Greetings, and welcome to the 374Water Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions]. As a reminder, the conference is being recorded. I would now like to turn the call over to our host, Heather Crowell, Investor Relations..

Hello, everyone, and welcome to 374Water's third quarter 2024 earnings call. My name is Heather Crowell, and I'm here today with our President and Chief Executive Officer, Chris Gannon, and Chief Financial Officer, Adrienne Anderson.

During today's call, we may make projections and other forward-looking statements under the Safe Harbor provisions contained in the Private Securities Litigation Reform Act of 1995 regarding future events, or the future financial performance of the company.

These statements may discuss our business, economic, and market outlook, growth expectations, new products and their performance, cost structure, and business strategy. Forward-looking statements are based on information currently available to us and on management's beliefs, assumptions, estimates, and/or projections.

Forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties, and other factors. We refer you to documents the company files from time-to-time with the SEC, specifically the company's Form 10-K and Form 10-Q.

These documents identify important factors that could cause actual results to differ materially, from those contained in our projections or forward-looking statements.

All statements made during this call are made only as of today, November 14, 2024, and the company expressly disclaims any intent, or obligation to update any forward-looking statements made during this call to reflect subsequent events or circumstances, unless otherwise required by law.

Note that our earnings release and transcript will be available on the Investor Relations page of our website. At this point, I will turn the call over to President and CEO, Chris Gannon..

capital purchase, lease and destruction-as-a-service or DaaS. Large municipalities typically desire to outright purchase the equipment within their facilities. So there may be some instances where these large municipalities opt for our DaaS model.

Smaller municipalities, landfill operators and many industrial clients are drawn to our DaaS model, which provides access to our waste destruction technology without significant upfront investment.

Federal government customers, including the military have also consistently articulated desire for our DaaS model, with centralized destruction facilities as well as mul-karan [ph] type structures to facilitate on-site destruction. Finally, TSDF market participants have been focused on our DaaS model and waste destruction and revenue sharing.

While we are in the early stages of making these agreements, we are increasingly bullish on these opportunities to generate meaningful revenue. We will naturally keep you informed as our procurement vehicles in our discussions of these market per verticals evolve. Now, let's turn to how we fund all of these opportunities.

As previously disclosed, we are actively raising capital to expand our company, and we'll be providing public disclosures on our progress here shortly. As mentioned previously, we have a backlog in pipeline of $1.8 billion in near-term capital sale and destruction-as-a-service revenue opportunities, which require capital to execute.

In addition, we have discussed the need to expand our team to more rapidly commercialize our AirSCWO technology across several waste streams, including biosolids, AFFF firefighting foam, landfill leachate and other PFAS contaminated liquids as well as build, sell and deploy our technology across these markets.

First, we plan to expand our engineering, field and manufacturing teams to fast-track technology commercialization and deployment. We are focused on advancing engineering efforts through parallel development paths to identify and resolve potential failure modes, ensuring the technology's resilience.

At the same time, the company intends to deploy field teams to conduct demonstrations across various market segments to gather critical data and validate the technology as well as begin to execute on DaaS revenue opportunities, particularly within the AFFF destruction market. Second, we plan to make key strategic hires.

We are currently meeting with accomplished Chief Technology Officer Candidates with deep, proven backgrounds in technology development, commercialization and deployment, and we intend to announce our new CTO shortly.

The CTO is an important hire as we scale our engineering organization to effectively execute our development, commercialization and technology deployment goals.

Third, we intend to establish a dedicated manufacturing and engineering facility that will enhance production capacity, improved quality control, and support ongoing innovation as the company scales to meet growing market demands.

Fourth, we are actively building two AS1 units which are hyper-mobile for on-site demonstrations and destructions, including near-term revenue-generating AFFF DaaS work.

In addition, we are constructing multiple AS6 units, one to deploy to Orange County Sanitation in 2025, another to potentially deploy to a TSDF partner, and one to begin generating AFFF DaaS revenue.

Finally, we are in the process of creating an independent industry advisory board consisting of experts with critical connections and expertise across our municipal, federal, industrial and TSDF market verticals.

This advisory board will support leadership and the Board of Directors to strategically and quickly explore and unlock new market opportunities, which will enable us to more rapidly scale our business.

In summary, 374Water's AirSCWO technology is tackling some of the world's most critical waste challenges with a solution that is both unmatched in its commercial efficacy and scale. We have made substantial progress on the path to commercialize our technology across both solid and liquid waste streams.

We continue to build a robust backlog and pipeline of actionable opportunities, which now totals more than $1.8 billion. In addition, we are pursuing near-term revenue opportunities across our AirSCWO capital sales, emerging destruction-as-a-service business model, destruction demonstrations, and our lab tests.

The progress we've made over the past six months is significant, and I am confident in our ability to continue driving value for our shareholders. Thank you for your support and interest, and we look forward to sharing more updates in the coming months. With that, I'll hand it over to Adrienne to update you on our financials..

Thank you, Chris. Today, I'll discuss our financial results for the third quarter of 2024, which reflects our business evolution as we began scaling our business and enhancing our financial position. I'll touch on a few key metrics for the first three quarters of 2024.

For the nine months of 2024, the company generated revenue of $434,000, compared to approximately $864,000 for the nine months of 2023.

As we start to reach the end of the assembly and fabrication work on our sold unit, our direct cost decline, which has resulted in a reduction of our equipment revenues of approximately $527,000, offset by an increase in our service revenues from our treatability studies of approximately $97,000.

Further, during the quarter, we deployed our owned AirSCWO unit to the City of Orlando for the waste destruction demonstrations previously discussed. We anticipate recognizing revenue from this deployment as we complete these demonstrations during Q4 2024.

Total operating expenses increased from $5.2 million in the first nine months of 2023 to $7.8 million in the first nine months of 2024, driven primarily by an increase in our general and administrative expenses of approximately $730,000, an increase in our professional fees of approximately $1.58 million and an increase in research and development expenses of $581,000.

Increases in general and administrative expenses stem from the continued efforts to build out and establish our executive team as well as the relocation of our manufacturing facility and continued commercialization and growth efforts.

Increase in our professional fees are primarily non-recurring expenses related to the settlement of a legal matter and the changes in our executive leadership and Board of Directors that have been previously disclosed.

The increase in our research and development expenses is primarily due to an increase in engineering expenses and our continued efforts to commercialize our systems. As of September 30, 2024, we have a working capital of $4.5 million and no outstanding debt obligations. With that, I will turn the call back over to Chris..

Thank you, Adrienne. We would now like to move to Q&A..

Certainly. At this time, we'll be conducting a question-and-answer session. [Operator Instructions]. Your first question for today is from Graham Price with Raymond James..

Hey, Graham..

Hi, thanks for taking the question. I had for my first one; I just wanted to ask one on the regulatory landscape, given the election.

So if the Trump administration curtails the EPA's ability to regulate PFAS, just wondering how you would think about that? Would that create a scenario of kind of state-by-state hodgepodge for PFAS rules? Or how would you see that playing out?.

Well, Graham, I appreciate the question. When I think about that, I really feel like the train has left the station. There are so many different lawsuits and other things going on, big awards and so forth geared towards dealing with this issue. It's in the news, gosh, every day now as well about the issue.

So while that may occur, they may delay or push-out the full implementation. I don't think that's going to have a material impact on the opportunity set that we have in front of us..

Got it. Thank you for that.

And then maybe for my follow-up, kind of along the same lines? Any changes do you see in your work with the DoD under new leadership?.

No, not at this time. We're in obviously constant contact with them. We have a host of different federal government demonstrations, and we're not hearing anything from them about worry that those are going to get delayed.

When you think about the military branches and all of the various facilities that are highly contaminated, the military is very focused on cleaning up where they live. And so again, I don't see that materially changing for us or other participants in the industry..

Got it. Understood. Thank you very much. I'll jump back into queue..

Thank you so much..

Your next question for today is from Justin Smith with Maxim Group..

Hi, good afternoon. Yes.

So my question was just if you guys could please give a little more detail on maybe the logistics and the operations at the Orlando facility kind of what type of testing are you guys doing exactly? Is it the percentage of PFAS that the AirSCWO systems can remove? And then, are those customer demonstrations currently going on right now at the facility? And if so, maybe what are some of the most important metrics that the customers are looking at during these demonstrations? Thank you..

Justin, thanks for the question, and thanks for being on the call here today. So in terms of the City of Orlando, we are fully up and running there. We have conducted some demonstrations for customers on-site there. But right now, we are focused on processing biosolids to meet that agreement with the City of Orlando as well.

As far as what people are looking at, they're looking at a lot of different items as they evaluate the efficacy of our technology. One is that it's a continuous flow system that it's operating very stably, and it is processing waste as we promised.

The other is they are looking at not only what that waste stream is as it goes into our system, but what's coming out, and they are taking samples, extensive samples throughout the processing period to send off to labs that they're choosing to, again, very -- be very focused on the destruction of the various waste streams.

Certainly, everyone is looking at PFAS within those waste streams and evaluating the efficacy of our destruction of long and short-chain PFAS. As a reminder, when you destroy long-chain PFAS, it often turns to short-chain PFAS, and the short-chain PFAS is incredibly difficult to destroy.

Our system is able to be tuned to, and have the resonance time or the length that that waste stream is within our reactor. And we have seen incredible results in terms of the complete destruction of PFAS at a very, very, very high percentage..

All right. Great. Thank you. That was all very helpful. Appreciate it. And then just for a quick follow-up.

Regarding the unit for Orange County Sanitation, how long is that Factory Acceptance Test expected to take before that unit can be shipped?.

Yes. So that's basically a day test and then we would -- based on those results. And we will, of course, have to perform that test down in Orlando, which is where we're building the unit, and then we would ship it out..

Okay. Great. Thank you. I'll hop back into queue. Appreciate it..

Thanks so much, Justin..

We have reached the end of the question-and-answer session. And I will now turn the call over to Chris for closing remarks..

Well, thank you, everyone, for joining us today, and we look forward to talking more in the near future. Also, please look for updates as we have additional press releases and different papers coming out as well over the near-term. Very exciting time for our business, a lot going on, and we again look forward to engaging with you in the future.

Bye for now..

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation..