FTEK - Earnings call transcript Q2 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings, and welcome to the Fuel Tech, Inc.

Second Quarter 2020 Financial Results Conference Call. [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

begin. may You

Devin Sullivan

copy Good Fuel Thank financial Tech's after website, issued call. Donna. available which us the at results for today Yesterday company's a we close, for second the the morning, you, release, you is everyone. www.ftek.com. joining conference of Thank quarter XXXX

our remarks, Vince for Our Albrecht, Financial Principal the be President and we open Chief call Arnone, analysts prepared the will for from speakers will Executive and questions Company's Officer. Chairman, today Officer; Ellen investors. After and

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

Vincent Arnone

and Many the a extended been joining of business everyone specific delays had we pandemic and your these with on begin hope as challenges. Tech and to health. impacting I'll operations call in of families the Thank we I Good We I believe pandemic second quantify. is you FUEL want how are Fuel Devin. safe COVID-XX morning, the good control, the that difficult air were today. for that in addressing closing overview of thank CHEM impact you, in how the is are Awards project result and the COVID-XX. and affected although new to our COVID-XX an pollution experiencing us quarter, APC today that

reduced electricity A units. power and was segment impacted May. in decline month COVID-XX lead particular activity of coal-fired dispatch a which in to due particular, CHEM in generation demand, April the drove to for in and by FUEL Our electricity activity in reduction slower generation economic

our June showed executive far a to of been order It that third essential run programs. minimize month thus Fuel under is as our and Illinois FUEL have of important execute the Tech our state CHEM our Fortunately, as objectives. normalized to business U.S. improvement, but the for series not in ability have to normal our and developed global operations and only of disruptions on and a an rates the designed use well. of returned active quarter, to basis activities note the we in qualified on We initiatives business preserve to deployed

our We deploying and on suppliers are recommended of FUEL our during across our customer CHEM this protocols remain employees, ensure segments and business APC potential requirements period future and time to and safety current supporting customers focused are enterprise for that our safe. critical

business requirements, active are million of $X.X more confident close segment. medium with gas economic in universities as contracts For new existing early opportunities an cycle until awards on and oil potential will medical This applications, markets APC power to our pipeline. of primarily near project upgrades did awards, SCR, in planning business, various do the the $XX COVID-XX the impact million processes focusing in new with on to small total new opportunity. awards for $XX that such continue aggregate proposal for of U.S. have customers of SCR new on heat others been current both as combined large by awards and the the we the weighted have that and projects for finding their industrial of this we and as moving clear. at These projects awards our gas provide planned, that are delayed best the combined natural negotiation new secure and just mentioned. depending awards the time while turbine to for outlook our complexes plant Notwithstanding becomes projects, execution We and some Europe term year. the ULTRA includes million customer's on in offerings. value gas I nature for end and and QX ULTRA stages and are And We additional towards business, and are we and SNCR such of forward are and the and

to internal suppliers small stationery solutions SCR support the power combustion engines with and continue distributed to and market. We engine plug-and-play suppliers, and of the for turbine of partner look deployment small exploit development for generation

Boiler state best of rules certain monitoring new emissions. are to regional at compliance available sources the guidelines technology environmental haze where We also EPA may and on the produce with install activities opportunities control including retrofits MACT level,

quarter SNCR, generation FUEL associated month timelines activity to run Africa. Early we decline previously, units for in of with breath, attract COVID-XX equipment supporting these to economic as best for demand. second throughout to business the our installation and month well June expect of I we those The May, States. generated in TIFI and of three overall in revenue order start in the that decline We related we and the slower continue our up have India, available year. from Longer revenue programs, announced Southeast Europe and and economic approximate of as in the targeted South our as and first technology, Asia, segment, and contributions impacted this we technologies, due the normalize the units the opportunities six our year. to third issued due returned from coal-fired our quarter, each electricity of April to revenue SCR thus XXXX technology In for beyond. far before to the are in CHEM that these rates and half first the quarter, guidelines furnace of noted expect related months a was should by At activity in particular compliance the of equipment and CHEM FUEL APC through and the injection the end term, United quarter, August reference tracking opportunities in new XXXX, in third had we see in the to ULTRA, third in third units occur were

primary and help solid pulp sulfur we at using RECOVERY to is southeastern a demand continue coal Europe countries, pricing units term, via Longer our partner issue. in build high paper an where biomass source oil. pursue emissions fuel and is to for where are burning falling of to municipal CHEM and progress Asia We FUEL high additional are other Southeast Mexico related by CHEM fuel, we our opportunities partner on our Papyrus power Asian Amazon our and in in in and is for mitigate program harmful solutions our where the to slagging applications with industry, waste continuing and employ

government process In control for measures. Mexican reduction high CHEM The two partner solidified burned. to install FUEL Mexico oil. provide Our to advance the partner that price our burn of and to other the placed cost produced has program burning sulfur our we high sulfur now, is with installed. wherever provided programs this June, have is And burned, we to largely the with working oil this is officials pollution state the which company, extensions fuel solution. for expansion partner with for fuel to of Pemex, continues our in being fuel oil impetus the the to at engage control of now CFE the on in however, in pollution Pressure oil explore contract estimates measures sites owned are the CFE, sites currently our local the utility this by being oil state-owned without

watch year. we move this We development as closely will the throughout

company order COVID-XX a prior entity the paper assets a we technology, purchased Kadance signed Prior ore municipal of Midwest facility treatment demonstration agreement a and waste is to to the LLC the flexibility second from Corporation, this license Regarding initiative, Dissolved with as at the of delayed market. in our in NanOX the of delivery technology with Gas has In now Cadence of a can been delivering Corporation to of date. in license delayed on technology manufacture onsite own. system market more the on is biological NanOX technology LLC. July, DGI, Fuel active solutions license new focus planned DGI demonstration all its had non-exclusive and XXXX this the and access regarding the Tech of quarter DGI previously we Under still this terms that pulp new an Infusion the of that related impact water a early agreement the our reported

advance other of industries. variety across We our conversations DGI several of with potential customers a technology continue to

efficient We opportunities continue on structure our financial current our and to an to the environment. cost relative market profile on by maintaining focus offered

million in the approximately debt a of excluding of Our charge impact a year, of quarter. second quarter reversal was favorable bad SG&A when the the $X.XX the in

have XX including years, cash to our the the wind later excess we $XX to of We reduction cash customers million million. $XX China SG&A of our to approximate environment. over in million us selected For past year, of expect cost quarter from million this In execution funds the in enabled year, China, ended in in $XX.X our with over has the sustain we few of of initiatives operation down this market full China $X these The and of as expected additional cash June repatriation year. with repatriated equivalents. in and difficult

first of financial second ahead. improvement current statements financial planned approximately our of from established conference our flow remains turn to of cost entered XX, loan reflected With Relief position during an the Aid providing XXXX call paycheck in company and principal for throughout I'll long-term the all and go in cash with We under completed for at was to her believe shareholders. Tech XXXX, operations beyond. qX. and pursuant are the performance is we on Coronavirus a the of material that funding noted $X.X XX that quarter for the basis into I our reduction lender Act, focused fund Economic Please combined efforts the we've our adequate Ellen Security its cash next company for a accomplished environment, This Despite the expected move as business to comments. operations protection and agreement the quarter, committed over challenging generated value April program be of amount Ellen? to in call Fuel the the with end months As our remainder million. that for the the that this said, delivering have team in and to

Ellen Albrecht

$X.X year million in lower CHEM morning the good significantly to $X.X of for the declined Lower revenues and Consolidated entering contract of variety decline were at Vince $X.X revenues in and both our the a quarter quarter expected FUEL the the slower than revenues included you, end revenues offerings of of from of awards, million timing projects, the in the $X.X XXXX were of across $X.X of was domestic in XXXX. Thank and Tech million new in for quarter multiple technology million to Projects compared segments. million current Backlog second backlog quarter XXXX quarter $X.X million completion as APC Fuel everyone. million backlog project. second of in foreign APC the APC the comprised APC second from of $X.X and a reflecting second geographies. entities. represent result

segment third we reports Vince for both quarter million new $X.X As awards the the technology The beyond be to mentioned, we comprised reduced quarter million which, of FUEL of were second $X.X quarter for from normal segments. of the CHEM as did effective million projects period. FUEL early $X.X in to revenues compared consider and XXXX. unscheduled outages impact the in revenues COVID-XX CHEM's would demand power what experienced of during our

related was have the as XX.X% with APC quarter. the charge in liability $X.X return to, Vince Consolidated issue driven entered third segment revenues more started to remedy of equipment large to compared the gross disclosed warranty of XX.X% for normalized second decline as mentioned This to to We equipment degree year’s a a by last XXXX we've was quarter and previously customer. U.S. quarter. see second revenues in a to the million margin non-conformance levels

Excluding gross quarter the second margin consolidated the charge XX%. was for

within for limits coverage and our of request to We is remediation, policy. insurance amount insurer such the have submitted in the a expended amounts reimbursement our

this All We to our work company and insurers. with upon be matter settlement closely will the resolve continue applied to to received with the insurance amounts charge. reverse

in China reflected on continued million results office second included Fuel of We compared with amount APC metric from reductions $X.X million realized year. in XXXX this is $X.X million savings compared XX% an for million consulting which declined reversal more respectively. In the certain this a to and costs of XXXX. still This purposes, cost remained and loss fees. Tech second a quarter and of be in million - of the reduction of to was our along for operating this in and suspension SG&A. warranty of last have quoted a $X.X reversal, our $X.X aforementioned Included XXXX the of driving SG&A administrative the controlling expense for by revenues focused quarter Factors SG&A to $X.X our operations, quarter comparative previously than related quarter For included recorded a previously would XX% seen to our in the same receivable from no on claim. quarter liability spite the second the by quarter the XXXX. decrease Beijing

spending development level reflecting our initiatives in despite demonstration. on expect due We decline XXXX our development Research continue delays in support of by to SG&A the nor our on COVID without treatment increase the and technology to of activities. sacrificing that customer current base, $XXX,XXX, $XX,XXX to an expenses will approximately business increased water

resources of targeted million We loss from a share. to $XXX,XXX support continued other $X.XX $X.XX share development and continuing per per or of dedicate was from Net continue continuing net operations enhancement. to in or compared initiatives $X.X product loss operations to

cash cash sheet $X.X $XX.X Our and and loan. of June had including And of our approximately million, we proceeds from SBA obligation at of million. XX PPP million the balance equivalents reflects restricted cash $X

continue respect per end our ongoing support was balance which needs operational book $XX capital the to valuation, million, value working of share Our With the $X.XX. quarter business. at was will to

working at share share $X.XX was per June $X.XX value and book per tangible capital XX. our was Our

XX, million geographies at several entity that June expect cumulative maintain Given will covered we which for tax or losses operating net which income our we China be at of given the NOLs, legal preserving includes are will figure expense in XXXX that near This $X.X we our zero. China.

to like I'd to back over Vince. turn Now the call

Vincent Arnone

this take questions. line operator, much and very Ellen, thank to you open the let's opportunity for

Operator

coming go ahead. Wainwright. [Operator Dayal is Amit Instructions] first of H.C. from question Please Our

Amit Dayal

know give Just of million And and the backlog on to are any that in opportunities around on us the pursuing add million if the to the sort of - or end is expect the still of to here. I backlog Vince mix do could $XX before what you over $XX color you year? any anticipating

Vincent Arnone

XXXX, to of Amit, expect profit would backlog it expect a the through but to loss would add that year. it before I end of actually deal would in I pull statements the and not great the in

Amit Dayal

the does what and of Vince now? right it Understood, the comprise mix backlog

Vincent Arnone

From a Amit? geographic perspective

Amit Dayal

just perspective Product know… you

Vincent Arnone

technologies perspective ULTRA it's and Oh right SCR okay, product now. in backlog our predominantly

Amit Dayal

understood it understood, Okay, got

Vincent Arnone

Yes.

Amit Dayal

technology this side, change there et that agreement the some of any color opportunity any water - and Kadance how DGI if, with on customers, of cetera? does piloted your these with efforts to trials sort the So is accelerate with on

Vincent Arnone

Kadance again, NanOX that of I is now place have call to we new some it Tech, Kadance, this agreement to Yes, think previously. the an we in that I we have signed, assets agreement enter actually a a not the that enter market have would LLC. did now we've favorable with opportunity that bit that The little in to more acquired opportunity Fuel expanded areas non-exclusive

and our to solutions providing. well the the fabricating And the Their municipal Under designing the longer wastewater what been delivery systems the the in delivery to ability as area. an delivering had in having that's in manufacture were then is Secondarily, for became from requirement biological advantage history own speaking. biological on and interested we think those we an DGI respected and long-term DGI reagents they enhancement that to the reagents we our treatment any us, technology that our purchase to focus licensor. all agreements, that, treatment prior our without systems generally I do fact did given they wastewater have systems, but have lastly, of skin-based to not - is Kadance

an better speaking, development that an generally Kadance would hope to I And opportunity expedited So we LLC than in with as prospectively. relates to it marketplaces. commercial we partner that with translate for NanOX would enhance believe there's to would to had previously us become have timeframe

Amit Dayal

Just or at whatever low you we electricity quarter Do coal some there? in picked one, some power over probably, has second still utilization up mode maybe the feel see are recovery we that facilities. last

Vincent Arnone

yet still think go. to I Yes, there's recovery

beneficial coal-fired of been dispatch some to seen have we units which has Fortunately, us.

we've As FUEL commentary QX and CHEM revenue the mentioned as to we’ve as system ended related QX I my relative in begun performance.

am So, that. I pleased see to

many of have in COVID-XX taking additional lack helpful just and of anticipated well we the the We of temperatures because dispatch. and associated the with factors as benefit to that's the And taking those season had outages earlier a weather extraordinarily units factors their that fact those to and impacting some parts because or that overall they with was the had to one of so, the regular extended of demand, demand. always running units, saw in get because saw year country we the need meet our warm back repair, the summer larger to wasn't to opportunity there outages, not some up do maintenance was do

remainder path and normalized seeing behind thus rate, what I'm QX, hopefully that on continue FUEL will we'll for hopefully, us. optimistic about the is run to this of year. will that more be far able in for keep a CHEM. in So to place you largely And if of I'm But a stay

Operator

Our next Please Jim from coming go is McIlree Woods. of ahead. question Bradley

Jim McIlree

pricing margins in commentary, margins same Is think that and a changed? FUEL to been normal there change you returning suggest about your are is in would CHEM that or for pricing levels. the I talked

Vincent Arnone

normally our year do And call operating result, year, gross in largely if it CHEM. Yes, performance FUEL a you in looked half when first little at our this the components this profile historically bit FUEL would a CHEM we actually same. as years, margin we've revenues has because for look expect is little reduction CHEM half we've at over a have a pricing of of and for because margins than of prior the approximate had XX% business the stayed FUEL bit first we it, fixed lower the of

revenue call increased a we'll a XX% to say should more the a FUEL CHEM see With margin or return to generation I gross it business. that normalized return for levels, more normalized

Jim McIlree

between that. that DGI. do help could I I we for tell testing? but testing then timeline on brushes me then when do take understand that a testing does evaluation. once testing what in hoping get you thanks has the that there's could contract your if recognize And - Great, past timeline as been what's when then me negotiation start just the the secondly, it And you on start broad I long was you the delayed, understand again timeline how would the be you and

Vincent Arnone

that demonstration. obviously the then to system we week sit out that for results it we whether sort timeframe. able and particular customer. a towards and to a that I'll for of use as at sale, And a treat the demonstration look discussion start QX start system pulp demonstration Well that demonstration timeframe, it a forward to we're and of our out measurement started over that was the sit then XX- of QX whether towards X is, of X had necessary would rental, the I as monitor that and an to Jim Coming water and customer It and of work we on Whereby XX-week that beginning hopefully thereabouts. program guess model what whichever with to be to basis obviously water we some end an period and all facility. testing planned or is we the would largely of of with doing be would best customer our baseline and XX-week X move looking assessing with that be business agreement conditions paper commercial assess

look specific look what So some would with the to modifications customer slight a depending we on and would the that be that's like that timeframe demonstration application addressing.

Jim McIlree

be was mouth, is the who X similar the XX afterwards fair enough then, it to XX so to contracts demo let's amount actually it long and would of a call but a But evaluation to XX maybe not knows to way all contract? signed takes a time. that. put your have And it at words weeks, so negotiate weeks sounds it how and like, of And in that before look you to

Vincent Arnone

that's generalized on I in expediently. customer a a on some how is would we'd is bit able process, hope lot that familiar more are nature a Jim basis they for fair, them. with going convinced say to beneficial of the yes. dealing relative and aeration depend and cases, to we're the be that's them But work wouldn’t with I to that system or what the advanced to of aeration completely type something takes it little DGI

good. the think I generally, So timeframe is

Jim McIlree

And last that suggesting is going you for them. Is number been speaking a for to have the been be companies to that loan other the the of case PPP loan, well? have forgivable as

Vincent Arnone

by majority sit is definitely uncertain are The web banks companies for receive SBA to of the lot as that actually that we paper We electronically, their here of for up were believe forgiveness authorized application first the great the their information as wave The opposed application. today. a to case. timing that indeed forgiveness occurred that the processing of that be did loans, of with having the submit portals setting

of SBA up time to set to that our that that then a portal to we're then day to mode, our our at they So told And waiting forgiveness to because the approve in XX-day has of our back get XX submit the review SBA for the end also will waiting bank. but and we're information, of period will bank to be in for then they has bank. information the

answer here yes, we the today your So the as uncertain. official forgiven. to we expect is forgiveness, loan question, be for But timeframe first to sit

Jim McIlree

thanks. ask great, if more. I I'd one I like lied - And That's I think to

field usage. it about refer your lowering electricity that? Are with about if or didn't a COVID impact business, case, people impact having to and install? you the Is there either talked and can't going was that to you refer was the you did service that to is in issues another you how impact having either on of are you that's or get mitigating that the You

Vincent Arnone

didn't up side. to the did that award related refer APC refer now some the bring I But call it COVID-XX. timing specifically other to delays on that point, of yes. you I to

personnel are to a have testing other some reasons. had that to in of deal being challenges commissioning field do our of either with installed systems or or variety the out relative We having to

So dealing remote to commissioning there, our direct It many the help knowledge work or in diagnostics and we've with deployed with at you're to the base but remotely contact cases, the customer tactics activities direct commissioning base customers that many dealing on our In of through site. depending be that at has we're hands site. instances, need plant can benefits, great Working challenging. on. you be to

to get it's much our when able technicians to And so many sites. more working with our are cases, efficient in systems

items. been in country address basis. a able people sites, state on we largely deploy to through to And trying to but get to specifically have issues had outside that customer we've this daily this country, to working technicians our related we're our So, of commissioning

Operator

Pete from ahead. MAZ of Enderlin go question next coming Please is Partners. Our

Pete Enderlin

loan, guess as two-year is the I maturity set it it's On PPP that a up correct? initially,

Vincent Arnone

Correct.

Pete Enderlin

it the but remember liabilities. that balance, was don't lot it the rest long-term I like looked And was and liabilities a Is of current right? the on

Vincent Arnone

current $X.X long-term. the approximately million Of it’s XXX,XXX XXX,XXX

Pete Enderlin

Right.

Vincent Arnone

maturity program. correct to two-year Yes,

month in starts actually payment seven. First

Pete Enderlin

so XXX,XXX you have liability. a as current that's why Okay, that the

Vincent Arnone

is That correct.

Pete Enderlin

that be keep is correct? And guess, order it people Okay. in for to paying I have you forgiven, to

Vincent Arnone

an periods during will. or the choose certain stipulations if program to period by a coverage policy, to as option coverage defined eight-week XX-week You people you And or regulations PPP paying keep the have period. coverage between companies have

Jim, caller mentioned be to prior we had forgiven. the loan I expect to As do the

Pete Enderlin

eight Right, so you or XX weeks pick did weeks?

Vincent Arnone

so have not. had that today not specify as of We we to and have

Pete Enderlin

a that, for I and kept would I guess future, take you getting as people which effectively gain, presuming in exchange you But hit guess. non-recurring be I'm on your paying point is in operating line Okay. treated the forgiven what way is such this at some so at in

this in way incurring at retrospect when is expenses that So and on the look the period then over by to whole to at money people you're of way the later to loan be right look paying maybe the Is because you forgiven. get it's back the that? going

Vincent Arnone

Assuming to forgiven. that benefit of loan that when at a we time is a formally loan forgiven that is the call or the that point loan value in take income, yes, will it due Pete indeed

Pete Enderlin

this Right all okay, know APC payment but segment remind What issue was old fairly problem? that? the caused the warranty - I us it's thanks. And that was the the issue actually warranty what a and then in insurance issue, and

Vincent Arnone

had that, actually of is have our piece a to would delays, changes went execution than some actually designed Pete. XXXX, needed one it as specification. some our was performance guarantee it a, to the design as system this was at we make met provided. leave and as some steel simple sound that of deviated from requirements. all structures design result, a We a But that specification. timeframe. call we we structurally commenced project And we had subsequent then level a and I'll the just And in project manner that effectively The four-year Right, the different over but high through in the

Pete Enderlin

Okay.

I of part redo million to had think cost X it you plus you basically and So that forgotten?

Vincent Arnone

correct. That is

Pete Enderlin

related you non-exclusive have new lastly changed now somewhat and this Okay what have change that exclusive areas What and to with for and the Kadance, areas rights? agreement has terms DGI exclusivity. you then, how do are

Vincent Arnone

today. Pete, was still had Everything exclusive that that we previously is exclusive

related cement, in address aquaculture applications - utilities products products. freshwater related oil and gas, exclusively. electric That's added ours, independence all to to biomass, on and What was to steel black, metal Fuel producers was anything related a to anything the glass, and are and for basis seawater and Tech markets all those anything forest carbon non-exclusive power livestock ability to that agriculture. any So us

added could opportunities list, ultimately some So we the to additional market overall which benefit. provide

Pete Enderlin

and any Okay, limitations of geographical are there that? in

Vincent Arnone

There that changed from are for agreement, the the none original agreement. of

we largely to if agreement, the with that other it's Pete, So to expand focused look a to approach the opportunity but geographies domestic licensor.

Pete Enderlin

reach would other agreement you on have them other In words, areas? geographical any an to with

Vincent Arnone

It yes. is correct,

Pete Enderlin

to very rates good fronts challenges rates that the multiple lot for a thanks you luck. contract clarification development and operating with all new Well, programs these good dealing Okay. much. luck Thank of all all with and on to and from

Vincent Arnone

support. Thank Pete. Have you, a day. good your Appreciate

Operator

like Thank closing to I'd back for Arnone floor the this time, you. At turn over comments. to Mr.

Vincent Arnone

operator. you, Tech. like interest for continued in Fuel the thank I'd to Thank everyone

today Tech caller through challenges. is and today to objective. shareholder our last our still pull we're company's companies several value environment Fuel many of out to our return think well is like base. this challenging As We positioned That working to noted be able ourselves

a again thanks day So have and folks good today.

Operator

gentlemen, for your Ladies and you participation. thank

have and your the at day. log a disconnect this time, may You lines wonderful off or webcast

Fuel Tech (FTEK) 12 Aug 202020 Q2 Earnings call transcript