FTEK - Earnings call transcript Q1 2018

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Operator

Greetings, and welcome to the Fuel Tech 2018 First Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Devin Sullivan, Senior Vice President of The Equity Group. you. Thank Mr. begin. may you Sullivan,

Devin Sullivan

we you, Doug, for first and you at the morning will financial of Executive a which is and us today good available close, for today's Officer. after joining Pach, Jim Yesterday, XXXX company's conference everyone, the from press for release, Principal results copy Financial thank the call. Speakers Web Thank be and issued Arnone, Fuel quarter and site on investors. www.ftek.com. call Chairman, Officer; Vince prepared open remarks, our analysts we After will questions call President, Tech's the and Chief company's

Securities Tech and statements Before made turning the to in to by tried cash in of limited the or and estimate, reflect subject statements contained developments, condition, XA the no performance prospects of statements. expressions, on opportunities, the but for to, Fuel are as the similar to and of regarding differ including, results any are call Tech subsequent operations, those statements cash these as of like involve risks opportunities could Harbor by under this herein risks, including Fuel information Fuel words made which except information remind of to Risk things for Private Vince, changed growth, detailed available but to exclusive Item and other company's means XX-K those in Fuel of are operations, with factors report announce based believe, from actual President, These Securities will Securities turn Tech reason. as available are pursuant Fuel identifying call cautioned forward-looking said, historical future flows, any ahead. Exchange intend, to such Tech's statements. the management. Form forward-looking Section the financial company's uncertainties materially filings those the of to update to Factors identify under Act Arnone, assumptions and Safe everyone XXE XXXX, over not please currently With and amended. to to circumstances and various publicly annual Reform or currently future implied Act current like These go forward-looking forward-looking as business undertakes Exchange words by I'd the Tech. business that of SEC. statements Fuel of expectations performance prospects, cause expect, I'd of using Act and Tech's and results not reflect anticipate, forward-looking well other has plan, the XXXX defined results caption these or filings that Tech's events, Chairman, to Fuel provisions on Investors Vince the and now factors information amended, uncertainties, in as such matters are XXXX as the obligation in growth, and to and in Litigation over flows, discussed CEO are to all or Vince, expressed discussed statements

Vince Arnone

our time. Good us keep on XXXX short conference focus today. today specific than joining Officer, brief call, since you morning Controller. call for period look with I two we has we Thank you, commentary Principal the last less Jim has am and months transpired been Devin. morning, on with everyone spoke here and on our to Pach, thank so It this our of will during fourth quarter what this a Financial

market the months, of full-year we Revenues internal in have for new projections XXXX environmental and on solutions XXXX. discovery in with further have strategic on performance quarter be concurrently, technology target efforts more And on new a XXXX improvement for some operating at first made versus And discuss timing financial To providing our $X.X XXXX quarter pleased line are are track and in to gained couple significant to realized our we able million from performance in very our first We XXXX. to XXXX. report directed we the for quarter past development venture for progress reflected that detail. results project year's rose for $XX.X let's XX.X% financial start, our last the orders execution confidence our for the meet of recent financial good full-year we which our performance. will that in In first million in remain our of water.

Net loss QX operating per over from which operations December of to being We diluted year's be at quarter reported operations from $X.X operation XXXX. continuing years. diluted share the to from majority compared operating or $X.X loss from amount significantly $XXX,XXX to was XXXX. in $XX first And this net from million million. continuing X.X% backlog operations XX, from QX great per recognized in of share last reduction $X.XX the approximately to of million XXXX three for reduction first loss declined expect the an cost in a initiatives of loss quarter. million or Our $XXX,XXX revenue previously narrowed $X.X an past of SG&A announced the our continuing $X.XX XXXX; of in continuing as million we $X.X results of was

XXXX; to to At cash being projects execution EBITDA had of suppliers. and of Lastly, the and March we decline of of million milestone XXXX, XX, an timing due for EBITDA $X.X our the XX, customers progress $XX,XXX as we in compared related million loss $XX.X the to payments of compared $XX.X December million. balance reported positive at

as had improve move half debt. share. Shareholder's we And or second the million to $X.XX particularly XXXX the flow long-term $XX.X company cash expect the was equity We in through zero year. of per

Now, let's review more business detail. in our segment performance

basis, a As three our a still operating two order The revenue shares in on landscape generates our APC to general relevance we years. within statement do over technologies and embodied to market to dramatically rate business a global that changed all have segments base that for has market continue FUEL capture both not and profitability. the of past ensure our to business, in we intend our CHEM run

represent For realized requirements in of we by many haze, requiring ESP opportunities, in basis or approximately applicable an reasonably remains $X needed our compliance of business we and XXXX far latest control the while contract technology for pipeline APC are orders. available as them state-specific unites have for on upgrades round RACT, with CSAPR, pursuing focused million on solid regional segment, Domestically new thus are been particulate a being SCRs driven and of to meet case-by-case maintenance SNCR With to our applications. in sorbent to technology primarily dry ULTRA systems our majority for expect respect of wider bookings these product Boiler a applications have we XXXX. industrial for basis orders requirements, and MATS where And MATS from technology contract units the help injection installed requirements. and increased on portfolio, loading

of continue to with We a industrial technology also relationships companies complete bid and users strategic that establish partner end multinational broad package. to business our portfolio require to

such, the utility we our impact do again earlier to this implementation activity this our from remains emissions And I'll on stated call. ULTRA until China, consistent as SNCR of hold second the drivers talk commentary not as significant operators expect earnings targets. quarter of we regulatory-related remainder call off further satisfy conference technologies in regulatory boiler year. conference for year, on With to and respect the our look for super-low project bidding As

municipal we compliance years, this continue to industry. As reach focus will next waste, couple solid our and that our of which for industries, full expect includes we the within primary to processed compliance utility units, market shift petrochemical industrial

the for the we Republic Balkans first heavily system the applications for this for and monitor which elimination of will levels and trend as European Best well Available upgrade to target of known to the neighboring the Union's as coal Industrial with Technology. moving In wake rely Turkey. of the systems, such Poland Missions emissions This market countries and technologies on reduces both current regulation SCR our latter we as a current Lastly, towards Reference continue de-NOx China includes Czech mercury the continue reduce their NOx trend Countries NOx, time. BREF, the in to need ammonia use Directive is guideline slowly. aqueous as to also Europe, reagent and in although in

We are pursuing these markets via strategic partners with presence. local

licensing construction We associated various with agreement are exclusive SNCR technology arrangements, our our leading Limited, including our engineering also Heavy ISGEC one of Engineering pursuing companies. for licensing opportunities with India's and

the has then As costs, NOx due March, aggressive compliance for Indian generation the SOx, now discussed set high phased of control. matter approach finally associated originally targets prioritizing the industry a operating under particulate the and off to backed are power first, and in government

technology used could anticipated, originally to ESP for this our bag low-cost a for presents our to compared in cost high FGC highly demonstrate be systems capital filtered meet particulate SNCR of in the when gas that emissions While flue requirements, is particulate solutions. more with particularly and the build the an will some than effective slowly control technology conditioning marketplace. opportunity us approach demand cases

progress this in market We will in continue to report future. on the

quarter key business FUEL With to reduction segment Asia, million the our demonstration product for in The to an utility minutes. will few our primarily of revenue which For discuss from reduction due in demo margin a declined outage slight CHEM a XXXX. expenses related gross in revenues to customer. RECOVERY to I due our further CHEM million in was $X.X first extended $X.X

profiles; a assist environment U.S., in to of slagging in CHEM providing boiler; program biomass utilities sector two first, opportunities in reduction for the we are load fouling pursuing an they can units on second, solid our and industrial to leverage In As declined, Europe, the units. And we and we traditional optimization waste biomass-fired have as lastly, with two working as our continue our a and unwanted cause units. revenues avenues and municipal variety currently strategy, to technology pursue develop solid The boiler providing to and utilize results solutions; municipal favorable, units of on adapt that the coal-driven as have to which supporting this are programs that FUEL blending look reduced with cost program Italy. the operators consequence coal all biomass-fired market. in waste unit we for are one our continued

with Amazon pulp paper XXXX. to days we a than currently chemical in conjunction converting the units into application utilizing and A of in our in and and our in are paper industry demonstration sell Papyrus approximately the NanOX to this Amazon license commenced documentation demonstration data XXX to the to manufactures CHEM current a technology to the working and with Papyrus Indonesia, far, units two RECOVERY the Thus results program for Chemicals activities to already continent. account. chemicals the marketing In we past leading a technology been planning agreement specialty today, of We're look supporting of to client industry-specific favorable, related to in months, our Asia, and NanOX's their variety greater forward XX LLC additional announced a sells commercial the we expansion market demonstration. and with from licensed supplier and of have of number a XXX-day gas Papyrus process pulp dissolved Group in that we technology. Amazon As of exclusive have recently geography

this noted a represents at Tech, targeted for previously, new Fuel water. strategic environmental business As solutions

and exclusivity As of for a markets in patents, to America technology Tech for throughout Fuel to North and territories with rights exclusive the a reminder, extent end is underlying the market term other the agreement the to specified provisions equal provides applications. to life

Tech far appropriate long, we embraced members is session for transfer being training of team. well a by and session So session Each the Fuel sales-focused team. the was days Tech the and technology Fuel completed a have the two technology

we characterization injector on the to plant On perform the technologies the side, the and operating in-house basic water analyze lab a construct first, will are which fully of to enable parameters technology to, for oxygen studies. development executing an treatment process us of

to treatment water performing aid develop Second, the in water. are injection will an in the technology Fluid calls plan our investigation existing capabilities bodies as and development treatment, and long-standing to our models perspective, industry begun to determine on specific sales basis. by a benchmarking action competitive process be in the expertise technology are discipline CFD lastly, discovery we we means. Computational a have we in make of and optimization system appears market-by-market channels. have And we From our laid to of best friends unutilized for market Dynamics to a of And that in customer-by-customer applied using out

promising meeting of predominantly The have the of calls have to follow-up results to as the first The into multiple focused the we face-to-face patch. these these better calls market clients. leading will gas initial markets next. treatment utility on markets. make we and are additional oil have industrial Our understand calls on first been and called water issues and And begun

the their are are that treatment technology in customers NanOX We existing possibly our finding that platform. water could benefits interested the bring to

a possible. with I of you as to again your the interest near-term. want have Fuel in up once look this as as a ongoing objective technology I for quickly is to to and in Our company about speaking more demonstration running you closing, venture In Tech. thank forward the

We are for pleased XXXX. the our begin our in operating remain financial to and with year, outlook results confident

driven We business. expect total to APC primarily by revenues our report higher

expect also to generate positive cash to operate We profitably, and flow.

future we to significant do not treatment forward technology While have a XXXX contributor years. results, being in expect look our water it venture on do we to a impact significant

go call turn to please ahead. going I'm over Jim, to Jim. Now, the

Jim Pach

quarter to quarter to good XX.X% the decline $X.X increase continue reflecting remains by of conversion a margin rest the revenues, margin APC first XXXX as or for revenue for certain XX.X% XXXX. due of segment compared throughout well XXXX. compared in offset APC from to XXXX. quarter Thanks, APC, demonstration the the morning declined gross for $X.X and margin FUEL conversion first Gross or XX.X% of through this CHEM quarter, first CHEM we totaled as the first quarter or was was $XX.X FUEL million XX.X% million product XXXX. strong $XXX,XXX to CHEM to revenue expect Revenues $X.X $X QX in of of expenses. million million XX.X% and of million as the or the FUEL million and backlog-to-revenue first Vince, APC as $X everyone. a at XXXX mix XX.X% compared to revenue gross between as

are development year's $X.X first XX%. plan and for blended For Selling, at margin million savings $XX quarter. substantially to of for be $X.X we $X.X downward and gross With R&D million $XX general and of three-year our as compared quarter $X.X trend between in a expenses XX% expenses million XXXX, of just continue last under their XXXX, targeting XXXX. between coming administrative cost costs and both to expect XXXX were we $XXX,XXX million the SG&A completed first research and and between million million. with in

our diversify efforts. our to continuing products ways new exploring product are in We market support for developments and to R&D

recently down spending loss slightly spending level increase continuing to continue initiatives these of We and quarter the entry into R&D from the $X.X We will million treatment expect announced in of XXXX because XXXX. first from of from our water our a loss $XXX,XXX market. including significantly of XXXX in wastewater a reported operations

reflected accrued alluded at project line XXXX. Vince December we noted, cash in had to, liabilities a million as reflected flow March projections evidenced for of as of timing this timing. current at Vince to $XX.X million by As XX, We the $XX.X an payable payments accounts million in projecting with liability primarily positive $X.X XX, XXXX. Again of overall first our approximately and declining APC during XXXX are which overall cash was quarter and an used

March China. and $X.X cumulative have geographies and taxable allow offset of currently $X.X exposure. $XX.X several Italy have to offset us offset to in future end, income what operating taxable that we million losses our future in XXXX, income business, As million U.S. income, income overall tax reduce point income do we offset XX, net we future to taxable in million future taxable To to which to

will near we XXXX. expense a expect income similar zero be to for result, tax or our at As XXXX continue that to

share equivalents had including at $X.X cash cash million XXXX, and $XX.X cash $X.XX sheet restricted million. and balance of or we March of debt-free XX, remains per Our

may balance which two-year XXXX our cash $X as result cash was working working during to performance XX, cash improved book to secured valuation, our our our With our include at facility balance March book capital value working basis capital Our under business, $XX.X of will able hopeful a the operating to domestic consistent continue million facility. U.S. XX, to credit support share our to on was $X.XX, cash quarter of of continued XXXX million remains second company ongoing domestic and was securitization availability. long-term reclassified we operating that of renegotiate per needs through our not the our $X.XX a The sheet the remove renewal that per share capital XXXX. tangible value restricted does restriction be on operating was March per credit was respect share $X.XX at

In share not share above. would reserved call of With fully addition, to per over any turn I amounts in the which been back assets and are like deferred approximately we that, the had Vince. and have tax included $X.XX quoted per to

Vince Arnone

ahead Jim. Thank up you, thank go calls. for line let's and Okay, Operator, you. open the

Operator

question Instructions] first comes Thank Pete Enderlin from MAZ of proceed Our with you. with the [Operator line questions. Please Partners. your

Pete Enderlin

and morning, Good Vince you. Thank Jim.

Vince Arnone

Hey, Pete. Good are how morning, doing? you

Pete Enderlin

positive the the you $X you backlog in of on some The give as of and said were see the little, that outlook pattern trends the orders segment, can the trending rest the how in APC over you pipeline down us year? a was million, roughly the quarter. Congratulations for order sense

Vince Arnone

perhaps are Yes, Thanks for little but than a we XXXX, thus bit far the to the not Pete. had we by Sure, concerned orders expected question. lighter for date that.

through as finally projects us we of We award. have cycle discussions coming the - customers contract are then to with let's call today a ongoing it's sit going of the handful on here that and bidding of it, process project

little year a uncommon. this down good Backlog, is here come if speaking, at the which but not will, So largely second-half of noted you think bit, you now. call necessarily is still at near-term, of cycle, level looking it's as are I'm expecting to have we loaded but a awards project some award Pete, in I contract a right through more

And revenue contract but terms we so said, bit a are some expecting awards awards. loss good and of new the our second-half we in to new to expect a see have generally go I speaking, here through of as some contract little But statement, very load would I XXXX profit of contract in near-term.

Pete Enderlin

And was pickup but Could in potential see there's a too? of I U.S, international what the good some comment there you a that there about markets. the especially think

Vince Arnone

we more the see would U.S. necessarily pickup now at we've decent wouldn't trend the this quo, nicely a showing right from status for but is where frame. trend it, I increased we're time call, what you year-and-a-half what as markets a noted looking call market seen from I international past, are year and in

we excited that. about are So

Pete Enderlin

And can product Asia, mainly that demo bit? [technical expenses margins, put some you on little that pressure gross expand a in difficulty] is

Vince Arnone

quarter, CHEM I about a that margin and this what that can, this we opportunity been our could excess for we demonstration Asia. come nice the yes. FUEL that our Yes, at And in the the talking technology $XXX,XXX customers way on future expenses demonstration impacting year, product gross the simply negatively that's then in [indiscernible] for think expanded quarter demonstration first wonderful success hopefully with to in and we've quarters demonstration during of is but the for And geography. recovery a other investment that rollout of had in now. the of couple in

Pete Enderlin

full-year could statement mean things, revenues was run a maybe that I'm thank fourth the that not Does Okay, the or the to quarter you - And sure said which down quite the the the FUEL down, few CHEM interpret release for little rate different regarding a a to XXXX? segment trend which total that like of mean the similar like should how was it quarter. bit, in XXXX. about be you. fourth well, in press

Vince Arnone

nature for year-on-year what Right, in XXXX we approximate we the XXXX were achieved revenues looking be in to for similar to full-year. or at

Pete Enderlin

then, international domestic have of Thank working total that but you. of Full-year, have to that's is okay. lot shows you sort and between to for there any and and capital, - breakdown to proportionally balance between and any international revenues, thing, revenues and a adjust assets that international of domestic you the try that? I Yes. assets? Do and assets the And know the other lot assets that plans more reasons

Vince Arnone

Pete, collection receivables Timeframe are Yes, balance the of the typically there, China longer carry we larger driver primary in for accounts there in some nature. geography. bit is the a actually little that

larger too. opposed as the driver a extended balance we'll can time only of for point really geographies. that So carry to an period other I That's

Pete Enderlin

And to little efforts way a change just to of is are try there flow bit kind any that that the or is? it

Vince Arnone

to week-in, Actually change business a week-out years good the about we've basis. company trying in pretty out of China job. think the quickly doing our I our experienced again as We've a It's is the unique, But and XX done best focus it's on past for that been flow decade, possible. we something hand do in and that day we the get we've as day ensure cash over to now. in

Pete Enderlin

of income one little there then kind a interest it And last $XX question, Is why million in with you shouldn't have be higher nitpicking almost than any reason particular that? zero total balances.

Vince Arnone

is really The of on cash unfortunately they and but interest be money available today. I wish there related was that about something just accounts that minimize just rates our to knew holding

we cash in investments of would in baiters. in operating our Just we we more And now very when time expensive account to something that had highly to business that it cash manage aside we is call but we've cash secured short-term other balance our have ensure a said right want perhaps closely balance global cash something need just opportunity an had over can on that needs. available all

Pete Enderlin

Okay, again for the and good congratulations on thank the you quarter work.

Vince Arnone

much, to Peter, you soon. will talk Thank very you

Operator

next with Our Private Gaspar, Please the Investor. comes of a your from George proceed question question. line

Unidentified Analyst

Yes, good morning and else Vince everyone there.

Vince Arnone

morning George. Hey, good

Unidentified Analyst

success and two, and I the and set beginning, two years cleaning where them is the year several on perspective the forward and please? last you in really one, set at be expectation the most to great market for this could at you're and situations what how last broadening or Vince, fronts answer good you're congratulations mean up attempting would company that morning the and that again, look work three question level the as moving to that's then the perspective comment up or my the to penetrate would you international by would at if countries whatever you be that is

Vince Arnone

George. do, We'll

so really the this Indonesia we're about demonstration there. we're in I company most a think today of about play doing excited the their for marketplace put is now are in we'd RECOVERY fee, that and most a there demonstration have our internationally Mainland what say generate excited we go geography. do and existing important from as at sit their to that is implementation if will have Papyrus, CHEM here today. happy right to as going out nice in The with flow we're expand that plant I'd installations actually there were agreement once the we China successful license but this successful us that technology region, very Asia, marketplace or demo Amazon which agreement so very in with the we and just opportunity we drive handful out for we're more ahead cash our be and We company technologies a as success receiving royalty some have to to be

the make Turkey our that move Europe from well. previously technologies their to some look Republic of watching what them marketplace we're terms and I Czech I current think in countries as to products with time offering Poland, that for as generate again and call of we're like quo it flow a from to that revenue more in status the coal-based looking this at had in point as we're noted

technology that geography that pollution tracking with status which the And so and so the following opportunities in could nice technologies right the future project and quo air European now. we in coal of would were I control also, then and RECOVERY countries deployment as products prioritization those in benefit provide call just more I well countries existing expansion and to of secondarily go a CHEM us for

Unidentified Analyst

that positive very Okay, on treatment all know right. it's I just try strategic would areas that mentioned one really and the but your area or some oil to and maybe you on that? think gas try you're you looking making I you, I water expense then to you put think cap market forward. into attack do prospects it's, so of Do really the broad comment two from that it's finger think you a is the move more and to effort that Thank at logical you for necessary and and on you the put that want you going to will

Vince Arnone

there this that we sit technology detail a but that downs marketplace as attack. in the will, is initial some to have we market we handful some we'll what an definitely customers have believe space Yes. with the based We and George, again should that opportunity will space there discussions more know today a been our all friends know with space be of going that in upon our of that to are we look of for deploying

Unidentified Analyst

And that the was going understandable the the in and that's it flow right. I forward the don't the prospectus second then of on and one you order all Okay, mentioned one backlog for down last half And year. into accelerating XXXX going this had was at the backlog year? your year to know at think as you but be you could want end the of top least question if good do the that where of answer early as

Vince Arnone

It remainder obviously that good this think a we're year opportunity and of are looking the a I that the have in opportunities address value question larger underneath some answer of we our dollar portfolio of be way. We to project to them we If an based come say have it's of again but I'll opportunity timing upon in to or a level higher. difficult certain that bookings at nature.

have the is end would XXXX. that there yes a we XXXX backlog any us at the so, the And say I but at opportunity for of end did to than of larger

Unidentified Analyst

going thank all forward. Okay, right and you well good luck kindly

Vince Arnone

good Have George. you, a day. Thank

Operator

the [Operator Instructions] I'd further closing There to queue. questions are like call the in back to for hand no management comments.

Vince Arnone

Thank you, Tech. Fuel thank interest their for in today to continued everyone Operator. your time like and I'd for

Los in we at are present scheduled California Micro X Conference there. For LD June of hope to Angeles, everyone's some see the information to and we you on

former the I met Officer a you of final comments or Collins knew Chief Dave sorrow many cancer. week passed as our away As that after battle great Dave report last that Financial for is with

company, Thank with have are a and to everyone for our thoughts and prayers thank have I'd family. are Dave time everyone their like a known day. great today, As Dave's we and now to you. grateful

Operator

and gentlemen, conclude your for this Thank today's Ladies you conference. does participation.

disconnect have this at time, and may day. wonderful You lines your a

Fuel Tech (FTEK) 10 May 182018 Q1 Earnings call transcript