Q4 2020 Fuel Tech Inc Earnings Call
Greetings and welcome to the fuel Tech fourth quarter and year end 2020 financial results Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Devin Sullivan Senior Vice President of the equity group. Thank you you may begin.
Thank you, Jeff and good morning, everyone and thank you for joining us today from fuel Tech's fourth quarter and year end 2020 financial results Conference call Yes.
Yesterday after the close we issued a copy of the press release, which is available at the company's website.
You Ww dot FTE K dot com.
Our speakers today will be Vince arnone.
Resident and Chief Executive Officer, and Ellen Albrecht from <unk>.
<unk> financial officer.
After prepared remarks, we will open the call for questions from our analysts and investors.
Before turning things over to Vincent I'd like to remind everyone that matters discussed on this call except for historical information on forward looking statements as defined in section 20, <unk> 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.
<unk> current expectations regarding future growth results of future growth and results of operations cash flows performance and business prospects.
As well as assumptions made by and information currently available to our company's 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 each day.
So 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 one a under the caption risk factors and subsequent filings under the Securities Exchange Act of 1934 as amended which could.
Cause fuel Tech's actual result, 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 forward looking statements contained herein to reflect future events.
Elements or changed circumstances or 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 SEC.
With that said I'd now like to turn the call over to Vince Arnone, President and CEO of fuel Tech Vince.
Vince Please go ahead.
Yes.
Thank you Devin good morning, and I want to thank everyone for joining us on the call today.
I am very proud of what our team has accomplished during this period of uncertainty and on.
I am optimistic regarding our outlook for 2021 and beyond as we continue on our path towards establishing a foundation for long term and sustainable growth.
We entered 2021 facing challenges related to the timing of contract awards.
Especially at our APC business and.
And the potential lingering impact of the COVID-19 pandemic on our operating results.
With the February February 2021 financing that raised gross proceeds of <unk>.
$25 $8 million.
Today, we have approximately $37 million on cash on our balance sheet and no debt.
This capital raised has helped to significantly reduce the near term risks associated with these challenges and he has provided us with the support for near term initiatives.
As a company we have the benefit of providing three distinct and proprietary environmental remediation platforms to the markets in which we share.
A P C.
Fuel Chem and our dissolved gas infusion business.
We believe that each of these technologies will allow us to capture significant opportunities in their respective end markets.
We emerged from the effects of the pandemic.
Uncertainty lifts and when global economic activity resumes to normalized levels.
With the financing we are on the best position in our recent history.
On the strategic solutions.
The return on our base businesses to profitability.
Excellent and expedite the demonstration and further market discovery of our D Gi technology.
On to investigate other product market opportunities.
While we intend to capitalize on the flexibility that our strong cash position affords us.
Our immediate focus will beyond expediently furthering the commercial development of our D Gi technology.
The other necessary investments in human and equipment resources.
Concurrently we will be assessing the business landscape in detail for our APC and fuel Chem business segments to better enable us to focus on the markets and products that can lead to profitability.
Yeah.
I want to thank all of our shareholders, both old and new for your support and the fuel Tech team is dedicated to work diligently to provide value for your investment in fuel Tech.
Let's begin with a discussion of our APC business.
Before COVID-19 has continued to affect the timing of new business Awards.
Due in large part to its impact on industrial purchasing activity.
We are continuing to emphasize support for client bid requests for custom engineered solutions, therefore, fulfills a unique needs of each of our customers.
On our last call. We had noted that we expected to have final decisions on multiple projects for an aggregate contract value of 10% to $15 million.
Within that group of project opportunities. The most critical project in terms of contract value was canceled by the end customer due to the inability to obtain financing, which was largely driven driven by COVID-19.
The remainder of the projects were pushed into 2021 for award decisions.
Okay.
The active markets have shifted to more industrial opportunities led by our SCR and ultra technologies, which are driven by permits for new units and retrofit regulatory requirements.
We are actively involved with the turbine suppliers.
The heat recovery steam generator manufacturers.
Rice engine suppliers carbon black manufacturers and municipal solid waste biomethane and pulp and paper facilities.
We are also monitoring activities at the state level, where new environmental guidelines, including compliance with the EPA boiler Mack and regional haze rules may produce opportunities to install best available retrofit control technology on certain sources of emissions.
As a company we are watching the actions of the Bidens administration very closely. However, we don't believe that near term actions will have a material impact on our business activities either positively or negatively.
In general the ATC landscape remains a very competitive space and opportunities are currently in a state whereby they are smaller by volume.
We continue to work on positioning with multinational firms that are developing business on a global basis.
As we have seen many times before on our company's history. We continue to receive phone calls to provide assistance to our customer base when they have difficulty with competitive systems.
For 2021, we do expect to have an increase in APC project award activity from our recent experience.
And we would expect revenue to be moderately improved versus 2020.
However, this will depend on the timing of contract award and required execution.
Yeah.
Our fuel Chem segment continued to produce strong results in the fourth quarter.
And finished the year on a high note after a sluggish start due to COVID-19.
Much of this recovery was attributable to the installation of our <unk> targeted in furnace injection technology on three new domestic coal fired units for a repeat customer in the northeast.
Well its a return to more normalized run rates across our fleet.
Following a period of slower unit activity earlier in the year due to the impact of the pandemic.
As we look ahead to 2021.
When these new units are operational and utilizing the technology on a continual basis throughout the year.
We would expect to see revenue of 500000 to 750000 per unit fuel Chem historical gross margin.
In 2021, we will continue to pursue fuel chem application opportunities in the U S.
Whereas the remaining fleet of coal fired power generation.
Generation boilers seeks to remain competitive and dispatch market yet.
Yeah, the utilization of lower cost lower quality fuel.
It is these scenarios that are likely to create the slagging and fouling issues that could necessitate the installation of our fuel Chem program.
We are also continuing to work with our partner in Mexico to employ our solutions to help them help them mitigate harmful emissions derived from the burning of high sulfur fuel oil.
Our partner continues to engage with local officials in Mexico to advance the solution.
The current Mexican government.
Is in favor of utilizing indigenous fuel sources for power generation to ensure that they can become energy independent.
The recent power generation dilemma in Texas further solidify their position that as a country. They do not want to be dependent on external fuel sourcing from power generation such as natural gas from the U S.
Okay.
Additionally, there was a correct a lot of high sulfur sulfur fuel oil in Mexico is the international market for this product has been significantly reduced with the adoption of the new International Maritime organization restrictions, which prohibit the use of this fuel.
We believe that these political and regulatory drivers have created an environment that will encourage that further further utilization of high sulfur fuel oil for power generation in Mexico.
In June of this past year, our partner solidified contract extensions through 2022 with Cfe. The state owned utility for the two sites at which we currently have our fuel Chem program install.
Also prior to the end of 2020.
We provided cost estimates to our partner for the expansion of our program to a site in Mexico that has five large power generation units all that burn high sulfur fuel oil.
This site is adjacent to a Pea next refinery.
As of today, our partner is in the midst of discussions with Cfe regarding this expansion opportunity and others. We know that high sulfur fuel oil is currently being burned at facilities in Mexico without the necessary environmental controls and local communities are rendering complaint about the impact on.
Beer pollution.
We will watch the development activity closely however, we believe that pressure is building in favor of the of the implementation of our fuel Chem program at additional facilities in Mexico.
Okay.
We are also continuing to pursue opportunities for additional fuel chem applications get biomass and municipal solid waste units in Europe.
In Southeast Asia via our partner Amazon papyrus pull apart from the pulp and paper industry, where we use our recovery Chem program.
And in other southeastern Asian countries, where coal is a primary source of fuel.
Our demand and related pricing is high and where slagging and fouling is an issue.
Although some uncertainty remains with respect to the lyric lingering economic impact of Covid on power generation here in 2021.
We have an optimistic outlook for fuel Chem this year driven by the stability of our installed client base.
We expected incremental revenues from our new unit installations.
And the increasingly recognized economic and environmental benefits that our chemical technologies deliver.
After a slow start attributable to the pandemic.
We are starting to realize some momentum in our <unk> business.
As noted in our press release.
We have completed two demonstrations in Q1 of this year the first yet on municipal wastewater treatment wastewater treatment facility on the West coast.
And the second.
We had a new customer in the pulp and paper business located in the Pacific Northwest.
We are currently reviewing data from each demonstration to specifically clarify and document the benefits of our delivery system and we will have a clearer roadmap of how to commercialize these opportunities.
Shortly thereafter.
We also expect to commence a demonstration and a separate wastewater treatment facility on the west coast within the next 30 days.
While each demonstration opportunity addresses customer specific issues.
The first demonstration at the municipal wastewater treatment facility on the West Coast was intended to provide supplemental oxygenation during a high waste volume period for the municipality.
This particular interest in municipality is located in a recreational area that receives an influx of visitors during the holiday periods and when this happens.
The wastewater treatment plant does not have the capacity to treat the incremental waste and.
And remain in compliance.
During the demonstration D. G. I system was able to efficiently deliver supersaturate of oxygen oxygen to improve the quality of the water to a level that was actually better than the prior year when the volume of wastewater to be treated was actually lower.
Alan will take you through the 2020 results here. Shortly however, with respect to 2021 as I noted previously.
We expect a B C project award activity to pick up as we move through the year and as a result, we would expect revenue to be moderately improved versus 2020.
And we expect fuel chem to grow its top line modestly versus the prior year.
D. G. I, we are focused on further further evolving.
And commercializing this technology.
To that end and with the benefit of new capital, we will look to design and fabricate higher capacity D. G I equipment delivery systems.
Which we believe will be necessary to address the needs of the majority of our end markets.
We will continue to pursue additional demonstration with a target of having a commercial system online before the end of this year.
For 2021, we.
We intend to maintain the lean operating structure that we have created over the last several years.
And we will ensure that the SG&A line line aligns closely with anticipated growth.
Our multi multi year cost reduction initiatives.
Including the wind down of our China operation.
Should allow us to profitably leverage top line growth with annual breakeven revenue of between between 25 and $30 million depending.
Depending on the product segment mix.
In 2021.
The fuel tech team will be guided by our focus on operational excellence and client service innovation.
And financial improvement.
With that said I'll turn the call over to Alan Alan. Please go ahead.
Thank you Ben and good morning, everyone.
We hope you have the opportunity to review our result, so my comments will be brief and focused on the fourth quarter.
Consolidated revenues during the quarter increased 26, 5% to $6 2 million from $4 9 million in last year's fourth quarter, reflecting higher revenue for both the APC and fuel Chem business segment.
After a sluggish start to the year due primarily to the impact of Covid, we experienced a strong second half.
APC segment revenue increased to $2 5 million from $1 7 million, primarily the result of project timing on completion.
APC backlog at the end of the quarter with $5 3 million $4 9 million of which was domestic and.
And included a variety of fuel tech APC technology offering across multiple geographies, including the U S Europe and China.
We anticipate approximately $3 million of current backlog will be recognized over the next 12 months.
APC backlog has trended downwards during 2020 as a result of the sluggish overall market that was compounded by deferred purchasing due to the uncertainties created by COVID-19.
As mentioned in our press release, we are pursuing a global sales pipeline of approximately 40 to $59.
Fuel Chem segment revenues rose $3 7 million from $3 2 million in last year's fourth quarter, primarily reflecting contributions from the completion of installation of equipment and three new coal fired unit, which began during 2023rd quarter as.
As well as the recovery more normalized run rates across our fleet.
Consolidated gross margin for the 2024th quarter was 41, 9% of revenue compared to 1% of revenue in last year's fourth quarter, which reflected an impact of a $2 million warranty charged to ATC cost of sales in the fourth quarter of 2019.
Excluding the charge consolidated gross margin in 2019 was 41, 1%.
APC gross margin was 29% in the fourth quarter of 2020.
Excluding the warranty charge gross margin for APC in the fourth quarter of 2019 with 30%.
On an annualized basis, both 2020 and 'twenty 19 were impacted by this warranty claim.
Total than 2020, excluding these charges APC gross margin for 2020 was 30% as compared to 36% in 2019.
The decrease in margin profile, that's attributed to the overall project mix.
Fuel Chem gross margin was 51% in the 2024th quarter as compared to 48% in the same period one year ago.
S expansion, our cost control initiatives are ongoing and continued to be reflected in SG&A.
SG&A for the fourth quarter declined by over 15% to $3 8 million from $4 5 million, reflecting lower administrative and professional car.
R&D activities from 95.
For 2021 we will maintain our focus on cost control initiatives and invest in projects and resources necessary to support the business and drive sustainable growth.
Net loss from continuing operations for the quarter was $1 5 million or seven and a loss of seven cents per share compared to a net loss from continuing operations of $2 3 million or 10 cents per share excluding the aforementioned warranty charge.
Adjusted EBITDA loss was $1 1 million for the 'twenty 'twenty fourth quarter compared to an adjusted EBITDA loss of $3 9 million in the third.
Fourth quarter 2019.
Moving to the balance sheet at December 31st we had cash and cash equivalents.
$10 6 million and restricted cash of 2 million for a total cash position of $12 6 million.
In January of this year $1 2 million of restricted cash on its been released and the operating cash related to December 2020 guarantee expertise.
Working capital was $15 5 million.
These figures do not reflect the February 2021 financing in which we raised the total gross proceeds of $25 8 million.
With respect to China, we collected and repatriated one $9 million in cash from our China subsidiary in 2020.
We continue to focus on collection efforts against an estimated available.
One $5 million to $2 million of receivables and we expect to continue to repatriate additional fun in 2021.
At December 31, we had $25 8 million common shares issued and outstanding.
This figure excludes the 5 million shares of common stock on the 2.59 common stock purchase warrants issued in connection with the February 2021 capital rate.
The recording of the proceeds from the capital raise will be reflected in our Q1 2021 10-Q filing.
On January eight 2021, the company was informed by the small business administration that is payroll protection plan loan in the amount of one point I've now had been forgiven in its entirety.
Income from the forgiveness of the debt will be realized in the first quarter of 2021.
With respect to valuation our book value per share with 88 cents on.
Tangible book back book value per share was 78.
And our working capital per share was 60 to Houston.
Yeah.
Our cumulative net operating losses at yearend total $25 5 million. These NOL from Nols cover several geographies, including China approximately $10 seven will begin to expire in 2034 as a result of these Nols our income tax expense for 2020 is immaterial and we.
That's to have the same result in 2021.
Now I would like to turn the call back over to them.
Thank you very much Helen operator, let's please go ahead and open the line for any questions.
Absolutely, ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad. The confirmation tone will indicate that your line is from the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before.
On the Sarkies one moment, please let me pull for questions.
Our first question comes from the line of Sameer Joshi with H C. Wainwright. Please proceed with your question.
Yes, good morning, Thanks Lynn L M.
Hope Youre doing all day.
Good morning Samir.
Good money, so it seems like Oh.
Good day and to the year end.
Looks like modest growth expected in 2021.
And you have a good balance sheet now.
What are the particularly the focus on I know you mentioned D. G I.
And then the.
A scale up but are you planning on getting more day more units in place or is the focus going to be on scaling and moving larger units.
Okay first of all I'm, saying things cause thanks for the commentary and then yes. We are looking for a modest improvement here in in 'twenty, one versus 'twenty and to your point on our balance sheet right now is probably stronger than its been for the past eight years timeframe. So we're very pleased in terms of where we're.
We're positioned today, okay. So in terms of where we're going.
As I noted as part of my commentary on the the further development.
And commercialization of water is if not number one priority number two priority for us as a company that is as we sit here today.
So we need to.
Converts.
Our existing demonstration or demonstrations yeah into commercial systems.
Systems, and along with that and working concurrently we are going to look to make some investments to design and in fabricate larger D. G. I a delivery systems. What we found is as part of our.
Our discovery a four for end markets over this past couple a couple of years is that the the demonstration unit that we have been working with while being a nice effective unit in some cases, it does not provide us with the ability to prove out.
Efficacy during that demonstration phase so we need a larger a more more upscale unit to be able to do that and so this next step is an important investment point for us we've been working diligently on the design of the upscaled.
Delivery system, and I'm confident that we're going to start to make some investments in that system here as we move into Q2.
But that is as I said, if its not number one priority is definitely number two the other part of our equation is returning our base business segments to complete profitability, our focus needs to remain on that because that that's necessary for our future success as well.
We're continuing our our our focus on SG&A I would expect we're going to come in in 2021 with a slight reduction in SG&A from 2020 due to some steps that we took during 2020. So we're going to have on infrastructure that is going to be able to be better less.
Bridged as well so I think we're well positioned to move forward here.
So so Vincent just mentioned the first priority would be to return to profitability and but at the same time, you are saying that your SG&A will be low or so what exactly are the.
The push towards profitability going to look like.
It's a combination of both factors from here.
Obviously as I, just said SG&A is going to come down, but our top line as I mentioned for both fuel Chem at a P. C. We're expecting to be improved vs versus 2000 22020 was.
An extraordinarily difficult year for APC in particular.
But even our fuel Chem performance was was not at the level that it should have been given some of the reductions in power generation demand that we had it in particular on quarters Q2, and Q3 of 2020. So it it's going to be a combination of both factors from here both top line.
Growth and continued good management of our our internal infrastructure.
Got it Mexico, and the high sulfur fuel line usage there.
Seems to be.
Emerging and has been emerging as a good opportunity.
What is your visibility in terms of timeline from revenue from that source.
Yes, we've been watching this as you as you well know for the better part of this past year.
And as we sit here today, there have been strong movements forward within Mexico to move towards burning more of the high sulfur fuel oil, but not just burning it.
Burning it while deploying the necessary pollution control.
Our systems that are necessary to go ahead and protect the local population from the pollution okay.
As we sit here today, we know they are burning more of the heavy sulfur fuel or other than they have from past years.
And we have every reason to believe that the Mexican government is going to take the next step to go ahead and ensure that the pollution controls are going to be placed on these facilities. Okay.
We have to work out funding mechanisms and the like to ensure that this is able to get done within a reasonable timeframe, but again, we've seen and working with our partner. We've seen continued steps forward locally in Mexico that leads us to believe that this is moving forward.
From my perspective.
I would think we would see something here in 2021 relative to it going forward exact timeframe I don't know but.
The longer that time passes before there's implementation. Obviously, then only further delays that could come from that but as we sit here today, even in today's Mexican newspapers. There are at least two articles that are talking about.
B and burning heavy sulfur fuel oil and requiring plants to put on the pollution control in conjunction with burning that fuel what happened in Texas was just further impetus for the Mexican government.
To say internally and to try to sell internally. The fact that they want to be power generation independent they don't want to solely irresponsible for relying on natural gas coming from the U S. Because we've just proven out in in the month of January and February.
Basically the fact that natural gas lines were shut down Mexico was not afforded the opportunity to receive that natural gas there were millions of people over and above what we heard about in Texas that went out went without power for weeks and so that will not continue so Theres Inc.
This timing is still difficult to predict but I would expect something here in 2021 from here.
Understood no that's.
That's fair enough just a.
Sub question to that.
So does this potential from Mexico.
And to use the upside.
Revenues of which you already other expecting it'll be modest school theater audio so with this Mexico would revenues be.
Additional upside thought about have you included that in the other expectation. We have included we've included nothing from from.
What I would call Mexico upside.
In our figures as we sit here today the potential in Mexico is is quite sizable but until we have a call a stronger feeling that it's going to be realized.
We won't include in any of those possible upside figures included in their numbers.
Okay, and then May I, just go back to <unk> for a quick second Oh.
What is the what is the scope of our ore or dollars required for this upscale you on that and also what would be a typical fluids project.
Implementation look like in terms of revenues for you.
There are there going to be ranges of course from there depending on on size of system required yeah. Bye bye bye the end customer to address their issues and in the ranges could be pretty wide. Okay. As we look at our capital investment internally for call. It on.
Our our next delivery system.
I'll give you a range of anywhere between 150000 and $300000 for internal capital spend two to build out an incremental system that we can use for demonstration purposes, or otherwise, but that will be an upscale system compared to the one that we have operating day okay.
On a plant by plant basis, once we get to actual commercialization there could be multiples of these types of systems that could be deployed to a a plant site to meet their demand and so so take the low end of.
The numbers that I provided multiple multiply that by.
Five to six times in that.
Could be a capital equipment sale. If you will it also could be a long term lease scenario as well whereby we're providing our delivery system with a maintenance contract in and other services that could go along and coincide with that capital equipment. So we're open minded to the business model as we sit here today and we need to better.
I understand mid end markets and their constraints relative to funding as to how best suit their needs.
Got it thanks for that color.
You mentioned it seems pipeline.
That you are looking at that is on 40 to 50 million.
Oh, Okay can you compare it to how it was at the end of 'twenty on 19.
Hum.
In previous years.
In spite line much larger than all of them and some other ore bodies.
Yeah, and then in general Sameer I would say, it's a little bit smaller than we've seen it historically and the primary reason being is that within our current sales pipeline. We don't have say two or three of what I would call larger contract value opportunities that reside within that pipeline.
And that's not to say that they won't materialize once again, because they they seem to every every year or two we'll have something like that come through our pipeline and then we've proven historically that will have contract bookings of $7 million or $12 million on a per contract award basis, but as we sit here today within our pie.
Line I would say, it's approximately the same number of opportunities, but not necessarily the the level of overall contract value that we've seen historically keep in mind, we're coming off from 2020 and that's the you know last year was a unique year for everyone in our <unk>.
Business and so I look at where we stand right now as a rebuilding of pipeline scenario as we move forward here in 'twenty one.
But one last question on gross margins.
I think Alan mentioned.
So do you expect.
Oracle, our gross margins on a D G I see it as well or maybe I got it wrong can you confirm that.
Yeah, we actually did not make a comment relative to gross margin on D. G. I think it's I think it's premature to comment on on that right now Sameer.
Just as a cod at the lower end of the scale I would think that.
You know, we'd be targeting 30% plus gross margins generally speaking for that product line.
Got it thanks, a lot the ovens and good luck for 2021 thank.
Thank you very much we'll talk to you soon.
Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad at this time. The next question comes from the line of Pete Enderlin with MDC Partners. Please proceed with your question.
Good morning, Thanks for taking my questions.
Good morning, Pete.
Well this year.
Talk about the $40 million to $50 million pipeline opportunity.
Globally can you give us some sense of how that breaks down between the domestic and the international pieces.
Yeah as we sit here today I'd say, it's approximately 25 million domestic and then 15 million international with the with the European marketplace, representing the majority of that international piece.
Okay. Your business today, obviously is mostly domestic and.
Could be looking for equal amounts coming from overseas.
And you mentioned talking using partners, but do we have any sense of how many partners you're talking to are using and how you relate to them. How do you get people to be partners with you in and trying to market. The a P. T. A P C systems.
Yes.
And when we when we talk in terms of partners. We usually talk in terms of either an OEM that requires our solutions as part of their ultimate package that they can provide to an end customer or an installation contractor or engineering firm that is providing turnkey.
<unk> work, but as part of their bid package day there'll be quite a we require the call.
Call It the technology package as well and these are companies that we work with in many cases, historically, but we are looking to build new relationships as well, but it's typically a contractor or a subcontractor relationship that we have with these firms and.
About how many such firms would you say you could characterize as having a relationship with now.
I'd say four to five or virally okay.
I would've thought that on a worldwide basis, there could be.
Multiples of 10.
Types of companies that you could work with but you're not working with them yet.
Fair enough to say.
Well no.
Differentiation point right. There is a firm that we would call a partner that we are calling more aligned with on I bid by bid basis versus firm is that we will bid too on a recurring basis, because we know that they're looking for our scope of work, but we don't necessarily have a.
Call. It a recurring business relationship with them per se they'll go out from multiple bids on a recurring basis. So.
So there's there's a difference between what I would call a close partner.
<unk> firms that we do business with on a regular basis, you know what I mean, yeah.
Okay and.
I have a question on the D G I T.
Technology, you talk about higher capacity, which would be necessary for demos and maybe for many of the commercial.
Installation is ultimately as well so what.
Physical metric do you use to talk about the throughput of the systems I heard you mentioned the dollar amounts but.
But I mean give us some idea of what size and how you measure the size of such systems and physically.
Understood. So when we're talking about delivery systems, we're talking about delivering pounds of oxygen per day into a a body of water that needs to be treated.
So this is an example, the system that we have today is a demonstration system delivers around 250 pounds per day of oxygen.
There are.
Going to be requirements that are that are going to be several multiples of that amount to be able to treat.
On the body of wastewater that requires treatment, it's going to be completely different by industry, but but that's why we need to look to scale up as as a next step we've had enough experience.
With the system, we have been working with to date that we are taking all of our learnings and building them into our next phase of design and control and that's what we'll look to put forth as a next step and interest.
Well I believe.
First maybe a naive question, but.
If you if you want to make it say three to four times bigger.
Well actually just design the specs to make it physically three or four times bigger what else do you need to do besides scale it up.
Yeah, no we need to be able to be sure a couple of things right.
Number one scale up isn't as always as it might seem to be right. So we need to ensure that the the various components that are required to do the scale up R&D going to be able to function in certain ways. Okay. Secondarily, what we're looking to go ahead and build delivery systems that are on.
Going to be able to.
Be delivered in a no I'm not.
In a repeatable way whereby if we have designed a system that is capable of delivering 1000 pounds. A day, if a customer requires 2000 pounds a day we may have.
As opposed to one system capable of 2000 pounds a day, we need may provide them with two 1000 pound systems, which will give them more flexibility to adapt to their operating environment on a recurring basis. So we.
We need to be sure that we're scaling up in the proper way, that's going to be able to meet the needs of potential customers and we're taking all of that into consideration.
Okay. It makes sense one last question and that is the provision for doubtful accounts seems to be a fairly significant is there's a lot of that China or is there some other stuff on there.
Now it's currently the majority of it is for China.
Our collection efforts have been a a very strong but from a conservative perspective, we find it prudent to.
Reflect the island for the China receivable, so what's what's the current reserve for China against the total amount.
Approximately.
Hum.
Yeah about a million dollars the reserves about $1 million versus total possible collectability in China of <unk>.
$2 million or are there or thereabouts.
Helen's pointed earlier, we've collected and repatriated just under $2 million from China in 2020.
At a minimum here in 2021, we're going to be able to repatriate at least another $1 million.
From China, and then and then we'll see what happens relative to outstanding collections. After that I have to tell you that I'm extremely pleased with the outcome that we've had with the wind down from China and our ability to go ahead and.
Not only collect but repatriate some of those funds back to the United States right. Okay. Thank you very much. Thank.
Thank you Pete.
Thank you. It appears we have no additional questions at this time, so I'd like to pass the floor back over to Mr. Arnone for any additional closing comments.
Thank you operator.
I want to thank everyone that joined us on the call today.
I want to thank all of our shareholders for their continued belief and fuel tech in the entirety of the employee team.
As I mentioned as part of my Q&A with some of your.
We are better positioned today as a company income we've been here it's been in approximately eight years from a strength of balance sheet perspective.
We are dedicating all of our efforts right now to return to profit profitability.
And developing a a a growth based on a platform of technologies for our future.
And I, thank everyone and have a good day.
Ladies and gentlemen, this does conclude today's teleconference and webcast. We thank you for your participation and you may disconnect. Your lines at this time.
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