Q2 2024 Fuel Tech Inc Earnings Call

Speaker Change: [music].

Operator: Greetings and welcome to the Fuel Tech Inc. 2nd Quarter 2024 Financial Results Conference Call. At this time, our participants are in a listen-only mode.

Greetings and welcome to the fuel Tech incorporated second quarter 'twenty 'twenty four financial results conference call. At this time all participants are in a listen only mode. A brief 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, discomfort as me and recall.

Operator: A brief question at the session will follow the formal presentation. If anyone should require operator assistance toward a 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 managing director of the equity group. Please proceed.

Devin Sullivan: It is now my pleasure to introduce your host, Devin Sullivan, Managing Director of the Equity Group. Please proceed.

Devin Sullivan: Thank you, Latanya.

Devin Sullivan: Thank you Latanya good morning, everyone and thank you for joining us today for fuel Tech's 'twenty 'twenty four second quarter 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 F. T E K dot com.

Devin Sullivan: Good morning, everyone. And thank you for joining us today for Fuel Tech's 2024 2nd quarter 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.ftek.com.

Devin Sullivan: Our speakers for today will be to start our own journey for President and Chief Executive Officer, and Ellen Albrecht, the company's Chief Financial Officer. After prepared remarks, we will open the call for questions from our analysts and investors.

Our speakers for today will be Scott.

Devin Sullivan: Got it.

Ellen Albrecht: And Ellen Albrecht at the company's Chief Financial Officer.

Operator: After the prepared remarks, we will open the call for questions from our analysts and investors. Fuel Tech undertakes no obligation to update such factors or to publicly announce the results of any forward-looking statements to reflect future events, developments, or change circumstances or for any other reason. Investors are cautioned that forward-looking statements involve risks and uncertainties, including those detailed in the company's filings with the SEC.

Speaker Change: After prepared remarks, we will open the call for questions from our analysts and investors.

Devin Sullivan: Before turning things over to Vince, I'd like to remind everyone that there's discussed on this call, except for historical information, our forward-look statements as defined in Section 21E of the Securities 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 your expectations regarding future growth, results of operations, cash flows, performance, and business prospects and opportunities, as well as assumptions made by and information currently available to our 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.

Speaker Change: We're turning things over to Vince I'd 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 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.

Vince: These patients regarding future growth results of operations cash flows performance and business prospects and opportunities as well as assumptions made by and information currently available to our company's management.

Speaker Change: 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.

Devin Sullivan: 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 the company's annual report on Form 10-K in Item 1A under the caption of Risk Factors and subsequent filings under the Securities Act of 1934, as amended, which could cause Fuel Tech's actual growth, results of operations, financial condition, cash flows, performance, business prospects, and opportunities to differ materially from those expressed in or implied by these statements.

Vince: 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 the company's annual report on Form 10-K.

Fuel Tech: Item one a under the caption of risk factors and subsequent filings under the Securities Act of 1934, as amended which could cause fuel tech's actual growth results of operations financial condition cash flows performance business prospects and opportunities to differ materially from those expressed in or implied by these statements you'll take undertakes no obligation.

Devin Sullivan: Fuel Tech undertakes no obligation to update such factors or to publicly announce the results of any forward-looking statements to reflect future events, developments, or change circumstances, or for any other reason. Investors are cautioned that forward-looking statements involve risks and uncertainties, including those detailed in the company's filings with the SEC.

Fuel Tech: To update such factors or to publicly announce the results of any forward looking statements to reflect future events developments or changed circumstances or for any other reason investors are cautioned that forward looking statements involve risks and uncertainties, including those detailed in the company's filings with the SEC.

Vincent Arnone: With that said, I'd now like to turn the call over to Vince Arnoni. Vince, please go ahead.

Fuel Tech: With that said I'd now like to turn the call over to Vince Arnone Vince. Please go ahead.

Fuel Tech: Yeah.

Vincent Arnone: Thank you, Devon.

Vince Arnone: Thank you Devon.

Vincent Arnone: Good morning, and I'd like to thank everyone for joining us on the call today. As expected, our performance in the second quarter was much improved over Q1 of this year. Following a slow start to the year, RATC and FuelCam business segments, each exhibited double-digit revenue growth and gross margin expansion during the second quarter. We remain very encouraged by the progress toward commercialization made with our dissolved gas infusion, or DGI Business Initiative, and we ended the quarter in a strong financial position, with cash, cash equivalents, and investments of over $30 million and no debt. Additionally, we were pleased to report the incremental $5 million in new APC contract bookings yesterday, which provides us with an effective backlog of just under $10 million as of this date.

Vince Arnone: Good morning, and I'd like to thank everyone for joining us on the call today.

Vince Arnone: As expected our performance in the second quarter was much improved over Q1 of this year.

Vince Arnone: Following a slow start to the year, our APC and fuel Chem business segments, each exhibited double digit revenue growth and gross margin expansion during the second quarter.

Vince Arnone: We remain very encouraged by the progress toward commercialization made with our dissolved gas infusion or D. G. I business initiative, and we ended the quarter in a strong financial position.

Vince Arnone: With cash cash equivalents and investments of over $30 million and no debt.

Vince Arnone: Additionally.

Vince Arnone: We were pleased to report the incremental $5 million in new APC contract bookings yesterday.

Vincent Arnone: This provides us with an effective backlog of just under $10 million as of this date. After a slower than expected first quarter, this performance puts us at the same level as the prior year on a year-to-date basis. We had two customers that had largely been dormant over the past two years return to service to address higher regional power demand in a cost-efficient and dependable manner. Following the election of President Claudia Schoenbaum, who takes office on October 1, we are still waiting to gain additional clarity on the likelihood of this opportunity.

Vince Arnone: Which provides us with an effective backlog of just under $10 million as of this date.

Vince Arnone: Now, let's discuss our results for the second quarter in more detail starting with fuel Chem.

Vincent Arnone: Now, let's discuss our results for the second quarter in more detail, starting with Fuel Pem. Our performance this quarter was highlighted by a 52% increase in revenue, as compared to the same quarter of the prior year. After a slower than expected first quarter, this performance puts us at the same level as the prior year on a year-to-date basis. This result was driven by several positive factors. First, we had two customers that had largely been dormant over the past two years, returned to service to address higher regional power demand in a cost-efficient and dependable manner. Second, as discussed on our last call, we realized a modest contribution from a recently initiated demonstration in the western U.S.

Vince Arnone: Our performance this quarter was highlighted by a 52% increase in revenue as compared to the same quarter of the prior year.

Vince Arnone: After a slower than expected first quarter. This performance puts us at the same level as the prior year on a year to date basis.

Vince Arnone: This result was driven by several positive factors.

Vince Arnone: First we.

Vince Arnone: We had two customers that had largely been dormant over the past two years.

Speaker Change: We turned to service to address higher regional power demand in a cost efficient and dependable manner.

Speaker Change: Second as discussed on our last call, we realized a modest contribution from our recently initiated demonstration in the Western U S of our chemical technologies program at a new coal fired unit.

Vincent Arnone: of our Chemical Technologies Program at a new coal-fired unit. These demonstration-related revenues will be more pronounced in the current third quarter. If this becomes a commercial account, it is expected to generate annualized revenue of approximately $1.5 to $2 million per year at historic Fuel Pem gross margins. In addition to this domestic opportunity, we are in discussions with one additional coal-fired power generation facility also on the Western U.S. regarding a demonstration later in the year or early in Q1 of 2025. We are also pursuing an opportunity to address the concerns of a biomass-fired boiler operator, and this could also materialize into an additional demonstration as we move into next year.

Speaker Change: These demonstrations related revenues will be more pronounced in the current third quarter.

Speaker Change: If this becomes a commercial account.

Speaker Change: It is expected to generate annualized revenue of approximately one and a half to $2 million per year and historic fuel Chem gross margins.

Speaker Change: In addition to this domestic opportunity we are in discussions with one additional coal fired power generation facility also in the Western U S. Regarding a demonstration later in the year or early in Q1 of 2025.

Speaker Change: We are also pursuing an opportunity to address the concerns of our biomass fired boiler operator, and this could also materialize in Q1 and additional demonstration as we move into next year.

Vincent Arnone: With respect to international fuel chem opportunities, we remain in discussions with our partner in Mexico to expand the provision of our chemical technology in that country. Following the election of President Claudia Sheinbaum, who takes office on October 1st, we are still waiting to gain additional clarity on the likelihood of this opportunity. We would expect her to act favorably toward implementation of environmental policy, given her background as an energy engineer and her long-term advocacy on matters of energy efficiency, sustainability, and the environment. With the combination of customers returning to service from scheduled and unplanned outages, the increase in power demand and associated unit dispatch that historically comes during the summer months, and the incremental impact of known demonstration revenue, we expect fuel chem revenue to improve significantly in the second half of the year versus the first half of the year, and we expect a year-on-year revenue improvement for the third quarter.

Speaker Change: With respect to international heal Chem opportunities, we remain in discussions with our partner in Mexico to expand the provision of our chemical technology in that country.

Following the election of President cloudy ashamed Boehm, who takes office on October one we.

Speaker Change: We are still waiting to gain additional clarity on the likelihood of this opportunity.

Speaker Change: We would expect her to act favorably toward implementation of environmental policy given her background as an energy engineer and her long term advocacy on matters of energy efficiency sustainability and the environment.

Speaker Change: With the combination of customers returning to service from schedules and unplanned outages.

Speaker Change: The increase in power demand and associated unit dispatch that historically comes during the summer months.

Speaker Change: And the incremental impact of known demonstration revenue.

Vincent Arnone: We expect fuel chem revenue to improve significantly in the second half of the year versus the first half of the year, and we expect a year-on-year revenue improvement in the third quarter. We are well positioned to take advantage of current industrial market trends, which include plant capacity expansion across several industries and the incentivized use of small turbines to replace traditional less clean power generation. On the regulatory front, in addition to the Good Neighbor Rule, we are also watching the progress of EPA's rule for large municipal waste combustor units, which is independent of the Good Neighbor Rule. This rule reduces the nitrogen oxide emissions requirements for large MWC units.

Speaker Change: We expect fuel Chem revenue to improve significantly in the second half of the year versus the first half of the year and we expect a year on year revenue improvement for the third quarter.

Vincent Arnone: Domestic and international opportunities that we are currently pursuing could provide additional turning to our APC segment. The 15% growth compared to last year's second quarter reflected the timing of successful project execution. As I mentioned previously, we were pleased to announce $5 million in due contract awards yesterday, and based on ongoing discussions with our potential customer base, we expect to close additional new APC orders during the second half of this year. In 2023 and 2024 thus far, we've benefited from the continued adoption of our ultra-SCR, SNCR, FTC, and ESP emissions control solutions that natural gas and coal-fired units in the US, Europe, South Africa, and the Pacific Rim.

Speaker Change: Domestic and international opportunities that we are currently pursuing could provide additional upside.

Speaker Change: Turning to our APC segment.

Speaker Change: The 15% growth compared to last year's second quarter reflected the timing of successful project execution.

Speaker Change: As I mentioned previously we were pleased to announce a $5 million in new contract awards yesterday and based on ongoing discussions with our potential customer base we.

Speaker Change: We expect to close additional new APC orders during the second half of this year.

Speaker Change: In 2023 and 2024, thus far.

Speaker Change: We benefited from the continued adoption of our ultra S. E. R. S. N E. R. S. T E N E S P emissions control solutions.

Speaker Change: Natural gas and coal fired units in the U S Europe, South Africa, and the Pacific Rim.

Vincent Arnone: I expect this to continue throughout the second half of 2024 and into 2025. Independent of the potential impact of regulatory drivers, we are well positioned to take advantage of current industrial market trends, which include plant capacity expansion across several interest industries, the incentivized use of small turbines to replace traditional less clean power generation, the development of the bio-carbon industry, the continued emphasis on decarbonization on a global basis, and the focus on using our ultra-systems as the safe source of ammonia for SCRs at hospitals and universities across the US.

Speaker Change: I expect this to continue throughout the second half of 2024 and into 2025.

Independent of the potential impact of regulatory drivers.

Speaker Change: We are well positioned to take advantage of current industrial market trends, which include plant capacity expansion across several industries.

Speaker Change: The incentivised used a small turbines to replace traditional less clean how organic generation the.

Speaker Change: The development of the bio carbon industry. The continued emphasis on de carbonization on a global basis.

Speaker Change: And the focus on using our ultra systems is the safe source of ammonia for Crs at hospitals and universities across the U S.

Vincent Arnone: Now on the regulatory front. On June 27th, the Supreme Court granted states and industry applicants' request to stay the Good Neighbor Rule while the case proceeds in the DC Circuit Court. As we had discussed on previous calls, the rule required 23 states to reduce emissions of nitrogen oxides from power plants and certain industrial facilities to limit their impact on downwind states. This decision temporarily halts the implementation of the rule, pending the disposition of the applicant's petitions for review in the U.S. Court of Appeals for the D.C. Circuit. We will be definitely closely monitoring the status of this case to better understand the impact and timing of the final decision making.

Speaker Change: Now on the regulatory front.

Speaker Change: On June 27th the Supreme Court granted states and industry applicants request to say the good neighbor rule, while the case proceeds in the D. C Circuit Court.

Speaker Change: As we have discussed on previous calls.

Speaker Change: The rule requires 23 states to reduce emissions of nitrogen oxides from power plants and certain industrial facilities to limit their impact on downwind states.

Speaker Change: This decision to temporarily halt the implementation of the rule pending the disposition of the applicants petitions for review in the U S Court of Appeals for the D C circuit.

Speaker Change: We will be definitely closely monitoring the status of this case to better understand the impact and timing of the final decision making.

Vincent Arnone: In addition to the good neighbor rule, we are also watching the progress of EPA's rule for large municipal waste combustor units, which is independent of the good neighbor rule. This rule reduces the nitrogen oxide emissions requirements for large MWC units. FuelTech has had a long history of assisting this industry in meeting its compliance requirements, and we have had discussions with customers in this segment to support their compliance planning. The MWC rule was proposed in February of this year and is currently being finalized by EPA after the public comment period. The final rule is expected in November, with compliance deadlines expected some time in the next three years.

Speaker Change: In addition to the good neighbor rule. We are also watching the progress of Epa's rule for large municipal waste combustor units, which is independent of the good neighbor rule.

Speaker Change: This rule reduces the nitrogen oxide emissions requirements for large and M WC units.

Vincent Arnone: Fuel Tech has had a long history of assisting this industry in meeting its compliance requirements, and we have had discussions with customers in this segment to support their compliance planning. The MWC rule was proposed in February of this year and is currently being finalized by EPA after the public comment period. The final rule is expected in November, with compliance deadlines expected sometime in the next three years. This same proposed rule includes tightening mercury and air toxic standards by 2028.

Speaker Change: Fuel Tech has had a long history of assisting this industry and meeting its compliance requirements and we have had discussions with customers in this segment to support their compliance planning.

Speaker Change: The <unk> C rule was proposed in February of this year and is currently being finalized by EPA after the public comment period.

A final rule is expected in November with compliance deadlines expected sometime in the next three years.

Vincent Arnone: Lastly, in April of this year, the EPA issued a new, stringent greenhouse gas emission standard that required 90 percent reductions for most new gas-fired plants and existing coal units by 2032. This same proposed rule includes tightening the mercury and air toxic standards by 2028, wastewater discharge limits for coal-fired power plants by 2029, and ash handling and disposal from coal-fired power plants over the next several years. This combined rule comes at a time where there are projections of potential shortfalls in power generation over the next five to seven years in certain geographic regions, due to data-centered power demands and increases in computing power resulting from the adoption of artificial intelligence, and we are on the process of evaluating the potential impact across our technologies in the power generation market.

Speaker Change: Lastly in April of this year, the EPA issued a new stringent greenhouse gas emission standards that require 90% reductions for most new gas fired plants and existing coal units by 2032.

Speaker Change: The same proposed rule includes tightening the Mercury and air Toxics standards by 2028 wastewater discharge limits for coal fired power plants by 2029, and ash handling and disposal on coal fired power plants over the next several years.

Vincent Arnone: Wastewater discharge limits for coal-fired power plants by 2029, and ash handling and disposal from coal-fired power plants over the next several years. As previously mentioned, opportunities related to these regulatory requirements would be incremental to our current expectations. Now, shifting to our DGI technology, ongoing business development initiatives continue to gain momentum. Should this demonstration prove successful, we would expect that DGI would be integrated into this customer's Greenfield project specifications for a large facility that is expected to be completed by late 2025. The business development activities we are pursuing across business segments. This base case outlet excludes any material contributions from DGI as we are still in the midst of commercialization and the opportunities we are pursuing at DGI.

Speaker Change: This combined rule comes at a time, where there are projections of potential shortfalls in power generation over the next five to seven years in certain geographic regions due to data center power demands and increases in computing power, resulting from the adoption of artificial intelligence artificial intelligence and we are on the price.

Speaker Change: <unk> are evaluating the potential impact across our technologies and the power generation market.

Vincent Arnone: As previously mentioned, opportunities related to these regulatory requirements would be incremental to our current expectations.

Speaker Change: As previously mentioned opportunities related to these regulatory requirements would be incremental to our current expectations.

Vincent Arnone: Now, shifting to our DGI technology, ongoing business development initiatives continue to gain momentum. We expect to commence a demonstration, late in the third quarter or early in the fourth, at a fish hatchery site in the western US, to highlight the capabilities of DGI for this aquaculture application. Should this demonstration prove successful, we would expect that DGI would be integrated into this customer's greenfield project specifications for a large facility that is expected to be completed by late in 2025. We are also progressing in discussions with one of the largest food processors in this country to utilize DGI to provide dissolved oxygen for the wastewater treatment facility at a food processing plant that they own and operate.

Speaker Change: Now shifting to our D G I technology.

<unk> business development initiatives continue to gain momentum.

Speaker Change: We expect to commence a demonstration late in the third quarter or early early in the fourth at a fish hatchery site in the Western U S to highlight the capabilities of D. G. I for this agriculture application.

Speaker Change: Should this demonstration proved successful we would expect that D. G. I would be integrated into this customer's greenfield projects specifications for a large facility that is expected to be completed by late in 2025.

Speaker Change: We are also progressing in discussions with one of the largest food processors in this country to utilize D. G. I to provide dissolved oxygen for the wastewater treatment facility at our food processing plant that they own and operate the timing of this demonstration is currently unknown, but is likely to occur towards the end of the year.

Vincent Arnone: The timing of this demonstration is currently unknown, but is likely to occur towards the end of the year. There are multiple other end markets of interest that we are pursuing for DGI, including pulp and paper, food and beverage, chemical, petrochemical, and horticulture, and we look forward to addressing these markets prospectively as we continue to advance towards commercialization. On the marketing front, we continue to increase our efforts to communicate the benefits of DGI to target at end markets and customers, and we will be attending the West Tech Conference, also known as the Water Environment Federation's Technical Exhibition and Conference, in New Orleans in October of this year.

Speaker Change: Yeah.

Speaker Change: There are multiple other end markets of interest that we are pursuing for D. G I, including pulp and paper food.

Speaker Change: Food and beverage chemical petrochemical and horticulture and we look forward to addressing these markets prospectively as we continued to advance towards commercialization.

Speaker Change: On the marketing front, we continue to increase our efforts to communicate the benefits of D. G. I to targeted end markets and customers and we will be attending the West Tech conference also known as water environment Federations Technical exhibition and conference in New Orleans in October of this year.

Vincent Arnone: Based on our effective APC backlog, the business development activities we are pursuing across business segments, and are previously noted expectations for QCAM, we continue to expect that total revenues for 2024 will exceed the total revenues recognized in 2023 of $27.1, and we will provide further guidance as we move throughout 2024. This base case outlet excludes any material contributions from DGI as we are still in the midst of commercialization.

Speaker Change: Based on our effective APC backlog.

Speaker Change: The business development activities, we are pursuing across business segments.

Speaker Change: And our previously noted expectations for fuel Chem.

Speaker Change: We continue to expect that total revenues for 2024 will exceed the total revenues recognized in 2023 of $27 $1 million and we will provide further guidance as we move throughout 2024.

Speaker Change: This base case outlook excludes any material contributions from D. G. I as we are still in the midst of commercialization.

Vincent Arnone: In closing, I want to express my thanks to the Fuel Tech team for their contributions to our business. We are encouraged by the contract landscape for APC, by the resilience and potential growth of our fuelcams segment, and the opportunities we are pursuing at DGI. I thank our shareholders for their continuing support and reiterate to you our focus on delivering long-term shareholder value.

Speaker Change: In closing.

Speaker Change: I want to express my thanks to the fuel tech team for their contributions to our business.

Speaker Change: We are encouraged by the contract landscape for APC.

Speaker Change: By the resilience and potential growth of our fuel Chem segment.

Speaker Change: And the opportunities we are pursuing at T. G I.

Speaker Change: I, thank our shareholders for their continuing support and reiterate you are focused on delivering long term shareholder value.

Ellen Albrecht: Now I'd like to turn the call over to Ellen. Thank you, Vince, and good morning, everyone. For the quarter, consolidated revenues rose 29% to $7 million from $5.5 million in last year's second quarter, reflecting double-digit growth in both the APC and fuel consignments from the prior year period. APC segment revenue increased to $3.9 million from $3.4 million in last year's second quarter, primarily related to progress made on project execution. Fuel consignment revenue increased to $3.1 million from $2 million in the second quarter of 2023 due to the combination of factors that Vince described earlier. Consolidated growth margin for the second quarter was 42% of revenues, up from 37% in last year's second quarter.

Speaker Change: Now I'd like to turn the call over to Ellen.

Ellen Albrecht: Thank you Vince and good morning, everyone.

Vincent Arnone: For the quarter, consolidated revenues rose 29% to $7 million from $5.5 million in last year's second quarter, reflecting double-digit growth in both the ATC and Fuel Chem segments from the prior year period. Fuel Chem segment gross margin increased to 46% from 45% during the prior year period, primarily due to the increase in segment revenue. Fuel Chem's second quarter gross margin also improved from a gross margin of 43% in the first quarter of 2024, validating our expectations that Fuel Chem segment gross margin will return to historic levels in the second half of the year.

Ellen Albrecht: For the quarter consolidated revenues rose, 29% to 7 million from $5 5 million in last year's second quarter, reflecting double digit growth in both the APC and fuel Chem segment from the prior year period.

Speaker Change: APC segment revenue increased to $3 9 million from $3 4 million in last year's second quarter, primarily related to progress made on project execution.

Speaker Change: Fuel Chem segment revenue increased to $3 1 million from 2 million in the second quarter of 2023 due to the combination of factors that Vince described earlier.

Speaker Change: Consolidated gross margin for the second quarter was 42% of revenues up from 37% in last year's second quarter.

Ellen Albrecht: This increased reflected an increase in both APC and Fuel Chem growth margin. APC segment growth margin increased to 39% of segment revenues from 31% in the prior year period due to favorable product and project mix. Fuel consignment growth margin increased to 46% from 45% during the prior year period, primarily due to the increase in segment revenue. Fuel Chem second quarter growth margin also improved from growth margin of 43% in the first quarter of 2024, validating our expectations that Fuel Chem segment growth margin will return to historic levels in the second half of the year.

Vince Arnone: This increase reflected an increase in both APC and fuel Chem gross margin.

Vince Arnone: A P. C segment gross margin increased to 39% of segment revenues from 31% in the prior year period due to favorable product and project mix.

Vince Arnone: Fuel Chem segment gross margin increased to 46% from 45% during the prior year period, primarily due to the increase in segment revenue.

Vince Arnone: Fuel Chem second quarter gross margin also improved from gross margin of 43% in the first quarter of 2020 for validating our expectations that fuel Chem segment gross margin will return to historic levels in the second half of the year.

Vince Arnone: Consolidated a P. C segment backlog at June 30th 2024 was $4 3 million down from a backlog of $7 5 million at December 31st 2023.

Ellen Albrecht: Consolidated APC segment backlog on June 30, 2024, was $4.3 million, down from a backlog of $7.5 million at December 31, 2023. Backlog at June 30 included $1.8 million of domestically delivered project backlog and $2.5 million of foreign delivered project backlog compared to $2.6 million of domestic delivered project backlog and $4.9 million of foreign delivered project backlog as of December 31. We expect that $4.3 million of the current consolidated backlog will be recognized in the next 12 months. As been noted, backlog at June 30 did not include the $5 million of new project awards announced yesterday.

Vincent Arnone: Backlog at June 30th included 1.8 million of domestically delivered project backlog and 2.5 million of foreign delivered project backlog. As Vince noted, backlog at June 30th did not include the 5 million of new project awards announced yesterday. SG&A expenses increased to $3.3 million from $2.9 million in last year's second quarter, reflecting higher employee-related expenditures. For 2024, we expect SG&A expenses to range between $13 and $13.5 million.

Vince Arnone: Backlog at June 30th included $1 8 million of domestically delivered project backlog and $2 5 million of foreign delivered project backlog compared to $2.6 million of domestic delivery project backlog and $4 9 million of foreign deliver project backlog as of December 31st.

Vince Arnone: We expect that $4 3 million of the current consolidated backlog will be recognized in the next 12 months.

Vince Arnone: As Vince noted backlog at June 30th did not include the 5 million of New Project Awards announced yesterday.

Vince Arnone: Yeah.

Ellen Albrecht: SGNA expenses increased to $3.3 million from $2.9 million in last year's second quarter, reflecting higher employee-related expenditures. Despite the year-over-year increase, SGNA as a percentage of revenue decreased to 46% from 53% in last year's second quarter, primarily driven by the increase in total revenue and our commitment to maintaining cost-efficient operations.

Vince Arnone: SG&A expenses increased to $3 3 million from $2 9 million in last year's second quarter, reflecting higher employee related expenditures.

Speaker Change: Right the year over year increase SG&A as a percentage of revenue decreased to 46% from 53% in last year's second quarter, primarily driven by the increase in total revenue and our commitment to maintaining cost efficient operation.

Ellen Albrecht: For 2024, we expect SG&A expenses to range between 13 and 13.5 million. Research and development expenses for the second quarter were essentially flat at just over 400,000. Primarily reflecting our ongoing investment in the development of new technologies to expand our product offerings in the water and wastewater treatment market and, more specifically, our DGI systems. Our operating loss narrowed to 715,000 from an operating loss of 1.3 million in last year's second quarter, reflecting the increases in revenue and gross profit in both business segments. We continue to take advantage of the favorable interest rate environment, and as of June 30th, have invested the majority of our 30.4 million in cash in health, maturity, debt securities, and money market funds.

Speaker Change: For 2024, we expect SG&A expenses to range between 13, and 13 and a half million dollars.

Speaker Change: Research and development expenses for the expenses for the second quarter were essentially flat at just over 400000, primarily reflecting our ongoing investment in the development of new technologies to expand our product offerings in the water and wastewater treatment market and more specifically our D. G I systems.

Speaker Change: Our operating loss narrowed to 715000 from an operating loss of $1 3 million in last year's second quarter, reflecting the increases in revenue and gross profit in both business segments.

Speaker Change: We continue to take advantage of the favorable interest rate environment and as of June 30th have invested the majority of our $30 4 million in cash and held to maturity debt securities and money market funds.

Ellen Albrecht: This generated 334,000 of interest income in the second quarter, compared to 307,000 in the prior year period. Assuming no significant changes in the interest rate environment, we expect to generate interest income in excess of 1.2 million in 2024. Our net loss for the quarter narrowed to 421,000 or 1 cent per share compared to a net loss of 1 million or 3 cent per share in the same period one year ago. Adjusted EBITDA loss was 529,000 compared to an adjusted EBITDA loss of 1.2 million in the same period last year.

Speaker Change: This generated 334000 of interest income in the second quarter compared to 307000 in the prior year period.

Speaker Change: Assuming no significant changes in the interest rate environment, we expect to generate interest income in excess of $1 2 million in 2024.

Speaker Change: Our net loss for the quarter narrowed to 421000 or one cents per share compared to a net loss of 1 million or three cents per share in the same period, one year ago.

Speaker Change: Adjusted EBITDA loss was 529000 compared to an adjusted EBITDA loss of $1 2 million in the same period last year.

Ellen Albrecht: Lastly, moving to the balance sheet, our financial condition remains strong. As of June 30th, we had cash and cash equivalence of 10.4 million and short and long-term investments totaling 20 million. Working capital was 25.8 million, or 85 cents per share; stockholders' equity was 43.6 million, or $1.43 per share, and the company continues to have no outstanding debt. We remain confident in our ability to maintain a strong financial position and fund our growth initiative.

Speaker Change: Lastly, moving to the balance sheet, our financial condition remains strong as of June 30th we had cash and cash equivalents of $10 4 million and short and long term investments totaling $20 million.

Speaker Change: Working capital was $25 8 million or <unk> 85 per share stockholders equity was $43 6 million or $1.43 per share and the company continues to have no outstanding debt.

Speaker Change: Okay.

Speaker Change: We remain confident in our ability to maintain a strong financial position and fund our growth initiatives.

Vincent Arnone: I will now turn the call back over to Vince. Thank you, Ellen.

I'll now turn the call back over to Vince.

Vince Arnone: Thank you Ellen.

Operator: Operator, let's go ahead and open the line for questions. Thank you. We will now conduct a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in a question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speak equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star 1 at this time. One moment while we pull for our first question.

Vince Arnone: Operator, let's please go ahead and open the line for for questions. Thank.

Operator: Thank you. We will now conduct a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's Star 1 at this time. One moment while we poll for our first question.

Speaker Change: Thank you we will now conduct a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: A confirmation tone will indicate your line is there any question queue you.

Speaker Change: You May press Star two if you would like to remove your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the stock east once again, that's star one at this time one moment, while we poll for our first question.

Amit Daya: The first question comes from Amit Daya with 8C, Wayne Wright. Please proceed.

Speaker Change: The first question comes from Amit Dayal with H C. Wainwright. Please proceed.

Speaker Change: Yeah.

Amit Daya: Thank you.

Amit Dayal: Thank you good morning, everyone.

Amit Daya: Good morning, everyone. Good morning, Amit. Congrats on the bounce back in the second quarter. You know, just focusing on something with DJI side of things. Looks like business development efforts are progressing well.

Amit Dayal: Good morning.

Amit Dayal: Congrats on the bounce back in the second quarter.

Amit Dayal:

Unknown Attendee: Just focusing on sort of the DGI side of things. Looks like business development efforts are progressing well. What are you seeing currently? How big some of these contracts could be for you? If you could share any range for how large these opportunities potentially could be, it would be very helpful.

Speaker Change: Focusing on some of the D G I side of things.

Operator: Thank you.

Amit Dayal: It looks like.

Speaker Change: Business development efforts are progressing well.

Amit Dayal: Hmm.

Vincent Arnone: What are you seeing currently, you know, for how big some of these contracts could be for you, if you could share any range, you know, for how large these opportunities potentially could be, would be very helpful. Thank you. Yeah, thanks, Amit. I mean, we've discussed this a little bit previously. I think when we talk about revenue range for DJI systems, it will depend on the size of the application that we're looking to serve. I mentioned that we're looking at a couple of demonstrations right now. One is for a large, it's a large food process in plant and their wastewater treatment plant is sizeable.

Speaker Change: What are you seeing currently you know for how big some of these contracts could be for you. If you could share any range you.

Speaker Change: And that's where our whole lives these opportunities potentially could be it would be very helpful. Thank you.

Speaker Change: Yeah, Thanks, Amit I mean, we've.

Speaker Change: We've discussed this a little bit previously I think when we talk about revenue range for D. G. I systems. It will depend on the size of the application that we're looking to serve.

Speaker Change: I mentioned that we're looking at a couple of demonstrations right now one is for a a large its a large food processing plant and their wastewater treatment plant is sizable the system that we would provide to a site like this could be between a half a million and a million dollars just just as a range for application.

Vincent Arnone: The system that we would provide to a site like this could be between a half a million and a million dollars, just as a range for application. As we're looking at an aquaculture site, it'll depend on the size of the aquaculture site, but I would expect perhaps something a little smaller than that revenue range. So, you will definitely get down to the size of the application for which we're looking to provide the dissolved oxygen. But the system range could be anywhere from as low as two to three hundred thousand dollars to in excess of a million dollars.

Speaker Change: As we're looking at and Aqua culture site and it'll depend on the size of the ultra Aqua culture side, but I would expect perhaps something a little smaller than in that revenue range. So it will definitely get down to the the size of the application for which we're looking to provide the dissolved oxygen and but the the system range could be anywhere from.

Speaker Change: Some as low as two to $300000 to in excess of a million dollars.

Speaker Change: Understood. Thank you for that.

Unknown Attendee: Thank you for that. You're welcome. And for the work you've done so far on this.

Vincent Arnone: with the work you've done so far on this segment. Gross margin trends will align with current levels for the legacy business for DGI. Yeah, we're going to be targeting 35% plus gross margins for DGI, just as a general statement, but technically we're not commercial yet. It's a little premature, but at a minimum we're going to be targeting 35% gross margin levels or better.

Speaker Change: The work you've done so far on this.

Speaker Change: This segment's.

Speaker Change: Gross margin trends.

Speaker Change: We've sort of current levels for the legacy business or D. G I.

Speaker Change: Yeah, we were gonna be targeting targeting 35% plus gross margins for for for D. G. I, just say as a general statement, but as technically we're not commercial yet it's a little premature but at a minimum we're gonna be targeting 35% gross margin levels or better.

Speaker Change: Okay. Thank you.

Amit Daya: Okay, thank you.

Vincent Arnone: You're welcome. Fuel can, you know, seems to be doing, you know, much better, especially going into 2025. Are you taking market share from sort of other players, or are these just previous customers, who you already have in relationship with, you know, endowment or not, sort of be engaging you?

Speaker Change: Welcome.

Amit Dayal: A few can, you know, seem to be doing, you know, much better, especially going into 2025. Are you taking market share from sort of other players? Or are these just previous customers who you already had a relationship with, who went dormant and are now sort of re-engaging you?

Speaker Change: A few can you know you should be doing in a much better, especially going into 2025.

Speaker Change: Taking market share from sort of other news or are these just.

Speaker Change: Previous customers, who already have a relationship with who you know endorsement on now sort of Reengage EU.

Vincent Arnone: Yeah, technically speaking, Amit, there really isn't competition for what we do with our fuel chem technology. So what's happening at this point in time is we are finding that there are, again, some pockets of opportunity where there are units in certain geographies that are being tasked to dispatch at higher load levels. They're burning some fuels that are difficult to burn, but it's very advantageous for them to try to keep themselves up and available to run, particularly during the peak dispatch times of the year, that being summer and winter.

Vincent Arnone: Yeah, no, technically speaking, Amit, there really isn't competition for what we do with our fuel chem technology. So what's happening at this point in time is we are finding that there are, again, some pockets of opportunity where there are units in certain geographies that are being tasked to dispatch at higher load levels. They're burning some fuels that are difficult to burn, but it's very advantageous for them to try to keep themselves up and available to run particularly during the peak dispatch times of year, that being summer and winter time. So it's these couple of facilities that are giving us the opportunities for additional business at this point in time.

Speaker Change: Yeah no.

Speaker Change: Technically speaking Amit did there really isn't competition for for what we do with our fuel Chem technology.

Speaker Change: So what's happening at this point in time as we are finding that there are.

Speaker Change: Again with some pockets of opportunity.

Speaker Change: Whether our units.

Speaker Change: In certain geographies that are being tasked to dispatch at higher load levels, they're burning some fuels that are difficult to burn, but its a very advantageous for them to try to keep themselves up and available to run, particularly during the the peak dispatch times of year that being.

Speaker Change: Summer and winter time. So it's these these couple of facilities that are giving us the the opportunities four for additional.

Vincent Arnone: So it's these couple of facilities that are giving us opportunities for additional business at this point in time. One where we're up and running now, and the demonstration is going well. The additional one where we're targeting looking at a startup as we move towards the end of this year or early next year. But those two accounts are indeed brand new customers for us.

Speaker Change: Business at this point in time, one where we're up and running on now are the demonstration is going well the additional one where were targeting and looking at a start up as we move towards the end of this year or early next year, but those two accounts are indeed brand new customers for us.

Vincent Arnone: One where we're up and running on now, the demonstration is going well. The additional one where we're targeting and looking at a startup as we move towards the end of this year or early next year, but those two accounts are indeed brand new customers for us. Okay, understood. And you highlighted that, you know, if you close on this account in Western US, you could, you know, generate record level margins. Like what would those margin levels be for the field can business? I did not say record. I think the word I used was returning to historic levels, returning to our historical levels, if you will.

Speaker Change: Okay understood and you highlighted that you know if you close on this account and Western U S.

Amit Dayal: Okay, understood. And you highlighted that, you know, if you closed on this account in the Western U.S., you could, you know, generate record-level margins. Like, what would those margin levels be for the fuel can business?

Speaker Change: You could you know generating record level margins, what would those margin levels be it for the silicon business.

Vincent Arnone: I did not say record. I think the word I used was returning to historic levels, returning to our historical levels, if you will. So not record levels, but through the first half of the year, our fuel chem gross margin on a year-to-date basis is a little bit lower than our norm. It's in the 44 to 45 percent range. But the additional volumes that we're going to see in the second half of the year, our overall year-to-date numbers, as we proceed throughout the year, should increase more towards our historical average of that 48 to 49 percent level, 50 percent level some years. So we will see some margin improvement as we move throughout the remainder of the year.

Speaker Change: I did not I did not say record I think the word I used was returning to historic levels returning to our historical levels. If you will so not not record levels, but through the first half of the year, our fuel Chem gross margin on a year to date basis is a little bit lower than our norm is in the 44% to 45% range with the additional.

Vincent Arnone: So not record levels, but through the first half of the year, our fuel chem grows margin on a year to date basis is a little bit lower than our norm. It's in the 44 to 45 percent range, but the additional volumes that we're going to see in the second half of the year are overall year-to-date numbers. As we proceed throughout the year, they should increase more towards our historical average of that 48 to 49 percent level, 50 percent level, some years. So we will see some margin improvement as we move throughout the remainder of the year.

Speaker Change: Volumes that we're going to see in the second half of the year. Our overall year to date numbers as we proceed throughout the year should increase.

Speaker Change: Increase more towards our historical average of that 48% to 49% level, 50% level. Some years. So we will see some margin improvement as we move throughout the remainder of the year.

Amit Daya: Thank you for clarifying that; I appreciate it. No problem.

Speaker Change: And thank you for Patterson good I appreciate it no problem yeah, that's what I have once we're taking one of the questions offline. Thank you.

Amit Dayal: Thank you for clarifying that. I appreciate it. No problem. Yeah, that's all I have, Vince. I'll take my other questions offline. Thank you.

Amit Daya: Yeah, that's all I have for this. I'll take one of the questions I'll find. Thank you.

William Bremer: Thanks. I mean, the next question comes from William Brimmer with Vanquished Capital Markets. Please proceed.

Speaker Change: Thanks, Amit.

Speaker Change: The next question comes from William Bremer with Vanquish capital markets. Please proceed.

William Bremer: Good morning, Vince. Hey, Bill. How are you? I'm doing well.

William Bremer: Good morning, Vince. Hey, Bill, how are you? I'm doing well. Thank you. I appreciate the update on the future political compliance rules. That's very helpful, especially there's a few of them out there.

William Bremer: Good morning, Vince.

Speaker Change: Hey, Bill how are you.

William Bremer: Doing well thank you.

William Bremer: I appreciate the update on the future political compliance rules, that's very helpful, especially there's a few of them out there.

William Bremer: The question I have, and I'm going back almost six years, was released by you guys September 10th of 2018, in which it was a very sizable release, totaling 15.8 million if you recall. But more importantly, in this release, this was the second contract that you received in the data center of power market. Going back six years, it was at its infancy, and we all know that the data center of power market has been a norms play. My question to you is that we supplied the selective catalytic reduction and the urea reagent technologies to these data centers.

Speaker Change: The question I have and I'm going back almost six years was released by you guys September 10 of 2018.

Speaker Change: In which he was a very sizable luby's totaling $15 8 million if you recall.

William Bremer: Thank you. I appreciate the update on future political compliance rules. That's very helpful, especially since there are a few of them out there. But more importantly, in this release, this was the second contrast. My question to you is that we supplied the selective catalytic reduction and urea reagent technologies to these data centers, and yet, there hasn't been any follow-through whatsoever.

Speaker Change: But more importantly in this release this was the second contract.

Speaker Change: But you will see in the data center power market.

Speaker Change: Going back six years.

Speaker Change: Okay. It was at its infancy, and we all know that the datacenter power market has been norms plus.

Speaker Change: My question to you is is that we supply.

Speaker Change: Elective catalytic reduction and urea reagents.

Speaker Change: Reagent technologies to these data centers.

Vincent Arnone: Why haven't we received the bulk load if we were so early on this end market? Where has been the future follow up orders, and as I voice in the past, we haven't had a book to burn over 1.5 in some time. Now today's announcement of 5 million is commendable; it's not earth shattering, but it's commendable. It's a step in the right direction, but we were so early on this end market, and yet there hasn't been any follow through whatsoever. Understood, I know, obviously, I know the order that you're making reference to; it was actually, it was two separate contract awards, but it, untotally, was for 20 units of SCR in support of gas turbines that were backed up power for a data center.

Speaker Change: Why haven't you received the bulk load if we were so early on this end market where has been the future follow up orders.

Speaker Change: And you know as.

Speaker Change: As a voice in the past, we Havent had a book to burn over 125, and some time not today's announcement of 5 million.

Speaker Change: Is commendable, it's not earth shattering, but it's commendable, it's a step in the right direction.

Speaker Change: But we were so early on this end market.

Speaker Change: And yet there hasn't been any follow through whatsoever.

Speaker Change:

Vincent Arnone: Understandable. I know, obviously, the order that you're making reference to.

Speaker Change: I know, obviously I know the order that you were making reference to it. It was actually it was two separate contract awards, but in total it was 420 units of <unk>.

Vincent Arnone: It was actually two separate contract awards, but in total, it was for 20 units. And yes, that was in the 2018-2019 timeframe. Now, interesting because we actually did think that we would see more opportunity from the data center market over the past handful of years. And if the permits that are obtained don't require these units to run at that requirement level, if you will, then they don't require pollution control systems on those units.

Speaker Change: S T R.

Speaker Change: In support of gas turbines that were backup power for data center.

Vincent Arnone: And yes, that was in the 2018-2019 time frame. Now, interesting because we actually did think that we would see more opportunity from the data center market over this past handful of years. But what we found out is a couple of things. A primary point is the requirement for the use of post combustion control. In other words, our systems for reducing nitrogen oxide emissions is very specific to each application because the requirement for that emissions reduction depends on how many hours that these units are going to be permitted to run on an annual basis. And if the permits that are obtained don't require these units to run over that requirement level, if you will, then they don't require the pollution control systems on those units.

Speaker Change: And yes that was in the 2018 2019 timeframe now interesting because we we we actually did think that we would see more opportunity from the data center market over this past handful of years, but what we found out is a couple of things primary point is the.

Speaker Change: <unk> for the use of post combustion control in other words D. R. R systems for reducing nitrogen oxide emissions is very specific to each application because the requirement for for that emissions reduction depends on how many hours that these units.

Speaker Change: Are going to be permitted to run on an annual basis.

Speaker Change: And if the permits that are obtained don't require these units to run over that requirement level. If you will then they don't require the pollution control systems on those units. So we've been watching this very very closely believe me there. There's no one that's more disappointed that we haven't seen more revenue from this market.

Vincent Arnone: So we've been watching this very, very closely. Believe me, there's no one that's more disappointed that we haven't seen more revenue from this marketplace than us, because it's something that we definitely had some high hopes for. But as we've come to find out, the data centers that are being permitted are not requiring pollution control requirements because of how they've written those permits for those applications. So we're still in contact with the gas turbine providers that we worked with previously and other ones as well.

Vincent Arnone: So we've been watching this very, very closely; believe me, there's no one that's more disappointed that we haven't seen more revenue from this marketplace than us because it's something that we definitely had some high hopes for. But, as we've come to find out, that the data centers that are being permitted, they're not requiring the pollution control requirements because of how they've written those permits for those applications. So we're still in contact with the gas turbine providers that we worked with previously and other ones as well. So we are watching this market space. If it happens to turn our way again, we'll be there ready to interact and engage.

Speaker Change: Place than us because it's something that we definitely had some high hopes for but as we've come to find out that.

Speaker Change: The data centers that are being permitted theyre not requiring the pollution control requirements because of how they've they've written those permits for those applications. So we're we're still in contact with the the gas turbine providers that.

Speaker Change: We worked with previously in other ones as well. So we are watching this market space and if it happens to turn our way again will be there ready to to interact and engage but unfortunately, they're there hasn't been a further expansion of the requirement for the pollution control technologies.

Vincent Arnone: So we are watching this market space. And if it happens to turn our way again, we'll be there ready to interact and engage. But unfortunately, there hasn't been a further expansion of the requirement for pollution control technologies in these applications. A long answer, but that's the best knowledge that we have today.

William Bremer: But unfortunately, there hasn't been a further expansion of the requirement for the pollution control technologies on these applications. I know a long answer, but that's the best knowledge that we have today.

Speaker Change: These applications.

Speaker Change: A long answer but.

Speaker Change: But that's that's the best knowledge that we have today.

William Bremer: No, I appreciate the articulation of that. I truly do in the education.

Speaker Change: No I appreciate the articulation of that are truly doing the education second question.

William Bremer: Second question. Our equity actually trades down to 91 cents this week, far below our cash per share. Basically, the market is telling us that they don't value our products, our management, the sector if we're trading below cash per share. We need to turn this around. I've articulated in the past that we need a complete change in our sales cycle or additional sales personnel.

Speaker Change: Oh equity actually trading down to 91 this week.

Unknown Speaker: far below, I'll cast for share. We need to turn this around. I've articulated in the past that we need a complete change in our sales cycle or additional sales personnel.

Speaker Change: Far below cash per share.

Basically the market is telling us that they don't value our products, our management's a separate for trading below cash per share.

Speaker Change: We need to turn this around I've articulated in the past that we need a complete change in our sales cycle or additional sales personnel.

Vincent Arnone: Have any of these changes been implemented since the last call? No changes in sales cycle bill nor indoor and sales team as we sit here today. Our sales cycles are our challenging cycles, and they've always have been. Sometimes our sales cycle for our air pollution control business is five to seven years long from when we first have an inquiry and provide a budgeted bid. It's something that we watch all the time. What's interesting to note is, as part of the contract orders today, the great majority of that contract value is international in nature. That's a little bit of a nuance and a little bit of surprise, particularly with the contract values that we're talking about.

Speaker Change: Any of these changes been implemented since the last call.

Speaker Change: No changes in sales cycle, Bill nor indoor and sales team as we sit here today are our sales cycles are challenging cycles and they've always have been sometimes our sales cycle for our area for our air pollution control business.

Speaker Change: It's five to seven years long from when we first have an inquiry and provide a budgeted bid. So it's something that we watch all the time, but what's interesting to note is as part of the contract orders today. The the great majority of that contract value was is international in nature. So it's a that's a call it a little bit of.

Speaker Change: Nuance I'm, a little bit of a surprise, particularly with the contract values that we're talking about.

Vincent Arnone: What we're looking to continue to do is not just focus domestically but look to find partners that are doing business all over the world that can utilize our technology and some of the expertise that we've developed over the past four decades. We follow our sales cycles very closely. One thing I will share with you is that we have never seen a call at longer periods of time to come to contract than we have over this past two to three, four years post COVID. I don't know if it's the way businesses interact with each other. I don't know if it's how budgets are being set and managed or just uncertainty in the timing of one project or push forward, but that has been a recent trend that we've specifically noticed with our business over this past, again, two to three year time frame. Just coming to contract closure is taking longer than we thought.

Speaker Change: What we're looking to continue to do is not just focused not just focused domestically, but look to find partners that are doing business all over the world that that can utilize our technology in some of the expertise that we've developed over the past four decades.

Speaker Change: So.

Speaker Change: We follow our our sales cycles very closely.

Speaker Change:

Speaker Change: One thing I will share with you is that we.

Unknown Speaker: We have never seen.

We have never seen.

Call it longer periods of time to come to contract than we have over this past two to three or four years post Covid I don't I don't know if it's the the the way businesses interact with each other.

Speaker Change: I don't know if it's how budgets are being set and managed or just uncertainty in the timing timing of when projects are pushed forward, but that that has it has been a recent trend that that we specifically noticed with our business over this past again to two to three year timeframe just coming to contract closure is taking.

Speaker Change: Longer than we thought some of the orders that we announced today I mean, we've been trying to get the contracts finalized for the past 234 months. Although we we have final agreement two three or four months ago, but just working through final terms and conditions exceptions payment terms to all your usual legal language as part of a contract.

Vincent Arnone: Some of the orders that we announced today, we've been trying to get the contracts finalized for the past two, three, four months, although we had final agreement two, three, four months ago, but just working through final terms and conditions, exceptions, payment terms, to all your usual legal language as part of a contract. It just takes longer to get those things done.

It just takes longer to get those things done so just general trends, but on an overall basis I am pleased with where we stand today relative to our APC contract outlook I am expecting to see some material awards between now and the end of the year or even as we move into the the first months of next year you may have noted.

Vincent Arnone: So just general trends, but on an overall basis, I am pleased with where we stand today relative to our APC contract outlook. I am expecting to see some material awards between now and the end of the year, or even as we move into the first month of next year. You may have noted in our contract award press release today that one of those contracts came with an option for additional units, and that option expires in January of 2025. If the customer exercises that option, it's a significant contract, incremental contract award for us, so I'm pleased with what we just announced yesterday. Long overdue, I'll definitely agree with that, but I do see good activity coming our way in this next. I appreciate that.

Speaker Change: And our our contract award press released today. They are one of those contracts came with an option for additional units and that option expires in January of 2025, if the customer exercises their option. It it's a significant contract to incremental contract award for us. So.

Speaker Change: I'm pleased with what we just announced yesterday long overdue.

Speaker Change: I'll definitely agree.

Speaker Change: I agree with that but I do see good activity coming our way in the next six to 12 months.

Speaker Change: I appreciate that I truly do I hope that you and the bally's arent content.

William Bremer: I truly do.

William Bremer: I hope that you and the Bailies aren't content. Okay? And I have more shares than yourself and Mr. Cummings combined. Okay. And so I am not happy with the performance, being an exceptionally long-term shareholder that saw the value, the trends, etc. I just don't see the implementation on your end. You guys have to kick it up a notch. You really do.

Speaker Change: Okay, and I for one I have more shares than yourself and Mr. Cummings combined.

Speaker Change: Okay, and so I am not.

Speaker Change: Happy with the performance.

Vince Arnone: Being a exceptionally long term shareholder that saw the value the trends et cetera, I just don't see the implementation on your end. This has to do you guys have to kick it up a notch you really do thank you for your time Vince. Thanks, Bill appreciate the comments and believe me we are not complacent in any way or form.

Vincent Arnone: Thank you. Thank you for your time, Vince. Thanks, Bill. Appreciate the comments, and believe me, we are not complacent in any way or form.

Marc silk: The next question comes from Marc Silk with the Silk Investment. Please proceed.

Vince Arnone: The next question comes from Marc Silk with Silk investment. Please proceed.

Operator: The next question comes from Marc Silk with Silk Investment. Please proceed.

Marc silk: Vince, how are you doing? Hi, Mark. How are you doing? Okay.

Marc silk: Vince how are you doing hi, Mark how are you doing okay.

Marc silk: The first thing you discussed, the fuel can, that $1.52 million, the way you phrase it, does that sound like that could be recurring, or it's just a one-off? If the customer fully goes commercial post-demonstration, it will be annualized revenue. It is recurring revenue. That's encouraging. Sticking with that area.

Speaker Change: The first thing you discussed the fuel chem that $1.52 million.

Marc silk: It's the way you phrased that says that sounds like that could be recovering or is that just a one off.

Marc silk: If the customer fully goes commercial post-demonstration, it will be annualized revenue. It is recurring revenue.

Speaker Change: If the the the customer fully goes commercial post demonstration it will be annualized revenue. It is recurring revenue.

That's how bridging.

Operator: Unknown Attendee, Marc Silk, Fuel Tech Inc.

Speaker Change: Sticking with that area, let me see what are the reasons of the return of the dormant customers and how did that come about did they reach out to you or was it an internal.

Vincent Arnone: Let me see. What are the reasons for the return of the dormant customers and how did that come about? Did they reach out to you, or was it an internal sale strategy? Actually, in this case, they reached back out to us. In one of the cases, our equipment was already on the site for this particular customer application. Because of regional power demand, they've been tasked to run these units, and they obviously have found it profitable to run these units. But when they run because of the coal they're utilizing, they need to run our program. Again, the levels that they're taking are chemical.

Speaker Change: <unk> sales strategy.

Speaker Change: Actually they are in and in this case, they they reached back out to us in in and one of the cases, we we are equipment was already on on the site for for this particular customer application and they.

Speaker Change: Because of our regional power demand they they've been tasked to run these units and they obviously have founded profitable to run these units about when they run.

Speaker Change: Because of the colder utilizing they need to run our program and so again, the the levels that they're they're they're taking our chemical.

Vincent Arnone: We haven't seen from this customer in probably three years or thereabouts. That was a nice surprise.

Speaker Change: We haven't seen from this customer and probably three years or thereabouts. So there was a nice surprise the other one I guess they are.

Vincent Arnone: The other one is outside of the U.S. a customer down and call it the Island area. They burn oil. This customer was actually looking to convert units to a different fuel source and used that different fuel source for power generation. Those conversions did not happen. They came to us and said, "We need to start back up and we need equipment for an additional unit as well." Can you help us? Of course, we did. That was a nice surprise return as well. Believe me, it was a good fortune to have these two customers return back to us in here in 2024.

Speaker Change: Outside of the U S a customer down in Oh.

Speaker Change: Call It would be the island area are they they they burn oil and this customer was actually looking to convert units to a different fuel source and you said that different fuel source for for power generation. Those conversion that did not happen. They came to us and said we need to start back up.

Vincent Arnone: We call it the island area; they burn oil. And this customer was actually looking to convert units to a different fuel source and use that different fuel source for power generation. Those conversions did not happen. They came to us and said, "We need to start back up, and we need equipment for an additional unit as well. Can you help us?"

Speaker Change: And we need equipment for an additional unit as well can you help us and of course, we did so that was a nice surprise return as well and believe me. It was a good fortune to have these two customers returned back to us and here in 2024, it very pleased with that.

Vincent Arnone: And of course, we did. So that was a nice surprise return as well. Believe me, it was good fortune to have these two customers return to us here in 2024. We were very pleased with that.

Vincent Arnone: Very pleased with that.

Unknown Attendee: So kind of get to this point, so how do you leverage the first example you gave? They realize they need your product, and they've used it in the past.

Vincent Arnone: It kind of gets to this point. How do you leverage the first example you gave as they realized they need your product and they've used it in the past? How do you leverage that? Again, you're the only player in town, and is there internal strategies as far as how it kind of leveraged that testimony, let's say, because you could capture lightning in a bottle? Agreed. We've tried to leverage the benefits of the technology. You're in and you're out. Over this past year, specifically, we do large advertising and email campaigns specifically targeted to coal-fired units that are operational today to see if we can provide them with benefits.

Speaker Change: So kind of get to this point so it.

Speaker Change: How do you leverage. The first example, you gave as they realize they need your product and they've used it in the past.

Speaker Change: How do you leverage that to again get the only player in town and as their internal strategies as far as how it kind of leverage that a testimonial, let's say because of you know you could capture lightning in a bottle.

Speaker Change: No agreed and we we've tried to to leverage call. It see the benefits of the technology you year in year out over this past year, specifically, we do large advertising and email campaigns, specifically targeted to coal.

Coal fired units that are operational today to see if we.

Speaker Change: Ken can provide them with benefit but our program benefits are there, they're really specific to the end user and end and what their needs and requirements are they they have to be burning a fuel that is causing them. Some difficulty they have to be dispatched at higher loads, because if they're only running at 25%.

Vincent Arnone: Our program benefits are really specific to the end user and what their needs and requirements are. They have to be burning a fuel that is causing them some difficulty. They have to be dispatched at higher loads because if they're only running at 25% or 50% of their base load level, in all likelihood, they're not going to have slagging and following issues on the inside of their boiler. It's very specific criteria that these end users need to have for them to see the benefit of our program. Our program isn't inexpensive, so for them to calculate a return on investment, it ends up being more of a specific case that provides success to them.

Speaker Change: 3% of their their base load level.

Speaker Change: And in all likelihood, they're not going to have slagging and fouling issues on the inside of their boilers. So it is very specific criteria that these end unit in these end users need to have for them to see benefit out of our program and our program isn't it's not inexpensive so for them to calculate.

Speaker Change: Our return on investment that it it ends up being more of a specific case that that that provides access to them. So and yes. We are we are out there in the marketplace, reaching out to anyone and everyone that we can to see if we can find additional opportunity for for this particular.

Vincent Arnone: Yes, we are out there on the marketplace, reaching out to anyone and everyone that we can to see if we can find additional opportunity for this particular application.

Speaker Change: <unk> application.

Vincent Arnone: Okay. And then the last question on fuel cam before I move on is you got two new customers. So how did that come about? Well, one one one one new customer. That's the one that we're demonstrating right now. This this new customer actually has. Paul had some some some common relationships, if you will, from from other plants where we've done business before. And so they end up coming to us because of their familiarity with what we've done on other units.

Unknown Attendee: Okay, and then the last question on Fuel Chem before I move on is you've got two new customers, so how did that come about?

Speaker Change: Okay and then the last question on fuel Chem before I move on is you've got two new two new customers. So how did the how did that come about.

11111: Well 11111, new customer there that's the one that where we are demonstrating right now.

11111: This this this new customer actually has call it some some.

Vincent Arnone: common relationships, if you will, from other plants where we've done business before. And so

11111: Common relationships, if you will from from other plants, where we've done business before and so.

11111: They end up coming to us because of their familiarity with what we've done on other units.

You mentioned invest in new technologies on your press release is that D. G I or there's other parts of the business that CGI specifically okay.

Unknown Speaker: Unknown Speaker You mentioned investing in new technologies in your press release. Is that DGI, or are those other parts of the business? Unknown Speaker That's DGI.

Vincent Arnone: You mentioned invested new technologies on your press release. Is that DJI or that other parts of the business that at DJI specifically? Okay.

Unknown Speaker: SETI, specifically

Vincent Arnone: So one thing that got overlooked and maybe time of big issue because it didn't even come up in a conference call. But when you talked about your 5.5 million backlog. This is the first time I heard you discuss renewable energy market. So can you expand on the possibilities and where you guys can find business opportunities? Yeah, so the renewable reference was in our contract press release. And so one of the orders that we were able to bring in house was it's an application where ammonia is being fracked. And it's being broken down into hydrogen and its other components.

Unknown Attendee: So one thing that got overlooked, and maybe it's not a big issue because it didn't even come up on a conference call, but when you talked about your 5.5 million backlog, that was the first time I heard you discuss the renewable energy market. So can you expand on the possibilities and where you guys can find business opportunities?

Speaker Change: So one thing that caught over looked and maybe it's not a big issue because it didn't even come up on a conference call, but when you talked about your $5 5 million backlog that this is the first time I've heard you discuss our renewable energy market. So can you expand on the possibilities and where you guys can find business opportunities.

Speaker Change: So the renewable referenced within our contract press release.

Speaker Change: And so one of whatever the orders that we were able to bring in house was it's an application where ammonia is being fracked and it's being broken down into.

Hydrogen and at its other components and whenever ammonia is broken down like that it creates an emissions flow. If you will and we're providing technology to address the emissions from that ammonia fracking process and it's actually.

Vincent Arnone: And whenever ammonia is broken down like that, it creates an emissions flow, if you will. And we're providing technology to address the emissions from that ammonia fracking process. And it's actually at two locations in Europe whereby we're providing our equipment. So it's a it's a it's a nice adder for us to say that we're associated with quality renewable energy application. It is fact. And hopefully we'll find more applications like this. Prospectively, the uncut the ultimate end customer that we're dealing with is looking to build facilities like this in multiple locations around the world. If we do well with our execution on our contract with them, hopefully we'll be well aligned for additional business with them in the future.

Speaker Change: At two locations in Europe, whereby we're providing our equipment. So it's it's a it's a nice adder for us to say that were associated with a call.

Speaker Change: Call it a renewable energy application it.

Speaker Change: It is fact and hopefully we'll find more applications like this prospectively the uncoated the ultimate end customer that we're dealing with is looking to build facilities like this in multiple locations around the world. If we do well with our execution on our contract with them hopefully will be well aligned for additional business with them in the future.

Speaker Change: Sure.

Marc silk: Great because it is a nice buzz word. And then maybe to be piggy bank on the last caller. So you know, you talk about this. Seems like there's so many opportunities there. Obviously, the Supreme Court hasn't done you any favors, but maybe things can change. I'm not going to rely on the kindness of people's hearts that their neighbors. They don't care if the neighbors get, you know, lung cancer or whatever. So there's no doubt you're over undervalued, especially you done a good job maintaining your cash balance and this stuff. So I do appreciate a healthy balance sheet.

Speaker Change: Great because it is a nice buzzword and then maybe to piggyback on the last call or.

Unknown Attendee: So, you know, you talk about, it seems like there are so many opportunities there. Obviously, the Supreme Court hasn't done you any favors, but maybe things can change. I'm not going to rely on the kindness of people's hearts, that their neighbors don't care if their neighbors get, you know, lung cancer or whatever.

Speaker Change: So you know you talk about this it seems like there's so many opportunities there obviously the Supreme Court Hasnt done you any favors, but maybe things can change and I'm not going to rely on the kindness that people's Hearts that their neighbors. They don't care, if the neighbors get lung cancer or whatever so theres no doubt you have a undervalued, especially you've done a good job main.

Marc silk: So, there's no doubt you're undervalued, especially because you've done a good job maintaining your cash balance and this stuff. So, I do appreciate a healthy balance sheet, but now that you're hovering at the $1 range, and, you know, I don't know. I don't know if anyone would be short to start, but if people could try to manipulate this below a dollar to try to get you delisted, but you can have orders below the market so that if something happens where the market tanks like it did this week and it's got to 91 cents, you might have been there at 92, 93, 85, 95, whatever.

Speaker Change: And your cash balance and this stuff. So I do appreciate a healthy balance sheet, but now that you're hovering at the $1 range and you know I don't know if.

Marc silk: But now that you're hovering at the $1 range and you know, I don't know if anyone would be sure to start, but if people could try to manipulate this below $1 to try to get you delisted. I think now's the time to talk about a very small just to announce a sheer buyback. Let's just use a million dollars for a million and a half dollars. A million and a half dollars can basically retire 5% of your shares outstanding. So when things turn around, there's going to be less opportunity. You know, this prime demand is going to be in these long-term shareholders' favor.

Speaker Change: I don't know if any might be short the stock, but if people can try to manipulate this below a dollar to try to get you de listed.

Speaker Change: I think now's the time to talk about a very small just tell announce a share buyback, let's just use a million dollars a million and half dollars a million and half dollars can basically retire 5% of your shares outstanding So when things turn around there's going to be less.

Speaker Change: The supply and demand is going to be in that in these long term shareholders favors.

Marc silk: But you can have orders below the market that, if something happens where the market tanks like it did this week and it's got to 91 cents, you might have been there at 92, 93, 85, what 90, 95, whatever. I think strategically using a small portion of your cash, and that's the important part.

Speaker Change: But you can have orders below the market that if something happens where the market tanks like it did this week and it's got to 91 cents you might've been there at 90 290, 385, what 90 95, whatever I think strategically using a small portion of your cash and that's the important part I'm not telling them to do a $5 billion buyback.

Marc silk: I think strategically, using a small portion of your cash, and that's the important part, I'm not telling you to do a $5 million buyback, but, and I haven't even proposed this before, but I think now's the time, maybe it makes sense to announce a small buyback, just so you have it, you know, you can retire shares at a ridiculously cheap price and then as the business gears up, then it was a great investment as well.

Vincent Arnone: understood, Marc. I appreciate the commentary.

Vincent Arnone: I'm not telling you to do a $5 million buyback, but, and I haven't even proposed this before, but I think now the time maybe it makes sense to announce a small buyback just so you have that you can retire here at a ridiculously cheap price, and then as the business gears up, then there was a great investment as well. I understood, Marc. I appreciate the commentary. As I mentioned previously, we do discuss it at board level on the best utilization of our cash, and we've discussed buyback scenarios on a recurring basis. If something that we will indeed discuss again, I can't make any specific comments about whether or not it's something we'll move forward and do at this point in time.

Speaker Change: But.

Speaker Change: And I haven't even propose this before but I think now's the time, maybe it makes sense to announce a small buyback just so you have it you know you.

Speaker Change: Can retire shares at a ridiculously cheap price and then as the business gears up than it was a great investment as well.

Speaker Change: Understood Mark I appreciate the commentary as I've mentioned previously we do discuss that at board level.

Vincent Arnone: As I mentioned previously, we do discuss at board level the best utilization of our cash, and we've discussed buyback scenarios on a recurring basis, and it's something that we will indeed discuss again. However, I can't make any specific comments about whether or not it's something we'll move forward with at this point in time. I will tell you that obviously, we watch the dollar threshold very, very closely. We take it very seriously, and if indeed we need to take action to secure a dollar share price, we will do it, and we'll find the best way to do it.

Speaker Change: The the best utilization of our cash and we.

Speaker Change: We've discussed buyback scenarios.

Speaker Change: On a recurring basis and it's something that we will indeed discuss again I cant make any specific comments about whether or not it's something we will move forward and do at this point in time.

Vincent Arnone: I will tell you that obviously we watch the dollar threshold very, very closely. We take it very seriously, and if indeed we need to take action to secure a dollar share price, we will do it and we'll find the best way to do it. Like I said, we'll be using a lot of the money, and as Warren Buffett said, you're not out there in the market buying the stock on the way up; you're just saying I'm going to retire stock at a ridiculous level because, as you give out options, it's going to be a plus plus.

Speaker Change: We'll tell you that obviously, we watch the dollar threshold very very closely we take it very seriously.

Speaker Change: And if indeed, we needed to take action to secure our dollar share price, we will do it and we'll find the best way to do it.

Speaker Change: Yeah, you know it and like I said, it wouldnt be using a lot of the money and as Warren Buffett said, you're not out there in the market buying the stock on the way up you're just they're saying I'm going to retire stock at a ridiculous level because as you give out options, it's going to be a plus plus so yeah. Hopefully they look at this more seriously than they have in the past and again the dollar number.

Marc silk: Yeah, you know, like I said, it won't be using a lot of money. And as Warren Buffett said, you're not out there in the market buying stocks on the way up. You're just there saying, I'm going to retire the stock at a ridiculous level. Because as you give out options, it's going to be a plus plus. So, yeah, hopefully they will look at this more seriously than they have in the past. And again, the dollar number, I don't think it would impact the balance sheet that negatively because I'm not looking for $5 or $10 million. I'm trying to be realistic here, okay?

Vincent Arnone: We'll do, Marc. I appreciate the commentary.

Marc silk: Hopefully, they look at this more seriously than they had in the past, and again, the dollar number, I don't think, would impact the balance sheet that negatively because I'm not looking for a $5 or $10 million buyback. I'm trying to be realistic here. We'll do them. I appreciate the commentary.

Speaker Change: Don't think would impact the balance sheet that negatively because I'm not looking for a five or $10 million buyback I'm trying to be realistic here. Okay. We'll do mark I. Appreciate the commentary good luck going forward my friend, Thank you Yep.

Marc silk: Good luck going forward, my friend.

Vincent Arnone: Good luck going forward, my friend. Thank you. Yeah.

Vincent Arnone: Thank you.

Speaker Change: Thank you at this time I would like to turn the call back over to Mr visit Arnone for closing comments.

Vincent Arnone: At this time, I would like to turn the call back over to Mr. Visitor. No need for closing comments.

Vincent Arnone: Thank you, operator. I would like to thank everyone for taking the time to join us on the call today. We are continually looking to find ways to increase our shareholder value, and we look forward to discussing further our results as we move throughout the year.

Speaker Change: Thank you operator, I would like to thank everyone for taking the time to join us on the call today.

Speaker Change: Hum, we are continually looking to find ways to.

Speaker Change: Increase our shareholder value and we look forward to discussing further our our our results as we move throughout the year I wish everybody a good day and we'll talk again soon thank you.

Vincent Arnone: increase our shareholder value, and we look forward to discussing our results further as we move throughout the year. I wish everybody a good day, and we'll talk again soon. Thank you.

Operator: I wish everybody a good day, and we'll talk again soon. Thank you.

Speaker Change: Thank you. This does concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a great day.

Operator: This thus concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.

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