Q3 2024 Fuel Tech Inc Earnings Call

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Operator: Greetings and welcome to the Fuel Tech Incorporated third quarter 2024 financial results conference call. At this time, all participants are in listen-only mode.

Speaker Change: Greetings and welcome to the fuel Tech incorporated third quarter 2024 financial results Conference call.

At this time, all participants are in listen only mode.

Operator: The question and answer session will follow the formal presentation. If anyone today should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker Change: And the answer session will follow the formal presentation.

Speaker Change: If anyone today should require operator assistance. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.

Devin Sullivan: It's now my pleasure to introduce Devin Sullivan, Managing Director of the Equity Group. Thank you, Devin.

Speaker Change: It's now my pleasure to introduce Devin Sullivan, managing director of the equity group. Thank.

Devin Sullivan: You may begin. Thank you, Rob. Good morning, everyone, and thank you for joining us today for Fuel Tech's 2024 Third Quarter Financial Results Conference Call.

Speaker Change: Thank you Devin you may begin.

Rob: Thank you Rob good morning, everyone and thank you for joining us today for fuel Tech's 'twenty 'twenty four third 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 K dot com.

Devin Sullivan: Yesterday, after the close, we issued a press release, a copy of which is available at the company's website, www.ftek.com. Our speakers for today will be Vince Arnone, Chairman, 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.

Speaker Change: Our speakers for today will be Vince Arnone, Chairman, President and Chief Executive Officer, and Ellen Albrecht The company's Chief Financial Officer.

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 matters discussed on this call, except for historical information, are forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934 as amended, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and reflect Fuel Tech's current expectations regarding future growth, results of operations, cash flows, performance, and business prospects and opportunities, as well as assumptions made by and information currently available to our companies' managers. 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: Before 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 Exchange Act of 1934 as amended which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 and reflect fuel Tech's.

Speaker Change: Current expectations regarding future growth results of operations cash flows performance and business prospects and opportunities as well as assumptions made by and information currently available to our 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. These statements are based on information currently available to fuel tech and are subject to various risks uncertainties and other factors.

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 1-A under the captioned risk factors and subsequent filings under the Securities Exchange Act of 1934 as amended, which could cause Fuel Tech's actual growth, results of operations, financial conditions, cash flows, performance, business prospects, and opportunities to differ materially from those expressed in or implied by these statements.

Speaker Change: Including but not limited to those discussed in the company's annual report on Form 10-K in item one a under the caption risk factors and subsequent filings under the Securities Exchange Act of 1934, as amended which could cause fuel tech's actual growth results of operations financial condition cash flows performance business prospects and.

Speaker Change: Opportunities to differ materially from those expressed in or implied by these statements you'll.

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

Speaker Change: Fuel Tech undertakes no obligation to update such factors or the public or to publicly announce the results of any forward looking statements contained herein.

Speaker Change: To reflect future events developments or changed circumstances or for any other reason and investors are cautioned that all forward looking statements involve risks and uncertainties, including those detailed in the company's filings with the SEC.

Devin Sullivan: So with that said, I would now like to turn the call over to Vince Arnone, Chairman. President and Chief Executive Officer of Fuel Tech.

Speaker Change: So with that said I would now like to turn the call over to Vince Arnone Chairman.

Vince Arnone: President and Chief Executive Officer of fuel Tech Vince. Please go ahead.

Vincent Arnone: Vince, please go ahead. Thank you, Devin.

Vince Arnone: Okay.

Speaker Change: Thank you Devin.

Vincent Arnone: Good morning, and I'd like to thank everyone for joining us on the call today. I'm pleased to report that we returned to profitability in the third quarter of 2024, due largely to continued strength in our chemical technologies business segment. where we are seeing an increase in interest from coal-fired utilities and other fossil fuel-based operators, resulting from our ability to assist them in reducing downtime, improving plant operations, and providing the ability to maximize revenue generation during periods of high electricity demand. Revenues at our APC business declined quarter over quarter due primarily to customer-driven delays on existing projects and to the timing of new project awards.

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

Speaker Change: I am pleased to report that we returned to profitability in the third quarter of 2024.

Speaker Change: Due largely to continued strength in our chemical technologies business segment.

Speaker Change: Where we are seeing an increase in interest from coal fired utilities and other fossil fuel based operators, resulting from our ability to assist them in reducing downtime improving plant operations and providing the ability the ability to maximize revenue generation during periods of high electricity demand.

Speaker Change: Revenues at our APC business declined quarter over quarter, due primarily to customer driven delays on existing projects and the timing of New project Awards.

Vincent Arnone: With that said, we are very pleased to have announced $2 million in new ATC orders yesterday, and we expect to close $2 to $4 million in additional ATC orders by the end of 2024 or early 2025. We remain encouraged by the progress made toward commercialization with our Dissolved Gas Infusion, or DGI, business initiative. Earlier this week, we announced the execution of a demonstration agreement for an aquaculture application. And we are currently in discussions for demonstrations with operators in two additional distinct end markets and expect to have clarity on these opportunities as we move throughout the remainder of this year and into early 2025.

Speaker Change: With that said, we are very pleased to have announced $2 million in new APC orders yesterday, and we expect to close $2 million to $4 million in additional APC orders by the end of 2024 or early 2025.

Speaker Change: We remain encouraged by the progress made towards commercial commercialization.

Speaker Change: Virtualization with our dissolved gas infusion or D G I business initiatives.

Speaker Change: Earlier this week, we announced the execution of a demonstration agreement for an aquaculture application and we are currently in discussions for demonstration with operators and two additional distinct end markets and expect to have clarity on these opportunities as we move throughout the remainder of this year and into early 2025.

Speaker Change: Five.

Vincent Arnone: We believe the diversity of these end markets highlights the versatility of DGI to address a wide range of water and wastewater treatment process issues.

Speaker Change: We believe the diversity of these end markets highlights the versatility of pgi to address a wide range of water and wastewater treatment process issues.

Vincent Arnone: We ended the quarter in a strong financial position, with cash, cash equivalents, and investments of over $31 million, and no debt.

Speaker Change: We ended the quarter in a strong financial position with cash cash equivalents and investments of over $31 million.

Speaker Change: And no debt.

Vincent Arnone: Now, let's discuss our results for the third quarter in more detail, starting with Fuel Chem. Revenues at Fuel Chem rose by 8% from the same quarter of the prior year, reflecting contributions from two returning customers, which I had discussed last quarter, and a material contribution from our previously announced demonstration in the western U.S. at a new coal-fired unit. We were very pleased to announce last month that this demonstration, a customer transitioned into a commercial account in October of this year and is expected to generate annualized revenues of approximately $1.5 to $2 million at historic fuel chem gross margins.

Speaker Change: Now, let's discuss our results for the third quarter in more detail starting with fuel Chem.

Speaker Change: Okay.

Speaker Change: Revenues at fuel Chem rose by 8% from the same quarter of the prior year.

Speaker Change: Reflecting contributions from two returning customers, which I had discussed last quarter and a material contribution from our previously announced demonstration in the Western U S and a new coal fired unit.

Speaker Change: We were very pleased to announce last month that this demonstration customer transition into a commercial account in October of this year and is expected to generate annualized revenues of approximately one and a half to $2 million and historic fuel Chem gross margins.

Vincent Arnone: We are continuing to pursue other fuel chem opportunities, in particular, one other coal-fired utility unit in the Midwest, which could materialize into a demonstration in the first quarter of 2025. And also, a biomass-fired power generation boiler operator in the eastern US, which is also interested in a demonstration in the first quarter of next year. 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. Based on conversations with our partners in Mexico, it is our understanding that the newly elected government is targeting the implementation of environmental policy aimed at the reduction of pollutants that cause climate change.

Speaker Change: We are continuing to pursue other fuel chem opportunities in particular, one other coal fired unit utility unit in the Midwest, which could materialize into a demonstration in the first quarter of 2025.

Speaker Change: And also a biomass fired power generation boiler operator in the Eastern U S, which is also interested in a demonstration in the first quarter of next year.

Speaker Change: With respect to international fuel Chem opportunities.

Speaker Change: We remain in discussions with our partner in Mexico to expand the provision of our chemical technology in that country.

Speaker Change: Based on conversations with our partners in Mexico. It is our understanding that the newly elected government is targeting the implementation of environmental policy aimed at the reduction of pollutants that cause climate change.

Vincent Arnone: As Mexico is planning to use the heavy fuel oil generated from the refining operations as a fuel for power generation for the near-term future, we are hopeful that our fuel chem program will be an integral part of President Shane Baum's plan.

Speaker Change: As Mexico is planning to use the heavy fuel oil generated from the refining operations as a fuel for power generation for the near term future we.

Speaker Change: We are hopeful that our fuel Chem program will be an integral part of president Shane bombs plan.

Vincent Arnone: Turning to our APC segment. Lower revenues compared to last year's third quarter reflected customer-driven delays in project execution on existing projects and delays in new project awards. As I mentioned previously, we were pleased to announce $2 million in new contract awards yesterday. And based on ongoing discussions with a potential customer base, we are expecting an additional $2 to $4 million of additional APC orders by the end of this year or early next year. In 2023 and 2024 thus far, we have benefited from the continued adoption of our ULTRA, SCR, SNCR, FTC, and ESP emissions control solutions at natural gas and coal-fired units in the US, Europe, South Africa, Southeast Asia, and the Pacific Rim.

Speaker Change: Turning to our APC segment.

Speaker Change: Lower revenues compared to last year's third quarter reflected customer driven delays and project execution on existing projects and delays in New project Awards as I mentioned previously we were pleased to announce $2 million in new contract awards yesterday and based on ongoing discussions with a potential customer base.

Speaker Change: We are expecting an additional $2 million to $4 million of additional APC orders by the end of this year or early next year.

Speaker Change: In 2023 and 2024, thus far we have benefited from the continued adoption of our ultra SCR S. N C. Our FTC and ESP emissions control solutions natural gas and coal fired units in the U S.

Speaker Change: Europe, South Africa, Southeast Asia, and the Pacific Rim.

Vincent Arnone: I expect this to continue as we move through the end 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 industries. The incentivized use of small turbines to replace traditional less clean power generation. The development of the biocarbon industry, the continued emphasis on decarbonization on a global basis. and the focus on using our ultrasystems as the safe source of ammonia for SCRs at hospitals and universities across the U.S.

Speaker Change: I expect this to continue as we move through the end of 2024 and into 2025.

Speaker Change: 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 industries.

Speaker Change: The incentivize us small turbines to replace traditional less clean power generation.

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

Speaker Change: And the focus on using our ultra systems.

Speaker Change: It's the same source of ammonia for SCR and.

Speaker Change: Hospitals and universities across the U S.

Vincent Arnone: on the regulatory front. In June, the Supreme Court granted states and industry applicants requests to stay the Good Neighbor Rule. In response, EPA stayed the Good Neighbor Rule last week for the 12 states where the rule was still active. As we had discussed on prior calls, the rule originally required 23 states to reduce emissions of nitrogen oxides from power plants and certain industrial facilities to limit their impact on downwind states. This EPA decision temporarily halted the implementation of the rule pending the disposition of the applicant's petitions for review in the United States Circuit Courts and the Court of Appeals for the D.C.

Speaker Change: On the regulatory front.

Speaker Change: In June the Supreme Court granted states and industry applicants request to stay the good neighbor rule.

Speaker Change: In response <unk>.

Speaker Change: Stayed the good neighbor will last week for the 12 states, where the rule was still active.

Speaker Change: As we have discussed on prior calls the rule originally required 23 states.

Speaker Change: Reduce emissions of nitrogen oxides from power plants, and certain industrial facilities to limit their impact on downwind states.

Speaker Change: This EPA decision temporarily halted the implementation of the rule pending the disposition of the applicants petitions for review in the United States Circuit Court and the court of Appeals for the D. C circuit.

Vincent Arnone: Circuit. As industry sources present their case and the objections are more clearly understood, EPA will then be in a position to formulate a response. We will continue to closely monitor the status of this case to better understand the impact and timing of the final decision making.

Speaker Change: Industry sources present, their case and the objections or more clearly understood.

Speaker Change: We'll then be in a position to formulate a response.

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

Vincent Arnone: Additionally, we are continuing to monitor the progress of EPA's rule for large municipal waste combustor units, which is completely independent of the Good Neighbor Rule. This rule reduces the nitrogen oxide emissions requirements for large MWC units. And 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 final rule is still expected yet in 2024, with compliance deadlines expected sometime in the next three years.

Speaker Change: Additionally, we are continuing to monitor the progress of Epa's rule for large municipal waste combustion units, which is completely independent of the good neighbor rule.

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

Speaker Change: Fuel Tech has had a long history of assisting this industry and meeting its compliance requirements and we haven't had discussions with customers in this segment to support their compliance planning.

Speaker Change: The final rule is still still expected yet in 2024 with compliance deadline is expected sometime in the next three years.

Vincent Arnone: Shifting over to our DGI technology, our ongoing business development initiatives continue to gain momentum. We had a very successful exhibition of DGI at the Water Environment Federation Technical Exhibition and Conference, also known as WEBTEC, held in New Orleans last month and generated significant interest in the technology for applications in multiple end markets. With respect to product demonstrations, as I mentioned previously, earlier this week, we announced that the DGI technology has been selected by a state government agency for an extended demonstration at a fish hatchery in the Western US. The demonstration is expected to commence late in the first quarter of 2025 to coincide with the hatchery's next growth cycle and is expected to last four to six months.

Speaker Change: Shifting over to our TGI technology.

Speaker Change: Ongoing business development issued initiatives continued to gain momentum.

Speaker Change: We had a very successful exhibition of D. G I F.

Speaker Change: Water environment Federation Technical exhibition and conference also known as Westech held in New Orleans last month and generated significant interest in the technology for applications in multiple end markets.

Speaker Change: With respect to product demonstrations as I mentioned previously earlier this week, we announced that the dji technology has been selected by a state government agency for an extended demonstration at a fish hatchery in the Western U S.

Speaker Change: The demonstration is expected to commence late in the first quarter of 2025 to coincide with the hatcheries next growth cycle and is expected to last four to six months.

Vincent Arnone: Providing consistent levels of dissolved oxygen in the grow basins for fish hatcheries and other aquaculture applications is critical to growth rates. overall animal health and survival rates, and potentially stocking density and food conversion ratio. This demonstration will have defined test protocols to evaluate the benefits of the DGI technology, resulting from the supply of consistent and precise levels of dissolved oxygen in the raising of game fish in a controlled environment. In addition to this demonstration, discussions are progressing with one of the largest food processors in this country to utilize DGI to provide dissolved oxygen for a wastewater treatment facility at a food processing plant that they own and operate, and also with a municipal wastewater treatment facility in the southeastern United States.

Speaker Change: Providing consistent levels of dissolved oxygen in the grow basins for fish hatcheries and other Aqua culture applications is critical to growth rates.

Speaker Change: Overall, animal health and survival rates and potentially stocking density and food conversion ratios.

Speaker Change: This demonstration will have defined test protocols.

Speaker Change: To evaluate the benefits of the dji technology, resulting from the supply of consistent and precise levels of dissolved oxygen.

Speaker Change: And the raising of game fish in a controlled environment.

Speaker Change: Okay.

Speaker Change: In addition to this demonstration discussions are progressing with one of the largest food processors in this country to utilize CGI to provide dissolved oxygen for a wastewater treatment facility at our food processing plant that they own and operate and also with the municipal wastewater treatment facility in the southeastern United.

Speaker Change: State.

Vincent Arnone: Lastly, 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. as we look out towards the balance of this year and into 2025. We are encouraged by the growth of our opportunities that we are pursuing at Fuel Chem and excited about the demonstrations we expect to commence at DGI.

Speaker Change: Lastly, there are multiple other end markets of interest that we are pursuing for DTI, 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.

Speaker Change: As we look out towards the balance of this year and into 2025.

Speaker Change: We are encouraged by the growth of our opportunities that we are pursuing at fuel Chem and excited about the demonstrations, we expect to commence at pgi.

Vincent Arnone: For APC Project Awards, as I mentioned earlier, 2024 has been slower than expected from a contract booking and execution perspective. However, we remain encouraged by our pipeline of opportunities, and we look forward to converting these opportunities into contracts as we move from 2024 into 2025. Based on these factors, we expect that total revenues for 2024 will be in the range of $25 to $26 million.

Speaker Change: For APC Project Awards as I had mentioned earlier 2024 has been slower than expected from a contract booking an execution perspective. However, we remain encouraged by our pipeline of opportunities and we look forward to converting these opportunities into contracts as we move from 2024 into 2010.

Speaker Change: Five.

Speaker Change: Based on these factors, we expect that total revenues for 2024 will be in the range of $25 million to $26 million.

Vincent Arnone: In closing. I want to express my thanks to the Fuel Tech team. for their contributions to our business. We are very encouraged by the resilience and potential growth of our fuel chem segment, the outlook for APC as we move into 2025 and the opportunities we are pursuing for DGI.

Speaker Change: In closing.

Speaker Change: I want to express my thanks to the fuel tech team for.

Speaker Change: For their contributions to our business.

Speaker Change: We are very encouraged by the resilience and potential growth of our fuel Chem segment the.

Speaker Change: The outlook for APC as we move into 2025 and the opportunities we are pursuing for DTI.

Vincent Arnone: I thank our shareholders for their continuing support and reiterate to you our focus on delivering long-term shareholder value.

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

Ellen Albrecht: With that said, I'd like to turn the call over to Ellen for her comments. Thank you, Vince, and good morning, everyone. For the quarter, consolidated revenues decreased slightly to $7.9 million from $8 million in last year's third quarter, reflecting growth in our fuel chem segment, offset by a slight decrease in APC segment revenue compared to the prior year period. APC segment revenue declined to $3.2 million from $3.7 million in last year's third quarter, primarily related to timing of project execution on existing contracts. Fuel segment revenue increased to $4.6 million from $4.3 million in the third quarter of 2023 due to customer accounts returning to service as a result of outage completions, increased dispatch, and to contributions from a new coal-fired account.

Speaker Change: With that said I'd like to turn the call over to Ellen for her comments.

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

Ellen Albrecht: For the quarter consolidated revenues decreased slightly to $7 9 million from $8 million in last year's third quarter, reflecting growth in our fuel Chem segment offset by a slight decrease in APC segment revenue compared to the prior year period.

Speaker Change: APC segment revenue declined to $3 2 million from $3 7 million in last year's third quarter, primarily related to timing of project execution on existing contracts.

Speaker Change: Fuel Chem segment revenue increased to $4 6 million from $4 3 million in the third quarter of 2023 due to customer accounts returning to service as a result of outage completions increased dispatch and to contributions from our new coal fired account.

Ellen Albrecht: Consolidated growth margin for the third quarter was 43% of revenues, down from 45% in last year's third quarter. This decrease primarily reflected a decline in the APC segment growth margin compared to last year. APC segment growth margin decreased to 35% of segment revenues from 40% in the prior year period due to changes in product and project mix. As a reminder, the APC segment contains revenues from capital projects and ancillary revenues for items such as post-contractual parts and services. Ancillary revenues maintain a higher margin profile and will offset project margins, which are recognized over time on a percentage of completion basis.

Speaker Change: Consolidated gross margin for the third quarter was 43% of revenues down from 45% in last year's third quarter.

Speaker Change: This decrease primarily reflected a decline in the APC segment gross margin compared to last year.

Speaker Change: APC segment gross margin decreased to 35% of segment revenues from 40% in the prior year period due to changes in product and project mix.

Speaker Change: As a reminder, the APC segment contains revenues from capital project and ancillary revenues for items, such as post contractual parts and services.

Speaker Change: Ancillary revenues maintain a higher margin profile and will offset project margin revenues.

Speaker Change: Project margins, which are recognized over time under percentage of completion basis.

Ellen Albrecht: The outcome segment gross margin was flat at 49% compared to last year. Fuel Chem's third quarter gross margin increased from first and second quarter revenue levels, validating our expectations that Fuel Chem's segment gross margin will return to historic levels in the second half of the year. Consolidated APC segment backlog on September 30, 2024 was $6.4 million, down from backlog of $7.5 million at December 31. Backlog at September 30th included 1.1 million of domestic delivered project backlog and 5.3 million of foreign delivered project backlog compared to 6.9 million of domestic delivered project backlog and 6 million of foreign delivered project backlog at December 31st.

Speaker Change: <unk> segment gross margin was flat at 49% compared to last year.

Speaker Change: Fuel Chem third quarter gross margin increased from first and second quarter <unk> revenue levels validating our expectations that fuel Chem segment gross margin will return to historic levels in the second half of the year.

Speaker Change: Consolidated APC segment backlog on September 32024 was $6 4 million down from backlog of $7 5 million at December 31.

Speaker Change: Backlog at September 30th included $1 1 million of domestic delivered project backlog and $5 3 million of foreign deliver project backlog.

Speaker Change: Compared to $6 $9 million of domestic delivered project backlog and $6 million of foreign deliver project backlog at December 30, 31.

Ellen Albrecht: We expect that $4.6 million of current consolidated backlog will be recognized in the next 12 months. SG&A expenses increased to $3.2 million from $3 million in last year's third quarter, reflecting higher employee-related expenditures, partially offset by decreases in international administration expenses. SG&A's percentage of revenue increased to 41% from 37% in last year's third quarter. However, it has decreased from each of the past two quarters. For 2024, we continue to expect SG&A expenses to range between $13 and $13.5 million. Research and development expenses for the third quarter decreased by 30% to $361,000 from $513,000 in last year's third quarter.

Speaker Change: We expect that $4 6 million of current consolidated backlog will be recognized in the next 12 months.

Speaker Change: SG&A expenses increased to $3 2 million from 3 million in last year's third quarter, reflecting higher employee related expenditures, partially offset by decreases in international administration.

Speaker Change: Got it.

Speaker Change: SG&A as a percentage of revenue increased to 41% from 37% in last year's third quarter. However, it has decreased from each of the past few quarters.

Speaker Change: For 2024, we continue to expect SG&A expenses to range between 13, and $13 5 million.

Speaker Change: Research and development expenses for the third quarter decreased by 30% to 361000 from 513000 in last year's third quarter.

Ellen Albrecht: R&D expenses in the third quarter of 2023 were higher as a result of demonstration project expenditures. Our research and development expenditures are focused on the development of new technologies to expand our product offerings into the water and wastewater treatment market, and more specifically, our DGI system. Spending in this area to support the demonstrations Vince described earlier will be reflected in future periods. Our operating loss was $179,000 compared to operating income of $133,000 in last year's third quarter, reflecting the decrease in consolidated revenue and gross profit. We continue to take advantage of the favorable interest rate environment and, as of September 30, have invested the majority of our $31.3 million in cash in health, maturity, debt securities, and money market funds.

Speaker Change: R&D expenses in the third quarter of 2023 were higher as a result of demonstration project expenditures.

Speaker Change: Our research and development expenditures are focused on the development of new technologies to expand our product offerings into the water and wastewater treatment market and more specifically our DTI systems spend.

Speaker Change: Spending in this area to support the demonstrations Vince described earlier will be reflected in future periods.

Speaker Change: Our operating loss was 179000 compared to operating income of 133000 in last year's third quarter, reflecting the decrease in consolidated revenue and gross profit.

Speaker Change: We continue to take advantage of the favorable interest rate environment and as of September 30th have invested the majority of our $31 $3 million in cash and held to maturity debt securities and money market funds.

Ellen Albrecht: This generated $323,000 of interest income in the third quarter compared to $322,000 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 for 2024. We return to profitability in the quarter, reporting net income of $80,000, or 0 cents per share, compared to a net income of $459,000, or 1 cent per share, in the same period one year ago. Our adjusted EBITDA loss was $35,000 compared to an adjusted EBITDA of $352,000 in the same period last year. Lastly, moving to the balance sheet, our financial condition remains strong.

Speaker Change: This generated 323000 of interest income in the third quarter compared to 322000 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 for 2024.

Speaker Change: We returned to profitability in the quarter reporting net income of $80000 or zero cents per share compared to a net income of 459000 or <unk> <unk> per share in the same period, one year ago.

Speaker Change: Our adjusted EBITDA loss of 35000 compared to an adjusted EBITDA of 352000 in the same period last year.

Speaker Change: Lastly, moving to the balance sheet, our financial condition remains strong as of September 30th we had cash and cash equivalents of $12 3 million and short and long term investments totaling 99.

Ellen Albrecht: As of September 30th, we had cash and cash equivalents of $12.3 million and short and long-term investments totaling $19 million. Working capital was $25.6 million, or $0.83 per share. Stockholders' equity was $43.9 million, or $1.42 per share. And the company continues to have no outstanding debt.

Speaker Change: Working capital was $25 6 million or <unk> 83 per share stockholders equity was $43 9 million or $1 42 per share and the company continues to have no outstanding debt.

Ellen Albrecht: We remain greatly confident in our ability to maintain a strong financial position and to fund our short and long-term growth initiatives.

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

Vincent Arnone: I'll now turn the call back over to Vin. Thanks very much, Ellen.

Dan: I'll now turn the call back over to Dan.

Speaker Change: Thanks, very much Alan operator, let's now please go ahead and open the line for questions.

Operator: Operator, let's now please go ahead and open the line for questions. Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove yourself from the queue. For participants that are using speaker equipment, it may be necessary to pick up the handset before pressing the star key. One moment, please, while we poll for questions. Thank you.

Speaker Change: Thank you.

Speaker Change: That'd be conducting a question and answer session if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

Dan: You May press star two if you'd like to remove yourself from the queue.

Speaker Change: For participants that are using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Speaker Change: One moment. Please for we poll for questions. Thank you.

Sameer Joshi: Thank you, and our first question is from the line of Sameer Joshi with H.C. Wainwright. Please proceed with your question.

Speaker Change: Thank you and our first question is from the line of Cemig Joshi with H C. Wainwright. Please proceed with your question.

Vincent Arnone: Hey Vince, hey Ellen, thanks for taking my question. Hello Sameer.

Speaker Change: <unk> been saying and thanks for taking my questions Hello Sameer.

Vincent Arnone: Hey, so my first question is about the EPA action on the good neighbor provision. I know I'm asking to peer in your crystal ball, but do you have any visibility on how long the circuit codes may take to review this and then for the EPA to formulate The neat idea of timeline is it like couple quarters, four to six quarters? My crystal ball, I think, unfortunately, doesn't have a good answer for you.

Speaker Change: Hey.

Speaker Change: So my first question is about the EPA.

Speaker Change: Action on that.

Speaker Change: Okay.

Speaker Change: No I'm asking do you have any more.

Speaker Change: Crystal ball, but do you have any visibility on how long the circuit goods Amit to review this and then.

Speaker Change: For the EPA to formulate its.

Speaker Change: The new regulations.

Speaker Change: Any idea of timeline is it like a couple of quarters to six quarters.

Speaker Change: Uh huh.

Speaker Change: My Crystal ball I think.

Speaker Change: Unfortunately, it doesn't have a good answer for you.

Vincent Arnone: Obviously, now we're going through a change of administration at the same time that some of these provisions are being reviewed. So I think a specific timeline is actually very difficult to predict as we sit right now at this point in time, Sameer. I wish I could give you a better timing on that, but unfortunately, it's very difficult for us to predict. We watch all of the regulatory boards for any updates that we see on these actions and these provisions. As we learn more, we'll share more with everyone that's interested in Fuel Tech as we do our conference calls.

Speaker Change: Obviously now we're going through a change of administration at the same time that some of these provisions are being reviewed.

Speaker Change: I think yes.

Speaker Change: Specific timeline is actually very difficult to predict as we sit right now at this point in time some of your I wish I can give you a better timing on that but unfortunately, it's a very difficult for us to predict we watch all of the the regulatory boards for any updates that we see on these.

Speaker Change: Actions and these provisions.

Speaker Change: As we learn more we'll share more with.

Speaker Change: Everyone that is interested in fuel tech as we do our conference calls but.

Sameer Joshi: Right now, I hesitate to even give you a tentative timeframe. We just don't know. Yeah, no, that's fair.

Speaker Change: Right now.

Speaker Change: I hesitate to even give you a a tentative timeframe, we just don't know.

Speaker Change: Yes, no that's fair.

Sameer Joshi: And one of the reasons to ask that question is also does any of your existing revenue come from the enforcement of this good neighbor provision in those 12 states, or this is just... goes in your favor, or it is favorable to you, I should say, this is additional upside that you would get?

Speaker Change: One of the reasons to ask the questions also.

Speaker Change: Sure.

Speaker Change: And you'll see your existing revenue.

Speaker Change: Come from.

Speaker Change: The enforcement.

Speaker Change: <unk> of this good neighbor erosion in those two states or this is just if it goes in your favor.

Speaker Change: It is favorable to you I should say.

Speaker Change: This is additional upside that you would get.

Vincent Arnone: Correct, good question, and thank you for asking that. The additional project opportunities that we were talking about with this call it updated Good Neighbor provision are all upside to us and it will not impact any of the what I would call standard ongoing project work that we would expect to see from industrial unit business and some utility business as well as we move through the end of this year into 2025 and beyond. The upgrade to the Good Neighbor rule that we were following was something that we were looking at for significant material upside potential. It will not impact the base level of revenues that we have been experiencing for these past couple of years.

Speaker Change: Correct.

Speaker Change: Good question and thank you. Thank you for asking that.

Speaker Change: The additional.

Speaker Change: Project opportunities that we were talking about with this call. It updated good neighbor provision.

Speaker Change: Are all upside to us and it will not impact any of the what I would call standard ongoing project work that we would expect to see.

Speaker Change: From industrial unit business, and some utility business as well as we move through the end of this year and into 2025 and beyond.

Speaker Change: The upgrade to the good neighbor rule that that we were following with something that we were looking at for significant material upside potential it will not impact the base level of revenues that we had been experiencing for these past couple of years.

Sameer Joshi: Thanks. Thanks for that. You're welcome.

Speaker Change: Good to know thanks, Thanks for that you are welcome.

Vincent Arnone: Moving to the fuel chem business, you mentioned the 1.5 to 2 million in annual revenue potential. This is in addition to your existing install base, and this is something that you have not announced before and is expected to come into play over the next few quarters. several years. Yeah, it is definitely an incremental co-fired unit for us. The the revenue range that we're expecting is indeed incremental revenue for for the chemical technologies business.

Speaker Change: For the next.

Speaker Change: Welcome to.

Speaker Change: The fuel Chem business.

Speaker Change: You mentioned, the $1 2 million.

Speaker Change: Our revenue potential.

Speaker Change: This is madison to your existing installed base and this is something that you have not announced before.

Speaker Change: As expected to come into play over the next few quarters and then for several years thereafter.

Speaker Change: Yes. It is definitely an incremental coal fired unit for us the revenue range that were expecting is indeed incremental revenue for for the chemical technologies business.

Vincent Arnone: I hesitate to go ahead and tell you with regard to forecasting just to add this number to revenues that we've experienced in prior years, because every single year we we have impacts both upside and downside on base accounts relative to equipment outages that our customer base has relative to some of the seasonal issues that we have with weather as well. But that being said, in answering your question specifically, it's an incremental co-fired unit that that we are extremely pleased to see. And we are we are very hopeful that as we move into the first quarter of next year that we'll be able to add an additional co-fired unit as well, because, as you well know, adding base accounts on Chemtech is extremely meaningful and very profitable for us.

Speaker Change: I hesitate to go ahead and tell you with regard to forecasting just to add this number too.

Speaker Change: Revenues that we've experienced in prior years, because every single year.

Speaker Change: We have impacts both upside and downside on base accounts relative to.

Speaker Change: Equipment outages that our customer base has relative to some of the seasonal issues that we have with weather as well.

Speaker Change: But that being said in answering your question specifically, it's an incremental coal fired unit that that we are extremely pleased to see.

Speaker Change: And we are we are very hopeful that as we move into the first quarter of next year that we'll be able to add an additional coal fired unit as well I think as you as you well know.

Speaker Change: Adding based account on Chem Tech is extremely meaningful and very profitable for us.

Sameer Joshi: So again, thanks for that, because it seems, except for outages or downtime, the contracted coal plants or deployments are increasing with this 1.5 to 2 and then some potential coming in additional in the early next year.

Speaker Change: Yes, yes.

Speaker Change: And so.

Speaker Change: Again, thanks for that because it seems.

Speaker Change: Except for the outages or downtime.

Speaker Change: The contracted.

Speaker Change: Quote unquote contracted coupons are deployments on T V.

Speaker Change: This one five to two and then some potential coming in.

Speaker Change: And the next early next year, yes.

Speaker Change: Got it.

Vincent Arnone: In the press release from yesterday, again, the 2 million in orders, does it include the potential orders and the orders in hand that were described in that press release, or is the 2 million only from orders in hand? That's only orders in hand, and as I had mentioned as part of my commentary, we are expecting additional orders as we move towards the end of this year. There's a high probability of us having $2 to $4 million in additional contract awards before the end of this year, very, very early into 2025 at the latest.

Speaker Change: Yes.

Speaker Change: The passengers from.

Speaker Change: Yesterday again with 2 million in orders.

Speaker Change: Does it include the potential orders the orders in hand that will describe.

Speaker Change: Good.

Speaker Change: So these are the $2 million from orders in hand.

Speaker Change: That's the only orders in hand, and as I had mentioned as part of my commentary we are expecting an additional orders.

Speaker Change: As we move towards the end of this year Theres, a high probability of us having $2 million to $4 million in additional contract awards.

Speaker Change: Before the end of this year, the very very early into 2025 at the latest.

Vincent Arnone: So the $2 million announced yesterday, those are contracts in hand already.

Speaker Change: So it's $2 million announced yesterday contracts those are contracts in hand already.

Speaker Change: Great.

Speaker Change: Okay. Thanks for that.

Sameer Joshi: On the DGI front...

Speaker Change: On the <unk>.

Speaker Change: This.

Vincent Arnone: And maybe my misheard, but This demo that is being planned for the state government agency. Is the demo expected to be in like operational in the second half of 2025? Or is some is the demo underway or So the demonstration with the fish hatchery in the western U.S. will actually commence on or about April 1st of next year, 2025. That's when the demonstration is going to commence. That's when this agency will start their next growth cycle for the next batch of fish that they are looking to grow. So yes, it will start then, it will last four to six months, and then with success, we would then look to have an order in hand as we move towards the latter part of 2025.

Speaker Change: And maybe my misheard, but.

Speaker Change: This demo that is the plan for the state government agencies.

Speaker Change: This is a demo expected to be in.

Speaker Change: Operational in the second half of 2025.

Speaker Change: Some is the demo under way or.

Speaker Change: So we lived in that and then the potential or the second half of 2010 is that alright, so the demonstration with the.

Speaker Change: Fish hatchery in the Western U S will actually commence.

Speaker Change: I wonder about.

Speaker Change: The April 1st of next year 2025, that's when the demonstrations going to commence that's when the this agency will start the next growth cycle for the next batch of.

Speaker Change: Is that they are looking to grow so so yes. It will start then it will last four to six months and then with success. We would then look to have an order in hand, as we move towards the latter part of 2025.

Vincent Arnone: That's with that demonstration.

Speaker Change: That's what that demonstration.

Sameer Joshi: The other two demonstrations that I talked about that we are looking to finalize an agreement for would be more near term in nature, as in potentially starting before the end of this year. Understood. Good, good, good.

Speaker Change: The other two demonstrations that I talked about that we are looking to finalize an agreement for would be more near term in nature as in potentially starting before the end of this year.

Speaker Change: Understood.

Speaker Change: Understood Thanks for that.

Sameer Joshi: And then, just in terms of outlook for the rest of the year, the outlook is for $25-26 million top line revenues. Does that imply year over year fourth quarter down revenue, because I think you had... 3 million in the December quarter last year. At this point, it does, Sameer, and it's due to the timing on execution of the air pollution control projects that I was making reference to. On a couple of contracts in particular, we've had delays from our direct customers, and as a result, their end customers that have shifted the timing of execution of project work.

Speaker Change: And then just in terms of our outlook for the rest of the year.

Speaker Change: The outlook is for 25 to 26 million top line revenues.

Speaker Change: Does that imply.

Speaker Change: Your fourth quarter down revenue.

Speaker Change: Because I think you had a 6.3.

Speaker Change: $6 3 million in the December quarter last year.

Speaker Change: At this point is it does it does sameer and it's due to the.

Speaker Change: The timing on execution of the air pollution control projects that I was making reference to.

Speaker Change: On a couple of contracts in particular, we've had.

Speaker Change: Delays from are our direct customers and as a result, there and customers that have shifted the timing of execution of project work earlier. This year I would have told you that our Q4 would've been.

Vincent Arnone: Earlier this year, I would have told you that our Q4 would have been a better Q4 than we're talking about right now, just based upon the expected execution timeframes. But these timeframes, unfortunately, they're not under our control, and it's something that we just have to adapt to with our customer base. So the downside is, yes, it's going to be a lower than expected Q4 revenue number, but ... ... The upside is that dollar value stays in our backlog and will be recognized in 2025. It does not go away.

Speaker Change: A better Q4, then we're talking about right now just based upon the <unk>.

Speaker Change: Expected execution time frames, but these timeframes. Unfortunately.

Speaker Change: They're not under our control.

Speaker Change: It's something that we just have to adapt to with with our customer base. So.

Speaker Change: The downside is yes, it's going to be a.

Speaker Change: Our lower than expected Q4 revenue number but.

Speaker Change: The upside is that dollar value stays as stays in our backlog and will be recognized in 2025. It does not go away.

Sameer Joshi: Yeah, that was going to be my follow-up. Good, good. I think I have most of my questions answered.

Speaker Change: Yes that does.

Speaker Change: To me my follow up thanks for clarifying that.

Speaker Change: I think I have most of my questions answered. Thank you <unk> and good luck.

Vincent Arnone: Thanks a lot, friends, and good luck. Thank you very much.

Speaker Change: Thank you very much.

Marc silk: As a reminder, to ask a question today, you may press star 1. Our next question is from the line of Marc Silk with Silk Investment Advisories.

Speaker Change: As a reminder to ask a question today you May press Star one.

Speaker Change: Our next question is from the line of Marc Silk with Silk investment Advisors. Please proceed with your questions.

Marc silk: Hey Vince, thanks for taking my question. My pleasure, Marc. How are you? I'm doing okay.

Vince Arnone: Hey, Vince Thanks for taking my questions My pleasure Mark how are you doing okay alright.

Vincent Arnone: All right, on the fish hatchery deal you announced a week or so ago, you said this is an extended demonstration. So does that mean you've been working with them previously and they just want to go to the next level? By extended, that was referring more to the temporal aspect, just a longer-than-normal demonstration time frame, because we're going to look to monitor the progress of the performance of DGI over the full growth cycle of the fish. And a four- to six-month demonstration is longer than what I would call a normal demonstration for us. So, that's the basis for the extended terminology.

Vince Arnone: The fish hatchery deal you announced a week or so ago. You said that this is an extended demonstration. So that does that mean, you would have been working with them previously and they just want to go to the next level.

Speaker Change: By extended that was referring more to the temporal aspect just a longer than normal demonstration timeframe.

Speaker Change: Because we are going to look to monitor the progress of the performance of dji over the full growth cycle of the fish.

Speaker Change: And.

Speaker Change: A four to six to seven months demonstration is longer than what I would call a normal demonstration for us so thats the basis for the extended terminology.

Vincent Arnone: Okay, and then, is there any revenue that will help you cover costs? Not for this demonstration, nor for the other two that we're looking at. We have not finalized the agreements for the other two demonstrations. If we're able to cover some cost, Marc, we will absolutely seek to do so.

Speaker Change: And then is there any revenues that will help you cover costs.

Speaker Change: Not not not for this demonstration nor nor for the other two that we're looking at.

Speaker Change: We have not finalized the agreements for the other two demonstrations if we're able to cover some cost Mark we will absolutely seek to do so.

Marc silk: Given where we are today with EGI, we're looking to get this technology out and operational and demonstrated so we can become commercialized as quickly as we can, so we are willing to absorb a demonstration-related cost, which for us typically aren't that material in any event, but in answering your question right now, we are not expecting any sort of cost recovery funds on the demonstration. That makes sense.

Speaker Change: Given where we are today with <unk>, we're looking to get this technology out and operational and demonstrated so we can become as.

Speaker Change: So we can become commercialized as quickly as we can so we are willing to absorb a demonstration related cost which for us typically are that material in any event, but in answering your question right now we are not expecting.

Speaker Change: Any sort of cost recovery funds on the demonstrations.

Speaker Change: That makes sense, okay. So on this.

Marc silk: Okay, so on this the the exhibition the show that you guys presented at can you kind of like give us more? Maybe just more color anecdotes. So an example is like, what are people saying to you? For instance, like, I have been looking for this type of technology and nobody's focusing on this issue. I mean, again, we're, you know, as we invest in the stock, it's nice to kind of know what these customers are saying. I know it's not gonna turn into deals, but I just wanna see what the market is thinking. And that will probably give us as investors a little bit more clarity as far as the excitement of this product.

Speaker Change: <unk> addition to show that you guys presented at can you kind of like give us more.

Speaker Change: Maybe just a more color or anecdotes. So an example is like what are people, saying to you for instance, like I have been looking for this type of technology and nobody is focusing on this issue I mean again, we're you know as we invest in the stock its nice to kind of know what these customers are saying I know, it's not going to turn into <unk>.

Speaker Change: Deals, but I just want to see what the market is thinking and that would probably give us as investors a little bit more clarity as far as the <unk>.

Speaker Change: Shipment of this product.

Vincent Arnone: Yeah, I think the I'd say the primary response that we get is that customers are looking for a new solution for old problems, or a new solution for technologies that have been in place for multiple decades. That's sort of the most frequent comments that we're hearing from potential customers, and that is actually reflected in each of the three demonstrations that we're working with today. All three of them are looking to go ahead and make a modification from moving away from their existing source of dissolved oxygen, if you will, and moving over towards something that could improve their performance, something that could lower their cost structure, a variety of other benefits that could come their way.

Speaker Change: Yes, I think the.

Speaker Change: I would say the primary response that we get is that customers are looking.

Speaker Change: For a new solution for all problems or a new solution for technologies that have been in place for for multiple decades, that's sort of the most frequent comments that we're hearing from potential customers and that is actually reflected in each of the the three demonstrations that that we're working with today.

Speaker Change: All three of them are looking to go ahead and make a modification.

Speaker Change: From from moving away from their existing source of dissolved oxygen, if you will and moving over towards.

Speaker Change: Something that could improve their performance something that could lower their cost structure, a variety of other benefits that could come their way.

Marc silk: Okay, and then as next year, we're going to have a new administration and what I've noticed is a lot of times they say they are for clean water and clean air. And also going forward, it looks like now the sources of energy in this country will include clean plus the traditional, quote unquote, dirty energy. So I would think on the dirty side, maybe comment a few things like, for instance, where there might have been some plants that were going to close if it wasn't this new administration. And kind of how can you capitalize on that?

Speaker Change: Okay, and then as next year, we're going to have a new administration and what I've noticed there's a lot of times. They say they are for clean water and clean air and also going forward. It looks like now the sources of energy in this country will include clean plus the traditional quote unquote Dirty energy.

Speaker Change: So I would think on the dirty side, maybe comment a few things like for instance, where there might have been some plants that are going to close if it wasn't this a new administration and kind of how can you capitalize on that I know, it's a small company like you you cant really put your money for like.

Vincent Arnone: I know a small company like you, you can't really put your money for like, you know, as far as, you know, promoting you within the government, lobbyists, that's the word I was coming with. But maybe if you can kind of... I know it just happened, but I'm sure you were thinking about it. So how can we capitalize on something like this, considering that's what they've kind of publicly said already about their energy. Yes, it's, it's obviously interesting times and there there is going to be a shift in in in how energy is going to be generated prospectively, right?

Speaker Change: You know as far as.

Speaker Change: Promoting you within the government lobbyists, that's the word I was coming with but maybe if you can kind of.

Speaker Change: I know, it's just have this happened, but I'm sure you were thinking about it so how can we capitalize on something like this considering that's what they've kind of publicly said already about their energy policy going forward.

Speaker Change: Yes.

Speaker Change: It's obviously, an interesting times and there is going to be a shift in.

Speaker Change: And how.

Speaker Change: Energy is going to be generated prospectively right I think that that's apparent but for for us, it's probably going to be a little bit of a.

Vincent Arnone: I think that that's apparent. But for for us, it's it's probably going to be a little bit of a mixed bag of of a scenario for us. So to your to your primary point, as it relates to fossil fuel generation, I think that that we can expect that fossil fuel is obviously going to remain in play in a very strong way. I think we're going to continue to see natural gas used as a significant source of fuel for power generation, perhaps an expansion of natural gas for power generation, and there's going to be more drilling for natural gas as a resource, if you will, that will occur.

Speaker Change: A mixed bag of a scenario for us so to your to your primary point as it relates to fossil fuel generation.

Speaker Change: I think that we can expect that.

Speaker Change: To fossil fuel is obviously going to remain in play and a very strong way I think we're going to continue to see.

Speaker Change: Our natural gas used as a significant source of fuel for power generation, perhaps had expansion of natural gas for power generation and theres going to be more drilling for natural gas.

Speaker Change: As a as a resource if you will that will occur at the same time.

Vincent Arnone: At the same time, we had talked earlier in the year about the extension of life of coal fired units, just as a general theme, because we've been talking about in this country and in other parts of the world about there being a power generation shortage. driven by data centers, driven by AI, driven by support for cryptocurrency mining, and the like. And so even prior to what transpired over this past handful of days, there have been public discussions and public statements about the extension of life for coal-fired units. So that's real. Now, with now the new administration coming on board, I think we might see more of that.

Speaker Change: We had talked earlier in the year about the extension of life of coal fired units.

Speaker Change: As a general theme.

Speaker Change: Because we've been talking about in this country and in other parts of the world about there being a power generation shortage drew.

Speaker Change: Driven by data centers, driven by AI, driven by support for crypto currency mining and alike, and so even prior to what's transpired over this past.

Speaker Change: A handful of days there have been public discussions in public statements about the extension of life for coal fired units. So thats real now with that with now the new administration coming on board.

Speaker Change: We might see more of that to what extent.

Vincent Arnone: To what extent? It's difficult for us to forecast that right now, but if we're going to see possible extension of coal-fired lives, that could provide some additional business opportunity for us. And the way we capitalize on that is via putting ourselves out in front of those remaining coal-fired generators that could have an opportunity for either our APC technologies or for our chemical technology approach as well. So that's the way we would look to capitalize on that. That's on the upside. On the other side of the equation, as I was answering Sameer's question earlier, proposed regulations for increased emissions reductions are likely going to be postponed or possibly modified.

Speaker Change: Difficult for us to forecast our forecast that right now, but if we're going to see possible extension of coal fired lives that could provide some additional business opportunity for us.

Speaker Change: The way, we capitalize on that as we are putting out there ourselves out in front of those remaining coal fired generators that that could have an opportunity for either our APC technologies or for our chemical technology approach as well. So that's the way we would look to capitalize on that.

Speaker Change: That said thats on the upside.

Speaker Change: On the other side of the equation as I was answering <unk> question earlier.

Speaker Change: Proposed regulations for increased.

Speaker Change: Emissions reductions are likely going to be.

Speaker Change: Postpones or possibly modified I think thats to be expected, we've heard about a day.

Vincent Arnone: I think that's to be expected. We've heard about a decrease in support for regulatory bodies in general, shrinking regulation and regulatory bodies. There may be a reduction in funding for the EPA. We don't know that as we sit here today, but that's a possibility as well. So it'll be interesting to see how this plays out, but there is a scenario whereby with a more heavily focused approach on fossil and its utilization for power generation, that that can give us a little boost over this next few-year time frame. Long-winded answer, but it's what we know today.

Speaker Change: Kris in support for regulatory bodies in general shrinking regulation and regulatory bodies.

Speaker Change: There may be a reduction in funding for the EPA, we don't know that as we sit here today, but thats a possibility as well.

Speaker Change: So it'll be interesting to see how this plays out but there is a scenario whereby with a more.

Speaker Change: Heavily focused approach on on fossil and its utilization for power generation that that can give us a little boost over this next few year time frame.

Speaker Change: Long winded answer, but it's what we know today no. That's what I was looking for I appreciate that and also appreciate that you and Ellen showing the investment community. How confident you are in the business by buying some shares for yourselves. So anyway. So well good luck it'll be an interesting year coming up.

Marc silk: No, that's what I was looking for. I appreciate that and also appreciate that you and Ellen showing the investment community how confident you are in the business by buying some shares for yourself. So anyways, well, good luck. It'll be an interesting year coming up. Sounds great, Marc. Thank you.

Speaker Change: Sounds great Mark Thank you.

William Bremer: Our next question is from the line of William Bremer with Vanquish Capital. Please proceed with your question.

Speaker Change: Our next question is from the line of William Bremer with Vanquish capital. Please proceed with your question.

William Bremer: Good morning, Vince. Hey, Bill, how are you? Okay, did I hear you correctly that we will be implementing two additional pilots for the DGI division before the end of this year? And if so, can you give some granularity in terms of the end markets, maybe the depths, etc.? The nozzles, the pressures that you're looking at, at these two different fields?

Speaker Change: Good morning, Vince Hi, Bill how are you.

Speaker Change: Okay did I hear you correctly that we will be implementing too.

Speaker Change: Additional pilots for the TGI Division before the end of this year and if so can you give some some granularity in terms of the end markets.

Speaker Change: And maybe the depths et cetera.

Speaker Change: The nozzles pressures that you are looking at these two different.

Speaker Change: Yields trials right.

Vincent Arnone: So, just to clarify, Bill, I said we are pursuing the additional two demonstrations as we sit here right now. We don't have demonstration agreements finalized yet, but there is the possibility that both of them could be up and running before the end of this year. That would be the, call it Vince's optimistic scenario for those two demonstrations, okay? So we're following them closely. We're in discussions on a daily basis with looking to move them forward, okay?

Speaker Change: So just to clarify Bill I said, we are pursuing the additional two demonstrations as.

Speaker Change: As we sit here right now we don't have demonstration agreements finalized yet.

Speaker Change: But there is the possibility that both of them could be up and running before the end of this year that would be the.

Vince Arnone: Call. It Vince is optimistic scenario for those two demonstrations okay. So.

Speaker Change: We're following them closely we are in discussions on a daily basis with looking to move them forward. Okay.

Vincent Arnone: That said, I can give you a little bit of granularity on each of them. One of them is specifically in the municipal wastewater treatment arena, and this is the case whereby we would be looking to provide that municipal wastewater treatment facility with supplemental oxygen for their needs to address conditions that are basically what I would call non-standard or offset conditions for their treatment facility. For this application, we expect to use a little bit of a smaller DGI unit given the incremental oxygen demand that they would believe to be needed, and so it would be a smaller capital sale opportunity for this particular site.

Speaker Change: I can give you a little bit of granularity on on each of them.

Speaker Change: One of them is specifically in the municipal wastewater treatment arena.

Speaker Change: This is the case, whereby we would be looking to provide that municipal wastewater.

Speaker Change: Treatment facility with some supplemental oxygen.

Speaker Change: For for their needs to address.

Speaker Change: Conditions that are that are basically what I would call non standard or upset conditions for their treatment facility.

Speaker Change: For this application we would use.

Speaker Change: We expect to use a little bit of a smaller deal.

Speaker Change: <unk> unit and given the incremental oxygen demand that they would believe to be needed and so it would be a smaller capital sale opportunity for for this particular site.

Vincent Arnone: Now the other one is actually with a large food producer in this country who at a meat processing facility, they are having challenges with their processing of wastewater at this facility because they've been using standard old school aeration technology for the past 25 to 30 years and it's starting to fail on them and they are extremely concerned about having their wastewater treatment plant take down the entire plant operation. And so they reached out to us to see if DGI can be a replacement technology for their wastewater treatment operation. So. This would be a potential larger equipment sale.

Speaker Change: <unk>.

Speaker Change: The other one is actually with.

Speaker Change: A large.

Speaker Change: Food producer in this country, who asked a meat processing facility.

Speaker Change: They are having challenges with their process of processing of wastewater at this facility because they've been using standard old school aeration technology for the past 25 years to 30 years and it's starting to fail on them and they are they are extremely concerned about.

Speaker Change: Having their wastewater treatment plant take down the entire plant operation.

Speaker Change: And so they reached out to us to see if the Gi can be a replacement technology for their wastewater treatment operations. So.

Speaker Change: This would be a potential larger.

Speaker Change: Equipment sale.

Vincent Arnone: It would be a the largest DGI unit that we would look to make available. And so it could be a larger potential capital sale. But we're we're working through both of these processes with these two end customers.

Speaker Change: B E.

Speaker Change: <unk> unit that we would look to make available and so it could be a larger potential capital sale, but where we are working through both of these processes with these two end customers and again, hopefully we will be able to share. Some good news. The next time, we're able to talk publicly.

William Bremer: And again, hopefully we'll be able to share some good news the next time we're able to talk publicly. Agreed.

Speaker Change: Agreed.

Vincent Arnone: Um, you mentioned sale on... Is it potentially an outright sale, or do you think that maybe we have an opportunity to have, say, an MSA, a multi-service agreement over the next, say, you know, three to five years in terms of the operating of the company? We are open to either scenario, and we've been discussing more and more so the possibility to have long-term service arrangements for a DGI delivery system, if you will.

Speaker Change: You mentioned sale on their use.

Speaker Change: Potentially an outright sale or do you think that maybe we have an opportunity to have see an MSA in multi service agreement over the next say.

Speaker Change: Three to five years in terms of the operating of these systems right.

Speaker Change: We are open to to either scenario and we've been discussing more and more so the possibility to have long term service arrangements for a <unk> delivery system. If you will.

Vincent Arnone: For these two particular applications, I think they're more apt to be capital than long-term service contracts, but it's really too soon to know right now. But it's something that... would be presented to both of them. Yes, as options, depending on what would best meet their needs.

Speaker Change: These two particular applications I think there are more apt to be capital than long term.

Speaker Change: <unk> contracts, but it's really too soon to know right now okay.

Speaker Change: Okay.

Speaker Change: It's something that.

Speaker Change: Would be presented to both of them.

Speaker Change: So for the signing yes as options, depending on what would best meet their needs. Okay.

William Bremer: Okay, all right, let's turn to the Mexico op. and if you give us a little more granularity there. Specifically, you know within the past say, you know, two to three months has there been more discussions more meetings, etc? Yeah, so... things have turned more favorable because of the administration that is now in place. That is factual. We know that. We know that our partner has been in contact with members of the new administration. In my discussions with our partner within this past couple of weeks' time frame, okay, the new government is, again, just became effective as of about five to six weeks ago.

Speaker Change: Okay.

Speaker Change: Alright, let's let's turn to the Mexico opportunity.

Speaker Change: And if you could give us a little more granularity there.

Speaker Change: Specifically within the past two.

Speaker Change: Two to three months as they have been more discussions more meetings et cetera.

Speaker Change: Yes so.

Speaker Change: Things have turned more favorable because of the administration that is now in place.

Speaker Change: That is factual we know that we know that our partner.

Speaker Change: Yes, it has been in contact with with with members of the New administration.

Speaker Change: In my discussions with our partner within this past past couple of weeks timeframe. Okay.

Speaker Change: The new government is again just became effective as of as.

Speaker Change: As of about a five to six weeks ago.

Vincent Arnone: There's a lot that they're moving through. However, their environmental policy has become more prominent as part of their discussions, okay? And so It is our partner's expectation that our chemical technology approach could be used to help them with their environmental issues. We know that, OK?

Speaker Change: There's a lot that they are moving through however, their environmental policy.

Speaker Change: <unk> has become more prominent as part of their discussions okay and.

Speaker Change: And so.

Speaker Change: It is our partners expectation that our chemical technology approach.

Speaker Change: Could be used to help them with their environmental issues, we know that okay. What remains undecided today is.

Vincent Arnone: What remains undecided today is. how much money their government is going to be willing to invest in some of the environmental technologies that they do indeed need to be applied to some of their fossil fuel burning units as we sit here today. So we're more encouraged than ever relative to what I would call the backdrop for the opportunity. But when you're no different than this country, when you're dealing with state-run agencies and the allocation of precious funds and funding, it's difficult for us to know when that converts into, call it, the real opportunity for us to generate revenue from chemical technology in Mexico.

Speaker Change: How much money Theyre government is going to be willing to invest in some of the environmental technologies that they do indeed need to be applied to some of their fossil fuelled by our burning units as we sit here today. So.

Speaker Change: We're more encouraged than ever relative to what I would call the backdrop for the opportunity but.

Speaker Change: When you are no different in this country when youre dealing with.

Speaker Change: The state run agencies.

Speaker Change: And the allocation of our precious funds and funding.

Speaker Change: It's difficult for us to know when when that converts into call. It the real opportunity for us to generate revenue from chemical technology in Mexico. So we're extremely encouraged our partner is encouraged but theres still needs to be pushed forward within the Mexican government.

Vincent Arnone: So we're extremely encouraged. Our partner is encouraged. But this still needs to be pushed forward within the Mexican government. And it's my.

Speaker Change: And it's my.

Speaker Change: Hi.

William Bremer: interpretation that you do have the fuel chem deployed. down there and a few there from Boilers currently, right? So- We do. And then how many additional? Boilers or opportunities Not saying that we have an opportunity to land all of them, but there is a potential of that. How many do you... All of these, I believe, are available for us to look at. to at least. petition to at least try to land the contract. Right. So we've actually been functioning on a couple of small units at two different plant sites. for more than a dozen years.

Speaker Change: Interpretation that you do have the fuel Chem deployed.

Speaker Change: Down there in a few of their boilers currently right. So we do that and then.

Speaker Change: How many additional.

Speaker Change: Boilers or opportunities.

Speaker Change: Not saying that we have an opportunity to land all of them, but there is a potential of that.

Speaker Change: How many do you.

Speaker Change: Believe are available for us to.

Speaker Change: So at least.

Speaker Change: <unk> to at least try to land a contract with alright.

Speaker Change: So we have actually been functioning on.

Speaker Change: A couple of small units at two different plant sites for for more than a dozen years.

Vincent Arnone: So we've had the system up and running there, and we've been generating royalty income for a dozen years. So.

Speaker Change: So we've had the the system up and running there and we've been generating.

Speaker Change: Excuse me royalty income for a dozen years.

Speaker Change: So.

William Bremer: There's been what I would call a rolling proof of concept in place down there for this entire time frame. And so evidence that our program can function for its intended use. Now, in terms of, you know, additional unit opportunities, there are many there are approximately. I'm going to give you a range because I don't have the specific numbers at three to four plant sites. There are approximately 13 to 15 additional units. that are burning heavy fuel oil that could use our program. So it's potentially very material for fuel tech.

Speaker Change: There has been what I would call a.

Speaker Change: Rowling proof of concept in place down there for this entire timeframe.

Speaker Change: So evidenced that our program can function for its intended use now in terms of.

Speaker Change: Additional unit opportunities there are many there are approximately.

Speaker Change: I'm going to give you a range because I don't have the specific numbers yet.

Speaker Change: At three to four plant sites.

Speaker Change: There are approximately 13 to 15 additional units.

Speaker Change: That are burning heavy fuel oil that could use that use our program.

Speaker Change: So it is potentially very material for four for fuel tech but.

Vincent Arnone: Because it's been so uncertain from a timeframe perspective, we don't focus on it as much as we would like to because the ability to make it reality is not within our control. No, it's sizable, you're proven down there, it seems to me it's a plug and play, especially with the new administration and her environmental background, I think that the probability has gotten a little bit greater. than it was in the past. And if I'm correct on this, it could be a very material. event, if this should come to play.

Speaker Change: <unk> <unk>.

Speaker Change: Because it's been so uncertain from a timeframe perspective.

Speaker Change: We don't focus on as much as we would like to because the ability to make it a reality is not within our control.

Speaker Change: No at the August due to the sizable it is sizable.

Speaker Change: It's sizable.

Speaker Change: Even down there it seems to get its a plug and play, especially with the new administration and her environmental background.

Speaker Change: I think that the probability has gotten a little bit greater.

Speaker Change: Then it was in the past and if I'm correct on this it could be a very material.

Speaker Change: Events, if this should come to play given the fact that Hey, you had been proven down there as you specified for a number of years. It just seems that hey, these other ones, we could do it and we should be able to so alright. That's good so great Yeah, Hey, Bill.

William Bremer: Given the fact that, hey, you had been proven down there, as you specified, for a number of years, it just seems that, hey, you know, these are the ones we could do it and we should be able to. So, all right, that's good. Great. Yeah.

Vincent Arnone: Hey, Bill, one more comment for you. You're correct on all those points. And what we did as a company within this past call it 12-12-18 months is actually we did invest in having equipment ready to go for one plant site already. So we have equipment ready to go should this become an urgent response requirement down in Mexico. We're ready to go to equip one plant site with equipment to run our Chemtech program. So we've made that investment already.

Speaker Change: One more one more comment for you. Yes, you are correct on all those points and what we did as a company within this past.

Speaker Change: Call. It 12 months 12 to 18 months is actually we did invest in and having equipment.

Speaker Change: Equipment ready to go for one plant sites.

Speaker Change: Already so we have equipment ready to go should this be become an urgent response requirement down in Mexico, We're ready to go to to equip one plant site.

Speaker Change: With equipment to run our Chem Tech program. So we've made that investment already.

William Bremer: And Okay, let's just say we land three. Okay, I'm being optimistic here. How quickly... We need to ramp up for the next two, is that a month, a quarter, is that longer than that? How long of a wait? if we had the order. Yeah, probably I give you a range of anywhere from 12 to 16 weeks. at a minimum, at a minimum to get ready for, we'd have to do new equipment build out to be able to meet the needs of other plant sites. Minimum 12-16 weeks to get ready But in all likelihood, Bill, if they do go forward, they would do it one site at a time and not all sites.

Speaker Change: And then.

Speaker Change: Let's just say we land story.

Speaker Change: Okay, I'm being optimistic here how quickly.

Speaker Change: Do we need in terms of the first store is a separate to ramp up for the next two is that is that a.

Speaker Change: A month is that a quarter is that longer than that how long of a week.

Speaker Change: If we had the order.

Speaker Change: Yes.

Speaker Change: Probably I would give you a range of anywhere from 12 for 12 to 16 weeks.

Speaker Change: At a minimum at a minimum to get ready for that we'd have to do new equipment build out to be able to meet the needs of other plant sites.

Speaker Change: Minimum 12 to 16 weeks to get ready.

Speaker Change: Mhm Okay.

Speaker Change: The likelihood if the if they do go forward.

Speaker Change: They would do with one one side at the time and not all sites that.

William Bremer: That's our indication as we sit here anyway. So the sites are inherent. All sites are a little bit different in terms of unit sizes and so on and so forth. So it might be the case whereby we need to change our equipment configuration a little bit from site to site. So there are those idiosyncrasies that we have to deal with as we work from one plant site to other plant site.

Speaker Change: That's our indication as we sit here anyway.

Speaker Change: So the sites are inherently.

Speaker Change: Slightly different than one another.

Speaker Change: All sites are a little bit different in terms of unit sizes, and so on and so forth. So.

Speaker Change: It might be the case, whereby we need to change our equipment configuration, a little bit from site to site. So there are those idiosyncrasies that we have to deal with as we as we work from one plant site to other plant site.

William Bremer: Okay Vince, I look forward to it. Thank you for your time. Sounds good Bill, thank you.

Speaker Change: Okay, Vince I look forward to it. Thank you for your tone sounds good bill. Thank you.

Operator: Thank you.

Vincent Arnone: At this time, we've reached the end of the question and answer session, and I'd like to turn the floor back to Vincent Arnone for closing remarks. Thank you, operator. I'd like to thank everyone for taking the time to listen to the call today. I'd like to thank our employee team for their continued dedication and efforts towards making Fuel Tech and continuing to make Fuel Tech a solid brand name and an excellent company to work for. I'd like to thank our shareholders for their continued support as well, and also our board of directors. With that, thanks everybody.

Speaker Change: Thank you at this time, we've reached the end of the question and answer session and I'd like to turn the floor back to Vincent Arnone for closing remarks.

Vincent Arnone: Thank you operator.

Vincent Arnone: I'd like to thank everyone for taking the time to listen to the call today.

Vincent Arnone: To think or our employee team for their continued dedication and efforts.

Speaker Change: Towards making fuel tech and continuing to make fuel tech.

Speaker Change: <unk> brand name and an excellent company a company to work for like to thank our shareholders for their continued support as well and also our board of directors with that thanks, everybody.

Operator: Have a great remainder of the day. Thank you.

Speaker Change: Have a great remainder of the day. Thank you.

Operator: This does conclude today's teleconference. We thank you for your participation. You may now disconnect your lines at this time.

Speaker Change: This does conclude today's teleconference. We thank you for your participation you may now disconnect your lines at this time.

Speaker Change: Okay.