Q3 2019 Earnings Call
Greetings and welcome to the fuel Tech 2019 third quarter financial results Conference call. At this time all participants are in listen only mode. A question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press Star Zero honor telephone keypad.
That's a reminder, this conference is being recorded.
I would now like to turn the conference over to your host.
Devin Sullivan senior Vice President of the equity group. Thank you you may begin.
Thank you Diego good morning, everyone and thank you for joining us today for fuel Tech's 2019 third quarter financial results Conference call.
Yesterday after the close we issued a copy of our copy of the release, which is available at the company's website www dot to Teekay Dot com.
Oh speakers for today will be Vince Arnone, Chairman, President and Chief Executive Officer, and Jim pockets, the company's principal financial officer.
After prepared remarks, we will open the call for questions from our analysts and investors.
Before turning things over the Vince I'd like to remind everyone that matters discussed during this call except for historical information all forward looking statements as defined in section 20, Onee. The securities. After 1934 as amended which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 and reflect the fuel.
Next current expectations.
Morning future growth.
Results for future growth the results of operations cash flows performance business prospects and opportunities as well as assumptions made by an information currently available to our company's management.
Fuel Tech has tried to identify forward looking statements about using words, such as anticipate believe plan expect estimate in 10 will and similar expressions, but these words or not the exclusive means of identifying forward looking statements.
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 discuss them fuel Tech's annual report on Form 10-K in item one eight under the caption risk factors and subsequent filings under the Securities Exchange Act would like to 34 as amended which could.
Caused 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 were to publicly announced the results of any forward looking statements contained herein to reflect future events developments for changed circumstances for for any other reason.
Investors are cautioned that all forward looking statements involve risks and uncertainties, including those detailed in the company's filings with the FCC.
Having said that I'd now like to turn the call over to Vince Arnone, Chairman, President and CEO of fuel Tech's Vince. Please go ahead.
Thank you David.
Good morning, and I want to thank everyone for joining us on the call today.
Im here today with the impacts our principal financial officer and controller.
Our third quarter results continue to reflect the impact of the extended period of sluggish New APC business Awards that we have faced since the beginning of 2019.
APC contract booking activity has been slower than expected. However, we believe that we are beginning to see a resurgence in order flow.
While the $2 million of New project Awards that we announced last week represents a small dollar value relative to our sales pipeline.
On a global basis, we continue to track approximately 80 to 100 million in potential project work for our SCR.
The trial essence, E.R. and D.S.P. offerings.
We expect to close on additional new contract awards to before the end of this year.
Well the impact of these delays has had a significant impact on 2019 financial result.
The overall result has been mitigated by two factors.
First our strong financial position.
Which includes 15.3 million in total cash and no debt.
And second.
The operating leverage that we have created as a result of our domestic and international restructuring effort over these past few years.
In that regard.
The suspension of our underperforming China operations is nearing completion and as it as expected the associated law, so losses narrowed significantly in Q3 2019 to approximately $150000.
The wind down of these operations is expected to be completed by the end of 2019 and should result in the removal of approximately $2 million in annual operating losses.
Full benefit of which should we were realized in 2020.
We are no longer a renewed originating project work from our Beijing office.
Our primary office has been closed and we have retained three individuals that are focused solely on completing field work activities at a few customer sites.
And on collecting the remainder of our outstanding accounts receivable.
Our cash collections from China remains strong during the third quarter and post quarterly close.
Our outstanding accounts receivable in China at September Thirtyth.
Declined by approximately $400000 from the end of the second quarter of 2019.
And we have collected an incremental $500000 since the close of Q3.
Receivables are down by approximately $3.1 million from December 2018.
We expect to have $2 million to $3 million and cash available to repatriate once the suspension activities are completed.
[noise], our fuel Chem business generated revenues of 4.6 million in the third quarter, what the gross margin of 49%.
Although revenue and gross margin in the third quarter of 2019 declined slightly from the prior year period year to date performance has been positive with higher revenue and stable gross margin of 49% compared to the first nine months of 2018.
Based on these year to date result.
We expect fuel cams performance to show modest improvement during the during the second half of 2019, when compared to the first half of the year.
It is important to note that we are continuing to see pockets of opportunity for the fuel Chem business segment in the us.
As we discussed earlier this year.
We successfully installed fuel chem at two new coal fired units at a utility in the southeast and weather and power demand permitting these units will run for a good portion of the winter month.
I'm pleased to note that early in Q4, we received a purchase order to install fuel Chem on one more utility unit in the southeast.
This is a unit that will run our fuel Chem program on an intermittent basis until its plan conversion to natural gas.
These pockets of opportunity a rising in the U.S. utility sector as they adjust their asset base to accommodate their desired future mix of power generation in terms of fuel source.
We expect that we may see additional such opportunities as we move into 2020 and beyond.
Okay.
Additionally.
At the end of this last month, we met with our partner in Mexico regarding a resurgence in interest in that country to burn high sulfur fuel oil, which is a byproduct of the petroleum refining process to generate power.
There are two factors driving the development.
First.
The I am all or international Maritime organization.
Effective as of January 1st of 2020.
I will enforce new emission standards designed to significantly curb pollution produced by the world shipping industry.
It is no longer allowing ships to use the heavy sulfur fuel oil as a source of fuel.
Mexico had been selling the majority of their heavy sulfur fuel oil for use in maritime transport and is now going to have a glut of this fuel.
Secondly.
Mexico's current government is supporting the use of all indigenous resources to generate power.
As opposed to encouraging increased reliance on foreign sources.
As natural gas from the United States.
This development will likely be slow, but the opportunity for our fuel Chem program to be used to mitigate pollutants generated from the burning of high sulfur fuel oil is potentially significant.
We are continuing to pursue fuel chem applications and geographies outside of the United States.
In Europe , where we are focusing on biomass and municipal solid waste opportunities.
In Southeast Asia via our partner Amazon Piris for the pulp and paper industry, where we are using our recovery come program and in other southeastern Asian countries, where coal is the primary source of fuel.
Power demand Dan related pricing is high.
And were Slagging and fouling is an issue.
Lastly, we are working with a partner in South Africa, but today predominantly for APC opportunities.
Okay.
Moving down the profit last statement.
Our ESG in a defined by approximately 300000 from the third quarter of 2018, which is approximately 8%.
As we head into 2020, we will benefit from the elimination of approximately $2 million in operating expenses from the suspension of our China operations.
This combined with our previous restructuring efforts, which were largely domestic.
Leaves us with the dramatically improved SDMA expense profile.
Together these efforts will be leveraged to generate operate in operating income and periods. When we have improved revenue generation.
Consolidated gross margin was 44.6% in the third quarter of 2019 up from 33.7% in last year's third quarter.
Reflecting the mix between APC and fuel Chem revenues recognized during the quarter and to an improvement in APC gross margin.
Now I'd like to take a few minutes to add some context and color to our global APC platform.
While we have had a setback in 2019 from a business generation perspective.
A near term APC projects landscape of opportunity remains active and viable.
Our goal is to establish establish a solid backlog of business as we closed 2019 in support of an improved financial year in 2020.
SCR and Ultrafryer natural gas applications in industrial markets continue to provide our best opportunity.
This is being driven by permits for new units and retrofit regulatory requirements.
We are actively involved with the turbine suppliers.
The heat recovery steam generator manufacturers and overall system integrators in an effort to capitalize on this market trend.
We're also seeing a consistent flow of new small to medium gas turbine combined cycle plant projects, such as the combined heat and power upgrades at universities and large hospital complexes.
Here, we are focused on building our relationships with package boilers suppliers.
Also to supply SCR ultrasystems.
The combined heat and power opportunities.
Also include industrial plants, where process steam as needed at a plant site.
And locations were distributed generation is used for improved energy efficiency.
We are continuing to pursue work with various industries in this country that have benefited from recent term favorable economic conditions.
One example continues to be the steel industry, where we are seeing a trend in this country whereby demand for higher quality metals is driving both greenfield projects in connection with new line in plant construction and retrofits for other entities that are committed to modernizing their plants.
We have had great relationships with the steel industry, historically and expect to leverage these relationships for new project development.
Another trend that we're seeing.
Is that certain states are establishing new regulatory guidelines that will require expedited implementation schedules to install best available or retrofit control technology uncertain sources of emissions.
In Southern California pursuant to recent directives from the South Coast Air quality Management District.
Individual units may require modifications to existing SCR systems, as well as new SCR for smaller boiler applications.
We are now under contract for a small ultra system in the Los Angeles area to replace a competitor is existing direct your urea injection system.
Because of poor performance.
Additionally, on the East Coast, New York, New Jersey filed a lawsuit against EPA under section 126 of the clean Air Act.
These states are having difficulty complying with their 2015 ambient ozone requirements.
And they attribute this to transport of emissions from up to 360, industrial and utility sources in Midwestern States all the way from Illinois, The Pennsylvania.
This 126 provision.
Allows downward downwind states to petition EPA to force upwind states to meet the good neighbor requirements of the clean Air Act.
EPA denied the position in October of 2019, and the DC Circuit court sided with the state leading to the lawsuit.
Maryland, Delaware in Connecticut are also pursuing 126 actions.
To require upwind sources to reduce Nox emissions.
We believe this will drive a number of opportunities over the next several years.
In Europe .
Breath, which is also known as best available reference technology guidelines were issued in August 2017, with a compliance timeline through 2020.
The guidelines reduce target Nox emissions from current levels ended to generate generally believed that this timeline will be extended as adoption is slow and dependent on funding.
Especially in eastern European countries.
The level of new increasing inquiries, thus far in 2019 remains very high with both ultra and SCR technology is being of greatest interest.
And they have generally come from clients in Western Europe , Europe pursuing projects in both Europe as a whole and also internationally.
We believe that Brett will drive APC demand in Europe for at least the next three to five years.
We will continue to pursue opportunities associated with our license licensing agreements in India, Although as we have mentioned in prior quarters. The government backed off from initial compliance timelines and prioritize remediation targets in order of importance.
First particulate matter and socks.
And then knocks it took them later.
While we believe that this will present, an opportunity for fuel tech to capitalize on our flue gas conditioning or FTC technology in the marketplace, which is a more cost effective particulate control technology compared to SP and bag filter hybrid solutions.
Adoption of this technology has been slow.
Additionally, it is important to note that the local regulatory environment has turned unfavorable for SNC are in India for pre 2016 power generation units as the state owned power generation company.
Known as NTP fee has pressured the government to relieve the 300 milligram per normal cubic meter Knox target.
As a result.
Yes, NCR will continue to be an opportunity for industrial applications, but the larger market opportunity has been delayed at this point in time.
Regarding our dissolved gas infusion water technology business I have the following comments.
After a year and a half onto our license agreement with nano to this technology has been assimilated into our company and we believe that our first demonstration is close to becoming a reality.
We continue to advance conversations.
With multiple potential customers across a variety of industries.
With the primary focus today currently on the pulp and paper industry and on the oil and gas industry.
Additionally, recent discussions with other water treatment suppliers.
Interested in advanced aeration, using DG, hi are gaining momentum.
Our investment in this venture has been modest thus far and has included the purchase of R&D and demonstration systems for less than $200000. However.
We realized that incremental investment was going to be necessary to ensure that we move forward with increased pace towards a demonstration.
And these past few months.
In addition to our own discovery and selling efforts, we have added to subject matter experts on a consulting basis to aid in the identification and diagnosis of specific problems that our guys system can address.
One each in support of the pulp <unk> paper pulp and paper and oil and gas industries.
Please individuals are paying dividends dividends already as they are opening doors to customer opportunities and providing technical insights on water treatment issues that will expedite arg development activities.
With respect to pulp and paper, we are actively engaged in data that data analysis and application review for a mid sized the paper production facility in the Midwest US and we are also engaged with a longstanding customer the customer of ours and the same industry, where we are focused on the possibility of in corpus.
Rating DG technology.
As part of the customers new water treatment facility, which is currently in the planning and engineering design phase.
Lastly, this past week, we received an inquiry from a third pulp and paper site that requires assistance with their wastewater treatment plant and we will be following up immediately.
Regarding oil and gas.
The Permian basin.
It is now the largest oil production region of the world and the phase for produced water is either reuse for fracking.
Disposal wells or recycling.
It is important to note that disposal wells are becoming more difficult to permit due to seismic considerations and transportation costs, either via truck or pipeline to more remote disposal wells are becoming a severe economic issue for the region.
The specific water issues that I can address include total suspended solids hydrogen sulfide issues and metals removal.
Along with keeping basins aerobic overtime.
We are working closely with our oil and gas subject matter expert to identify the optimal customer customer with whom to demonstrate our DG technology.
In closing.
I want to think we once again for your ongoing interest in fuel Tech.
One year ago, we were struggling financially.
Our available operating cash was diminishing as we head only 10.7 million in global cash on our balance sheet at the end of a third quarter of 2018.
We were uncertain as to the source of bookings for the remainder of 2018 and internally we were on the cost of taking the final decision on the wind down in China.
Today liquidity has stabilized and.
We ended Q3 of 2019 with more than 15 million in global cash and no debt.
The wind down of the China Operation has gone successfully.
And as a result, we will likely have $2 million to $3 million and cash available to repatriate along with the benefit of $2 million and eliminated operating losses commencing commencing in 2020.
Our fuel Chem customer base remains stable.
And we are managing to uncover new business opportunities.
Despite the shortfall in bookings in 2019, thus far.
I remain confident in our APC opportunity landscape as we move towards 2020.
We also expect to continue to benefit from an overall strong economy in this country in a modestly more favorable us regulatory landscape for fossil fuels.
For 2019.
Although our outlook for generating operating income.
From continuing operations. This year has shifted as a result of our APC performance.
Our long term goal as a company and as a team.
Is the generation of sustained profitability and cash flow.
While our complete turnaround as the company has been delayed a year.
We still have the resiliency and ability to complete the process that we commenced in 2015.
And I remain confident that the fuel tech team will be successful in achieving this objective.
I'll now turn things over to Jim pack for a discussion of our financial results. Please go ahead Jim.
Thanks, Vince and good morning, everyone.
As Vince noted our Q3 results were impacted by slower than expected new business awards into a much lesser extent losses that are China operations.
With respect to the topline third quarter revenues declined to 6.5 million from 16.1 million, primarily reflecting a 9 million dollar revenue declined at APC.
Lower APC revenues were the result of a decline in backlog entering the third quarter and slower than expected new APC contract Awards.
As Vince as mentioned, we are pursuing several avenues for new APC business in the USA in if secured approximately $2 million a new contract awards subsequent to the close of the third quarter.
Consolidated gross margin was 44.6% of revenues compared to 33.7% of revenues in Q3 2018, and this is primarily due to the mix in revenues between the APC and fuel Chem business segments.
APC gross margin was 600000 or approximately 33.2% of revenues as compared to $2.8 million or 25.4% in Q3 2018.
APC results for Q3 2019 included no revenues from Beijing fuel Tech and an operating loss of approximately 123000.
In Q3, 2018 revenues from Beijing fuel Tech were approximately 1.1 million and the operating losses approximately 435000.
Fuel Chem segment revenues were 4.6 million compared to 5.2 million in Q3 2018.
Selecting soft electric demand market and low natural gas prices, which leads to fuel switching unscheduled outages and combustion units operating at less than capacity.
This segment will likely continue to be affected by these factors going forward.
Segment gross margin was 49% in Q3, 2019, and 51.1% in Q3 2018.
For the full year 2019, we are targeting a blended SDN fuel chem gross margin of between 40 and 45% excluding the impact of China.
We continue to focus on cost control and our SNA for Q3 reflects that as DNA for Q3 2019 declined by 8% to 3.8 million from 4.1 million in Q3 2018.
SGN eight for the first nine months of 2019 was 12.7 million and remain on track to meet our full year 2019 objective of us DNA ranging between 15, and 16 million, which excludes China, SGN and restructuring costs of approximately 1.5 million.
R&D expenses of just over $300000 were higher higher than last year's third quarter due to our continued focus and efforts on the development of dissolved cash infusion technology. We continue to expect that R&D for 2019 will be comparable to the 1.1 million we invested in 2000.
And then 18.
Net loss from continuing operations was 1.3 million.
Four or five cents per diluted share compared to the net income from continuing operations of 1.1 million or four cents per share in last year's third quarter.
Excluding the impact of operating losses at Beijing fuel Tech fuel Tech's net net loss from continuing operations for Q3, 2019 was 1.1 million or five cents per diluted share.
Given our cumulative net operating losses of 29.4 million at September Thirtyth, 2019, which cover several geographies. We continue to expect that our income tax expense for 2019 will be at or near zero.
This figure includes China, and wells, which we will maintain given that we're preserving the legal entity in China.
Our balance sheet at September Thirtyth, 2019 remain debt free and we had cash and cash equivalents of 15.3 million, including restricted cash of approximately 2.5 million.
3.5 million decline in restricted cash from December 31, 2018 reflected our new banking agreement with BMO as well as reductions in our outstanding letters of credit with existing customers.
Our working capital balance at September Thirtyth, 2019 was 20.1 million, which will continue to support our ongoing operating needs of the business.
In China. We currently have 3.1 million of trade accounts receivable outstanding at September Thirtyth 2019 down from 3.5 million at June Thirtyth, 2019, and $5.5 million of trade accounts receivable outstanding as of March 31.
This reduction is comprised of cash collections activity offset by invoicing activity on existing projects.
Total consolidated accounts receivable at September Thirtyth, 2019 are offset by an allowance of approximately 1.2 million.
We continue to actively pursue cash collections in China through a variety of means with our recently announced suspension in that geography.
With respect to valuation our book value per share was $1.27. Our tangible book value per share was $1.11 and our working capital per share was 83 cents at September Thirtyth 2019.
In addition, we have approximately 73 cents per share in deferred tax assets for the us in Italy, which had been fully reserved and are not included in any of the per share amounts reported above.
With that I would like to turn the call back over to Vince.
Thank you Jim.
Operator, before we open up the the call for questions for those online I would like to respond to two questions that we that we received via email. Okay. The two questions are as follows first of all.
For the current years APC bookings have we been able to generate business with new customers as part of those bookings.
And answer that question. The answer is yes, and the example that ill give is.
As part of my commentary I mentioned the.
The ability to do business with package boiler suppliers, particularly for for smaller applications and one application in particular that we were actually able to garner new business is for our ultra solution and for a package boilers supplier that was actually having difficulty.
With the tech technology provider that they had originally been using for their scope of supply.
So we were asked to come into to assist this package boilers supplier.
With.
Diagnosing the issues that they were having on site, but then ultimately providing them with our ultra solution to go ahead and meet the end customers needs. So the ability to generate new business with with new customers is still there and we take advantage of every opportunity that we can to generate these new business relationships.
Okay question number two is regarding India.
And the question is is with regard to Demmon technology demonstrations that were performed in that marketplace. The question is.
Regarding the demonstrations that were done for NTP see where these on multiple fuel sources.
Or on units with with similar fuels and did the demonstrations meet the requirements of and TPC. Okay.
NTP see particularly for the NCR, sorry, SNC, our scope of supply did require certain companies to do demonstrations to prove that their technology was going to be viable for application in the marketplace.
And these demonstrations were solely done on on coal okay.
Fuel tech be because of our long term record right Rob.
Our long term history and providing SNC.
Yes, NCR solutions globally, we did not have to perform a demonstration to be qualify within TPC in India. So we weren't.
Basically on the hook to be able to go ahead and perform that work as I noted in my commentary, however, SNC our work for the utility.
Base, if you will out there for the pretax pre 2016 units is likely be delayed because of the pressure that NCTC is putting on the government to go head end and delayed implementation. Okay. So those are the money at my answers to those two questions and with that operator, Let's go ahead and open the call for additional questions from those online.
Hi.
Thank you.
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Our first question comes from Amit Dayal with H.C. Wainwright. Please state your question.
Thank you good morning wins good money in June .
Consulting my question good morning.
Thank you just on the overall macro environment Vince.
It looks like you know there are some headwinds and was also opportunities remain recently met in the near term. So just starting to get colored whether there is some challenge in converting some of these bids into orders are you trying to sort of maintain margins and Betsy.
You may not have been successful pricing across the spectrum and winnings on these.
Are there is any color on sort of how this can bounce back for you.
Yes, I'll stop it.
Understood and thanks for the question.
Margins have been generally been an overall consideration for us is as weve.
Looked at winning some of the work that's put in front of thus we have certain margin targets that we that we maintain.
And there are a little bit different by geography, because the competitive landscape is a little different by geography.
But but generally speaking the the delays that we've had.
Over this past several months on bookings has not been margin based if you will.
The pipeline of opportunities that we have in front of is right now and that we're discussing as yet as a team.
I would not expect to have different margin profile than what we've seen in the past.
However, as Ive always mentioned, if there is a strategic opportunity for us to enter a new market space or to be aligned with a specific customer base that could provide a larger landscape of opportunity we will engage in subsea some sits.
Strategic pricing that will involve a possibly some impact on margin I mean, thats from our perspective, that's as good business, but as we sit here right now we're not looking at a change in our margin profile prospectively for the pipeline of work that we see in front of us.
Got it.
So so then in.
What is on the challenge the delays are driven by just some of these macro headwinds and do things sort of even looking into the fourth quarter.
We're expecting a similar performance relative to the third quarter or do you anticipate some improvements.
I do expect us to have bookings between now and the end of year.
Difficult to say what that dollar value will will be Amit as we sit here right now.
And so from that perspective, it's it's not something that I can give you a and approximation on but I I'm very confident that we are going to see some project bookings between now and the ended the year and.
And then we'll see how what transpires from there, but there are up again, a slate of projects that we are in rebid process is on or will be in bid processes on as we move through the end of this year and into Q1 of next year, which gives me confidence that the again that that broader landscape of opportunity is still there.
For us it is not like we are seeing a complete dry up of all opportunities for the ADC technology base that is not the case at all.
In fact is quite the opposite as as I sit here right now and that applies to both what we're seeing in the us and for the European space as well.
So that's that's the commentary that I can provide right now, but I am I level of confidence for bookings between now and the end of the year is high.
Got it on just moving on them.
The water treatment side of the business.
It looks like you are investing a little bit more resources towards this effort to accelerate things.
Is this just wanted to confirm this only one demo unit.
Market rates.
That we we just have one demo units that we've actually constructed right now and is ready for deployment to a demonstration site. So yes. We we just have that one demo resource available for our customers site.
You want it. So if you had a couple more of these would accelerate development and commercialization efforts or with Dr. material difference at this stage.
At this stage, we don't believe you would make that difference relative relative to having an impact on acceleration.
We we stand ready to to very very happily invest those incremental dollars on demonstration systems. Once we have that that specific custard customer demand coming our way. So we won't let those investment dollars prohibit us moving forward with pace once once we're re.
I'd to actually move forward with pace.
Sorry.
That's all I understand just so much.
Thanks Summit.
Our next question comes from Pete Enderlin with and made the partners. Please state your question.
Thank you good morning.
Hi, good morning, Peter.
He has given us a very thorough run down Vince I actually just one question.
And that as you mentioned the IMO regulations beginning.
In January 2020 regarding high sulfur fuel.
Poker fuel for ships and then the resulting in some excess.
Availability of high sulfur fuel in Mexico, and maybe other places so.
The question.
I have is.
Can you expand.
You mentioned about how you your technology your opportunity.
To address the use of high sulfur fuel maybe for electrical generation to potentially for the marine.
Market as well would play out and which of your technologies can actually apply to those opportunities.
There will do Pete.
Sounds good thanks for the question the application that I'm, specifically referencing is is the actual burning of this is high sulfur fuel oil for power generation.
In the Mexican market, Okay, and it's I'm, we're not looking to address.
Call it at pollution control on ships.
As we sit here today that that sub different subject matter all together, so relative to to Mexico.
Approximately a 10 10 11 years ago, we actually installed our fuel Chem application.
Add.
At a site.
Down in Mexico that was actually located very near a a pork and resort area.
What was happening was heavy sulfur fuel oil was was being burned at the local power plant and it did not have any pollution control on the back end of this unit and what was being generated was the equivalent of acid rain.
Because esso three was being created as part of that burning process and.
Acid rain was effectively coming down on the local community and obviously, causing causing some issue okay and so we successfully installed our technology back then on a unit and then a couple of years. After that we were at we were able to actually installer technology at a second sight and.
Mexico for similar reasons okay.
The development in terms of growing that business stopped due to due to the change in and governmental regime and the focus being on selling that heavy fuel oil into international marketplaces, and and focusing much more heavily on on burning.
Imported fuels such as natural gas from the United States now that regime head to head has been in place for.
The better part of the.
In the past eight eight years, plus we're show, but coming into 2019 the regime has changed.
New regime is focusing on.
Using indigenous resources where necessary.
Go ahead and become more energy independent and so that's what's what's driving a little bit of the resurgence in and this application and I'll also note Pete is that.
We've been running our fuel Chem program at those two original units for the past years. It hasn't stopped so that the benefits that we've shown R&D deal benefits in our partner that we work with down in in Mexico is working with.
Mexican government Mexican national utility to.
Basically ensure that our technology application if indeed, they look to burn this heavy fuel oil on more.
Generation sources that they will need to use our technology, so so thats where that chance as it looks excellent.
I'm sorry. Please go ahead.
So it's a sort of a special situation at this point, but it could become more widespread and I wonder if you could just summarize how much of a reduction in the so too.
Missions that technology managed to accomplish.
Well I can tell you that without quoting numbers I mean, when we were first investigating the this site that was burning the heavy fuel oil you, we're actually able to see.
A light blue plumer of smoke hovering over the Marina area, and which was basically esso three not being admitted from the smokestack yes.
The flu was completely eliminated and I know that the the actual a percentage of emissions reduction was indeed significant.
In terms of the reduction that we actually did achieve unfortunately, Pete I just don't have those specific numbers I am I hand to share that with you, but I certainly can do so publicly in the future.
Okay and do you think that this is good going to become very widespread in Mexico or is it just sort of a few plants.
Take off the excess.
It's difficult to say pita in its something that we're we're just going to watch it closely I mean, they were on on two units right now.
That from a power generation perspective, generally speaking you. If we were to go from these two units due to all of the units that could burn heavy sulfur fuel oil.
It would be a magnitude of of increase of five to 10 from what we're doing right now at least.
They have quite a few cytec that are capable of burning heavy fuel oil have you sell for fuel oil and so we just have to watch to see how that pans out its political obviously and so we.
We mentioned it because it is a potential opportunity, but as I note.
It's going to develop slowly and.
I just hope it develops because the opportunity for us is quite nice.
Okay. Thanks, a lot.
Thank you Pete.
Our next question comes from George Gasper. Please state your question.
Yes, good morning.
Hi, Good morning, George Good morning.
Well tough quarter.
And revenue stream that.
The technology.
Hi developments are impressive and the key is going to be.
Implement im going forward.
In the interim.
With the stack having back on.
In Europe .
Recapturing two questions million out of China.
Maybe some of the cash flow coming back in.
Should go to stock purchases repurchasing.
Take a couple of 3 million shares are the market.
That's one thought I got the others.
On the water treatments died hi strongly recommend.
That you.
Approach.
Some of the operators developing in the powder River basin in Western Wyoming.
This is an area that has been regenerated in the last six months.
It was formally 30 40 years ago, one of the first basins that was drove in Wyoming.
And then it is it kind of descended along the way because of what.
It has happened in Texas in the Permian Basin and other basins.
But there is some very impressive results coming out or the powder River basin, which is in western Wyoming and.
And I think that there's.
You are stepping in on the water treatment side.
Would be very interesting there and you might be able to get ahead in some other operators and water treatment.
The.
The additional is that the gas flaring volumes.
That are taking place.
And particularly in the.
Yes.
Yes.
The eastern part of the United States.
There is tremendous gas drilling is underway.
And.
Oh, Ohio, and east from there in West, Virginia, and Pennsylvania.
These and these grass gas flaring volumes.
It just seems to me that some of your technology would be adaptable for capturing.
And reducing this flaring.
Situation that's evolving.
And.
It's becoming very enormous requests in the Permian, which is the other side of what you were talking about Vince.
On the water side.
But.
I think that.
With the technology that.
Fuel Tech has.
In.
Utilization of Carbonization elimination.
It would be advisable to maybe spend a little.
R&D time or whatever.
Seeing if you could come up with us system of capturing the flaring that's going on.
And some of these areas.
I don't know if you've got any comments on any of this and I said.
Let me take each year.
Your comments one of the time on Georgia. Thanks, Thanks for the comments.
First of all on the on the stock repurchase.
Throughout throughout our history, we have engaged in in that activity.
At least once perhaps a couple of times.
It's something that as as a board we do discuss on a recurring basis.
As we sit here today and as you well know we've we've been watching our operating cash balance is very very closely over this past three to four year timeframe and as we sit here today, we will continue to watch our operating cash balances very very closely and until we move to.
Good point, whereby we've established a.
A sustainable level that we just feel comfortable with as a company as a whole that's going to support our business opportunities prospectively. So as we sit here today I think the likelihood of a stock repurchases probably pretty remote I think we as a company we prefer to see our our performance generates any any.
The impact on stock price and I do believe that that will happen, but but your point is noted and as I said on a recurring basis, we do discussed at board level. Okay. So that's point number one.
PRB. Thanks for the inside there, where we're definitely familiar with that that region, just because of the the source of coal that they are in the fact that we we've done a good deal of business applying our technologies on PRB coal.
But relative to opportunities for water.
Treatment of business out there that's something that I'll, just make a note for our team to to assess.
And then on your last point.
Yes gas flaring is it's it's happening quite a bit and to your point on its due to excess in certain areas.
It's due to.
Price points being.
Varying wildly depending on where that at the availability of that that extra gas is.
It's due to infrastructure lack of into infrastructure in some ways to get that gas, where where it needs to be yes. Some years ago. We did look at it at some gas flaring technology and if thats. The space. If you will and we had found that.
There appear to be call it enough players in that space that would address the the flaring.
Concerns or issues from an environmental perspective.
Adequately at that point in time, but that doesn't mean, we can't take a relook as a company as a whole because it is happening more and more often in greater volumes than than ever before in history. So it's just something that we can take a look at all right. So I say, thanks to the inside and.
All right and then one where another question if I could just secret comment from yet.
The opportunity in the natural gas generator.
Market.
Is fast and it appears as though you're.
On the verge of.
Making some.
Rio inroads there.
And with the emphasis.
Basically being on the United States.
I bet Deb.
I think you maybe maybe make make them.
Alternative comment on that and in Europe and so.
It looks like there's going to be a larger push internationally I'm going to gas turbine.
In certain areas and that could definitely our current or an opportunity.
Agreed agree with you on that absolutely door. Okay. Thank you.
Thank you very much.
Thank you.
Minor to ask a question press star one on your telephone keypad.
Sure move your question from the Q Press Star to.
Once again Thats a question press star one on your telephone keypad.
Our next question comes from William Bremer with Vanquished capital. Please state your question.
Good morning, gentlemen.
Hey, good morning Bill.
I'm going to go back to my previous question.
Former conference call and to see has anything changed along in terms of your sales personnel.
Absolutely right Hey, one.
Definitely sales more bookings per quarter.
Hello, This is something that the board.
Hi, fuel who needs to make some changes.
I would encourage investment for the sales of proven sales personnel versus any other type of capital infusion.
This point.
Just wanted to hear to take on that.
So, we'll we'll do bill and yes, we did have a discussion on that point on our last conference call.
Today, we as a company we have about the equivalent of 18 to 20.
Call its sales related invoice sales related personnel, if you will.
Seven internal salespeople.
About 10 manufacturing representatives that we use for the APC business more specifically and then we have to salespeople over in Europe as we sit here today.
And we have as I mentioned on the last conference call. We have some of the most experienced people for for for these business applications that that we would ever want to find and it's as simple as that and their track record historically has been proven out.
And so.
As we sit here today.
Okay and to the same comment on on on stock buyback as we sit here today, we talk about organ a straight organizational structure and design and personnel at board level every time, we get together as a board and that will continue in the future.
But as we sit here today, we have not made any any changes on our approach to two marketplaces and I don't have the board does not have any immediate plans to change the approach today I mean, I would ask that you, let's let this next.
Period of time Pan out and I believe in our sales team I believe in the opportunities that lie in front of us.
Just because we've gone through a little bit of a slower phase it doesn't mean that our resource base is not performing as well as they should or can.
Because if I if I thought that was the case it would be a different story completely but that applies to every functional area of of our company.
So as we sit here today Bill I again, I believe me no one no one better understands that concern than than myself and the board as we sit here today, we know we need to generate incremental business and it has to start to happen here in this near term so that would be my commentary bill.
With that whole heartedly I think there is definitely tremendous amount of fatigue and the name with a lot of the shareholders as well as institutional shareholders. Okay. I think definitely some changes need to be made.
As we proceed forward I'd like to give update on the waterfall GPI and transit technicalities.
Has there been.
Progress in that and how soon where we do we feel as though we have a unit that potentially could go modular.
So really start.
So ramp that we've been talking about this for quite some time, we're getting there hasn't been changes to the seeing the origination of it and if so how close do we feel as though we are in terms of really having a model that we fuels.
Rollout.
Understood and and good question.
The interesting point that actually relates to your question does that.
As we've been talking with potential customers relative to demonstration in application opportunities. We are finding that the that the system size requirement in terms of the size of system to generate the the volume of of oxygen thats required to to make an impact.
The system size is going to have to be larger than me call. It. The demonstration system that we have today right. So what we what we have been doing is developing a platform for the ability to dramatically upsize and further modularize. This system when we do need to go to site with.
Call at larger volume capability Okay.
We haven't had to do that yet right. So the only thing we've done is.
We took the demonstration system from our our license or which was at a certain call it size and capable capability of system, we upsized that system on our own to be able to generate a larger volume of the dissolved oxygen.
We feel confident just based upon our engineering experience our of our ability to module realize equipment for deployment. The sites that we are going to be able to be effective in upsizing. This system for deployment for larger applications. So as we sit here today Bill I'll tell you that's.
That's not on but I would call a higher risk area profile for us.
More so is identifying those specific applications that are going to require that system and then moving forward from there im less concerned today about.
Yes, im less concerned about our ability to upsize and module Modularized just based upon our engineering experience as a company.
Good color and finally.
I do agree with you in terms of the allocation of cash.
Two of the core business right now versus buying back stock that being said.
When bookings consistently.
All running at over 1.2 times per quarter.
Hi, Dan I think its advantageous what I would like to see more inside of by not just from yourself and maybe water to others in the company, but more broad based.
And I think that needs to resonates with the whole to the board.
The managers.
Through the financial Department.
As well as personnel.
They believe in this company this point, where we are.
Given the core value here.
Step in and align themselves with the shareholders with you for many many years.
That's all I have to say.
Out to fill Noah Thanks and of course I appreciate.
That commentary as well as a tiered tier note we have had some insider buying.
By the employees and end by directors as well, but there is there's nothing like larger volumes of insider buying to show confidence in in a company's future. So I agree with your point.
Thank you.
Okay.
Thank you Bill Thanks Bill.
Ladies and gentlemen, there are no further questions at this time I'll turn the floor back to Vince Arnone for closing remarks. Thank you.
Thank you operator.
I want to thank everyone for for taking the time today for our third quarter earnings Conference call.
As I as I noted on the call and in in Q in a thereafter I still remain highly confident in the fuel tech teams capability to to complete this turnaround that we started as a company back in 2015.
And I look forward to speaking to everyone. Once again in the future and have a good day everyone. Thank you.
Thank you. This concludes today's conference all parties may disconnect have a great day.