Full Transcript: LiqTech Intl Q1 2026 Earnings Call

LiqTech Intl (NASDAQ:LIQT) held its first-quarter earnings conference call on Wednesday. Below is the complete transcript from the call. This content is powered by Benzinga APIs. For comprehensive financial data and transcripts, visit https://www.benzinga.com/apis/. The full earnings call is available at https://app.webinar.net/WaNVyXlyEGe Summary LiqTech International Inc reported a year-over-year revenue decrease of 10.4% for Q1 2026, primarily due to a non-repeated significant water for energy delivery from the previous year. The company saw a 32% revenue increase from Q4 2025, with gross margin expanding by 1,290 basis points, driven by increased activity in commercial pool, marine, and DPF and membrane sectors. LiqTech International Inc reiterated its full-year 2026 revenue outlook of $23 million to $27 million, indicating a growth of 39% to 64% from the previous year, and highlighted strong order books for marine and pool systems. The company emphasized strategic focus on building repeatable and scalable platforms, especially within commercial pool and marine sectors, supported by joint ventures and local capabilities. Management noted disciplined resource allocation, particularly in sales and marine development, while maintaining careful overhead management to drive toward profitability. Full Transcript OPERATOR Good morning and welcome to the LiqTech International Inc First Quarter Fiscal Year 2026 Financial Results Conference Call. After today's presentation, there will be an opportunity to ask questions. To submit a question, you may type it into the Ask A Question box on the webcast screen. Please note that this event is being recorded. I would now like to turn the conference over to Robert Bloom with Litham Partners. Please go ahead, sir. Robert Bloom (Moderator) All right, thank you very much Operator and good morning everyone. Thank you all for joining us on today's conference call, as the operator indicated, to discuss LiqTech International Inc's first quarter 2026 financial results. Joining us on today's call from the company are Faye Chen, Chief Executive Officer and David Kwalchek, 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 a Q and A session at the end of the call. Again, 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 call. The Company therefore urges all listeners to carefully review and consider the various disclosures made in their reports filed with the securities and Exchange Commission, including risk factors that attempt to advise interested parties of the risks that may affect their 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 to update any forward looking statements to reflect any events or circumstances that 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 International. Faye, please proceed. Faye Chen (Chief Executive Officer) Thank you, Robert and good day to everyone on the call. The fourth quarter was in line with our expectations and represented a continued step forward in transition we have been describing over the past several quarters. Our focus remains on building a more balanced, repeatable and ultimately more profitable LiqTech by placing greater emphasis in the markets where our technology delivers clear value and where customer adoption can scale in a more predictable way. The year over year revenue comparison was impacted by a significant water for energy delivery in the first quarter of 2025 that did not repeat in the first quarter of 2026 as well as timing of order conversion. However, the underlying activities across the business were encouraging. Commercial, pool, marine, DPF and membrane all showed meaningful activity in the quarter and the new pool and marine orders are setting the stage for improved results in the second quarter and throughout 2026. Compared to quarter four in 2025, revenue increased by 32%. Our gross margin expanded by roughly 1,290 basis points. The nature of our business and the sales cycle time means that all the improvements we have made in 2025 will show gradual improvements quarter over quarter in 2026. We are therefore reiterating our full year 2026 outlook for revenue of $23 million to $27 million. David will go through the financial details in a few minutes, so I will focus on operating progress, customer activity and strategic direction. The main message is that our strategy is advancing. We are building around a portfolio of opportunities where our silicon carbon membrane technology can be deployed in repeatable platforms, supported by stronger service capabilities and scaled across geographies. Our commercial pool business continues to be one of the clearest examples of this strategy. During the first quarter, pool deliveries totaled revenue of 0.8 million compared to 0.3 million in the first quarter 2025. More importantly, the order activity we have announced since the beginning of the year reinforces our confidence that Clariflo is getting traction as a differentiated solution for modern commercial aquatic facilities. In fact, based on our order book, we expect a record quarter for commercial swimming pool in quarter two. 2026. A key milestone was our first US pool system order consisting of three systems to be installed at the Western County School District Number one Aquatic center in Newcastle, Wyoming. Entering the US Market has been an important objective for us because it is a large market with aging infrastructure, high water quality expectations and a growing need for more automated and space efficient filtration solutions. We view this first US Order as an important proof point that can help open additional opportunities over time. We also received consecutive record selling pool system orders internationally. One was in partnership with LOTEC for a new large scale commercial pool project, Eden Hayden, Netherlands. The next was the follow on Record Order in partnership with Watercolor Limited for 10 systems for Plumpton Aquatic and Leisure center in Fraser Rice, Victoria, Australia. These wins demonstrate that our solution is being adopted across different geographies, project types and the partner channels Clariflo is well suited to this market because it addresses several customer needs at the same time. Our systems are compact, modular and designed for stable water quality, automation and efficient operation. For retrofit projects, the smaller footprint can be a meaningful advantage where equipment room space is limited for new build facilities. The modular design gives customers a flexible solution that can be planned into the project from the beginning. From a business model perspective, pools are attractive because the systems are becoming more standardized and repeatable. This is different from large one off projects which often require more customization and can be more difficult to forecast as pool adoption grows. We believe this vertical can contribute to better revenue visibility, improved execution and a stronger margin profile over time. Our marine business also continued to build momentum in the first quarter. We delivered 2 systems under the quarter for marine dual fuel engine water treatment for LNG vessels and we expect two more systems to be delivered during the second quarter. Marine revenue totaled 0.8 million in the first quarter compared to 0.2 million in the first quarter 2025. Faye Chen (Chief Executive Officer) The growth in this vertical is being supported by our joint venture in China, which we believe can help drive more sustainable order flow throughout 2026. As we discussed on our last call, we have invested in local capabilities to support the marine market, including development and the localization activities and regional service infrastructure. This is important because the marine market requires reliable execution, responsive service and a cost competitive localized supply chain. Faye Chen (Chief Executive Officer) We believe silicon carbon membrane technology has a strong fit in marine applications, particularly for vessels equipped with dual fuel engines. These resources require advanced water treatment solutions that can support onboard wastewater purification and reuse. We are meeting demanding operating requirements. Marine is also attractive because it has the potential to become more repeatable as adoption grows. Each Vessel project has its own delivery schedule, but the underlying system platform can be standardized and supported through our regional presence. Faye Chen (Chief Executive Officer) Turning to water for energy and industry applications, our view remains balanced and disciplined. Oil and gas continue to be an opportunity for LiqTech and our pipeline remains active at the same time. As we have said before, the timing of larger projects can be difficult to predict. During the quarter, we commenced a new pilot program in West Texas for produced water stream treatment with an energy services and solutions company. This type of field activity is important because it gives customers the opportunity to validate the performance of our technology in demanding operating conditions prior to their investment decision for large size commercial projects and it allows us to further demonstrate the value proposition of silicon carbon membranes in produced water treatment. We continue to believe our technology is well positioned for difficult water streams where durability, chemical resistance and stable filtration performance are critical. Produced water and industry wastewater are both areas where customers are looking for solutions that can handle high variability, reduce operational disruptions, and support environmental and water reuse objectives. Faye Chen (Chief Executive Officer) At the same time, we are being careful in how we allocate resources. We are not basing our operating plan on the timing of any single large oil and gas project. We will continue pursuing attractive opportunities, but we will do so in a way that supports the broader strategy of building a more balanced business. Beyond systems, our DPF and membrane business and our plastic business remain important contributors to LiqTech in the first quarter. DPF and membrane revenue increased to 1.3 million from 1 million in the prior year quarter. Faye Chen (Chief Executive Officer) This was driven by strong order flow from both existing and the new customer. Following our renewed focus within this March, vertical plastic revenue increased approximately 5% in the quarter and totaled about 1 million, driven by strong external interest, especially in food processing. Looking ahead, our priorities are clear. We are reiterating our 2026 outlook and remain focused on executing against the revenue growth and the adjusted EBITDA improvement we have communicated. Faye Chen (Chief Executive Officer) The path to achieving this outlook is not depending on a single large oil and gas order. It is based on continued progress across commercial pool, marine industry application and the components market with potential upside from water for energy and as opportunities convert. The most important strategic priority is to improve the quality of our growth marks where solutions can be standardized, partners can extend our reach, service infrastructure supports customer confidence and volumes can support better margins. Faye Chen (Chief Executive Officer) We believe the first quarter will provide encouraging evidence that this transition is working. Pool orders are expanding geographically, marine deliveries are increasing, supported by China, joint venture, DPF and membrane is benefiting from renewed commercial focus and the water for energy remains active but we are approaching it with appropriate discipline. Let me now turn the call over to David to review the financials in more detail. I will then make a few closing comments and look to open the call for your questions. David Kwalchek (Chief Financial and Chief Operating Officer) thank you Fei and good day everyone. Let me take some time to walk through our first quarter financial results in a bit more detail and add some color to what was included in the press release. As Fay noted, the quarter was generally in line with our expectations, the expectations we provided in our year end call. My remarks today will focus primarily on the year over year changes for the first quarter and on how those results fit into the full year outlook that we are reiterating today. David Kwalchek (Chief Financial and Chief Operating Officer) Let's start with revenue. So revenue for the first quarter of 2026 was 4.1 million compared with 4.6 million in the first quarter of 2025. This represents a decrease of 10.4%. Broken down by verticals, sales for the year were as follows. Distance and aftermarket sales were 1.8 million compared to 2.7 million in the prior year quarter. DPF and membrane sales were 1.3 million compared to 1.0 million in the prior year quarter. And finally, plastic components revenue was 1 million compared to approximately 1 million in 1Q25. David Kwalchek (Chief Financial and Chief Operating Officer) The year over year revenue decline was solely attributable to lower system sales, specifically the fact that we had a significant water for energy delivery in 1Q25. This did not repeat in 1Q26. That comparison is important because the underlying activity in several of our priority areas stronger than the headline revenue number might suggest. Within systems, both commercial pool and marine showed meaningful improvements. Commercial pool revenue was approximately 0.8 million for the quarter compared with approximately 0.3 million in the prior year quarter. David Kwalchek (Chief Financial and Chief Operating Officer) Marine revenue was also approximately 0.8 million compared with approximately 0.2 million in 1Q25. Those increases were offset by the non repeat of the larger water for energy delivery last year. Outside of systems, DPF and membrane sales increased meaningfully driven by strong order flow from both existing and new customers. Following our renewed focus within that market, vertical components also increased during the quarter supported by continued external interest, especially within food processing. These are important contributors because they provide a more stable base for recurring activities while we continue to scale the high growth system opportunities. Turning to gross margins, gross profit for the quarter was 0.4 million representing a gross margin of 9.5%. That compares to a gross profit of 0.1 million or a gross profit of 2.7% in 1Q25. The improvement in gross margin is an important point. Even though total revenue was lower year over year, our gross profit dollars actually increased and our gross margin expanded by roughly 280 basis points. The improvement was primarily driven by mix in system sales, better utilization of our manufacturing capacity, procurement efforts on prices, and lower depreciation expenses. As we have discussed before, we are still operating below the revenue level where our production platform can fully absorb fixed costs. As a result, our gross margin is not yet where we believe it can be over time. That said, the first quarter shows the benefit of improving mix, continued operating discipline and greater focus on repeatable applications where our cost structure and system design can become more efficient as volume increases, gross margin improvement remain a key priority. Scaling standardized system in commercial pool and marine along with continued strength in our component business should help Support a better margin profile as we move through 2026. Turning to operating expenses, the total operating expenses for the first quarter were 2.7 million compared to 2.3 million in 1Q25. Approximately 60% of this increase was related to foreign exchange development. Because the majority of our cost base is denominated in Danish krona or euros, the year over year currency movement affected how expenses translate into US Dollars breaking operating expenses down by category. Selling expenses for the first quarter were 1.0 million compared to 0.7 million in the prior year quarter. Excluding foreign exchange effects, the increase was primarily related to the full year effect of hires within our Chinese joint venture as well as continued investment in the sales organization across the United States and Europe. General and Administrative expenses were 1.4 million compared to 1.4 million compared to in 1Q25. Adjusting for foreign exchange development, G and A expenses remained stable and below general inflation. We continued to manage overhead carefully and the filling of open position was balanced by savings in other areas. Research and development expenses were 0.3 million compared to 0.2 million in the prior year quarter. The increase was primarily tied to membrane development costs and development work related to marine systems. Overall, our approach to operating expenses remains disciplined. We are investing where we see clear commercial returns, particularly in sales coverage, marine development and capabilities that support the scaling of repeatable system platforms. At the same time, we are carefully managing overhead and focusing resources on the areas of the business that are most important to our path towards profitability. Other expenses for the quarter were 0.4 million compared to other expenses of 0.2 million in the comparable period for 25. The change was primarily attributable to losses on foreign exchange transactions due to the US Dollar development compared to Euro lower interest income and accrued interest on the senior promotionary note partly balanced by lower amortization of debt discount and a decrease of net interest expenses. Net loss for 1Q26 was 2.7 million compared to a net loss of 2.4 million in 1Q25. The year over year change was primarily driven by the higher operating expenses and other expense levels that I just discussed, particularly offset by the improvement in gross Profit for the first quarter. Adjusted EBITDA was a negative 1.5 million compared to a negative 1.4 million in 1Q25, while the year over year comparison was relatively stable. We continue to believe the most important drivers of adjusted EBITDA improvements are revenue scale, stronger system mix and increased utilization. Disciplined operation Expense control We are making investments in targeted areas, but our objective remains to convert revenue growth into meaningful operating leverage as the year progresses. Turning to our outlook, we are reiterating our expectations for the full year of 2026 revenue to be in the range of 23 to 27 million. This would represent a growth of approximately 39 to 64% compared to full year 25. As Fay discussed, the growth outlook is expected to be driven primarily by commercial pool, marine and continued activity across water for energy and industrial applications, supported by stable contributions from DPF and membranes and plastic components. We expect improved pool Results in the second quarter and through 2026, supported by recent order activity including the first US pool system order, an additional larger international improved projects in Marine. We delivered 2 systems during the first quarter and expect 2 more systems to be delivered during the second quarter, with further sustainable order flow expected through the year supported by our Chinese joint venture. The quarterly cadence of revenue will continue to be influenced by system and delivery time. As a result, we do not view the first quarter as a full year indicator. We remained focused on executing against backlog, converting the order pipeline and maintaining cost discipline as the business scales. And finally, from a cash perspective, we ended the first quarter with cash on hand, including restricted cash of 2.7 million as of March 31, 2026. Our focus remains on disciplined cash management and careful allocation of resources. We are aligning spending with the verticals that we believe can support repetitive growth, improved margin performance and better revenue visibility over time. As we move through 26, we will continue to balance investments in growth with the need to preserve flexibility and drive the business towards positive adjusted ebitda. And with that, let me now turn the call back to Faye. Faye Chen (Chief Executive Officer) Thank you David. Before we open the call for questions, I want to reiterate that our first quarter results were in line with our expectations and reflect continued progress against our strategic plan. We are building LiqTech around end markets that can support more predictable repeatable growth, particularly commercial, pool, marine, DPF membrane and plastic compound. We believe the results this year will continue to highlight these transitions. At the same time, we remain encouraged by long term opportunity in water for energy, but we are being disciplined in how we plan the business and allocate resources. Our focus is on markets where our silicon carbon technology delivers clear performance advantages and where we can scale profitably with that. Robert, we would be happy to take any questions. Robert Bloom (Moderator) Thank you very much Faye and David for your prepared remarks there. As a reminder to everyone listening through the webcast portal there, if you would like to ask a question, you can Type it into the ask a question feature on the webcast player. We do have a few questions already in the queue here. So Faye and David, I'll begin. First question here is what does a quote steady state margin structure look like for the new Lick tech? How should we model gross margins? David Kwalchek (Chief Financial and Chief Operating Officer) Yeah, that's a good question. And so essentially what we have told before and what we you can say continue to see is that on a project basis we are realizing margins between 30 to 50%. So essentially you can say on average 40%. So with a volume increase we should be closing in on a steady state margin of 40. Of course on top of that we with the volume increase you will see additional scaling effects leaving you can say opportunity open for lowering the production cost further for systems and membranes. Robert Bloom (Moderator) Okay, very good. There are a few questions here regarding guidance for the year, so I'll try to combine them together. You are guiding revenue of 19 to 23 million dollars for the rest of the year here, which implies 6.3 to 7.6 million per quarter. What are the major drivers of this steep revenue growth and how much does water for energy or industry contribute to this revenue? Faye Chen (Chief Executive Officer) Robert, that was a very good question. And your numbers correct. In the first quarter we do not have very much contribution from water for energy and water industry but we do have a pipeline with some very interesting projects with high probabilities. So we expect in the year going forward we will see some project go through from these two areas, waterfall energy and water for industry. But very importantly also we see really significant growth in our commercial pools, Marines and also DPF and membrane from for the rest of the year. So this whole together will contribute the increase quarter by quarter. Robert Bloom (Moderator) Okay, very good. And as a sort of extension of that, do you have any information you can provide relating to how revenue will be distributed between Q2, Q3 and Q4? David Kwalchek (Chief Financial and Chief Operating Officer) Yes, so we definitely and as we said you can see also in the presentation of the result, we expect the implementations of, you can say changes in how we operate in 25 to show gradual improvements through 26. So we definitely do expect to see a gradual ramp up. But Also with the Q2 you can say increase compared to Q1 of this year already. Faye Chen (Chief Executive Officer) Yeah, I would like to add, as I mentioned in my speech before, if we look at our old book, we already can see for example for marine and especially commercial pool, pool system we already have very strong order book. So we know at the quarter two for the, for the commercial pool will be a record quarter on revenue because there's a time difference between the commercial order and the revenue conversion. And that's, you know, always make it complicated when the revenues come in. But we have a very strong order book so we can really see what's happening next quarter. Robert Bloom (Moderator) All right, very good. Again, as a reminder, if you'd like to ask a question, feel free to type it into the Ask a Question feature on the webcast player. And if there are any follow ups that need to be submitted, please send those along as well. Next question here is regarding commercial pools. The order that you highlighted in the Netherlands is for a new pool. This person's understanding is that you focused on retrofits. Is new sales a new opportunity for the company? Faye Chen (Chief Executive Officer) That's a very, very good question. I mean, two years ago, I think our pool system has been very much focused on the retrofit. It very much depends on the distributors because at that time our distributor in UK was Total Pool. Their focus was and still is Richer Fit Swimming Pools. And now we have started building up the new distributors, both in UK with the Binary and also in Logtech. They are the ones really very active both on the retrofit and the new project. So now we see the new projects also coming. So I would like to emphasize we're actually working both on the retrofit and the new pool, new build pools because our system has really strong advantages for both segments. Robert Bloom (Moderator) All right, very good. I'm showing no further questions in the queue here. So with that, Faye, I will turn it back over to you for closing remarks. Faye Chen (Chief Executive Officer) Thank you, Robert. Thank you all very much for being with us today. We look forward to communicating with you soon again. Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.