Operator
Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Birch Tech 4th Quarter 2025 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions for dial-in participants. This conference is being recorded today, Tuesday, March 31, 2026, and the earnings press release accompanying this conference call was issued after market close today. On our call today is Birch Tech President and CEO Richard McPherson and CFO Fiona Fitzmaurice. Before we get started, I'll read a disclaimer about forward-looking statements. This conference call may contain, in addition to historical information, forward-looking statements that are made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, or forward-looking information under applicable Canadian securities laws regarding Birch Tech. Forward-looking statements include, but are not limited to, statements that express the company's intentions, beliefs, expectations, strategies, predictions, or other statements relating to its future earnings, activities, events, or conditions. These statements are based on current expectations, estimates, and projections about the company's business based in part on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual outcomes and results may and are likely to differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors discussed from time to time in Birch Tech's periodic filings with the U.S. Securities and Exchange Commission or Canadian Securities Regulators. In addition, such statements could be affected by risks and uncertainties related to factors beyond the company's control that may cause actual results to differ materially from those in forward-looking statements. During today's call, the company will discuss adjusted EBITDA, a non-GAAP financial measure. Adjusted EBITDA is presented as a supplemental measure of the company's performance exclusive of certain items that the company believes do not reflect the core operations of the Such non-GAAP measures should not be considered in isolation or as a substitute for GAAP financial information. Additionally, the company's definition of these measures may differ from those used by other companies, making comparisons across organizations difficult. And finally, this conference call contains time-sensitive information that reflects management's best analysis only as of the date and time of this conference call. a company that does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information, or circumstances that arrive after the date of this conference call. At this time, I'd like to turn the call over to President and CEO Richard McPherson. Richard, the floor is yours.
Thank you, Operator, and good afternoon, everyone.
Welcome to our fourth quarter and full-year 2025 financial results conference call. I want to start with a few milestones that reshaped the company's trajectory over the past several months. In February of 2026, we completed our uplisting to the New York American Stock Exchange with a concurred public offering raising a gross amount of proceeds of approximately $16.6 million, including the partial exercise of the underwriters' overall allotment option. That capital raise, combined with a senior exchange listing, material strengthened our balance sheet and broadened our investor base at a critical time in Birch Tech's growth. Now, on the legal front, the U.S. District Court for the District of Delaware entered our patent infringement judgment in December of 2025, which increased our judgment amount to approximately $78 million, up from the original $57 million unanimous jury verdict. Post-judgment interest will continue to accrue until this judgment is paid. Although defendants have filed an appeal, they have not posted a bond. Therefore, we have initiated collection proceedings, are pursuing enforcement of our judgment now. Since launching our IP enforcement strategy in 2019, approximately $37 million in license fees and fillments have been received. and we expect to convert other prior infringers into long-term commercial partners. Now, turning to operations, our business delivered fourth-quarter revenues of $3.8 million with a 31% gross margin driven by our expanding base of licensed utilities and growing product-supply relationships. The U.S. coal market has stabilized, and recent federal support for continued coal plant operation reinforces demand for proven emissions control solutions like our patented SEA platform. We believe this creates a longer operational runway for our core air quality business. Now let me go deeper now into our air business. The SEA platform continues to anchor the company, and this quarter's results reflect the durability of that franchise. What has changed is the nature of the revenue. As existing supply contracts expire for those utilities now under Birch Tech's license agreements, we will actively work toward gaining their reoccurring product supply as utilities embed our sorbent formulations into the processes and directly benefit from our operational expertise and know-how. Fourth quarter air revenues totaled over $3 million, close to $4 million, and mostly derived from product supply. Importantly, we expect to see a change in how utilities engage with us, with our goal being that licenses that began as enforcement targets can transition to purchasing activated carbon directly, and we expect the pipeline of supply conversions to continue to grow as power demand increases in the coming years. That transition from legal resolution to commercial partnership was our core objective in our business-first approach patent enforcement efforts that began over six years ago. Now, over the past year, we've signed several new license agreements, bringing us closer to a critical mass of licensed coal-fired utilities. Each agreement not only validates the uniqueness of our RCA process, but extends revenue visibility to multi-year procurement cycles. As licensees incorporate our assortment formulations into their ongoing operations, we expect activated carbon sales to become an increasingly significant portion of our revenue, a shift that should drive meaningful year-over-year growth. As I noted earlier, our $78 million final judgment represents the culmination of years of patent enforcement. The defendants have appealed, but we are confident in the strength of our ruling and the thorough judicial review behind it. Collection efforts, as I mentioned, are actively underway. Now, related to our business, U.S. coal power generation is holding steady within a diversified energy mix that values grid reliability as well as domestic fuel supply. Federal policy continues to support the operational longevity of coal-fired plants, which in turn sustains demand for mercury emissions control. Our SEA technology remains the most effective solution globally recognized, and that positions us as an essential partner for utilities committed to running cleaner baseload power. With U.S. mercury emissions, the lowest in the world relative to coal power generation, we're pleased to play a significant role in America's clean coal and will continue to do so as long as coal power is produced. For 2026, the Air Division's roadmap centers on three objectives. Continue converting unlicensed users to our technology into licensees and long-term supply customers while protecting our patent. Second, grow reoccurring activated carbon sales to our expanding base of licensed utilities. And thirdly, channel the cash flow from this mature, high-margin segment into our scaling of our water purification business. Now, taken together, the Air Division is a self-funding growth engine generating the cash and credibility that allow us to invest aggressively in water while continuing to deliver for shareholders. So now let me turn to water, where the story shifted meaningfully since last year. We moved from laboratory validation to real commercial activity, booking our first revenues, signing our first strategic partnership, and launching new products. The commercialization of our water treatment solutions began with approximately $0.9 million in purchase orders from a large mid-Atlantic power utility for filtration system media replacement at two locations, removing contaminants from wastewater using our proprietary sorbent media. That engagement validated our technology in a real utility environment and gave us a reference account to build from. We then expanded our reach through a collaboration with civil and environmental consultants, a national engineering firm with over 30 offices and 1,600 team members. Under this arrangement, we provide rapid, small-scale column testing through our analytical design center in Grand Forks, North Dakota, giving CEC's hundreds of water utility clients nationwide access to our testing and analysis capabilities. This effectively creates a pipeline of future system design and media supply opportunities without BirchTech having to build a direct sales force from scratch. For those less familiar, RSSCT replicates full-scale filter performance in a compressed timeframe, enabling utilities to evaluate carbon media options and PFAS removal strategies quickly and cost-effectively. Our center is one of the few independent RSSCT labs in the country with the capacity to serve the national market at this level. Beyond those two anchors, we hit several additional milestones. In January of 2026, we demonstrated that thermally rejuvenated granular activated carbon performs comparably to virgin carbon for PFAS removal. it was a breakthrough for our carbon rejuvenation program that could dramatically lower life cycle costs for utilities. This week we just announced our SEAIX nuclear grade ion exchange rosin product line targeted at an approximate 220 million addressable market spanning nuclear power, coal-fired utilities, and municipal water treatment. Birch Tech's water platform covers a broad range of media supply, filtration services, our design centers, our SSCT testing and analysis, along with carbon rejuvenation, and now ion exchange resin. So we have a comprehensive offering that didn't exist 12 months ago. Our approach to the market is completely different and our competitors. We work closely with and through engineering firms, such as CEC and others, alongside utilities to fully integrate the procurement of appropriate equipment, media, and other Encelry services. This collaborative approach to the market will ensure water utilities with an affordable, high-effective clean water solution and will secure Birchstack's a strong market position as we continue to build customers and strategic relationships. Now speaking of our design centers that launched our position into the water treatment market with our data first approach, we are now generating a growing pipeline of lab scale engagements with water utilities and engineering firms. We are currently participating in a grant funded research project with a leading national engineering firm evaluating strategies for managing PFAS, contaminated drinking water waste, where Birch Tech is leading advanced bench and pile scale testing of thermal GAC reactivation using our proprietary rotary kiln system that we established in Pennsylvania. Other key projects include our role in the initial phase of a multi-phase project where we are collaborating with another major national engineering firm and a large utility focused on carbon reactivation to identify the most appropriate media solutions for the removal of multiple contaminants. Our expertise in activated carbons provides our competitive edge and our ability to support both the engineering firm and the large water utility. And additionally, we're conducting water quality analysis, spent carbon evaluations, and RSFCT testing for numerous other utilities to optimize media selection, reactivation protocols, and overall treatment performance for PFAS and other contaminants. Each of these engagements is building relationships that have the potential to convert into long-term thermal reactivation partnerships or feed directly into our water treatment services pipeline. This data-first approach ensures that these utilities and engineering firms gain highly accurate and more effective media recommendations and receive full benefit from our unique industry expertise. We look forward to this area of our business becoming a key market differentiator and growth driver. The next chapter is about conversion and scale, turning these early engagements into reoccurring service and product revenue, progressing the development of our first GAC rejuvenation facility and expanding our water treatment solution offerings. Regulatory pressure around PFAS is only intensifying and utilities are actively seeking affordable solutions. Birch Tech is now in position to meet that demand with a full suite of water purification technologies that complement our established air business and open a second significant revenue stream for the company. With that, I'd now like to turn the call over to Fiona Fitzmore, our Chief Financial Officer, to walk through some key financial details from the fourth quarter of 2025. Fiona?
Thank you, Rick. I will constrain my section to a concise review of the financial results for the fourth quarter. For a full breakdown of our financial results please view our regulatory filings revenues totals 3.8 million in the fourth quarter as compared to 5.6 million in the same year ago quarter product revenues increased 19.8 percent to 3.6 million as compared to 3 million in the same year ago quarter the change in revenues was primarily due to a one-time 2.5 million licensing payment from a large Southwest utility in Q4 2024. Gross profit totaled 1.2 million or 31 percent of total revenues in the fourth quarter of 2025 as compared to 3.3 million or 60 percent of total revenues in the same year ago quarter. The change in gross profit was a result of the one-time license fee recognized in Q4 of 2024. This change was partially offset by an increase in product revenue during the fourth quarter of 2025 compared to the fourth quarter of 2024 the decrease in growth profit as a percentage of revenues was a result of the one-time license revenue generated in the fourth quarter of 2024 having higher margin sgna expenses decreased 42 percent to 2 million in the fourth quarter of 2025 as compared to 3.4 million in the same year ago quarter the decrease in expenses was primarily due to lower legal fees in connection with patent litigation. R&D expenses totaled $0.5 million in the fourth quarter of 2025 compared to nil in the same year-ago quarter. R&D expenses relate to research conducted to develop water treatment products utilizing new sorbent technologies. Net loss for the fourth quarter of 2025 totaled $0.6 million, or three cents per basic undiluted share as compared to 1.3 million or seven cents per basic undiluted share. Adjusted EBITDA, a non-GAAP measure, totaled negative 1.1 million in the fourth quarter of 2025 compared to negative 0.5 million in the fourth quarter of 2024. Cash as of December 31st 2025 totaled 2.2 million with no debt as compared to 3.5 million with no debt as of december 31st 2024 subsequent to the quarter end the company completed a 16.6 million capital raise concurrent with its uplisting to the new york stock exchange american in february 2026 significantly strengthening our balance sheet i'd also like to briefly discuss the classification of our profit share liability in the amount of 7.9 million as a current liability on our balance sheet this is a non-recourse liability that will not be repaid from cash on hand and is only to be paid for litigation proceeds including the proceeds of our 78 million final judgment in our patent infringement case interest on the judgment amount continues to accrue during this appeal period under gap accounting rules the profit share liability is classified as a current liability as the company expects the proceeds from this judgment are likely to be received and the profit share from those proceeds repaid within the next 12 months. So ironically, the positive news of us believing receipt of these funds is likely within the next 12 months causes the profit share to be classified as a current liability while at the same time not allowing us to reflect in our current financial statements the expected revenue from the judgment. This completes my prepared comments. Now, before we begin our question and answer session, I'd like to turn the call back to Rick for some closing remarks.
Thank you, Fiona. So, folks, to sum up, 2025 was the year Birch Tech proved out its next chapter. We have since fortified our balance sheet with a $16.6 million raise in new capital, earned a senior exchange listing on the New York Stock Exchange, secured a 78 million dollar judgment validating our ip and turned our water business from a development stage initiative into a revenue generating platform with real customers and real orders the execution plan for 2026 is focused collect on our judgment expand our roster of licensed utilities into reoccurring supply customers and obtain offtake agreements to support our first carbon rejuvenation facility. We entered the year from a position of strength, well capitalized, listed on a senior exchange and operating two complementary business lines that reinforce each other. The opportunity ahead is substantial and I'm confident that this team that we have will deliver on it. I look forward to reporting on our continued progress throughout the year.
With that, operator, please open the line for questions.
Operator
Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions.
Thank you. Our first question is from Rob Brown with Lake Street Capital.
Good afternoon, Rick, and congratulations on all the progress. Thank you, Rob.
On the air business product revenue, could you give a sense of what the sort of run rate is on that business as you see it and maybe how it ramps throughout uh 26 with the with the customers that you've licensed to this point sure so um on the product supply side we had a increase as you can see um in that in the last quarter of 2025 i expect to see increases as we go through 2026 the only unknown on that is when the actual contracts that are held by the companies that we just licensed will come up for renewal as they come up for renewal we're in a preferred position to vie for that business through rfps so i'll be advising the the industry as we go along but i do expect to see growth in that side of the business i just at this point don't i can't put a number on it but i i will expect to be able to do so in the coming month or two, I do figure that we will be in excess of $20 million on the air side for 2026.
Okay, great. And then on the remaining customers, I guess, that are utilities, I should say, that are potentially infringing or are infringing, how many are left to settle that you haven't either gone to trial on or settled with the ad? What's sort of the remaining amount of potential there?
Sure. So, Rob, there are a couple of very large defendants in the Iowa case that have significant product supply potential, and we are now, as you know, working through that case. I would expect that we can get to some decision with those in the first half of 2026, but they have a significant amount of opportunity should we be able to convert them to clients rather than have them remain as defendants. So, you know, as far as a specific number, I would expect that the outstanding infringers at this point hold somewhere in the $10 million a year range of supply-side business should we secure it.
And then just maybe moving to the water side business, good progress there. Maybe just a sense of the pipeline of the rejuvenation customers and maybe can you walk through how that pipeline develops and what are sort of the steps that it goes through to turn into off-take agreements?
Yeah, so where we are right now is working through the collaborations with engineering firms. We've been doing a lot of testing and analytical work with their clients, and also we've been in discussions with a number of different end users, water utilities, that would be interested in us either building a rejuvenation center for them on site or in a regional location nearby where we would be able to provide our rejuvenation services to them. We're still in the negotiation side of that. We have yet to sign any actual offtake agreements, but we're in some great discussions right now and continuing to move forward to present that option to a number of different new utilities as well. What's significant is we've basically become the tip of the spear for a lot of these engineering firms with regards to the analytical work that's necessary to be able to go back to their clients and provide some real tight assessment as to what their situation is and what can be done to get ahead of the PFAS problem. So we are a very firm part of the solution of the process, and we think that that will lead to longer-term work for us, not just the analytical work. And what we're shooting for, of course, is to have the offtake agreements signed where we can do a collaborative effort of building out the regional facilities that we feel they're going to need. So the offtake agreements are the next step, to answer your question, in the rejuvenation side of our business. Now that we've proved that we can do it and we're doing analytical work on a one-on-one basis, the next step will be to get the offtake agreements in place that will allow us to move forward with the construction of these facilities.
Okay, and the last question is on the new ion exchange product line. You gave some color on the market opportunity. Is that market sort of the similar customer base, or would this be a utility kind of customer base, or just maybe help me understand the customer base that you're going after there?
Yeah, actually, it's a totally different market. We're very excited about it. We've had great results with this new product that we've helped to bring to market, and it is a multi-hundred millions of dollars opportunity. We're focused on the power plant side of it at this point, but we expect to be able to expand as well. And, you know, we've yet to talk about the water treatment services side of our business, and I think that will show substantial growth this year in real revenues, adding to that first million-plus of business that we've booked to date. So I really think that that, and we're now looking to hire specialists to represent us in the field on that particular product line, but I've also been looking at and adding others to our team to move our general water treatment materials into the market. So I really think that that's one of our faster-growing aspects in 2026 in terms of adding real revenue to the company.
Okay, great. Thank you. I'll turn it over. Thank you. Thank you. This does conclude our question and answer session.
Operator
I will now hand the call back over to Chairman and CEO Rick McPherson for his closing remarks.
Well folks, thank you again to each of you for joining us on today's earnings conference call. Our IR firm, MZ Group, will be available to assist with any questions that you might have. We look forward to continuing to update you on our progress as we strive to deliver value to my fellow shareholders and execute upon our vision of becoming a leader in the specially activated carbon space, delivering cleaner air and water to improve our environment.
Ladies and gentlemen, this concludes today's conference. Thank you again for your participation. You may now disconnect your lines.
