FTEK Fuel Tech Inc

Fuel Tech, Inc. (NASDAQ: FTEK), a technology company providing advanced engineering for the optimization of combustion systems, emissions control, and water treatment in utility and industrial applications, today reported financial results for the first quarter (Q1 2024) ended March 31, 2024.

“Our revenues for the first quarter were impacted by customer-driven delays in executing new contracts at our APC business segment, while performance at FUEL CHEM® reflected warmer weather across the US that affected unit dispatch,” said Vincent J. Arnone, President and CEO. “We continue to expect that APC revenue will increase modestly in 2024 when compared to 2023 and that the bulk of our new award activity will occur in the second half of the year. Our results at FUEL CHEM are also expected to improve as we move through 2024, driven by increased unit dispatch as we approach the summer months and contributions from a new coal-fired unit that will demonstrate our chemical technology program later this month. The annualized revenue potential at this new client, if it becomes commercial, will be approximately $1.5 to $2.0 million dollars, and this revenue is expected to generate historic FUEL CHEM gross margins. We are currently pursuing additional FUEL CHEM opportunities at units that use coal and other fuel sources, which could provide incremental revenue contribution in the latter half of 2024.

“We are also very encouraged by continuing market acceptance of our Dissolved Gas Infusion (DGI™) technology. We have an agreement in place to commence and complete a demonstration of DGI at a municipal wastewater site in the current second quarter. With respect to aquaculture, we are building on the successful deployment of DGI at a domestic shrimp farming facility in the US and are in discussions with that facility to incorporate DGI into its planned stacked raceway system. We are also in advanced discussions with a potential new aquaculture client in the US that is considering a demonstration of DGI.”

Mr. Arnone concluded, “We remain optimistic about our prospects and technology development initiatives. We remain supported in our efforts by a strong financial position, which included $32.1 million in cash and investments, and no long-term debt at March 31, 2024.”

Q1 2024 Consolidated Results Overview

Consolidated revenues for Q1 2024 declined to $5.0 million from $7.3 million in the three months ended March 31, 2023 (Q1 2023), with reductions in both business segments from the prior year period.

Consolidated gross margin for Q1 2024 rose to 40.9% of revenues from 38.5% of revenues in Q1 2023, due to an increase in the APC operating segment gross margin partially offset by a decrease in FUEL CHEM operating segment gross margin.

SG&A expenses increased slightly to $3.3 million from $3.2 million in Q1 2023, reflecting increases in employee compensation and benefit related costs, which were partially offset by decreases in costs related to our international locations.

Interest income was flat at $0.3 million. Interest income primarily related to interest received on the held-to-maturity debt securities and money market funds.

Other income in Q1 2024 was $1.7 million related to the recording of income associated with the expected receipt of the Employee Retention Credit (“ERC”) during the quarter, as compared to no such income in Q1 2023.

Net income in Q1 2024 was $281,000, or $0.01 per share, compared to net loss of $(414,000), or $(0.01) per share, in Q1 2023.

Consolidated APC segment backlog at March 31, 2024 was $6.2 million compared to $7.5 million at December 31, 2023.

APC segment revenue decreased to $2.3 million from $3.6 million in Q1 2023, primarily related to customer-related delays in project execution. APC gross margin rose to 38.4% from 27.1%, primarily due to the mix of APC projects and services executed during the quarter.

FUEL CHEM segment revenue declined to $2.6 million from $3.7 million in Q1 2023, due to a decrease in electrical generation demand, unscheduled plant outages and plant closures. Gross margin decreased to 43.2% from 49.4%.

Adjusted EBITDA loss was $(1.5) million in Q1 2024 compared to Adjusted EBITDA loss of $(0.6) million in Q1 2023.

Financial Condition

At March 31, 2024, cash and cash equivalents were $11.4 million, short-term investments were $11.8 million, and long-term investments totaled $8.9 million. Stockholders’ equity at March 31, 2024 was $44.0 million, or $1.43 per share, and the Company had no debt.

Conference Call

Management will host a conference call on Wednesday, May 8, 2024 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 1,300 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 channel injector 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,

 

 

 

2024

 

 

2023

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

11,382

 

 

$

17,578

 

Short-term investments

 

 

11,872

 

 

 

12,136

 

Accounts receivable, less current expected credit loss of $111 and $111, respectively

 

 

7,104

 

 

 

6,729

 

Inventories, net

 

 

537

 

 

 

439

 

Prepaid expenses and other current assets

 

 

1,295

 

 

 

1,439

 

Total current assets

 

 

32,190

 

 

 

38,321

 

Property and equipment, net of accumulated depreciation of $18,763 and $18,703, respectively

 

 

4,572

 

 

 

4,539

 

Goodwill

 

 

2,116

 

 

 

2,116

 

Other intangible assets, net of accumulated amortization of $483 and $468, respectively

 

 

343

 

 

 

358

 

Right-of-use operating lease assets, net

 

 

582

 

 

 

609

 

Long-term investments

 

 

8,879

 

 

 

3,664

 

Other assets

 

 

764

 

 

 

781

 

Total assets

 

$

49,446

 

 

$

50,388

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,852

 

 

$

2,421

 

Accrued liabilities:

 

 

 

 

 

 

 

 

Operating lease liabilities - current

 

 

105

 

 

 

81

 

Employee compensation

 

 

1,289

 

 

 

1,252

 

Other accrued liabilities

 

 

1,284

 

 

 

1,934

 

Total current liabilities

 

 

4,530

 

 

 

5,688

 

Operating lease liabilities - non-current

 

 

512

 

 

 

533

 

Deferred income taxes, net

 

 

172

 

 

 

172

 

Other liabilities

 

 

276

 

 

 

281

 

Total liabilities

 

 

5,490

 

 

 

6,674

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $.01 par value, 40,000,000 shares authorized, 31,361,303 and 31,361,303 shares issued, and 30,385,297 and 30,385,297 shares outstanding, respectively

 

 

313

 

 

 

313

 

Additional paid-in capital

 

 

164,957

 

 

 

164,853

 

Accumulated deficit

 

 

(117,248

)

 

 

(117,529

)

Accumulated other comprehensive loss

 

 

(1,891

)

 

 

(1,748

)

Nil coupon perpetual loan notes

 

 

76

 

 

 

76

 

Treasury stock, at cost

 

 

(2,251

)

 

 

(2,251

)

Total stockholders’ equity

 

 

43,956

 

 

 

43,714

 

Total liabilities and stockholders’ equity

 

$

49,446

 

 

$

50,388

 

 

See notes to condensed consolidated financial statements.

 

FUEL TECH, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except share and per-share data)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Revenues

 

$

4,957

 

 

$

7,287

 

Costs and expenses:

 

 

 

 

 

 

 

 

Cost of sales

 

 

2,928

 

 

 

4,482

 

Selling, general and administrative

 

 

3,345

 

 

 

3,245

 

Research and development

 

 

376

 

 

 

218

 

 

 

 

6,649

 

 

 

7,945

 

Operating loss

 

 

(1,692

)

 

 

(658

)

Interest expense

 

 

—

 

 

 

(5

)

Interest income

 

 

311

 

 

 

339

 

Other income (expense), net

 

 

1,673

 

 

 

(90

)

Income (loss) before income taxes

 

 

292

 

 

 

(414

)

Income tax expense

 

 

(11

)

 

 

—

 

Net income (loss)

 

$

281

 

 

$

(414

)

Net income (loss) per common share:

 

 

 

 

 

 

 

 

Basic net income (loss) per common share

 

$

0.01

 

 

$

(0.01

)

Diluted net income (loss) per common share

 

$

0.01

 

 

$

(0.01

)

Weighted-average number of common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

30,385,000

 

 

 

30,296,000

 

Diluted

 

 

30,756,000

 

 

 

30,296,000

 

 

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,

 

 

 

2024

 

 

2023

 

Net income (loss)

 

$

281

 

 

$

(414

)

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(143

)

 

 

86

 

Comprehensive income (loss)

 

$

138

 

 

$

(328

)

 

See notes to condensed consolidated financial statements.

 

FUEL TECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Operating Activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

281

 

 

$

(414

)

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

80

 

 

 

79

 

Amortization

 

 

16

 

 

 

11

 

Non-cash interest income on held-to-maturity securities

 

 

(9

)

 

 

(95

)

Stock-based compensation, net of forfeitures

 

 

104

 

 

 

89

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

1,250

 

 

 

990

 

Employee retention credit receivable

 

 

(1,677

)

 

 

—

 

Inventory

 

 

(99

)

 

 

(116

)

Prepaid expenses, other current assets and other non-current assets

 

 

151

 

 

 

51

 

Accounts payable

 

 

(563

)

 

 

934

 

Accrued liabilities and other non-current liabilities

 

 

(609

)

 

 

(519

)

Net cash (used in) provided by operating activities

 

 

(1,075

)

 

 

1,010

 

Investing Activities

 

 

 

 

 

 

 

 

Purchases of equipment and patents

 

 

(114

)

 

 

(30

)

Purchases of debt securities

 

 

(7,641

)

 

 

(9,685

)

Maturities of debt securities

 

 

2,750

 

 

 

1,000

 

Net cash used in investing activities

 

 

(5,005

)

 

 

(8,715

)

Financing Activities

 

 

 

 

 

 

 

 

Net cash provided by financing activities

 

 

—

 

 

 

—

 

Effect of exchange rate fluctuations on cash

 

 

(116

)

 

 

75

 

Net decrease in cash and cash equivalents

 

 

(6,196

)

 

 

(7,630

)

Cash and cash equivalents at beginning of period

 

 

17,578

 

 

 

23,328

 

Cash and cash equivalents at end of period

 

$

11,382

 

 

$

15,698

 

 

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 March 31, 2024

 

Control Segment

 

 

Segment

 

 

Other

 

 

Total

 

Revenues from external customers

 

$

2,318

 

 

$

2,639

 

 

$

—

 

 

$

4,957

 

Cost of sales

 

 

(1,428

)

 

 

(1,500

)

 

 

—

 

 

 

(2,928

)

Gross margin

 

 

890

 

 

 

1,139

 

 

 

—

 

 

 

2,029

 

Selling, general and administrative

 

 

—

 

 

 

—

 

 

 

(3,345

)

 

 

(3,345

)

Research and development

 

 

—

 

 

 

—

 

 

 

(376

)

 

 

(376

)

Operating income (loss) from operations

 

$

890

 

 

$

1,139

 

 

$

(3,721

)

 

$

(1,692

)

 

 

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

)

  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,

 

 

 

2024

 

 

2023

 

Revenues:

 

 

 

 

 

 

 

 

United States

 

$

3,595

 

 

$

5,981

 

Foreign

 

 

1,362

 

 

 

1,306

 

 

 

$

4,957

 

 

$

7,287

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Assets:

 

 

 

 

 

 

 

 

United States

 

$

45,744

 

 

$

46,487

 

Foreign

 

 

3,702

 

 

 

3,901

 

 

 

$

49,446

 

 

$

50,388

 

 

FUEL TECH, INC.

RECONCILIATION OF GAAP NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA

(Unaudited)

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Net Income (loss)

 

$

281

 

 

$

(414

)

Interest (income) expense, net

 

 

(311

)

 

 

(334

)

Income tax expense

 

 

11

 

 

 

-

 

Depreciation expense

 

 

80

 

 

 

79

 

Amortization expense

 

 

16

 

 

 

11

 

EBITDA

 

 

77

 

 

 

(658

)

Stock compensation expense

 

 

104

 

 

 

89

 

Gain on employee retention credit

 

 

(1677

)

 

 

-

 

ADJUSTED EBITDA

 

$

(1,496

)

 

$

(569

)

 

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 gain on employee retention credit. 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/20240507292864/en/

Vince Arnone President and CEO (630) 845-4500

Devin Sullivan Managing Director The Equity Group Inc. dsullivan@equityny.com