Greetings, and welcome to the Fuel Tech 2018 Second Quarter Financial Results Conference Call. [Operator Instructions] And as a reminder, this conference is being recorded. I’d now like to turn the conference over to Devin Sullivan, Senior Vice President of The Equity Group. Thank you. Please go ahead.

Thank you, Brenda, and good morning everyone. Thank you for joining us today for Fuel Tech's 2018 second quarter financial results conference call. Yesterday, after the close, we issued a copy of the release which is available at the company's website www.ftek.com. The 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 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, 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 which 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. 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. Overall, our Q2 results continue to reflect the themes of our ongoing operational improvement program. Our focus has been on increased revenue generation from our core business segments while leveraging the significantly improved SG&A profile that we've worked so hard to create with our cost-containment initiatives over these past three years. Our financial performance in the second quarter was unfavorably impacted by several items and I will discuss those in detail here shortly. On a overall basis, the business activity over the past few months since we last spoke is positive. As example's, first for our FUEL CHEM business segment. We recently added a new coal fire unit to our customer base for the first time in four years. This is the second unit as existing customer site and our program began hitting chemical just after July 1. When this unit runs at full capacity, it could generate between $200,000 and $250,000 in incremental revenue per month at our historic gross margin of approximately 50%, and we are very excited about this expanded business. Additionally, with the increased temperatures around the country during these past couple of months, coal fire dispatch is improved. And as a result, we currently expect good performance in the third quarter for our FUEL CHEM segment. Lastly, as of the beginning of July we completed a successful RECOVERY CHEM demonstration with our licensed fee Amazon Papyrus at a client site in Indonesia. With our program, the boiler ran for an excess of 160 days before we shut down for operational maintenance not related to the efficacy of our program. This customers previous longest running campaign was…

Thanks Vince, and good morning everyone. Revenues for the second quarter of 2018 totaled $11.8 million reflecting a $2.9 million revenue increase for APC offset by a $0.8 million revenue decline at FUEL CHEM as compared to the second quarter of 2017. APC backlog to revenue conversion remains strong through the second quarter based on our capital projects backlog at June 30, 2018 of $14.4 million, as well as promising pipeline of additional contract opportunities with potential customers of $10 million to $15 million which we expect to close by the end of the third quarter. We expect this conversion to continue throughout the remainder of 2018. Gross margin declined to 31.4% from 37.2% in Q2 2017 due to the revenue mix between APC and FUEL CHEM, as well as to the margin erosion on lower margin projects in our foreign geographies. APC gross margin was $2.1 million or 24.7% as compared to $1.4 million or 26% in the second quarter of 2017. FUEL CHEM segment gross margin was $1.6 million or 48% as compared to $2.2 million or 52% for the second quarter of 2017. The FUEL CHEM segment gross margin declined as a result of certain international project demonstration costs incurred during the quarter. For the full year of 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 $4.8 million or 38.9% of revenues from $5.9 million or 61% of revenues in last year's second quarter. On a sequential basis, SG&A declined from $4.9 million reported in Q1 of 2018. On a year-to-date basis SG&A declined by $1.4 million while revenue have increased by $6.4 million. For the second half of 2018, we expect increases in revenues and declining SG&A as compared…

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

[Operator Instructions] Our first question comes from the line of Pete Enderlin with MAZ Partners.

First congratulations on the continued good progress on the calls front, especially on the SG&A obviously. First question I have is related to this new coal-fired installation, that's obviously really good news and it can be very significant. The question is, is that sort of an unusual circumstances and a one-off kind of thing, or could it possibly lead to significantly more of those kinds of new installations.

Pete, I would - as we sit here right now, I would have to call it a one-off just to give you candied. The new coal-fired unit to our base at this point in time given the - just the negative influences on coal utilization is actually, it's quite accrue for the Fuel Tech sales team, I have to say. We have excellent relationships with this particular customer on both sides of our business both APC and FUEL CHEM and we were feeding on one unit at this particular customer site already, and we had been watching the potential need for our FUEL CHEM program on the additional unit and it came to a realization. So yes, we actually installed the equipment on the unit in the month of June and came up and running in the month of July, and so it was just a nice incremental benefit for the FUEL CHEM business at this point in time. And I will add that again, a coal unit capacity factors in general are still way down from what they were some years ago, and our FUEL CHEM program revenue generation is still tied to how these units are going to be dispatched, until it's really as simple as that. I am very pleased with the additional unit but to answer your question, I call it more than one-off today as we look at the marketplace.

Talking about the potential for orders, and I know there are no high clear guarantees, but you did say these are various stages of negotiation the 10 million to 15 million. Does that mean that there could be some potential slippage and when you get those orders? In other words, do you expect to close them in the third quarter but it's sort of question of whether it's early or late in the quarter.

And the answer would be yes. The timing in terms of when we are actually able to get under contract always have some variability to it, and that works with every contract that we negotiate with the customer. So we always try to speak in general terms Pete as you know in terms of timing on some of these events. What doesn't necessarily change sometimes is the requirement for a deliverable at a customer site, and so depending on when that deliverable is on a customer site, we try to work back and try to determine what needs to get accomplished between data contract and that deliverable date and that gives us an indication as to what our revenue and margin flow could be over a periods of time. So yes, there is some variability in that time frame but we have some good potential contract activity that we're working on right now that we're very pleased with and that we feel pretty confident about.

And then you mentioned additional opportunities for the fourth quarter. Can you give us some sense of magnitude of those opportunities, would that be roughly comparable to what you're looking out for the third quarter or something else?

Could be and actually has the potential to be perhaps a little bit higher but we have a variety of contracts call it in our near-term sales pipeline and then obviously as we look at our total sales pipeline which will cover the next couple of years, that’s going to be a larger possible scope of contract work but - before the end of this year, we're looking at some potential larger scale orders to come our way, and if that works out for us, yes, Q4 could we have a similar anticipation that we have for Q3.

You mentioned with regard to NanO2 technology that you're talking to existing clients. Which group of clients and what's the relevance of water technology to your existing clients?

Couple of comments there, our existing - first of all our existing customer base is quite broad. We have both obviously utility customer base and industrial customer bases as well. We have many long-standing relationships across utility and industrial marketplaces. There are water needs and water treatment you can say a more specifically all over a utilities like power generation plant site, whether they would be processed for a utilization uses, or otherwise and at the same thing at industrial clients site, whether it would be cleaning sludge ponds or other source of water treatment uses or basically finding out that there could be applications in all of those market segments. We are looking at some potential opportunities in oil and gas as well. They may not be our direct customers today with our current business segments but they could be potential uses for the water treatment solution in the future. So we’re finding that there are water treatment needs across all of our market segments where we've done business previously and our task has been to uncover where this existing technology could be applicable.

And then just one quick balance sheet question if I may. Are there accrued liabilities on the balance sheet which is a pretty big numbers, what are the main pieces of that?

So you're looking at both employee compensation and then the other accretive 2.9 million, lot if it is project accrual. So if you think about that, we have projects whereby we've got receipt of cash prior to execution of the work that would show up in other accrued liabilities is an item that we would have to provide for. So that's going to be most of the bulk of that is existing contracts that we have to execute on.

[Operator Instructions] Our next question comes from the line of George Gaspar, Private Investor.

Just a question ongoing on this potential build-up and backlog going forward. Could you breakdown - you've got a 14.4 million backlog and how much of that was domestic versus international?

One moment we are checking on this, but numbers right now it will - it is phenomenally domestic as we see it here right now. The great majority is domestic.

And then looking at the potential build-up in the third quarter here is 10 million to 15 million you're talking about. Can you just equate of that what's potentially domestic versus international?

We largely follow the same ratios George. It will sub largely be more domestic than international yes.

George to answer your question about 75% of the backlog at June 30 is domestic, the other 25% international.

75% is domestic, okay. All right, and while it was a good overview, just can you confirm your next presentation - is that going to be the ideas that was in Chicago here at the end of the month?

Yes, it will George. In my closing comments I'll note that we’re going to presenting here in the near term but thanks for publicizing that, I appreciate it.

This concludes our question-and-answer session. I would now like to turn the floor back over to management for any closing comments.

Thank you, Operator. I would like to thank everyone for their time today and for your continued support and interest in Fuel Tech. As George just mentioned, Fuel Tech is scheduled to present at a Three Part Advisors Midwest IDEAS Conference on August 30 here in the Chicago area, and we would hope to see some of you there. Thank you again for your support. We are looking to drive value for all of our shareholders and we look to speaking - we look forward to speaking with all of you again very, very soon. Thank you very much.

This concludes today's teleconference. You may disconnect your lines at this time. And thank you for your participation.