Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fuel Tech Inc (FTEK, Financial) reported a 29% increase in consolidated revenues for the second quarter, reaching $7 million, driven by double-digit growth in both the APC and FUEL CHEM segments.
- The company ended the quarter with a strong financial position, holding over $30 million in cash, cash equivalents, and investments, with no debt.
- FUEL CHEM segment revenue increased by 52% compared to the same quarter last year, indicating a significant recovery from a slow start to the year.
- Fuel Tech Inc (FTEK) secured $5 million in new APC contract bookings, contributing to an effective backlog of just under $10 million.
- The company is making progress in its Dissolved Gas Infusion (DGI) business initiative, with ongoing business development efforts and potential demonstrations in aquaculture and food processing applications.
Negative Points
- Despite revenue growth, Fuel Tech Inc (FTEK) reported a net loss of $421,000 for the quarter, although this was an improvement from a $1 million loss in the same period last year.
- The APC segment backlog decreased to $4.3 million as of June 30, 2024, down from $7.5 million at the end of 2023.
- SG&A expenses increased to $3.3 million from $2.9 million in the previous year's second quarter, although they decreased as a percentage of revenue.
- The company faces challenges with long sales cycles, particularly in the APC segment, which can extend up to 5 to 7 years.
- Fuel Tech Inc (FTEK) is trading below its cash per share value, indicating potential undervaluation and market skepticism about its product offerings and management.
Q & A Highlights
Q: Can you provide a range for the potential size of DGI contracts?
A: Vincent Arnone, CEO: The size of DGI contracts will depend on the application. For a large food processing plant, the system could range from $0.5 million to $1 million. For aquaculture sites, it might be smaller. Overall, systems could range from $200,000 to over $1 million.
Q: Will DGI gross margins align with current levels for the legacy business?
A: Vincent Arnone, CEO: We are targeting 35% plus gross margins for DGI. Although we are not yet commercial, this is our minimum target.
Q: Is FUEL CHEM gaining market share, or are these returning customers?
A: Vincent Arnone, CEO: There isn't direct competition for our FUEL CHEM technology. The opportunities arise from units in certain geographies being tasked to dispatch at higher load levels. The two accounts we are targeting are new customers.
Q: Why haven't there been more follow-up orders in the data center power market?
A: Vincent Arnone, CEO: The requirement for post-combustion control depends on the permitted hours of operation. Many data centers don't require pollution control systems due to their permit conditions. We continue to monitor this market closely.
Q: Have there been any changes in the sales cycle or sales personnel?
A: Vincent Arnone, CEO: No changes have been made. Sales cycles are challenging and can be lengthy. We are focusing on both domestic and international opportunities and are seeing longer periods to contract closure post-COVID.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
