Fuel Tech, Inc.

Don't do that, I have to pick you off screen.

Greetings, and welcome to the FuelTech, Inc. fourth quarter and full year 2023 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, Managing Director of the Equity Group. Thank you. You may begin.

Thank you, Melissa. Good morning, everyone. And thank you for joining us today for FuelTech's 2023 fourth quarter and full year 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. 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. 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 results of operations, cash flows, performance of 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 conditions, 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'd like to thank everyone for joining us on the call today. We were pleased with our business progress along several fronts in 2023. Total revenue of $27.1 million was within our previous guidance range and represented our highest annual revenue level since 2019. Our APC business segment performed well, reflecting more than $8.3 million of new project awards during the year and we ended the year with a backlog of 7.5 million at December 31st, 2023. Further, we were pleased to announce the additional 2.1 million in new contract awards yesterday. We completed a successful trial of our dissolved gas infusion technology in an aquaculture setting, and we believe that we are well positioned to commercialize DGI in 2024. And lastly, We continue to maintain a conservative cost profile with SG&A expenses up modestly from 2022 levels and ended the year in a strong financial position with $33.4 million in cash and investments and no long-term debt. We are most heartened by the progress we have made in our DGI business initiative in 2023. Last month, we announced the publication of a white paper that detailed the benefits of deploying DGI for oxygen injection at a shrimp farm in the United States. As a reminder, our DGI technology involves the efficient transfer of high concentrations of gas into a body of water through a patented saturator and a patent-pending injection array to drive chemical or biological reactions such as for wastewater treatment odor control, and pH adjustment, or for process improvements in industrial applications or, in this case, aquaculture. Specifically, the use of DGI at this location increased shrimp production compared to traditional aeration methods and contributed to likely health improvements. Demand for shrimp is increasing globally, and inland shrimp farming is an important source to help meet the growing demand in a safe and sustainable manner while reducing overfishing of the marine environment and lowering the overall carbon footprint by reducing transportation costs. By deploying DGI, producers now have an opportunity to improve stock health and yields while achieving more efficient operations immediately adjacent to their customer locations. At present, we are utilizing DGI to deploy oxygen into bodies of water. However, we believe that DGI can be applicable for other gases as well, such as CO2 and ozone. DGI's benefits include the precise control of dissolved oxygen levels for all process applications, an ability to extend plant capacity without major capital expansion or capital outlay, odor reduction, and minimal bubble formation for extended residence time. We believe that DGI can be applied across several end markets, including pulp and paper, food and beverage, chemical and petrochemical, water and wastewater treatment, horticulture, and aquaculture. As a follow-up to the publication of our DGI white paper, we presented our technology and favorable findings from our aquaculture demonstration at the Aquaculture America 2024 conference last month. This annual conference provides members and participants with the opportunity to stay current with technical advancements and inspect the latest in products and services in the aquaculture industry. In recent months, in part driven by the interest generated after publishing and presenting our demonstration results, we have received a notable increase in inquiries regarding our DGI technology from potential customers in multiple end markets, including municipal odor control, pH control for municipal and industrial applications, agricultural applications, and additional aquaculture applications. We are currently in negotiations with potential customers regarding on-site demonstrations of DGI, and we are targeting to sign our first commercial contract for DGI in 2024. Lastly, to further expedite the introduction of DGI into end markets, we have recently hired a former water and wastewater treatment executive on a consulting basis. This individual is well experienced in the application of dissolved gas technologies, and we look forward to his contributions over these next several months. Let's now please spend a few minutes discussing our fuel chem and APC business segments. As we had expected, revenues for our fuel chem segment declined from 2022 levels due to the effects of warmer weather across the U.S., which impacted overall demand and related unit dispatch. However, segment gross margin was essentially unchanged for the year and remain at historical levels. Our base fuel chem unit count remains intact as we enter 2024. And for the first time in a few years, I'm very pleased to say that we are currently pursuing multiple additional fuel chem development opportunities, which could provide incremental revenue contribution in 2024 and beyond. These opportunities are for both coal and biomass fired boilers. For 2024, excluding any material incremental revenue from new business development activities, we would expect that fuel chem revenue would remain at parity with 2023. With respect to international opportunities for the fuel chem segment, we continue to follow the opportunity to expand the provision of our chemical technology in Mexico via our partner in that country to address the emissions created by the burning of high sulfur fuel oil, which is being undertaken without the necessary environmental remediation and at the expense of the health of surrounding communities. In 2023, we executed a two-year extension to the program that we currently have in place at one facility. With the upcoming presidential election in Mexico in June of this year, we believe that political pressure is building in favor of our implementation of our fuel chem program at additional facilities in this country. Our partner is currently in discussions with a state-owned utility, CFE, regarding the application of our technology at several units. Now, turning over to our APC segment. We benefited in 2023 from the continued adoption of our Ultra, SCR, SNCR, and FTC emissions control solutions at natural gas and coal-fired units in the U.S., Europe, South Africa, and the Pacific Rim. Independent of the potential impact of favorable regulatory outcomes, which I will discuss here shortly, we remain well positioned to take advantage of current industrial and 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 Ultra system as a safe source of ammonia for SCRs at hospitals and universities across the U.S. On the regulatory front, we continue to monitor progress related to the adoption of the U.S. EPA's cross-state air pollution control rule to meet the good neighbor requirements of the Clean Air Act, which we believe can be a potential catalyst for APC growth in 2024 and for the remainder of this decade as utility and industrial customers explore ways to further reduce NOx emissions. We have, in fact, received and responded to several requests for budgetary proposals, as customers prepare to address the upcoming compliance requirements as part of their capital budgeting requirements for 2024 and beyond. As discussed on previous calls, the rule currently obligates 23 states to reduce emissions of nitrogen oxides from power plants and certain industrial facilities to limit their impact on downwind states. The ultimate timing of the effectiveness of the rule is uncertain, because several upwind effective states and sources have challenged the efficacy of EPA's proposed regulation in multiple courts, and stays of the effectiveness of the rule have been issued for many upwind states. Last month, oral arguments were presented to the Supreme Court by both parties, and we will closely monitor the potential impact of the Supreme Court's ruling on whether to stay the rule for all states when it is issued later this year. In addition to the Good Neighbor Rule, we are also watching the progress of EPA's rule for large municipal waste combustors, which is independent of the Good Neighbor Rule. This rule reduces the nitrogen oxide emissions requirements for large municipal waste combustor units. FuelTech has had a long history of assisting this industry in meeting their compliance requirements, and we have had discussions with customers in this segment to support them in their compliance planning. The municipal waste combustor rule is currently in a public comment period, with compliance deadlines expected sometime in the next three years. Based on our effective backlog at year end, the business development activities we are pursuing, and our previously noted expectations for Huelchem, we expect that total revenues for 2024 will exceed the total revenues recognized in 2023 of $27.1 million. and we will provide further guidance as we move throughout 2024. This base case outlook excludes any material contributions from DGI, as we are still in the early stages of commercialization, any significant contributions to APC from the above-referenced EPA regulations, and the impact of material business development activities for Fuel Chem. Now, in closing, I want to thank the FuelTech team for their contributions to the improvement of our business in 2023. It is their continued hard work, passion, and dedication that drive our ability to be successful. Additionally, I thank our shareholders for their continued support. We expect that 2024 will be an important year in the growth and evolution of FuelTech. and we look forward to keeping everyone apprised of our progress. With that said, I would now like to turn the call over to Ellen to talk about our financial statements. Ellen, please go ahead.

Thank you, Vince, and good morning, everyone. The primary takeaways from 2023 were improved total revenue, margin maintenance, a continuing focus on cost containment within the larger framework of building out our DGI business, and a remarkably resilient balance sheet that allowed us to enter 2024 in a strong and secure financial position. We accomplished all of this while navigating some industry headwinds in our two primary business segments. I'll start off today by reviewing our fourth quarter results. For the quarter, consolidated revenues declined to 6.3 million from 7 million in last year's fourth quarter, reflecting declines in both the APC and Fuel Can segments from the prior year period. APC segment revenue marginally decreased to $2.8 million from $2.9 million due primarily to the timing of execution on projects and services during the quarter. The Fuel Can segment revenue declined from $4.1 million to $3.6 million, mainly due to an expected decrease in dispatch electrical generation demand from the very high levels experienced in 2022, and changes in product and fuel usage. Consolidated growth margins for 2023 fourth quarter was 51% of revenues, a significant increase from 43% in the fourth quarter of 2022, reflecting increased APC segment growth margin of 55%, up from 35% in the same quarter a year ago. This higher gross margin for APC can be attributed to a change in project and product mix. COCOM segment gross margin remained essentially unchanged at 48%, consistent with historical performance. Consolidated APC segment backlog on December 31st, 2023 was 7.5 million, up from a backlog of 5.6 million at September 30th, 2023, and down slightly from backlog of 8.2 million at December 31, 2022. Backlog on December 31, 2023 included 2.6 million of domestically delivered project backlogs and 4.9 million of foreign delivered project backlogs as compared to the 3.7 million of domestic project backlogs and the 4.5 million of international project backlogs at December 31, 2022. We expect that $7.4 million of the current consolidated backlog will be recognized in the next 12 months. SG&A expenses increased to $3.7 million from $3.1 million in last year's fourth quarter, reflecting the timing of employee and employee related expenses. As a percentage of revenue, SG&A in the 2023 fourth quarter increased to 58% from 44% in the 2022 fourth quarter. Research and development expenses for the fourth quarter rose to $367,000 from $179,000 in the same period a year ago, mainly attributed to continued investment in water treatment technology, and more specifically, our DGI technology. Our operating loss was $801,000 compared to $250,000 in last year's fourth quarter, reflecting a reduction in overall revenue, a shift in margin contribution from product-made. We continue to take advantage of the favorable interest rate environment, and as of December 31, 2023, have invested more than $30 million and held to maturity debt securities and money market funds. This generated $322,000 of interest income in the fourth quarter and $1.3 million of interest income for 2023, up from just $200,000 in 2022. Our net loss for the quarter was $539,000, or two cents per share, compared to a net loss of $402,000, or one cent per share, in the same period one year ago. Adjusted EBITDA loss was $646,000 compared to an adjusted EBITDA loss of $263,000 in the same period last year. Moving to results for the full year 2023, consolidated revenue rose to $27.1 million from $26.9 million in 2022, reflecting a 27% increase in our ATC segment revenues, offset by a 17% decline in the FuelCon segment. As previously mentioned, the increase in APC segment revenue is attributed to the timing of project execution and new orders and a 50% increase in our ancillary product line revenue. The fuel comes segment revenue decreased for the year was driven by decreased unit dispatch demand and unforeseen plant outages experienced in the second quarter of 2023. Consolidated growth margin remained flat at 43% compared to last year, reflecting an increase in the APC segment growth margin offset by a slight decrease in the fuel chem growth margin. APC segment growth margin was primarily due to product and project mix. SG&A expenses for 2023 increased by 4% to $12.8 million from $12.3 million in 2022, which fell within the low end of the forecasted range. We continue to prioritize our strategic investments and resources to support current and upcoming business initiatives while maintaining prudent cost controls. For 2024, we expect SG&A expenses to range between $13 and $13.5 million. Research and development expenses were $1.5 million for 2023 compared to $895,000 in 2022. As Vince discussed, our investment in commercializing our DGI technology is a primary focus for the company. Strategic expenditures in this area will continue throughout 2024. Operating loss was 2.7 million for the 2023, compared to a loss of 1.5 million in 2022, reflecting the change in mix of segment revenue and higher operating expenses. Net loss for 2022 was 1.5 million or 5 cents per diluted share compared to a net loss of 1.4 million or 5 cents per share in 2022. Adjusted EBITDA loss was 2 million in 2023 compared to an adjusted EBITDA loss of 909,000 in 2022. We generated nearly $700,000 in cash from operations in 2023. as compared to a use of cash of $4.1 million in 2022. Lastly, moving to the balance sheet, our financial condition remains strong. As of December 31, 2023, we had cash and cash equivalents of $17.6 million and short and long-term investments totaling $15.8 million. In 2023, our largest use of cash was the incremental investment of $6 million in debt securities to drive a sustainable long-term financial profile. Working capital was $32.6 million, or $1.08 per share. Stockholders' equity was $43.7 million, or $1.44 per share. And the company continues to have no outstanding debt. We remain confident in our ability to fuel our growth initiatives, pursue new products and market opportunities, and maintain our strong financial position, which we view as important is an important competitive advantage. To reiterate Vince's earlier comments, we are pleased with our results and remain optimistic about our opportunities in 2024 and beyond. I'll turn the call back over to Vince.

Ellen, thank you very much. Operator, I think it's time to open the line for calls now. Thank you.

Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Amit Dayal with HC Wainwright. Please proceed with your question.

Thank you. Good morning, everyone. Good morning, Amit. Hey, Vince. So it looks like DGI is going to be a big focus for you this year. One question is, how are these potential customers finding out about DGI? Can you just give us a sense of what you guys are doing in terms of just getting in front of this audience?

Right. Over this past six months, we've definitely enhanced our marketing efforts. As I just noted, our presentation at Aquaculture America was actually our our first presentation at a water and wastewater treatment conference. And we received some very favorable impact from the result of that body of work. So, my comment would be we are increasing our exposure to end markets. We really needed to have something to go ahead and put out there publicly that we can support. as part of our market reach out and the successful demonstration that we did have in the aquaculture application afforded us the opportunity to start to go a little bit more public with DGI and its capabilities. And so my expectation is that is going to continue. We are going to have more of a, call it a public face for DGI. But it also needs to continue to be supported by specific favorable actions from end results of that technology, if you will. So we are going to do additional demonstrations. We are going to do white papers on those additional demonstrations and put those results out publicly as well. Again, high-level answer, we are going to be out there more publicly with DGI in 2024 and beyond.

Understood. Thank you. And then the OPEX guidance, you know, you provided for the year, does that already include some of the marketing and sort of, you know, business development efforts, or will that potentially be a little bit more additional cost to your, you know, normal sort of operating activities?

Yeah, right now the range that Ellen provided, 13 to 13.5, does include a nice uptick in additional spending related to DGI marketing efforts. As we've discussed our investment in DGI with this past handful of years, we've been very measured in how we've been investing. As we see the opportunity to invest based on successes, we'll go ahead and enhance that investment in those activities. So right now, I would tell you that the range Ellen gave does include a nice increase in expenditures for DGI marketing efforts. If we feel as though we need to do more prospectively, we'll share that with you on future calls.

Thank you, understood. Maybe just last one on the APC and fuel chem businesses. You know, should we expect the second half to be stronger for those segments or sort of evenly spread throughout the year? It looks like this from the press release and some of the commentary, maybe the second half looks like it could be, you know, more heavier in terms of revenue versus first half of the year.

As a general statement, I would say yes, that is correct. Based upon the way we see things right now, we would expect a stronger second half than first half of the year.

Okay. That's all I have, Vince. I'll take my other questions offline. Thank you. Thanks, Ahmed.

Thank you. Our next question comes from the line of William Brenner with Vanquish Capital Partners. Please proceed with your question.

Good morning, Vince. Hey, good morning, Bill. How are you?

Good. I want to specifically target your... the air pollution control segment, the APC segment. Yes. Regarding our product offering, how would you rate that?

I think our product offering for these technologies is best in class. For what we put out into the marketplace for SNCR and SCR technologies and Ultra as well, they're best in class. And actually, for Ultra, there is no competitive product in the marketplace today. Domestically.

And I completely agree with you. I mean, thus, I've been with and having a material stake in this company for north of seven years. My concern is on the sales front and the bookings. You know, your senior VP of sales has been with you over 25 years. I mean, 25 years is an enormous amount of time. You know, you voiced about the regulatory issues. front and the EPA and the Good Neighbors Act that should be a major catalyst for us going forward. At what point does the board have to make a change here to start bringing in some competent individuals to ramp up the sales, utilize the balance sheet, and hire some executive EPs to go after the submissions opportunity that's in front of us?

So to specifically address your question, FuelTech, as a company, has a lot of longer-tenured employees. I'm at 24 years myself, and so I would put myself in the category as a lot of well-experienced folks with FuelTech that I believe are still doing a pretty darn good job. So specifically on the APC side of the equation, as you note, what's potentially out there related to regulatory opportunities I'll tell you right now that there is no one that is better positioned to capitalize on those opportunities should the regulatory requirement be officially put in place in a way that drives business. Because I can tell you right now, I've seen the proposals and work that we've put out to the utility customer base in this country that supports the work that we would be doing if we had a firm regulation in place. So I have every confidence in the world, Bill, and you and I have discussed this previously, with the team that we have in place, and I am chairman of the board, so I'll speak on behalf of the board as well. We're confident in the team that we have in place to be able to capture these future opportunities that are potentially out there for us. If that wasn't the case, Bill, we'd be making dramatic changes. Simple as that. Simple as that.

I hope you're right. I haven't seen a book to burn ratio over 1.5 in years in this segment.

I don't disagree with you there. The end markets, particularly on the utility segment, have been a little shallow over these past several years. Fortunately, we've been supported by industrial market activity, which in the absence of anything that happens regulatorily, that base business level is still going to be there for us prospectively. It's the upside that we're talking about, and I think we're very well positioned to capture the upside.

My second question, other than yourself stepping in pretty much every year consistently, and I appreciate that as well as my fellow shareholders, I have not seen any Form 4 open market purchases from anyone else on the board. for years, or your CFO, your division heads, et cetera. If the company is making a change and we're selling below a tangible book as you articulated, and we are flush with cash, okay, when is the management team gonna step forward here and align themselves with current shareholders?

It's a good point, Bill. As you stated, I've been out there buying. There's been at least one other high-level officer of the company that has been out there buying over these past few years. We only have three reportable employees that we form for as we sit here today. So there is some other activity that the public world does not see relative to purchases. All I can say is that it's difficult for me to go ahead and mandate that, whether it be the board or the leadership team, difficult to mandate that they take their personal situations and further invest in FuelTech. The board and the employees of this team are already well vested in FuelTech. I can definitely make that statement honestly and clearly. I think you'll see some additional purchases from the leadership team and or board in the future. I just can't tell you when. But I can tell you from my perspective, I have been a supporter and I will continue to be a supporter from that perspective.

I thank you for that. I truly do. I would welcome to see some additional sales hires. I think that would be a good use of capital versus a dividend or share repurchase agreement. I think we need to drive top line sales through structuring. has been performed over the last few years, and now it's a time to grow the top line. So I would echo my fellow shareholders, and I would hope the board and yourself decide to start hiring some additional sales personnel, and the ones that aren't producing have to go at this point.

Understood, Bill. I appreciate your commentary, as always. And I can tell you that we review every one of this company on an annual basis relative to performance. But as I said, I am very confident that we are well positioned to take advantage of opportunities that are going to come our way. I thank you. You're welcome. Thank you, Bill.

Thank you. Our next question comes from the line of Jim McElroy with Dawson James. Please proceed with your question.

Thank you. Good morning. Hey, good morning, Jim. Hey, Vince. I just wanted to make sure I heard your comment correctly regarding the APC revenue this year. That assumes no impact from a potential favorable good neighbor ruling. Is that correct? That is correct. And I know there's a lot of different end cases on the ruling, but can you kind of bracket what you think that might do for APC over a couple-year time period? You know, how big of an impact do you think it might have over a couple of years?

Jim, it's quite favorable. We went through approximately nine, ten years ago a scenario whereby the effectiveness of regulation had a very favorable impact on the company as well. But what I can say is this. We have $50 million plus in budgetary quotes, $50 million plus in budgetary quotes, out to utilities in this country to assist them with compliance. The numbers, it's greater than that. And everything can't be done at once, obviously. So this would be implemented over a, I'll say a three to five year time horizon, approximately. But it's a magnitude over the APC revenue that we've generated over these past three to four years. It's a material impact on our company. As I said, it's something that we've dealt with historically. We would love to be able to address those needs again.

Understood. Thank you. That's helpful. And then my second question is, you talked about the initial DGI contract this year. Can you be a little bit more specific on timing, first half, second half, and just how big can these contracts be, these initial contracts? Are we talking sub a million or are we talking greater than a million?

Right. So on your first question, I would look at second half of the year from a timing perspective. And then on your second question, I'd probably expect the first system sales that we'll see that they're going to be sub a million and a lot larger than a million dollars. Our smaller systems are anywhere on the $100,000 to $200,000 range. Assuming it would be a capital sale, some of the larger scale systems are indeed going to potentially exceed a million dollars. Completely depends on the magnitude of the process environment that we're looking to treat. But when I look at something commercially happening this year, I think we're probably seeing something more on the smaller side than on the larger side.

Great. Thank you. And that's it for me. Thank you. Thank you, Jim.

Thank you. Our next question comes from the line of Mark Silk with Silk Investment and Advisories. Please proceed with your question.

Hey, Vince. How are you doing? I'm good, Mark. How are you? I'm doing fine. Thank you. So let's go and stick with the good neighbor rule. You said you've received a bunch of requests, etc., Are these mostly from downwind states or upwind, or it's a mix?

I would say predominantly upwind, but some downwind.

Okay.

Yeah, predominantly upwind folks, again, looking at their potential range of outcome given, you know, what way the regulatory rule falls.

Correct.

Yeah.

And then so like on the $50 million plus, let's just say potential there, I know it could be a lot more. Is that like a 50-50 mix?

I'd say it would be more in favor of upwind.

Of upwind, okay. Yes. And then on the DGI, you talked about multiple end markets. You mentioned a bunch of things like municipalities, etc., So let's say money was an object, that you had an unlimited budget, unlimited cash. Where would you aggressively be putting money based on what you've seen up to now, or is it too early to kind of say? This is more of a hypothetical, just so we can kind of see where maybe the biggest growth can come from over the next few years.

Right. To be honest, I would say that it's premature for me to say. where we would invest the majority of that capital, assuming we had end pockets, if you will. It's premature to say. It's premature to say. We're looking for what I would call near-term opportunities for success of the technology to form building blocks for whatever comes prospectively from that. We need to build the success building blocks. The demonstration we did last year was one of those We need more of those in markets to prove out the viability of the technology. And then once we have a little bit more of that information, we can then better assess where our investment dollars are going to be better spent relative to approaching one end market over another.

And as far as municipalities, what are some of the areas they are looking at? I know you mentioned it earlier, but I can't read my notes here.

One of the ones we're looking at here near term is actually an odor control application for a municipal water lift station. That's a huge problem for them, but there's other applications for municipalities that we'll be able to address as well. This one for odor control is an immediate requirement for us.

Great. Thanks for taking my questions.

Thank you, Mark. Appreciate it.

Thank you. Our next question comes from the line of Pete Enderlin with MAZ Partners. Please proceed with your question.

Thank you. Good morning. Good morning. I just have a couple of questions. You've mentioned a lot of different opportunities for the DGI technology. One that you didn't mention, and I don't know if it's actually valid or not, and that is related to 3M. 3M agreed to pay $10.3 billion over 13 years for the remediation of forever chemicals in drinking water. That's a lot of money, obviously. And so the question is, will DGI or could DGI play a role in that process? I mean, I'm sure that there's some filtration and other stuff going on to remove those chemicals, but would DGI enhance that process? And is that a valid opportunity?

As we look at it right now, Pete, DGI would not have a direct impact on PFAS, PFOS, forever chemicals. To your point, it's a very, very, very widely watched area today on a global basis, and the EPA is coming out with regulatory requirements and guidance that I don't think anyone can achieve at this point in time because no one has all the answers. It's something we're going to watch closely, again, to your point, to see if DGI can help enhance certain, whether it be chemical-related processes or otherwise, that could address the forever chemical issue. But as of today, it's not something where we're relying on that end market as something that we're focusing on right now. But it is something that we'll watch.

Thank you. And then one for Helen. The SG&A expense in the fourth quarter was $3.7 million versus $3.1 million. And the press release says it's related to the timing of employee and employee-related expenses. Can you just elaborate on that a little bit? Was there anything sort of non-recurring in there? Because obviously if you annualize $3.7 million, it's a lot more than your projected level for this year.

Correct. There were some employee and employee-related expenses that last year were spread out over the last six months of the year, and in 2023 just happened to all hit in Q4.

Okay, so it's nothing specifically identifiable as non-recurring, just basically as it says, the timing.

Correct, it's just timing.

Okay, thanks a lot.

Hey, Pete, thank you.

You're welcome. Thank you. Ladies and gentlemen, there are no other questions at this time. I'll turn the floor back to Mr. Arnone for any final comments.

Thank you, operator. Once again, I'd like to thank everyone who participated in the call today. I'd like to thank all of our shareholders and, of course, the entirety of the FuelTech employee team. As both Ellen and I noted, 2024 is indeed a critical and pivotal year for FuelTech. And as we move throughout the year, we are excited, and we look forward to having further discussions with everyone at later points in time this year. Thanks to everyone, and have a great day.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.