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 first quarter ended March 31, 2023.
“We followed up a strong full year 2022 with 2023 first quarter
results that included a 32% increase in total revenues reflecting
quarter-over-quarter growth for our Air Pollution Control (APC) and
FUEL CHEM® business segments, $5.2 million of new APC contract
awards, and a significant leadership appointment at our Dissolved
Gas Infusion (DGITM) technology business segment,” said Vincent J.
Arnone, President and CEO. “We generated positive cash from
operations, and ended the first quarter with $33.8 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.”
He continued, “Within APC, we are having more meaningful
conversations with potential utility and industrial clients
following the March 2023 ruling by the U.S. Environmental
Protection Agency to reduce emissions of nitrogen oxides (NOx) from
power plants and certain industrial facilities in 23 states. This
rule, known as the Good Neighbor Plan, allows these facilities to
comply with the 2015 National Ambient Air Quality Standards. We
expect that over time any such awards would benefit our SCR, SNCR
and ULTRA emissions control solutions. In FUEL CHEM, we are
implementing new marketing strategies to reintroduce the benefits
of our chemical technology program to domestic coal-fired utilities
while pursuing targeted international opportunities. We continue to
expect that FUEL CHEM will show a modest decline in revenue for the
year driven by reduced usage compared to 2022 and an expected plant
closure, however, gross margins should align with historic
levels.”
Mr. Arnone concluded, “Our DGI segment continues to evolve and
make meaningful advancements towards commercialization with a goal
of securing our first contracts this year, and the addition of Bill
Decker last month to the Fuel Tech team will bolster our efforts.
To that end, we expect to commence an on-site demonstration using
our small-scale dissolved oxygen infusion system at a customer site
for one of our targeted markets in the United States late in the
second quarter of 2023 or early in the third.”
Q1 2023 Consolidated Results
Overview
Consolidated revenues for the first quarter ended March 31, 2023
(“Q1 2023”) rose 31.7% to $7.3 million from $5.5 million in the
first quarter ended March 31, 2022 (“Q1 2022”), reflecting higher
revenues at APC and FUEL CHEM.
Consolidated gross margin for Q1 2023 was 38.5% of revenues
compared to 41.4% of revenues in Q1 2022, reflecting changes in
product and project mix.
SG&A expenses rose to $3.2 million from $3.1 million in Q1
2022, reflecting higher employee-related expenses partially offset
by lower administrative costs and depreciation. As a percentage of
consolidated revenues, SG&A expenses declined to 45% from
55%.
Operating loss for the quarter was $(0.7) million compared to an
operating loss of $(1.0) million in Q1 2022.
Interest income improved to $0.3 million from $0.001 million in
Q1 2022, reflecting higher interest rates on held-to-maturity debt
securities and money market funds.
Net loss in Q1 2023 narrowed to $(0.4) million, or $(0.01) per
share, from a net loss of $(1.0) million, or $(0.03) per share, in
Q1 2022.
Consolidated APC segment backlog at March 31, 2023 was $7.6
million compared to $8.2 million at December 31, 2022.
APC revenues increased to $3.6 million from $2.2 million in Q1
2022 with gross margin of 27.1% compared to 35.2%, due primarily to
the timing of project execution.
FUEL CHEM segment revenues rose to $3.7 million from $3.3
million in Q1 2022 due to increased demand, with gross margin
improving to 49.4% from 45.5% in Q1 2022.
Adjusted EBITDA loss was $(0.6) million in Q1 2023 compared to
Adjusted EBITDA loss of $(0.9) million in Q1 2022.
Financial Condition
At March 31, 2023, cash and cash equivalents were $15.7 million,
short-term investments were $11.1 million, and long-term
investments totaled $7.1 million. Stockholders’ equity at March 31,
2023 was $44.6 million, or $1.47 per share, and the Company had no
debt.
Conference Call
Management will host a conference call on Wednesday, May 10,
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 in 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)
March 31,
December 31,
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
$
15,698
$
23,328
Short-term investments
11,067
2,981
Accounts receivable, net
6,755
7,729
Inventories, net
509
392
Prepaid expenses and other current
assets
1,350
1,395
Total current assets
35,379
35,825
Property and equipment, net of accumulated
depreciation of $18,646 and $18,557, respectively
4,370
4,435
Goodwill
2,116
2,116
Other intangible assets, net of
accumulated amortization of $418 and $406, respectively
401
397
Right-of-use operating lease assets,
net
166
197
Long-term investments
7,054
6,360
Other assets
796
794
Total assets
$
50,282
$
50,124
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
3,651
$
2,710
Accrued liabilities:
Operating lease liabilities - current
109
125
Employee compensation
588
1,105
Other accrued liabilities
827
826
Total current liabilities
5,175
4,766
Operating lease liabilities -
non-current
51
66
Deferred income taxes, net
177
177
Other liabilities
277
274
Total liabilities
5,680
5,283
Stockholders’ equity:
Common stock, $.01 par value, 40,000,000
shares authorized, 31,272,303 and 31,272,303 shares issued, and
30,296,297 and 30,296,297 shares outstanding, respectively
313
313
Additional paid-in capital
164,511
164,422
Accumulated deficit
(116,405
)
(115,991
)
Accumulated other comprehensive loss
(1,642
)
(1,728
)
Nil coupon perpetual loan notes
76
76
Treasury stock, at cost
(2,251
)
(2,251
)
Total stockholders’ equity
44,602
44,841
Total liabilities and stockholders’
equity
$
50,282
$
50,124
See notes to condensed
consolidated financial statements.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(in thousands, except share and
per-share data)
Three Months Ended
March 31,
2023
2022
Revenues
$
7,287
$
5,535
Costs and expenses:
Cost of sales
4,482
3,245
Selling, general and administrative
3,245
3,054
Research and development
218
220
7,945
6,519
Operating loss
(658
)
(984
)
Interest expense
(5
)
(5
)
Interest income
339
1
Other expense, net
(90
)
(10
)
Loss before income taxes
(414
)
(998
)
Income tax expense
—
—
Net loss
$
(414
)
$
(998
)
Net loss per common share:
Basic
Basic net loss per common share
$
(0.01
)
$
(0.03
)
Diluted net loss per common
share
$
(0.01
)
$
(0.03
)
Weighted-average number of common
shares outstanding:
Basic
30,296,000
30,267,000
Diluted
30,296,000
30,267,000
See notes to condensed
consolidated financial statements.
FUEL TECH, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2023
2022
Net loss
$
(414
)
$
(998
)
Other comprehensive income (loss):
Foreign currency translation
adjustments
86
(70
)
Comprehensive loss
$
(328
)
$
(1,068
)
See notes to condensed
consolidated financial statements.
FUEL TECH, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2023
2022
Operating Activities
Net loss
$
(414
)
$
(998
)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation
79
94
Amortization
11
14
Non-cash interest income on
held-to-maturity securities
(95
)
—
Provision for doubtful accounts, net of
recoveries
—
(25
)
Stock-based compensation, net of
forfeitures
89
18
Changes in operating assets and
liabilities:
Accounts receivable
990
(1,520
)
Inventories
(116
)
(13
)
Prepaid expenses, other current assets and
other non-current assets
51
(3
)
Accounts payable
934
682
Accrued liabilities and other non-current
liabilities
(519
)
5
Net cash provided by (used in) operating
activities
1,010
(1,746
)
Investing Activities
Purchases of equipment and patents
(30
)
(53
)
Purchases of debt securities
(9,685
)
—
Maturities of debt securities
1,000
—
Net cash used in investing activities
(8,715
)
(53
)
Financing Activities
Taxes paid on behalf of equity award
participants
—
(17
)
Net cash used in financing activities
—
(17
)
Effect of exchange rate fluctuations on
cash
75
2
Net decrease in cash, cash equivalents
and restricted cash
(7,630
)
(1,814
)
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)
$
15,698
$
35,240
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 are provided below:
Air Pollution
FUEL CHEM
Three months ended March 31, 2023
Control Segment
Segment
Other
Total
Revenues from external customers
$
3,559
$
3,728
$
—
$
7,287
Cost of sales
(2,594
)
(1,888
)
—
(4,482
)
Gross margin
965
1,840
—
2,805
Selling, general and administrative
—
—
(3,245
)
(3,245
)
Research and development
—
—
(218
)
(218
)
Operating income (loss) from
operations
$
965
$
1,840
$
(3,463
)
$
(658
)
Air Pollution
FUEL CHEM
Three months ended March 31, 2022
Control Segment
Segment
Other
Total
Revenues from external customers
$
2,204
$
3,331
$
—
$
5,535
Cost of sales
(1,429
)
(1,816
)
—
(3,245
)
Gross margin
775
1,515
—
2,290
Selling, general and administrative
—
—
(3,054
)
(3,054
)
Research and development
—
—
(220
)
(220
)
Operating income (loss) from
operations
$
775
$
1,515
$
(3,274
)
$
(984
)
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
March 31,
2023
2022
Revenues:
United States
$
5,981
$
3,688
Foreign
1,306
1,847
$
7,287
$
5,535
March 31,
December 31,
2023
2022
Assets:
United States
$
46,893
$
47,007
Foreign
3,389
3,117
$
50,282
$
50,124
FUEL TECH, INC.
RECONCILIATION OF GAAP NET INCOME
(LOSS) TO EBITDA AND ADJUSTED EBITDA
(Unaudited)
(in thousands)
Three Months Ended March 31,
2023
2022
Net Loss
$
(414
)
$
(998
)
Interest (income) expense, net
(334
)
4
Depreciation expense
79
94
Amortization expense
11
14
EBITDA
(658
)
(886
)
Stock compensation expense
89
18
ADJUSTED EBITDA
$
(569
)
$
(868
)
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/20230509005965/en/
Vince Arnone President and CEO (630) 845-4500
Devin Sullivan Managing Director The Equity Group Inc.
dsullivan@equityny.com
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