Gas Tech, Inc. (FTEK) This autumn 2023 Earnings Name Transcript

Gas Tech, Inc. (NASDAQ:FTEK) This autumn 2023 Earnings Convention Name March 12, 2024 10:00 AM ET

Firm Individuals

Devin Sullivan – Managing Director, The Fairness Group

Vince Arnone – Chairman, President & Chief Government Officer

Ellen Albrecht – Chief Monetary Officer

Convention Name Individuals

Amit Dayal – H.C. Wainwright

William Bremer – Vanquish Capital Market Companions

Jim McIlree – Dawson James

Marc Silk – Silk Funding Advisories

Pete Enderlin – MAZ Companions

Operator

Greetings, and welcome to the Gas Tech, Inc. Fourth Quarter and Full Yr 2023 Monetary Outcomes Name. Right now, all members are in a listen-only mode. A matter-and-answer session will observe the formal presentation. [Operator Instructions] As a reminder, this convention is being recorded.

I might now like to show the convention over to your host, Devin Sullivan, Managing Director of the Fairness Group. Thanks. Chances are you’ll start.

Devin Sullivan

Thanks, Melissa. Good morning, everybody, and thanks for becoming a member of us as we speak for Gas Tech’s 2023 fourth quarter and full yr monetary outcomes convention name. Yesterday after the shut, we issued a replica of the discharge, which is obtainable on the firm’s web site, www.ftek.com.

Our audio system for as we speak will likely be Vince Arnone, Chairman, President and Chief Government Officer; and Ellen Albrecht, the corporate’s Chief Monetary Officer. After ready remarks, we are going to open the decision for questions from our analysts and buyers.

Earlier than turning issues over to Vince, I might prefer to remind everybody that issues mentioned on this name, apart from historic data are forward-looking statements as outlined in Part 21E of the Securities Trade Act of 1934 as amended, that are made pursuant to the Protected Harbor provisions of the Non-public Securities Litigation Reform Act of 1995 and replicate Gas Tech’s present expectations concerning future progress, outcomes of operations, money flows, efficiency and enterprise prospects and alternatives in addition to assumptions made by and data at the moment accessible to our firm’s administration.

Gas Tech has tried to establish forward-looking statements by utilizing phrases resembling anticipate, consider, plan, anticipate, estimate, intend, will and related expressions, however these phrases will not be the unique technique of figuring out forward-looking statements. These statements are based mostly on data at the moment accessible to Gas Tech and are topic to numerous dangers, uncertainties and different components, together with, however not restricted to, these mentioned in Gas Tech’s annual report on Type 10-Ok in Merchandise 1A underneath the caption of Threat Elements and subsequent filings underneath the Securities Trade Act of 1934 as amended, which might trigger Gas Tech’s precise progress, outcomes of operations, monetary situations, money flows, efficiency and enterprise prospects and alternatives to vary materially from these expressed in or implied by these statements.

Gas Tech undertakes no obligation to replace such components or to publicly announce the outcomes of any forward-looking statements contained herein to replicate future occasions, developments or modified circumstances or for every other purpose. Buyers are cautioned that each one forward-looking statements contain dangers and uncertainties, together with these detailed within the firm’s filings with the SEC.

With that mentioned, I might now like to show the decision over to Vince Arnone. Vince, please go forward.

Vince Arnone

Thanks, Devin. Good morning, and I might prefer to thank everybody for becoming a member of us on the decision as we speak. We have been happy with our enterprise progress alongside a number of fronts in 2023. Complete income of $27.1 million was inside our earlier steerage vary and represented our highest annual income stage since 2019. Our APC enterprise section carried out properly, reflecting greater than $8.3 million of recent challenge awards through the yr, and we ended the yr with a backlog of $7.5 million at December 31, 2023.

Additional, we have been happy to announce the extra $2.1 million in new contract awards yesterday. We accomplished a profitable trial of our dissolved fuel infusion know-how in an aquaculture setting, and we consider that we’re properly positioned to commercialize DGI in 2024.

And lastly, we proceed to keep up a conservative value profile, with SG&A bills up modestly from 2022 ranges and ended the yr in a robust monetary place with $33.4 million in money and investments and no long-term debt. We’re most heartened by the progress we have now made in our DGI enterprise initiative in 2023.

Final month, we introduced the publication of a white paper that particulars the advantages of deploying DGI for oxygen injection at a shrimp farm in the US. As a reminder, our DGI know-how entails the environment friendly switch of excessive concentrations of fuel right into a physique of water via a patent saturator and a patent-pending injection array to drive chemical or organic reactions, resembling for wastewater remedy, odor management and PH adjustment, or for course of enhancements in industrial functions, or on this case, aquaculture.

Particularly, using DGI this location elevated shrimp manufacturing in comparison with conventional aeration strategies, and contributed to seemingly well being enhancements.

Demand for shrimp is growing globally, and inland shrimp farming is a vital supply to assist meet the rising demand in a secure and sustainable method, whereas lowering over fishing of the marine surroundings and reducing the general carbon footprint by lowering transportation prices.

By deploying DGI, producers now have a chance to enhance inventory well being and yields whereas reaching extra environment friendly operations instantly adjoining, to their buyer places. At current, we’re using DGI to deploy oxygen into our bodies of water. Nonetheless, we consider that DGI could be relevant for different gases as properly resembling, CO2 and Ozone.

DGI’s advantages embody the exact management of dissolved oxygen ranges, for all course of functions and talent to increase plant capability with out main capital growth or capital outlay odor discount, and minimal bubble formation for prolonged residence time.

We consider that DGI could be utilized throughout a number of finish markets together with pulp and paper, meals and beverage, chemical or petrochemical, water and wastewater remedy, horticulture and aquaculture. As a observe up, to the publication of our DGI white paper, we introduced our know-how and favorable findings from our aquaculture demonstration on the Aquaculture America 2024, convention final month. This annual convention supplies members and members, with the chance to remain present with technical developments and examine the most recent in services, within the aquaculture trade.

In current months, partially pushed by the curiosity generated after publishing and presenting our demonstration outcomes, we have now obtained a notable improve in inquiries concerning our DGI know-how, from potential clients in a number of finish markets together with, municipal odor management, pH management, for — municipal and industrial functions, agricultural functions and extra aquaculture functions. We’re at the moment in negotiations, with potential clients concerning on-site demonstrations of DGI and we’re concentrating on to signal our first industrial contract for DGI in 2024.

Lastly, to additional expedite the introduction of DGI into finish markets, we have now lately employed a former water and wastewater remedy govt on a consulting foundation. This particular person is properly skilled within the software of Dissolved Gasoline Applied sciences and we look ahead to his contributions over these subsequent a number of months.

Let’s now, please spend a couple of minutes discussing our FUEL CHEM and APC enterprise segments. As we had anticipated, revenues for our FUEL CHEM section declined from 2022 ranges, because of the results of hotter climate throughout the US, which impacted general demand and associated unit dispatch. Nonetheless, section gross margin was basically unchanged for the yr, and stay at historic ranges.

Our base FUEL CHEM unit rely, stays intact as we enter 2024, and for the primary time in a couple of years, I am very happy to say that we’re at the moment pursuing a number of extra FUEL CHEM growth alternatives, which might present incremental income contribution in 2024 and past. These alternatives are for each coal and biomass fired boilers. For 2024, excluding any materials incremental income from new enterprise growth actions, we might anticipate that FUEL CHEM income would stay at parity, with 2023.

With respect to worldwide alternatives for the FUEL CHEM section, we proceed to observe the chance to broaden the availability of our chemical know-how in Mexico, be our associate in that nation, to deal with the emissions created by the burning of high-sulfur gas oil, which is being undertaken with out the mandatory environmental remediation, and on the expense of the well being of surrounding communities.

In 2023, we executed a two yr extension to this system that we at the moment have in place at one facility. With the upcoming presidential election in Mexico in June of this yr, we consider that political stress is constructing in favor of our implementation of our FUEL CHEM program at extra services on this nation.

Our associate is at the moment in discussions with the state-owned utility CFE concerning the appliance of our know-how at a number of items.

Now turning over to our APC section. We benefited in 2023 from the continued adoption of our Extremely SCR, SNCR and FTC emissions management options at pure fuel and coal-fired items within the US, Europe, South Africa and the Pacific Rim, independence of the potential affect of favorable regulatory outcomes, which I’ll focus on right here shortly. We stay properly positioned to reap the benefits of present industrial finish market tendencies, which embody plant capability growth throughout a number of industries, the incentivized use of small generators to exchange conventional much less clear energy technology, the event of the biocarbon trade, the continued emphasis on the decarbonization on a world foundation and the concentrate on utilizing our ULTRA System as a secure supply of ammonia for SCRs at hospitals and universities throughout the US.

On the regulatory entrance, we proceed to observe progress associated to the adoption of the US EPA’s Cross-State Air Air pollution Management rule to satisfy the Good Neighbor necessities of the Clear Air Act, which we consider could be a potential catalyst for APC progress in 2024 and for the rest of this decade, as utility and industrial clients discover methods to additional cut back NOx emissions. We’ve got the truth is obtained and responded to a number of requests for budgetary proposals, as clients put together to deal with the upcoming compliance necessities as a part of their capital budgeting necessities for 2024 and past.

As mentioned on earlier calls, the rule at the moment obligates 23 states to cut back emissions of nitrogen oxides from energy crops and sure industrial services to restrict their affect on downwind states. The last word timing of the effectiveness of the rule is unsure as a result of a number of upcoming efficient states and sources have challenged the efficacy of EPA’s proposed regulation in a number of cohorts and stays of the effectiveness of their – of the rule have been issued for a lot of upwind states.

Final month, oral arguments have been introduced to the Supreme Courtroom by each events and we are going to intently monitor the potential affect of the Supreme Courtroom’s ruling on whether or not to remain the rule for all states when it’s issued later this yr. Along with the Good Neighbor rule, we’re additionally watching the progress of EPA’s rule for big municipal waste combustors, which is impartial of the Good Neighbor rule. This rule reduces the nitrogen oxide emissions necessities for big municipal waste combustor items.

Gas Tech has had a protracted historical past of aiding this trade in assembly their compliance necessities. And we have now had discussions with clients on this section to help them of their compliance planning. The municipal waste combustor rule is at the moment in a public remark interval with compliance deadlines anticipated someday within the subsequent three years.

Based mostly on our efficient backlog at yr finish, the enterprise growth actions we’re pursuing and our beforehand famous expectations for FUEL CHEM, we anticipate that complete revenues for 2024 will exceed the whole revenues acknowledged in 2023 of $27.1 million and we are going to present additional steerage as we transfer all through 2024. This base case outlook excludes any materials contributions from DGI, as we’re nonetheless within the early phases of business commercialization, any vital contributions to APC from the above referenced EPA laws and the affect of fabric enterprise growth actions for FUEL CHEM.

Now in closing, I need to take – to thank the Gas Tech workforce for his or her contributions to the development of our enterprise in 2023. It’s their continued onerous work, ardour and dedication that drive our means to achieve success. Moreover, I thank our shareholders for his or her continued help. We anticipate that 2024 will likely be an essential yr within the progress and evolution of Gas Tech and we look ahead to protecting everybody apprised of our progress.

With that mentioned, I might now like to show the decision over to Ellen to speak about our monetary statements. Ellen, please go forward.

Ellen Albrecht

Thanks, Vince, and good morning, everybody. The first takeaways from 2023 have been improved complete income, margin upkeep, a unbroken concentrate on value containment throughout the bigger framework of constructing out our DGI enterprise and a remarkably resilient steadiness sheet that allowed us to enter 2024 in a robust and safe monetary place. We achieved all of this whereas navigating some trade headwinds in our two major enterprise segments.

I will begin off as we speak by reviewing our fourth quarter outcomes. For the quarter, consolidated revenues declined to $6.3 million from $7 million in final yr’s fourth quarter, reflecting declines in each the APC and gas chem segments from the prior yr interval. APC section income marginally decreased to $2.8 million from $2.9 million due primarily to the timing of execution on initiatives and providers through the quarter. The gas chem section income declined from $4.1 million to $3.6 million, primarily on account of an anticipated lower in dispatch electrical technology demand from the very excessive ranges skilled in 2022 and modifications in product and gas utilization.

Consolidated progress margins for 2023 fourth quarter was 51% of revenues, a big improve from 43% within the fourth quarter of 2022, reflecting elevated APC section progress margin of 55%, up from 35% in the identical quarter a yr in the past. This increased progress margin for APC could be attributed to a change in challenge and product combine. Gas chem section progress margin remained basically unchanged at 48%, in keeping with historic efficiency.

Consolidated APC section backlog on December 31, 2023 was $7.5 million, up from a backlog of $5.6 million at September 30, 2023, and down barely from backlog of $8.2 million at December 31, 2022. Backlog on December 31, 2023 included $2.6 million of domestically delivered challenge backlog and $4.9 million of international delivered challenge backlog as in comparison with the $3.7 million of home challenge backlog and the $4.5 million of worldwide challenge backlog at December 31, 2022. We anticipate that $7.4 million of the present consolidated backlog will likely be acknowledged within the subsequent 12 months.

SG&A bills elevated to $3.7 million from $3.1 million in final yr’s fourth quarter, reflecting the timing of worker and employee-related bills. As a share of income, SG&A within the 2023 fourth quarter elevated to 58% from 44% within the 2022 fourth quarter. Analysis and growth bills for the fourth quarter rose to $367,000 from $179,000 in the identical interval a yr in the past, primarily attributed to continued funding in water remedy know-how and extra particularly, our DGI know-how.

Our working loss was $801,000 in comparison with $250,000 in final yr’s fourth quarter, reflecting a discount in general income, a shift in margin contribution from product combine, and better working bills for the quarter. We proceed to reap the benefits of the favorable rate of interest surroundings and as of December 31, 2023, have invested greater than $30 million in held to maturity debt securities and cash market funds.

This generated $322,000 of curiosity revenue within the fourth quarter and $1.3 million of curiosity revenue for 2023, up from simply $200,000 in 2022. Our web loss for the quarter was $539,000 or $0.02 per share in comparison with a web lack of $402,000 or $0.01 per share in the identical interval one yr in the past. Adjusted EBITDA loss was $646,000 in comparison with an adjusted EBITDA lack of $263,000 in the identical interval final yr.

Shifting to outcomes for the complete yr 2023, consolidated income rose to $27.1 million from $26.9 million in 2022, reflecting a 27% improve in our ATC section income offset by a 17% decline within the FUEL CHEM section. As beforehand talked about, the rise in APC section income is attributed to the timing of challenge execution and new orders, and a 50% improve in our ancillary product line. Income gas can section income decreased for the yr was pushed by decreased unit dispatch demand and unexpected plant outages skilled within the second quarter of 2023.

Consolidated gross margin remained flat at 43% in comparison with final yr, reflecting a rise within the APC section gross margin offset by a slight lower within the FUEL CHEM gross margin. APC section gross margin was primarily — progress was primarily on account of product and challenge combine.

SG&A bills for 2023 elevated by 4% to $12.8 million from $12.3 million in 2022, which fell throughout the low finish of the forecasted vary. We proceed to prioritize our strategic investments in assets to help present and upcoming enterprise initiatives whereas sustaining prudent value controls.

For 2024, we anticipate SG&A bills as we speak it is between $13 million and 13.5 million. Analysis and growth bills have been $1.5 million for 2023 in comparison with $895,000 in 2022. As Vince mentioned, our funding in commercializing our DGI know-how is a major focus for the corporate. Strategic expenditures on this space will proceed all through 2024.

Working loss was $2.7 million for the 2023 in comparison with a lack of $1.5 million in 2022, reflecting the change in mixture of section income and better working expense. Internet loss for 2022 was $1.5 million or $0.05 per diluted share in comparison with a web lack of $1.4 million or $0.05 per share in 2022.

Adjusted EBITDA loss was $2 million in 2023 in comparison with an adjusted EBITDA lack of 909,000 in 2022. We generated practically $700,000 in money from operations in 2023 as in comparison with a use of money of $4.1 million in 2022.

Lastly shifting to the steadiness sheet. Our monetary situation stays robust. As of December 31, 2023, we had money and money equivalents of $17.6 million and quick and long-term investments totaling $15.8 million. In 2023, our largest use of money was the incremental funding of $6 million in debt securities to drive a sustainable long-term monetary profile.

Working capital was $32.6 million or $1.8 per share. Stockholders’ fairness was $43.7 million or $1.44 per share. And the corporate continues to don’t have any excellent debt. We stay assured in our means to gas our progress initiatives, pursue new product and market alternatives and preserve our robust monetary place, which we view as essential as an essential aggressive benefit. To reiterate Vince’s earlier feedback, we’re happy with our outcomes and stay optimistic about our alternatives in 2024 and past.

I will flip the decision again over to Vince.

Vince Arnone

Ellen, thanks very a lot. Operator, I believe it is time to open the road for calls now. Thanks.

Query-and-Reply Session

Operator

Thanks. [Operator Instructions] Our first query comes from the road of Amit Dayal with H.C. Wainwright. Please proceed together with your questions.

Amit Dayal

Thanks. Good morning, everybody.

Vince Arnone

Good morning, Amit.

Amit Dayal

Hey, Vince. So it appears to be like like this yr goes to be an enormous focus for this yr. My one query is, how are these potential clients discovering out about DGI, are you able to simply give us a way of what you guys are doing by way of simply getting in entrance of this viewers?

Vince Arnone

Proper. So we over this previous six months, we have positively enhanced our advertising efforts. And as I simply famous, our presentation at Aquaculture America was really our first presentation at a water and wastewater remedy convention, and we obtain some very favorable affect from the results of that physique of labor.

So my remark could be we’re growing our publicity to finish markets. We actually wanted to have one thing to go forward and put on the market publicly that we will help as a part of our market attain out within the profitable demonstration that we did have within the app — software afforded us the chance to begin to go a bit of bit extra public with DGI and its capabilities.

And so my expectation is that’s going to proceed. We’re going to have extra of a name it a public face for DGI, nevertheless it additionally must proceed to be supported by particular favorable actions from finish outcomes of that of that know-how if you’ll. So we’re going to do extra demonstrations. We’re going to do white papers on these extra demonstrations and put these outcomes out publicly as properly. So once more high-level reply, we’re going to be on the market extra publicly with DGI in 2024 and past.

Amit Dayal

Understood. Thanks. After which the OpEx steerage — you offered for the yr, does that already embody a few of the advertising and type of regional enterprise growth efforts or will that probably be a bit of bit extra extra prices to your – regular type of working actions?

Vince Arnone

Sure, proper now the vary that Ellen $13 million to $13.5 million does embody a pleasant uptick in extra spending associated to the DGI advertising efforts. As we have mentioned our funding in DGI with this previous handful of years, we we have been very measured in how we have been investing as we see the chance to take a position based mostly on successes and we’ll go forward and improve that funding in these actions. So proper now I might let you know that the vary Alan gave does embody a pleasant improve in expenditures for DGI advertising efforts. If we really feel as if we have to do extra prospectively, we are going to share that with you on future calls.

Amit Dayal

Thanks. Understood. And possibly simply final one on these UPC and gas can companies. Sure, ought to we anticipate the second half to be stronger for these segments are, type of, evenly unfold all year long? It appears to be like like simply from the press launch and a few of your commentary possibly the second half appears to be like prefer it could possibly be both extra heavier by way of income versus first half of the yr?

Ellen Albrecht

As a common assertion I might say sure, that’s right. Based mostly upon the way in which we see issues proper now we might anticipate a stronger second half than first half of the yr.

Amit Dayal

Okay. In order that’s on-line and so forth given different questions offline. Thanks.

Vince Arnone

Thanks, Amit.

Operator

Thanks. Our subsequent query comes from the road of William Bremer with Vanquish Capital Market Companions. Please proceed together with your query.

William Bremer

Good morning, Vince.

Vince Arnone

Hey, good morning, Invoice. How are you?

William Bremer

Good. I need to particularly goal your — the Air Air pollution Management section — the APC section?

Vince Arnone

Sure

William Bremer

Concerning our product providing, how would you learn that?

Vince Arnone

I believe our product providing for these applied sciences is best-in-class for what we put out into {the marketplace} for SNCR and SCR applied sciences and Extremely as properly on their finest in school. We really for Extremely there’s there isn’t any aggressive product within the market as we speak domestically.

William Bremer

And I utterly agree with you. I imply it does. I have been with and having a cloth stake on this firm for north of seven years. My concern is on the gross sales entrance and the bookings. You already know, your Senior VP of gross sales has been with you over 25 years. I imply 25 years is a large period of time. You have voiced concerning the regulatory entrance the EPA and the great neighbors there — a serious catalyst for us going ahead. At what level does the Board should make a change right here to begin bringing in some competent people to ramp up the gross sales, make the most of the steadiness sheet and rent some govt VPs to go after the submissions alternative that is in entrance of us.

Vince Arnone

So to particularly tackle your query Gas Tech as an organization has a whole lot of longer-term longer tenured workers. I am in 24 years myself. And so I might put myself into the class has a whole lot of properly skilled people with Gas Tech that, I consider are nonetheless doing a reasonably darn good job, okay? So particularly on the APC aspect of the equation, as you word, what’s probably on the market associated to regulatory alternatives, I will let you know proper now that, there isn’t any one that’s higher positioned to capitalize on these alternatives ought to the regulatory necessities be formally put in place in a manner that drives enterprise, as a result of I can let you know proper now, I’ve seen that the proposals and work that we have put out to the utility buyer base on this nation that helps the work that we might be doing, if we had a agency regulation in place.

So, I’ve each confidence on the planet, Invoice, and also you and I’ve mentioned this beforehand, with the workforce that we have now in place, and I’m Chairman of the Board. So, I will converse on behalf of the Board as properly. We’re assured within the workforce that we have now in place to have the ability to seize these future alternatives which might be probably on the market for us. If that wasn’t the case, Invoice, we might be making dramatic modifications so simple as that. Easy as that.

William Bremer

I hope you are proper. I have not seen a ebook to burn ratio over 1.5 in years on this section.

Vincent Arnone

I do not disagree with you there. The tip markets, significantly on the utility section have been a bit of shallow over these previous a number of years. Happily, we have been supported by industrial market exercise, which within the absence of something that occurs regulatorily that base enterprise stage remains to be going to be there for us prospectively. It is the upside that we’re speaking about, and I believe we’re very properly positioned to seize the upside.

William Bremer

My second query, aside from your self stepping in just about yearly constantly, and I respect that in addition to my fellow shareholders. I’ve not seen any FORM 4 open market purchases from anybody else on the Board for years or your CFO, your division heads, et cetera. If the corporate is making a change and we’re promoting under a tangible ebook, as you articulated, and we’re flush with money, okay? When is the administration workforce going to step ahead right here and align themselves with present shareholders?

Vincent Arnone

It is a good level, Invoice, as you said. I have been on the market shopping for, there’s been at the least one different high-level officer of the corporate that has been on the market shopping for over these previous few years. We solely have three reportable workers that we type for as we sit right here as we speak. So there’s another exercise that the general public world doesn’t see relative to purchases. All I can say is that, it is troublesome for me to go forward and mandate that, whether or not or not it’s the Board or the management workforce troublesome to mandate that they take their private conditions and additional spend money on Gas Tech.

The Board and the staff of this workforce are already properly vested in Gas Tech. I can positively make that assertion, truthfully, and clearly. I believe you will see some extra purchases from the management workforce and our Board sooner or later. I simply cannot let you know when. However I can let you know, from my perspective, I’ve been a supporter and I’ll proceed to be a supporter from that perspective.

William Bremer

Thanks for that. I really do. I might welcome to see some extra gross sales hires. I believe that might be use of capital versus a dividend or share repurchase settlement. I believe we have to drive high line gross sales restructuring has been carried out about much less few years, and now it is time to develop the highest line. So I might echo and my fellow shareholders and I might hope the Board and your self resolve to begin hiring some extra gross sales personnel and those that are not producing should go at this level.

Vincent Arnone

Understood, Invoice. I respect your commentary as all the time, and I can let you know that we assessment each considered one of this firm on an annual foundation relative to efficiency. However as I mentioned, I’m very assured that we’re properly positioned to reap the benefits of alternatives which might be going to return our manner.

William Bremer

Thanks.

Devin Sullivan

You are welcome. Thanks, Invoice.

Operator

Our subsequent query comes from the road of Jim McIlree with Dawson James. Please proceed together with your query.

James McIlree

Thanks. Good morning.

Vince Arnone

Hey. Good morning, Jim.

Jim McIlree

Sure. Hey, Vince. I simply needed to ensure I heard your remark accurately concerning the APC income this yr. That assumes no affect from a possible favorable Good Neighbor ruling, is that right?

Vince Arnone

That is right.

Jim McIlree

And so — and I do know there’s a whole lot of distinction finish circumstances are on the ruling however are you able to sort of bracket what you assume which may do for APC over a few yr time interval. How massive of an affect do you assume it may need over a few years?

Vince Arnone

I am assuming it is fairly favorable. We went via roughly 9, 10 years in the past a situation whereby the effectiveness of regulation had a really, very favorable affect on the corporate as properly. However what I can say is that this, we have now $15 million plus in budgetary quotes to $50 million plus in budgetary quotes out to utilities on this nation to assist to help them with compliance.

The numbers it is larger than that. And it is every little thing cannot be achieved without delay clearly, so this is able to be applied over a — I will say, a 3 to 5 yr time horizon roughly, nevertheless it’s a magnitude over the APC income that we have generated over these previous three to 4 years. It is a materials affect on our firm. As I mentioned it’s one thing that we have handled traditionally. We might love to have the ability to tackle these wants once more.

Jim McIlree

Understood. Thanks. That is useful. After which my second query is, on the — you talked concerning the preliminary DGI contract this yr. And may you be a bit of bit extra particular on timing first half, second half? And simply how massive can these contracts be these preliminary contracts, are we speaking sub $1 million or are we speaking larger than $1 million?

Vince Arnone

Proper. So in your first query, I might take a look at second half of the yr from a timing perspective. After which in your second query, I might in all probability anticipate the primary system gross sales that we’ll see which might be they will be sub $1 million and never lots bigger than $1 million. Our smaller techniques are wherever on the $100,000 to $200,000 vary assuming it might be a capital sale. A number of the bigger scale techniques are certainly going to probably exceed $1 million. Utterly will depend on the magnitude of the method surroundings that we’re trying to deal with. However once I take a look at one thing commercially taking place this yr, I believe we’re in all probability seeing one thing extra on the smaller aspect than on the bigger aspect.

Jim McIlree

Okay, nice. Thanks, and that is it for me. Thanks.

Vince Arnone

Thanks, Jim.

Operator

Thanks. Our subsequent query comes from the road of Marc Silk with Silk Funding Advisories. Please proceed together with your query.

Marc Silk

Hey, Vince. How are you doing?

Vince Arnone

I’m good, Marc. How are you doing?

Marc Silk

I’m doing properly, fantastic. Thanks. So, let’s go and say let’s follow the Good Neighbor rule. Is that you simply mentioned you’ve got seen obtained a bunch of requests, et cetera, I believe largely from downwind states or upwind or it’s combine?

Vince Arnone

I might say, predominantly upwind however some downwind.

Marc Silk

Okay.

Vince Arnone

Predominantly upwind people and once more, taking a look at their potential vary of final result given what manner the regulatory guidelines falls.

Marc Silk

Right.

Vince Arnone

Sure.

Marc Silk

After which, so like on the $50 million plus of — let’s simply say potential there, I do know it could possibly be much more. Is that like a 50-50 combine?

Vince Arnone

I might say, it might be extra in favor of upwind.

Marc Silk

Of upwind, okay.

Vince Arnone

Sure.

Marc Silk

After which on the DGI, you talked concerning the a number of finish markets. You talked about a bunch of issues like municipalities, et cetera. And for instance cash was an object that you simply had an infinite funds, limitless money. The place would you aggressively be placing cash based mostly on what you’ve got seen to this point? Or is it too early to sort of say, look, that is extra of a hypothetical simply so we will sort of see the place possibly the some the most important progress can come from over the following few years?

Vince Arnone

Proper. I — to be trustworthy, I might say that it is untimely for me to say, the place we might make investments nearly all of that capital, assuming we had finish pockets, if you’ll. It is untimely to say. We’re on the lookout for what I might name near-term alternatives for achievement of the know-how to type constructing blocks for no matter comes prospectively from that.

We have to construct the success constructing blocks. The demonstration we did final yr was a type of. We want extra of these finish markets to show out the viability of the know-how. After which as soon as we have now a bit of bit extra of that data, we will then higher assess the place our funding {dollars} are going to be higher spent relative to approaching one finish market over one other.

Marc Silk

And so far as municipalities, what are a few of the areas they’re taking a look at? I do know you talked about it earlier, however I can not learn my notes right here.

Vince Arnone

One of many ones we’re taking a look at right here close to time period is definitely an odor management software for a municipal water carry station. That is an enormous downside for them, however there’s different functions for municipalities that we’ll be capable to tackle as properly. This one for odor management is a right away requirement for us.

Marc Silk

Nice. Thanks for taking my questions.

Vince Arnone

Thanks, Marc. Respect it.

Operator

Thanks. Our subsequent query comes from the road of Pete Enderlin with MAZ Companions. Please proceed together with your query.

Pete Enderlin

Thanks. Good morning.

Vince Arnone

Hey, good morning,

Pete Enderlin

I simply have a few questions. You have talked about a whole lot of completely different alternatives for the DGI know-how. One that you simply did not point out, and I do not know if it is really legitimate or not, and that’s associated to 3M. Final June, 3M agreed to pay $10.3 billion over 13 years for the remediation of perpetually chemical compounds and consuming water. That is some huge cash, clearly. And so the query is, will or might DGI play a job in that course of? I imply I am positive that there is some filtration and different stuff happening to take away these chemical compounds, however would DGI improve that course of? And is {that a} legitimate alternative?

Vince Arnone

As we take a look at it proper now, Pete, DGI wouldn’t have a direct affect on PFAS/PFOS Eternally Chemical substances. It is — to your level, it is a very, very, very extensively watched space as we speak on a world foundation. And the EPA is popping out with regulatory necessities and steerage that I do not assume anybody can obtain at this time limit, as a result of nobody has all of the solutions. It is one thing we’ll watch intently.

Once more, to your level, to see if DGI can assist improve sure whether or not or not it’s chemical-related processes or in any other case that might tackle the perpetually chemical problem. However as of as we speak, it is not one thing the place we’re counting on that finish market is one thing that we’re specializing in proper now, however it’s one thing that we’ll watch.

Pete Enderlin

Thanks. After which one for Ellen. The SG&A expense within the fourth quarter was $3.7 million versus $3.1 million. And the press launch says to the timing of worker and employee-related bills. Are you able to simply elaborate on that a bit of bit? Was there something type of non-recurring in there? As a result of clearly, should you annualize $3.7 million, it is much more than your projected stage for this yr.

Ellen Albrecht

Right. There have been some worker and employee-related bills that final yr have been unfold out during the last six months of the yr. And in 2023, simply occurred to all hit in This autumn.

Pete Enderlin

Okay. So, it is nothing particularly identifiable as non-recurring, simply principally because it says, the timing.

Ellen Albrecht

Right. It is simply timing.

Pete Enderlin

Okay. Thanks lots.

Vince Arnone

Hey, Pete, thanks.

Ellen Albrecht

Certain.

Operator

Thanks. Girls and gents, there are not any different questions at the moment. I will flip the ground again to Mr. Arnone for any closing feedback.

Vince Arnone

Thanks, operator. As soon as once more, I might prefer to thank everybody who participated within the name as we speak. I might prefer to thank all of our shareholders, and naturally, the whole thing of the Gas Tech worker workforce. As each Ellen and I famous, 2024 is certainly a crucial and pivotal yr for Gas Tech. And as we transfer all year long, we’re excited. And we look ahead to having additional discussions with everybody at later deadlines this yr. Because of everybody, and have an ideal day.

Operator

Thanks. This concludes as we speak’s convention. Chances are you’ll disconnect your strains at the moment. Thanks to your participation.