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Fuel Tech Reports 2023 Fourth Quarter and Full Year Financial Results

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 fourth quarter (Q4) and full year ended December 31, 2023.

“We reported higher total revenues compared to full year 2022, completed a successful trial of our Dissolved Gas Infusion (DGITM) technology in an aquaculture setting, maintained tight expense control, and ended the year in a strong financial position, with $33.4 million in cash and investments, and no long-term debt,” said Vincent J. Arnone, President and CEO.

“Our Air Pollution Control (APC) business performed well in the 2023 fourth quarter and full year, driven by approximately $8.3 million of new project awards announced during the year, with an emphasis on our ULTRA, SCR, SNCR and FGC emissions control solutions both domestically and abroad. Our APC backlog at December 31, 2023 was $7.5 million, up from $5.6 million at September 30, 2023. Although we do expect that APC revenue will increase modestly in 2024 when compared to 2023, it is likely that the bulk of our new award activity will occur in the second half of the year. As expected, revenues at our FUEL CHEM® segment declined year-over-year for both the fourth quarter and full year 2023, with warmer weather across the US impacting unit dispatch; however, segment gross margin was essentially unchanged and at historic levels. Our base FUEL CHEM unit count remains intact as we enter 2024 and we are currently pursuing additional FUEL CHEM opportunities which could provide incremental revenue contribution in 2024.”

Mr. Arnone concluded, “We are very pleased with the trajectory of our DGI business segment. In February we announced the publication of a white paper that detailed the benefits of deploying DGI for oxygen injection at a shrimp farm in the US and we presented these results at Aquaculture America in San Antonio, Texas. We have received a notable increase in inquiries regarding our DGI technology from potential customers in multiple end markets and are currently in negotiations with potential customers regarding on-site demonstrations of DGI. We are targeting to enter into our first commercial contract for DGI in 2024.”

Q4 2023 Consolidated Results Overview

Consolidated revenues for Q4 2023 declined to $6.3 million from $7.0 million in Q4 2022, with modest declines in both business segments from the prior year.

Consolidated gross margin for Q4 2023 rose to 51.1% of revenues from 42.8% of revenues in Q4 2022, due to a significant increase in APC gross margin during the quarter driven by the mix of APC projects and services executed during the quarter.

SG&A expenses increased to $3.7 million from $3.1 million in Q4 2022, reflecting the timing of employee and employee-related expenses.

Interest income improved to $0.3 million from $0.1 million in Q4 2022, reflecting an increase in capital invested and higher interest rates on held-to-maturity debt securities and money market funds.

Net loss in Q4 2023 was $(539,000), or $(0.02) per share, compared to net loss of $(402,000), or $(0.01) per share, in Q4 2022.

Consolidated APC segment backlog at December 31, 2023 was $7.5 million compared to $5.6 million at September 30, 2023 and $8.2 million at December 31, 2022.

APC segment revenue decreased to $2.8 million from $2.9 million in Q4 2022. APC gross margin rose to 55.6% from 35.4%, due primarily to the mix of APC projects and services executed during the quarter.

FUEL CHEM segment revenue declined to $3.6 million from $4.1 million in Q4 2022, due to a decline in electrical generation demand for the units on which our FUEL CHEM program is installed. Gross margin was unchanged at 48.0%.

Adjusted EBITDA loss was $(0.6) million in Q4 2023 compared to Adjusted EBITDA loss of $(0.3) million in Q4 2022.

2023 Full Year Overview

Consolidated revenues for 2023 rose 1.0% to $27.1 million from $26.9 million in 2022, reflecting the increase in APC revenue partially offset by a decline in FUEL CHEM revenue.

Consolidated gross margin for full year 2023 was unchanged at 43% compared to 2022, reflecting an increase in APC gross margin and a stable FUEL CHEM gross margin.

SG&A expenses for 2023 increased to $12.8 million, or 47.3% of revenues, from $12.3 million, or 45.6% of revenues, in 2022, reflecting an increase in employee related costs and other expenses.

Interest income improved to $1.3 million from $0.2 million in 2022, reflecting an increase in capital invested and higher interest rates on held-to-maturity debt securities and money market funds.

Net loss for 2023 was $(1.5) million, or $(0.05) per share, compared to net loss of $(1.4) million, or $(0.05) per share, in 2022.

Adjusted EBITDA loss was $(2.0) million in 2023 compared to Adjusted EBITDA loss of $(0.9) million in 2022.

Financial Condition

At December 31, 2023, cash and cash equivalents were $17.6 million, short-term investments were $12.1 million, and long-term investments totaled $3.7 million. Stockholders’ equity at December 31, 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 Tuesday, March 12, 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

(in thousands, except share and per share data)

 

 

 

December 31,

 

 

 

2023

 

 

2022

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

17,578

 

 

$

23,328

 

Short-term investments

 

 

12,136

 

 

 

2,981

 

Accounts receivable, less current expected credit loss of $111 and $110, respectively

 

 

6,729

 

 

 

7,729

 

Inventories, net

 

 

439

 

 

 

392

 

Prepaid expenses and other current assets

 

 

1,439

 

 

 

1,395

 

Total current assets

 

 

38,321

 

 

 

35,825

 

Property and equipment, net

 

 

4,539

 

 

 

4,435

 

Goodwill

 

 

2,116

 

 

 

2,116

 

Other intangible assets, net

 

 

358

 

 

 

397

 

Right-of-use operating lease assets

 

 

609

 

 

 

197

 

Long-term investments

 

 

3,664

 

 

 

6,360

 

Other assets

 

 

781

 

 

 

794

 

Total assets

 

$

50,388

 

 

$

50,124

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,421

 

 

$

2,710

 

Accrued liabilities:

 

 

 

 

 

 

 

 

Operating lease liabilities - current

 

 

81

 

 

 

125

 

Employee compensation

 

 

1,252

 

 

 

1,105

 

Other accrued liabilities

 

 

1,934

 

 

 

826

 

Total current liabilities

 

 

5,688

 

 

 

4,766

 

Operating lease liabilities - non-current

 

 

533

 

 

 

66

 

Deferred income taxes

 

 

172

 

 

 

177

 

Other liabilities

 

 

281

 

 

 

274

 

Total liabilities

 

 

6,674

 

 

 

5,283

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

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 in 2023 and 2022, respectively

 

 

313

 

 

 

313

 

Additional paid-in capital

 

 

164,853

 

 

 

164,422

 

Accumulated deficit

 

 

(117,529

)

 

 

(115,991

)

Accumulated other comprehensive loss

 

 

(1,748

)

 

 

(1,728

)

Nil coupon perpetual loan notes

 

 

76

 

 

 

76

 

Treasury stock, at cost (Note 5)

 

 

(2,251

)

 

 

(2,251

)

Total stockholders’ equity

 

 

43,714

 

 

 

44,841

 

Total liabilities and stockholders’ equity

 

$

50,388

 

 

$

50,124

 

   

See notes to condensed consolidated financial statements.

 

FUEL TECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

 

 

 

Three Months Ended

 

 

Twelve Months Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenues

 

$

6,345

 

 

$

7,021

 

 

$

27,081

 

 

$

26,941

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

3,102

 

 

 

4,018

 

 

 

15,425

 

 

 

15,298

 

Selling, general and administrative

 

 

3,677

 

 

 

3,074

 

 

 

12,803

 

 

 

12,275

 

Research and development

 

 

367

 

 

 

179

 

 

 

1,511

 

 

 

895

 

 

 

 

7,146

 

 

 

7,271

 

 

 

29,739

 

 

 

28,468

 

Operating loss

 

 

(801

)

 

 

(250

)

 

 

(2,658

)

 

 

(1,527

)

Interest expense

 

 

(6

)

 

 

(4

)

 

 

(21

)

 

 

(17

)

Interest income

 

 

332

 

 

 

101

 

 

 

1,300

 

 

 

202

 

Other income (expense), net

 

 

5

 

 

 

(204

 

 

 

(90

)

 

 

(46

)

Loss before income taxes

 

 

(470

)

 

 

(357

)

 

 

(1,469

)

 

 

(1,388

)

Income tax expense

 

 

(69

)

 

 

(45

)

 

 

(69

)

 

 

(54

)

Net loss

 

$

(539

)

 

$

(402

)

 

$

(1,538

)

 

$

(1,442

)

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net loss per common share

 

$

(0.02

)

 

$

(0.01

)

 

$

(0.05

)

 

$

(0.05

)

Diluted net loss per common share

 

$

(0.02

)

 

$

(0.01

)

 

$

(0.05

)

 

$

(0.05

)

Weighted-average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

30,385,000

 

 

 

30,296,000

 

 

 

30,348,000

 

 

 

30,289,000

 

Diluted

 

 

30,385,000

 

 

 

30,296,000

 

 

 

30,348,000

 

 

 

30,289,000

 

   

See notes to condensed consolidated financial statements.

 

FUEL TECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

 

 

 

For the years ended December 31,

 

 

 

2023

 

 

2022

 

Net loss

 

$

(1,538

)

 

$

(1,442

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(20

)

 

 

(124

)

Total other comprehensive loss

 

 

(20

)

 

 

(124

)

Comprehensive loss

 

$

(1,558

)

 

$

(1,566

)

 
 

See notes to condensed consolidated financial statements.

 

FUEL TECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

For the years ended December 31,

 

 

 

2023

 

 

2022

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net loss

 

$

(1,538

)

 

$

(1,442

)

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

 

 

 

 

 

 

 

 

Depreciation

 

 

281

 

 

 

352

 

Amortization

 

 

61

 

 

 

88

 

Loss on sale of equipment

 

 

10

 

 

 

 

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

 

 

(433

)

 

 

(5

)

Provision for credit losses, net of recoveries

 

 

 

 

 

(106

)

Deferred income taxes

 

 

(5

)

 

 

38

 

Stock-based compensation, net of forfeitures

 

 

389

 

 

 

224

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

1,039

 

 

 

(4,448

)

Inventories

 

 

(46

)

 

 

(45

)

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

 

 

(6

)

 

 

(314

)

Accounts payable

 

 

(295

)

 

 

1,159

 

Accrued liabilities and other non-current liabilities

 

 

1,239

 

 

 

360

 

Net cash provided by (used in) operating activities

 

 

696

 

 

 

(4,139

)

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Purchases of equipment and patents

 

 

(418

)

 

 

(206

)

Purchases of debt securities

 

 

(14,026

)

 

 

(9,777

)

Maturities of debt securities

 

 

8,000

 

 

 

500

 

Net cash used in investing activities

 

 

(6,444

)

 

 

(9,483

)

 

 

 

 

 

 

 

 

 

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

 

 

(44

)

 

 

(87

)

Net decrease in cash and cash equivalents

 

 

(5,750

)

 

 

(13,726

)

Cash and cash equivalents at beginning of period

 

 

23,328

 

 

 

37,054

 

Cash and cash equivalents at end of period

 

$

17,578

 

 

$

23,328

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

 

Cash income taxes paid, net

 

$

12

 

 

$

14

 

   

See notes to condensed consolidated financial statements.

 

Fuel Tech, Inc.

Segment Data- Reporting Segments

(in thousands)

 

Information about reporting segment net sales and gross margin from operations is provided below:

 

Three months ended December 31, 2023

 

Air Pollution

Control

Segment

 

 

FUEL

CHEM

Segment

 

 

Other

 

 

Total

 

Revenues from external customers

 

$

2,791

 

 

$

3,554

 

 

$

 

 

$

6,345

 

Cost of sales

 

 

(1,255

)

 

 

(1,847

)

 

 

 

 

 

(3,102

)

Gross margin

 

 

1,536

 

 

 

1,707

 

 

 

 

 

 

3,243

 

Selling, general and administrative

 

 

 

 

 

 

 

 

(3,677

)

 

 

(3,677

)

Research and development

 

 

 

 

 

 

 

 

(367

)

 

 

(367

)

Operating income (loss) from continuing operations

 

$

1,536

 

 

$

1,707

 

 

$

(4,044

)

 

$

(801

)

Three ended December 31, 2022

Air Pollution

Control

Segment

 

FUEL

CHEM

Segment

 

Other

 

Total

 

Revenues from external customers

$

2,927

 

$

4,094

 

$

 

$

7,021

 

Cost of sales

 

(1,892

)

 

(2,126

)

 

 

 

(4,018

)

Gross margin

 

1,035

 

 

1,968

 

 

 

 

3,003

 

Selling, general and administrative

 

 

 

 

 

(3,074

)

 

(3,074

)

Research and development

 

 

 

 

 

(179

)

 

(179

)

Operating income (loss) from continuing operations

$

1,035

 

$

1,968

 

$

(3,253

)

$

(250

)

For the year ended December 31, 2023

 

Air Pollution

Control

Segment

 

 

FUEL

CHEM

Segment

 

 

Other

 

 

Total

 

Revenues from external customers

 

$

13,483

 

 

$

13,598

 

 

$

 

 

$

27,081

 

Cost of sales

 

 

(8,410

)

 

 

(7,015

)

 

 

 

 

 

(15,425

)

Gross margin

 

 

5,073

 

 

 

6,583

 

 

 

 

 

 

11,656

 

Selling, general and administrative

 

 

 

 

 

 

 

 

(12,803

)

 

 

(12,803

)

Research and development

 

 

 

 

 

 

 

 

(1,511

)

 

 

(1,511

)

Operating income (loss) from continuing operations

 

$

5,073

 

 

$

6,583

 

 

$

(14,314

)

 

$

(2,658

)

For the year ended December 31, 2022

Air Pollution

Control

Segment

 

FUEL

CHEM

Segment

 

Other

 

Total

 

Revenues from external customers

$

10,597

 

$

16,344

 

$

 

$

26,941

 

Cost of sales

 

(6,924

)

 

(8,374

)

 

 

 

(15,298

)

Gross margin

 

3,673

 

 

7,970

 

 

 

 

11,643

 

Selling, general and administrative

 

 

 

 

 

(12,275

)

 

(12,275

)

Research and development

 

 

 

 

 

(895

)

 

(895

)

Operating income (loss) from continuing operations

$

3,673

 

$

7,970

 

$

(13,170

)

$

(1,527

)

 

Fuel Tech, Inc.

Geographic Segment Financial Data

(in thousands)

 

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.

 

For the years ended December 31,

 

2023

 

 

2022

 

Revenues:

 

 

 

 

 

 

 

 

United States

 

$

21,062

 

 

$

20,311

 

Foreign

 

 

6,019

 

 

 

6,630

 

 

 

$

27,081

 

 

$

26,941

 

As of December 31,

 

2023

 

 

2022

 

Assets:

 

 

 

 

 

 

 

 

United States

 

$

46,487

 

 

$

47,007

 

Foreign

 

 

3,901

 

 

 

3,117

 

 

 

$

50,388

 

 

$

50,124

 

 

FUEL TECH, INC.

RECONCILIATION OF GAAP NET LOSS TO EBITDA AND ADJUSTED EBITDA

(in thousands)

 

 

 

Three Months Ended

 

 

Twelve Months Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(539

)

$

(402

)

 

$

(1,538

)

 

$

(1,442

)

Interest income, net

 

 

(326

)

 

 

(97

 

 

 

(1,279

)

 

 

(185

)

Income tax expense

 

 

69

 

 

 

45

 

 

 

69

 

 

 

54

 

Depreciation expense

 

 

34

 

 

 

85

 

 

 

281

 

 

 

352

 

Amortization expense

 

 

15

 

 

 

18

 

 

 

61

 

 

 

88

 

EBITDA

 

 

(747

)

 

 

(351

)

 

 

(2,406

)

 

 

(1,133

)

Stock compensation expense

 

 

101

 

 

 

88

 

 

 

389

 

 

 

224

 

Adjusted EBITDA

 

$

(646

)

 

$

(263

)

 

$

(2,017)

 

$

(909)

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

Managing Director

The Equity Group Inc.

dsullivan@equityny.com

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