LiqTech International, Inc. Q4 FY2024 earnings call

• Fourth quarter revenue of $3.4 million, a 37% sequential increase from Q3. Key drivers were water filtration pilots for lithium brine and petrochemical microplastics removal, and a record commercial order from Razorback Direct for PureFlow mobile units in the energy sector.
• Implemented a cost reduction strategy aiming to lower breakeven target to $5.5-$6.0 million quarterly revenue, including 10% headcount reduction, 10% senior management salary cut, 50% board cash compensation cut, etc.
• Established a JV in China for marine market expansion, with a team in place and pilot testing expected in Q2 2025. Received supplier approval for WISC treatment system for WinGD dual-fuel engine.
• Ongoing pilots in various industries including lithium brine, petrochemical microplastics, and Middle East, with key orders and partnerships driving market penetration.

For the fourth quarter, revenue was $3.4 million. The water treatment systems operations saw revenue up nearly $750,000 or 108% sequentially. Ceramic membrane sales were $1.1 million, down from $1.4 million in Q4 2023 and flat compared to Q3 2024. Simplastics revenue was almost $900,000, up 13% year-over-year and 34% sequentially. Water treatment systems contributed significantly to the sequential growth with ongoing pilots and a key oil and gas order.

• Q1 2025 revenue expected between $4.3 and $4.7 million, a 26%-38% sequential growth led by the oil and gas order.
• Breakeven target on adjusted EBITDA basis lowered to a quarterly revenue level of approximately $5.5 to $6.0 million, a significant improvement from previous targets.
• Anticipate continued revenue growth and improved profitability as cost savings and revenue growth drive operating leverage.

• Uncertainty in pilot program outcomes affecting transition to commercial orders.
• Market competition in water treatment and marine sectors could impact market share.
• Dependence on key partnerships and orders for revenue growth, which carries inherent risks if partnerships falter or orders are delayed.

Q: On Q4 revenues, was there deterioration since November call?

A: No, but timing differences on key projects caused being towards lower end of expectations but still within guidance range.

Q: How would Q1 oil and gas order affect subsequent quarters?

A: Q2 expected to have other market segments contribute for continued growth.

Q: Why were pool sales disappointing in 2024?

A: Lacked strong sales pipeline in 2023, but pipeline value increased in recent months with expectation of catch-up in 2025.

Q: When will marine engine supply approval lead to revenue?

A: Pilot testing in China expected to have final results by end of Q2, with commercial sales to follow thereafter.

Q: Clarification on oil and gas order delay?

A: The order received in December 2024 from Razorback Direct for PureFlow mobile units will be delivered in Q1 2025, which was the delayed order from Q3.

Q: Gross margin visibility?

A: Contribution margin at 40%-45% excluding fixed overhead, and Q1 expected to return to positive gross margins due to revenue growth and cost initiatives.