Fuel Tech, Inc. (NASDAQ: FTEK), a technology company
providing advanced engineering solutions for the optimization of
combustion systems, emissions control, and water treatment in
utility and industrial applications, today reported financial
results for the second quarter ended June 30, 2023 (“Q2 2023”).
“Q2 2023 results were mixed between our operating segments.
Revenue from our Air Pollution Control (APC) business segment
increased 25% from the second quarter of 2022, and were offset by
lower revenue from our FUEL CHEM® business segment driven by
unplanned maintenance-driven outages at our clients throughout the
quarter,” said Vincent J. Arnone, President and CEO. “At our
Dissolved Gas Infusion (DGI®) technology business segment, in late
June we commenced our first on-site demonstration using a
small-scale dissolved oxygen infusion system at an aquaculture
setting in the Western United States. The deployment, which is
scheduled to conclude in Q3 2023, has demonstrated encouraging
early results that are in line with our objective of improving the
customer’s operational productivity and efficiency using optimized
high-levels of dissolved oxygen. In addition to this demonstration,
we are continuing our investigation into other markets of
opportunity, including discussions with potential market channel
partners and industry experts and the development of market
specific collateral.
“We were pleased to recently announce $2.2 million of new APC
awards, and our contract pipeline for the second half of 2023 is
promising with any such awards expected to utilize our SCR, SNCR
and ULTRA emissions control solutions, both domestically and
internationally. As we entered the third quarter of the year, the
unplanned outages within FUEL CHEM have abated, and we expect
improved FUEL CHEM revenue for the second half of the year.”
Mr. Arnone concluded, “We ended the second quarter with $32.9
million in cash and investments and no long-term debt. We remain
optimistic about our outlook for the year and continue to expect
that total revenue for full year 2023 will improve modestly from
2022, driven primarily by our APC business.”
Q2 2023 Consolidated Results
Overview
Consolidated revenues for Q2 2023 were $5.5 million compared to
$6.4 million in the second quarter ended June 30, 2022 (“Q2 2022”),
reflecting higher APC revenue offset by a decline in FUEL CHEM
revenue.
Consolidated gross margin for Q2 2023 was 37% of revenues
compared to 42% of revenues in Q2 2022, reflecting changes in
product and project mix and lower FUEL CHEM revenue.
SG&A expenses were unchanged at $2.9 million.
Operating loss for the quarter was $(1.3) million compared to an
operating loss of $(0.5) million in Q2 2022.
Interest income improved to $0.3 million from $0.001 million in
Q2 2022, reflecting higher interest rates on held-to-maturity debt
securities and money market funds.
Net loss in Q2 2023 was $(1.0) million, or $(0.03) per share,
from a net loss of $(0.4) million, or $(0.01) per share, in Q2
2022.
Consolidated APC segment backlog at June 30, 2023 was $6.6
million compared to $8.2 million at December 31, 2022.
APC segment revenue increased to $3.4 million from $2.7 million
in Q2 2022 with gross margin of 31.4% compared to 34.2%, due
primarily to the mix of projects under execution.
FUEL CHEM segment revenue declined to $2.0 million from $3.6
million in Q2 2022 due to unplanned maintenance-driven outages,
with gross margin declining to 45.2% from 48.0% in Q2 2022.
Adjusted EBITDA loss was $(1.2) million in Q2 2023 compared to
Adjusted EBITDA loss of $(0.2) million in Q2 2022.
Financial Condition
At June 30, 2023, cash and cash equivalents were $15.1 million,
short-term investments were $12.9 million, and long-term
investments totaled $4.9 million. Stockholders’ equity at June 30,
2023 was $43.7 million, or $1.44 per share, and the Company had no
debt.
Conference Call
Management will host a conference call on Wednesday, August 9,
2023 at 10:00 am ET / 9:00 am CT to discuss the results and
business activities. Interested parties may participate in the call
by dialing:
- (877) 423-9820 (Domestic) or
- (201) 493-6749 (International)
The conference call will also be accessible via the Upcoming
Events section of the Company’s web site at www.ftek.com. Following
management’s opening remarks, there will be a question-and-answer
session. Questions may be asked during the live call, or
alternatively, you may e-mail questions in advance to
dsullivan@equityny.com. For those who cannot listen to the live
broadcast, an online replay will be available at www.ftek.com.
About Fuel Tech
Fuel Tech develops and commercializes state-of-the-art
proprietary technologies for air pollution control, process
optimization, water treatment, and advanced engineering services.
These technologies enable customers to operate in a cost-effective
and environmentally sustainable manner. Fuel Tech is a leader in
nitrogen oxide (NOx) reduction and particulate control technologies
and its solutions have been installed on over 1,200 utility,
industrial and municipal units worldwide. The Company’s FUEL CHEM®
technology improves the efficiency, reliability, fuel flexibility,
boiler heat rate, and environmental status of combustion units by
controlling slagging, fouling, corrosion and opacity. Water
treatment technologies include DGI™ Dissolved Gas Infusion Systems
which utilize a patented nozzle to deliver supersaturated oxygen
solutions and other gas-water combinations to target process
applications or environmental issues. This infusion process has a
variety of applications in the water and wastewater industries,
including remediation, aeration, biological treatment and
wastewater odor management. Many of Fuel Tech’s products and
services rely heavily on the Company’s exceptional Computational
Fluid Dynamics modeling capabilities, which are enhanced by
internally developed, high-end visualization software. For more
information, visit Fuel Tech’s web site at www.ftek.com.
NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This press release contains “forward-looking statements” as
defined in Section 21E of the Securities Exchange Act of 1934, as
amended, which are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995 and reflect
Fuel Tech’s current expectations regarding future growth, results
of operations, cash flows, performance and business prospects, and
opportunities, as well as assumptions made by, and information
currently available to, our management. Fuel Tech has tried to
identify forward-looking statements by using words such as
“anticipate,” “believe,” “plan,” “expect,” “estimate,” “intend,”
“will,” and similar expressions, but these words are not the
exclusive means of identifying forward-looking statements. These
statements are based on information currently available to Fuel
Tech and are subject to various risks, uncertainties, and other
factors, including, but not limited to, those discussed in Fuel
Tech’s Annual Report on Form 10-K in Item 1A under the caption
“Risk Factors,” and subsequent filings under the Securities
Exchange Act of 1934, as amended, which could cause Fuel Tech’s
actual growth, results of operations, financial condition, cash
flows, performance and business prospects and opportunities to
differ materially from those expressed in, or implied by, these
statements. Fuel Tech undertakes no obligation to update such
factors or to publicly announce the results of any of the
forward-looking statements contained herein to reflect future
events, developments, or changed circumstances or for any other
reason. Investors are cautioned that all forward-looking statements
involve risks and uncertainties, including those detailed in Fuel
Tech’s filings with the Securities and Exchange Commission.
FUEL TECH, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(in thousands, except share and
per share data)
June 30,
December 31,
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
$
15,134
$
23,328
Short-term investments
12,855
2,981
Accounts receivable, net
6,781
7,729
Inventories, net
528
392
Prepaid expenses and other current
assets
1,287
1,395
Total current assets
36,585
35,825
Property and equipment, net of accumulated
depreciation of $18,651 and $18,557, respectively
4,368
4,435
Goodwill
2,116
2,116
Other intangible assets, net of
accumulated amortization of $437 and $406, respectively
382
397
Right-of-use operating lease assets,
net
495
197
Long-term investments
4,874
6,360
Other assets
789
794
Total assets
$
49,609
$
50,124
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
3,097
$
2,710
Accrued liabilities:
Operating lease liabilities - current
107
125
Employee compensation
615
1,105
Other accrued liabilities
1,307
826
Total current liabilities
5,126
4,766
Operating lease liabilities -
non-current
376
66
Deferred income taxes, net
177
177
Other liabilities
280
274
Total liabilities
5,959
5,283
Stockholders’ equity:
Common stock, $.01 par value, 40,000,000
shares authorized, 31,361,303 and 31,272,303 shares issued, and
30,385,297 and 30,296,297 shares outstanding, respectively
313
313
Additional paid-in capital
164,651
164,422
Accumulated deficit
(117,449
)
(115,991
)
Accumulated other comprehensive loss
(1,690
)
(1,728
)
Nil coupon perpetual loan notes
76
76
Treasury stock, at cost
(2,251
)
(2,251
)
Total stockholders’ equity
43,650
44,841
Total liabilities and stockholders’
equity
$
49,609
$
50,124
See notes to condensed consolidated financial
statements.
FUEL TECH, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(Unaudited)
(in thousands, except share and
per-share data)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Revenues
$
5,461
$
6,368
$
12,748
$
11,903
Costs and expenses:
Cost of sales
3,465
3,690
7,947
6,935
Selling, general and administrative
2,915
2,874
6,160
5,928
Research and development
413
289
631
509
6,793
6,853
14,738
13,372
Operating loss
(1,332
)
(485
)
(1,990
)
(1,469
)
Interest expense
(5
)
(4
)
(10
)
(9
)
Interest income
307
8
646
9
Other (expense) income, net
(14
)
134
(104
)
124
Loss before income taxes
(1,044
)
(347
)
(1,458
)
(1,345
)
Income tax expense
—
(9
)
—
(9
)
Net loss
$
(1,044
)
$
(356
)
$
(1,458
)
$
(1,354
)
Net loss per common share:
Basic net loss per common share
$
(0.03
)
$
(0.01
)
$
(0.05
)
$
(0.04
)
Diluted net loss per common
share
$
(0.03
)
$
(0.01
)
$
(0.05
)
$
(0.04
)
Weighted-average number of common
shares outstanding:
Basic
30,324,000
30,296,000
30,310,000
30,282,000
Diluted
30,324,000
30,296,000
30,310,000
30,282,000
See notes to condensed consolidated financial
statements.
FUEL TECH, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Net loss
$
(1,044
)
$
(356
)
$
(1,458
)
$
(1,354
)
Other comprehensive (loss) income:
Foreign currency translation
adjustments
(48
)
(222
)
38
(292
)
Comprehensive loss
$
(1,092
)
$
(578
)
$
(1,420
)
$
(1,646
)
See notes to condensed consolidated financial
statements.
FUEL TECH, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2023
2022
Operating Activities
Net loss
$
(1,458
)
$
(1,354
)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation
154
182
Amortization
30
50
Non-cash interest income on
held-to-maturity securities
(203
)
—
Provision for credit losses, net of
recoveries
—
43
Stock-based compensation, net of
forfeitures
187
46
Changes in operating assets and
liabilities:
Accounts receivable
966
(3,245
)
Inventories
(135
)
(58
)
Prepaid expenses, other current assets and
other non-current assets
114
205
Accounts payable
383
812
Accrued liabilities and other non-current
liabilities
(21
)
(2
)
Net cash provided by (used in) operating
activities
17
(3,321
)
Investing Activities
Purchases of equipment and patents
(103
)
(138
)
Purchases of debt securities
(9,685
)
—
Maturities of debt securities
1,500
—
Net cash used in investing activities
(8,288
)
(138
)
Financing Activities
Proceeds from exercise of stock
options
42
—
Taxes paid on behalf of equity award
participants
—
(17
)
Net cash provided by (used in) financing
activities
42
(17
)
Effect of exchange rate fluctuations on
cash
35
(280
)
Net decrease in cash, cash equivalents
and restricted cash
(8,194
)
(3,756
)
Cash, cash equivalents, and restricted
cash and cash equivalents at beginning of period (Note 2)
23,328
37,054
Cash, cash equivalents and restricted
cash at end of period (Note 2)
$
15,134
$
33,298
See notes to condensed consolidated financial
statements.
Fuel Tech, Inc.
Segment Data- Reporting
Segments
(Unaudited)
(in thousands)
Information about reporting segment net
sales and gross margin from operations is provided below:
Air Pollution
FUEL CHEM
Three months ended June 30, 2023
Control Segment
Segment
Other
Total
Revenues from external customers
$
3,422
$
2,039
$
—
$
5,461
Cost of sales
(2,347
)
(1,118
)
—
(3,465
)
Gross margin
1,075
921
—
1,996
Selling, general and administrative
—
—
(2,915
)
(2,915
)
Research and development
—
—
(413
)
(413
)
Operating income (loss) from
operations
$
1,075
$
921
$
(3,328
)
$
(1,332
)
Air Pollution
FUEL CHEM
Three months ended June 30, 2022
Control Segment
Segment
Other
Total
Revenues from external customers
$
2,738
$
3,630
$
—
$
6,368
Cost of sales
(1,802
)
(1,888
)
—
(3,690
)
Gross margin
936
1,742
—
2,678
Selling, general and administrative
—
—
(2,874
)
(2,874
)
Research and development
—
—
(289
)
(289
)
Operating income (loss) from
operations
$
936
$
1,742
$
(3,163
)
$
(485
)
Air Pollution
FUEL CHEM
Six months ended June 30, 2023
Control Segment
Segment
Other
Total
Revenues from external customers
$
6,981
$
5,767
$
—
$
12,748
Cost of sales
(4,941
)
(3,006
)
—
(7,947
)
Gross margin
2,040
2,761
—
4,801
Selling, general and administrative
—
—
(6,160
)
(6,160
)
Research and development
—
—
(631
)
(631
)
Operating income (loss) from
operations
$
2,040
$
2,761
$
(6,791
)
$
(1,990
)
Air Pollution
FUEL CHEM
Six months ended June 30, 2022
Control Segment
Segment
Other
Total
Revenues from external customers
$
4,942
$
6,961
$
—
$
11,903
Cost of sales
(3,231
)
(3,704
)
—
(6,935
)
Gross margin
1,711
3,257
—
4,968
Selling, general and administrative
—
—
(5,928
)
(5,928
)
Research and development
—
—
(509
)
(509
)
Operating income (loss) from
operations
$
1,711
$
3,257
$
(6,437
)
$
(1,469
)
Fuel Tech, Inc.
Geographic Segment Financial
Data
(Unaudited)
(in thousands of
dollars)
Information concerning our operations by
geographic area is provided below. Revenues are attributed to
countries based on the location of the end-user. Assets are those
directly associated with operations of the geographic area.
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Revenues:
United States
$
4,316
$
4,279
$
10,297
$
7,967
Foreign
1,145
2,089
2,451
3,936
$
5,461
$
6,368
$
12,748
$
11,903
June 30,
December 31,
2023
2022
Assets:
United States
$
46,191
$
47,007
Foreign
3,418
3,117
$
49,609
$
50,124
FUEL TECH, INC.
RECONCILIATION OF GAAP NET INCOME
(LOSS) TO EBITDA AND ADJUSTED EBITDA
(Unaudited)
(in thousands)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Net Loss
$
(1,044
)
$
(356
)
$
(1,458
)
$
(1,354
)
Interest income
(302
)
(4
)
(636
)
-
Income tax expense
-
9
-
9
Depreciation expense
75
88
154
182
Amortization expense
19
36
30
50
EBITDA
(1,252
)
(227
)
(1,910
)
(1,113
)
Stock compensation expense
98
28
187
46
Adjusted EBITDA
$
(1,154
)
$
(199
)
$
(1,723
)
$
(1,067
)
Adjusted EBITDA
To supplement the Company's consolidated financial statements
presented in accordance with generally accepted accounting
principles in the United States (GAAP), the Company has provided an
Adjusted EBITDA disclosure as a measure of financial performance.
Adjusted EBITDA is defined as net income (loss) before interest
expense, income tax expense (benefit), depreciation expense,
amortization expense, stock compensation expense, and intangible
assets abandonment and building impairment. The Company's reference
to these non-GAAP measures should be considered in addition to
results prepared in accordance with GAAP standards, but are not a
substitute for, or superior to, GAAP results.
Adjusted EBITDA is provided to enhance investors' overall
understanding of the Company's current financial performance and
ability to generate cash flow, which we believe is a meaningful
measure for our investor and analyst communities. In many cases
non-GAAP financial measures are utilized by these individuals to
evaluate Company performance and ultimately determine a reasonable
valuation for our common stock. A reconciliation of Adjusted EBITDA
to the nearest GAAP measure of net income (loss) has been included
in the above financial table.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230808294022/en/
Vince Arnone President and CEO (630) 845-4500
Devin Sullivan Managing Director The Equity Group Inc.
dsullivan@equityny.com
Fuel Tech (NASDAQ:FTEK)
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