Business Wire | May 12, 2021 04:15PM EDT

Fuel Tech Reports 2021 First Quarter Financial Results

May 12, 2021

WARRENVILLE, Ill.--(BUSINESS WIRE)--May 12, 2021--Fuel Tech, Inc. (NASDAQ: FTEK), a technology company providing advanced engineering solutions for the optimization of combustion systems, emissions control, and water treatment in utility and industrial applications, today reported financial results for the first quarter ended March 31, 2021 ("Q1 2021").

"Our first quarter 2021 results reflected a nearly 60% increase in net sales at our FUEL CHEM(r) business segment, driven primarily by the installation of our TIFI(r) Targeted In-Furnace Injection technology on new domestic coal-fired unit accounts, higher demand for power, and early recovery from the COVID-19 pandemic," said Vincent J. Arnone, President and CEO. "We are continuing to pursue multiple opportunities both domestically and internationally and are optimistic about the performance for FUEL CHEM in 2021. Offsetting the improvement at FUEL CHEM was sluggish performance at our Air Pollution Control (APC) business, where we are continuing to experience pandemic-driven project delays and cancellations that have resulted in a lack of new orders. We are hopeful that APC will recover in conjunction with the resumption of global economic activity in 2021 which, in turn, would allow us to capture opportunities associated with our current global sales pipeline of $40-50 million.

"We are addressing multiple growth pathways at our Dissolved Gas Infusion (DGI(tm)) business, including the development of a large-scale DGI delivery system, in-depth market assessment and research, and the pursuit of commercial opportunities that will likely take place in the second half of 2021 following two successful demonstrations of the technology, one in support of our licensor and the other in support of an internally-generated opportunity."

Mr. Arnone concluded, "We ended the first quarter with $36.1 million in total cash following the closing of our financing in February 2021 and have no debt. We will deploy this capital as required to support our internal growth initiatives while exploring strategic opportunities that advance our mission of providing advanced engineering solutions that support environmental remediation, while delivering long-term value to our shareholders. In that regard, we are monitoring opportunities associated with proposed federal infrastructure spending, a component of which is a continuing reduction in harmful emissions as the nation transitions from fossil fuels."

Q1 2021 Consolidated Results Overview

Consolidated revenues increased 33.2% to $5.0 million from $3.8 million in Q1 2020, reflecting higher revenues at FUEL CHEM offset by revenue declines at APC.

Gross margin for Q1 2021 was 46.9% of revenues compared to 40.4% of revenues in Q1 2020, reflecting a higher concentration of FUEL CHEM segment revenues as a percentage of the total versus the prior period.

SG&A expenses declined by 20.2% to $3.1 million from $3.9 million in Q1 2020, reflecting lower administrative and professional services costs, including costs related to the previously announced closure of the Company's APC business in China.

Operating loss narrowed to $(1.2) million from an operating loss of $(2.7) million in Q1 2020.

Other income in Q1 2021 was $1.6 million, reflecting full forgiveness of the loan proceeds from the Paycheck Protection Program, established pursuant to the CARES Act. Other income in Q1 2020 was $0.2 million.

Net income was $0.4 million, or $0.01 per share, compared to a net loss of $(2.6) million, or $(0.10) per share, in Q1 2020.

Consolidated APC segment backlog at March 31, 2021 was $5.2 million compared to $5.3 million at December 31, 2020. Backlog at March 31, 2021 included $4.7 million of domestic backlog as compared to $4.9 million of domestic backlog at December 31, 2020.

APC segment revenues declined to $0.9 million in Q1 2021 from $1.2 million in Q1 2020, primarily the result of delayed projects related to the COVID-19 pandemic. APC gross margin was $0.4 million, or 41.5% of revenue, in Q1 2021, as compared to gross margin of $0.4 million, or 36% of revenue, in Q1 2020.

FUEL CHEM segment revenues rose to $4.1 million from $2.6 million in Q1 2020 primarily reflecting higher power demand and recovery from the initial emergence of the COVID-19 pandemic, which impacted results in the prior year period. Segment gross margin improved to 48% in Q1 2021 compared to 42.4% in Q1 2020.

Adjusted EBITDA loss was $(0.9) million in Q1 2021 compared to an Adjusted EBITDA loss of $(2.2) million in Q1 2020.

Financial Condition

At March 31, 2021, cash and cash equivalents were $35.7 million and restricted cash was $0.4 million. Stockholders' Equity at March 31, 2021 was $46.5 million, or $1.68 per share and the Company had no debt.

Conference Call

Management will host a conference call on Thursday, May 13, 2021 at 10:00 am EDT / 9:00 am CDT to discuss the results and business activities. Interested parties may participate in the call by dialing:

* (877) 423-9820 (Domestic) or * (201) 493-6749 (International)

The conference call will also be accessible via the Upcoming Events section of the Company's web site at www.ftek.com. Following management's opening remarks, there will be a question-and-answer session. Questions may be asked during the live call, or alternatively, you may e-mail questions in advance to dsullivan@equityny.com. For those who cannot listen to the live broadcast, an online replay will be available at www.ftek.com.

About Fuel Tech

Fuel Tech develops and commercializes state-of-the-art proprietary technologies for air pollution control, process optimization, water treatment, and advanced engineering services. These technologies enable customers to operate in a cost-effective and environmentally sustainable manner. Fuel Tech is a leader in nitrogen oxide (NOx) reduction and particulate control technologies and its solutions have been in installed on over 1,200 utility, industrial and municipal units worldwide. The Company's FUEL CHEM(r) 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(tm) Dissolved Gas Infusion Systems which utilize a patented nozzle to deliver supersaturated oxygen solutions and other gas-water combinations to target process applications or environmental issues. This infusion process has a variety of applications in the water and wastewater industries, including remediation, aeration, biological treatment and wastewater odor management. Many of Fuel Tech's products and services rely heavily on the Company's exceptional Computational Fluid Dynamics modeling capabilities, which are enhanced by internally developed, high-end visualization software. For more information, visit Fuel Tech's web site at www.ftek.com.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release contains "forward-looking statements" as defined in Section 21E of the Securities Exchange Act of 1934, as amended, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and reflect Fuel Tech's current expectations regarding future growth, results of operations, cash flows, performance and business prospects, and opportunities, as well as assumptions made by, and information currently available to, our management. Fuel Tech has tried to identify forward-looking statements by using words such as "anticipate," "believe," "plan," "expect," "estimate," "intend," "will," and similar expressions, but these words are not the exclusive means of identifying forward-looking statements. These statements are based on information currently available to Fuel Tech and are subject to various risks, uncertainties, and other factors, including, but not limited to, those discussed in Fuel Tech's Annual Report on Form 10-K in Item 1A under the caption "Risk Factors," and subsequent filings under the Securities Exchange Act of 1934, as amended, which could cause Fuel Tech's actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. Fuel Tech undertakes no obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances or for any other reason. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including those detailed in Fuel Tech's filings with the Securities and Exchange Commission.

FUEL TECH, INC.CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)(in thousands, except share and per share data)

March 31, December 31,

2021 2020

ASSETS

Current assets:

Cash and cash equivalents $ 35,711 $ 10,640

Restricted cash 150 1,595

Accounts receivable, net 4,601 6,548

Inventories, net 156 97

Prepaid expenses and other current assets 1,771 2,193

Total current assets 42,389 21,073

Property and equipment, net of accumulated 5,041 5,220 depreciation of $27,007 and $26,889, respectively

Goodwill 2,116 2,116

Other intangible assets, net of accumulated 529 553 amortization of $791 and $757, respectively

Restricted cash 270 371

Right-of-use operating lease assets 350 394

Other assets 348 361

Total assets $ 51,043 $ 30,088

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 1,466 $ 2,353

Accrued liabilities:

Operating lease liabilities - current 148 149

Employee compensation 699 930

Other accrued liabilities 1,580 2,099

Total current liabilities 3,893 5,531

Operating lease liabilities - non-current 194 237

Long-term borrowings - 1,556

Deferred income taxes, net 134 134

Other liabilities 299 309

Total liabilities 4,520 7,767

Stockholders' equity:

Common stock, $.01 par value, 40,000,000 sharesauthorized, 31,227,300 and 25,639,702 shares 312 262 issued, and 30,263,791 and 25,228,951 sharesoutstanding, respectively

Additional paid-in capital 164,137 140,138

Accumulated deficit (114,205 ) (114,603 )

Accumulated other comprehensive loss (1,563 ) (1,370 )

Nil coupon perpetual loan notes 76 76

Treasury stock, at cost (2,234 ) (2,182 )

Total stockholders' equity 46,523 22,321

Total liabilities and stockholders' equity $ 51,043 $ 30,088

FUEL TECH, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except share and per-share data)

Three Months Ended

March 31,

2021 2020

Revenues $ 5,033 $ 3,778

Costs and expenses:

Cost of sales 2,675 2,251

Selling, general and administrative 3,100 3,886

Research and development 415 324

6,190 6,461

Operating loss (1,157 ) (2,683 )

Interest expense (4 ) (3 )

Interest income 1 11

Other income, net 1,558 226

Income (loss) before income taxes 398 (2,449 )

Income tax expense - (118 )

Net income (loss) $ 398 $ (2,567 )

Net income (loss) per common share:

Basic net income (loss) per common share $ 0.01 $ (0.10 )

Diluted net income (loss) per common share $ 0.01 $ (0.10 )

Weighted-average number of common shares outstanding:

Basic 27,510,000 24,597,000

Diluted 27,737,000 24,597,000

FUEL TECH, INC.CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (in thousands)

Three Months Ended

March 31,

2021 2020

Net income (loss) $ 398 $ (2,567 )

Other comprehensive income loss:

Foreign currency translation adjustments (193 ) (231 )

Comprehensive income (loss) $ 205 $ (2,798 )

FUEL TECH, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)

Three Months Ended

March 31,

2021 2020

Operating Activities

Net income (loss) $ 398 $ (2,567 )

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

Depreciation 168 163

Amortization 34 43

Loss on disposal of equipment 2 -

Provision for doubtful accounts, net of recoveries 47 -

Stock-based compensation, net of forfeitures 20 81

Gain of forgiveness on Paycheck Protection Plan Loan (1,556 ) -

Changes in operating assets and liabilities:

Accounts receivable 1,831 795

Inventories (59 ) (104 )

Prepaid expenses, other current assets and other 422 99 non-current assets

Accounts payable (874 ) (313 )

Accrued liabilities and other non-current liabilities (658 ) (102 )

Net cash used in operating activities (225 ) (1,905 )

Investing Activities

Purchases of equipment and patents (4 ) (14 )

Net cash used in investing activities (4 ) (14 )

Financing Activities

Proceeds from sale of common stock issued in connection 25,812 - with private placement

Costs related to sale of common stock issued in (1,783 ) - connection with private placement

Taxes paid on behalf of equity award participants (52 ) (5 )

Net cash provided by (used in) financing activities 23,977 (5 )

Effect of exchange rate fluctuations on cash (223 ) (441 )

Net increase (decrease) in cash, cash equivalents and 23,525 (2,365 )restricted cash

Cash, cash equivalents, and restricted cash at 12,606 13,501 beginning of period (Note 2)

Cash, cash equivalents and restricted cash at end of $ 36,131 $ 11,136 period (Note 2)

FUEL TECH, INC.BUSINESS SEGMENT FINANCIAL DATA (Unaudited) (in thousands)

Air FUEL Pollution CHEM

Three months ended March Control Segment Other Total 31, 2021 Segment

Revenues from external $ 907 $ 4,126 $ - $ 5,033 customers

Cost of sales (531 ) (2,144 ) - (2,675 )

Gross margin 376 1,982 - 2,358

Selling, general and - - (3,100 ) (3,100 )administrative

Research and development - - (415 ) (415 )

Operating income (loss) $ 376 $ 1,982 $ (3,515 ) $ (1,157 )

Air Pollution

FUEL CHEM

Three months ended March 31, 2020

Control Segment

Segment

Other

Total

Revenues from external customers

$

1,196

$

2,582

$

-

$

3,778

Cost of sales

(765

)

(1,486

)

-

(2,251

)

Gross margin

431

1,096

-

1,527

Selling, general and administrative

-

-

(3,886

)

(3,886

)

Research and development

-

-

(324

)

(324

)

Operating income (loss)

$

431

$

1,096

$

(4,210

)

$

(2,683

)

FUEL TECH, INC.GEOGRAPHIC INFORMATION (in thousands)

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

Air FUEL Pollution CHEM

Three months ended March Control Segment Other Total 31, 2020 Segment

Revenues from external $ 1,196 $ 2,582 $ - $ 3,778 customers

Cost of sales (765 ) (1,486 ) - (2,251 )

Gross margin 431 1,096 - 1,527

Selling, general and - - (3,886 ) (3,886 )administrative

Research and development - - (324 ) (324 )

Operating income (loss) $ 431 $ 1,096 $ (4,210 ) $ (2,683 )

FUEL TECH, INC.GEOGRAPHIC INFORMATION (in thousands)

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

Three Months Ended

March 31,

2021 2020

Revenues:

United States $ 4,463 $ 3,097

Foreign 570 681

$ 5,033 $ 3,778

March 31,

December 31,

2021

2020

Assets:

United States

$

45,379

$

24,524

Foreign

5,664

5,564

$

51,043

$

30,088

FUEL TECH, INC.RECONCILIATION OF GAAP NET LOSS TO EBITDA AND ADJUSTED EBITDA (Unaudited) (in thousands)

March 31, December 31,

2021 2020

Assets:

United States $ 45,379 $ 24,524

Foreign 5,664 5,564

$ 51,043 $ 30,088

FUEL TECH, INC.RECONCILIATION OF GAAP NET LOSS TO EBITDA AND ADJUSTED EBITDA (Unaudited) (in thousands)

Three Months Ended March 31,

2021 2020

Net Income (Loss) $ 398 $ (2,567 )

Interest (income) expense, net 3 (8 )

Income tax expense -- 118

Depreciation expense 168 163

Amortization expense 34 43

EBITDA 603 (2,251 )

Gain on forgiveness of Paycheck Protection Plan loan (1,566 ) --

Stock compensation expense 20 81

ADJUSTED EBITDA (943 ) (2,170 )

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210512005983/en/

CONTACT: Vince Arnone President and CEO (630) 845-4500

CONTACT: Devin Sullivan Senior Vice President The Equity Group Inc. (212) 836-9608