Fuel Tech Inc (FTEK) 2005 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter and year-end 2005 Fuel-Tech N.V. earnings conference call. My name is Cindy and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (OPERATOR INSTRUCTIONS) I would now like to turn the call over to Tracy Krumme, Director of Investor Relations. Please proceed.

Thank you, Cindy. Good morning and welcome to Fuel-Tech's fourth-quarter and year-end 2005 conference call. By now all of you should have received a copy of today's release. If you have not, please call 203-425-9830 and we will be happy to send you one.

Joining me on the call this morning is Ralph Bailey, Executive Chairman and Chief Executive Officer; John Norris, Fuel Tech, Inc.'s newly appointed President and Chief Executive Officer, who will be available for the Q&A session; Steve Argabright, Vice Chairman International of Fuel Tech, Inc.; and Vince Arnone, Senior Vice President, Chief Financial Officer, and Treasurer.

As a reminder, the matters discussed on this conference call, except for historical information, are forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in our forward-looking statements. The factors that could cause results to differ materially are included in our filings with the SEC.

The information contained in this call as accurate only as of the date discussed; and investors should not assume that statements made in this call remain operative at a later date. Fuel-Tech undertakes no obligation to update any information discussed in this call. As a reminder, this call is being broadcast over the Internet and can be accessed at our website, www.FuelTechNV.com.

With that said, I would now like to turn the call over to Ralph Bailey. Ralph, please go ahead.

Thanks, Tracy, and good morning to everyone. Before Steve and Vince report to you on our year-end results, which I know they are very anxious to do, I would like to comment on the moves that we have recently made to bolster our organization, looking at the expanding job that we have ahead of us.

During the last several months, your management and the Board has spent considerable time planning the Company's future. We looked back, and we looked ahead, and our conclusion was that we have come a long way and that we have a very exciting growth prospect ahead of us, all within our core competency, and all within the fairway of the business we're now in.

The top management moves we have made were carefully measured against the rapid growth that we foresee. Our game plan is not complicated. We're really focused on four major thrusts. First, we are adding management horsepower designed to achieve deeper and faster penetration of our domestic FUEL CHEM and our Air Pollution Control markets.

Secondly, we have identified the need and the market for both our FUEL CHEM and Air Pollution Control technologies and products beyond the borders of the United States. Particular focus is on Europe, Mexico, and China. We know that we can't cover the world, and these appear to be the sweet spots.

We also know that we will take time, expertise and tenacity to develop these markets. But importantly, we also know they are huge.

Third, we would like to deploy some of our cash buildup to acquire some additional technologies and products, as long as they fit and that they are essential to the customer base that we serve. In addition, we will continue to encourage the internal development of new products.

Fourth and important, we want to make certain that our engineering and service organizations keep pace with the expected rapid growth.

So the election of John Norris as President and CEO located in Batavia, and the election of Steve Argabright to the post of Vice Chairman to take on the international development, gives us two very strong experienced executives to get this job done.

So the modus operandi is straightforward, and that is to put the throttle full forward in the U.S. and jump on the international opportunities that we see. So with those comments, I will turn it over to Steve for the financial report.

Thank you, Ralph, and thank you all for joining us today. We are extremely pleased to report net sales for the fourth quarter of $16.3 million, up 110% from the $7.8 million in the fourth quarter of 2004. Net income for the quarter was $2.6 million or $0.11 per diluted share versus $1.4 million or $0.06 per diluted share in the comparable period last year.

As you know, we also reported all-time record annual revenues for 2005 of $52.9 million, a 72% increase over last year, together with all-time record net income of $7.6 million or $0.33 per diluted share compared to net income of $1.6 million or $0.07 per diluted share in 2004. We're very proud of these results and looking forward to another outstanding year in 2006.

Air Pollution Control revenues led the way to these record results, as they had all during the year. Starting with this segment, we continue to be extremely excited about the order flow as bookings for 2005 were almost $43 million; and we have already announced $8.5 million year-to-date in 2006.

Adding to the excitement of these numbers is that the bookings have been broadbased. Contracts have been received from utilities and industrial facilities, and have come from international as well as domestic customers.

Of particular note are the bookings we have received from our domestic alliance partners and from the People's Republic of China. As we discussed during the last earnings conference call, independent sources have projected a significant increase in electric generation in China over the next five years, much of it to be provided by coal-fired boilers.

I am very pleased to announce that FUEL CHEM revenues were also at record levels at $20 million for 2005, an increase of 25% over last year. This growth was achieved even though rail issues caused significant problems with Powder River Basin coal deliveries and high oil prices reduced oil-fired unit operating levels, both of which negatively impacted our results in this segment. Unfortunately, both of these issues are still present in 2006 and expected to be with us during the course of the year.

To provide a little insight into the impact of the rail issues, one of our major customers actually burned well over 1 million tons more coal than they received last year at a facility where our technology is installed on two units. Production at that same facility remains curtailed as they attempt to raise inventories to acceptable levels for the upcoming high-demand season.

As for oil, thus far in 2006 the production of oil-fired units has been curtailed even more severely than last year, due to the combination of high oil prices and unusually warm weather.

That being said, we remained very excited about the FUEL CHEM business and its future growth. In the last four-plus months, we've announced Targeted In-Furnace Injection demonstration orders on four coal-fired utility boilers and in two industrial facilities in the U.S.; expansion to a second coal-fired utility boiler in Italy; and the long awaited first commercial order for the technology in Mexico.

We have also successfully completed a TIFI demonstration on a large Illinois Basin coal-fired unit and are in active discussions with owners of other facilities burning this type of coal. As we discussed during the last call, we expect Illinois Basin coal to increase in popularity with the upcoming requirements to install scrubbers for sulfur dioxide control.

Also as we have discussed in the past, the regulatory accounting approach taken by the utility industry due to state utility commission policies can be an impediment to FUEL CHEM growth rates. Recently however, one of our customers gained permission to pass through the cost of our program as part of their fuel adjustment cost accounting, a very positive development. We also know of other utilities that are pursuing the same flexibility from their state regulatory commissions.

I want to say a few words about our development activities, because I feel they are extremely exciting for both of our business segments.

As mentioned in the past, we're working hard to commercialize a process to mitigate sulfur trioxide emissions, called Targeted Duct Injection, a spin-off from our Targeted In-Furnace Injection technology. Once successful tests have been completed, then we're looking at two additional projects.

Also related to Air Pollution Control, we are investigating potential opportunities to expand our clean coal activities to new areas such as the control of fine particulates, sulfur dioxide, and mercury emissions.

We have also recently completed a successful test of a high-temperature corrosion inhibition process, Targeted Corrosion Inhibition or TCI, which is specifically designed for the municipal solid waste incineration industry. We're not ready for commercialization yet but hope to be by the second half of the year. Vince?

Thank you, Steve, and good morning, everyone. As Steve mentioned, net sales increased 110% to $16.3 million, an $8 million increase over the fourth quarter of 2004. Net sales for the 12 months increased 72% to $52.9 million, a $22 million increase over 2004. Revenues for the quarter and full year were record achievements for the Company as a whole.

Net income for the fourth quarter was $2.6 million or $0.11 per diluted share, compared with $1.4 million or $0.06 per diluted share in the comparable quarter of 2004. Net income for the full year was a record $7.6 million or $0.33 per diluted share versus net income of $1.6 million or $0.07 per diluted share in 2004.

Net income for the quarter and full year included tax benefits of $228,000 and $419,000 respectively. These benefits predominantly represent the recording of non-cash tax benefits related to the anticipated utilization of deferred tax assets. On a pretax basis, net income for the quarter and full year was $0.10 and $0.31 per diluted share, respectively.

The fourth-quarter results reflected outstanding performance for the Company as a whole. Revenues from our Air Pollution Control business segment were $9.6 million, which represented a $5.6 million increase over the prior year. On a full-year basis, revenues from this business segment were $32.6 million, an increase of $18 million over the prior year.

Approximately $43 million in orders were placed in 2005. The backlog at December 31 was $28 million.

Utilities and industrial facilities both domestically and abroad continued to prove that Fuel Tech's technology is a viable tool in their ongoing compliance planning. Fuel Tech continues to work towards developing alliance agreements with critical customers looking to finalize their compliance plans.

The fuel treatment chemical business segment generated revenues of $6.6 million in the fourth quarter of 2005. FUEL CHEM began to exhibit some strengthening in the second half of the year, reflecting the benefit of new accounts and a third-quarter pickup in oil-fired business due to heat-related electricity demand. On a full year basis, revenues for the fuel treatment chemical business segment were $20.3 million, an increase of 25% over 2004.

This segment's growth, although indicative of the continued market acceptance of Fuel Tech's patented Targeted In-Furnace Injection technology, would have been enhanced had revenues not been hampered by the following circumstances during 2005.

First of all, demonstration programs. There were five demonstration programs, which did not yield commercial revenues at December 31, 2005. Two were structured as reductions in the commercial price offer to the customer. The impact of these two demonstrations was a reduction in revenues of approximately $500,000.

The remaining three demonstrations were structured on a cost share basis and did not reach their success evaluation dates until after December 31, 2005. Although approximately $600,000 in commercial revenue was not recognized in 2005 related to these three demonstrations, the large majority of this dollar amount has already been received here in the first quarter of 2006 due to the success of the largest of the three demonstrations.

The second issue, coal supply chain issues. As Steve noted, rail disruptions in the Powder River Basin during 2005 impacted several utilities' ability to receive and burn Powder River Basin coal. The required repair and maintenance work on several rail lines is expected to impact coal shipments in several parts of the country well into 2006.

Lastly, as Steve also noted, the high price of oil has resulted in reduced oil-fired electricity generation in the United States with a resulting negative impact on revenues from Fuel Tech's oil-fired customer accounts.

As Steve mentioned, the outlook for FUEL CHEM remains extraordinarily exciting. Western coals are being burned in larger quantities and at an increasing number of facilities due to its lower cost and lower pollutant content.

Further, during 2005, demonstrations were performed on utility units that burn Illinois Basin coal. The utilization of this coal, whose high iron content can create slagging and following issues, is likely to provide the FUEL CHEM product line with an additional market niche.

Gross margins for the Company as a whole for the fourth quarter and full year were 50% and 49%, respectively. This compares favorably with 44% and 46% for the same periods of the prior year.

For the Air Pollution Control business, margins have improved on a full-year basis to 49% from 42% in the year-ago period. The improvement is attributable to the mix of projects and to the superb performance of the Air Pollution Control sales and engineering teams.

For the FUEL CHEM business, margins have declined on a full-year basis to 50% from 52% in the year-ago period. This slight erosion stems largely from the program demonstrations that have not yielded commercial revenues, as I just mentioned.

SG&A expenses for the fourth quarter and full year were $5.5 million and $17.4 million respectively. Of the year-on-year increase of $4.6 million, almost $2.8 million was due to employee-related costs, including wages and benefits resulting from the addition of new personnel, recruiting costs, and incentive compensation. Revenue-related internal and external commissions accounted for $1.1 million of the increase.

The remainder of the variance is attributable to audit and audit-related fees for Sarbanes-Oxley compliance, and to legal and consulting fees derived from Fuel Tech's strategic desire to engage in business in new geographies.

Research and development expenses were at the same level for both 2005 and 2004. Fuel Tech continues to pursue commercial applications for technologies related to its core businesses, with a particular focus on the FUEL CHEM technologies.

As I have mentioned previously, on a full-year basis Fuel Tech reported a tax benefit of $419,000, with current and deferred tax expense being offset by deferred tax benefits, again related to the anticipated future utilization of deferred tax assets. These are predominantly comprised of the net operating loss carryforwards, and research and development tax credit carryforwards.

The balance sheet is showing the increased strength afforded by the leverage of Fuel Tech's business model. At December 31, 2005, Fuel Tech had cash and cash equivalents and short-term investments of $16.4 million and working capital of $19.6 million, versus $6.5 million and $11.3 million at the end of 2004.

Operating activities provided $11.5 million of cash in 2005, primarily due to Fuel Tech's operating profit before depreciation and amortization, while investing activities used cash of $6.3 million during the year. Of the $6.3 million, $3.5 million was used to increase the short-term investment balance and $2.8 million was used for equipment, primarily related to the fuel treatment chemical business.

Business activity continues to be robust for both business segments. We expect additional orders in the near term for the Air Pollution Control business, and strong revenues are expected through 2007. For FUEL CHEM, as Steve mentioned, our opportunities both domestically and abroad continue to look favorable.

In reviewing our outlook for 2006, we're projecting our full-year revenues to be in the 65 to $70 million range. We expect the FUEL CHEM business to generate 25 to $27 million in revenues, and the Air Pollution Control business to generate 40 to $43 million in revenue.

Our pretax net income for this revenue will be from $0.42 to $0.47 per diluted share. Now I turn it back over to Steve.

Thanks, Vince. In summary, we're absolutely thrilled about the record revenues and profits we achieved in 2005. Eclipsing the $40 million mark for APC bookings during the last year, including two major contracts from the People's Republic of China, is also an accomplishment to be proud of.

And we have begun 2006 on a similar track. On the FUEL CHEM side, our business momentum is excellent even with the impediments I mentioned, and we're extremely optimistic about additional new orders in the very near future, leading the way to significant growth for the year.

We are also excited about the development activities that are underway which could leverage our skills to new market opportunities. Operator, please open the call for questions.

(OPERATOR INSTRUCTIONS) John Quealy of Canaccord Adams.

Congratulations. A couple questions here. First of all, APC very strong in terms of past year performance and the outlook here. Can you comment on -- is it a lot of existing customers filling out the portfolio? Is it new customers? Can you give us a little bit of detail there?

John, it's both. Actually the alliance customers that we've enjoyed for quite some time certainly contributed heavily to the increase. But there were new customers as well. Of course, China also had its additional not insignificant contribution. So our Italian subsidiary had all-time record sales on the Air Pollution Control side. So it was a mix of all those things.

Okay. On FUEL CHEM, Vince, I may have missed this. You went through a couple of things that held back revenues this year, whether it's the demonstrations or the rails. Did you quantify the rail issue? How much it -- ?

I did not. I'm sorry, John, I did not quantify the rail issue specifically. I mean it was definitely a material impact on our business in 2005. If I was just to put a conservative number to that impact -- and Steve could comment as well -- I would say at least $1 million in revenues lost relative to that particular situation.

Yes, John, I would say that is a minimum. Also thrown into that mix is the impact it had on new business, on getting some new business started. Certainly some people slowed down their [test] burns of PRB, slowed down the amount of blending they were doing, just because they couldn't rely on getting that coal when they needed it.

So it not only was an existing account attrition situation, but it was a new account impediment, if you will.

I get you. In terms of the margins, APC came in pretty much as expected, although FUEL CHEM was actually up a little bit better than I thought it could've gotten. Can you comment on what popped the FUEL CHEM gross margins this quarter?

Right, we definitely can. As you know, when we engage in these risk share programs, sometimes we have a little bit of a deferral of revenue recognition. That is exactly what happened here.

We had some demonstration programs that were basically in-process during the first and second and third quarters of the year. Actually what happened is we had a pickup in the fourth quarter for demonstrations that actually came to their success evaluation period.

So had a pickup of around, I would say, $0.02 to $0.03 a share due to the realization of revenues from demonstration programs in the fourth quarter. So that is why we're seeing the favorable uptick in gross margins in the fourth quarter for FUEL CHEM.

I think the actual number is around 54% for the fourth quarter on FUEL CHEM; and on a full-year basis the FUEL CHEM gross margins were 50% overall. So we did see a nice pickup in the fourth quarter.

Okay. Then Vince, you've given us pretty good guidance for next year. If you could help us understand the moving pieces, obviously, we've got a little bit of a pickup in Q4 for some onetimes in the margin. That might come in a little bit.

But help us understand operating expenses and how all the moving pieces fit. It looks like you're increasing sales force efforts both internationally and [engineering] services domestically. Can you help us?

Also I guess you've got FAS 123 this year. Can you help us with the moving items on that line?

Obviously, we're going to see a nice increase in the SG&A line with regard to that increase in revenues that we are showing. I would say the exceptional impact -- I will talk to the exceptional impacts; that is probably easiest.

The FAS 123 stock compensation expense, historically as we have actually provided in footnotes to financial statements, we have had a $0.03 to $0.04 per-share impact of stock compensation expense. That covers '93, '94, and you will see a similar amount for -- sorry; 2003, 2004, and a similar amount for 2005 in our 10-K when that is filed later today.

I would expect a similar amount actually to flow through the profit and loss statement on that SG&A expense line in 2006. So I would factor in that $0.03 to $0.04 estimate for stock compensation expense for 2006.

Independent of that, it's going to be just a ramping up of some of our, obviously, our personnel requirements to meet the demand of additional accounts. Actually also to go ahead and service our international requirements as well; we will be adding staff for that area too. So difficult for me to say anything more than that at this point in time, John.

Okay, that fair. Just a final couple broad questions here. It sounds like this is the first time we have heard that a (technical difficulty) customer can get rate case recovery. Can you give us a little bit of background here?

When did they petition the PUC for that? Are other customers exploring that, or is it an industry lobbying effort? If you could just give us some background there.

John, unfortunately I cannot tell you the details exactly of when they filed, because I don't know. But we know of other customers that we have provided -- and we have discussed this at length in the past -- provided a white paper on some research we did with the state of Florida on how they got to this point.

We know that some of our other customers are very interested in going to their PUCs. Again it's something that we can provide assistance for, but we can't really get directly involved. We are thrilled that this first customer was successful in doing it and are very hopeful that others will have the same success in the very near future.

Okay. My last two. Mexico, you finally got a Mexican order. It's fairly small given the opportunity there. Can you talk about expectations moving forward and, I guess, Steve, your efforts in driving that market in particular in the next couple years?

I am going down there next week. There is a green affair going to be happening around the Monterrey, Mexico, area that some very high-level government officials are going to be attending, and I am going down.

We're in the process now doing a design engineering and building the equipment on this first application of these, on those three small boilers. That's underway right now.

We will be training an engineer or two from our distributor down there in the very near future, because we need local support there just like we need here. They are going to be providing that as part of our agreement.

As far as the next step, I think it's very difficult to comment on that, as far as the speed of step 2, if you will. But I know that there is a great need there. We have discussed that in detail in the past. We are very, very confident that we can provide the kind of results that that country as a whole needs to control a severe pollution situation.

So we're going to be pushing as hard as we can, as is our distribution partner. I really can't comment on what that is going to mean for 2006. Although we have not got a very large amount in the plan, it is just too hard to predict.

But don't overlook the goal of the future, knowing that that potential in that country is very significant. We have talked 20 to $35 million in the past. Of course now that we have got our foot in the door, that will become easier to define. Rather than such a broad range, we hope to have a better picture of it in the relatively near future.

My last question, if John is on the call, in terms of your goals for the next, I guess, year or 24 months, can you just comment on the work you have down with Fuel Tech before, and how that is going to change? Or what other doors you can knock on here in the next couple of years? If you could just give us your perspective.

Yes, John, I'm here, and it's good to talk to you again. Well, I think as Ralph said, we want to try to keep the foot on the accelerator in going after new clients. Hopefully my knowledge of the industry and contacts in the industry can help open some doors at executive levels for folks to give us a try.

These folks hopefully know that I would never recommended something to them that I didn't strongly believe in, and I strongly believe in Fuel Tech, the people and its technologies. I am very hopeful that that is going to lead to a quicker sales cycle with some significant clients.

Okay, if I could just throw in one more, you talked about M&A really pretty candidly. Can you talk about any particular areas that you would like? Is it more boiler maintenance type of stuff? Is it more mercury technologies? Can you give us an idea of what looks appealing for you folks?

I didn't get too specific, but I did mention that we have opportunities that have been brought to us relative to some clean coal activities on fine particulates, sulfur dioxide, and mercury. We are actively looking at all three of those situations. Hopefully, at least one, and it would be nice if all three came to fruition.

It is more of a joint development with those three technologies as it stands today, rather than an acquisition type. But we're certainly out on the look for acquisitions on any of those areas, or something else that, like Ralph said, that fits our core competency.

Steve, are there any hurdles, whether it is profitability, or accretion, or is it -- can you buy a technology company at this stage? Can you just give us an idea how you evaluate opportunities?

Well, that is a difficult (indiscernible). Certainly we want it to be accretive. It has got to fit, as Ralph said again; it has got to fit in more ways than just that. It's got to fit going forward. We have to make sure that the market that it would represent is real.

There is a lot of talk about the mercury situation, for example, how real is it? When is it going to be real? The regulatory situation is certainly unclear still.

So all those are factors in how much money you may spend on any one area, depending on the total evaluation of the company in one case or the technology in another.

Great. Thanks, guys.

(OPERATOR INSTRUCTIONS) George Gaspar of Robert W. Baird.

Great quarter. Question on the Mexico situation. You mentioned about gearing up for design engineering on three boilers, I believe it was. What do you see as a timeline to prove up the technology in some actual application runs, and start working toward some reasonable orders?

That is what is hard to predict, George. The equipment and so forth, the design of the equipment part of this particular contract should be done within the next four months or so. As far as when that will translate into chemical revenue, that is a little more difficult to say.

We certainly hope we would start getting chemical revenue from these small units late third quarter, sometime in that time frame. But again, it's very difficult to say.

Okay, now your thoughts on China penetration; you were very successful in generating some decent initial orders. Do you have any thoughts on the framework of how you view that market relative to where you thought it was going originally?

Let me tell you where we are today. In fact, our commercial person is leaving for China today on the next trip.

We have enlisted the help of a third party in China to help improve our local sales and marketing efforts. That gets the word out even better than we have already done. As you know, that is a massive country and there's projects underway at all over the place. So we're trying to get a little broader reach to make sure we don't miss something.

Also, important, we have interest from three technology suppliers to work with us to enhance our position and theirs as well -- combustion modifications, particulate control, and SCR catalyst, to name those three technology suppliers. So we have a broader offering when we talk to these major utilities.

In fact, in late May, May 30, I think, we are sponsoring a seminar in the Hong Kong area with the help of the U.S. Department of Commerce and the technology suppliers I just mentioned.

So we're going in it strong. I cannot tell you exactly when the next contract would come. I wish I could, but there is activity going on and we're pushing hard.

Our goals are really to maximize revenues but also, at the same time, to minimize risks, so we're going at it very carefully.

As Vince mentioned, part of our SG&A situation is we have spent and will continue to spend a significant amount of money on the legal aspect. We have got a law firm that is well represented both in this country and in China that we're working closely with. We're taking it one step at a time. The opportunity is significant and we want to do it the right way.

Okay. This may be kind of a far-out wild question, but is there any application of the FUEL CHEM side or anything that you have been working on, on the precipitator stack injection process, that could have an application to mine safety?

I don't know. We will have to give that some thought, George. With Ralph's background in that particular situation, I am sure that he will be thinking about that as well.

Yes, okay. All right. Thank you.

Tom Harenburg of Carl M. Henning, Inc.

Congratulations on a great quarter. What is the status of reflagging back to the U.S. of the Corporation?

We actually are about to engage in a project to get that done, actually. I don't have a time frame for you, but we're going to look to domesticate Fuel-Tech N.V., the current holding company, the current traded entity, back in the U.S.

Our time frame is this year. I don't have a specific date, as I said, but our time frame is this year and we plan on getting that done.

Great, thanks much.

(OPERATOR INSTRUCTIONS) George Gaspar from Robert W. Baird.

I want to just penetrate this precipitator stack thought that you have indicated in past quarterly calls, that you have been doing some testing on. I think you maybe alluded to it in some of the comments.

How far along is the testing in that direction? Do you see some application that could start to generate some revenues in '06? Or is that something that is out there a distance yet?

George, I think you must be referring to our efforts on sulfur trioxide control?

Yes, exactly.

Well, again, we had a successful full-scale test last year on an oil-fired boiler. Our goal has been all along to find the same kind of an opportunity on a coal-fired boiler, and we have found that opportunity. So yes, there will be some revenue in 2006.

Again, we feel that whether it be done with this Targeted Duct Injection or whether it be done with a combination of that and Targeted In-Furnace Injection, there's lots of different ideas on the best way to do that.

But the need for sulfur trioxide control in this country is growing and will continue to grow as more high-sulfur coal comes into play when scrubbers are installed later in this decade.

That is the primary driver in Mexico. Even though our technology that we're going to be applying there will also as a side benefit, I guess, control flagging, it is also aimed at sulfur trioxide control.

Because acid emissions, with the oil quality or lack thereof, that is the standard in Mexico, with very high sulfur levels and hide vanadium levels that do result in high sulfur trioxide emissions, that is the primary driver for this first contract.

However, the side benefit will be cleaner, more efficient, operation of the boilers themselves because of the [slide] control we also provide. So that market is a very exciting to us.

And it's growing in the U.S. This becomes a very much bigger issue for utilities every time they add an SBR to control NOx. One of the issues around adding SBRs is the generation of SO3 across the catalyst. So this is a growing market segment.

Okay, all right. Thank you.

Thank you. This concludes our Q&A portion of the conference call. I would now like to turn the presentation back to Steve Argabright for any closing remarks.

Thank you all for joining us today and your interest in Fuel Tech.

Thank you for your participation in today's conference. This concludes the presentation, and you may now disconnect your lines. Have a great day.