Birchtech (BCHT) Q3 2026 earnings review
Birchtech's product sales grow, but its operations still lose money
Birchtech, a maker of carbon filters for coal power plants and water utilities, grew its product sales while cutting legal expenses. Product revenue rose 16% to $5.5 million on hot summer weather and early water shipments, while total sales fell 26% by our math only because last year included a one-time patent license fee. Lower legal bills helped chief executive Richard MacPherson narrow the quarterly cash drain to $1 million by our math, leaving $10.8 million in the bank.
| Product revenue | $5.5M +15.7% from a year ago |
|---|---|
| Total revenue | $5.5M -26% from a year ago (lapped $2.6M license fee) |
| Cash with no debt | $10.8M $11.8M last quarter (-$1.0M by our math) |
| Quantitative outlook | None issued consistent with prior two quarters |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because slower cash burn and a capital-light carbon supply deal for early 2027 were offset by lingering operating losses and missing water figures. Even in the peak summer quarter for coal power, the air business posted an operating loss before one-offs and could not cover company overhead. One caution: management still has no signed utility contracts for its planned carbon reactivation plant and gave no dollar figure for water sales.
The question now is whether the water business is becoming a real second revenue stream or remains a tiny line item behind delayed announcements. Either the new 2,000-ton supply partnership brings measurable utility orders in early 2027, or water stays too small to break out while the company waits on its $78 million court appeal. The quarterly filing's segment breakdown and first-quarter 2027 shipments will tell.
🐂 Bull Case
Product Sales Grew and Cut Operating Losses
Birchtech sells SEA, a patented activated-carbon technology that captures toxic mercury from coal-fired power plants. Total revenue fell 25.7% from a year ago by our math because last year included $2.6 million in one-time patent license fees. Product sales, which exclude those one-offs, grew 15.7% to $5.5 million.
- Product revenue: $5.5 million, up 15.7% from a year ago and up 44.7% from last quarter by our math
- Gross margin: 29.9%, down 24.9 percentage points from a year ago because of the missing license fees
- Selling and administrative costs: $1.8 million, down 35% from a year ago on lower legal bills
This matters because recurring product shipments and lower legal expenses narrowed the quarterly net loss to $0.3 million, down from $3.0 million in the second quarter. What to watch: fourth-quarter product revenue against last year's $3.6 million, which had no license fees and gives a clean comparison.
Partner Deal Starts Water Supply Without Factory Spending
The company is expanding from air filters into water purification to remove PFAS, chemicals that stay in water and the body for years. While its air patents are now safe after regulators ended all validity challenges in June, building water filter plants from scratch requires cash the business is trying to conserve.
During the quarter, Birchtech signed an agreement with an industry partner to supply granular activated carbon (GAC), a charcoal media that traps water contaminants. Deliveries begin in early 2027 at 2,000 tons per year, offering a "faster, more capital-efficient route into the water treatment market without requiring capital expenditures to establish its initial supply capabilities".
The environmental group also hired Charlie Cooper as business development manager to sell to rural water utilities. What to watch: whether management names the supply partner and reports initial customer orders from those 2,000 tons in the first quarter of 2027, which would prove utilities are buying.
🐻 Bear Case
Air Profits Still Do Not Cover Company Costs
"Our third quarter results reflect the underlying strength of our core business," chief executive Richard MacPherson said. He added that the air business serves as a "self-funding engine for the growth of our water platform". The third quarter is usually a strong summer period for coal power demand.
The numbers show the company still spent more than it earned. Gross profit of $1.6 million failed to cover $1.8 million in selling and administrative expenses and $0.5 million in research costs. Operating profit before depreciation and one-offs (Adjusted EBITDA) was a loss of $0.5 million, following a $1.9 million loss in the second quarter.
Because the release once again compared its $10.8 million cash balance to December's $2.2 million rather than June's $11.8 million, it did not highlight the $1.0 million third-quarter cash drop by our math. What to watch: fourth-quarter cash and Adjusted EBITDA, because a wider winter loss would show the air business cannot fund the water buildout alone.
Water Sales Stay Unquantified as Facility Agreements Slip
Birchtech plans to build a Carbon Rejuvenation facility, a plant that heats used carbon filters so water utilities can reuse them at lower cost. Management wants this plant and its water testing labs to become a major growth line alongside coal emissions control.
In the third quarter, the company recognized some water treatment sales compared to none a year ago, but it did not give the dollar amount or update its order total. On the planned reactivation plant, MacPherson said a priority heading into 2027 is to "advance offtake discussions with prospective utility partners for our first planned Carbon Rejuvenation® facility".
That language means no utility has signed a binding purchase contract for the plant yet, despite several quarters of talks. The new carbon supply partner also went unnamed. What to watch: the exact water revenue figure in the quarterly filing, because omitting the number suggests water sales remain a very small fraction of the $5.5 million total.
The $78 Million Judgment Remains Tied Up in Court
A federal court previously awarded the company an approximately $78 million final judgment against power-plant defendants for infringing its mercury-capture patents. The defendants appealed the decision without posting a bond, and Birchtech owes a $7.3 million profit share from the proceeds only when it collects.
On October 22, the patent holder filed its legal brief with the appeals court asking the judges to uphold the full award while post-judgment interest accrues. Because collection waits on the court's ruling and subsequent enforcement, the timing and final cash recovery remain unknown. What to watch: the appeals court oral argument schedule, which will set the earliest window for a decision in 2027.
Risks this quarter didn't answer
Three standing questions about the core air business received no new figures in the earnings release.
- The $40 million year-end air revenue pace: management set this target late last year and has not mentioned it since; third-quarter product sales equal $22 million on a yearly basis by our math.
- Utility contract conversions: former patent defendants took licenses, but the release gave no count of how many have switched to buying Birchtech's carbon supplies.
- Long-term coal plant closures: winter and summer weather help short-term coal burn, but the gradual retirement of North American coal plants still limits the long-run market.
👓 Other Themes
Hot Weather and Gas Prices Lifted Coal Demand
Birchtech said third-quarter demand for its mercury-capture products rose because of extreme weather and higher natural gas prices. Hotter summer temperatures raise electricity use for air conditioning, and pricier natural gas causes power grids to run coal-fired plants more often. That temporary boost helped push product revenue up 15.7% from a year ago.
💲 Other KPIs
Cash fell by $1.0 million from the second quarter's $11.8 million by our math, after dropping $2.9 million in the quarter before that. The company carries no debt following its $16.4 million stock offering in February 2026. Slower cash burn reflects higher seasonal sales and lower legal bills.
Research spending held at $0.5 million, matching the third quarter of last year and down slightly from $0.6 million in the first two quarters of 2026. The company spends 9.1% of revenue on research by our math, focused on new sorbent materials for water treatment.
The company began buying back stock in September under its $5.0 million repurchase plan, using cash on hand. It did not disclose the dollar amount spent in the release; total cash fell by $1.0 million over the whole quarter by our math.
❓ Key Questions
How much revenue came from water treatment in Q3?
Management cited water sales as a growth driver alongside mercury control, but did not break out the dollar amount or update the $1.0 million resin order figure from the first quarter.
Who is the carbon supply partner and what are the margins?
The new 2,000-ton supply agreement avoids factory construction costs, so investors need to know the partner's identity, whether minimum purchase commitments apply, and what gross margin reselling that carbon will earn.
How many licensed coal utilities now buy recurring carbon supply?
With all but one patent lawsuit settled, the main air growth driver is converting those licensees into product buyers as their old supply contracts expire.
What will the first carbon reactivation plant cost to build?
Offtake talks with utilities are still underway; once signed, the company will need to explain how it will pay for the plant with $10.8 million in cash on hand.