applicable to units below 85 megawatts installed to run for 24 months or less. These units will be required to achieve NOx levels of 25 ppm, which in some cases may not require SCR for all turbines.

Turbines greater than 5 megawatts with high operating capacity will need to meet 15 ppm of NOx, which will likely require SCR, and turbines greater than 85 megawatts will need to get to 5 ppm NOx, which will require SCR in almost all cases. So what is the impact of the new regulation? First of all, several organizations including the Clean Air Task Force, Sierra Club, and the Environmental Defense Fund have filed a petition for reconsideration with the EPA, and the hard deadline to file a formal lawsuit challenging these amendments in the U.S. Court of Appeals for the D.C. Circuit is March 16. It is certain that lawsuits will be filed.

And second, with this rule in place, power generation developers will need to decide how best to proceed with their pollution control solutions for their new sources of power generation. Based on the discussions that we have had with our potential client base, we are not aware of this new regulation having a significant negative impact on decision-making regarding the implementation of pollution controls. It is important to note that state-specific permitting requirements can vary from the new federal regulation. And it is also important to note that, outside of the NSPS requirements, the use of multiple gas turbines working together classify them as a major source for NOx.

Major sources are governed by other regulations and are often required to meet more stringent NOx emissions which would require SCR. We continue to pursue additional new awards driven by industrial expansion globally and by state-specific regulatory requirements in the U.S. We are continuing to monitor the progress of the EPA's rule for large municipal waste combustion units. This rule reduces the nitrogen oxide emissions requirements for up to 150 large MWC units across the country. Fuel Tech, Inc. has had a long history of assisting this industry in meeting its compliance requirements, and we have had discussions with customers in this segment to support their compliance planning.

The final rule is currently in the White House Office of Management and Budget and is expected to take effect before March, with NOx emission levels likely requiring advanced SNCR technology to meet compliance deadlines three years from the date of issue.

Moving over to DGI. We are continuing the extended demonstration of the technology at a fish hatchery in the Western U.S., which remains on track to conclude in the second quarter of this year. The system is performing well, meeting customer expectations for the precise delivery of concentrated dissolved oxygen and generating positive results in terms of reduced operational costs and improved fish growth. A second trial that commenced at a municipal wastewater site in the Southeast U.S. was successfully completed in January and converted to a six-month rental contract that is expected to run through the beginning of the third quarter of this year.

Our DGI system is delivering the designated volume of oxygen, and the client reports that odor-related complaints in the areas surrounding the plant have been dramatically reduced. We are currently in discussions with multiple other end markets of interest for DGI, including pulp and paper, food and beverage, petrochemical, and horticulture. We have been supported in these efforts with the addition of representative firms with end-market expertise. As we look ahead to 2026, we are optimistic about our potential financial outlook. Our FUEL CHEM business is expected to continue to perform well, driven by the performance of our base accounts and by the expectation that we convert another demonstration account to commercial operation.

Our APC business development activities, including our standard opportunities, those associated with respect to the Walco acquisition, and potential tailwinds from data center opportunities, are at the highest level that we have experienced in several years. And regarding DGI, based on progress at our demonstrations, it is expected that we will have our first commercial contract in 2026. Overall, we expect that revenues for 2026 will exceed the level of 2025, with FUEL CHEM approximating 2025 revenues and APC exceeding 2025 performance, without considering the benefit of data center awards, which would be additive to the forecast.

Before turning things over to Ellen, I want to thank the entire Fuel Tech, Inc. team for their dedication in advancing our strategic objectives and our shareholders for their patience and support. Now, I would like to turn the call over to Ellen for her comments on the financial results. Ellen, please go ahead. Thank you.

Ellen T. Albrecht: Thank you, Vince, and good morning, everyone. I will start off today by reviewing our fourth quarter results. For the quarter, consolidated revenues rose 37% to $7,200,000 from $5,300,000 in the prior-year period, reflecting growth from both our APC and FUEL CHEM segment revenues. APC segment revenue increased 37% to $2,400,000 from $1,800,000, primarily related to timing of project completion. FUEL CHEM had a very strong quarter, generating a 37% increase in revenue to $4,900,000 from $3,500,000, reflecting contributions from our legacy portfolio and the six-month commercially priced demonstration program that commenced in early November.

Consolidated gross margin for the fourth quarter rose to 45% of revenues from 42% in last year's fourth quarter, with APC and FUEL CHEM each producing higher margins for the quarter. FUEL CHEM gross margin increased to 46% from 45% in 2024 due to the increase in the revenue base. APC gross margin expanded significantly to 42% in the fourth quarter compared to 36% in the prior-year period as a result of project and product mix. Consolidated APC segment backlog on December 31, 2025 was $7,000,000, up from backlog of $6,200,000 on December 31, 2024.

Backlog at 2025 included $3,400,000 of domestically delivered project backlog and $3,600,000 of foreign-delivered project backlog, compared to $1,900,000 of domestic-delivered project backlog and $4,300,000 of foreign-delivered project backlog at 2024. We expect that approximately $6,000,000 of current consolidated backlog will be recognized in the next twelve months.

SG&A expenses were $4,200,000 in the fourth quarter compared to $3,900,000 in the prior-year period. As a percentage of revenue, SG&A expenses declined to 57% from 75%, reflecting higher consolidated revenue in the current period offset by the timing of certain expenditures. Research and development expenses for the fourth quarter rose to $504,000 from $405,000 in the same period a year ago, mainly attributed to our commercialization efforts for our DGI technology. Our operating loss narrowed to $1,400,000 compared to a loss of $2,100,000 in last year's fourth quarter, reflecting higher revenue and margin contributions from our operating segment.

We continue to take advantage of the favorable interest rate environment and, as of December 31, 2025, have invested a majority of our $31,900,000 in held-to-maturity debt securities and money market funds. This generated $288,000 of interest income in the fourth quarter and $1,400,000 of interest income for 2025.

Moving to the results for full year 2025. Consolidated revenue rose 6% to $26,700,000, in line with our most recent guidance provided in November. The increase in full year revenue was driven by a 28% rise in FUEL CHEM segment revenue to $17,800,000, exceeding our guidance for the year. This increase in revenue was partially offset by a decrease in APC segment revenue. Consolidated gross margin for 2025 rose to 46% from 42% in 2024, with higher margins for both the FUEL CHEM and APC operating segments. SG&A expenses for 2025 modestly increased to $14,100,000 from $13,800,000 in 2024, within the guidance range we provided at this time last year. The increase was mainly attributed to employee-related expenditures.

As a percentage of revenue, SG&A decreased to 53% from 55%, reflecting higher consolidated revenue. For 2026, we expect SG&A expenses to increase modestly from those in 2025. Research and development expenses for the year were $2,000,000 for 2025, compared to $1,600,000 in 2024. As we move closer to fully commercializing our DGI segment technologies, in addition, we also continue to invest efforts related to our legacy technologies as necessary. Operating loss narrowed to $3,700,000 for 2025 compared to a loss of $4,700,000 in 2024, reflecting higher segment revenues and relatively flat total costs and expenses.

Net loss for 2025 was $2,300,000, or $0.08 per diluted share, compared to a net loss of $1,900,000, or $0.06 per diluted share, in 2024. Adjusted EBITDA loss was $2,700,000 in 2025, compared to an adjusted EBITDA loss of $2,200,000 in 2024. Lastly, moving to the balance sheet. Financial condition remains very strong. As of December 31, total cash and cash equivalents, total cash and investments was $31,900,000, comprised of cash and cash equivalents of $11,900,000 and short- and long-term investments of $20,000,000. Net cash provided by operating activities was $3,000,000 for the year as compared to a use of total cash of $2,800,000 in the same period last year.

Shares outstanding at quarter end were approximately 31,100,000, equating to cash per share of $1.03. Working capital was $25,700,000, or $0.83 per share. Stockholders' equity was $40,000,000, or $1.29 per share, and the company continues to have no outstanding debt. We remain fully confident in our ability to uphold a strong financial condition and continue funding both short- and long-term growth initiatives across FUEL CHEM, APC, and DGI. I will now turn the call back over to Vince.

Vincent J. Arnone: Thanks very much, Ellen. Operator, let us please go ahead and open the line for questions.

Operator: Thank you. At this time, we will be conducting a question-and-answer session. Before pressing the star keys. Our first question comes from Sameer Joshi with H.C. Wainwright. Please proceed with your question.

Sameer S. Joshi: Hey, good morning, Vince, Ellen. Thanks for taking my call. Good morning. So first, the data center opportunity should be significant for the company. You mentioned you are reliant on these integrators or OEMs for getting the final order. My question is, are you already designed in with these participants or is there further sort of competition once those guys get the orders from data center?

Vincent J. Arnone: I cannot say that we are specifically designed in for these operators at this point in time, Sameer. What we are doing is, we would obviously like to be at the point whereby we are designed in with an integrator or operator that is looking to build several sites. But right now, at the beginning phase with some of these operators, what we are doing is establishing ourselves as a potential trusted partner to be able to do the design pollution control system for them. A lot of the parties that are coming to us are not necessarily very familiar with pollution control requirements.

So we are definitely playing an education role as we work with some of these parties at this point in time. But we are hoping that the upfront time that I mentioned that we are investing with these opportunities is going to pay off a little bit longer term as these projects actually do come through their evolution and are ultimately awarded. So that is where we stand today. And the situation I would say is slightly different across the different parties that we are dealing with.

Sameer S. Joshi: Got it. Understood. And I do not want to conflate this, but the requirements for the less than 85 megawatt plants and short term working less than 24 months, does that in any way affect or impact these data center opportunities? I just do not want to conflate those, but is there any relation?

Vincent J. Arnone: Right. Ultimately, on a long-term basis, should not have an impact, Sameer, because most of the projects that we read about, most of the projects that we are having discussions about, are intended to be long-term power generation solutions for that particular data center, right? It would only be in the instance whereby a potential operator or integrator needed that to meet perhaps a very specific startup date and they had the ability to have some power generation equipment up and running for a short period of time to meet that startup date. Again, perhaps, right?

But again, from our perspective, the people and party that we are dealing with, they are looking at long-term power generation solutions that are indeed not temporary in nature because they are looking to support that data center long term, not just for less than 24 months.

Sameer S. Joshi: Got it. Sticking to sort of regulatory environment, with the PPA declaring carbon dioxide not a pollutant and you talked about the mercury's doctrines, and it indirectly helping you because it does not require NOx reductions, and so existing plants may have extended life because of the other reductions in requirement or loosening of requirement. Are you already seeing any increased activity as a result of this where some of the plans that may be on the way to shut down are now saying that, hey, we can continue to function, and reaching out to you?

Vincent J. Arnone: At this point in time, Sameer, it is a little bit too early to assess the impact of those relatively recent rollbacks. We just wanted to point out very specifically that those rollbacks do not impact Fuel Tech, Inc.'s opportunity to capture prospective awards that are specifically related to nitrogen oxide reduction opportunities. So we just want to ensure that there is not confusion related to those rollbacks which are not going to impact Fuel Tech, Inc. business opportunities. Longer term, those rollbacks, they could indeed have the impact of possibly extending the useful lives of some facilities.

Sameer S. Joshi: Got it. Moving to FUEL CHEM, it is nice to see the six-month sort of trial order and likely because they are seeing the results likely to convert. Are there more such potential customers that you have in the pipeline or are at least talking to in terms of getting because each additional customer could bring two plus million or almost four plus million in orders annual recurring revenues?

Vincent J. Arnone: So at this point in time, yes, we are very optimistic about converting this demonstration to a commercial contract. Hopefully, that will bode well for us here in 2026. But incrementally, as I have said on prior conference calls, the coal-fired base-loaded unit, just call it phenomenon, it is not as robust as it used to be a decade or fifteen years ago. So many coal-fired plants being shut down. We are looking for these pockets of opportunity whereby we can, on an incremental basis, add these one-off opportunities for us.

Sameer S. Joshi: Okay.

Vincent J. Arnone: And we need to be a little bit careful about saying that each unit is going to be between $2,000,000 and $3,000,000 per opportunity in revenue, because it does vary by unit size and the specific runtime of that unit. I just wanted to qualify that. So to specifically answer your question, we do not have anything of what I would call specifically that we are looking for imminent demonstration, but we are looking at some other opportunities that could be for us, and perhaps with the same body of plants that we are doing business with today, to add another unit or two at plant sites.

So there is opportunity there, but again, as I have said previously, we have not looked at FUEL CHEM as being what I would call a material growth opportunity for the past several years. What we are seeing here in the recent term, we are very, very pleased with. We finished 2025 at just under $18,000,000 revenue, which if you would have asked me that question five years ago, I would have said it would not have been possible. So we are very pleased with where we are. And there is some, I will call it, moderate upside opportunity. Opportunity, but it is moderate.

Sameer S. Joshi: I am guessing this outlook for 2026 where FUEL CHEM is expected to be at same level as 2025 does not include this incremental opportunity that may convert into, like, from trial to full time.

Vincent J. Arnone: Yes. We are looking at it right now very, very conservatively, Sameer, without knowing exactly what the outcome is going to be as we sit here today. We will have more information to share in early May when we have our first quarter conference call.

Sameer S. Joshi: Yes. That is fair. And just squeezing in one last one on DGI. It seems this municipal wastewater is working well as well as the fishery seems to be working well. Should we expect revenues from DGI during 2026? Because on the outlook, you did not mention any of that.

Vincent J. Arnone: Right. So we are going to recognize, hey, a small dollar value of revenue from the rental of the system at the municipality. That is only $10,000 per month. As we look at the remainder of the year, we are hoping to have a system sale between now and the 2026 of one of our DGI units. It is not going to be material to our overall results. But what is important regarding that activity is it sets the platform for us to be able to further and go ahead and discuss a success story specifically with the end markets that we are looking to chase. And we have not had the opportunity to do that yet.

So that moment is extremely critical for us as we look to further develop and commercialize DGI.

Sameer S. Joshi: Thanks, Vince, for taking my questions. Congrats on a strong year and good luck.

Vincent J. Arnone: Thanks, Sameer.

Operator: Our next question comes from Adam Waldo with Lismore Partners. Your line is now live.

Adam Waldo: Good day, Vince. I hope you can hear me okay. Your stock trades at $1.20 to $1.25 a share. You have about a dollar a share in cash on your balance sheet. You have reasonable prospect of being cash flow positive in 2026, and you articulate a sizable new business pipeline in the data center area. I would argue that with your stock trading where it is, the market does not believe you are going to close any of that pipeline. You are very optimistic that you can. Over the balance of 2026, and you were optimistic in the 2025 as well. The timing of these projects is very hard to predict.

What gives you so much confidence and optimism that you are going to close, you know, a sizable number of data center projects over the next twelve to eighteen months.

Vincent J. Arnone: Adam, thanks very much for the question. Yes, you are correct. I mean, we are in a position whereby, yes, we are trading just a little bit above cash value today. We as a company have not been able to go ahead and bring to the table any material award as of yet as to the data center opportunity. So in response to your question, my level of confidence lies in a couple of areas.

First of all, as we have seen this opportunity develop, and literally over the past nine to twelve months because it is still what I would call a new opportunity and it is one that we do not believe for Fuel Tech, Inc. is a short-term opportunity, it is one that is going to develop over the next five to ten years. But what we have seen over this past nine to twelve months is more and more players, if you will—players defined as data center integrators, parties that have access to power generation equipment in the form of turbines or engines—and just then the OEMs of those turbines or engines themselves.

There have been more inquiries come our way literally over this past three months than we saw come our way over the initial six to nine months, relative to parties seeking to take advantage of the opportunity to provide a power generation solution to the data centers that are going to be built out. Okay.

So point number one is just the volume of activity, the different types of parties and players that are coming to the table, and also what I would call the caliber of the parties that we are dealing with as well, in terms of them being in some cases multinational organizations with scale and capability, that give us the confidence that at some point in time here, just given the demand, that Fuel Tech, Inc.'s products and solutions are going to be pulled into this ultimate data center solution. Okay. So number one, the volume of activity gives me a very high level of confidence.

Point number two is my confidence in the Fuel Tech, Inc. team to be able to go ahead and basically assimilate all of the inquiries that have been coming our way and determine our best path with these data center integrators and/or engine or turbine suppliers to be able to position us well with those organizations and give these organizations the confidence that we, as Fuel Tech, Inc., can deliver on our air pollution control solution for them. So it is twofold. And yes, I am optimistic. I mean, the level of inquiry is indeed extraordinary.

And so it is up to us to capitalize on it, and we are doing everything that we can to do so at this point in time. I hope that answers your question.

Adam Waldo: Thank you very much.

Vincent J. Arnone: Thank you, Adam.

Operator: We have reached the end of the question-and-answer session. I would now like to turn the call back over to Vincent J. Arnone for closing comments.

Vincent J. Arnone: Thank you, operator. In closing, I want to thank, obviously, our Fuel Tech, Inc. team for their continued support and dedication. Thanks to all of our stakeholders, again, for your patience. We are doing what we can to create shareholder value. And we have an opportunity landscape in front of us today that we know we need to capitalize on, and we are going to do everything that we can. Thanks to our Board for support as well. With that, I want to wish everyone a good day, and thanks for participating in the conference call.

Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

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