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| 8-K - 8-K - FUEL TECH, INC. | ftiinvestordeckregulationf.htm |
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September 2017 Investor Presentation
2
Safe Harbor
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This presentation 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.
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Air Pollution Control
Low capital, high efficiency
emissions control solutions.
Installed worldwide on
combustion units, primarily
coal-fired utility and industrial.
Capital project sale, typically
fixed-price and turn-key.
FUEL CHEM®
Improves combustion
efficiency, reliability, heat rate,
and environmental status.
Decreases unit maintenance.
Allows fuel flexibility:
customers can burn cheaper,
lower quality coal without
sacrificing performance.
Diverse, customizable portfolio of low cap-ex emissions control solutions to enable clean efficient energy
Addressing a Fundamental, Structural Shift in
Power Generation Industry
62%
38%
2016 Revenues
$55.2 M
4
2017 Overview
Coming off one of the most challenging periods in
Fuel Tech’s recent history…
Legislative inertia
Declining energy demand
Ongoing shift in fuel sources
…we continued to execute against a series of multi-year,
proactive initiatives driven by three primary mandates:
Global business development
Positive cash flow from base businesses,
leveraging reduced SG&A
R&D investment
Fuel Tech has installed
~ 25%
of all NOx reduction systems
in the US and
~ 85%
of all US SNCR equipment
>1,000 Installations in 26 Countries
Improving backlog
~ $30 M of new contracts thus far in 2017
Higher revenues
~50% increase expected in 2H 2017 from 1H 2017
Lower expense profile
~ $19 M in costs removed (YE 2014 – 2017 F)
Strong balance sheet: $0 LTD
Expect improved operating results in 2H 2017
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Investment Overview
Backlog
~ $30 M of new contracts
announced thus far in 2017
Focusing on Business Development, Positive Cash Flow, and R&D
$30.9
$25.6
$11.1
$22.2
$8.0
$22.5
$1.5
$4.3
$4.6
SG&A
Expect ~40% decline for
2017 from 2014
R&D
Focus on technologies that will
help define our future, in wake of
Fuel Conversion suspension
$35.4
2014 2015 2016 1H
2016
Proactively Managing Business and Financial Assets
2015 2016 3/31
2017
6/30
2017
~$30.0
$ in MMs
2014 2015 2016
1H
2017
$0.6
$21.4
pf = includes $8M of
contracts announced
after 6/30
1H
2017
$13.9
$0.8
1H
2016
Pro forma
6/30
2017
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Maintaining a Strong Financial Position
Investment Overview
$35.9
$26.6 $17.8
2014 2015 2016 6/30
2017
$39.7
2014 2015
$12.6
$18.6
2014 2016
$21.7
6/30
2017
2015 2016
0
$
Cash and Cash Equivalents Working Capital Long-Term Debt
Continue to manage cash position, which should begin to trend higher due to
growing backlog and elimination of losses associated with Fuel Conversion
Through the implementation of corporate initiatives, we expect to sustain a
working capital profile that ensures our ability to meet near-term operating and
investment requirements
$0 long-term balance despite significant investments in R&D
6/30
2017
$18.1
$ in MMs
$0.53
p/s
$0.76
p/s
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Recent Developments
Corporate Initiatives
» Engaged third-party consultant to review operating model and organizational design
– prioritize resource allocation
– further reduce cost structure
– improve operational efficiencies
– strengthen balance sheet and cash flow generation capabilities
– catalyze business development
» Suspend pre-revenue Fuel Conversion initiative effective June 28, 2017
– staff reductions
– discussions with suppliers and partners to support orderly suspension of Fuel Conversion
– exploring potential monetization of certain Fuel Conversion assets
» Re-direct cash flow from Fuel Conversion suspension and prior initiatives
– develop new markets and applications for APC and FUEL CHEM®
– pursue complementary technology applications in the water treatment and renewables markets
“The combination of a refreshed business focus, lower operating costs and improved business
activity will enhance our competitiveness and position us to deliver the long-term value that our
stockholders expect and deserve.”
- Vincent J. Arnone, President and CEO
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Products and Services
FGC
= Fuel Tech Products and Services
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Geographies and End Markets
SNCR
570+ / 51,300
FUEL CHEM®
110+ / 21,900
ULTRA®
250+ / 27,700
Combustion Modifications
110+ / 16,400
SCR, ASCR,
Catalyst Management
Services
150+ / 63,200
U.S. China
57%
29%
14%
84%
16%
77%
89%
81%
Utility Industrial ROW
68%
32%
67%
33%
87%
13%
74%
26%
68%
32%
FTEK Solution Geography End Market
Deployments/MW
6%
6%
9%
2%
17%
13%
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Blue Chip Client Base
U
T
I
L
I
T
Y
I
N
D
U
S
T
R
Y
G
L
O
B
A
L
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Air Pollution Control Segment
» Environment remains challenging, with lingering regulatory
uncertainty despite “coal-friendly” posture of new
administration
» $150 M global sales pipeline
» 2017 booking level highest in three years
($ in MMs)
($ in MMs)
APC Revenues
APC Gross Profit
$42.0
$34.0
$43.5
2014 2015 2016 1H
2017
2014 2015 2016 1H
2017
$15.4
$12.9
$8.7
37%
30%
25%
Overview and U.S. Market Drivers
Domestic Market Drivers
» Focus on Boiler MACT and maintenance drivers for ESP upgrades
» Industrial project activity encouraging
– ULTRA and SCRs for industrial applications (gas-fired turbines) and
SNCR for units requiring compliance with latest round of CSAPR
– Establishing relationships with multi-national industrial end users
$9.5
$2.9
I-NOx Integrated NOx Reduction System
Low Nox Burners
Over-Fire Air Systems
Urea SNCR Systems - NoxOUT and HERT
ASCR Advanced SCR
SCR Systems – Industrial
Static Mixers
®
®
Our APC Solutions Include
™
®
®
®
GSG Graduated Straightening Grid
Ammonia Injection Grid (AIG)
ULTRA and ULTRA-5
Flue Gas Conditioning
Electrostatic Precipitators (ESP)
SCR Services
IMPULSE Cleaning Technology
™
™ 31%
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Air Pollution Control Segment
International Market Drivers
» Europe
– $5 M of new contracts thus far in 2017 for SCR and ULTRA
– EU Industrial Emissions Directive (effective Jan. 2016)
• Covers 28 European Union member states
• Installed Advanced SNCR systems on 7 units to date
– Benefitting from strategic partnerships: Spain, Turkey, Poland, Czech Republic
» China
– $6 M of new contracts thus far in 2017, with an improving sales trend
– Still a challenging market; new plant construction decreasing - 100 coal-fired
projects in 11 provinces canceled in January 2017
– More stringent NOx reduction standards will lead to either:
• SCR upgrades, which would require enhanced ammonia production and
delivery technology (ULTRA); or
• Require SNCR to increase NOx reduction
» India
– Licensed SNCR Technology to India’s ISGEC Heavy Engineering Ltd. (June ‘16)
– Focusing on cement industry (SNCR)
– India government will likely adopt a phased-in compliance program
– Demand for urea to ammonia conversion should grow, similar to China
G
R
O
W
T
H
D
R
I
V
E
R
S
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FUEL CHEM® Segment
» Declining revenues due to low-priced natural gas and
coal-to-gas conversions
» Revenues will likely decline in 2017 vs. 2016, with consistent
gross margin (48% - 52%)
» In U.S. market, technology to utilities as a means to:
– Combat effects of reduced load profiles
– Support coal blending as a cost reduction strategy
» In Europe, offer technology to:
– Operators of biomass and MSW units to combat slagging and
fouling issues
– Two demonstrations in progress and performing well
» Globally expand industrial reach into pulp and paper industry
– Licensed RECOVERY CHEM® technology to Amazon Papyrus, a
leading supplier of specialty chemicals to the pulp and paper
industry in Asia
($ in MMs)
($ in MMs)
FUEL CHEM® Revenues
FUEL CHEM® Gross Profit
2014 2015 2016 1H
2017
$37.0
$30.2
$21.1
2014 2015 2016 1H
2017
$19.7
$15.7
$10.1
53% 52%
48%
$8.7
51%
$4.4
FUEL CHEM provides plants with the flexibility to burn lower
cost fuels while adhering to strict emissions control mandates
Appalachian
Powder
River Basin
Illinois
Basin
Biomass
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Before TIFI®
• Tenacious
• Fewer pores
• Hard, dense
• Amorphous
TIFI® Program Treatment Benefits
After TIFI®
• Lighter
• Softer
• Easier to
crumble
WITHOUT TIFI® WITH TIFI®
Higher DP and flue
gas temperature
Unscheduled, high-
cost boiler outages in
order to remove slag
No more outages for
slag removal
DP controlled
Increased production
(power) capacity
Lower maintenance
costs
Hard Slag Formation Controlled
Benefitting a Biomass Boiler
15
Operating Performance
(in MMs, except per share data)
Q2
2017
Q2
2016
First Half
2017
First Half
2016
Total Revenues $9.7 $15.2 $ 18.2 $33.0
Gross Profit $3.6 $5.6 $7.3 $11.6
Gross Margin % 37.2% 36.8% 40.3% 35.2%
SG&A $5.9 $6.8 $11.1 $13.9
Net Loss from Continuing Ops $(5.6) $(1.8) $ (7.4) $(3.8)
Net (Loss) Per Diluted Share
from Continuing Operations
$(0.24)
$(0.08)
$ (0.31)
$ (0.16)
Diluted Avg. Shares O/S 23.7 23.4 23.6 23.3
(1) Excludes $0.8 M in non-cash accelerated stock vesting charge
Results Excluding Charges
SG&A (1)
$5.1 M in Q2 2017
$10.3 M in 1H 2017
Net Loss From Continuing Operations (2)
$1.1 M, or $0.05 per diluted share, in Q2 2017
$2.9 M, or $0.12 per diluted share, in 1H 2017
(2) Excludes a total of $4.5 M in charges, consisting of: $3.0 M non-cash building impairment
charge; $0.8 M non-cash accelerated stock vesting charge; $0.4 M in accruals associated with
foreign operations; $0.2 M of incremental inventory reserves; and $0.1 M in severance.
16
Summary
Continue to evolve
business model to
address changing
energy environment
and global trends
At APC, focus on
global business
development,
including
international
expansion
Manage through
challenges at
FUEL CHEM via
focus on additional
market segments
and geographies
Leverage
~ $19M in annual
S,G & A savings
Maintain strong cash
+ working capital
positions
$0 LTD profile
Continue to
invest in and
develop promising
technologies
Expect to show
improved operating
results in 2H 2017