Greetings. And welcome to the Fuel Tech Fourth Quarter and Year End 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Devin Sullivan, Senior Vice President of The Equity Group. Thank you. You may begin.

Thank you, Jessy. Good morning, everyone. And thank you for joining us today for Fuel Tech’s fourth quarter and year-end 2020 financial results conference call. Yesterday after the close, we issued a copy of the press release, which is available at the company’s website, www.ftek.com. Our speakers today will be Vince Arnone, President and Chief Executive Officer; and Ellen Albrecht, Fuel Tech’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. These statements reflect Fuel Tech’s current expectations regarding future growth, results of operations, cash flows, performance, and business prospects, as well as assumptions made by and information currently available to our company’s management. Fuel Tech has tried to identify forward-looking statements by using words such as anticipate, believe, plan, expect, estimate, intend, will, and similar expressions. However, 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, which could cause Fuel Tech’s actual results, growth, results of operations, financial condition, cash flows, performance, and business prospects to differ materially from those expressed in or implied by these statements. Fuel Tech 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, changed circumstances, or for any other reason. Investors are cautioned that all forward-looking statements involve risks and uncertainties. With that said, I’d now like to turn the call over to Vince Arnone, President and CEO of Fuel Tech. Vince, please go ahead.

Thank you, Devin. Good morning. And I want to thank everyone for joining us on the call today. I am very proud of what our team has accomplished during this period of uncertainty and I am optimistic regarding our outlook for 2021 and beyond, as we continue on our path towards establishing a foundation for long-term and sustainable growth. We entered 2021 facing challenges related to the timing of contract awards, especially at our APC business and the potential lingering impact of the COVID-19 pandemic on our operating results. With the February 2021 financing that raised gross proceeds of $25.8 million, we have approximately $37 million in cash on our balance sheet and no debt. This capital raised has helped to significantly reduce the near-term risks associated with these challenges and has provided us with the support for near-term initiatives. As a company, we have the benefit of providing three distinct and proprietary environmental remediation platforms to the markets in which we serve: APC, FUEL CHEM, and our Dissolved Gas Infusion business. We believe that each of these technologies will allow us to capture significant opportunities in their respective end markets as we emerge from the effects of the pandemic, uncertainties lift, and when global economic activity resumes to normalized levels. With the financing, we are in the best position in our recent history to find strategic solutions to return our base businesses to profitability, expedite the demonstration and further market discovery of our DGI technology, and investigate other product market opportunities. While we intend to capitalize on the flexibility that our strong cash position affords us, our immediate focus will be on expediently furthering the commercial development of our DGI technology via the necessary investments in human and equipment resources. Concurrently, we will be assessing the business landscape in detail for our APC and FUEL CHEM business segments to better enable us to focus on the markets and products that can lead to profitability. I want to thank all of our shareholders, both old and new, for your support, and the Fuel Tech team is dedicated to work diligently to provide value for your investment in Fuel Tech. Let’s begin with a discussion of our APC business, where COVID-19 has continued to affect the timing of new business awards, due in large part to its impact on industrial purchasing activity. We are emphasizing support for client bid requests for custom engineered solutions that fulfill the unique needs of each of our customers. On our last call, we noted that we expected to have final decisions on multiple projects for an aggregate contract value of $10 million to $15 million. Within that group of project opportunities, the most critical project, in terms of contract value, was canceled by the end customer due to the inability to obtain financing, which was largely driven by COVID. The remainders of the projects were pushed into 2021 for award decisions. The active markets have shifted to more industrial opportunities led by our SCR and ULTRA technologies, which are driven by permits for new units and retrofit regulatory requirements. We are actively involved with turbine suppliers, heat recovery steam generator manufacturers, light engine suppliers, carbon black manufacturers, and municipal solid waste, biomethane, and pulp and paper facilities. We are monitoring activities at the state level where new environmental guidelines, including compliance with the EPA Boiler MACT and regional haze rules, may produce opportunities to install best available retrofit control technology on certain sources of emissions. As a company, we are watching the actions of the Biden administration very closely. However, we don’t believe that near-term actions will have a material impact on our business activities, either positively or negatively. In general, the APC landscape remains a very competitive space, and opportunities are currently in a state whereby they are smaller and by volume. We continue to work on positioning with multinational firms that are developing business globally. As we have seen many times before in our company’s history, we continue to receive phone calls to provide assistance to our customer base when they have difficulty with competitive systems. For 2021, we expect to have an increase in APC project award activity based on our recent experience, and we would expect revenue to be moderately improved versus 2020. Our FUEL CHEM segments continue to produce strong results in the fourth quarter and finish the year on a high note after a sluggish start due to COVID. Much of this recovery was attributable to the installation of our TIFI targeted in-furnace injection technology on three new domestic coal-fired units for a repeat customer in the Northeast, as well as a return to more normalized run rates across our fleet following a period of slower unit activity earlier in the year due to the impact of the pandemic. As we look ahead to 2021, when these new units are operational and utilizing the technology on a continual basis throughout the year, we would expect to see revenues of $500,000 to $750,000 per unit at FUEL CHEM’s historical gross margin. In 2021, we will continue to pursue FUEL CHEM application opportunities in the U.S. where the remaining fleet of coal-fired power generation boilers seeks to remain competitive in dispatch markets via the utilization of lower-cost, lower-quality fuel. It is these scenarios that are likely to create the slagging and fouling issues that could necessitate the installation of our FUEL CHEM program. We are also continuing to work with our partner in Mexico to employ our solutions to help mitigate harmful emissions derived from the burning of high sulfur fuel oil. Our partner continues to engage with local officials in Mexico to advance this solution. The current Mexican government is in favor of utilizing indigenous fuel sources for power generation to ensure that they can become energy independent. The recent power generation dilemma in Texas further solidifies their position that as a country, they do not want to be dependent on external fuel sourcing for power generation, such as natural gas from the U.S. Additionally, there’s a current philosophy 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. We believe that these political and regulatory drivers have created an environment that will encourage the further utilization of high sulfur fuel oil for power generation in Mexico. In June of this past year, our partners solidified contract extensions through 2022 with CFE, the state-owned utility for the two sites at which we currently have our FUEL CHEM program installed. Also, prior to the end of 2020, we provided cost estimates to our partner for the expansion of our program to a site in Mexico that has five large power generation units, all that burn high sulfur fuel oil. This site is adjacent to a Pemex refinery. As of today, our partner is in the midst of discussions with CFE regarding this expansion opportunity and others. We know that high sulfur fuel oil is currently being burned at facilities in Mexico without the necessary environmental controls, and local communities are rendering complaints about the impact of the severe pollution. We will watch the development activity closely. However, we believe that pressure is building in favor of the implementation of our FUEL CHEM program at additional facilities in Mexico. We are also continuing to pursue opportunities for additional FUEL CHEM applications at biomass and municipal solid waste units in Europe and Southeast Asia via our partner, Amazon Papyrus, for the pulp and paper industry, where we’re using our RECOVERY CHEM program. We are also looking for opportunities in other Southeastern Asian countries where coal is the primary source of fuel, power demand and related pricing are high, and where slagging and fouling is an issue. Although some uncertainty remains regarding the lingering economic impact of COVID on power generation here in 2021, we have an optimistic outlook for FUEL CHEM this year, driven by the stability of our installed client base, expected incremental revenues from our new unit installations, and the increasingly recognized economic and environmental benefits that our chemical technologies deliver. After a slow start attributable to the pandemic, we are starting to realize some momentum at our DGI business. As noted in our press release, we have completed two demonstrations in Q1 of this year, the first at a municipal wastewater treatment facility on the West Coast, and the second at a new customer in the pulp and paper business located in the Pacific Northwest. We are currently reviewing data from each demonstration to clarify and document the benefits of our delivery system, and we will have a clearer roadmap of how to commercialize these opportunities shortly thereafter. We also expect to commence a demonstration at another wastewater treatment facility on the West Coast within the next 30 days. While each demonstration opportunity addresses customer-specific issues, the first demonstration at the municipal wastewater treatment facility on the West Coast was intended to provide supplemental oxygenation during high waste volume periods for the municipality. This particular municipality is located in a recreational area that receives an influx of visitors during the holiday periods. When this happens, the wastewater treatment plant does not have the capacity to treat the incremental waste and remain in compliance. During the demonstration, the DGI system was able to efficiently deliver supersaturated oxygen to improve the quality of the water to a level that was actually better than the prior year when the volume of wastewater to be treated was lower. Ellen will take you through the 2020 results here shortly. However, with respect to 2021, as I noted previously, we expect APC project award activity to pick up as we move through the year, and as a result, we would expect revenue to be moderately improved versus 2020. We expect FUEL CHEM to grow modestly versus the prior year. With DGI, we are focused on further evolving and commercializing this technology. To that end and with the benefit of new capital, we will look to design and fabricate higher capacity DGI equipment delivery systems, which we believe will be necessary to address the needs of the majority of our end markets. We will continue to pursue additional demonstrations, with a target of having a commercial system online before the end of this year. For 2021, we intend to maintain the lean operating structure that we have created over the last several years, ensuring that the SG&A aligns closely with anticipated growth. Our multiyear cost reduction initiatives, including the wind-down of our China operation, should allow us to profitably leverage topline growth with annual breakeven revenue of between $25 million and $30 million, depending on the product segment mix. In 2021, the Fuel Tech team will be guided by a focus on operational excellence, client service, innovation, and financial improvement. With that said, I’ll turn the call over to Ellen. Ellen, please go ahead.

Thank you, Vince, and good morning, everyone. We hope you have the opportunity to review our results. My comments will be brief and focused on the fourth quarter. Consolidated revenues during the quarter increased 26.5% to $6.2 million from $4.9 million in last year’s fourth quarter, reflecting higher revenue for both the APC and FUEL CHEM business segments. After a sluggish start to the year, primarily due to the impact of COVID, we experienced a strong second half. APC segment revenues increased to $2.5 million from $1.7 million, primarily as a result of project timing and completions. APC backlog at the end of the quarter was $5.3 million, $4.9 million of which was domestic and included a variety of Fuel Tech’s APC technology offerings across multiple geographies, including the U.S., Europe, and China. We anticipate approximately $3 million of current backlog will be recognized over the next 12 months. APC backlog has trended downwards during 2020 due to the sluggish overall market that was compounded by deferred purchasing due to the uncertainties created by COVID-19. As mentioned in our press release, we are pursuing a global sales pipeline of approximately $40 million to $50 million. FUEL CHEM segment revenues rose to $3.7 million from $3.2 million in last year’s fourth quarter, primarily reflecting contributions from the completion of the installation of equipment on three new coal-fired units, which began during the third quarter of 2020, as well as the recovery of more normalized run rates across our business. Consolidated gross margin for the 2020 fourth quarter was 41.9% of revenues, compared to 0.1% of revenue in last year’s fourth quarter, which reflected the impact of a $2 million warranty charge to APC cost of sales in the fourth quarter of 2019. Excluding the charge, consolidated gross margin in 2019 was 41.1%. APC gross margin was 29% in the fourth quarter of 2020. Excluding the warranty charge, gross margin for APC in the fourth quarter of 2019 was 30%. On an annualized basis, both 2020 and 2019 were impacted by this warranty claim that was settled in 2020. Excluding these charges, the APC gross margin for 2020 was 30%, as compared to 36% in 2019. The decrease in margin profiles is attributed to the overall project mix. FUEL CHEM gross margin was 51% in the 2020 fourth quarter, as compared to 48% in the same period one year ago. As Vince mentioned, our cost control initiatives are ongoing and continue to be reflected in SG&A. SG&A for the fourth quarter declined by over 15% to $3.8 million from $4.5 million, reflecting lower administrative and professional costs. R&D activities remained flat. For 2021, we will maintain our focus on cost control initiatives and invest in projects and resources necessary to support the business and drive sustainable growth. Net loss from continuing operations for the quarter was $1.5 million or a loss of $0.07 per share, compared to a net loss from continuing operations of $2.3 million or $0.10 per share, excluding the aforementioned warranty charge. Adjusted EBITDA loss was $1.1 million for the 2020 fourth quarter, compared to an adjusted EBITDA loss of $3.9 million in the fourth quarter of 2019. Moving to the balance sheet, at December 31st, we had cash and cash equivalents of $10.6 million and restricted cash of $2 million for a total cash position of $12.6 million. In January of this year, $1.2 million of restricted cash has been released into operating cash related to a December 2020 guarantee expiration. Working capital was $15.5 million. These figures do not reflect the February 2021 financing, in which we raised total gross proceeds of $25.8 million. With respect to China, we collected and repatriated $1.9 million in cash from our China subsidiary in 2020. We continue to focus on collection efforts against an estimated available $1.5 million to $2 million of receivables, and we expect to continue to repatriate additional funds in 2021. At December 31st, we had 25.8 million common shares issued and outstanding, excluding the 5 million shares of common stock and the 2.5 million common stock purchase warrants issued in connection with the February 2021 capital raise. The recording of the proceeds from the capital raise will be reflected in our Q1 2021 10-Q filing. On January 8, 2021, the company was informed by the Small Business Administration that its Payroll Protection Plan loan in the amount of $1.5 million had been forgiven in its entirety. Income from the forgiveness of the debt will be realized in the first quarter of 2021. With respect to valuation, our book value per share was $0.88, our tangible book value per share was $0.78, and our working capital per share was $0.62. Our cumulative net operating losses at year-end totaled $25.5 million, covering several geographies, including China. Approximately $10.7 million will begin to expire in 2034. As a result of these NOLs, our income tax expense for 2020 was immaterial, and we expect to have the same results in 2021. Now I’d like to turn the call back over to Vince.

Thank you very much, Ellen. Operator, let’s go ahead and open the line for any questions.

Absolutely. Our first question comes from the line of Sameer Joshi with H.C. Wainwright. Please proceed with your question.

Yes. Good morning. Thanks, Vince and Ellen. Hope you’re doing all right.

Good morning, Sameer.

Good morning. So it seems like a good end to the year and looks like modest growth expected in 2021, and you have a good balance sheet now. What are the particular areas of focus? I know you mentioned DGI development and scale-up, but are you planning on getting more demo units in place or is the focus going to be on scaling and building larger units?

Okay. First of all, thanks for the commentary. Yes, we are looking for a modest improvement here in '21 versus '20. To your point, our balance sheet right now is probably stronger than it’s been for the past eight-year timeframe. So we’re very pleased in terms of where we’re positioned today. In terms of where we’re going, the further development and commercialization of DGI is, if not our number one priority, our number two priority for us as a company. We need to convert our existing demonstrations into commercial systems, and along with that, we are going to look to make some investments to design and fabricate larger DGI delivery systems. What we found is that the demonstration units we have been working with, while being effective, do not always provide us with the ability to prove out efficacy during that demonstration phase. We need larger, more upscale units to be able to do that. This next step is an important investment point for us. We’ve been working diligently on the design of the upscaled delivery system, and I’m confident that we’re going to start to make some investments in that system here as we move into Q2. But as I said, it’s not our number one priority; it is definitely number two. The other part of our equation is returning our base business segment to complete profitability. Our focus needs to remain on that because that’s necessary for our future success as well. We’re continuing our focus on SG&A, and I would expect we’re going to come in 2021 with a slight reduction in SG&A from 2020 due to some steps taken during 2020. So, I think we’re well-positioned to move forward here.

So, Vince, you just mentioned that the first priority would be to return to profitability, but at the same time, you are saying that your agenda will be lower. What exactly is the push towards profitability going to look like?

It’s a combination of both factors, Sameer. Obviously, as I’ve just said, SG&A is going to come down. But our topline, as I mentioned, for both FUEL CHEM and APC, we’re expecting to be improved versus 2020. 2020 was an extraordinarily difficult year for APC in particular. Even our FUEL CHEM performance was not at the level that it should have been given the reductions in power generation demand we had, particularly in quarters Q2 and Q3 of 2020. It’s going to be a combination of both factors, Sameer: topline growth and continued good management of our internal infrastructure.

Got it. Mexico and the high sulfur fuel oil usage there seems to be emerging as a good opportunity. What is your visibility in terms of a timeline for some revenues from that source?

Yes. We’ve been watching this, as you know, for the better part of this past year. There have been strong movements within Mexico towards burning more of the high sulfur fuel oil while deploying the necessary pollution control systems to protect the local population from the pollution. As we sit here today, we know they are burning more of the heavy sulfur fuel oil than in past years. We have every reason to believe that the Mexican government is going to take the next steps to ensure that the pollution controls are placed on these facilities. They probably have to work out funding mechanisms to ensure that this gets done within a reasonable timeframe. We’ve seen continued steps forward locally in Mexico that lead us to believe this is moving forward. I’d think we would see something here in 2021 relative to it going forward. Exact timeframe, I don’t know. The longer time passes before there’s implementation, the further delays that come from that. However, even in today’s Mexican newspapers, there are at least two articles talking about CFE burning heavy sulfur fuel oil and requiring plants to put on the pollution controls. The events in Texas just further show the Mexican government that they want to be power generation independent and not reliant on natural gas from the U.S. That scenario is not sustainable, as proven by what happened in January and February when gas lines were shut down, and Mexico wasn't able to receive natural gas, leading to a loss of power for millions.

Right.

So there’s impetus, but timing is still difficult to predict. However, I expect we see some progress this year.

Understood. That’s fair enough. Just a sub-question to that. Does this potential from Mexico increase the upside to revenues, which you already expect to be modest growth year-over-year? Would these Mexican revenues be additional upside, or have you included that in your expectation?

We have included nothing from Mexico as an upside in our figures. The potential is quite sizable, but until we have a stronger feeling that it's going to be realized, we won’t include any of those possible upside figures in our numbers.

Okay. And may I just go back to DGI for a quick second? What is the scope of or dollars required for this upscale unit? What would a typical first project implementation look like in terms of revenues for you?

There’s a lot of range regarding cost depending on size required by end customers to address their issues. For our next delivery system, I estimate it could cost anywhere from $150,000 to $300,000 to build an incremental system for demonstration purposes. On a plant-by-plant basis, once we get to commercialization, there could be multiples of these types of systems deployed to a site. Assuming you take the low end of that range, you're potentially talking a capital equipment sale, or it could be a long-term lease scenario with a service agreement. So we’re open-minded to the business model as we sit here today.

Got it. Understood. Thanks for that color. You mentioned your sales pipeline that you’re looking at is around $14 million to $15 million. Can you compare it to how it was at the end of 2019 and previous years? Is the sales pipeline much larger now or smaller?

In general, I would say it’s a little smaller than we’ve seen historically. The primary reason is, within our current sales pipeline, we don’t have two or three larger contract value opportunities that reside within it. That’s not to say they won’t materialize, as they seem to every year or so. We’ll have contract bookings of $7 million or $12 million on a per contract basis. As we sit here today, it’s approximately the same number of opportunities, but not necessarily the level of overall contract value. Last year was unique for our business, and I look at where we stand now as a rebuilding of the pipeline as we move forward into '21.

Got it. One last question on gross margins; I think Ellen mentioned, I expect historical gross margins on DGI sales as well, or maybe I got it wrong, can you confirm that?

We actually did not comment on gross margin for DGI. I think it’s premature to comment on that right now, but I would think we’d be targeting 30% plus gross margins generally speaking for that product line.

Got it. Thanks a lot, Vince, and good luck for 2021.

Thank you very much. We’ll talk to you soon.

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

Good morning and thanks for taking my questions.

Good morning, Pete.

Vince, you talk about the $40 million to $50 million pipeline opportunity globally. Can you give us some sense of how that breaks down between the domestic and international pieces?

As we sit here today, I’d say it’s approximately $25 million domestic and then $15 million international, with the European marketplace representing the majority of that international piece.

Okay. Your business today is mostly domestic, and you could be looking for equal amounts coming from overseas. You mentioned talking or using partners. Do we have any sense of how many partners you’re talking to or using? How do you get people to be partners with you and try to market the APC systems?

When we talk about partners, we refer to either OEMs that require our solutions as part of their ultimate packages or installation contractors or engineering firms that provide turnkey installation work. These are companies we work with historically, but we are looking to build new relationships. It’s typically a contractor or subcontractor relationship with these firms.

And about how many such firms would you say you could characterize as having a relationship with now?

I’d say four to five that require our solutions.

Oh! Really? Okay.

Yeah.

I mean, I would have thought that on a worldwide basis, there could be multiples of 10 types of companies that you could work with, but you’re not working with them yet. Fair enough to say?

Well, there’s a differentiation. A firm that we would call a partner that we are aligned with on a bid-by-bid basis versus firms that we will bid to on a recurring basis because we know they’re looking for our scope of work, but we don’t necessarily have a recurring business relationship with them.

Yeah. Okay. And I have a question on the DGI Technology. You talk about higher capacity, which would be necessary for demos and maybe for many of the commercial installations ultimately as well. So what physical metric do you use to talk about the throughput of these systems? I heard you mention the dollar amounts, but give us some idea of what size and how you measure the size of such systems physically?

Understood. When we’re talking about delivery systems, we’re delivering pounds of oxygen per day into a body of water that needs treatment. For example, the system we have today delivers around 250 pounds per day of oxygen. There’s a requirement that will be several multiples of that amount to treat a body of wastewater. It’s going to vary by industry. We need to scale up as a next step, taking all of our learnings and incorporating them into our next phase of design.

Just a…

Go ahead, please, Pete.

Maybe a naive question, but if you want to make it say 3 times to 4 times bigger, why not just design the specs to make it physically 3 times or 4 times bigger? What else do you need to do besides scaling it up?

We need to ensure a couple of things. Scale-up isn’t always as straightforward. We need to ensure the various components required to do the scale-up function appropriately. Additionally, we are looking to build delivery systems that can be delivered in a repeatable way. For example, if we design a system capable of delivering 1,000 pounds a day and a customer requires 2,000 pounds a day, we may provide two 1,000-pound systems for flexibility. We need to be sure we’re scaling up in the proper way to meet potential customers' needs while considering all those factors.

Okay. Makes sense. One last question: the provision for doubtful accounts seems significant. Is a lot of that related to China, or is there some other stuff in there?

No, the majority of it is for China. Our collection efforts have been very strong, but we believe it is wise to account for the allowance regarding the China receivables.

Okay.

The reserve is about $1 million versus total possible collectability in China of approximately $2 million. We’ve collected and repatriated just under $2 million from China in 2020. At a minimum here in 2021, we’re going to be able to repatriate at least another $1 million from China and we’ll see what happens relative to outstanding collections after that. I have to tell you that I’m exceedingly pleased with the outcome regarding the wind-down from China and our ability to collect and repatriate those funds back to the United States.

Right. Okay. Thank you very much.

Thank you, Pete.

Thank you. It appears we have no additional questions at this time. I’d like to pass the floor back over to Mr. Arnone for any additional closing comments.

Thank you, Operator. I want to thank everyone that joined us on the call today. I want to thank all of our shareholders for their continued belief in Fuel Tech and the entirety of the employee team. As I mentioned, as part of my Q&A with Sameer, we are better positioned today as a company than we’ve been in approximately eight years from a strength of balance sheet perspective. We are dedicating all of our efforts right now to return to profitability and developing a growth-based platform of technologies for our future. Thank you, and have a good day.

Ladies and gentlemen, this concludes today’s teleconference and webcast. We thank you for your participation, and you may disconnect your lines at this time.