Fuel Tech, Inc. (FTEK) September 2026 Conference Transcript

Hi, everyone. Thank you for coming. I'd like to introduce Ramesh Nagahali, President and CEO of FuelTech.

Good. Good afternoon, everyone. I'll just start off with a very small introduction, and then I'm going to go through the rest of the presentation. That's the actual picture of mine, taken two years ago. Nothing has changed since then. Just my background, I started my career in Canada, working for industrial companies and power companies, went very deep into the energy sector, working for companies like Babcock and Wilcox and General Electric, kind of seen all aspects of the power industry, all sectors of the environmental sector as well. And once I got my business degree, I joined GE Energy, which is what NOVA today, in the mergers and strategy group spent several years going very deep on the strategy and and mna growth and i took that game to amitech which is a highly acquisitive industrial company spent few years at tyco doing the same commercial role and then i got my first break to go run at pnl in middle east i was based in dubai for four years serving oil and gas petrochemical plants And then after that, briefly, I took a role at Xylem as well. I was based in Singapore for four years in the water sector. And my last role at Seco Environmental, I came in as an outside advisor and support the board of directors and the CEO of the company and helped them put together an enterprise strategy and an M&A playbook. and the board asked me to join the company to go run the company for them and implement the strategies that we put on a piece of paper. So started the journey and around the time the stock price was around $5 and four years later we were $35 plus. Company went from $300 million to $600 million. It was all about transformation and value creation at a public company at the speed of a private equity company so when i got a call to join fuel tech i kind of knew the company and and what i saw was a company which had a highly diversified portfolio product and services catering to more than several vertical markets and i kind of looked at it as a diamond in the rough i was hoping to come and do the same thing that was able to replicate not only at seaco but different sizes of company the one big mandate for me from the board is one word that's growth And that's what the board is expecting from me, and I'm all energized and thrilled to go do that at this company. So when we talk about fuel tech simplistically, we look at this company along three vertical markets. We have the air pollution controls market, which caters to all the pollutant that comes out of the industrial sector that needs to be cleaned. That's a long cycle business. It's a project business for us. And the second one is Chemical Technologies, which is an annuity-based, high-margin business that's a short-cycle business for us. And finally, we have an emerging water technology business where it's still in the preliminary stages of introducing a product. That combination of having the long cycle, the mid-cycle, and the system business bodes well for us, irrespective of how the economy is going to play out for us. this is certainly going to help us to continue the trajectory of growth and profitability. You know, we've been around for 40 years. We play in 37 some odd countries, but as a company of our size, we are global. And we have a set of talented team. And let me touch upon the financials as well. This year, for the first time in a long time, we're going to be ending the year with a big backlog. and we still are bidding. We still have several months left in the year. We are hoping that we could add some more so that, you know, that backlog is going to look north of where we are today. Revenue-wise, we are certainly going to be north of $26.5 million. That's what was reported last year. It's a project business. We're looking at how we're going to complete some of the project recognition so that in Q4, very soon, we feel that the revenue is also going to be ticking high towards the end of the year. So investment thesis. Let me hit upon a couple of bullets here just to see how our company is going to play in all these end markets, which are pretty rich today. So first and the foremost thing, we have the broadest suites of product and technologies, and we also have a service business. We cater to the power market, the industrial, which is the paper and pulp, the chemical, the process industry. And we have the we have a presence in the secular water industry as well. And that's a good thing, depending on how the economy plays out. More than anything else, our business model is I kind of say that we are a house of engineering and we're a house of products. We have a bunch of product, we have a bunch of engineering and combined with the supply chain that we have built over the year, this is going to help us to keep the low cost structure that we have but our ability to scale certainly increases because the constraint is not on the front end the constraint for the industry is on the back end and as we are building this partnership and some of our partners in the manufacturing and supply chain they have been with us for more than 10 years and that's a good thing by the way and they're exclusively supporting us and if we get the project we have a supply chain aligned with that. We talked about the strong balance sheet that we have and the mandate again for us is to continue the growth starting with reinforcing the core business and deploying the capital the most appropriate way and I'm going to be touching on it in the coming slides. Not to go through the history but we do have a long history and what fascinates me is for a company of our size and sophistication we had north of 100 patents a while back and today we still have 32 patents that the company owns, and we were one of the first companies to get the technology from EPRI in the 70s for all the pollution control equipment. The goal for us is to take all this history that we have today and focus it on the right end market so that we can commercially be savvy enough to take all these technologies, put a commercial offering, and continue the growth trajectory. So we did talk about some of the end markets that we play in today. Our core end market It is still in the energy sector, the power and the oil and gas. If you look at the demand characteristics of the power today, just to sustain the GDP growth of the country, at least for the foreseeable future, we see a huge demand in the power. If you sit today, I mean, if you've got any of the gas turbine manufacturers, their order book is completely full until 2031. And they're taking orders for them in 2035. So if the richness of the power industry is great, and we play a huge role in that. So the chemical and the petrochemical and the process industry, anything that we do on the power side is transferable to some of these end markets because there you see the combustion, you see the pollutants coming out, you have water in there. So some of the product and technologies and the services franchise that we have is applicable to that as well. And finally, the water, we are slowly getting into the water side. And if we have this proven technology, prove itself, that opens up as well in the waste and water and wastewater side which is probably 5x of what we are catering today which is in the aquaculture industry. So the next few slides I'm going to briefly touch upon the three segments that we have today starting with the air pollution control. So end of the day simplistically whatever the exhaust that comes out of the gas turbine or a re-sip engine or whether the aero derivative engine they have pollutants and our products and our technologies removes 90 percent of the pollutants and you can simplistically think in terms of the the the dust particles that comes through or the socks and the nox these are sulfur dioxide nitrogen oxide and co um pretty bad for the environment we clean that up and and that is essential and that is good because that can be transferable to the industrial side as well. Today, we don't touch upon those. We are still predominantly on the power side. So we have a funnel. We are working through a funnel of close to 150 million plus. And part of the commercial excellence I'm going to be talking about in the value creation is to keep expanding that funnel. Today, it is good. And we already booked close to 15 million in backlog. We may see another five to seven million by end of the quarter but the funnel is so big depending on how the customer wants to close the project our backlog and booking profile going into next year is going to look really good for us again i don't need to go through this chart you know we found this study uh from mckenzie and basically essentially the power market is going to continue to grow there's a lot of news on the data center and and i don't think you know it's like reading the tea leaves depending on what newspaper you see either it's a bad news or it's a good news but take a step back these things the data center that we cater to is not ai it is a data center and data centers are used for multiple reasons and the power island the captive power island we service it's all goes to the data center irrespective of which way this is going to play out even if 30 of the data centers are not going to get built there is still going to be a lot of business for us so this article is saying 7x i will take 3x we don't need 7x so the momentum in the power sector is really is going to play good for us going forward again not not to belabor this but simplistically this is what our technology does on the bottom right hand side you know there is the flow of the exhaust that comes through with all the pollutant and it goes through our systems and out comes the emission, which is all cleaned up. Where we differentiate is in modeling all this in-house. We have a bunch of engineers, a bunch of PhDs. For a company of our size, we have just 80 employees. We've got like 35 to 50 people with advanced degrees. We have five PhDs cranking away on this model. Now, why is that so important for us? If you look at some of the other companies, everything is outsourced engineering. And what's happening in all the data centers is there's horse trading going on. Depending on the week, they're changing the systems left and right because there is not too many turbines available there. This is where we come in and we are able to respond back to the customer fast. And there's a lot of conversation going on, week in, monthly. That gives me hope. The timing of the projects, I don't dictate and we don't dictate. What we do feel good about it is the customers are talking to us every week. And that gives me hope. That gives the permission for us to continue to talk to them so that we can pull in a couple of these projects before the end of the year. This is another pictorial view of how it looks like behind the gas turbine. It looks like a big box, but that's where the magic happens, you know, where we take all the pollutants, and we've been doing this for such a long time, so we have the right to honor the business. When customers are going from the heavy-duty gas turbine to other forms of energy because all the gas turbines are solidly booked this is where we come into play and this is where we want to earn our business and this is where we want to deploy all the commercial resources so that we continue to take this slice of the market and and gain market share then i'm going to go into the next one which is our chemical technologies um so again this is a business you know that goes back to earlier days of fuel tech where we have our own formulation of chemical technologies which allows to improve the efficiency of combustion people talk about this technology as if it only applies to coal now wherever there is a burner wherever the burner is used in a boiler system where they're slagging our technology improves the efficiency not many people know the roi on a big unit whether it's a paper and pulp whether it's a steel mill whether it's a coal-fired plant if you improve the efficiency by one percent the output for them is incredible. For us, this is an annuity pool. This is our SAS model. We sell chemical as a SAS model. And if we just incrementally beat one or two of the customer, what it does to our income statement is just incredible. And this is where I get excited when I see, where else can we take this? What else can we do? Because paper and pulp, steel mills, cement mills, untapped territory for us. And again, coming back to our commercial model, How do we take all this savvy engineering bench strength and take them commercial to different marketplaces? And water. The water story is also very similar. We have two patented technology that caters to the aquaculture. And very soon, I mean, we've been doing some pilot. And, you know, for 100 reasons, our team picked aquaculture. They could have picked wastewater. They could have picked mine water management. They could have picked polymer. But we picked aquaculture. Not the most easiest industry to get in, but we are there. But we need to prove the proof of concept here. And if we do, this is another one like the previous one we can take into the other markets that we don't play today. We have patented technology, and we can partner with other people. And I'm hoping we'll keep the fingers crossed. We have a couple of pilots going. And once we commercialize this, this is another one that's going to help us continue to grow. Look, so here are the four levers as the growth leader coming into the company. I've spent three weeks. I probably had 30-some-odd one-on-one calls. And I'm thinking, I said, wow. I said, there are things we can do. These things are not rocket science. We are a smaller company. To scale a company of our size compared to a few billion-dollar company should be relatively easy, you would think. But I'm also playing with a set of people and a set of resources that I need to effectively use to focus them on two or three things, not 10 things. When you look at private equities, when they get into companies, they don't implement 10 things. They pick the liver on two or three things. And these are the four levers that I'm working on with three weeks of experience. So give me a break there. Okay. So that's the first tranche. We have a great business. We got to strengthen our business. We have runway. We, it's not like we have 90% market share in any of the things that we play in today. So incrementally, it should not take us too long or too effortful to get penetration in our core market. And that's where at least the initial tranche of my strength and my experiences and the focus for the team is going to be on the first lever. The second one is we got to accelerate growth. Whether it's talking to the OEMs that we don't talk today, we've been comfortable with one or two, but there are three or four still available for us. How do you go get that? How do other companies go get, build that momentum in business development or commercial development or project pursuit, which converts it into a booking is where the resources and support is going to go from my side. And deploying the balance sheet on M&A. To do that, you need to start formulating a strategy. And once you get the strategy, you've got to start building your adjacent marketplace. And once you find the adjacent marketplace, we as a micro-cap company, compared to the big guys, it's a guerrilla warfare. We are much more effective to win those games. The big boys are not going to compete with where I compete. I don't need $50, $100 million deals. I need a $2 million EBITDA company that's going to fill a product gap or a channel gap. And that's going to significantly improve the P&L for us. So that's something that we are actively looking for. Driving operational excellence. We're a house of engineers. Engineers love creating something new every day. So one of the things, I'm an engineer too, so I have my policies, but somewhere I transitioned to become a business guy. Customization to standardization. When you do customization, if the customers are not willing to pay for customization, don't do. Standardization is what you do. And you can standardize 10 of the customization, and you can start to get leverage, and the speed at which you deliver to the marketplace increases, the margin profile increases, and your product profile increases. So we're going to go start doing that in our company. And lastly is deploying the capital, not just on the money side. That's the easy part. We've got cash sitting there, clean balance sheet. We're going to go figure that out. We're going to find the companies. We're going to do it. But equally important organically, getting the commercial excellence that we're going to go tap on the new end markets, go tap in the OEM markets, go tap in some of the projects. And that doesn't mean we're going to increase our SG&A cost. That is not the model for us. The model for us is to the people that I used to work in the past to bring in advisor, no different than how a private equity brings in a couple of operating managers and operating directors, parachutes them, and gets the engine going. That's our model for us. Well, that's my team, Team A. Look, some of the team members have been with us for quite some time, and what I'm really impressed with is the background they have, the time they've spent in the field. We have a CFO who went to Chile and executed an EPC project. We have a head of engineers who went and executed in the field some EPC project. My job is to take all this strength and to see how do we get growth out of this company. The story is not about, oh boy, we don't have product line or product sucks and the vitality is low and we've got to fix up. No, that's not the story at all. We have all that. It is, how do I take this team or bring in people that are going to commercially take this product to the next level? And that's the game for us. And in the coming months, weeks, quarters, you'll start to hear that. Just in closing, look, we are in good end markets. We have good product lines that are out there. And if you don't have, that is a tough game to play. In my case, that isn't the case. we have all that. We have a pipeline that you're working with. Frustration is the timing of the pipeline. But that's not the game at all. I'm not even worried about this quarter. What I'm worried about is next year, that pipeline has to look twice as big. And how do we go get it? And where do we go get it? And building the pipeline, my job is once the order gets in and it's booked, we're going to deliver. But it's getting to the funnel. Good companies chase the funnel. Smart people chase the funnel. And that's where, you know, the team is going to be focused on. And strengthening our core business is not fixing it. Nothing is broken. It's just strengthening it. And then getting the M&A engine going for us. And that's a skill in itself. Some companies do well. Some companies suck at it. And it's not that we're going to go and pull a trigger on a humongous deal. That's not the story either. It's earning our way into certain things so that as we build the momentum in the marketplace, We fill the product gap with a couple of nice ones so that it's a creative, where we build the capabilities in-house. IT, HR, engineering, project, all those things have to come in as we start bringing in M&A targets. Again, the backlog, 20 million, highest historically in the last four or five years. Would love to see that grow. And that's all, again, heavily dependent on project timing. That's the nature of our business, and that's the not-so-good part of any project business. But if you keep the funnel big, hopefully the backlog improves. And finally, the story is all about growth. And that's what I've been hired for. And that's what excites me. That's what gets me going every Monday morning. And I will be traveling. I won't be in the office because we'll be chasing growth. That's it.

Yeah, I can bring a mic over if you have questions. Thank you, Ramesh, for a great presentation.