Greetings, and welcome to the Fuel Tech 2018 First Quarter 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. [Operator Instructions] 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. Mr. Sullivan, you may begin.

Thank you, Doug, and good morning everyone, and thank you for joining us today for Fuel Tech's 2018 first quarter financial results conference call. Yesterday, after the close, we issued press release, a copy of which is available at the company's Web site www.ftek.com. Speakers on today's call will be Vince Arnone, Chairman, President, and Chief Executive Officer; and Jim Pach, the company's Principal Financial Officer. After prepared remarks, we will open the call for questions from our analysts and investors. Before turning things over to Vince, I'd like to remind everyone the matters discussed in 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 Fuel Tech'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 the 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, but 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 including, but not limited to, those discussed in Fuel Tech'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. These could cause Fuel Tech's actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities 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, 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, Chairman, President, and CEO of Fuel Tech. Vince, please go ahead.

Thank you, Devin. Good morning, and thank you everyone for joining us on the call today. I am here today with Jim Pach, our Principal Financial Officer, and Controller. It has been less than two months since we last spoke on our fourth quarter 2017 conference call, so we will look to keep our commentary brief this morning with a specific focus on what has transpired during this short period of time. We are very pleased to report that our first quarter financial results are in line with our internal projections for 2018. And we remain on track for a significant improvement in operating performance for the full-year 2018 versus our recent financial performance. In the past couple of months, we have gained further confidence that we will be able to meet our full-year financial target for 2018. And concurrently, we have made some good progress on our market discovery and technology development efforts for our new strategic venture directed at providing environmental solutions for water. To start, let's discuss our performance in the first quarter of 2018 in more detail. Revenues rose 15.6% to $12.8 million from $8.5 million in last year's first quarter which reflected the timing of project execution on new orders realized in 2017 and 2018. Our backlog at December 31, 2017 was approximately $22 million. And we expect great majority of this amount to be recognized as revenue in 2018. SG&A declined to 4.5% to $4.9 million from $5.2 million in the first quarter of 2017; the reduction being the results of our previously announced cost reduction initiatives over the past three years. We reported an operating loss from continuing operations of $184,000 which narrowed significantly from an operating loss from continuing operations of $1.8 million in last year's first quarter. Net loss from continuing…

Thanks, Vince, and good morning everyone. Revenues for the first quarter of 2018 totaled $12.8 million reflecting a $4.6 million revenue increase for APC, offset by a $200,000 revenue decline at FUEL CHEM as compared to the first quarter of 2017. APC backlog-to-revenue conversion remains strong through the first quarter, and we expect this conversion to continue throughout the rest of 2018. Gross margin declined to 39.3% of revenues, from 43.8% in Q1 2017 due to the revenue mix between APC and FUEL CHEM as well as certain product demonstration expenses. APC gross margin was $3 million or 34.8% as compared to $1.5 million or 37.5% in the first quarter of 2017. FUEL CHEM segment gross margin was $2 million or 48.5% as compared to $2.2 million or 49.5% for the first quarter of 2017. For 2018, we are targeting a blended gross margin of between 35% and 40%. Selling, general and administrative expenses continue their downward trend coming in at $4.9 million as compared to $5.2 million in last year's first quarter. With our three-year cost savings plan substantially completed for 2018, we expect SG&A to be between $17 million and $18 million with research and development costs of between $1.3 million and $1.4 million. R&D expenses were just under $300,000 for both the first quarter of 2018 and 2017. We are continuing to support new product developments and exploring ways to diversify our products in market for our R&D efforts. We continue to expect R&D spending in 2018 will increase slightly from our 2017 spending level because of these initiatives including our recently announced entry into the water and wastewater treatment market. We reported a loss from continuing operations of $184,000 down significantly from a loss of $1.8 million in the first quarter of 2017. As Vince noted,…

Okay, thank you, Jim. Operator, let's go ahead and open up the line for calls. Thank you.

Thank you. [Operator Instructions] Our first question comes from the line of Pete Enderlin with MAZ Partners. Please proceed with your questions.

Thank you. Good morning, Vince and Jim.

Hey, Pete. Good morning, how are you doing?

Congratulations on the positive trends in the quarter. The backlog was down a little, orders were as you said roughly $6 million, can you give us some sense of the outlook for the pipeline in the APC segment, and how you see that order pattern trending over the rest of the year?

Sure, Pete. Thanks for the question. Yes, the orders to date perhaps a little bit lighter than we had expected thus far for 2018, but we are not concerned by that. We have a handful of projects as we sit here today that are on the process of - let's call it, it's ongoing cycle of us bidding the project going through discussions with customers and then finally coming to contract award. So I'm expecting to have some contract awards come through here in the near-term, but largely speaking, Pete, I think we are looking at a call more of a second-half of this year loaded project award cycle, if you will, which is not necessarily uncommon. Backlog, as you noted is down little bit, but it's still at a good level right now. And so we have some good contract revenue to go through our profit and loss statement, but generally speaking, I would expect to see a little bit of a second-half of 2018 load in terms of new contract awards. But as I said, we are expecting some new contract awards here in the very near-term.

And I think there was a comment that there's especially good potential in the U.S, but what about some of the international markets. Could you see a pickup there too?

I wouldn't necessarily see a pickup from decent trend right now for the international markets where we're looking at what I would call, more status quo, but we are as you noted the U.S. market is showing a nicely increased trend from what we've seen in this past, call it, year and year-and-a-half time frame. So we are excited about that.

And product demo expenses put some pressure on gross margins, is that mainly that [technical difficulty] in Asia, can you expand a little bit?

I can, yes. Yes, we've been talking about the demonstration for the recovery [indiscernible] technology for couple of quarters now. And during the first quarter of this year, we had in excess of $100,000 in product demonstration expenses for that demonstration in Asia. And that's negatively impacting the FUEL CHEM gross margin on the quarter, but that simply our investment and what we think is a wonderful opportunity that could come our way in the future with success at this demonstration and then hopefully a nice expanded rollout to other customers in that geography.

Okay, thank you. And in the press release you said that the trend in the FUEL CHEM segment should be about like 2017. Does that mean - well, it could mean a few different things, like the fourth quarter which was down a little bit, the full-year which was down, or maybe a run rate similar to the fourth quarter. I'm not quite sure how to interpret that statement of regarding the total revenues for 2018?

Right, we were looking at revenues for 2018 to be similar in nature or to approximate what we achieved in 2017 year-on-year for the full-year.

Full-year, okay. Yes. Thank you. And then, you have - the breakdown of the revenues and assets between domestic and international shows a lot more international assets proportionally to the revenues, and I know that's total assets and lot of working capital, and that sort of thing, but is there any other reasons for that? Do you have any plans to try to adjust that that balance between domestic and international assets?

Yes, the primary driver there, Pete, is some of the larger accounts receivables balance that we actually carry in the China geography. Timeframe for collection there are typically a little bit longer in nature. So we'll carry a larger balance for an extended period of time as opposed to other geographies. That's really the only driver that I can point too.

And are there any efforts to try to change that flow a little bit or is that just kind of the way it is?

We've been trying to change the flow for about 10 years now. Actually I think we've done a pretty good job. It's the focus of the company on a week-in, week-out basis. But doing business in China is unique, it's something that we've experienced again over the past decade, and we do our best day in and day out to ensure that we get our cash in hand as quickly as possible.

And then one last nitpicking kind of question, you have almost zero interest income with $12 million in total balances. Is there any particular reason why it shouldn't be a little higher than that?

The available rates of interest on holding money and our cash accounts is really to minimize I wish there was something they knew about that but unfortunately just that just be related today. Just in something that over time when we've had more expensive cash balance we would have had an opportunity to perhaps said aside cash in other call it highly secured short-term investments but our cash balance right now is something we manage very closely on a global baiters. And we want all of that cash available in our operating account just to ensure that we can need business needs.

Okay, again congratulations on the quarter and thank you for the good work.

Thank you very much, Peter, will talk to you soon.

Our next question comes from the line of George Gaspar, a Private Investor. Please proceed with your question.

Yes, good morning Vince and everyone else there.

Hey, good morning George.

Vince, good morning again, and that's the last question or comment at the beginning, congratulations on the great work you're moving forward and cleaning up situations in the last year to two years and I mean this company set to really and then several fronts and my perspective is that as you look at the broadening perspective at the international market that you're attempting to penetrate and what would be the one, two, three how would you set them up is most where the expectation level would be for success by countries or whatever if you could answer that please?

We'll do, George. I think right now as the company we're most excited about what we're doing with the RECOVERY CHEM demonstration out in Asia, actually this demonstration is in Indonesia at a plant there. The success of this demo is really important to us to go ahead there and expand their technology and their geography. We do have our agreement as license and implementation agreement with Amazon Papyrus, so we're going to be receiving a royalty fee, once we are successful but if we were we'd be very happy to have a handful or more successful installations out there which will just generate and drive some very nice cash flow for the company from that region, so I'd say we're most excited about that opportunity internationally as we sit here today the Mainland China marketplace for our existing technologies that we have put in play in that marketplace today. I think as I had noted previously with more status quo in terms of what we're looking to generate from a revenue flow at this point in time that as for our current products that we're offering to that marketplace and in Europe again we're watching some of the call it coal-based countries look to make their move them from technologies Poland, Czech Republic and the like Turkey as well. And so we were following and tracking project opportunities in those countries as well which could provide a nice benefit to us in the future also, so prioritization I would go with RECOVERY CHEM and the deployment of that technology secondarily expansion of air pollution control technologies and more the coal in European countries and then geography for existing products I just call that status quo right now.

Okay, all right. Thank you and then just more comment on from you on the water treatment prospects it's, I think it's a very strategic positive move that you're making and do you, I know it's really for you to try to put your finger on the logical cap maybe one or two areas that you want to attack but I would think that you mentioned looking at the oil and gas area and the expense of that market is so broad and necessary going forward. Do you think that you will really try to put some effort into that?

We definitely will, George, some of our initial discussions have been with again some of our friends in that market space and we believe based upon what we know today that there should be an opportunity for the deploying this technology that marketplace will all we'll know more as we have the detail sit downs with a handful of customers in that space but there is a space that we are going to look to attack. Yes.

Okay, all right. And then one last one on the backlog it was down and that's understandable and you had mentioned going forward the prospectus for accelerating the order flow in the second half of the year. And I don't know if you want to answer that question but do you think that going into the end of the year 2018 your backlog could be at least as good as where was at the top of early this year?

It obviously it's a difficult question to answer based upon the timing of bookings but I'll say that I think we have a good opportunity to be at that level or a higher. If certain project opportunity come our way. We again we have an underneath portfolio of opportunities that we're looking to address in the remainder of this year and some of them are larger dollar value in nature. And so, but I would say yes that there is the opportunity for us to have any a larger backlog at the end of 2018 than we did at the end of 2017.

Okay, all right well thank you kindly and good luck going forward.

Thank you, George. Have a good day.

[Operator Instructions] There are no further questions in the queue. I'd like to hand the call back to management for closing comments.

Thank you, Operator. I'd like to thank everyone for their time today and for your continued interest in Fuel Tech. For everyone's information we are scheduled to present at the LD Micro Conference on June 5 in Los Angeles, California and we hope to see some of you there. As the final comments many of you knew or as met our former Chief Financial Officer Dave Collins is for great sorrow that I report that Dave passed away last week after a battle with cancer. As a company, we are grateful to have known Dave and our thoughts and prayers are now with Dave's family. I'd like to thank everyone for their time today, and everyone have a great day. Thank you.

Ladies and gentlemen, this does conclude today's conference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.