Q1 2022 Fuel Tech Inc Earnings Call
[music].
Greetings and welcome to fuel Tech's first quarter 2022 financial results Conference call.
At this time all participants are in a listen only mode.
Question and answer session will follow the formal presentation.
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Please note this conference is being recorded.
At this time I'll now turn the conference over to Devin Sullivan Senior Vice President of the equity group.
You may now begin.
Thank you Rob good morning, everyone and thank you for joining us today for fuel Tech's first quarter 2022 financial results conference call yesterday. After the close we issued a press release, a copy of which is available at the company's website Www Dot S. T E K dot com.
Our speakers for today will be Vince Arnone, President and Chief Executive Officer, and Illinois Brooks 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 to Vince.
Like to remind everyone that matters discussed on this call except for historical information are forward looking statements as defined in section 21 E 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.
Results of operations cash flows performance and business prospects and opportunities 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. These.
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 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 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 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 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 Inc. Please go ahead.
Thank you Devin.
Good morning, and I want to thank everyone for joining us on the call today.
After a strong end to 2021.
I am pleased to be able to report an improved beginning to the new year versus prior year performance.
For the 2022 first quarter revenues improved by 10%.
SG&A reflected a continuing commitment to cost control measures.
Backlog improved.
And our current balance sheet reflects total cash of more than $35 million and no debt.
A P C revenues increased by about $1.3 million from last year's first quarter.
While still well below historical levels, we continue to believe that APC revenues for the year will exceed the $6 9 million reported for full year 2021.
To that end our backlog at March 31, 2022 was $9 6 million approximately.
Approximately $7 million of which is expected to be realized over the next 12 months.
We announced a $5 $3 million of new orders during the first quarter of the year and are pursuing a global sales pipeline of $50 million to $75 million.
We are tracking projects with a contract value of $5 million to $10 million.
That are expecting to be awarded before the end of Q2 or early in Q3 and.
And we are optimistic regarding the outcome.
Okay.
Fuel Chem revenues declined due to a decrease in power generation demand in the areas of the country that are units serve and margins were down slightly as a result.
As we head into the warmer summer months, we are expecting to see a seasonal increase in demand.
That's the end of Q2 and all of Q3 are typically the best performing months for our fuel Chem business segment.
When we last spoke I had noted that we had expected fuel chem revenues to be in the $13 million to $15 million range for 2022.
And that's a reduction from 2021 was due to one known plants shut down as of 12 31, 21 from a long term customer and the business segment.
The return of a more normalized maintenance outage schedule in 2022.
And to the continued pressure on the remainder of our customer base to optimize program usage.
We are still expecting revenues to be in this range.
And I'm pleased to report that we recently started up our fuel Chem program on a new coal fired unit this past month, and the western United States and thus far the program is working well.
The new customer is using our program to burn a challenging coal as they seek to generate power at full capacity levels during the high demand summer months.
If the program continues to be successful, we would expect to see revenues of $500000 to $1 million for the full year 2022.
Overall when taken in combination with the improved outlook at APC. We continue to expect that total revenues for 2022 will show a modest improvement from 2021.
Yeah.
For the APC segment.
We continue to pursue opportunities for our SCR and ultra product offerings.
Recent contract awards and current discussions have involved the application of our S. N C. Our emissions control solution to reduce nitrogen oxide from stationary combustion sources for domestic and international applications.
And also our flue gas conditioning technology to improve the performance of electrostatic precipitated for an international client.
Additionally.
Decarbonization is top of mind for many industries.
And we are closely watching the planting of the steel industry and others as they pledged to invest in technologies to improve their global carbon footprint.
Fuel Tech has long standing relationships with technology suppliers and end users that will assist in our ability to capitalize on these opportunities as they develop.
Of note, we have been receiving a noticeably a higher volume of inquiries.
From potential new and former utility and industrial customers.
Regarding epa's proposed update to the cross state Air pollution control rule also known as Kasper.
Was published on April six of this year in the Federal Register.
The previous Casper rule was based on 2008 ozone national ambient air quality standards, where Nox is a precursor pollutant ozone.
The EPA entered into a consent decree early this year to update the Casper rule to make it compliant with the 2015 national the ozone standards, while meeting meeting of the good neighbor requirements of the clean Air Act.
These casper revisions could impact utility and industrial sources requiring.
Additional Nox control starting as early as 2023 for utilities.
In 2026 for industrials.
And we are receiving inquiries related to these potential new standards as we speak.
For our fuel Chem segment we.
We are continuing to explore ways to broaden the application of our chemical technology.
We are preparing to do a fresh reach out to all domestic coal fired utilities to reintroduce our fuel Chem program benefits, including the following.
Lowering the cost of dispatched by offering fuel flexibility and the ability to burn lower cost fuels of opportunity.
Extending facility life and improving overall facility profitability.
And lastly.
Our program can be structured to be utilized only when the unit owner wants to capitalize on high demand and related high capacity opportunities.
Yeah.
Additionally, as we have discussed in prior calls.
We continue to investigate providing our chemical technology solution to address the emissions created by the burning of high sulfur fuel oil in Mexico, which is being undertaken without the necessary environmental remediation.
And at the expense of the health of surrounding communities.
Yeah.
We are continuing to support our partner in Mexico as they engage with local officials to advance the solution.
The current Mexican government supports utilizing edition as fuel sources.
Our power generation to ensure that they can move towards becoming energy independent.
There is currently a glut of high sulfur fuel oil in Mexico, and as 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 for ocean transport.
We will continue to watch the development of this activity closely. However, we do believe that political pressure is building in favor of the implementation of our fuel Chem program at additional facilities in Mexico and our partner is currently in discussions with the state owned utility Cfe regarding application of.
The technology at several units at one plant site.
Yeah.
With respect to our developmental dissolved gas infusion or D. G I business initiative.
We continue to have high expectations for this technology, which focus on it focuses on industrial and municipal water and wastewater treatment.
I am pleased to report that we.
We have made progress towards advancing this nascent business towards commercialization.
D. G. I offers an innovative alternative to current generation technologies.
Utilizing a patent pending saturater saturater vessel DTI infuses gas into a liquid at high operating pressure, which allows the gas to be dissolved into the liquid with greater than 95% efficiency.
The gas infused liquid is then injected into an end use reservoir using our patent pending zoned injection array that delivers best in class gas transfer efficiency.
This delivery system enables our DDI technology to provide fast pressed.
Precise and controllable dosing of dissolved gas <unk>.
Mentoring underperforming traditional technologies and providing real time response to varying process needs.
The modular compact and scalable system configuration of <unk> technology allows for rapid deployment.
The system can be used as a standalone operation or to augment duration assets for increased treatment capacity without significant capital investment.
On our last call, we laid out our 2022 goals for DTI.
Today I want to give you an update on where we stand with respect to those objectives and provide some additional information.
The first goal was the completion of documented DTI performance testing that is independently verified by experts in the field of iteration and wastewater treatment.
While supply chain difficulties delayed our ability to start our testing by about six to eight weeks. We have made good progress in this area and expect to have the results of our testing before the end of the second quarter I am pleased to report that <unk> is performing favorably.
Second.
We targeted to identify our addressable markets in conjunction with our water and wastewater treatment marketing specialists.
Our addressable markets consist of municipal wastewater and water utilities agricultural applications.
Food and beverage facilities, including dairy farms and soft drink manufacturers.
Landfills and natural bodies of water and reservoirs.
Across these end markets D. G. I can address a variety of issues, including regulatory compliance water preservation as a replacement for chemicals to treat wastewater.
Odor reduction and improving improving overall water quality for humans and wildlife.
We have begun to identify potential customers and each of these business verticals and will create specialized marketing campaigns that address.
The individual concerns of these customers.
Our third goal was to construct an internal resource space specifically in support of the G. I.
Okay.
Goal number one and two were intended to be a precursor to this third goal.
But now that we have confidence in the performance of the DDI technology.
And also when our belief that there are viable end markets for the technology, we will be begin to plan for the build out of our resource base in support of CGI as we move throughout the remainder of 2022.
As I've as I have indicated previously.
We have been very measured in our approach towards our investments in DTI and.
This approach will continue as we evaluate resource requirements prospectively.
Our current goal for <unk> is to have one to two commercial applications before the end of 2022.
That's ambitious but we are working diligently to achieve this objective and we look forward to keeping you apprised of our progress as we work throughout the year.
In closing.
I want to again, thank the fuel tech team for their continued hard work and dedication.
We remain excited about 2022, and we look forward to keeping you apprised of our progress.
With that said I'll now turn the discussion over to Alan Elham. Please go ahead.
Thank you Vince and good morning, everyone.
For the first quarter 2022, consolidated revenues rose, 10% to $5 5 million and $5 million in last year's first quarter.
The increase was driven by a $1 3 million dollar increase in APC segment revenue to $2 2 million from <unk> 9 million in last year's first quarter, reflecting project execution timing and revenue recognition revenue generation from new orders booked in late 2021, and the first quarter of <unk>.
2022.
The fuel Chem product line revenue declined to $3 4 million from $4 1 million in last year's first quarter, primarily due to a decline in power generation demand in the regions our units there.
And to the sale of equipment to our fuel Chem customer in the first quarter of the prior year.
Consolidated gross margin was 41, 4% of revenues compared to 46, 9% in the first quarter of 2021, reflecting lower gross profit margins from both operating segments.
APC gross margin was 35, 2% compared to 41, 5% in last year's first quarter due.
Due to shift in project and product mix.
While gross margin for fuel Chem declined from 45, 5% from 48% in last year's first quarter, driven by higher material freight and labor and administrative costs.
Consolidated APC segment backlog at March 31, 2022 rose to $9 6 million from $9 1 million at December 31, 2021.
Backlog at March 31st included $4 million of domestic delivered project backlog and $5 6 million of foreign deliver project backlog.
As compared to $3 4 million of domestic delivered project backlog and $5 7 million of International project delivered.
<unk> backlog at December 31.
We expect that $6 7 million of current consolidated backlog will be recognized in the next 12 months.
SG&A expenses were stable at $3 1 million for the 2022 and 2021 quarterly period.
As a percentage of revenue SG&A in 2022 first quarter declined to 55, 2% compared to 61, 6% and the 2021 first quarter.
For 2022, we are targeting SG&A BT.
Between 12, and 12 and a half million exclusive of any additional investment that will be required to grow our business specifically our D. G I segment.
Research and development expenses for the first quarter declined to 220000 from 415000 in last year's first quarter.
While our project specific initiatives remain our top priority in particular I D. G I initiative.
Decline was primarily attributed to a reduction in administrative resource expenditures.
Our operating loss narrowed to 984000 from $1 2 million in last year's first quarter, reflecting higher revenues improved margin and lower operating costs.
Okay.
Our net loss for the quarter was 998000 or <unk> <unk> per share compared to a net compared to net income of 398000 or one <unk> per share in last year's first quarter.
Net income for the first quarter of 2021 included a $1 $6 million of other income, reflecting full forgiveness of the loan proceeds from the Paycheck protection program established pursuant to the cares Act.
Absent. This other income net loss for the 2021 first quarter would have been $1 2 million or four cents per share.
Adjusted EBITDA loss was 868000 compared to an adjusted EBITDA loss of 943000 in the same period last year.
Moving to the balance sheet I'm happy to report that our financial condition remains strong as of March 31st we had cash and cash equivalents of $34 2 million and our restricted cash was $1 1 million working capital was $37 5 million or $1 24 per share.
Holders' equity was $45 3 million or $1 49 per share and the company had no debt.
We are off to a solid start in 2022, and we continue to remain focused on improved financial performance cost control initiatives and efforts related to our core and expanding businesses.
I will now turn the call back over to Vince.
Thanks, very much Alan operator, let's please go ahead and open the line for questions.
Hey, sure. Thank you.
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One moment, please while we poll for questions and once again Thats star one thank you.
Okay.
Our first question comes from the line of Amit Dayal with H C. Wainwright. Please proceed with your question.
Thank you good morning, everyone.
Morning, Amit.
Humans have you.
But just to be.
With respect to how we should sort of think about the revenue cadence for the rest of the year could you give us some sense of you know whether you are anticipating sequential improvements given sort of the strength you've seen recently.
Through 2022.
In general I mean, we we normally expect to see a little bit of an improvement driven by Kevin Chemical technologies late in Q2, and then in Q3.
Before it was going to look at what I would say it might be our best revenue performing quarter, its looks likely to be Q3, but as we had noted we are working off some APC backlog as well and depending on timing of us working off that backlog that could easily shift quarter to quarter. So overall as I had noted.
We are looking at.
An uptick in revenue on a year on year from 22 versus <unk> 21.
Timing of how that falls into Qs, two three and four could shift a little bit, but generally I would expect to see Q3, probably being the best performing quarter.
Oh, Thank you for the headwinds Youre welcome.
And then on the gross margin side it looks like there is some pressure there.
Relative to sort of last year you know.
How should we think about margins this year and give me give us a sense of you know historically, what sort of average APC and fuel Chem margins have been and maybe what you are anticipating for those in 2022.
Understood.
But let's talk the I.
Talk about the business segments independently, so let's talk about fuel Chem first.
As Alan noted first quarter of 'twenty two was approximately 46%.
Our revenues for the quarter were a little bit.
Our lower than we had thought they were going to be due to demand predominantly but generally speaking fuel chem margins have historically been approximately 50%.
On an overall basis and I would expect to see that fuel chem margins for all of 'twenty two.
Once we start generating more revenue moving into Q <unk> two in Q3 and offset some of the fixed costs that are associated with that program that 46% is going to start to increase and push towards 50% when once we get to a full year outcome basis.
We've been fortunate in that.
A good percentage of the price increases or I should say the pricing pressure that we felt on our chemical technology side.
We have been able to have absorbed by our customer base. So again, we should approximate historical few Kim fuel Chem margins on a purely a full year basis. Okay.
A P C.
Margins vary.
Byproduct line and I should say by product.
Technology solution mix.
Historically anywhere between 30 and 40% on average so for full year 2022.
Probably somewhere in between.
30% to 35% is probably what I would target for APC margins for the full year as.
As we look at that.
Okay. Thank you that's helpful.
Are you expecting power generation demand to be able to say to you already seen you added a new customer it looks like we'll see you again.
Just seems like you know maybe an uptick on the power.
Generation demand.
Are you seeing similar sort of.
Developments, taking place for that.
A few of the games, especially.
Well I mean R R.
Our number of what I would call based customers <unk>, obviously down from front. It was historically right. So when we have one of our base customers that that has reduced dispatch during our quarterly period of time because of the impact on on demand we feel it as a company.
In general as we look for the remainder of the year, we're not expecting any anomalies I mean, we're here in Chicago, and Chicago area, where in the nineties today and tomorrow.
Our weather warms up and as our client base are also starts to feel the impact of the of the summer weather coming dispatch is going to pick up and so we will be able to capitalize on that.
We did as I noted we were able to go ahead and pick up a new fuel chem customer.
Very pleased to be able to see that and this is a customer thats in the western U S that day.
They want to be able to ensure that during the the the heavy demand a high dispatch summer months that theyre not going to have any issue at all burning the fuel that theyre looking to burn so they came to us and so that our program started up with them actually at the end of last month.
And so far so good.
And again this is a customer that likely won't use our program for the full year, but even if they use our program for a solid four to five to six months, that's excellent incremental revenue and margin for us.
As I noted in my in my commentary, we are going to do a.
Call it a revisit to the marketplace relative to the benefits that our fuel Chem program can offer we are seeing some new dynamics in markets whereby a many of the utilities are not necessarily.
Not necessarily looking to lock into longer term coal contracts theyre looking at spot market opportunities to lower their cost of dispatch.
When they do that they may be looking to bring in house coals that that their units may not have been designed to burn and when that happens that's where our fuel chem program can be beneficial to them.
So we're looking at some of the change in dynamics closely.
I don't know exactly what <unk>.
Incremental opportunities are out there for us, but we're definitely going to scour the marketplace.
Okay. Thank you and then one of them.
Just last one you said you were targeting one to two applications for D. G. I by the end of 'twenty two I don't know if I heard that correctly could you elaborate a little bit on what those applications can could be.
Yeah. They are in all likelihood I may say, they could be commercial demonstrations.
Would be the sale of a smaller scale system.
It's a goal that we set internally for the company as we are looking to push <unk> forward not as not expecting any material revenues from <unk> in 2022, that's something that I have stated previously, but as we look at look to take steps to move <unk> forward.
Or we're looking at building a upon where we are today and again the three goals that I had laid out for <unk> for us for 2022.
They're moving forward and once they start to move forward once we're able to to come out a little bit more publicly regarding the the capabilities of <unk> that will enable us to talk a little bit more deeply about what commercialization looks like so so for us for for this year again, the sale of 1% to two.
Systems that that that's a target.
As we learn more specifically about the.
The end market demands and how <unk> is going to fit into the the markets of our opportunities that I outlined we will be able to talk more about that in the future, but right now I wanted to you systems as a goal and again not expecting material revenues in 2022.
Okay.
That's all elements. Thank you so much.
Youre welcome Amit Thank you.
As a reminder to ask a question today you May press star one from your telephone keypad.
Our next question is from the line of George Gaspar Private Investor. Please proceed with your questions.
Yeah. Thank you can you hear me.
Yes, Stuart Hi, how are you Hello, good morning, I, just like to press a little bit more on this water treatment situation.
I'm a little surprised that.
It's taking this long to actually get a delivery completed.
What what's what's underway.
Underway in terms of the process of.
Of your go to <unk>.
Satisfied customers.
That the water treatment process is.
<unk> represents an opportunity for them too.
Take it on and is there something that you're still doing in terms of the technology that.
You haven't got to the end of yet could you just explain a little bit more about the process here.
Sure George Thanks.
Thanks for the question.
Okay keep in mind that we first started talking about DTI.
Pre COVID-19, if you will pre pre 2020, and we licensed the technology on or about.
Early parts of 2000.
19, so at the beginning we spent a lot of time actually looking at the technology and looking to develop some enhancements to the technology itself. Okay. Just when we were looking to go ahead and jump into the marketplace a little bit further with DTI is when COVID-19 hit and.
There were sites that were looking to go ahead, and and put the equipment out there for demonstration purposes to be able to to develop and better understand the actual performance and the impacts of the technology.
So we lost time in 2020, one as it relates to Covid, but what it also did for US George It enabled us to approach our development of this technology in a very structured way whereby.
We've done incremental.
Development of the technology, we have.
<unk>.
Worked with outside firms experts in water and wastewater treatment to identify segments of end use markets, where <unk> could be applicable. Those those studies were just finished the beginning of this year and we're now working with a marketing company to go ahead and determine how we're going to go to market publicly.
With D G I.
One primary item that we haven't had in hand that we really need to go forward is.
What I would call documented supportable verifiable DTI performance results.
Whether it would be a commercial demonstration or something setup in a test environment that we have certified by experts in the field. Okay. That's what we're in the process of finalizing right now as I said in my commentary, we're expecting to finalize that by the end of the second quarter. Once we have that in hand once we ensure.
Sure that.
The system.
Four months deliverables R&D, what we expect them to be we'll be able to go ahead and go to go to market with <unk> capabilities and at that same point in time.
We're going to be looking to.
Further address how we're going to support the Gi internally via our resource space. So we've been very structured in our approach towards.
Towards building our T G I.
We're mindful obviously of utilization of our financial resources in support of Dji, but where we're getting close to the point in time, whereby we're we're going to push this.
Forward it more pace, so we're getting close George.
Okay, Yeah, it just seems like.
Yes, it's a tremendous opportunity in the market are considering our books are in California, particularly and even in Florida.
The reduction in our water Pratt.
Processing capacities.
I really starting to show a particularly Martin in California, right now because it's dry and it.
It just looks like are there really.
Gonna be looking for more effort and they kind of equipment that you potentially could supply into the market.
I would hope that you can really take advantage of that.
Hey, George you're actually you're spot on we are seeing this.
Water wastewater treatment infrastructure, whether it be municipal or anything industrial related yeah. It is indeed in in and short capacity and so as we look at markets of opportunity. We are going to be look at areas, whereby dji couldnt be a an augmented enhancements to some of those facilities.
But but you're right. It's a market that is it is it is further developing.
Yes, as we as we look not just at this country yet in many parts of the world as well.
Okay and then one quick question on the.
The natural gas turbine market.
Anything materializing and therefore, you at this point in time that would be larger than what it has been in the past it just looks like natural gas.
Turbine is going to get further pushed here.
We're we're definitely pursuing any and all of those opportunities that look to come our way.
As you know.
Our technology definitely works well with instant and supportive.
Nox reduction for the installation of natural gas turbines, we have not seen the advent of additional data center data center opportunities that we had discussed post are.
2017, 2018 installation on 20 units out in the Western U S. But we haven't seen is the additional development of that marketplace, but that's not to say that it won't continue to develop because data center needs are forever growing and so we're watching it closely but we are.
And good positions with relationships with natural gas turbine Oems so that puts us in a good place. So we're ready to respond when those markets continuing to further develop.
I see okay, well very good good luck to you going forward.
Thank you. Thank you George you take care.
Yeah.
The next question comes from the line of William Bremer with Vanquish Capital Partners. Please proceed with your question.
Good morning, Vince.
Hey, Bill how are you. Good good. Thank you can you provide an update to us on your sales initiatives and how you go into market across your platform.
I will do.
As it relates to base business technologies, both for four fuel Chem and for APC.
It's the same approach that we've used historically relative to a combination of internal direct sales force and then utilization of manufacturing representatives. So we use a combination of both for for both fuel Chem and four for APC today.
One trend that we have seen is that.
Our use of manufacturing referenced representatives has been declining generally speaking here in this country.
And I think that the overall market or opportunities relative to our end markets. His four for some of those folks that were focusing solely on pollution control technologies.
And working as reps for those technologies, they've they've looked to move on to other business lines.
So we find ourselves utilizing reps a little bit less than in the past okay.
As it relates to our outlook on water.
Where we're gonna have to look to to build out what our approach is going to be from water, but.
It is all in all likelihood going to be a similar approach in nature because.
From our discussions with those that are familiar with our end market space for water.
<unk> representatives are used on and often in a regular basis relative.
Relative to the unused customers that we're looking to target. So in all likelihood it's going to be a combination of an internal sales force and also manufacturers representatives of well by representatives that are going to be very specific to the industries of choice.
So probably a similar business model.
Okay. Good to hear has there been any change in your sales personnel since the beginning of the calendar year.
Year.
There have not.
There have not.
I call. Upon this because one of your key competitors and peers had extremely strong bookings yesterday, I mean out of the park bookings, yes. So.
There's definitely a market.
Just seems as though you guys are.
Need to pick it up on the sales side and the bookings side.
Alright, I wont go into G. G I N T.
Give me an idea.
All the.
Yeah.
Your focus I know, what's going to be a modular type of infrastructure gearing towards wastewater.
Give us an idea of how small a pool.
Do you believe could be performed as well as how large and how we had the examination of our system for say a.
You know a million dollars a million say gallon you know pools water wastewater that needs to be are rated.
Understood. So what's come our way relative to our study of and marketplaces.
He is that we're going to require systems of varying sizes from the.
Call it the <unk>.
Gallon multimillion gallon basins to something much much much smaller than that.
Originally when we first.
We are discussing about market opportunities with.
Within our team and others outside of the company.
We had thought that.
The majority of the systems, we're going to need to be larger scale and so we internally. We went ahead and developed or a larger scale DTI deliverable system.
Which is designed to deliver 2000 pounds of Boston oxygen a day and we would be looking to address.
Your larger basins, if you will when we've come to learn more about all of our possible end markets. We're gonna have to have something in hand, that's going to deliver 25 pounds of oxygen a day and so it's a much much much smaller scale system something similar in size to the we have a pilot flash lab.
Scale system.
<unk> already but that's something that we're going to have to we're going to have to strategize on what fuel tech small scale delivery system is going to look like for our end markets.
And that's something we're going to have to design and in fact, we're going to be meeting on that next week and so it's something that we're watching very closely but what we found out is that a to your point, they're going to be modular, but be theyre going to have to cover a fairly wide variety of application sizes as we look at our end markets.
And then I like to take this to the sales side.
Is this gonna be a.
Or could we utilize the strength of our balance sheet and perform a say a MSA a multi service agreement with al and customer over a few years for recurring revenue or is this going to be more in essence, a sales tight.
System.
Right.
I am hoping to see that we're going to find.
Find that it's going to be a combination of both bill but.
I would love for us to be able to say that water treatment is going to be.
Our service our recurring revenue base, whereby it's a lease arrangement plus plus a service component, but I think the end markets are going to drive that a little bit in terms of how they look at.
Bringing this this type of application into their wastewater treatment environment I am going to envision that it's going to be a combination of both I think we're going to see capital sales that may have some follow on service component to it but I'm, hoping that we're going to see this as a possible recurring revenue opportunity and to your point you use our balance sheet.
At this point in time as well that would be that would be opportune I would I would enjoy that.
Right.
Echo George's remarks on the wastewater market theres been a lot.
Acquisitions in the last two quarters.
That potentially could be competition for fuel tech.
So my essence, and I agree with George is that we need to start really moving a lot quicker than we are.
Understood.
And point noted and <unk>.
Please know that.
The entirety of the fuel Tech team has this as a priority.
Okay. Thanks Vince.
Bill.
Thank you.
At this time, we've reached end of our question answer session I'll now turn the floor back to management for closing remarks.
Thank you operator.
I would like to again, thank the entirety of the fuel tech team for their support I would also like to thank all of our Investor base.
For their patients as a.
They provide the leadership team with the with a confidence and looking to bring fuel tech back to profitability and to generate shareholder value. Thanks to everyone and have a good day.
This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.
Yeah.
Okay.