On Thursday, Birchtech (TSX:BCHT) discussed second-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

Birchtech ended all legal challenges to its SEA technology patents, securing a $78 million final judgment with ongoing appeal processes.

Q2 2026 revenues reached $3.8 million, driven by increased demand in the air and water treatment businesses, with gross margin at 27%.

The company is focusing on converting licensed utilities into recurring product supply customers and expanding its water treatment business.

Expansion of the water treatment product line includes SEA IX ion exchange resins targeting a $200 million market across various sectors.

Operational highlights include the promotion of Jim Trettle to COO and significant investments in water business R&D and scaling efforts.

Net loss for Q2 2026 was $3 million, with increased SG&A and R&D expenses due to investments in water division expansion.

The company maintains a strong cash position with $11.8 million as of June 30, 2026, and no debt, despite ongoing legal and operational expenses.

Full Transcript

OPERATOR

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Birchtech's second quarter 2026 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, Thursday, August 13, 2026, and the earnings press release accompanying this conference call was issued after the market closed today.

On our call today is Birchtech President and CEO Richard McPherson and CFO Michael Myoska. 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 Birchtech.

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 Birchtech'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 the 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 and is exclusive of certain items that the Company believes do not reflect the core operations of the Company. 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. The Company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information, or circumstances that arise 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.

Mike Mioska, Chief Financial Officer

Mike, thank you. Rick, and good afternoon, everyone. I will keep my section to a concise review of the financial statements for the second quarter of 2026. For a full breakdown of our financial results, please view our regulatory filings. Revenues totaled 3.8 million for the second quarter of 2026 as compared to 3.3 million for the same year-ago quarter. The increase in revenues from the comparative period was primarily due to increased air business demand driven by the mix of plants running combined with more extreme weather conditions and higher natural gas prices in the current period as compared to the comparative period.

Additionally, sales were recognized for the water treatment market in the second quarter of 2026 compared to none in the comparable period of 2025. Gross profit totaled 1 million as compared to 1 million in the same year-ago quarter. Gross profit was comparable to the prior period, despite higher revenues in 2026, resulting from a shift in revenue mix away from the licensing revenues generated in the second quarter of 2025, which carry typically higher margins.

We continue to incur significant expenses as we invest heavily in the expansion of the water division. To that end, SG&A expenses totaled $2.1 million in the second quarter of 2026 as compared to $1.7 million in the same year-ago quarter. The increase in expenses was primarily due to increased professional fees driven by increased legal fees in the second quarter of 2026, combined with increased public company costs associated with the company's uplisting to the NYSE American.

R&D expenses totaled 0.6 million for the second quarter of 2026 as compared to 0.5 million in the same year-ago quarter. R&D expenses relate to research conducted to develop water treatment products utilizing new sorbent technologies. Other expenses totaled 1.4 million in the second quarter of 2026 as compared to 0.4 million in the same year-ago quarter. The increase in other expenses was mainly the result of license and settlement fees incurred in the second quarter of 2026.

No such comparable fees were incurred during the second quarter of 2025. Net loss for the second quarter of 2026 totaled 3 million or $0.11 per basic and diluted share as compared to a net loss of 1.5 million per basic and diluted share in the same year-ago quarter. Adjusted EBITDA loss, a non-GAAP financial measure, totaled 1.9 million in the second quarter of 2026 compared to a loss of 1 million for the second quarter of 2025. Cash as of June 30, 2026 totaled 11.8 million with no debt as compared to 2.2 million as of December 31, 2025.

Also, as our investors understand, but I still wanted to highlight, the liabilities we do have include a $7.3 million profit share liability that is only repayable when the company collects the $78 million plus final judgment discussed earlier by Rick. 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.

Richard McPherson (President and CEO)

Thank you, Mike. To sum up the quarter, the second quarter closed the book on all remaining IPR challenges to our patents, appeal process underway to support collectability on our $78 million final judgment, and strengthened our leadership team with Mike Mioska joining us as Chief Financial Officer in May and Jim Treadle promoted to COO as well. We continue to invest in driving forward the water business and look forward to providing updates on this front in the weeks and months ahead.

Our plan for the rest of 2026 is straightforward and focused on long-term fundamental growth: convert more licensed coal power utilities into recurring supply customers, advance offtake agreements for our first planned carbon rejuvenation facility, and deepen our market penetration in water treatment across the industry through enhanced visibility and strategic partnerships. We enter the rest of 2026 from a position of strength, and I'm confident in this team's ability to capture the opportunity in front of us.

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 on 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 keys. One moment, please, while we poll for questions.

Thank you. Our first question is from Rob Brown with Lake Street Capital Markets.

Rob Brown, Analyst at Lake Street Capital Markets

Good afternoon. My first question's on the air business. It seems like you've gotten good progress in getting the settlements from most of the base. How much is sort of left in terms of outstanding cases at this point?

Richard McPherson (President and CEO)

Rob? So, yeah, we've settled away with, at this point, all but one remaining case, and we're in discussions with them at this time. So the settlements have been put in place, and we're now just waiting for supply contracts to come up for renewal so that we can quote on that business.

Rob Brown, Analyst at Lake Street Capital Markets

Okay, great. And then with what you've settled and the timing of those supply comments, how should we think about the revenue in the air business? How does that sort of play out? And how long does, sort of on average, do those supply contracts need to happen? And what's the sort of baseline air business that you think you can get to with what you've settled so far?

Richard McPherson (President and CEO)

So the opportunity, given the capacity factor of the plants that we've signed licenses with, is quite significant. It's difficult to say exactly when that's going to come to fruition because we can't control when their present contracts run out. I do expect that we'll see an increase starting in the second half of this year. I do expect that we'll see a significant increase in the actual product supply revenue on the air side for 2026 over 2025. And I just don't have a hard number on what that is at this time.

Rob Brown, Analyst at Lake Street Capital Markets

Okay, great. Got it. And I think you talked about the outstanding judgment. The defendant has appealed, and I know that's not hard to predict, but what's sort of the steps that are left here in the appeal process and just a sense of timing that that could take?

Richard McPherson (President and CEO)

Sure. As with the federal judge decisions that we waited on for a period of time, it's difficult for me to say when the Appellate Group will rule. We are very confident in our position and expect we will win the day on that. I am hoping that we will get a decision this year. I just can't, nor can my attorneys, predict exactly when that's going to happen. But I think we'll be in a very favorable position to move forward on the collection once we get a ruling on the appeal.

Rob Brown, Analyst at Lake Street Capital Markets

Okay, great. And then I guess moving to the water side, a couple questions there. The, you know, you've had a lot of customers doing testing. How, you know, what are sort of the latest in terms of getting offtake agreements, and how many people are you sort of in discussions with on that front?

Richard McPherson (President and CEO)

Sure. So we've got some really good negotiations going on right now with several significant parties, and we're also involved in a number of research and development programs with utilities that are looking to find solutions for their PFOA/PFAS challenges. So I very much expect to bring some hard news to the market, most likely in the third quarter. We are getting close to some significant decisions on that front through the work that we've been doing over these past few months.

So I'm looking forward to at least bring the market up to speed on what our opportunities are that we've been working on and have signed agreements on and the partners that are affiliated with that in this coming quarter. I'm hoping that they will turn into real business by the end of the year. But we'll bring a lot more color to our activities there in the third quarter for sure.

Rob Brown, Analyst at Lake Street Capital Markets

Okay. And the water business, I think there's a deadline in 2027 from the EPA to get some reporting out for PFAS levels. And then I know, I think one of the big competitors in the market recently increased prices. But how are some of the macro things that are happening driving kind of customer action, and how might those things affect you?

Richard McPherson (President and CEO)

Yeah. So what we're finding is a lot of research and development work going on right now as people try to ramp up to get ahead of the regulations. And there's a lot of state regulations that are coming in ahead of the federal regulations on an earlier timeline. So we're working with a number of different utilities right now through the relationships we have with engineering firms to actually play a part in building out some of our rejuvenation centers in the coming couple of years.

We're also very active, as I mentioned to the market, in moving forward to get our own rejuvenation facility up and running as soon as possible. We're making a great deal of headway on that, and I'm hoping, most likely sometime by the end of September, to be able to bring some material news to the market on that front, which will move us ahead significantly on that side of our business. So I'm very excited about that. We're just, you know, going through the paces right now and trying to get all of the paperwork done to be able to close out the effort that we've embarked on that will allow us to do that.

Rob Brown, Analyst at Lake Street Capital Markets

All right. Excellent. Thank you. I'll turn it over.

Richard McPherson (President and CEO)

Thank you.

OPERATOR

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Richard McPherson for any closing remarks.

Richard McPherson (President and CEO)

Well, thank you, operator, and thanks once again to everyone for joining us on today's earnings call. Our investor relations firm, MZ Group, remains available to assist with any follow-up questions that you might have. We look forward to sharing future updates as we work to create value for my fellow shareholders and advance our vision of leading the specialty activated carbon space, delivering clean air and water more affordably, especially to those utilities in smaller communities, and ensuring the more efficient removal of many harmful toxins from our environment.

I especially look forward to addressing the investment community in the third quarter where we very much expect the results of a lot of work that we've been doing in the past couple of months will come to fruition. So with that, I want to thank everybody once more.

OPERATOR

This concludes today's conference call. You may disconnect your lines at this time. Thank you again for your participation.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.