Fuel Tech(US:FTEK)2022-05-11 18:48Financial Data and Key Metrics Changes - For Q1 2022, consolidated revenues rose by 10% to $5.5 million from $5 million in Q1 2021, driven by an increase in APC segment revenue [17][6] - Consolidated gross margin was 41.4%, down from 46.9% in Q1 2021, reflecting lower gross profit margins from both operating segments [17][18] - The net loss for Q1 2022 was $998,000 or $0.03 per share, compared to net income of $398,000 or $0.01 per share in Q1 2021 [20][21] Business Line Data and Key Metrics Changes - APC revenues increased by approximately $1.3 million to $2.2 million in Q1 2022, reflecting project execution timing and revenue generation from new orders [17][6] - FUEL CHEM revenues declined to $3.4 million from $4.1 million in Q1 2021, primarily due to decreased power generation demand [17][18] - APC gross margin was 35.2%, down from 41.5% in Q1 2021, while FUEL CHEM gross margin declined from 48% to 45.5% [18][20] Market Data and Key Metrics Changes - The backlog for the APC segment rose to $9.6 million as of March 31, 2022, from $9.1 million at the end of 2021, with expectations of $6.7 million being recognized in the next 12 months [18][19] - The company is pursuing a global sales pipeline of $50 million to $75 million, with $5.3 million of new orders announced in Q1 2022 [7][6] Company Strategy and Development Direction - The company is focusing on expanding its FUEL CHEM program and exploring new applications for its chemical technology, particularly in the context of decarbonization and emissions control [9][11] - The DGI initiative is being developed with high expectations for commercialization, targeting one to two commercial applications by the end of 2022 [13][15] - The company is also monitoring regulatory changes, such as the EPA's proposed updates to the CASPER rule, which could create new opportunities for its technologies [10][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about revenue growth for 2022, expecting total revenues to show a modest improvement from 2021 [9][6] - The company is closely watching market dynamics and customer inquiries related to new environmental regulations, which could drive demand for its products [10][12] - Management acknowledged the challenges posed by reduced power generation demand but anticipates a seasonal increase in demand during the summer months [8][28] Other Important Information - The company reported total cash of more than $35 million and no debt as of March 31, 2022, indicating a strong financial position [20][21] - SG&A expenses remained stable at $3.1 million, with a decrease in SG&A as a percentage of revenue from 61.6% in Q1 2021 to 55.2% in Q1 2022 [20][17] Q&A Session Summary Question: Revenue cadence for the rest of the year - Management expects a general improvement in revenue, particularly in Q3, driven by chemical technologies and backlog [24][26] Question: Gross margin expectations - FUEL CHEM margins are expected to improve towards historical levels of approximately 50% as revenue increases, while APC margins are targeted between 30% to 35% for the full year [26][25] Question: Power generation demand - Management noted a decrease in base customers but anticipates an uptick in demand as summer approaches, with new customer acquisition in the FUEL CHEM segment [28][27] Question: DGI applications - The company targets one to two commercial applications for DGI by the end of 2022, focusing on smaller scale systems for various end markets [29][29] Question: Water treatment technology development - Management explained delays due to COVID-19 but is now finalizing performance testing for DGI, with expectations to go to market soon [33][32] Question: Sales initiatives and market approach - The company utilizes a combination of internal sales force and manufacturing representatives, with a focus on specific industries for water treatment [41][40]