FTEK - Earnings call transcript Q2 2021

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Operator

Greetings. Welcome to the Fuel Tech Second Quarter 2021 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] Please note this conference is being recorded. the President to of turn Sullivan, host, now Vice Senior The will conference your over Devin I Equity Group. you. Thank

begin. may You

Devin Sullivan

Thank of Tech’s website, everyone us morning, after the the results you, company’s you issued Yesterday which Alex. joining a are we for at copy conference and call. today results quarter www.ftek.com. second thank Fuel close, XXXX our financial for Good available

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

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

Vince Arnone

Good for the everyone want on thank call Thank you, us today. And Devin. morning. joining to I

and the COVID-XX We our the beyond emerge imposed XXXX from are the continuing restrictions for strengthening. balance is to by of optimism pandemic and

positive is in business Pollution Infusion, Control treatment wastewater well. end business Although And or making our challenges are respective as remain, we call forward our FUEL taking their progress segments markets. CHEM DGI, each Dissolved and steps Air that Gas developmental

that quarter no million continue border Our ended in pursue significantly near-term financial in to the will with $XX strongest and $XX to million is depending structure we having position and end, that our cash project at produce annual losses sustainable range narrowed operating second To results breakeven operating million profitability. allow on lean it has $XX an of to history us to We the been operating debt. in continue mix. a our revenue maintain the nearly

for XXXX driven and that in net the rose prior This by approximately quarter to the FUEL XX% last benefit has in year business of the XX% including increase rise nearly year Our in program fourth an from base, new a our CHEM current our quarter segment continued revenues sales second of operations segment. energy. from overall for installations demand installed occurred

X is FUEL eclipse is first Some the to economic XXXX its the resumption activity on and generated months. million. segment of year and of the Through to $XX $X.X increased tied summer gross million margin tied of demand remains power XXXX, specifically full revenue CHEM performance of in of some seasonal to months the when this usage, pace

Although million and $X.X impacted our by we quarter, the orders encouraged of we of second at through were markets our continued announced results end to seeing pandemic and the by project economic of some delays at APC in improvements the be end the end driven cancellations new are July. we

million We of sales APC to continue $XX pursue a million. to $XX pipeline global

to a of year, end this have global pace than seen million to us an economic be before value resumption awarded do we opportunities these $XX healthier will of of likely many activity, we with which of XXXX aggregate expect contracts since backlog pre-COVID. to with enable will Although tied the the of $X end see to million

made business businesses, second Beyond our Infusion two good during base at quarter. Gas Dissolved progress the our we

opportunities. pathways, large address multiple market the a development system, delivery growth the We in-depth assessment continue to of and of DGI and research, scale including pursuit commercial

demonstrations the quarter, in DGI United at locations our of this Regarding during we States. the technology two completed development, business

facility and much ways to as paper is its at capacity production first by The the examining increase a XX%. in Northwest pulp was as that

for a wastewater demonstrations the the potentially volume to action. of analysis municipality with treatment working show of The second expensive dissolved determine during could to treatment supplemental of on now data DGI to supporting high we oxygen from as derived a the success Coast substitute the are be was and municipal an customer feedback at was cost that designed lower benefits or and West on periods our by waste that facility expansion. course customers a next based capital both were Both delivery

development delivery DGI a our moving that we noted with equipment delivery investment end be capacity and large-scale DGI our call system, in higher and the believe conference were capacity had in increased we forward necessary of currently completed address is our of the majority during will QX system. next is of Regarding needs month. of design fabrication Yes, fabrication This we the system the the markets. to the

lastly, to QX, assessment, commercialization. technology, our plan, the to a in QX, the channels. both DGI available this will of our will engaged market positioned market and detailed this to then the necessary, company information, us resources regarding our landscape markets are this the competitive evaluation have out and assessment by better is be our We available including excited market And development evaluation bring prepare unit in an to technology of to the expediently we out completed for we as capital understand addressable end human With this assist we class DGI and including in-class for the firm of technologies. the opportunity of deployment field. When with

APC Now, FUEL into I’d a deeper call segments like our before bit dive CHEM to take and little of Ellen. over the turning a to

NOx solid is for SCR municipal suppliers, black most engine actively carbon the generator combustion and of following reduce and pursue manufacturers, turbine fuels opportunities and we remain manufacturers, with For SCR APC, waste, product technology offerings. we engaged recovery suppliers, and our steam paper ULTRA to widely used and the pulp emissions fossil to heat facilities. rice biomethane continue

provide the state technology The involve at EPA’s on rules retrofit our including opportunities Congress, where also certain compliance of We Pollution Tech Fuel level, with they trillion emissions environmental that install produce best to guidelines, Regional Haze sources activities control are Cross-State with through control way Air opportunities monitoring making infrastructure the its technologies. available bill emissions. $X new and may also

a and renewable may we The energy change regard nitrogen but as controls option increase source industrial NOx interest administration for and time. growing Biden over actions on additional oxide are reduction require watching to since emissions greenhouse the As focus in closely, option gas there a are hydrogen include this emissions. wind units with options is company, from would and the no climate beyond emissions, traditional especially very gas of The solar. fuel utility greenhouse

and lower continue support As FUEL will CHEM noted, of emissions burn to cost, results we quality applying allow the strong associated to while lower at the during industrial to fuel, technology is of utility oil without primary providing XXXX. created and expense lies potential segment surrounding to the remainder the in undertaken produce of by continue operational our of emissions address that issues. believe upside the which we to them will mitigating customers Domestically, environmental burning our the the necessary remediation solution our communities. being by sulfur fuel high Internationally, Mexico, health the in

in this our been support sulfur as as to has can with is quarter external as of power they advance in And towards Mexico international the continuing the to currently new of coming of from independent. their on the becoming for in fuel reduced natural ensure do oil fuel are move to generation generation such fuel. as to this that partner want for power in local market utilizing not gas country, sources sourcing with the The that glut energy significantly of favor use There is generation, for restrictions, U.S. they Mexican this Texas dependent current this We maritime the product international power Mexico of government a the high solidified solution. be fuel which dilemma officials the they prohibit in indigenous organization adoption engage position year first further a

of to closely. this We activity the will watch continue development

that our the believe at program building FUEL units site. utility, and at plant political CHEM with However, of discussions in currently one Mexico, technology additional in we is application implementation in regarding of facilities several of our this do partner is the at CFE, pressure state-owned favor

year, against As we over long-term to expedite recent go Fuel with and our as our closing, in continue would continue said, their base of the solutions we investigate And Tech towards And execute and we to delivering position our and I’ll return best in market find product plan. the discovery have support our our I are for our Ellen, completed please the team to long-term and with we DGI Ellen. like discussion short-term discussed path thank as quarter other work I shareholders, value. first in financing turn and thank to market opportunities. to want the demonstration their of we on ahead. profitability, both to to shareholder hard In continued dedication patience to for that strategic and the previously, technology that businesses the further history the

Ellen Albrecht

many to XX.X% segment. and segment from increased reflecting $X $XXX,XXX quarter quarter Thank $X.X $X.X on the declined gross was revenues Control in you, from the year’s rate. $X.X accounts new CHEM to the Vince, in XXXX prior completion pandemic. and XX% margins negative demand, and quarter in revenues margin from year COVID-XX the project result primarily morning, of in the of in year’s from included second everyone. $X.X quarter Consolidated Air of revenues a a last or in XXXX, the second XX.X% pandemic, timing margin significantly rose million year’s APC the the return revenue for period. current FUEL impacted to quarter, to $X.X quarter Pollution in decline COVID-XX run second by quarter to warranty or in delayed last of quarter, quarter last of in of million improved year’s primarily to APC to related in second million second million revenues compared charge of segment, second awards second normalized good revenue offset as emergence which million in XXXX segment of XX.X% higher million last our revenue remediation. gross CHEM results the APC the attributed FUEL initial second that higher from projects $XXX,XXX power customers during gross million a addition our recovery the reflecting $X.X significantly Segment

to margins APC XXXX quarter. to second The second product the charge, increase for in second of gross for year’s margin of this of in for XX.X% $XXX,XXX revenues revenues Consolidated attributed was margin the mix. XX.X% last the or Excluding quarter compared was is APC XX%. quarter segment

quarter at of in backlog impact million for compared million of margin backlog $X.X as XX%. was charge aforementioned Consolidated XXXX. at the compared December Backlog June same for gross to the million end APC $X.X domestic of domestic XX, consolidated XX million $X.X segment, to at was at XXXX the Excluding XX, million $X.X backlog segment December. June included the the $X.X XXXX APC of

next will SG&A in not of recognized $X.X that XX% in in from Backlog million new North in current XX this America year. expect Korea, employee million increased the We revenue, awarded contracts just Europe, consolidated a XXXX and to did expenses, reversal the an offset months. be $XXX,XXX $X.X at of include XX for by June million recorded from allowance backlog in expenses a the customers July second Despite administrative and higher $X.X million quarter. of reflects second year’s quarter. charge the in rise $X in last X% This doubtful accounts to by

a compared XXXX in in to XX.X% XX.X% SG&A quarter. quarter As was revenue, the percentage of second XXXX the second

to continue expect expenses For $XX XXXX, to SG&A and full between year range million million. $XX.X we

the year narrowed business last including necessary our $X.X the any million the and efforts of was XX% quarter. attributed application on $XXX,XXX quarter development in contract loss to from spending Operating second continued our new operating material quarter to $XXX,XXX, DGI in technology. of in activity, expenses the developments increase an $XXX,XXX, further second our primarily from which loss changes adjust were a will DGI technology. However, we for commercialization prior Research of reflect or awards of to year’s the as

are $X.X to was to in quarter was the loss same of operating $X.X to compared XXXX second of loss of on continue receivables. the focus loss warranty the respect China, to we of Cash in second the $XXX,XXX in EBITDA million from million an of And $X.X million the quarter XXXX, efforts. last we same the as for collection XX, our quarter the year. pursuing XXXX With estimated June $XXX,XXX. $X.X second adjusted EBITDA repatriated in Adjusted period quarter $XXX,XXX an million. was China Excluding charge

to remains Moving balance report strong. sheet. happy I’m very condition that to financial the our

last to we June share, was the and was $X.XX our equity restricted of cash the of same June had use $XX.X company Stockholders’ to capital As to declined $XXX,XXX XX, million, per or and $X.XX and by million back at or cash million a equivalents the compared over has period operating year. in million $X.X has no debt. Vince. share. cash XXXX, was of Cash $XX.X I’ll of turn Working $XXX,XXX. provided call activities $XX.X cash XX per now

Vince Arnone

for Operator, Thank open you, go questions. and the please Ellen. ahead line the

Operator

from H.C. your question. Thank you. [Operator with Wainwright. Sameer Please with Instructions] Our proceed first question Joshi comes

Sameer Joshi

Thank you. morning, Good Ellen. Vince,

Vince Arnone

Good Sameer. morning,

Sameer Joshi

the seems Just XXXX. They next European the in the year, APC was orders be time the likely Europe. But of based months. press next expectations digging release, the on are impact revenue from the North new XX into like America, that million the does for that the your in quarters? rest during it delivered previous orders North the American not and included How provided the over to line the revenues the $X.X are $X.X million is for Korea, two

Vince Arnone

Right.

nor where of we the we contribution in month incremental end year. the July, would coming had million now between that new between in and as anything be $XX to we that that going revenue are part now, have $X.X deal not are somewhere contract a awarded our given that indeed Sameer, the are the million awards right and way, great I million think of I orders from the possible year of of were $X noted, from

into from – expect we just XXXX revenue wouldn’t awards. a of lot flowing contract We’re those

little it, right line of and into above then XXXX’s year, build June, backlog year what around And were $X.X for a APC come that be the and more just based revenue Ellen just that little end now the look into looking will roll to prior between Okay? that to upon is million indeed month the to healthy backlog will perhaps we at From noted level as of move would timing. $X at less discussing. XXXX, million end at as bit a APC. the But of okay? the we’re likely As a, from of we’re that anything of do orders respectable, year, we this look remainder we same this looking over new the total call bit a as revenue and

Sameer Joshi

just Understood. FUEL to incremental TC/TIFI installations the during on CHEM that. be staying any do could line? of rest then you additional for And revenues, that Thanks the revenue expect FUEL CHEM the year

Vince Arnone

be that We we As we XXXX. are not but do. about give to we sit the through Mexico, for would receive the uncertain. timing here the would going our today, likelihood, up we would procurement for due is process that B, here anything the at have contributions upside site Sameer, to: that talked in timing the be a minimal starting just have forecasting for potential? And of incremental and in equipment nature, to then need A, fabrication would all XXXX award; we installed Do program. required contract remainder in We that

So would this necessarily year. not for CHEM expect FUEL incremental anything I

run prior what as our CHEM rate we of realized FUEL for on nicely XXXX. had However, current ahead noted calls, is in we

which as run rate also little – will CHEM, and FUEL somewhere on the more our our bit bit weather But rates million facility full rates, the utility the today. $XX to little range depending in would a in expecting indeed revenues dispatch sit here so million units dispatch of on require is year, impact remainder we – for So also indeed perhaps depending more this a are we to summer, frequently. healthy run $XX for that

Sameer Joshi

to were questions my Thanks Yes. couple next that. and months. summer Yes. Thanks for that. the of That for Those was about be Mexico great. going

being to is was accomplished? give that into that Moving after to the or you or going DGI, third insight any Can done only that? facility a scale-up us be planned was third DGI demonstration there is

Vince Arnone

looking we specific our of from for That that third and well started ahead that the very a planning now that finalizing focus the consultants, slightly into work we’re We plan customer went did at What very for actually right a in have demonstration is That technology. the wastewater now to did are commercialization actually municipal at incremental XXXX. end we’re the and study don’t then from and looking right of on of with going the demonstration. was okay? in together also midst We perspective, and terms facility DGI the anything our development towards a have put Right. third-party XXXX on table also a treatment perspective. receptiveness was

to As know, move position, incremental we have on our capture you need have years, the couple we into the more of are deal we to forward further, incremental DGI. go the of to bit put opportunity past prior over DGI. financing, financial funds now we that business. that specifically to for going for great to look aware this directions Due a best be our to of need that ability a to But the commercialization development of little we and not invest and to investment

Sameer Joshi

I intend kind in also your are? you think force, asked offerings? thoughts strong is you product what Can some And utilize to calls, I how that maybe part terms activity. do DGI us I balance sheet, mean, of the question M&A sales Understood. expanded the previous of maybe of have quarters next but give few but this development, it over in new

Vince Arnone

DGI. focus Sameer, the on now, very Right strongly Right. is

QX. development from we it, Once positioned on that call We better else we going to we our here will study have understand today, indeed take above But where in to relative our for will we in is, hand, And invest the much to DGI. are then in be to then be DGI. our able end could results think better get, around what activities over indicative to need how of or is decisions we go focus and further that of terms DGI.

Sameer Joshi

Thanks. Great. the continued I and to recovery Understood. Thanks for you later. will speak

Vince Arnone

Okay. Thanks Sameer.

Operator

[Operator question. from MAZ Please your Enderlin Pete Instructions] proceed comes Our next Partners. with question with

Pete Enderlin

taking Vince my question. and Thanks for Ellen. morning Good

Ellen Albrecht

Good morning. Pete. Hi

Pete Enderlin

have of you of any can delayed that in you in give – about been project talked size what The area? Just way has APC the the quantify sense delays the canceled? or any us

Vince Arnone

a range, to you cancellations right tell just give of it has But you been now a of lack minimum. it’s funding combination and a that financing $XX And will some I $XX million due Pete. would I million Yes. projects. delays for at to and/or

Pete Enderlin

And that prospective in some your and some pipeline, at but of included I back will come point, presumably suppose? – that’s

Vince Arnone

delays – the whether depending again, and those Cancellations, absolutely – a perspective, mean, the new not opportunities. so. – definitely from yes. owner to, to to delays, they project they those pursue develop I and continue in to those would decide life itself or From need But of on

indeed And pipeline that sales part some of near-term. here our projects the were delayed, as the are we including for of

Pete Enderlin

how And that regions? million $XX by does down roughly, to pipeline, $XX break million that geographic

Vince Arnone

where predominantly in the still would from. It’s contracts originate U.S. based of terms

of So, sales is I domestic. that indeed would say XX% pipeline

Pete Enderlin

this Well, is international overseas the a maybe of mix current yes, little expand more some is I even which there shows so as than well, business, potential guess? to

Vince Arnone

of keep example, China. with mind of is July, are, it’s the say, contract contracts the out material the is in located month most I States. that United And as the a But the in of should is. an at actual here project contract announced the one Fuel that There the in contract Tech end we

U.S., organizations OEMs the global on a be or opportunities won’t whereby will contracts the do come through U.S. themselves engineering there necessarily here work basis. business through again, in that we So the may are projects but The

Pete Enderlin

Right.

keep to from the life for of long-term new but of would contracts CHEM you long-term do a of show some period have being time? that streams would foreseeable any CHEM, sunset the them kind future? any that FUEL definite arrangements a that the FUEL in outlook ongoing existing provision like of call out is revenues there that, For aspects the of wouldn’t it – other phase or or anything the In words, just limit sort mean would anything

Vince Arnone

aren’t specifically, Pete. There provisions Understood. sunset

There over about of that that our the customers customers country. no seen know next we will past base any month. what given here of There in units, guarantee the this have take decade, represent guarantees particular However, and chemical those happen is we lines. along are coal-fired no given in what

is something month-out on day-in, day-out, a basis that impact we So, in country base regional activities this here month-in, our watch it could accounts. develop indeed that as economic

– it’s we we on coal-fired the the some there given impact regulation there is end and at environmental have is has for direction in in it units another our clauses, there. but FUEL trying So, going, will Also, anticipate indeed to seen been pressure continue. aren’t running game that of up focus uncertainty quickly tech and Hence, as business CHEM an some as unit mine time. point get hence, on we there some can, because likely

Pete Enderlin

understood. now stands even you or Well, the is CHEM Is fair where particular it of yes, FUEL But – as of utility shutdown. say? scheduled contemplated know that to any that existing don’t to installations,

Vince Arnone

There we in aware XXXX. evolves piece. million recurring that that likely to of It today $X is that one to is planning basis shutdown are a unit or impact at $X.X on so. least going million But

closely. it watching are we again, So

year, And way. we as could have come look very is opportunities strong. to to additional and our where units this remainder will our look the outlook at we we add the of Fortunately, extent opportunities very positive the

X.X the As for you that this to region. add been upon facilities drivers to at good be their economic know, specific years we contributing over able fortune their nicely based two have have units had past

Pete Enderlin

you aspects some where a that on one on bit last just you. you of NOx. hydrogen. that you talking that Thank And green elaborate Vince, you would mentioned would little produce apply And are process hydrogen. Can one, or process? guess about I in your technology Great. that green

Vince Arnone

as emissions nitrogen a and generate utilize would is be the that’s Yes. where operations of that It hydrogen itself be a manufacture source as part actual, that result, But NOx Pete, be not fuel would itself, to used that oxide could for it, as call wouldn’t generation. where of the power, an power But hydrogen the to it, would process. is there. fuel entity use choose there larger opportunities there call source some incremental scale likelihood hydrogen if on,

Pete Enderlin

Okay.

hydrogen and for operated not cells vehicles things or that? So, like fuel

Vince Arnone

Correct.

Pete Enderlin

Thanks Okay. good and luck. Alright. Thank for clarification that you.

Vince Arnone

Pete. you, Thank

Operator

session. Thank to you. of turn I have closing now for over the reached remarks. and end Ladies the question-and-answer gentlemen, Arnone we the Vince call will

Vince Arnone

Tech for to thank you on thanks and Again, today. Thank like support I base, the you the shareholder to would team And month forward a for talking very our us quarter you. we contributions. for Have joining November. Fuel on with the great of everyone in our look much, the thank Thank Alex. day, call to of third conference their again everyone. continued everyone call

Operator

today’s disconnect And lines have Thank concludes this This wonderful conference. time. your at may your a you and participation for day. you

Fuel Tech (FTEK) 11 Aug 212021 Q2 Earnings call transcript