LigTech delivers robust Q2 results with nearly $5 million in revenue, strong swimming pool segment growth, and anticipates highest annual revenue in four years.

OPERATOR - (00:01:22)

Good day and welcome to the LigTech Second Quarter 2025 Financial Results Conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Robert Bloom with LISAM Partners. Please go ahead.

Robert Bloom - Moderator - (00:01:59)

All right, thank you very much. Good morning everyone and thank you for joining us today to Discuss LiqTech Intl's second quarter 2025 financial results for the period ended June 30, 2025. Joining us on today's call from the Company are Faye Chen, Chief Executive Officer and David Kwalczyk, the company's Chief Financial and Chief Operating Officer. Before I turn the call over to management, I do want to remind listeners that there will be a Q and A session at the end to ask a question through the webcast portal, simply type in your question through the Ask a question feature in the webcast player there. Before we begin with prepared remarks, we submit for the record the following statement. 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 actual results to be materially different 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 risks factors that attempt to advise interested parties of the 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 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 the date of the release and conference call. The Company assumes no obligation to update any forward looking statements reflect any events or or circumstances that may arise after the date of this release and conference call. Now I'd like to turn the call over to Faye Chen, CEO of LiqTech Intl. Faye, please proceed.

Faye Chen - Chief Executive Officer - (00:03:54)

Thank you, Robert and good day to everyone on the call. At a high level, we achieved improved financial performance across the board during the second quarter, including revenue growth, gross margin improvement and decreased operating expenses. As we continued to execute on our key strategic Priorities in the second quarter we achieved strong performance in our swimming pool segment, delivering six systems and generating nearly 800,000 in revenue. Further, the order flow for swimming pools looks strong as we enter the back half of the year. We also received an order for an advanced membrane based filtration system to treat oily wastewater and delivered a new pilot system to our partner at Riverbank Direct to address a new end market opportunity. These water system orders coupled with 31% sequential growth in our ceramic and the plastics business combined helped drive the overall revenue improvement during the quarter beyond the strength of the second quarter. Results for the year Our revenue outlook at TCPEMPS continued year over year improvements in the third and fourth quarters with full year revenue expected to be at company's highest level in four years dating back to the pandemic. I am certainly pleased with the progress made to date and expected over the rest of the year. In brief, this quarter is a little different than some of the previous quarters in that we really had solid operational performance across the board. Unlike the first quarter where we had the record oil and gas system order, the second quarter was much more balanced with contributions from water system deliveries, ceramics, DpFs and the plastics. We obviously like this balance as something to build on for the rest of the year. One item I would like to mention is the order we received from North Star Bluescope Steel, a major US based steel producer. The system, designed to resolve recurring filtration process upset caused by the high oil content and the variability in wastewater quality is scheduled to be commissioned and begin operation in the second half of the calendar year 2025. That said, based on consultation with our accounting firm, we have mutually agreed moving forward that when orders exceed a certain threshold, we will record revenue on a percentage of completion basis for the second quarter. We recognized about 200,000 for this project with another 300,000 or so to be recognized during the second half of the year. This practice should help to avoid wide swings and better align the balance sheet and income statement. This order is key for a couple of reasons. First, where cross flow filtration is the most sustainable wastewater treatment process, it comes with a major volume in to volume out challenge. LiqTech Intl's ceramics based system addresses this challenge while adapting to ever changing area and to beat water quality. The addition of LiqTech Intl Advanced Wastewater pretreatment filtration supports North Star's border water reclamation initiatives and reflects a growing trend in the steel industry toward more sustainable water management practices. This project demonstrates our growing traction in industry water treatment and our ability to contribute meaningfully to our customers operational efficiency and sustainability goals. Another key order during the quarter was a pilot unit which was sold to Riesselback Direct. As most of you are aware, reservoback Direct has been a great partner for us in North America. In November 2024, based on the success of an earlier pilot unit at the customer site, we received a record breaking commercial order from the oil gas customer. That order has subsequently been installed this quarter at the customer side and is now in stable operation. This new pilot order, also sourced through Razorback Direct, is for a completely new customer in a different industry from oil and gas. I will withhold the industry's focus until further customer feedback occurs, but we are excited by the opportunity that it may present to us in the long term. Overall, we continue to make progress with multiple pilot projects underway that leverage our preparatory technology to address some of the most demanding environments. As the history of progress with Razorback Direct, we see the US oil and gas industry highlighted the first steps to new application. Success with our filtration systems often starts with a pilot level program. Recently our pilot unit at one of the world's leading integrated energy companies has successfully completed. The positive results have resulted in that our ultrafiltration solution has been approved for the commercial application at this influential company. Beyond the various water for energy and industry applications discussed, we made very good progress during the second quarter within our swimming pool segment. As I mentioned a moment ago, during the quarter we delivered six systems generating nearly 800,000 in revenue. This is a significant step up from the past couple of quarters. Our team effectively leveraged our broad distribution agreements to source multiple new opportunities in the swimming pool market. As we look at the back half of the year, we believe the momentum within swimming pools will continue. Notably, we have recently received our first inquiry for a US refurbishment project fourth project through our partner at NAF Aquatics. If we are able to formally secure this project, it would serve as a good reference for other US based opportunities in the future. Transitioning to other parts of our established market starting with DPFs and ceramic membranes where sales during quarter two we were about 1.3 million which was down from the year ago second quarter but up nicely from 0 million during the most recent sequential first quarter. Order intake remains strong. We anticipate sustained positive performance for the remainder of the year. Within plastics, we saw a nice uptick during Q2 with revenue of 1.2 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 again, these two areas combined, ceramics and plastic were up to up 31% sequentially. One final area that showed nice progress was our aftermarket sales within the marine industry driven by several membrane housing replacements. This growth was boosted by the China GWA after sales Framework agreement we discussed in detail last quarter. In addition to aftermarket sales, we are advancing opportunities within our water treatment unit dual fuel marine segment. We speak to participate in in the upcoming quarter three bidding process for water treatment units for dual fuel results presenting a promising opportunity for LiqTech. Further updates will follow in the coming months. So to recap, we really had a nice quarter across the board. Six swimming pool systems delivered a new order from a US Steel producer. A new pilot system sought to address a new end market opportunity with Risoback Direct good performance from our ceramics and plastic groups. Incremental progress being made out of our Chinese gwa, numerous pilots and commercial progress on the way which we believe can drive broad large scale orders across our segment in the future. As I mentioned at the beginning for the year, our revenue outlook anticipates continued year over year improvements in the third and fourth quarters. With full year revenue expected to be at the company's highest level in four years dating back to the pandemic. I believe we are well positioned to build up the success of recent pilot and commercial projects that handle the most challenging liquids across a variety of large scale applications. We are strengthening our commercial position in established markets such as swimming pools, dpfs, ceramics and plastics. 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 look to open the call to for your questions. David please.

David Kwalczyk - Chief Financial and Chief Operating Officer - (00:14:49)

Thank you Faye and good day everyone. 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. Let's start with revenue. Revenue for the quarter came in at almost US$5 million up from 4.5 million in the year ago first quarter and up from 4.6 million in the sequential first quarter broken down by verticals. Sales for the first quarter were as Water system sales and related services of 2.4 million compared to 1.9 million in the same period last year and 2.7 million in Q1 this year. Remember we had the large record system sales during Q1 of this year to Razorback Direct. DPF and ceramic Membrane sales were 1.3 million down from 1.7 million in Q2 last year but up compared to 1 million in Q1 as we see a nice rebound in orders and finally plastics revenue came in at 1.2 million compared to 0.9 million in Q2 last year and 1 million in Q1. Key takeaway for the quarter includes strong year over year improvement in water systems driven by a combination of multiple swimming pool orders, a portion of the industrial order for the steel industry and multiple ongoing pilot programs, continued growth in plastics and stabilization of DPF and cebramic membranes sequentially but well off the year ago quarter which included a few large deliveries. Looking ahead to Q3 of 2025 and as Faye mentioned, we anticipate revenue to be between 3.8 million and 4.2 million which would equate to a 52 to 68% increase from Q3 2024. We are also introducing full year expectations with 2025 revenue to be between 19 and 20 million US dollars which will equate to a 30 to 37% increase from full year 2024. Turning to gross margin, as we continue to be below our optimal revenue level, we continue to have fixed production costs that are not being fully absorbed and those lower than normalized gross margins. For the second quarter gross margins were 9.8% compared to 16% in the year ago period. We are better compared to the 2.7% gross margin experienced during Q1 of this year. In Q2 we had a few one off write offs related to the closure of a loss making project in the Middle east, sale of a pilot unit and currency effect on inventory lowering the margin. Adjusted for these one off costs of 364,000 we would have had a gross profit margin of close to 15%. 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 driven by cost improvements and volume growth. Turning to OPEX, total operating expenses for the quarter were 2.6 million compared to 2.8 million in Q2 of last year and compared to 2.3 million in Q1 of 2025. As we look to the future, our breakeven target measured on an adjusted EBITDA basis is at a quarterly revenue level of approximately 5.5 to 6 million. Concluding on the P L net loss was 2 million for the quarter compared to 2.1 million for the comparable period of 2024. And finally from a cash perspective, we ended the quarter with $8.7 million in cash which compares to 10.4 million at the end of March. Everything else was pretty Much in line with our normal operating procedures from a balance sheet perspectives. With that, let me turn it back to Faye.

Faye Chen - Chief Executive Officer - (00:19:42)

Thank you, David. To close things out before I turn it over to questions, I see our preparatory silicon carbon filtration technology as a cornerstone for addressing some of the world's most pressing environmental challenges. Our advanced ceramic membranes offer unparalleled performance in trading the most difficult water purification applications from oil and gas produced water to swimming pool systems. By enabling industries to meet stringent regulatory requirements, we are reducing water usage and energy consumption. We are not only solving critical purification needs, but also driving sustainability. Our recent successes such as securing significant orders for produced water treatment as well as the steel processing industry in the US and expanding our presence in the marine and poor filtration markets demonstrate the growing global demand for our solutions. The opportunity ahead is significant. Driven by increasing water scarcity and strengthen environmental regulation worldwide through strategic partnerships such as our collaboration with the Razorback Direct for oil and gas applications, we are expanding our reach to deliver tailored turnkey systems. These collaborations amplify our ability to provide turnkey systems that not only ensure compliance, but also optimize production processes, protecting equipment and reducing operational costs for our clients. Working ahead, Lystek's vision is to be a global partner in creating a cleaner, more sustainable future. We are committed to innovating and scaling our filtration technologies to address these large opportunities. Again, thank everyone for your support of LI Tech. With that Robert, we would be happy to take any questions.

Robert Bloom - Moderator - (00:22:04)

Wonderful. Thank you very much Faye and David for the prepared remarks. As a reminder to everyone listening in on the webcast player, if you would like to ask a question, you can type it into the Ask a Question feature there on the webcast player. I do have a couple of questions here. Fay and David, to begin the first off here, can you discuss the area focus for the new Razorback pilot?

Faye Chen - Chief Executive Officer - (00:22:34)

As I mentioned in my speech, it's an area outside oil and gas industry, but it's an industrial water treatment. And I would like to wait until we got positive customer feedback before I give more concrete information about the end market.

Robert Bloom - Moderator - (00:22:56)

Okay, very good. Next question here. What does the approval of the pilot at the U.S. oil and Gas industry application mean in terms of potential timing?

Faye Chen - Chief Executive Officer - (00:23:12)

It's a very, very good result for us because this is the world leading integrated energy company. They have their fixed procedures to approve projects in their technology pipeline and we have now got the highest grade. That means we are able to commercialize across the whole company and I am optimistic we're going to see some very exciting results in the near future.

Robert Bloom - Moderator - (00:23:45)

All right, very good. Once again, as a reminder to everyone on the webcast player, if you'd like to ask a question, please type it into the webcast player. Another question here. What timing do you think will be or what do you think timing will be for the bidding process in the Marine segment there that was mentioned.

Faye Chen - Chief Executive Officer - (00:24:08)

As I said in my speech, it will be in quarter three. So we expect something's going to happen in the next two months.

Robert Bloom - Moderator - (00:24:20)

Okay, very good. Again, final reminder here to everyone. If you'd like to ask a question, just type it into that Ask a Question feature on the webcast player. Next question here it says. So based on your full year guide of $19 to $20 million and your Q3 guide of 3.5 or 3.8 to 4.2 million, that implies a Q4 run rate of 6.2 to 6.6. First off, are my numbers correct? And secondly, does that mean you will be ebitda profitable in Q4?

Faye Chen - Chief Executive Officer - (00:24:57)

Yes. So definitely we expect Q4 you can say to be a higher of the two quarters. Will we see an EBITDA positive again, we are guiding, you can say up to six and a half for that to happen. It will be depending on mix, but for sure the goal will be to reach an EBITDA positive quarter this year, but depending on mix and of course, the total sales volume happening in the quarter.

Robert Bloom - Moderator - (00:25:26)

All right, very good. I am showing no further questions here. Faye David, I will turn it back over to you for any closing remarks.

Faye Chen - Chief Executive Officer - (00:25:37)

Okay. I would like to thank everyone all very much for being with us today. We look forward to communicating with you soon again. Thank you.

OPERATOR - (00:25:53)

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