Fuel Tech, Inc.

Greetings, and welcome to the FuelTech, Inc. third quarter 2021 financial results call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Devin Sullivan, Investor Relations for FuelTech, Inc. Thank you. You may begin. Thank you.

Thank you, Melissa. Good morning, everyone, and thank you for joining us today for FuelTech's third quarter 2021 financial results conference call. Yesterday after the close, we issued a copy of the release, which is available at the company's website, www.ftek.com. The speakers on today's call will be Vince Arnone, Chairman, President, and Chief Executive Officer, and Ellen Albrecht, the company's Principal Financial Officer. After prepared remarks, we will open the call for questions from our analysts and investors. Before turning things over to Vince, I'd like to remind everyone that matters discussed in 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 FuelTech's current expectations regarding future growth of 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. FuelTech 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 FuelTech and are subject to various risks, uncertainties, and other factors, including but not limited to those discussed in FuelTech's annual report on Form 10-K in Item 1A under the caption Risk Factors and subsequent filings under the Securities Exchange Act of 1934 as amended, which could cause FuelTech's actual growth, results of operations, financial condition, cash flows, performance and business prospects, and opportunities to differ materially from those expressed in or implied by these statements. FuelTech undertakes no obligation to update such factors or to publicly announce the results of any forward-looking statements contained herein to reflect future events, developments, or changed circumstances or for any other reason. Investors are cautioned that all forward-looking statements involve risks and uncertainties including those detailed in the company's filings with the SEC. With that said, I'd now like to turn the call over to Vince Arnone. Vince, please go ahead.

Thank you, Devin. Good morning, and I want to thank everyone for joining us on the call today. We were very pleased to report strong third quarter financial performance, highlighted by continued strength in our fuel chem segment, new contract awards, in our APC segment and incremental progress in our developmental dissolved gas infusion or DGI business that is focused on wastewater treatment. We continue to focus on maintaining and deploying a cost-effective infrastructure while providing the highest levels of client service. We operated profitably in the quarter without the impact of any extraordinary items. and ended the quarter with a very strong financial position with more than $36 million in cash and no debt. Net sales for FuelChem increased to $5.6 million from last year's $5.3 million, benefiting from our current installed base, new program installations, and an overall rise in demand for energy, some of which is related to increased economic activity, and some of which reflected higher power usage during the summer months. Through the first nine months of 2021, FuelChem's revenues have matched the revenue level for all of 2020, and we continue to expect strong performance during the remainder of 2021. As we look ahead into 2022, we do expect some pressure on our FuelChem business segment as we have been informed that one of our long-term installations will cease operations in connection with the planned shutdown of the associated coal-fired plant. Scenarios such as this have been long anticipated, given the expanding diversity of our nation's sources of fuel for power generation. It is the primary reason we are broadening FuelTech's portfolio of environmental remediation solutions, specifically with our DGI business. It is also important, however, to consider that we are pursuing a number of new opportunities, both domestically and internationally, to apply FuelChem's chemical technology. One such opportunity, which we have discussed on prior calls, involves providing our solution to address the emissions created by the burning of high sulfur fuel oil in Mexico, which is being undertaken without the necessary environmental remediation and at the expense of the health of surrounding communities. We are continuing to support our partner in Mexico as they engage with local officials to advance this solution. The current Mexican government is in favor of utilizing indigenous fuel sources for power generation to ensure that they can move towards becoming energy independent. There is currently a glut of high sulfur fuel oil in Mexico, as the international market for this product has been significantly reduced with the adoption of the new international maritime organization restrictions, which prohibit the use of this fuel for ocean transport. We will continue to watch the development of this activity closely. However, we believe that political pressure is building in favor of the implementation of our fuel chem program at additional facilities in Mexico, and our partner is currently in discussions with the state-owned utility, CFE, regarding application of the technology at several units at one plant site. APC revenues declined in the third quarter as pandemic-driven project delays and cancellations continued to weigh on this segment's operations. However, we are beginning to see some evidence of improvement in our APC business. We were encouraged by the $4.5 million of new orders we announced at the end of July, which helped to improve our backlog from the immediately preceding second quarter of 2021. The pace and depth of our business development activities has accelerated over the past few months with these conversations involving both existing and new potential clients. As a result, we have good visibility into new contract awards of between $3 and $5 million, which could close by the end of this year. These discussions have also provided us with confidence to increase the value of our current global sales pipeline to $50 to $75 million from the $40 to $50 million level that we have noted on recent conference calls. While we continue to pursue opportunities for our SCR and Ultra product offerings, recent discussions have involved the application of our SNCR emissions control solutions to reduce nitrogen oxides from stationary combustion sources for domestic and international applications, and our flue gas conditioning technology to improve the performance of electrostatic precipitators for an international client. We are also continuing to monitor the infrastructure bill making its way through Congress. As you know, this bill has taken many forms over the past several months as we continue to believe that the administration's focus on climate change and greenhouse gas reduction may include options beyond traditional renewable energy from wind and solar, which could bode well for FuelTech. Infrastructure improvement and investment in water treatment is another area of focus that could have a positive impact. During the quarter, we made incremental progress in our dissolved gas infusion business as we continue to explore how to best commercialize our wastewater treatment technology. We continue to view DGI as possessing long-term upside potential for FuelTech, especially when considering the modest investment, less than $1 million as far, As discussed, we have completed three successful demonstrations in the United States and continue to work with these potential customers to determine next steps. We have also completed the fabrication of a higher capacity DGI equipment delivery system that will allow us to offer a treatment solution which we believe will be required for the majority of our targeted applications. Additionally, as discussed previously, In Q2, we engaged a firm to assist us with the evaluation of the market opportunity landscape for the DGI technology, including an assessment of competitive in-class and out-of-class technologies. This study will be completed shortly and we will be better positioned as a company to understand our addressable markets and our available market channels. With this information in hand, Our goal is to complete our detailed commercialization and development plan before the end of this year, which will include the resources necessary, both human and capital, to expediently bring this technology to market. In closing, I want to thank the FuelTech team for their continued hard work and dedication. We are excited about 2022 and the opportunities that it may present. And as always, I want to thank our shareholders for your continued support and patience as we continue to execute on our plan to deliver long-term shareholder value. With all of that said, I'd like to turn the discussion over to Ellen. Ellen, please go ahead.