Financial Data and Key Metrics Changes - Consolidated revenues for Q2 2023 were $5.5 million, down from $6.4 million in Q2 2022, reflecting higher APC segment revenues offset by a decline in FUEL CHEM product revenue [18][19] - Adjusted EBITDA loss was $1.2 million compared to a loss of $200,000 in the prior year period [23] - Net loss for the quarter was $1 million or $0.03 per share, compared to a net loss of $356,000 or $0.01 per share in the same period last year [47] - Consolidated gross margin for Q2 was 37% of revenues, down from 42% in the prior year period [44] Business Segment Data and Key Metrics Changes - APC segment revenue increased 25% to $3.4 million from $2.7 million in the prior year period, driven by project execution timing and new orders [43][40] - FUEL CHEM product revenue was $2 million, down from $3.6 million in the prior year quarter, primarily due to unplanned client maintenance and outages [19][6] - Consolidated APC segment backlog as of June 30 was $6.6 million, down from $7.6 million at March 31, 2023 [20] Market Data and Key Metrics Changes - The company is pursuing international opportunities for the FUEL CHEM segment, particularly in Mexico, to address emissions from high sulfur fuel oil [14] - The U.S. EPA's new rule tightening NOx emission requirements is expected to drive new APC orders over the next several years [41] Company Strategy and Development Direction - The company is focused on maintaining a conservative cost profile while investing in growth, particularly in water and wastewater treatment technology [36] - The company expects total revenues for 2023 to increase modestly to between $28 million and $30 million, up from $26.9 million in 2022 [17] - The company is working on commercializing its Dissolved Gas Infusion (DGI) technology and has commenced on-site demonstrations [12][21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improved performance in the second half of 2023, particularly for the FUEL CHEM segment as maintenance issues have subsided [6][27] - The company anticipates that interest income for 2023 will exceed $1.2 million [47] - Management noted that while it is too early to determine the full impact of DGI technology, initial data shows promising results [37] Other Important Information - Research and development expenses for Q2 increased to $413,000 from $289,000 in the prior year, driven by new product development efforts [21] - The company ended the quarter with total cash and investments of nearly $33 million and no long-term debt [36][48] Q&A Session Summary Question: Are you getting the full benefit of the quarter with all unplanned maintenance activities at client sites complete before Q3? - Management confirmed that most outages were completed in Q2, and they expect a normalized run rate for primary accounts in Q3 [27] Question: Were there any specific actions taken to bring SG&A down? - Management indicated that there were no material changes in human resources for DGI, but they plan to invest in SG&A as they see success in DGI [28][52] Question: Should R&D expenses be expected to be in line with Q2 rather than Q1? - Management confirmed that R&D expenses would likely remain consistent with Q2 as they continue to invest in demonstrations [30][53] Question: Is there a possibility that one of the DGI demonstrations could convert into an order recognized in Q4 2023? - Management acknowledged that while it is a possibility, they do not expect it to be material [63]
Fuel Tech(FTEK) - 2023 Q2 - Earnings Call Transcript