Q1 2025 LiqTech International Inc Earnings Call

Operator: Good day and welcome to the LiqTech International Report's first quarter 2025 financial results call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Good day and welcome to the Lyft check International reports first quarter 'twenty 25 financial results call.

All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's remarks, there will be an opportunity to ask questions to ask a question. You May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please note. This event is being <unk>.

Operator: After today's remarks, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded.

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Robert Blum: I would now like to turn the conference over to Robert Blum with Litham Partners. Please go ahead.

Speaker Change: Now I'd like to turn the conference over to Robert Blum with Lytham Partners. Please go ahead.

Robert Blum: All right, thank you very much, Jason, and good morning, everyone. Thank you all for joining us today to discuss LiqTech International's first quarter 2025 financial results for the period ended March 31, 2025.

Robert Blum: Alright, Thank you very much Jason and good morning, everyone. Thank you all for joining us today to discuss Lectec International's first quarter 2025 financial results for the period ended March 31, 2025, joining us on today's call from the company are Fei Chen Chief Executive Officer, and David call, Jack The company's Chief financial.

Robert Blum: Joining us on today's call from the company are Fei Chen, Chief Executive Officer, and David Kowalczyk, the company's Chief Financial and Chief Operating Officer. Before I turn the call over to management, let me remind listeners that there will be an open Q&A session at the end of the call. If you dialed into the call through the traditional teleconference line, as the operator indicated, please press star, then one to ask a question. If you are listening through the webcast portal and would like to ask a question, you can submit your question through the ask a question feature in the webcast player.

Robert Blum: <unk> and Chief operating officer before I turn the call over to management, let me remind listeners that there will be an open Q&A session at the end of the call if you're dialed into the call to the traditional teleconference line as the operator indicated. Please press Star then one to ask a question. If you are listening to the webcast portal and we'd like to ask a question you can.

Robert Blum: Submit your questions through the ask a question feature in the webcast player.

Robert Blum: Before we begin with prepared remarks, you submit for the record the following statement. This conference call may contain forward-looking statements. Although the forward-looking statements reflect a good faith and judgment of management, forward-looking statements are inherently subject to known and unknown risks and uncertainties that may cause future actual results to be materially from those discussed during the conference call. The company therefore urges all listeners to carefully review and consider the various disclosures made in the reports filed with the Securities and Exchange Commission, including risk factors that attempt to advise interested parties of risks that may affect our business, financial condition, operations, and cash flows.

Robert Blum: Before we begin with prepared remarks, you submit for the record the following statements.

Robert Blum: This conference call may contain forward looking statements. Although the forward looking statements reflect the good faith and judgment of management forward looking statements are inherently subject to known and unknown risks and uncertainties that may cause future results actual results to be materially from those discussed during the conference call. The company. Therefore does all listeners to carefully review and can.

Robert Blum: The various disclosures made in the reports filed with the Securities and Exchange Commission, including risk factors that attempt to advise interested parties of risks that may affect our business financial condition operations and cash flows if one or more of these risks or uncertainties materialize or if the underlying assumptions prove incorrect. The company's actual results may vary materially.

Robert Blum: If one or more of these risks or uncertainties materialize, or if the underlying assumption is proven correct, the company's actual results may vary materially from those expected or projected. The company therefore encourages all listeners not to place undue reliance on these forward-looking statements, which pertain only as of this date and the date of the release and conference call.

Robert Blum: From those expected or projected the company. Therefore encourages all listeners not to place undue reliance on these forward looking statements, which pertained only as of this date and the date of the release and conference call. The company assumes no obligation to update any forward looking statements to reflect any events or circumstances that may arise after.

Robert Blum: The company assumes no obligation to update any forward-looking statements to reflect any events or circumstances that may arise after the date of this release and conference call.

Robert Blum: The date of this release and conference call.

Robert Blum: Now I'd like to turn the call over to Fei Chen, CEO of LiqTech International. Fei, please proceed.

Fei Chen: Now I'd like to turn the call over to Fei Chen CEO of Lectec International Fe. Please proceed.

Fei Chen: Thank you, Robert, and good day to everyone on the call. At a high level, the results of the first quarter come in, come in line with expectations we provided the previous quarter, with revenue growing 36% sequentially to $4.6 million, led primarily by successful delivery of a record commercial orders of our pure flow mobile units to the oil and the gas industry. This order was a key milestone for LiqTech that further validates how our highly specialized filtration solutions can benefit the global energy industry.

Speaker Change: Thank you Robert and good day to everyone on the call.

Speaker Change: At a high level there is shelf after first quarter can be kind of in line with expectations. We provided at previous quarter with revenue growing 36% sequentially to $12 6 million need primarily except for delayed deliveries.

Speaker Change: Alicia older of our pure flow more by unions, so the oil and gas industry.

Speaker Change: These older less at key milestone for leachate that further validates how our highly specialized filtration solutions and benefit the global energy industry.

Fei Chen: Beyond the oil and gas segment, we have also made progress on a number of other initiatives we have set forth these past few quarters, including our joint venture in China, which officially had its grand opening in April. Following the grand opening, we received our first new marine scrubber orders in more than one and a half years and entered into a new framework agreement for after-sales support, which has already gained traction. It is great to see the immediate progress made in China. The other key high-level comment I will make is that we are seeing nice progress made with key pilot units currently deployed in a variety of addressable end markets, including one for lithium brine extraction pre-treatment in the US, and a unit with one of the world's leading integrated energy companies for oil and gas water treatment.

Speaker Change: Beyond oil and the gas segment. We have also made a progress on a number of other initiatives we have set forth.

Speaker Change: These past few quarters, including our joint venture in China, which officially had its grand opening in April.

Knowing the Grand opening we received our first new marine scrubber odors in more than one and half years and entered into a new framework agreement, but after sales support which has already gained traction.

Speaker Change: It is great to see the immediate progress made in China.

Speaker Change: The other key high level comment I will make is that we are seeing nice progress made at least you keep pilot units currently deployed.

Speaker Change: The reality of it.

Speaker Change: Dress and markets, including one for lithium brine extraction pre treatment in the U S and the unit with one of the world's leading integrated energy companies, so oil gas water treatment.

Fei Chen: Both rental-based agreements have recently been extended with expanded scope. The progress I just mentioned, corporate with relative strength across a variety of our key products and the market verticals, such as a ramp up in DPF order intake, increase in swimming pool systems order, and the growth in our plastic division are all expected to drive revenue growth. As you can see from our upload, revenue for the second quarter is expected to show continued sequential growth from Q1 estimated to be within the range of $4.8 to $5.2 million. Beyond revenue growth, however, our focus is on bottom line profitability with a better manufacturing utilization that should drive improved growth margins and the full effect of our recent cost-saving initiatives implemented during the past few months.

Speaker Change: Those rental based agreements has recently been extended which expanded scopes.

Speaker Change: The progress I just mentioned.

Speaker Change: Thanks.

Speaker Change: A variety of our key products and the Max once it goes such as a ramp up in D. C. F order intake increased in swimming pool systems odor.

Speaker Change: And the growth in our plastics division are all expected to drive revenue growth.

Speaker Change: As you can see from our outlook revenue for the second quarter is expected to show continued sequential growth from Q1 estimated to be within the range of $8 million to $502 million.

Speaker Change: Youngest revenue growth. However, our focus is on bottom line profitability at least a better manufacturing utilization that should drive improved gross margins and the food effect of our recent cost saving initiatives.

Speaker Change: Indeed during the past few months as we are expected to further improve our profitability metrics in Q2 as well.

Fei Chen: We are expected to further improve our profitability metrics in Q2 as well. So the high-level summary improved sequential revenue growth in Q1 of 36%, led by the record commercial oil and gas delivery. Real progress made in China from our joint venture, which we think will continue to expand. Improved odor flow from DPFs, swimming pools, and the plastic. Implementations of cost. aimed at lowering our break-even rate and Q2 guidance of 4.8 to 5.2 million.

Speaker Change: So the high level summary.

Speaker Change: Sequential revenue growth in Q1.

Speaker Change: These 6% led by record commercial oriented guests delivery.

Speaker Change: Real progress made in China from our John Winter, which we see we continue to expand it.

Speaker Change: The order flow from D T S swimming pools and the plastics.

Speaker Change: Implementation of cost.

Speaker Change: Aimed at lowering our breakeven rate and the Q2 guidance of $12 eight to $5 2 million.

Fei Chen: Transitioning back to the required oil and gas order. This truly was a milestone order and delivery for us.

Speaker Change: Transitioning back to the RIN clutch orienting the guest order. This truly was a milestone order and delivery for US. We just started about a year ago. When we signed a distribution agreement in February 2020 for at least the recent back direct.

Fei Chen: It started about a year ago when we signed a distribution agreement in February 2024 with Riesbeck Direct. And sequentially, secured an order for a containerized pilot system for produced water treatment, which was promptly delivered and performed successfully at the customer site throughout the second half of 2024. The success of this pilot program paved the way for a record-breaking commercial order. The order shifted during Q1, which is when we recognized revenue. The units are expected to be installed at the customer site in the US in the June or July time frame for produced water treatment. Once we got the commercial-grade system up and running, it will help serve as an additional reference for prospective customers.

Speaker Change: Sequentially.

Speaker Change: He cute and older continue to rise the pilot system for produced water treatment, which was promptly delivered and performed successfully at the customer site throughout the second half of 2024, especially phase of this pilot program paved the way for a rig.

Speaker Change: Called braking and Marcia odor.

Speaker Change: Oldest ship it during Q1, which is when we make a nice living units I expect it to be installed at the customer sites in U S. In June or July timeframe for produced water treatment.

Speaker Change: Once we got become Moshe great system up and running it's you'll hear pursue as an additional reference surplus they keep customers.

Fei Chen: Where some customers might still choose to have their own pilot programs, these commercial-scale operational units should help shorten the path to future orders. To that end, we continue to make progress with multiple pilot projects on the way that leverage our preparatory technology to address some of the most demanding environments. As the history of progress with Riesbeck Direct within the US oil and gas industry highlighted, the first steps to new application success with our filtration systems often starts with a pilot-delivered program. Currently, we have multiple systems at the various phases of testing and piloting, including a pilot unit from a leading technology company, Lithium Brine Production in the US.

Speaker Change: Where some customers may still choose to have their own pilot programs niche commercial scale operational unit should shorten the path to future orders.

Speaker Change: So that and we continue to make progress with as much of a pilot projects.

Speaker Change: The way that leverage our preparatory technology to address some of the most demanding environments.

Speaker Change: As to his history of progress with visual bad direction, we've seen the U S and the gas industry highlighted the first steps to new applications, such as with our filtration systems opens that we used a pilot liver program.

Speaker Change: Currently we have once you go systems at the various phases of testing and piloting including a pilot unit from a leading.

Speaker Change: He knows the company at least I'm, Brian production in the U S. We announced it in November It has recently been extended once again, we say expanded scope to get data. So at a commercial level design. The customer is very satisfied with the performance to date and we look forward to <unk>.

Fei Chen: We announced it in November. It has recently been extended once again with an expanded scope to get data for commercial-level design. The customer is very satisfied with the performance to date. And we look forward to potential next steps with this customer. We also have a pilot unit with one of the world's leading integrated energy companies for produced water treatment in the U.S. which was shifted in Q3 of last year. Similar to the Lithium brand system, the unit has demonstrated superior performance, and the customer has extended the rental period to collect additional performance data. Very recently, RISC-V Direct has rented a pilot unit to explore various applications for our UF filtration system, since they have experienced strong interest from customers.

Speaker Change: Sure next steps with this customer.

Speaker Change: You'll have a pilot unit with one of the world's leading integrated energy companies.

Speaker Change: He used to water treatment in the U S.

Speaker Change: Which was shipped in Q3 of last year similar to the light did some brand system. The unit has demonstrated superior performance and the customer has extended the rental period to collect additional performance data.

Speaker Change: Very recently recent thanks, Derek has to rent a pilot you'll need to explore various application for our U S filtration system since they have experienced strong interest from customers.

Fei Chen: We look forward to the continued execution on our multiple pilots and the opportunities it could lead to for us in the future.

Speaker Change: We look forward to the continued execution on our multiple pilots and the opportunities it could lead to for us in the future.

Fei Chen: Let's transition for a moment to our China GeoWeek. where there is a number of activities happening, which included our official grand opening ceremony in Shanghai in April.

Speaker Change: Let's transition for a moment to our China JV.

Speaker Change: We are there is a number of activities happening, which included our official Grand opening ceremony in Shanghai in April.

Fei Chen: Taking a step back, we initially established the GAV in November of last year. We are the majority owner of the GAV, contributing our pioneering marine water treatment solutions, where GeoTree is the minority owner and is contributing facilities, local support, and with the initial operational and commercial funding. In February, we achieved an important operational step when we received supplier approval for our water treatment system for the RENCD ISO technology. For those not familiar, RENCD is one of the market leaders in marine engine manufacturing with a focus on advancing the decarbonization of marine transportation. This supplier approval allows us to seamlessly deliver systems to WendyD, its licensees, and authorized service partners.

Speaker Change: Taking a step back we initially established a JV in November of last year, we had the majority owner of the JV contributing our pioneering marine water treatment solutions, where Ikea tree is a minority owner in each country building facilities local support and then we.

Speaker Change: The initial operational and the commercial funding.

Speaker Change: In February we achieved an important operational stop it wasn't we received supplier approval for our water treatment system.

Speaker Change: So there's a N G D. ISO technology for those not familiar with TV is one of the market leaders in marine engine manufacturing at least their photos.

Speaker Change: Answering the decarbonization of Marine transportation.

Speaker Change: This supplier approver allows us to seamlessly deliver systems to win T. D is licensees and also writes the service partners.

Fei Chen: We commenced a pilot test for our marine water treatment solution for the Wengidi ISO system, which was successfully carried out in China in March. We are now in close dialogue with the relevant stakeholders for commercial projects integrating into the Wengidi ISO system. Separately in China, we received an order for two marine scrubber water treatment units at the Shanghai Qiyao Environmental Technology Company. The units are scheduled to be delivered in November 2025 and February 2026. It's a small initial step, but certainly nice to see the orders coming in after one and a half year's empty period for the marine scrubber market.

Commenced a pilot test for our marine water treatment solution for the win T. D. ISO system, which was successfully carried out in China in March.

Speaker Change: Well now in close dialogue with relevant stakeholders become Murcia projects integrating into the Windsor The ISO system.

Separately in China, We received an order for two marine scrubber water treatment units at the Shanghai, Yeah, Environmental Technology company.

Speaker Change: Units are scheduled to be delivered in November 2025, and the February 2020 sake.

Speaker Change: It's a small initial step, but certainly nice to see the oldest coming after one and half years MTT period for the marine scrubber market.

Fei Chen: In connection with the grand opening ceremony, we also entered into a new framework agreement for after-sales support for the marine scrubber market, which has already gained traction. Service of our existing units in the field and the maintenance revenue associated with it has always been a key initiative for us, and this is another step in further capturing this profit. In summary, we see a lot of positive progress in China with 80% of the global shipping building market and the numerous retrofit applications taking place to move towards cleaner fuel applications. China is expected to be a strong growth market for our marine water treatment solutions in the years to come.

Speaker Change: In connection we used a grand opening ceremony, we also entered into a new framework agreement. So after sales support for the marine scrubber market, which has already getting traction.

Speaker Change: Surveys of our existing units in the field and the maintenance revenue associated with it has always been a key initiative for US and this is another step in further capturing these profit.

Speaker Change: Opportunity.

Speaker Change: In summary, we see a lot of pushes your progress in China with 80% of the global seating fueling market and the numerous retrofits application taking place to move towards cleaner few applications, China is expected to be a strong growth market.

Speaker Change: Water treatment solutions in the years to come.

Fei Chen: Before I turn it over to David, let me quickly touch on a few other key markers with a brief update. First, within the swimming pool market, we shipped two systems during Q1, and have another three systems set to ship here in Q2.

Speaker Change: Before I turn it over to David Let me quickly touch on a few other key markets with a brief update.

Speaker Change: First we've seen the swimming pool market, we shipped two systems during Q1 and have another three system set to see here in Q2.

Fei Chen: Recently, we also signed a distribution agreement with NAF Aquatics in New Jersey for the sales and distribution of LiqTech pool systems in the US. NAF Aquatics holds a strong market position in the US, particularly in the Northeast, with decades of experience and a broad network of local experts, which should lead to them being an ideal partner for us as we expand in the US. Certainly, swimming pools will remain a key contributor and I look forward to more progress made here.

Recently, we also signed a distribution agreement with the N F Aquatics in New Jersey, but the sales and distribution of the list for systems in the U S.

Speaker Change: And they S aquatics hosts a strong market position in the U S, particularly particularly in the north east with decades of expert experience and a broad network of local express.

Speaker Change: Which should lead to them being a I D.

Speaker Change: E a partner for us as we expand in the U S.

Speaker Change: Separately swimming pools will remain a key contributor and then look forward to more progress made here.

Fei Chen: Transitioning to other parts of our established markets, starting with DTFs and ceramic membranes, where sales during Q1 was about 1 million, which was similar to what they were in Q4 of 2024, but down quite a bit from the year-ago period when we had a few large orders. We are seeing a nice uptick in orders here in the second quarter. Within plastics, we saw a nice uptick during Q1 with revenue of almost 1 million, which was up year-over-year and sequentially. The plastic team continues to do a great job differentiating itself and is generally outperforming our expectations.

Speaker Change: Transitioning to other parts of our established markets, starting with the U S and ceramic membranes.

Speaker Change: Sales during Q1 was about 1 million, which was similar to what you want in Q4 of 2024, but down quite a bit from the year ago period. When we had a few large orders we are seeing a nice uptick in orders here in the second quarter.

Speaker Change: Wasting plastics, we saw a nice uptick during Q1 with revenue of almost 1 million, which was up year over year and sequentially. The plastic team continues to do a great job differentiating itself and its generally outperforming our expectation.

Fei Chen: As we look at the second quarter, our expectation is for revenue of $4.8 to $5.2 million. The revenue breakdown will be a little more diversified than it was during Q1, which benefited from the large commercial oil and gas order. We expect to see growth in revenue from the pilot unit rentals, growth in swimming pool, growth in DPFs and ceramic membranes, growth in plastics, and increased contribution from our aftermarket sales. We are less dependent in Q2 on any one or two large orders to achieve our stated objectives. With nice rebounds across our various product lines, it should serve as a nice potential springboard as new large systems come on board.

Speaker Change: As we look at the second quarter, our expectation is for revenue of 4.8 to $5 2 million the revenue breakdown will be a little more diversified.

Speaker Change: Then it's less during Q1, which benefited from the large commercial and.

Speaker Change: Gas odor.

Speaker Change: We expect to see growth in revenue from the pilot unit renters, grossing swimming pool grows in D. P. S.

Yeah, Amit membranes close in plastics and the increased contribution from our after market sales.

Speaker Change: We are less dependent in Q2 on a new one or two large orders to achieve our stated objectives with nice rebounds across our various product lines, it's yourself as a nice potential springboard as new large systems come onboard.

David Kowalczyk: Let me now turn the call over to David to review the financiers in more details.

Speaker Change: Let me now turn the call over to David to review the financials in more details I will then make a few closing comments and then look to open the call for your questions.

David Kowalczyk: I will then make a few closing comments and then look to open the call for your questions.

David Kowalczyk: Thank you, Fei.

Speaker Change: Thank you and good day everyone.

David Kowalczyk: And good day, everyone.

David Kowalczyk: Let me take some time diving into the financial results in a bit more detail. and add some color to what was in the press release.

David: Let me take some time diving into the financial results in a bit more detail.

David: And add some color to what was in the press release.

David Kowalczyk: Let's start with Brevin U. Revenue for the quarter came in at $4.6 million, up from $4.2 million in the year-ago first quarter, and up from $3.4 million in the sequential fourth quarter. Broken down by verticals. Sales for the first quarter were as follows. Water systems sales and related services of $2.7 million. compared to 1.5 million in the same period last year and up from 1.4 million in Q4. DPF and ceramic membrane sales were $1 million, down from $1.8 million in Q1 last year, and down slightly compared to $1.1 million in Q3. And finally, the plastic revenue came in at one million compared to 0.9 million in Q1 last year and 0.9 million in Q2.

David: Let's start with revenue.

David: Revenue for the quarter came in at $4 6 million.

David: Up from $4 2 million in the year ago first quarter.

David: And up from $3 4 million in the sequential fourth quarter.

David: Yeah.

David: Broken down by verticals.

David: Sales for the first quarter, whereas follows.

David: Water systems sales and related services of $2 7 million.

David: Compared to $1 5 million in the same period last year and up from $1 4 million in Q4.

David: D P F and ceramic membrane sales were $1 million down from one 8 million in Q1 last year.

David: And down slightly compared to $1 1 million in Q4.

David: And finally, the plastics revenue came in at $1 million compared.

David: Two 0.9 million in Q1 last year, and <unk> 9 million in Q4.

David Kowalczyk: Key takeaways for the quarter include Strong sequential and year-over-year improvements in water systems, driven by our record commercial oil and gas order and multiple ongoing pilot programs. Continued growth in plastic. stabilization of DPF and ceramic membrane sequentially but well off the year ago quarter which included a few larger deliveries.

David: Key takeaways for the quarter include.

David: Strong sequential and year over year improvements in water systems.

David: <unk> bio a record commercial oil and gas odor and multiple ongoing pilot programs.

David: Continued growth in plastics.

David: The stabilization of TPS and ceramic membrane sequentially.

David: But we lost a year ago quarter, which included a few larger deliveries.

David Kowalczyk: Looking ahead to Q2 of 2025, and as Fei mentioned, we anticipate revenue to be between 4.8 and 5.2 million. which would equate to a 4-13% sequential increase from Q1 2025 and a 7-16% increase year-over-year.

David: Looking ahead to Q2 of 2025 and as Dave mentioned, we anticipate revenue to be between $4 eight and $5 2 million.

David: Which would equate to a fool to 13% sequential increase from Q1, 2025, and a savings of 16.

David: Percentage increase year over year.

David Kowalczyk: Turning to gross margin. As we continue to be below our optimal revenue level, we continue to have fixed production costs that are not fully absorbed and those lower than normalized gross margin. For the first quarter, gross margin was 2.7% compared to 6.4% in the year-ago period. Remember that gross margins were negative during the sequential fourth quarter. We have previously reported on a contribution margin basis. which excludes the impact from our fixed overhead. This margin for the quarter was significantly higher. We expect through 2025 to see the gap between gross margin and contribution margin to narrow during by cost improvements and volume growth.

David: Turning to gross margin.

David: As we continue to be below our estimate of revenue level.

We continue to have fixed production costs that are not fully absorbed and those lower the normal normalized gross margin.

David: For the first quarter gross margin was two 7% compared to six 4% in the year ago period.

David: Remember the gross margins were negative during the sequential fourth quarter.

David: We have previously reported on a contribution margin basis, which excludes the impact from our fixed overhead.

David: This margin for the quarter was significantly higher.

David: We expect through 2025 to see the gap between gross margin and contribution margin to narrow driven by cost improvements and volume growth.

David Kowalczyk: for our delivered PureFlow system. in Q4, we realized a fair margin in light of this being our first full scale commercial order. Going forward, we expect significant improvements as one-time startup costs and design costs will be much slower.

Speaker Change: Well it delivered pure flow system.

David: Q4.

David: Realized a fair margin in light of this being our first full scale commercial owner.

David: Going forward, we expect significant improvements as one time startup costs and design costs.

David: It will be much lower.

David: Yeah.

David Kowalczyk: Turning to OPEX. Total operating expenses for the quarter were $2.3 million compared to $2.3 million in Q1 of last year and compared to $2.2 million in Q4 of 2020. A couple of items to note here. General and administrative expenses was down about $180,000, while SG&A was up about $200,000. The increase in sGNA was particularly attributable to cost associated with a newly formed joint venture in China and reversal of bonus accruals in first quarter 2024.

David: Turning to Opex.

David: Total operating expenses for the quarter with $2 3 million compared to $2 3 million in Q1 of.

David: Of last year, and compared to $2 2 million in Q4 2024.

David: A couple of items to note here.

David: General administrative and administrative expenses was down about 180000, while SG&A was up about 200000.

The increase in SG&A.

David: <unk> attributable to costs associated with the newly formed joint venture.

David: And China and reversal of bonus accruals in the first quarter 'twenty 'twenty four.

David Kowalczyk: lowering cost last year. We incurred about $60,000 in expenses pertaining to startup and running of the pilot in China. We believe this will be recouped given the orders we have already come from here. In Q1 2025, we also incurred costs in relation to resizing the organization and building competencies to secure future growth. Also, as you will note on the balance sheet, Our JV partner put 1.2 million of cash into the JV. which is then recognized on our consolidated balance sheet. The increase in cash is then associated with a corresponding loan from a related party of 1.2 million.

David: Lowering cost last year.

We incurred about 60000 of expenses pertaining to stock and running a pilot in China.

David: We believe this will be recouped given the orders we have already come in come from here.

David: In Q1, 2025, we also incurred costs in relation to resizing, the organization and building competencies to secure future growth.

David: Also as you will note on the balance sheet.

JV partner, who had one 2 million of.

David: Of cash into the JV.

David: Which is then recognized on our consolidated balance sheet.

David: The increase in cash is associated with a corresponding loan from related party of $1 2 million.

David Kowalczyk: This loan can be repaid in cash or equity when or if the joint venture will need future equity financing. but option to choose is the choice of LiqTech.

David: This loan can be repaid in cash or equity when or if the joint venture will need future equity financing.

David: But option to choose is the choice of leasing.

David Kowalczyk: As we look to the future. We have now fully implemented the Comprehensive Cost Reduction Strategy, aimed at lowering our breakeven.

David: As we look to the future.

David: We have now fully implemented the comprehensive cost reduction strategy.

David: Aimed at lowering our breakeven.

David Kowalczyk: Unknown Attendee, Lucas Ward, Robert Blum, Unknown Attendee, Lucas Ward, Phillip Price, David Kowalczyk, LiqTech This is now a quarterly revenue level of 5.5 to 6 million, a significant improvement from the previous target of 6.5 to 7 million. Concluding on the P&L, net loss was $2.4 million for the quarter compared to $2.4 million for the comparable period of 2024. And finally, from a cash flow perspective, we ended the quarter with $10.5 million in cash, which compares to $10.9 million at the end of December. We touched already on the cash infusion from the joint venture, but one other item.

David: Our breakeven target mission on an adjusted EBITDA basis.

David: This is now a quarterly revenue level of $5.5 million to $6 million a significant improvement from the previous target of six five to seven.

David: Concluding on the P&L net loss was $2 4 million for the quarter compared to $2 4 million for the comparable period of 2024.

David: And finally from a cash flow perspective, we ended the quarter with $10 5 million in cash, which compares to $10 9 million at the end of December.

David: We touched already on the cash infusion from the joint venture.

David: But one other item.

David Kowalczyk: I thought I would call out on the balance sheet was the increase in our accounts receivable. was a large order and oil gas oil and gas system shipped out in late Q1 that caused an increase in our accounts receivable from 2.4 million in December. 3.4 million in March. This amount will be collected in the coming months. Everything else was pretty much in line with our normal operating procedures from a balance sheet. With revenue growth expected in Q2 and throughout 2025 as a whole, which should drive improved operating leverage. given our largely fixed production cost base and supported by the cost reductions we have implemented.

David: So what I would call out on the balance sheet was the increase in our accounts receivables.

With a large order in oil gas or oil and gas system shifts out in late Q1 that caused the decrease in our accounts receivable from $2 4 million in December.

David: $3 4 million.

David: Much.

David: This amount will be collected in the coming months.

Everything else was pretty much in line with our normal operating procedures from a balance sheet perspective.

David: With revenue growth.

David: Expected in Q2 and throughout 2025 as a whole.

David: Which should drive improved operating leverage.

David: Given our largely fixed production cost base.

David: Supported by the cost reductions we have implemented.

David Kowalczyk: We expect to see a significant improvement in cash utilization in 2025 with our ultimate goal to surpass the 5.5 to 6 million quarterly revenue breakeven amount.

David: We expect to see a significant improvement in cash utilization in 2025 with our ultimate goal to surpass the five $5 million to $6 million quarterly.

David: Revenue breakeven amount.

Fei Chen: With that, let me turn it back to Fei. Thank you, David.

David: With that let me.

David: I'll turn it back to Phil.

Phil: Thank you David.

Fei Chen: to close things out before I turn it over to the questions. Let me just recap a few key points. First, we are gaining traction within key end markets, particularly oil and gas. The record commercial order, we received it in the US, corporate with an ongoing pilot program with one of the world's leading integrated energy company highlights just that. Energy operations often face significant challenges in managing water quality due to the highly variable nature of water sources. harsh environmental conditions, and the remote locations of mining sites. These factors demand solutions that are both robust and flexible.

Phil: To close things out before I turn it out to the questions. Let me just recap a few key points.

Phil: First we are gaining traction we are seeing key end markets, particularly oil and gas.

Hey, Rick Cot Marcia older. We received it in the U S corporate with ongoing pilot program with one of the world's leading integrated energy company highlights just that.

Phil: And is your operations Olson face significant challenges in managing water quality due to the highly variable nature of water celsis.

Phil: Cash cash environmental conditions and remote locations of many sites.

Phil: These factors demand solutions that are both robust and flexible.

Fei Chen: Our PureFlow mobile units are purpose-built to address these challenges. They are fully containerized and completely automated, require minimal daily manpower, as they are monitored and controlled remotely. Their mobility and compact design make them ideal for deployment in remote areas where their weatherized construction ensures reliable operation across a wide range of climates, from the frozen temperatures of Alaska to the scorching heat of Texas. Beyond oil and gas, our silicon carbon membrane technology provides unmatched durability and performance, making it an excellent choice for industry applications that demand reliability and efficiency. With the pilots and recent orders in a wide variety of applications, including lithium brine, MEG recovery, metal processing, marine scrubbers, and microplastics, we are gaining traction.

Phil: Our pure flow mobile units are purpose built to address these challenges they.

Phil: They are fully containerized and completely automated require minimal daily manpower.

Phil: They are monitored and controlled remotely.

Phil: Mobility and the complex design makes them ideal for deployment in remote areas, where they are whether rice construction issues reliable operation across a wide range of climates.

Phil: Frozen temperatures of Alaska to the scorching heat off takes us.

Beyond oil and gas or silicon carbide membrane technology provides unmatched durability and performance, making it an excellent choice for industry applications that demand reliability and efficiency.

Phil: The pilots and recent orders in of that wide variety of applications, including nation Bryan M. Easy recovery may chose precision marine scrubbers and the micro plastics, we are gaining traction.

Fei Chen: Financially, Q1 showed nice progress, and Q2 is expected to show further growth. with Improved Manufacturing Utilization that should drive improved gross margins and the full effect of our recent cost-cutting initiatives implemented. We are expect to further improve our profitability metric. As I emphasized this last quarter, we remain fully aware of the importance of preserving our cash balance. We drive the business with a strong focus on sustainable cash flows generation and long-term value creation. We understand the expectations of our investors and are highly committed to delivering on this objective.

Phil: Financially Q1 showed nice progress and Q2 is expected to show further growth.

Phil: With improved manufacturing utilization that should drive improved gross margins and the food effect of our recent cost cutting initiatives implemented we expect to further improve our profitability.

Phil: Matrix.

Phil: I sat emphasize this last quarter, we remain fully aware of the importance of preserving our cash balance we drive the business with a strong focus on sustainable cash flow generation and long term value creation, we understand the expectations of our investors.

Phil: And are highly committed to delivery on this objective.

Fei Chen: Again, thank everyone for your support of LiqTech.

Phil: Again, thanks, everyone for your surplus of <unk> with that operator, we would be happy to take any questions.

Operator: With that, operator, we will be happy to take any questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two.

Thank you.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

Lucas Ward: At this time, we will pause momentarily to assemble our raw And our first question comes from Lucas Ward from Ascendian Capital Markets.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

And our first question comes from Lucas word from a sentient capital markets. Please go ahead.

Lucas Ward: Please go ahead. Hi, this is Ray Fei for Lucas Ward. Can you talk about your order pipe?

Speaker Change: Hi, This is refrained from like a sworn in central and capital markets.

Can you talk about your order pipeline is it improved deteriorated stayed the same since your last call on March 28.

Fei Chen: Hi, Lucas, it's nice to talk with you again. As you can As you can hear, you can hear our guidance for quarter two. We continue to grow. So we continue to have growth. So definitely, our older pipeline is improving continuously.

Speaker Change: Hi, Lukas, it's nice to talk with you again and as you can.

Speaker Change: As you can hear and you can hit our guidance of her closer tool will continue to grow. So so hesitant to know what type of girls. So definitely our order pipeline is improving continuous David do you want to say anything there.

David Kowalczyk: David, you want to say anything there? Only to add that I think it's broad-based. We see improvement both in marine. We see it in pool. And you can say water energy will be a building momentum.

Speaker Change: Wanted to add that I think it's broad based we see improvements both in marine we see at the pool and you can say what of energy will be a building momentum and that's just what I want to add.

Fei Chen: That's just what I want to add. Great.

Speaker Change: Okay and can you talk about which segments you said, it's broad based so can we.

Fei Chen: And can you talk about which segments? You said it's broad-based. So can we... How do you see sales trending sequentially in Q3 and Q4? I mean, as we mentioned, in Q2, we'll be kind of spreading out, basically, all the segments is going to have contributed to the growth. And this is the picture we are going to see in Q3 and Q4. And it will be nice on top of that has one or two big projects also coming. But basically, we see kind of grow across all the segments, plus we have some big projects coming. Great, thank you.

Speaker Change: How do you see sales trending sequentially into Q3 and Q4 of this year.

Speaker Change: I mean, as we mentioned in Q2 with the kind of spreading out basically get older segments starting to contribute.

Speaker Change: Contributing to the growth and this is the picture, where you're going to see in Q3, and Q4 and it will be nice on top of all that has to win the two big projects. Those are pending and that is basically we see kind of a girl and trust oldest segment plus we have some big projects coming.

Speaker Change: Great. Thank you.

Operator: Thank you. Again, if you have a question, please press star, then 1.

Speaker Change: Thank you.

Speaker Change: Again, if you have a question. Please press Star then one.

Robert Blum: Jason, this is Robert Blum here. While we wait to see if there are additional questions through the live dial-in, we have some questions here through the webcast.

Speaker Change: Jason This is Robert Blum here, while we wait to see if there are additional questions through the live dial in a we have some questions here through the webcast and I want to remind everyone on the webcast player.

Robert Blum: Again, I want to remind everyone on the webcast player, if you'd like to ask a question, you can type your question into the Ask a Question feature there on the webcast player.

Speaker Change: To ask a question you can type your question into the ask a question feature there are on the webcast player a fade. David first question here, you've always had some competition and silicon carbide technology, but at least in the past it was from a few Japanese companies, whose target markets.

Robert Blum: Fei, David, first question here. You've always had some competition in silicon carbide technology, but at least in the past, it was from a few Japanese companies whose target markets were very narrowly defined. Is that still the case? In your target markets, do you find more competition from others also using silicon carbide? If not, why not? Is the market too small or are they behind LiqTech technologically?

Speaker Change: We're very narrowly defined.

Speaker Change: Is that still the case in your target markets do you find more competition from others also using silicon carbide.

Speaker Change: Now why not a is the market too small or are they behind lectec technologically. So I know I probably had a few questions in there, but maybe talk about the market in general for Silicon carbide technology and are in the competition you see out there.

Fei Chen: So I know I probably had a few questions in there, but maybe talk about the market in general for silicon carbide technology and the competition you see out there. That's a long question, Robert. Answer is very short. Definitely, there are competitions in the market. So we're not the only one in the market. And we don't actually see Japanese very active in the market. But we do see there are some competitors coming from France, Germany, and China. So we have different competitors in different segments. So we're not alone. And if I take the oil and gas segment as example, our competitors have been there before us, but they failed.

Speaker Change: And that's a long question that robust.

Speaker Change: I'm sorry, it's very shall see definitely they are competitions in the market. So we're not the only one.

Speaker Change: In the market and we don't actually see in your opinion, so very active in the market, but we do see there are some competitors are attending from a French Germany, and China and you know so we have different competitors in different segments. So we're not alone and if I take the O N E.

Gas segment as the December our competitors as being there before us, but they field, so dear numbering could not live up to what they promise. So we actually come in and able to shoot our membrane has a much better stable and superior performance compared to competition show so that bus.

Fei Chen: So their membrane could not live up to what they promised for. So we actually come in and able to show our membrane have a much better, stable, and superior performance compared to competition. So that was the case we have experienced. And for the swimming pool area, there's also competitions going on. But we are at least at the same level as our competitors. And the marine scrub areas are also better. So we do experience the competitions in all different application areas. But we're actually able to show we are superior in those areas, which we are really aimed at to achieve.

Speaker Change: The case, we have some experience and therefore, the swimming pool area their social competitions going on but we are at least at the same level as our competitors and then marine scrubber areas, our social adventure show. So we don't experience the competitions in Oh defend application areas, but we actually able.

Speaker Change: We feel we are superior in those areas, which we are really aimed at towards you.

Robert Blum: Okay, great.

Speaker Change: Okay, Great again to ask a question either in the ask a question feature or online or if you're dialed in you can press Star then one couple of more questions here for your faith, David will all the cost savings initiatives.

Operator: Again, to ask a question, either in the ask a question feature or online, or if you're dialed in, you can press star then one.

Fei Chen: A couple more questions here for you, Fei and David. Will all the cost savings initiatives be in full effect in the second quarter? And what is the run rate for operating expense expected?

Speaker Change: In full effect in the second quarter and what is the run rate offer operating expense expected to be.

Fei Chen: Yeah, they will be. And you can say, running operating expenses cause always a balance between things being added and things being taken out. But we show 2.1 million in Q1 and expect to be a little lower, but it's not significantly lower than that level. Yeah, we expect for the coming quarter. Okay, great.

Speaker Change: Yeah, they will be.

Speaker Change: And you can see running operating expenses has caused all of us are balanced between things being added in and things being taking out.

Speaker Change: But we showed $2 1 million in Q1, and then expect to be a little lower but it's not significantly lower and.

Speaker Change: The net level.

Speaker Change: We expect for the coming quarters.

Okay, Great. Our next question here is how much more performance data is needed for the lithium brine pilot and the same goes for the oil and gas unit that is under a pilot as well.

Fei Chen: Our next question here is how much more performance data is needed for the lithium brine pilot? And the same goes for the oil and gas unit that is under a pilot.

Fei Chen: Yeah, I mean, these two cases are different, right? Because the Leishen brand production, we had a pre-treatment there, and customers were very impressed because they have tried many different pre-treatment technology, and we are the only one able to actually deliver the water qualities as they expected. So right now, the reason they extended the pilot is really to gather more data in order to be able to go into the next phase for the commercial project, use the data for the design and the feasibility. So we are moving ahead, and very positive there.

Speaker Change: Yeah I mean, these two cases are different right because the nation, Brian production, we add I appreciate it's been there and the customers who are very fast because they have tried many different pre treatment technology.

Speaker Change: We are the only been able to actually deliver the water quantities as they expected. So I'm sure right now the recently extended the pilot is three together what Asia in order to able to go into the next phase.

Speaker Change: Commercial projects use the data for that for the design and the feasibility. So so yeah. They are moving ahead and very positive there and let them for the oil and gas areas and we are close to them and financing are finalizing of the pilot, which they said when what's eating our imaging to it.

Fei Chen: And for the oil gas areas, we are close to the finalizing of the pilot, which is one world-leading energy-integrated company. And we also have a very positive expectation, and that will lead to next phase discussion. So they're both actually very satisfied with our performance, and we believe very soon we will gather the data which is needed for the next phase.

Speaker Change: Companies and.

Speaker Change: We also have a very positive expectation and that will need to and next phase and discussion show them. So they both actually Larry said stay with our performance.

Speaker Change: We believe there is some be able to gather the data that is needed for the next phase.

Robert Blum: Okay, fantastic.

Speaker Change: Okay Fantastic a final reminder, here to everyone. If youre dialed in through the traditional teleconference lines Star then one to ask a question, if you're dialed or if you're listening or through the webcast portal you can type your question into the ask a question feature here.

Operator: Final reminder here to everyone, if you're dialed in through the traditional teleconference line, star then one to ask a question. If you're dialed, if you're listening through the webcast portal, you can type your question into the ask a question feature here.

Fei Chen: Maybe one last question here at the moment, Fei, David, for the framework aftermarket agreement that you have here in China, is this servicing only your own systems or competitor systems? Our focus now is to get the after-sales service agreement with our, you know, the collaboration partners for all the 170 systems which we supplied before. So this is our first step. And then we see if we want to go in further, because if you want to take a competitor system, it's more complicated. You need to understand more about their design and so on. So our ambition definitely is that we should focus on what we have delivered, because there's a lot of potential for us to get profitable revenue.

Speaker Change: Maybe one last question here at the moment a fair David.

Speaker Change: For the framework aftermarket off agreement that you have here in China is this servicing only your own systems or competitor systems as well.

Speaker Change: Yes.

Speaker Change: I mean, our focus now is to get.

Speaker Change: After sales service equipment lease.

Speaker Change: Sure you know the calibration partners Oh, the 170 system, which we supplied before so this is our first step and then we see if we want to go even further because if you want to take a competitors system is too complex, it's more complicated and need to understand more about their design and Sean So our ambition.

Speaker Change: Definitely we should focus on what we have delivered because theres a lot potential to get to profitable revenue. So this is what we're focused right now.

Fei Chen: So this is what we focus on right now.

Robert Blum: Alright, fantastic. Fei, David, I'm showing no further questions either dialed in or through the webcast portal.

Speaker Change: Alright fantastic.

Speaker Change: Hey, David I am showing no further questions either dialed in or through the webcast portal. So at this point I will turn it back over to you for closing remarks.

Robert Blum: So at this point, I will turn it back over to you for closing remarks. Yeah, thank you, Robert. I just want to say thank you all very much for being with us today. We look forward to communicating with you soon again. Thank you.

Yeah.

Speaker Change: Yeah. Thank you I just want to say thank you all very much for being with US today, we look forward to communicating with you. So again thank you.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].