LiqTech (LIQT) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Nov. 12, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Fei Chen
• Chief Financial and Chief Operating Officer - David Kowalczyk

TAKEAWAYS

• Revenue -- $4.4 million, representing an increase of 15.5% year over year driven by growth in the Marine and DPF segments.
• Gross Margin -- 12.3%, improving from 8.4% in the second quarter of 2026 due to sequential progress in manufacturing efficiency.
• Adjusted EBITDA -- negative $1.1 million, representing a $500,000 improvement from the negative $1.6 million reported in the preceding quarter.
• Net Loss -- $1.8 million, narrowing from $3.1 million in the second quarter of 2026.
• Full-Year Revenue Guidance -- $20 million to $23 million, implying growth of 21% to 39% over the previous year.
• 2027 Revenue Outlook -- 30% to 40% growth relative to 2026, supported by an identified pipeline of commercial opportunities.
• DPF Revenue -- $1.1 million, increasing from $0.8 million in the third quarter of 2025 following a renewed focus on sales execution.
• DPF Order Growth -- 30%, reflecting the increase in sales orders from Jan. 1 through Nov. 1 compared to the same period in 2025.
• Marine Revenue -- $0.9 million, compared with $0.5 million a year ago, driven by the delivery of iCER water treatment systems.
• Commercial Aquatics Revenue -- $0.8 million, decreasing from $1.1 million in the prior-year period due to the timing of specific project milestones.
• Plastics Revenue -- $0.7 million, down from $1.0 million in the third quarter of 2025.
• Cash and Restricted Cash -- $13.9 million at the end of September, providing liquidity for working capital and strategic priorities.
• Industrial Wastewater Order -- $2.1 million, covering four additional QureFlow systems for a U.S. steel manufacturer following a successful initial installation.
• Wastewater Recovery Rate -- 95%, the target level for reuse at the new Freeport, Texas, facility utilizing the QureFlow QF-6 system.
• Operating Expenses -- $2.3 million, an increase of 12.2% year over year but a decrease of 13.4% from the second quarter of 2026.
• Selling Expenses -- $1 million, up from $0.5 million a year ago due to headcount additions and increased marketing activity at the U.S. service center.
• General and Administrative Expenses -- $1 million, down 21.5% year over year reflecting the timing of the Annual General Meeting.
• R&D Expenses -- $289,000, focused on silicon carbide membrane development and water treatment system improvements.
• Quarterly Revenue Targets -- $7.1 million to $10.1 million, the range required in the fourth quarter to meet the company's full-year guidance objectives.
• EBITDA Breakeven Threshold -- $8 million to $10 million, the quarterly revenue level management identified as necessary to achieve positive EBITDA.

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RISKS

• Chen stated, "the timing of customer acceptance shifted to marine scrubber deliveries into the fourth quarter," which impacted the realized revenue for the third quarter.
• Kowalczyk indicated that "revenue scale and product mix both affect our ability to absorb fixed manufacturing costs," noting that capacity utilization was lower than in the prior-year quarter.

SUMMARY

LiqTech International, Inc. (NASDAQ:LIQT) reported a 15.5% year-over-year revenue increase and reaffirmed its full-year revenue guidance of $20 million to $23 million. Management stated that growth was led by the Marine and Diesel Particulate Filter segments, while Commercial Aquatics and Plastics experienced timing-related softness. The company is emphasizing the standardization of its filtration systems to scale operations and improve gross margins. Management indicated that the current opportunity pipeline supports a preliminary 2027 revenue growth outlook of 30% to 40% as the company works toward sustainable profitability.

• The company reported that a successful installation at a U.S. steel manufacturer led to a follow-on order for four additional systems, illustrating a strategy of generating repeat business from proven technology.
• Management noted that raw material availability issues that impacted DPF production in the second quarter have been resolved.
• CEO Chen stated, "An established Marine customer is expanding its use of our technology from scrubber application into iCER application," highlighting the adoption of next-generation engine solutions.
• The company expanded its geographic footprint in the Commercial Aquatics segment with its first order in Finland for the Original Sokos Hotel Presidentti in Helsinki.
• Management indicated that its China joint venture is providing local engineering and assembly capabilities for the Marine segment, while core membrane manufacturing remains in Denmark.
• The company expects to establish a reference installation in the United States with the scheduled operation of its first commercial pool system in Worland, Wyoming, in November.
• David Kowalczyk will depart as Chief Financial Officer on Nov. 30, with Michael Schroder appointed as Interim Chief Financial Officer.

INDUSTRY GLOSSARY

• DPF: Diesel Particulate Filter, a ceramic device designed to remove particulate matter or soot from the exhaust gas of a diesel engine.
• iCER: Intelligent Control Exhaust Recycling, a technology used in next-generation marine engines to reduce emissions and improve efficiency.
• EGR: Exhaust Gas Recirculation, a nitrogen oxide emission reduction technique used in internal combustion engines.
• QureFlow: The company's standardized filtration platform designed for demanding industrial wastewater applications.
• QlariFlow: A standardized silicon carbide filtration platform specifically developed for the commercial pool and aquatics market.
• Silicon Carbide Membrane: A high-performance ceramic membrane used for liquid and gas filtration in extreme environments.
• Scrubber: A water-treatment system used in the marine industry to remove contaminants from ship exhaust gases.

Full Conference Call Transcript

Operator: Good morning, and welcome to the LiqTech International reports Third Quarter Fiscal Year 2026 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Robert Blum, Lytham Partners. Please go ahead.

Robert Blum: All right. Thanks so much, and good morning, everyone, and thank you all for joining us today on today's conference call to discuss LiqTech International's Third Quarter 2026 Financial Results. Joining us today on the call from the company is 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 a Q&A session at the end of the call. [Operator Instructions] 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 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 the date of this release and conference call. Now I'd like to turn the call over to Fei Chen, Chief Executive Officer of LiqTech International. Fei, please proceed.

Fei Chen: Thank you, Robert, and good day to everyone on the call. At LiqTech, our strategy is clear: translate the strength of our filtration technology into sustained commercial growth and better profitability. We are prioritizing applications, where we solve a compelling customer problem, successful installations can generate repeat orders and standardized systems allow us to scale efficiently. This is shaping our investment and execution priority across industrial wastewater treatment, marine water treatment and the Commercial Aquatics alongside a renewed commercial focus on DPF. We are seeing tangible indications that this strategy is working. A successful wastewater installation at a U.S. steel manufacturer has led to an order for 4 additional systems.

An established Marine customer is expanding its use of our technology from scrubber application into iCER application. Our first Commercial Aquatics order in Finland expands the geographic footprint of QlariFlow and renewed attention to DPF is generating significant orders. Each is an example of building on proven technology and existing customer relationships to create further growth opportunity. Our immediate priority is to turn this momentum into a strong fourth quarter. We are maintaining full year revenue guidance of $20 million to $23 million. Revenue recognized to date, combined with existing orders and backlog gives us meaningful visibility, especially in industrial wastewater, Marine and DPF.

The key now is execution, completing production, meeting customer acceptance milestones and delivering systems on schedule before year-end. We are managing those activities closely with continued cost discipline. With that context, let me review our third quarter performance and the developments across our businesses. Third quarter revenue was $4.4 million, up 15.5% year-over-year. Marine water treatment and DPF drove growth, while our industrial wastewater projects continued to progress. Commercial Aquatics and Plastics were softer during the quarter and the timing of customer acceptance shifted to marine scrubber deliveries into the fourth quarter. We also made sequential progress on profitability. Gross margin improved to 12.3% from 8.4% in second quarter.

Our net loss narrowed to $1.8 million from $3.1 million, and adjusted EBITDA improved to negative $1.1 million from negative $1.6 million. There is more work ahead, but these are encouraging steps. David will discuss the financial performance, including the year-over-year comparisons in more detail. Starting with Water for Industry, we are advancing projects that demonstrate the value of our QureFlow platform in demanding industrial wastewater applications. Our $2.1 million follow-on order from a U.S. steel manufacturer covers 4 additional QureFlow systems. We expect systems to be substantially completed by year-end with revenue recognized on a percentage of completion basis.

This is an important contributor to our fourth quarter outlook and a strong example of an initial installation leading to repeat business. We are also progressing the QureFlow QF-6 system for Water Works industry services at its new facility in Freeport, Texas. Delivery is expected in the fourth quarter. The system is designed to treat wastewater from industrial equipment cleaning operations and recover more than 95% of incoming wastewater for reuse as wash water. This can reduce both freshwater consumption and the volume of wastewater disposal. For LiqTech, it opens another industrial application for our filtration platform. In Water for Energy, we remain selective in pursuing opportunities and evaluating strategic commercial partnerships that could accelerate market penetration.

We see meaningful long-term potential while recognizing the customer decisions and the project schedules can be difficult to predict. Potential new orders could provide upside within our guidance range, existing orders and the backlog in our other businesses provide substantial visibility towards the low end of our guidance range. Turning to marine water treatment. Third quarter revenue was approximately $0.9 million compared with $0.5 million a year ago. We delivered our third iCER water treatment system during the quarter following factory acceptance test approvals for our first 2 units in the second quarter. This marks continued progress in bringing our technology into next-generation marine engine applications.

Four completed scrubber systems are now scheduled for fourth quarter delivery after customer factory acceptance testing shifted in timing. The first of 4 previously announced EGR water treatment systems also remains scheduled for fourth quarter delivery. In October, we have announced 2 new iCER orders with an existing customer. This expands a customer relationship that had previously centered on scrubber water treatment. It illustrates how we can bring additional applications to customers already familiar with our technology. Across iCER, EGR and the scrubber systems, our solutions remove contaminants from circulating water, support reuse and help maintain reliable operation. Our China joint venture is central to this effort.

Local engineering, sourcing, assembly and service bring us closer to customers and shipyards, where core silicon carbide membrane continue to be manufactured in Denmark. With the broader application portfolio, scheduled deliveries and aftermarket service activity, we expect Marine to finish the year strongly. In Commercial Aquatics, third quarter revenue was $0.8 million compared with $1.1 million a year ago. The soft quarter revenue largely reflects project timing. We expect stronger sales in the fourth quarter and remain focused on expanding our standardized QlariFlow platform. In October, we announced our first Commercial Aquatics order in Finland for the Original Sokos Hotel Presidentti in Helsinki through our local partner, Pool4You.

This expands our geographic reach and builds on our partnership in the Finnish market. Our silicon carbide filtration technology, combined with a compact system design, gives pool operators a practical way to improve water quality and resource efficiency. We expect the Helsinki installation to become a local reference supported by Pool4You's market knowledge and customer relationships. In the United States, installation and initial operation of our first Commercial Pool system in Worland, Wyoming are scheduled for November. This is an important step towards establishing a U.S. reference installation. Standardization allows us to deploy the same core technology across different facilities with local partners supporting sales and project delivery as our installed base expands further opportunity for service and aftermarket support.

We see Commercial Aquatics as an important part of building a more scalable business. Existing orders and expected project activity support our expectation of a strong fourth quarter revenue contribution from this segment. Turning to DPF. Third quarter revenue was $1.1 million compared with $0.8 million in the prior year quarter. As we announced earlier this week, we have secured significant new orders, reflecting the impact of our renewed commercial focus. DPF sales exceeded expectations in each of the first 3 quarters of 2026 and that momentum continued into the fourth quarter. Sales orders from January 1 through November 1 increased 30% compared with the same period in 2025.

This order activity reflects the strength of long-standing customer relationships as well as opportunities to bring our DPF technology into additional applications and end markets. DPF draws on our established technology and manufacturing capabilities. Our goal is to convert renewed demand into consistent revenue through disciplined sales follow-up and reliable deliveries. Importantly, DPF also supports utilization of our ceramic membrane manufacturing capacity, making it a valuable complement to our growth in water treatment businesses. The raw material availability issue that affected production in the second quarter has been resolved. We entered the fourth quarter with a strong DPF order backlog.

Our focus is now on production execution and timely delivery, and we expect fourth quarter DPF revenue to exceed the third quarter level. Plastics revenue was approximately $0.7 million compared with $1.0 million in the third quarter of last year. Following the softer third quarter, order activity strength entering the fourth quarter. We expect this improvement to contribute to our year-end revenue plan. To conclude, our commercial progress and secured orders position us for a solid fourth quarter. We remain our full year revenue guidance and our near-term focus is straightforward. Complete production meet customer acceptance requirements and convert backlog into recognized revenue.

Throughout 2026, we have invested in developing a more robust opportunity pipeline to strengthen commercial execution and improve revenue visibility. Based on the opportunities currently identified, we believe the pipeline supports the potential for 30% to 40% revenue growth in 2027 relative to full year 2026. This preliminary outlook is not formal guidance, converting opportunities into orders and revenue will depend on customer decisions and execution. Our priority remains building a scalable business and progressing towards sustainable profitability. Let me now turn the call over to David to review our financial results and explain the fourth quarter revenue plan in more detail. I will then make a few closing comments before we open the call for questions. David?

David Kowalczyk: Thank you, Fei, and good day, everyone. I will review our third quarter financial results and key comparisons to both last year and second quarter and the revenue contributions supporting our maintained full year guidance. The revenue for the third quarter of 2026 was $4.4 million compared with $3.8 million in the third quarter of last year, an increase of 15.5%. Revenue was essentially unchanged from the second quarter of this year. The year-over-year increase reflects higher systems and aftermarket and filters and membrane revenue, including growth in Marine and Water for Industry. We also recognized revenue from externally funded research and development activities. These contributions were partially offset by lower component revenue.

As Fei discussed, Marine revenue was approximately $0.9 million. Commercial Pool was approximately $0.8 million, DPF was approximately $1.1 million and Plastics was approximately $0.7 million. The quarter benefited from Marine and DPF growth, while Commercial Pool and Plastics remained below their prior year levels. Gross profit for the third quarter was approximately USD 540,000, representing a gross margin of 12.3%. This compares with approximately $748,000 and a gross margin of 19.6% in the third quarter of '25. Sequentially, gross profit increased by approximately $174,000 from the second quarter, and gross margin improved from 8.4% to 12.3%. That improvement contributed to the reduction in our operating loss, even with revenue essentially unchanged.

The year-over-year decline reflected a shift within Systems and aftermarkets towards more system sales, particularly marine and fewer aftermarket services. Manufacturing capacity utilization was also lower than in the prior year quarter when production was supported by a build in safety stock. Revenue scale and product mix both affect our ability to absorb fixed manufacturing costs. The higher fourth quarter activity provides an opportunity to improve that absorption, while utilization and disciplined procurement remain important to the longer-term margin profile. Total operating expenses were $2.3 million compared with $2.1 million in the prior year quarter, an increase of 12.2%. Foreign exchange rates were broadly comparable to the year-over-year period.

Sequentially, operating expenses declined by approximately $363,000 or 13.4% from the second quarter of this year. Selling expenses were approximately $1 million compared with $0.5 million in the third quarter of '25. The increase primarily reflected new hires and a much higher activity level within sales and marketing, costs associated with our U.S. service center and the reversal of a bonus and other accruals in the prior year period. General and administrative expenses were approximately $1 million compared to $1.3 million in the prior year quarter, a decrease of 21.5% -- the comparison benefited from the timing of the Annual General Meeting, which moved to fourth quarter this year.

Research and development expenses were approximately $289,000 compared to $268,000 in the prior year quarter. The increase primarily reflected membrane development and development work on Marine And Commercial Pool systems. We continue to manage spending carefully, while supporting our commercial priorities. The timing of expenses, including Annual General Meetings will continue to affect quarterly comparisons. Total other expense was approximately $55,000 compared with $127,000 in the third quarter of '25 and $720,000 in the second quarter of '26. The reduction primarily reflects the repayment of the debt in June and July this year. Net loss for the third quarter was $1.8 million compared with $1.5 million in the prior year period and $3.1 million in the second quarter.

Net loss attributable to LiqTech was approximately $1.84 million or $0.05 per basic and diluted share compared with $1.43 million or $0.1 million (sic) [ $0.10 ] per share a year ago. Adjusted EBITDA was a negative $1.1 million compared with a negative $0.5 million in the prior year quarter and negative $1.6 million in the second quarter. The sequential improvement of approximately $0.5 million reflected higher gross profit and lower operating expenses. The year-over-year decline reflects lower gross profit and higher operating expenses. Turning to guidance. We are maintaining our full year 2026 revenue range of $20 million to $23 million. This represents growth of approximately 21% to 39% over 2025.

With $12.9 million of revenue reported through September, approximately $7.1 million is needed in the fourth quarter to reach the low end of that range. Existing orders and backlog within especially Water for Industry, Marine and DPF support a substantial portion of the lower end of the guidance and provide meaningful visibility into fourth quarter activity. Achieving the planned increase from the third quarter will depend on timely production, customer acceptance, shipment and revenue recognition. Our focus is on managing those milestones closely. The $23 million upper end would require additional $10.1 million in fourth quarter revenue. Revenue above the current plan depends on additional material orders for the timing of project execution, including potential Water for Energy opportunities.

We are pursuing those opportunities while keeping production and delivery of the existing orders as our immediate priority. We ended September with cash and restricted cash of $13.9 million compared with $15.7 million at the end of June and $5.1 million at the end of 2025. Cash and restricted cash declined by approximately $1.8 million during the quarter. The financing completed in June continues to provide financial flexibility to support working capital and our growth priorities. Our responsibility is to use that flexibility careful as we complete the projects in front of us. We remain focused on managing collections, inventory and project working capital alongside operating spending.

The objective is to convert increased activity into stronger financial performance, while maintaining the resources needed to serve our customers. And with that, let me turn the call back to Fei.

Fei Chen: Thank you, David. Before we conclude, I would like to thank David for his dedication and contributions to LiqTech ahead of his departure on November 30. We appreciate his work across our finance and operations teams and wish him every success in his next chapter. We have appointed Michael Schroder as Interim Chief Financial Officer, effective November 1. Michael brings extensive financial leadership experience, and we welcome him to LiqTech as we work through this transition and continue executing our priorities. As we move through the fourth quarter, our team is focused on the work required to meet our customer commitments from production and testing through delivery and installation.

We are encouraged by the opportunity in front of us and recognize that consistent execution is essential to earning the confidence of our customers and shareholders. Thank you to our customers, employees and shareholders for your continued support. We look forward to demonstrating further progress through execution. With that, Robert, we would be happy to take questions.

Robert Blum: All right. Very good. Thank you, both Fei and David, for your prepared remarks there. [Operator Instructions] We have a few questions submitted already, so we'll begin. The first question here is, could you break down the medium-term targeted revenue split between your standardized platforms like Commercial Pools, Marine and DPF versus project-based Water for Energy and Water for Industry platforms?

Fei Chen: It's a very good question. We have a very clear strategy we would like to have a stable basis of revenue from repeatable recurring business such as DPF and now also Commercial Aquatics and also Marine business give us a strong baseline for the revenue. And then on top of that, we got projects from water for industry and Water for Energy. And for the medium term, I guess that's for 2027. That's why we had a look ahead. And we can see definitely the stable platforms from the DPF and Marine and Commercial Aquatics is contributing very strongly there. So in this way, we have a much more visibility for our revenue prediction in the medium term.

Robert Blum: And as a follow-on to that, the question is, how do you expect the margins to shift due to the change in business mix?

David Kowalczyk: Yes. So we definitely expect improvements, both through the shift in segments and also through, you can say, much better capacity utilization. What we see is that with Marine and Aquatics, we definitely get a more standardized system to deliver, which makes it, you can say, much easier for us to optimize margin on each system that is delivered. So definitely a positive for possibility.

Robert Blum: All right?

Fei Chen: Yes. We have been working very much on standardizing our systems, both for the Marine and Commercial Aquatics and also we're also looking into the water for industry area. So the whole thinking is by standardizing our system, we will have a much better chance to improve the margin continuously.

Robert Blum: Okay. Our next question here is what are the key factors for reaching the 30% to 40% growth in 2027?

Fei Chen: The very -- I mean, we have seen -- we're building up a very good pipeline opportunity. So we have a base to be optimistic about our future. And as I said several times in my speech, the most important is consistent, efficient execution from the beginning, the sales process to the delivery and service installation. The whole process we have to turn all the opportunity into actual revenue, and that requires execution discipline. That's really the key factor.

Robert Blum: And as a follow-on to that, are you able to discuss what the current backlog and sales pipeline size is?

Fei Chen: We don't expose our backlog sizes.

David Kowalczyk: Not beyond, you can say that fourth quarter is covered by a substantial amount, you can say, compared to the guidance, but not for '27. We would not discuss backlog for '27.

Fei Chen: We are building up, but we don't disclose the numbers.

Robert Blum: [Operator Instructions] The next question here is, what sort of operating leverage will the company see with sales approaching $8 million to $10 million for quarter four?

David Kowalczyk: So definitely a strong operating leverage. I think that's what we have said. You can say we see EBITDA breakeven at those levels. Could be happening in Q4, depending on the final mix of the customers, but that level is what we are indicating to say here. We are in the area where we see EBITDA breakeven?

Robert Blum: Very good. Another question here on the pipeline, if there's a way that you can talk about the quality of the sales pipeline currently.

Fei Chen: This is something we're continuously working on improvement, the quality of our pipeline. So to give you a concrete example, when we're looking into 2027 prediction, we have really going very analytically looking into our pipeline analysis each of the opportunities and really to be kind of selective and critical and to evaluate them. And in this way, we got much better visibility and also hopefully more stable prediction of our revenue. So this is definitely something we have improved a lot, and we will continue to improve.

Robert Blum: All right. Very good. [Operator Instructions] Our next question here is, has there been any change in the sales cycle time to closing contracts?

Fei Chen: There's been change in the commercial part, for example, because we have much better pipeline now. So we're able to combine the retrofit project with the new build project because new build project is normally take 1 to 1.5 years sales cycle and retrofit is much faster. So in this way, we're able to combine these 2 things to kind of shorten the sales cycle of our project. And we're also working very much on the marine areas. We try to standardize and also repeating to the same customer again and again. In this way, we're also working on to shorten the cycle. And the DPF area, you see we have really got very good orders.

We have been very disciplined going to see who are our key customers. And those ones got extra attention. So we've got faster order coming in from our key customers. And that also really very strongly. We also reduced our sales cycle in this way. So we're putting on our priorities in the right way and the right place as when you allocate your resource and the focus in the right place and you see the sales cycle improve.

Robert Blum: All right. Very good. I'm showing no further questions at this time. So Fei, David, I will turn it back over to you for closing remarks.

Fei Chen: I would like to thank you all very much for joining us today and for your continued interest in LiqTech. We look very much forward to updating you on our fourth quarter and full year results in 2027. Thank you very much.

Operator: Thank you. The conference has now concluded, and we thank you for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

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