All right, hello and welcome to the LiqTech Fireside Chat. My name is Robert Blum, Managing Partner at Lithium Partners, and today I have the honor of moderating a Q&A discussion with Fei Chen, LiqTech's Chief Executive Officer. Fei, welcome.
Thank you, Robert.
Fantastic. Let's sort of dive right in to maybe set the stage a bit. Please provide a brief overview on the company and maybe remind everyone on your background as well and why you sort of joined LiqTech.
Yes, LiqTech is a leading innovator in specialized filtration technology. The company is listed on Nasdaq and has headquarters in Denmark. We have more than 100 highly skilled professionals, and we develop both membrane products and complete system solutions. Our technology is deployed across more than 250 customers and our 300 installed systems around the world. I joined LiqTech in September 2022, bringing our 30 years of experience in technology development, sales, marketing, and new business creations. My background spans multiple industries, including energy, chemicals, water treatment, environmental solutions, and medical devices. The reason I joined LiqTech is I really truly believe LiqTech has a unique technology, and the water treatment area is very important, growing, and important for the future of the world. I also think I can contribute based on my experience for the commercialization and the growth of the company.
All right, that's a good background there. Let's maybe dive in a little bit more specifically here. The silicon carbide filtration technology is really sort of the cornerstone, right, of all of your offerings here. Can you explain how it works and why it's superior to traditional filtration methods?
Silicon carbide ceramic membranes, they are exceptionally durable and with very high mechanical strength and chemical resistance. They outperform both polymer and other ceramic membranes when treating aggressive liquids or water, which contains high solid particles, heavy metals, oil, grease, and bacteria. Our membranes can also stand for wide pH range and high temperatures. We have a patent, you know, several patents cover our silicon carbide ceramic membrane. The differentiator from our company compared with other membrane producers or other competitors is we both produce membrane products and have the system solution. We integrate both together, allowing us to optimize the performance and efficiency. Our membrane features with specialized coating that enable filtration from three micrometers down to 60 nanometers, allowing us to tailor solutions to specific customer needs.
Additionally, our cross-flow filtration system ensures continuous, stable operation, which is very often critical for industries that require high reliability. During the years, we have built up solutions, expertise, and knowledge of a building system based on our silicon carbide membrane. Our filtration systems are highly automated, remotely monitored, practically unmanned, and run for many years with only minimal maintenance. We work very actively close to partners, partner with our clients to solve some of the toughest challenges for our customers and in the world.
Yeah, maybe expand just a bit on that last point there. Talk about what you think are maybe most impactful applications of LiqTech's technology today, and maybe which ones are you most excited about in the future here?
We work on four different areas, commercial and market areas. The first one is called Water for Energy, which is the industry wastewater treatment and beneficial reuse of the water in the energy and petrochemical industries. The second one is the commercial swimming pool area, where we are able to deliver high-efficiency filtration for superior water quality for commercial swimming pool water treatment. The third one is called maritime water treatment, where we are able to address environmental regulation and also the decarbonization of clean shipping operations. The last one is the Diesel Particulate Remover, where we are able to reduce harmful emissions in transportation and industry settings. We see water for energy as a high growth market where we are actively expanding.
At the same time, we see our swimming, commercial swimming pool, maritime water treatment, and diesel particulate removal business as well established and able to continue to grow and develop. Together, those four segments represent a $4.2 billion addressable market potential.
You know, maybe talk a little bit about how you settled almost on those applications. How do you decide which applications to prioritize, you know, given really almost the broad potential of your filtration systems here?
Yeah, that's a very good question because it's a quite challenge to decide where do you want really to focus on. We actually prioritize our market segment based on three major facts. The first one we're working on is to see the areas we actually have a proven application success. We're able to leverage the customer adoption and also to demonstrate the performance of our solutions. Because this way, we're able to have the value proposition to discuss with the customers and the partners, and it's easy for us to get in. The second thing we're looking at is the market attractiveness. We want to target the areas with high growth potential, the industries with significant business potential. The third one is a strategic fit. We're looking for opportunities which are able to align with our core strengths and the technological advantages.
In other words, we have the right to play, and that's very important for us. These three facts are the things we use to prioritize. Based on our analysis and based on this three-facts evaluation, we have chosen to focus on water for energy, commercial swimming pools, maritime water treatment, and diesel particulate removal.
All right, very good sort of explanation there. Let's talk about this from a geographic perspective. What geographic markets are you sort of view as maybe the strongest opportunities here over the next five to 10 years or so?
Yes, since we are a Europe company, we're located in Denmark. Historically, Europe has been our largest market. However, since 2024, we have intensified our efforts in the U.S. market, particularly within the water for energy sector. We have also re-entered the Chinese market through a joint venture focused on maritime water treatment. We believe the U.S. and China will be the strongest growth drivers in the growth market over the next five to 10 years for LiqTech.
All right, good. Let's go maybe through a little bit of your commercialization approach here. How have you maybe, you know, you talked a little bit about your background at the beginning. How have you leveraged your past experience to sort of create these distribution agreements and joint ventures going forward here?
Because our technology is highly specialized, successful commercialization requires both geographically in place, in the presence, we should be there close to our customer and also have a deep customer understanding. We focus on developing robust application cases and also some compelling value propositions to attract the right distribution partners. By forming strategic distribution agreements, we accelerate market penetration, enhance the customer engagement, and scale our solutions more efficiently. Definitely, we have been using both myself and also the other people in our organization, our network, to really get faster to get close to some relevant collaboration partners in the industry.
All right, good. That's helpful there for hopefully for everyone. You know, I want to come back to sort of these four markets that you've talked about, you know, sort of the, you know, you've had success in markets like marine scrubber, the oil and gas market, swimming pools, right, DPF. You know, talk about sort of the specific achievements or the case studies from each of these and maybe talk a little bit about sort of how that pilot program leads to commercial orders and how that really drives the growth in the future here for the company.
Yeah, I think the best way to talk about it is to give some examples. If we take the oil and gas segment as an example, in 2024, we started a signed distribution agreement with a Houston-based company called Razorback Direct. Right after that, we actually were able to deliver a pilot system to them at their customer site. The pilot system ran satisfactorily. That led to a commercial scale project. That was signed in December 2024. Actually, these days, we are going to send two of our pure flow container solution systems to a U.S. customer via Razorback Direct in the U.S. Those installations will build market awareness and drive further penetration in the oil and gas sectors. This is a very, very good example to show how the process will be in such heavy industry sectors.
We normally will start with a pilot program, and that will lead to commercial projects. We do hope with this success and also the substantial visibility of our system in the market, that will shorten the timeline of our future adaptation in the market. The commercial swimming pool area is a little bit different. What we have done in the past year is we have absorbed the market feedback and the customer comments, and we launched a modular filtration solution. We also optimized our automation software for the customers and for the partners. Additionally, we actually also secured an NSF approval in the U.S. We will be processing us for broader adoption, both in the U.S. market and also in the Europe market. We really believe this will push the growth of commercial swimming pool in 2025 and the years to come.
Marine scrubber is very special in the way because the major market is taking place in China. We have set up a joint venture with a partner in China and established officially the joint venture in December 2024. We actually already have a dedicated sales and engineering team in China that's working in this area. We have initiated discussions with engine manufacturers, ship builders, ship owners, and scrubber manufacturers in China. We actually are setting the process and the stage for re-entering this market by doing in this way. There's a different one to another. For the DPF area, what we're really happy to inform is we actually see some new opportunities both for the inland transportation in Europe and also for the emergency power supply of data centers around Europe.
Those are the new opportunities we see also for the DPF area. We are working moving forward in all market segments.
Yeah, it's very interesting. Every market is a little bit different. Your approach to every market is a little different. What you have to highlight to each market is very different. I think it's important for people to understand it really is a unique and multi-sort of faceted approach to how you have to address each of these. You know, maybe coming to the next question here, how do you balance the need for sort of this, you know, rapid expansion? You've got all these opportunities out there, different market opportunities, and you've sort of very focused on the four that you've talked about here today. How do you balance sort of that expansion with also sort of just operational efficiencies, which is something I know you have emphasized ever since taking over as CEO?
Yeah, it's really a very important balance we have to keep. Over the past two years, we have focused on transforming LiqTech into a lean and perform-driven organization. We are preparing for substantial growth. The key initiative I would like to mention here is we really strengthened our sales team, so in this way, we have enhanced the commercial capability of the sales team. The sixth thing we have done is we established a structured sales pipeline that really improved the forecast and the execution of the sales and the sales process. The third thing we have really been really working on is implementing financial and operational reporting systems. That will give us a much better transparency and the data-driven decision process.
The last one I would like to mention is the people are very important in how they think, and we continuously optimize our organization structure. We maintain the cost efficiency, also grow the critical competence. This combination is a culture, is discipline we're working on. This disciplined approach enables us to expand aggressively. We are maintaining the financial and operational discipline.
All right, that's good to understand here. I guess maybe just a couple more questions. When you think about your top goals, let's say for 2025, you know, talk through those and maybe how you build on some of the success that you had over the last year or so.
I mean, in a very straightforward way, our primary goal for 2025 is top-line growth. We are maintaining a lean cost structure. Following a cost reduction initiative in late 2024, we have positioned ourselves to achieve break-even measured on an adjusted EBITDA basis to a runway of $5.5-$6.0 million in quarterly revenue. We are targeting this milestone later this year. This is our primary and really the main focus of 2025. As mentioned earlier, we built out the foundation and the discipline and the process of the organization. This will make us feel confident we're able to achieve these major milestones later this year.
All right, good. Top-line growth, efficiencies, driving bottom-line improvements and break-even and profitability there. Last question here, you know, sort of reflecting on your tenure here so far, last couple of years, you mentioned 2022. You know, what's sort of the achievements I think that you're most proud of, and how does it position LiqTech for the future here?
Yeah, I've been here since September 2022, as I mentioned before. Leading LiqTech through a period of transformation has been both challenging and rewarding. I am most proud of we have actually strengthened our team, and we maintain the key talents at the same time at critical expertise. We have also driven some very interesting innovations. The example like the pure flow container solution I mentioned before, and also the modular swimming pool system developed, those are very good examples on how we develop new solutions tailored based on the customer needs. The third thing I would like to mention is that we have built some very strong strategic partnerships which expand our reach through key industry collaborations. We also have succeeded in enhancing transparency. This has been actually confirmed by the positive feedback from investors, partners, and customers.
The last thing I'm also very proud of is we are fostering and also continually fostering a committed culture where we are creating a team that is fully engaged in our mission. With these achievements as a focus foundation, I am excited for a bright and prosperous future of LiqTech. I'm really proud of what we have achieved and look forward to able to share more progress with you in the future.
All right, fantastic, Fei. Thank you so much for joining us today. Thank you to everyone who's been watching. If you do have any questions and maybe you'd like to schedule a meeting with Fei here in the management of LiqTech, you can send me an email. That's Blum, B-L-U-M, at lithiumpartners.com. We have additional presentations and fireside chats coming up throughout the day here, so please stick around. Again, Fei, thank you so much for your time today. Greatly appreciate it.
Thank you, Robert.
All right, everyone, have a great rest of your day, and we'll talk to you soon.
Thank you.