Fuel Tech, Inc.

Greetings and welcome to the FuelTech Incorporated third quarter 2024 financial results conference call. At this time, all participants are in listen-only mode. 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. Now, my pleasure to introduce Devin Sullivan, Managing Director of the Equity Group. Thank you, Devin. You may begin. Thank you, Devin.

Thank you, Rob. Good morning, everyone, and thank you for joining us today for FuelTech's 2024 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.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, 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 the company's annual report on Form 10-K and Item 1-A 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, 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 or to publicly announce the results of any forward-looking statements contained herein to reflect future events, developments, or current 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. So with that said, I would now like to turn the call over to Vince Arnone, Chairman, President, and Chief Executive Officer of FuelTech. Vince, please go ahead.

Thank you, Devin. 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 technology 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 in our APC business declined quarter over quarter, due primarily to customer-driven delays on existing projects and to the timing of new project awards. With that said, we are very pleased to have announced $2 million in new APC orders yesterday, and we expect to close two to four 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. 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. We ended the quarter in a strong financial position with cash, cash equivalents, and investments of over $31 million, and no debt. Now, let's discuss our results for the third quarter in more detail, starting with FuelChem. Revenues at FuelChem 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 and the Western U.S. at a new coal-fired unit. We were very pleased to announce last month that this demonstration 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. 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 fire power generation boiler operator in the eastern U.S., 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. 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 programs will be an integral part of President Chainbaum's plan. Turning to our APC segments. 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 our 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 U.S., Europe, South Africa, Southeast Asia, and the Pacific Rim. 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 ultra systems as the safe source of ammonia for SCRs at hospitals and universities across the US. On the regulatory front, in June, the Supreme Court granted states and industry applicants request 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. 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. 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 FuelTech has had a long history of assisting this industry in meeting its compliance requirements, and we have had discussions with customers in this segment to support their compliance planning. The final rule is still expected yet in 2024, with compliance deadlines expected sometime in the next three years. 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 WEFTEC, 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 U.S. 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. 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 ratios. 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. 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 Fuelchem and excited about the demonstrations we expect to commence at DGI. For APC project awards, as I had 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. In closing, I want to express my thanks to the FuelTech 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. I thank our shareholders for their continuing support and reiterate to you our focus on delivering long-term shareholder value. With that said, I'd like to turn the call over to Ellen for her comments.