Fuel Tech(FTEK) - 2024 Q2 - Quarterly Results

Overview of Q2 2024 Performance The company reported strong Q2 2024 performance with significant revenue growth, improved profitability, and a robust financial position Management Commentary Management reported a 29% consolidated revenue increase in Q2 2024, driven by strong segment performance and new technology advancements - Consolidated revenues rose by 29% year-over-year in Q2 2024, driven by a 52% increase in FUEL CHEM® revenue and a 15% rise in APC revenues[2] - The company maintains a strong financial position with $30.1 million in cash and investments and no long-term debt as of June 30, 2024[2] - FUEL CHEM® growth was supported by the return of two previously dormant customers and a new demonstration with a potential annualized revenue of $1.5 million to $2.0 million[3] - The company is advancing its Dissolved Gas Infusion (DGI™) technology, with a demonstration planned at a U.S. fish hatchery in Q3 2024 to target the aquaculture market[4] - An incremental $5.0 million of new APC contract bookings was announced, with expectations to close more orders during the remainder of the year[3] Q2 2024 Consolidated Financial Highlights Consolidated revenues grew 29% to $7.0 million in Q2 2024, with gross margin improving to 41.9% and net loss narrowing to $(0.4) million Q2 2024 vs. Q2 2023 Consolidated Results (in millions) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Revenues | $7.0 million | $5.5 million | +29% | | Gross Margin | 41.9% | 36.6% | +5.3 p.p. | | SG&A Expenses | $3.3 million | $2.9 million | +13.8% | | Net Loss | $(0.4) million | $(1.0) million | Improved | | Net Loss per Share | $(0.01) | $(0.03) | Improved | - Adjusted EBITDA loss narrowed to $(0.5) million in Q2 2024, compared to an Adjusted EBITDA loss of $(1.2) million in Q2 2023[6] Business Segment Performance In Q2 2024, APC segment revenue grew to $3.9 million with a 39.1% gross margin, while FUEL CHEM revenue surged to $3.1 million with a 45.5% gross margin Q2 2024 Segment Performance vs. Q2 2023 (in millions) | Segment | Q2 2024 Revenue | Q2 2023 Revenue | Q2 2024 Gross Margin | Q2 2023 Gross Margin | | :--- | :--- | :--- | :--- | :--- | | APC | $3.9 million | $3.4 million | 39.1% | 31.4% | | FUEL CHEM | $3.1 million | $2.0 million | 45.5% | 45.2% | Financial Condition and Backlog As of June 30, 2024, Fuel Tech maintained a strong balance sheet with $30.5 million in cash and investments, no debt, and an APC backlog of $4.3 million, excluding new contracts - The company had cash and cash equivalents of $10.4 million, short-term investments of $9.7 million, and long-term investments of $10.4 million at June 30, 2024, with no debt[7] - Consolidated APC segment backlog was $4.3 million at June 30, 2024, compared to $7.5 million at December 31, 2023, excluding $5.0 million in new contracts announced post-period[5] Detailed Financial Statements This section provides a comprehensive overview of the company's balance sheets, statements of operations, and cash flows for the reported periods Condensed Consolidated Balance Sheets As of June 30, 2024, total assets were $49.0 million, liabilities decreased to $5.4 million, and cash and investments totaled $30.4 million Key Balance Sheet Items (in thousands) | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $10,404 | $17,578 | | Total current assets | $30,303 | $38,321 | | Total assets | $48,994 | $50,388 | | Total current liabilities | $4,482 | $5,688 | | Total liabilities | $5,425 | $6,674 | | Total stockholders' equity | $43,569 | $43,714 | Consolidated Statements of Operations Q2 2024 revenues increased to $7.0 million, with operating loss narrowing to $(0.7) million and net loss improving to $(0.4) million Statement of Operations Highlights (in thousands, except per-share data) | Metric | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $7,042 | $5,461 | $11,999 | $12,748 | | Gross Profit | $2,952 | $1,996 | $4,981 | $4,801 | | Operating Loss | $(715) | $(1,332) | $(2,407) | $(1,990) | | Net Loss | $(421) | $(1,044) | $(140) | $(1,458) | | Diluted Net Loss per Share | $(0.01) | $(0.03) | $(0.00) | $(0.05) | Consolidated Statements of Cash Flows For the six months ended June 30, 2024, net cash used in operating activities was $(2.7) million, with cash and equivalents ending at $10.4 million Six Months Ended June 30 Cash Flow Summary (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(2,664) | $17 | | Net cash used in investing activities | $(4,311) | $(8,288) | | Net cash (used in) provided by financing activities | $(95) | $42 | | Net decrease in cash and cash equivalents | $(7,174) | $(8,194) | | Cash and cash equivalents at end of period | $10,404 | $15,134 | Segment and Geographic Information This section details revenue and gross margin performance across business segments and provides a breakdown of financial data by geographic region Reporting Segment Data Q2 2024 saw APC segment revenue at $3.9 million with 39.1% gross margin, and FUEL CHEM at $3.1 million with 45.5% gross margin Q2 Segment Revenue and Gross Margin (in thousands) | Segment | Q2 2024 Revenue | Q2 2024 Gross Margin | Q2 2023 Revenue | Q2 2023 Gross Margin | | :--- | :--- | :--- | :--- | :--- | | Air Pollution Control | $3,949 | $1,544 | $3,422 | $1,075 | | FUEL CHEM | $3,093 | $1,408 | $2,039 | $921 | Six Months Segment Revenue and Gross Margin (in thousands) | Segment | Six Months 2024 Revenue | Six Months 2024 Gross Margin | Six Months 2023 Revenue | Six Months 2023 Gross Margin | | :--- | :--- | :--- | :--- | :--- | | Air Pollution Control | $6,267 | $2,434 | $6,981 | $2,040 | | FUEL CHEM | $5,732 | $2,547 | $5,767 | $2,761 | Geographic Data Q2 2024 U.S. revenues were $4.5 million, while foreign revenues more than doubled to $2.6 million, with most assets in the U.S. Revenues by Geographic Area (in thousands) | Region | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | United States | $4,471 | $4,316 | $8,066 | $10,297 | | Foreign | $2,571 | $1,145 | $3,933 | $2,451 | | Total | $7,042 | $5,461 | $11,999 | $12,748 | Assets by Geographic Area (in thousands) | Region | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | United States | $45,525 | $46,487 | | Foreign | $3,469 | $3,901 | | Total | $48,994 | $50,388 | Non-GAAP Financial Measures This section provides a reconciliation of GAAP net loss to Adjusted EBITDA, a key non-GAAP metric used to assess operational performance Reconciliation of GAAP Net Loss to Adjusted EBITDA Adjusted EBITDA, a non-GAAP measure, improved to a loss of $(0.5) million in Q2 2024, reflecting better financial performance excluding specific non-cash items - Adjusted EBITDA is defined as net income (loss) before interest expense, income tax expense (benefit), depreciation expense, amortization expense, stock compensation expense, and gain on employee retention credit[22] Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Metric | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Loss | $(421) | $(1,044) | $(140) | $(1,458) | | EBITDA | $(653) | $(1,252) | $(576) | $(1,910) | | Adjusted EBITDA | $(529) | $(1,154) | $(2,025) | $(1,723) |