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 third quarter ended September 30, 2023 ('Q3 2023').
'Revenue from our Air Pollution Control (APC) business segment increased by 36% in Q3 2023, which offset lower revenue from our FUEL CHEM business segment,' said Vincent J. Arnone, President and CEO. 'FUEL CHEM operations normalized during Q3 2023 as the unit downtime we experienced in the second quarter of 2023 ('Q2 2023') caused by temporary maintenance activities and unplanned outages substantially abated. In this regard, FUEL CHEM revenues more than doubled in Q3 2023 when compared to Q2 2023.'
'We completed the on-site deployment and pilot testing of our Dissolved Gas Infusion (DGI) technology at an aquaculture setting in the Western United States. Over the 100-day demonstration, the DGI technology delivered and consistently controlled the dissolved oxygen levels in a band between nine and twelve milligrams per liter (approximately 150% of atmospheric saturation). Based on an analysis of the results and post-study consultation with the client, the DGI technology met and, in many cases, exceeded the pilot study expectations and parameters for consistent delivery of high-quality dissolved oxygen on demand. The client reported excellent results from taste tests by local chefs including an absence of trimethylamines (TMA) within the harvest. Results from this study will be presented at Aquaculture America 2024. We are currently in negotiations with this client to deploy our DGI system at its location for both the next growth cycle and its larger scale development plans. In addition to this demonstration, we are continuing our conversations with other potential channel partners as we look to deploy DGI in other end markets.'
Mr. Arnone concluded, 'We ended the third quarter with $33.2 million in cash and investments and no long-term debt. We remain optimistic about our outlook for the year and are continuing to pursue multiple domestic and international award opportunities to utilize our SCR, SNCR and ULTRA emissions control solutions, as evidenced by our announcement of new contract awards yesterday. We continue to believe that total revenue for full year 2023 will improve modestly from 2022, driven primarily by our APC business.'
Q3 2023 Consolidated Results Overview
Consolidated revenues for Q3 2023 were unchanged at $8.0 million compared to Q3 2022, reflecting higher APC revenue offset by a decline in FUEL CHEM revenue.
Consolidated gross margin for Q3 2023 was 45.2% of revenues compared to 45.8% of revenues in Q3 2022, driven primarily by lower FUEL CHEM revenue when compared to Q3 2022.
SG&A expenses declined to $3.0 million from $3.3 million in Q3 2022, due to a reduction in employee-related expenditures.
Interest income improved to $0.3 million from $0.1 million in Q3 2022, reflecting higher interest rates on held-to-maturity debt securities and money market funds.
Net income in Q3 2023 was $0.5 million, or $0.02 per share, compared to net income of $0.3 million, or $0.01 per share, in Q3 2022.
Consolidated APC segment backlog at September 30, 2023 was $5.6 million compared to $8.2 million at December 31, 2022.
APC segment revenue increased to $3.7 million from $2.7 million in Q3 2022 with gross margin increasing to 40.3% from 34.0%, due to the timing of project execution and new awards announced during 2022 and continuing through the first nine months of 2023.
FUEL CHEM segment revenue declined to $4.3 million from $5.3 million in Q3 2022, due to a decline in electrical generation demand for the units on which our FUEL CHEM program is installed and contributions from one additional unit in Q3 2022 that has since been retired. Gross margin declined slightly to 49.5% from 51.9% in Q3 2022 due to lower segment revenue.
Adjusted EBITDA was $0.4 million in Q3 2023 compared to Adjusted EBITDA of $0.4 million in Q3 2022.
Financial Condition
At September 30, 2023, cash and cash equivalents were $13.5 million, short-term investments were $14.8 million, and long-term investments totaled $4.9 million. Stockholders' equity at September 30, 2023 was $44.1 million, or $1.45 per share, and the Company had no debt.
Conference Call
Management will host a conference call on Wednesday, November 8, 2023 at 10:00 am ET / 9:00 am CT 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 installed on over 1,200 utility, industrial and municipal units worldwide. The Company's FUEL CHEM 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 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.
Contact:
Vince Arnone
Tel: (630) 845-4500
Devin Sullivan
Managing Director
The Equity Group Inc.
Email: dsullivan@equityny.com
FUEL TECH, INC. 
