Fuel Tech (NASDAQ:FTEK) reported higher third-quarter revenue as growth in its Air Pollution Control, or APC, segment offset a modest increase in FUEL CHEM revenue, while changes in business mix and higher operating expenses contributed to a quarterly net loss.
Third-quarter 2026 revenue increased 16% year over year to $8.7 million. APC revenue rose 38%, while FUEL CHEM revenue increased 3%, President and Chief Executive Officer Ramesh Nuggihalli said during the company’s earnings call.
Consolidated gross margin declined to 45% from 49% in the prior-year quarter, primarily due to lower APC margin associated with project and product mix. Operating expenses increased to $9.2 million, including a $450,000 rise in selling, general and administrative expenses. Nuggihalli said the increase reflected higher employee-related costs and professional fees, including approximately $175,000 of non-recurring expense related to his appointment as CEO in August.
The company recorded a net loss of $267,000, or $0.01 per share, compared with net income of $303,000, or $0.01 per share, a year earlier. Adjusted EBITDA was a loss of $249,000, compared with positive adjusted EBITDA of $228,000 in the prior-year period.
Backlog Reaches Multi-Year High
Fuel Tech ended the quarter with backlog of $16.6 million, up $2.3 million from June 30. Including a recently announced $3.3 million APC contract award, pro forma backlog was approximately $20 million, according to Nuggihalli.
The company ended the quarter with $27.8 million in cash and investments, no debt and stockholders’ equity of $37.2 million, or $1.19 per share.
Nuggihalli said the APC business is building on a multi-year high backlog and is pursuing opportunities in industrial, power and data-center applications. He said Fuel Tech sees potential demand stemming from power infrastructure investments, including projects supporting data-center growth.
“As the power sector gets built, we will have an opportunity to participate in that,” Nuggihalli said, adding that air-pollution-control projects and efficiency improvements at traditional fossil power plants could provide positive momentum for both APC and chemical technology operations.
Margins, Pricing and Expenses
In response to an analyst question regarding margins, Nuggihalli said gross margins can fluctuate depending on the mix of project-based APC work and the company’s FUEL CHEM business. He said the company’s recent APC contract award suggested Fuel Tech can command premium pricing when it provides differentiated capabilities.
FUEL CHEM demand is affected by customer power-plant utilization because chemical volumes supplied are directly correlated with plant operations, he said. Still, Nuggihalli said the company expects margins to be “stable or growing.”
Chief Financial Officer Ellen Albrecht said Fuel Tech will continue working to maintain or improve margins across its product segments. She also said SG&A expense is expected to remain in line with the current quarter and prior-year levels, excluding the impact of one-time charges, as the company works through its strategic and operational initiatives.
Strategy Focuses on Core Markets and Commercial Execution
Nuggihalli, who joined Fuel Tech in August, outlined a strategy centered on strengthening core markets, creating a more sales-driven organization and maintaining cost discipline. He said the company has started a cross-functional strategy-planning process and engaged external advisers to evaluate growth opportunities in existing and adjacent markets.
Fuel Tech expects to complete that work and present the resulting strategy to its board early next year. The company is also preparing its 2027 budget, including consideration of ongoing bids for larger projects.
The company identified several areas of focus for organic growth:
- Expanding APC applications from power generation into diversified industrial markets and pollutant-mitigation applications.
- Extending FUEL CHEM beyond core fossil-power applications into industrial and potentially water-related uses.
- Reviewing water technology opportunities beyond aquaculture.
- Improving customer engagement, pricing, opportunity identification and pipeline conversion.
- Increasing operational productivity and improving project-execution margins.
Nuggihalli said the company is reviewing research and development spending in its water segment, particularly around its DGI technology. While DGI is patent-protected and has completed successful field demonstrations, its adoption in aquaculture has been slower than anticipated. Fuel Tech is evaluating uses beyond aquaculture that could enable faster adoption, he said.
M&A and Service Opportunities
Alongside its organic initiatives, Fuel Tech plans to selectively pursue acquisitions that add complementary technologies, products or channel capabilities. Nuggihalli said the company is developing an M&A playbook designed to assess potential targets against strategic and financial criteria, with emphasis on operational synergies and integration capability.
He said Fuel Tech is initially examining product gaps, followed by market and business-model gaps. One potential opportunity is developing service offerings, including long-term service contracts, into a more formal standalone business. The company currently provides some related services informally, he said, but customers have expressed interest in longer-term arrangements.
Nuggihalli said management’s immediate priorities include completing the strategic plan and M&A framework, increasing customer and partner engagement, encouraging action on outstanding bids, establishing performance metrics and business-review processes, and removing operational inefficiencies.
“Our focus is now on execution, advancing our organic growth initiatives, managing costs with discipline, and evaluating outside opportunity to strengthen the business,” Nuggihalli said in his closing remarks.
About Fuel Tech (NASDAQ:FTEK)
Fuel Tech, Inc is a technology company that develops and commercializes solutions for air pollution control, combustion optimization, and fuel treatment. Its products and services are designed primarily for utility, industrial, and other large combustion facilities seeking to improve operating performance and reduce emissions.
The company’s air pollution control technologies focus on reducing nitrogen oxide emissions from boilers, furnaces, and other combustion equipment. Its offerings include selective and non-selective catalytic reduction systems, related reagent-injection technologies, engineering services, and software and controls used to monitor and optimize emissions-control processes.
Fuel Tech also provides fuel-treatment and combustion-enhancement technologies under its Fuel Chem business.
