Fuel Tech, Inc.

Hello, and welcome to the FuelTech Inc. 4th Quarter 2021 Financial Results Conference Call and Webcast. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Devin Sullivan with the Equity Group. Please go ahead, Devin. Thank you, Devin.

Thank you, Kevin. Good morning, everyone, and thank you for joining us today for FuelTech's fourth quarter 2021 financial results conference call. Yesterday after the close, we issued the company's financial results. A copy of the release is available at FuelTech's website, www.ftek.com. Our speakers today will be Vince Arnone, Chairman, President, and Chief Executive Officer, and Alan 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 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 FuelTech's current expectations regarding future growth 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. Shultech 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 conditions, cash flow, 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 end the year with improved operating performance. For the full year 2021, we generated higher revenues, continued a strict cost control discipline that produced lower selling general and administrative expenses, significantly reduced our operating loss, and we reported annual net income for the first time since 2013. Our current balance sheet is among the strongest in our history, and we ended 2021 with $37.1 million in total cash and no debt. Our fuel chem segment generated higher revenues and higher segment gross margin compared to 2020. Net sales for FuelChem increased 24.1% to $17.4 million from last year's $14 million number, benefiting from our current installed base, new program installations, and an overall rise in demand for energy related to increased economic activity and higher seasonal power usage versus the heavily COVID-impacted year in 2020. As I discussed in last quarter's call, we continue to expect some pressure on our fuel chem business segment resulting from the reduced use of our chemical technology due to scheduled coal fired plant shutdowns and to a decline in coal fired dispatch. By way of background, COVID-19 had distinct impacts on our fuel chem business over the past two years. In 2020, Utility and industrial power plant operators experienced higher levels of downtime due to overall lower demand for energy usage. In some cases, these operators took advantage of that downtime to perform extensive non-routine maintenance on their units. Conversely, 2021 turned out to be a better than expected year for FuelChem. Given the economic tailwinds created by the country's initial emergence from COVID-19 related shutdowns last year and to fewer than normal downtime related outages as these outages were largely taken in 2020. As we look ahead to 2022, we see fuel cam revenues of 13 to $15 million, approximating the 14.1 million in revenues that this segment generated in 2019. This reduction from 2021 is due to one known plant shutdown as of 12-31-21 from a long-term customer in the business segment, the return of a more normalized maintenance outage schedule in 2022, and to the continued pressure on the remainder of our customer base to optimize program usage. APC revenues for the year were lower. although we did generate approximately $8 million of new awards in the APC segment during 2021, and we added 2 million of new bookings during the first quarter of 2022. Our total APC backlog, inclusive of these recent awards, is approximately 10.5 million as of this date. While not quite at the levels of prior years, it is strengthening, and we continue to pursue a global sales pipeline of between 50 to $75 million. We believe that 2021 was the low point for our APC business and expect that revenues from this segment will improve significantly in 2022 from the 6.9 million recorded this year. In conjunction with anticipated dual-chem revenues of 13 to 15 million, we expect that total revenues for 2022 will show a modest improvement from 2021. We are continuing to explore ways to broaden FuelTech's portfolio of environmental remediation solutions. One such opportunity, which we have discussed in prior calls, involves providing our chemical technology solution to address the emissions created by the burning of high sulfur fuel oil in Mexico, which is being undertaken without the necessary environmental remediation and at the expense of the health of surrounding communities. 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 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. For the APC segment, we continue to pursue opportunities for our SCR and Ultra product offerings. However, our recent contract award press release fully demonstrates that our full suite of APC technologies remains relevant. Recent contract awards and current discussions have involved the application of our SNCR emissions control solution to reduce nitrogen oxides from stationary combustion sources for domestic and international applications, and also our flue gas conditioning technology to improve the performance of electrostatic precipitators for an international client. Additionally, decarbonization is top of mind for many industries, And we are closely watching the planning of the steel industry and others as they pledge to invest in technologies to improve their global carbon footprint. FuelTech has longstanding relationships with technology suppliers and end users that will assist in our ability to capitalize on these opportunities as they continue to develop. During the year, we made significant progress with our developmental dissolved gas infusion, or DGI, business initiative. Over the past couple of years, we have made measured strategic investments in this technology, which is focused on industrial and municipal water and wastewater treatment. During 2021, we completed three successful demonstrations in the United States and are currently working with these potential customers to determine next steps. We 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 our targeted applications. We recently finalized a market opportunity assessment in conjunction with an outside firm that we believe will assist our long-term product commercialization activities, and we are continuing to execute on our commercialization and development plan. The primary market areas of opportunity that we have identified include the following, municipal wastewater, agricultural production, food and beverage, natural waters, and landfill leachate. These addressable markets are material. However, our ability to capture a share of the market opportunity is solely dependent on our ability to execute on our commercialization and development plan. As a result, as we look ahead to 2022 for DGI, we have established the following goals for our company. We need to complete verifiable documented DGI performance testing that is independently confirmed by experts in the field. This work is currently in process. Next, we are working with water and wastewater treatment marketing specialists to develop our approach to our identified markets. Lastly, we are looking to begin to build an internal resource base specifically in support of DGI starting later in the year. We believe that we have created a strong foundation upon which to commercialize this technology, and we are targeting for late 2022. In closing, I want to thank the FuelTech team for their continued hard work and dedication to our company. Like many companies, we have worked diligently through two very challenging years impacted by the pandemic. We are excited about 2022, and we look forward to keeping you apprised of our progress. With that said, I'll now turn the call over to Ellen. Ellen, please go ahead.