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Fuel Tech Reports 2021 Second Quarter Financial Results

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, 2021 (“Q2 2021”).

“Our Q2 2021 revenues rose 18.6% from the second quarter of 2020 (“Q2 2020”), driven by a 72% revenue improvement for the FUEL CHEM® segment attributable to contributions from recent installations of our TIFI® Targeted In-Furnace Injection technology on new domestic accounts, increased demand for power, and the ongoing recovery from the COVID-19 pandemic,” said Vincent J. Arnone, President and CEO. “We believe that our FUEL CHEM business segment will continue to produce strong results for the balance of 2021, with upside potential derived from application opportunities in the U.S. and internationally.

“Our Air Pollution Control (APC) business remained challenged in Q2 2021 due to ongoing pandemic-driven project delays and cancellations that have resulted in a lack of new orders, and project timing. We were pleased to recently announce $4.5 million in new contracts from customers in Korea, North America, and Europe, and view this as a reflection of a strengthening post-COVID business procurement environment. We believe that our greatest opportunities lie in industrial applications, led by our Selective Catalytic Reduction (SCR) and ULTRA® technologies, and we continue to pursue a current global sales pipeline of $40-50 million.”

Mr. Arnone continued, “During Q2 2021, we completed on-site demonstrations of our Dissolved Gas Infusion (DGITM) at two locations in the United States – the first at a pulp and paper facility in the Northwest that is looking to increase its production capacity later this year, and the second at a municipal wastewater treatment facility on the west coast that was intended to show the benefits of supplemental oxygenation that could be provided by DGI during periods of high waste treatment volume for the municipality. These incremental, yet important demonstrations proved the efficacy of our advanced aeration technology as an adjunct to existing wastewater treatment processes at the facilities.”

He concluded, “We ended the second quarter with a strong balance sheet and have no debt. We are well-positioned to pursue a variety of business development growth initiatives and continue to monitor proposed federal infrastructure spending related to the reduction of harmful emissions.”

Q2 2021 Consolidated Results Overview

Consolidated revenues for the quarter increased 18.6% to $5.2 million from $4.4 million in Q2 2020, reflecting higher revenues for FUEL CHEM offset by revenue declines in the APC segment.

Gross margin for Q2 2021 was 49.5% of revenues compared to 13.7% of revenues in Q2 2020. Gross margin in Q2 2020 included a $1.1 million charge for an APC product warranty issue; excluding this charge, consolidated gross margin for Q2 2020 was 40%.

SG&A expenses rose to $3.0 million from $2.8 million in Q2 2020, reflecting higher administrative and employee expenses, offset by a reversal of a $0.5 million charge to the allowance for doubtful accounts recorded in Q2 2020.

Operating loss narrowed to $(0.7) million from an operating loss of $(2.4) million in Q2 2020.

Net loss narrowed to $(0.8) million, or $(0.03) per share, compared to a net loss of $(2.5) million, or $(0.10) per share, in Q2 2020.

Consolidated APC segment backlog at June 30, 2021 was $4.9 million compared to $5.3 million at December 31, 2020. Backlog at June 30, 2021 included $4.6 million of domestic backlog as compared to $4.9 million of domestic backlog at December 31, 2020. Backlog at June 30, 2021 did not include $4.5 million in new contracts from customers in Korea, North America, and Europe awarded in July 2021.

APC segment revenues declined to $1.0 million in Q2 2021 from $1.9 million in Q2 2020, primarily the result of delayed projects related to the COVID-19 pandemic. APC gross margin in Q2 2021 was $0.5 million, or 48.6% of revenue, compared to gross margin of $(0.4) million in Q2 2020 that included the above-referenced $1.1 million charge. Excluding the charge, APC gross margin for Q2 2020 was $0.7 million, or 39%.

FUEL CHEM segment revenues rose to $4.2 million, up 71.8% from $2.4 million in Q2 2020. This increase primarily reflected higher power demand and recovery from the initial emergence of the COVID-19 pandemic, which impacted results in the prior year period. Segment gross margin improved to 49.7% in Q2 2021 from 40.0% in Q1 2020.

Adjusted EBITDA loss for the quarter was $(0.6) million in Q2 2021 compared to an Adjusted EBITDA loss of $(2.2) million in Q2 2020.

Financial Condition

At June 30, 2021, cash and cash equivalents were $36.6 million and restricted cash was $0.4 million. Stockholders’ Equity at June 30, 2021 was $45.9 million, or $1.52 per share, and the Company had no debt.

Conference Call

Management will host a conference call on Wednesday, August 11, 2021 at 10:00 am EDT / 9:00 am CDT 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)

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

36,194

 

 

$

10,640

 

Restricted cash

 

 

98

 

 

 

1,595

 

Accounts receivable, net

 

 

3,403

 

 

 

6,548

 

Inventories, net

 

 

194

 

 

 

97

 

Prepaid expenses and other current assets

 

 

1,555

 

 

 

2,193

 

Total current assets

 

 

41,444

 

 

 

21,073

 

Property and equipment, net of accumulated depreciation of $18,459 and $26,889, respectively

 

 

5,087

 

 

 

5,220

 

Goodwill

 

 

2,116

 

 

 

2,116

 

Other intangible assets, net of accumulated amortization of $828 and $757, respectively

 

 

516

 

 

 

553

 

Restricted cash

 

 

270

 

 

 

371

 

Right-of-use operating lease assets

 

 

311

 

 

 

394

 

Other assets

 

 

317

 

 

 

361

 

Total assets

 

$

50,061

 

 

$

30,088

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,400

 

 

$

2,353

 

Accrued liabilities:

 

 

 

 

 

 

 

 

Operating lease liabilities - current

 

 

132

 

 

 

149

 

Employee compensation

 

 

681

 

 

 

930

 

Other accrued liabilities

 

 

1,339

 

 

 

2,099

 

Total current liabilities

 

 

3,552

 

 

 

5,531

 

Operating lease liabilities - non-current

 

 

171

 

 

 

237

 

Long-term borrowings

 

 

 

 

 

1,556

 

Deferred income taxes, net

 

 

134

 

 

 

134

 

Other liabilities

 

 

306

 

 

 

309

 

Total liabilities

 

 

4,163

 

 

 

7,767

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $.01 par value, 40,000,000 shares authorized, 31,227,300 and

25,639,702 shares issued, and 30,263,791 and 25,228,951 shares outstanding, respectively

 

 

312

 

 

 

262

 

Additional paid-in capital

 

 

164,157

 

 

 

140,138

 

Accumulated deficit

 

 

(114,983

)

 

 

(114,603

)

Accumulated other comprehensive loss

 

 

(1,430

)

 

 

(1,370

)

Nil coupon perpetual loan notes

 

 

76

 

 

 

76

 

Treasury stock, at cost

 

 

(2,234

)

 

 

(2,182

)

Total stockholders’ equity

 

 

45,898

 

 

 

22,321

 

Total liabilities and stockholders’ equity

 

$

50,061

 

 

$

30,088

 

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,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues

 

$

5,218

 

 

$

4,401

 

 

$

10,251

 

 

$

8,179

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

2,635

 

 

 

3,799

 

 

 

5,310

 

 

 

6,050

 

Selling, general and administrative

 

 

2,957

 

 

 

2,755

 

 

 

6,057

 

 

 

6,641

 

Research and development

 

 

315

 

 

 

271

 

 

 

730

 

 

 

595

 

 

 

 

5,907

 

 

 

6,825

 

 

 

12,097

 

 

 

13,286

 

Operating loss

 

 

(689

)

 

 

(2,424

)

 

 

(1,846

)

 

 

(5,107

)

Interest expense

 

 

(5

)

 

 

(3

)

 

 

(9

)

 

 

(6

)

Interest income

 

 

2

 

 

 

2

 

 

 

3

 

 

 

13

 

Other (expense) income, net

 

 

(76

)

 

 

(88

)

 

 

1,482

 

 

 

138

 

Loss before income taxes

 

 

(768

)

 

 

(2,513

)

 

 

(370

)

 

 

(4,962

)

Income tax expense

 

 

(10

)

 

 

(31

)

 

 

(10

)

 

 

(149

)

Net loss

 

$

(778

)

 

$

(2,544

)

 

$

(380

)

 

$

(5,111

)

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net loss per common share

 

$

(0.03

)

 

$

(0.10

)

 

$

(0.01

)

 

$

(0.21

)

Diluted net loss per common share

 

$

(0.03

)

 

$

(0.10

)

 

$

(0.01

)

 

$

(0.21

)

Weighted-average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

30,264,000

 

 

 

24,668,000

 

 

 

28,895,000

 

 

 

24,633,000

 

Diluted

 

 

30,264,000

 

 

 

24,668,000

 

 

 

28,895,000

 

 

 

24,633,000

 

FUEL TECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(in thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net loss

 

$

(778

)

 

$

(2,544

)

 

$

(380

)

 

$

(5,111

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

133

 

 

 

152

 

 

 

(60

)

 

 

(79

)

Comprehensive loss

 

$

(645

)

 

$

(2,392

)

 

$

(440

)

 

$

(5,190

)

FUEL TECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2021

 

 

2020

 

Operating Activities

 

 

 

 

 

 

 

 

Net loss

 

$

(380

)

 

$

(5,111

)

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

 

 

 

 

 

 

 

 

Depreciation

 

 

319

 

 

 

329

 

Amortization

 

 

71

 

 

 

85

 

Loss on disposal of equipment

 

 

13

 

 

 

 

Provision for doubtful accounts, net of recoveries

 

 

23

 

 

 

(1,082

)

Stock-based compensation, net of forfeitures

 

 

40

 

 

 

150

 

Gain on forgiveness of Paycheck Protection Plan Loan

 

 

(1,556

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

3,079

 

 

 

1,863

 

Inventories

 

 

(97

)

 

 

(78

)

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

 

 

681

 

 

 

424

 

Accounts payable

 

 

(943

)

 

 

(531

)

Accrued liabilities and other non-current liabilities

 

 

(1,021

)

 

 

537

 

Net cash provided by (used in) operating activities

 

 

229

 

 

 

(3,414

)

Investing Activities

 

 

 

 

 

 

 

 

Purchases of equipment and patents

 

 

(237

)

 

 

(122

)

Net cash used in investing activities

 

 

(237

)

 

 

(122

)

Financing Activities

 

 

 

 

 

 

 

 

Proceeds from borrowings

 

 

 

 

 

1,556

 

Proceeds from sale of common stock issued in connection with private placement

 

 

25,812

 

 

 

 

Costs related to sale of common stock issued in connection with private placement

 

 

(1,783

)

 

 

 

Taxes paid on behalf of equity award participants

 

 

(52

)

 

 

(6

)

Net cash provided by financing activities

 

 

23,977

 

 

 

1,550

 

Effect of exchange rate fluctuations on cash

 

 

(13

)

 

 

(258

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

23,956

 

 

 

(2,244

)

Cash, cash equivalents, and restricted cash at beginning of period (Note 2)

 

 

12,606

 

 

 

13,501

 

Cash, cash equivalents and restricted cash at end of period (Note 2)

 

$

36,562

 

 

$

11,257

 

FUEL TECH, INC.

BUSINESS SEGMENT FINANCIAL DATA

(Unaudited)

(in thousands)

 

 

 

Air

Pollution

 

 

FUEL

CHEM

 

 

 

 

 

 

 

 

 

Three months ended June 30, 2021

 

Control

Segment

 

 

Segment

 

 

Other

 

 

Total

 

Revenues from external customers

 

$

986

 

 

$

4,232

 

 

$

 

 

$

5,218

 

Cost of sales

 

 

(507

)

 

 

(2,128

)

 

 

 

 

 

(2,635

)

Gross margin

 

 

479

 

 

 

2,104

 

 

 

 

 

 

2,583

 

Selling, general and administrative

 

 

 

 

 

 

 

 

(2,957

)

 

 

(2,957

)

Research and development

 

 

 

 

 

 

 

 

(315

)

 

 

(315

)

Operating income (loss) from operations

 

$

479

 

 

$

2,104

 

 

$

(3,272

)

 

$

(689

)

 

 

Air

Pollution

 

 

FUEL

CHEM

 

 

 

 

 

 

 

 

 

Three months ended June 30, 2020

 

Control

Segment

 

 

Segment

 

 

Other

 

 

Total

 

Revenues from external customers

 

$

1,937

 

 

$

2,464

 

 

$

 

 

$

4,401

 

Cost of sales

 

 

(2,320

)

 

 

(1,479

)

 

 

 

 

 

(3,799

)

Gross margin

 

 

(383

)

 

 

985

 

 

 

 

 

 

602

 

Selling, general and administrative

 

 

 

 

 

 

 

 

(2,755

)

 

 

(2,755

)

Research and development

 

 

 

 

 

 

 

 

(271

)

 

 

(271

)

Operating (loss) income from operations

 

$

(383

)

 

$

985

 

 

$

(3,026

)

 

$

(2,424

)

 

 

Air

Pollution

 

 

FUEL

CHEM

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2021

 

Control

Segment

 

 

Segment

 

 

Other

 

 

Total

 

Revenues from external customers

 

$

1,893

 

 

$

8,358

 

 

$

 

 

$

10,251

 

Cost of sales

 

 

(1,038

)

 

 

(4,272

)

 

 

 

 

 

(5,310

)

Gross margin

 

 

855

 

 

 

4,086

 

 

 

 

 

 

4,941

 

Selling, general and administrative

 

 

 

 

 

 

 

 

(6,057

)

 

 

(6,057

)

Research and development

 

 

 

 

 

 

 

 

(730

)

 

 

(730

)

Operating income (loss) from operations

 

$

855

 

 

$

4,086

 

 

$

(6,787

)

 

$

(1,846

)

 

 

Air

Pollution

 

 

FUEL

CHEM

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2020

 

Control

Segment

 

 

Segment

 

 

Other

 

 

Total

 

Revenues from external customers

 

$

3,133

 

 

$

5,046

 

 

$

 

 

$

8,179

 

Cost of sales

 

 

(3,086

)

 

 

(2,964

)

 

 

 

 

 

(6,050

)

Gross margin

 

 

47

 

 

 

2,082

 

 

 

 

 

 

2,129

 

Selling, general and administrative

 

 

 

 

 

 

 

 

(6,641

)

 

 

(6,641

)

Research and development

 

 

 

 

 

 

 

 

(595

)

 

 

(595

)

Operating income (loss) from operations

 

$

47

 

 

$

2,082

 

 

$

(7,236

)

 

$

(5,107

)

FUEL TECH, INC.

GEOGRAPHIC INFORMATION

(in thousands)

Information concerning Fuel Tech’s operations by geographic area is provided below. Revenues are attributed to countries based on the location of the customer. Assets are those directly associated with operations of the geographic area.

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

4,588

 

 

$

3,310

 

 

$

9,051

 

 

$

6,407

 

Foreign

 

 

630

 

 

 

1,091

 

 

 

1,200

 

 

 

1,772

 

 

 

$

5,218

 

 

$

4,401

 

 

$

10,251

 

 

$

8,179

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Assets:

 

 

 

 

 

 

 

 

United States

 

$

46,186

 

 

$

24,524

 

Foreign

 

 

3,875

 

 

 

5,564

 

 

 

$

50,061

 

 

$

30,088

 

FUEL TECH, INC.

RECONCILIATION OF GAAP NET LOSS TO EBITDA AND ADJUSTED EBITDA

(Unaudited)

(in thousands)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net Loss

 

$

(778

)

 

$

(2,544

)

 

$

(380

)

 

$

(5,111

)

Interest (income) expense, net

 

 

(9

)

 

 

1

 

 

 

(6

)

 

 

(7

)

Income tax expense

 

 

10

 

 

 

31

 

 

 

10

 

 

 

149

 

Depreciation expense

 

 

151

 

 

 

166

 

 

 

319

 

 

 

329

 

Amortization expense

 

 

37

 

 

 

42

 

 

 

71

 

 

 

85

 

EBITDA

 

 

(589

)

 

 

(2,304

)

 

 

14

 

 

(4,555

)

Gain on Forgiveness of Paycheck Protection Plan loan

 

 

-

 

 

 

-

 

 

 

(1,566

)

 

 

-

 

Stock compensation expense

 

 

20

 

 

 

69

 

 

 

40

 

 

 

150

 

ADJUSTED EBITDA

 

 

(569

)

 

 

(2,235

)

 

 

(1,512

)

 

 

(4,405

)

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.

Contacts

Vince Arnone

President and CEO

(630) 845-4500



Devin Sullivan

Senior Vice President

The Equity Group Inc.

(212) 836-9608

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