Fuel Tech, Inc.

What they do

Fuel Tech sells engineered air pollution control (APC) equipment and services, including NOxOUT and Advanced SNCR systems, ASCR selective catalytic reduction, ULTRA and UDI reagent systems, electrostatic precipitators (ESP), and flue gas conditioning. Its FUEL CHEM segment injects specialty chemicals via proprietary TIFI in-furnace injection to control slagging, fouling, corrosion, and related combustion problems. Both segments rely on internal computational fluid dynamics and chemical kinetics modeling. A newer DGI dissolved gas infusion water treatment line remains in the demonstration phase and generated no reported revenue figure in these excerpts.

Revenue drivers

• FUEL CHEM chemical injection programs — The larger of the two segments in the latest quarter: $3.7 million of $6.5 million Q2 2026 revenue (about 57%), sold as recurring on-site chemical programs to coal- and oil-fired combustion units, with over 100 applications worldwide.
• Air Pollution Control (APC) systems and services — The other reportable segment: $2.8 million of Q2 2026 revenue, driven by SCR/SNCR and ESP project execution for utilities and industry, with $14.3 million consolidated backlog at June 30, 2026.
• DGI water treatment — Dissolved Gas Infusion systems for water and wastewater treatment; described in the 10-K as still in the demonstration phase, with third-party validation testing completed and management expecting demonstration-related revenue throughout 2026.

Recent performance

Q2 2026 consolidated revenue rose 17% to $6.5 million from $5.6 million, with APC up 11% to $2.8 million and FUEL CHEM up 21% to $3.7 million. Consolidated gross margin fell to 41% from 46%, as APC segment margin dropped to 36% from 44% on product and project mix and FUEL CHEM margin slipped to 45% from 47% on demonstration, freight, and maintenance labor costs. SG&A rose to $3.6 million from $3.3 million, and interest income fell to $266,000 from $537,000 after a prior-year $257,000 Employee Retention Credit collection. Net loss widened to $(1.2) million, or $(0.04) per share, from $(0.7) million, or $(0.02) per share; Adjusted EBITDA loss was $(1.2) million versus $(0.9) million. For the six months ended June 30, 2026, revenue was $12.6 million, up 5%.

Strategy

Management is pursuing emissions-control demand across multiple fuel sources while investing in R&D to bring new technologies to the water and wastewater market, particularly the DGI dissolved gas infusion systems. It points to business development depth and a global sales pipeline of roughly $75-100 million, plus claim of approximately $17 million effective APC backlog including $3 million of recently announced awards. The company is engineering a recently announced large contract at a publicly owned Midwest utility, which is part of the $10 million of APC awards tied primarily to a Midwest utility grid enhancement project. Cost discipline is cited alongside support for growth initiatives, and the CEO transition to Ramesh Nuggihalli effective August 10, 2026 is the key leadership change.

Risks

• Portfolio concentration — The 10-K states plainly that the product portfolio lacks diversification, with two segments both tied to pollution control and efficiency for coal, biomass, and natural gas-fired facilities.
• Regulatory dependence — APC segment growth depends on adoption and enforcement of U.S. and global NOx and particulate emissions rules, so any softening of regulation directly reduces demand.
• Project timing and backlog conversion — APC revenue fell in 2025 on customer-driven project delays, and backlog is delivered-project based, so revenue recognition can swing with execution timing rather than steady demand.
• Gross margin pressure — Q2 2026 consolidated gross margin fell to 41% from 46%, with management also citing inflation in materials and labor and long lead times for components such as pumps, fans, and SCR catalyst.

Outlook

Management says it remains optimistic about both segments for full year 2026 and is preparing for what has historically been a strong third quarter for FUEL CHEM, where it expects segment revenues to approximate last year's results. For APC, it cites effective backlog of roughly $17 million, more than double the $7.0 million at the end of 2025, including $10 million of recently awarded contracts, and has begun engineering work on a large contract at a publicly owned Midwest utility. The company states its existing capital resources are sufficient for current operations, planned technology development, and reasonably anticipated requirements.