LiqTech International, Inc. 2026 Q2 Earnings Call

Please go ahead. Great. Thank you very much, Chloe.

Good morning, everyone, and thank you for joining us on today's call to discuss LiqTech's second quarter 2026 financial results. 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. As the Operator mentioned, before I turn the call over to management, I will remind everyone that there will be a Q&A session at the end of the call today. To ask a question through the webcast portal, simply type 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 the risk 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 this date and the date of the release and conference call.

The company assumes no obligation updating forward-looking statements to reflect any events or circumstances that may arise after the date of this release and conference call. Now, I would like to turn the call over to Fei Chen, CEO of LiqTech International.

Fei, please proceed. Thank you, Robert, and good day to everyone on the call.

Before discussing the quarter, I want to acknowledge an important development for LiqTech and our shareholder base. In June, we completed an underwritten public offering that generated approximately $18 million in net proceeds. The offering brought a number of new shareholders into LiqTech, and I want to thank those investors, along with our existing shareholders, for the confidence you have placed in our company and our technology. We recognize the rising equity capital comes with significant responsibility to our shareholders. We expect to be judged by how effectively we deploy that capital, how consistently we execute, and ultimately, whether we can translate our technology and the market opportunities into sustainable financial performance. A portion of the proceeds was used to repay our outstanding senior promissory notes and original issue discount notes, significantly strengthening our balance sheet.

The remaining capital provides us with the working capital and the financial flexibility to execute our growth priorities. Importantly, having a stronger balance sheet does not change the need for financial discipline. We remain focused on careful capital allocation, disciplined spending, and converting our commercial opportunities into revenue and improved profitability. Our priority now is execution and demonstrating measurable progress in our financial results. For shareholders who are newer to LiqTech, I would like to provide just a very brief high-level review of the strategy we have been implementing over the past several years. Our objective is to build a more balanced, repeatable, and profitable company around applications where our silicon carbide membrane technology provides a clear performance advantage and where customer adoption can scale. To begin with, commercial pool has become a much more important part of that strategy.

We have invested in a standardized and modular QlariFlow platform, expanded our distribution network, and built references across multiple geographies. Next, marine has also re-engaged through our joint venture in China, which gives us local sales, sourcing, assembly, development, and service capabilities in a market where local execution is essential. Our DPF and membrane business and our plastics business provide a steadier base of activity and important manufacturing capabilities. The largest variable in our outlook remains water for energy and water for industry. These markets represent meaningful revenue opportunities for LiqTech, but the sales cycles are typically longer and more complex. Projects often require pilot testing, technical validation, customer approvals, capital budgeting, and multiple layers of internal decision-making. As a result, project timing can be difficult to predict and is often influenced by customer processes that are outside our direct control.

This means water for energy and water for industry can be significant drivers of our future growth, but they can also create variability in our quarterly and annual revenue. Our focus is therefore on building a broader pipeline, advancing multiple opportunities in parallel, and converting more of these projects into firm orders. Over time, we believe this should make the business less dependent on the timing of any single large project. Based on what we have learned from the market, we have refined our go-to-market approach for both water for energy and water for industry. In water for energy, going forward, we will focus on building strategic commercial partnerships that help us accelerate market penetration and then convert our technology capabilities into commercial opportunities.

In water for industry, we will take a more targeted approach, focusing our resources on selected applications where we see clear customer needs and a strong technology fit. The steel industry is a good example, where our recent follow-on order demonstrates the potential to move from an initial installation to broader multi-system deployments. Our objective is to build a more visible, repeatable, and scalable opportunity pipeline while maintaining disciplined resource allocation. The second quarter illustrates both sides of our strategy. Commercial pool achieved record revenue, and marine continues to execute against its order book. Since quarter end, the U.S. industry wastewater reuse order and the DKK 2.1 million follow-on order from a U.S.-based steel manufacturer has further reinforced the progress we are making in selected water for industry applications. At the same time, delay in a larger water for energy project has reduced our revenue visibility for the remainder of 2026.

As a result, we are revising our full year revenue guidance to a range of DKK 20 million-DKK 23 million. Importantly, even at the revised guidance range, we expect to deliver meaningful year-over-year revenue growth reflecting the underlying process across our business. We are disappointed by this delay, particularly because we had expected this project to contribute revenue this year. Our response is not to wait. We are putting greater emphasis on the resources behind the markets where we see more repeatable demand, shorter sales cycles, and better revenue visibility. At the same time, we will continue to pursue significant opportunities in water for energy, but in a more selective and increasingly partnership-driven manner. This is not a sudden change in direction. Rather, it's a continuation and acceleration of the strategy shift we have discussed over the past several quarters, informed by what we have learned from the market.

We now have a stronger balance sheet, growing commercial platform, and significant market opportunities. Ultimately, we need to demonstrate that these strengths translate into improved financial performance. Our priorities are clear: execute on the opportunities in front of us, maintain financial discipline, improve profitability, and build a more predictable and sustainable business. Let me be clear, achieving profitability as quickly as possible remains one of our highest priorities. Let us talk about each area in more detail. Commercial pool was the strongest area of business in the second quarter. Revenue reached a record DKK 1.5 million, compared with DKK 0.8 million in both the second quarter of 2025 and the first quarter of 2026. The performance reflects the work we have done to standardize the QlariFlow platform, strengthen our distribution partnerships, and establish a broader base of reference installations.

During the quarter, we completed assembly of the systems for the Plumpton Aquatic and Leisure Centre project in Australia and our first U.S. commercial pool project in Worland, Wyoming. The large pool system in the Netherlands, which we announced in April, is now operating successfully. These projects demonstrate that QlariFlow can serve different facility sizes, project designs, and geographies. We are maintaining the advantage of a modular platform. We continue to have our focus in establishing new distribution relationships in the prioritized geographic regions. Expanding the partner network is an important part of the pool strategy, because local partners are critical for identifying projects earlier, supporting system design and installation, and providing the customer relationships needed to scale efficiently. Pools are attractive to detail because the systems can be more standardized than our many large industry projects.