All right, hello everyone, and thank you all for joining us throughout the day here at the Lytham Partners Fall 2025 Investor Conference. Again, my name is Robert Blum, Managing Partner at Lytham Partners. Up next, we're going to be conducting a fireside chat with LiqTech , and from the company is Fei Chen, the company's Chief Executive Officer. A quick reminder, LiqTech trades on NASDAQ under the ticker symbol LIQT. Fei, thank you so much for joining us here today.
Thank you, Robert. I'm very happy to have the chance to talk with you today.
Fantastic. Let's jump right in. For maybe those not familiar, let's start off there. High-level review of LiqTech and their mission.
We are experts in advanced membrane filtration technology for the purification of liquids and gases. LiqTechl is a highly specialized business, sharply focused on industries where we believe our technology and application knowledge can make the greatest difference. We want to be a partner for our customers. Our advanced membrane filtration systems help to ensure high-end products and an efficient and reliable operation so our customers can free up their resources to run a profitable and sustainable business.
Talk a little bit about how LiqTech differentiates itself from traditional players in the filtration and separation technology space, if you are.
At LiqTech, we provide totally automatic filtration systems. We have both membrane production and system assemblies in-house, which means we can design our filtration system highly optimized. We have well-defined commercial focus areas. All of our systems are remotely monitored and supported by LiqTech. We are constantly gathering application knowledge in our focus areas. This builds the basis for the continuous improvement of the service for our customers.
All right, let's talk a little bit about what are the proprietary technologies or innovations that make your silicon carbide ceramic membranes sort of stand out compared to competitors that are using some polymer-based or other materials. How do your products deliver sort of the superior performance in terms of the durability, the efficiency, sustainability? Maybe share some examples of this sort of and how it works in action.
Sure. I mean, LiqTech has worked for more than 20 years on a strong knowledge of surface and material science for silicon carbide ceramic membrane. Our proprietary technology is the ability to produce silicon carbide ceramic membrane in commercial scale, maintaining the physicochemical properties developed in the laboratory. Compared to polymer membrane, silicon carbide ceramic membrane is mechanically stronger and chemically much more resistant. Ceramic membranes can withstand high temperatures and aggressive chemicals. Our ceramic membranes have a superior surface that is fouling resistant. This means that our membranes can run for a much longer time before they need to be cleaned. One good example is for the oil and gas produced water treatment. Our ceramic membranes can handle high solid particles, greasy, oily content, and tough salt concentration. Our filtration system is able to treat the difficult water to a sufficient clean quality for recycling.
This market is known for its very high OpEx and the constant replacement due to the aggressive media. We are turning that upside down with our industry-leading lifetime warranties on membranes.
I want to dive into oil and gas here in just a moment, but maybe sort of talking about some of the barriers to entry in some of these target markets. You know, how has LiqTech positioned it to overcome some of these?
Yeah, we are currently seeing a lot of market validation for a better product. The main hurdle is asking customers to switch from a CapEx-driven mindset to start considering total cost of ownership and what it means to their operation to simply have a better filtration process that is robust and will keep running when many other technologies aren't. Our technology is a quality product, and we are letting the market know that there's a better solution out there. In many cases, we conduct a pilot test together with our customers at their application site. Through the excellent pilot test results, customers will build up confidence in our filtration technology.
Yeah. How are some of the macroeconomic trends right now? Water scarcity, are these creating tailwinds for the business?
For water treatment, we have the business focus in the growing oil and gas industry, maritime industry, and the commercial swimming pool. In all these markets, we feel a strong interest in adopting efficient and sustainable technology solutions for water treatment in order to preserve water resources and to recycle the water resources.
All right. Let's, you just mentioned three markets there, oil and gas, maritime, commercial swimming pools. Let's kind of dive into one in a little bit more detail now. Let's start on the oil and gas side, sort of expand on this market here if you could.
Yeah. I mean, the oil and gas produced water treatment is getting more and more attention. The oil and gas exploration areas are very often located in the region where water is a scarce resource. In the U.S., the oil and gas industry, more than 20 billion bbl of water is produced every year. This is toxic, oily water that is being produced in some of the water scarcity regions in the States. Exactly. Therefore, we are highly involved in the many beneficial reuse projects that are undergoing in the region where we can act as a robust pre-treatment step before, for example, desalination and direct recycling to avoid using more fresh water. Apart from delivering superb filtration 24/7 in this market, we're also benefiting from our system's ability to up-concentrate wastewater streams to a very high degree.
In this way, we're able to lower the waste disposal cost significantly for the operators.
All right, very good. Let's go to the second market there. Maybe let's go into swimming pools. Talk a little bit about how your technology is utilized in those markets there.
Yeah, currently, sand filtration is widely used for swimming pool water cleaning. It's really incredible. This is a more than a thousand years old technology. It consumes a large amount of water, energy, and chemicals. Our ceramic membrane filtration has demonstrated a well-documented cleaning performance in the past three to five years. We're using 40% less in energy and water consumption and 60% less in chemical consumption. Our filtration system has a 40% less footprint and is very suitable for retrofitting for existing sand filtration systems. We experience big interest in the North European market. We are working with our U.S. partner to penetrate the market of our Atlantic.
All right. This is really applicable for a number of additional sort of applications where you've talked about very, very difficult environments. More broadly on the industrial side, talk about some of the applications there.
Yeah, in parallel to the oil and gas market mentioned before, our filtration system is also highly suitable for some industry wastewater treatment. Many industry wastewater streams either contain a very high load of solids and oil, or they operate at elevated temperatures, or the water has a high or low pH, which means they are quite aggressive to matting of the polymer membrane. Many industries are today struggling with finding better solutions than what is currently on the market, solutions that will give them peace of mind. Example industries can be the steel processing industry, refinery, paper and paper, plastic recycling, and the chemical industry. In June this year, we received an order for advanced wastewater filtration from North Star BlueScope Steel in the U.S., which is a good example of a company that has struggled with getting polymeric membranes to work with their wastewater streams.
We currently experience more interest in this. We definitely expect more interest in these applications in the future.
All right. You know, you've got sort of these markets where the focus there is on these systems and such, but you also have sort of DPF filters and plastics and such. For those maybe not familiar, talk about these two sort of established markets.
Yeah, DPF filters and the plastics are two very established market segments for LiqTech. They are different from the others because they are not a system business. They are a component business. We have a good customer basis in Europe and in Denmark, respectively. Our customers highly appreciate our flexibility, short delivery time, and the closeness to them. We expect a stable, moderate growth in these areas.
All right, good. Let's sort of turn focus here geographically. You really seem to have focused your efforts on maybe two key markets lately, the U.S. as well as China. Talk more about some recent announcements you've made in each of these to form JVs and open service centers very recently.
Yeah, I mean, traditionally, we have been very focused on the European market. This will continue. The activity you mentioned in the U.S. and China, which is a new extension geographically for us. We have four selected segments: water for energy and industry application, maritime industry, pool systems, and DPF plastics. Pool systems and DPF plastics have the customer bases in Europe, which is close to our office in Denmark. Water for energy and industry applications have marked focus in the U.S. Our recent established service center in the U.S. will provide close and in-time service to our customers. This has already received warm welcomes from our U.S. customers. For the maritime industry, we have focused on the new commercial vessels with dual fuel engine design.
When more than 70% of new commercial vessels are built in China today, there's no doubt that we need to have a setup in China to enter the market. Our joint venture in China is now well-functioning. We will have sales, service, and the system assembly function established in China.
All right, maybe as we sort of start looking to wrap things up here, let's talk about your outlook for the business. I believe you've provided guidance of $19 million - $20 million here for fiscal year 2025. You know, talk about some of the drivers to your outlook.
Yeah, in the past year, we have really worked out, largely improved our sales management and the sales process. This is reflected in our sales results in the past couple of quarters. We are very happy to see the sales growth coming across all the business segments. This gives us very good confidence in delivering the outlook with significant growth compared to 2024.
All right, very good. Maybe sort of looking out a little bit further, what are sort of the key drivers, the most significant growth opportunities for LiqTech here in the next three to five years and why?
I would like to start to say it's very clear we're going to expect to see strong growth in our system business. Maritime water treatment will provide more foreseeable growth because all the vessel building projects, they often planned it for more than a year ahead. Swimming pool systems will provide steps up growth each time when we have succeeded in a new geographic market. Water for energy and industry applications will provide the most significant growth opportunities due to the huge addressable market potential, as well as the nice match between LiqTech technology solutions and the market needs.
You know, talk about maybe some of the strategic shifts or the operational changes that you've implemented here over the last couple of years since you took over as CEO to sort of improve profitability or move towards profitability, improve scalability as well.
Yeah, we have undergone a very fundamental transformation process in the company in the past three years since I became the CEO. If I summarize them, I would like to mention four important things, what we have achieved, which contribute to the improvement of profitability and scalability. First thing is we have worked on innovation. We standardized and standard-modelized our design for our system. In this way, we smoothened our system assembly and also reduced the system cost. The second thing is we have worked on execution, discipline, quality improvement, supply, and operation planning. In this way, we improved manufacturing profitability. The third thing I would like to mention is that we started to investigate system assembly locations besides Denmark, which is our traditional place, with the purpose of reducing costs. For example, for the maritime water treatment system, the assembly will be moved to joint venture in China.
In this way, we will be able to achieve significant noticeable cost reduction. The last thing it's important to mention is we have streamlined our organization to strike the right balance between maintaining the critical key competencies and minimizing fixed costs.
All right, just kind of looking to wrap things up here. The guidance you provided, $19 million - $20 million, that's, I believe, a 30% - 37% increase compared to the previous fiscal year. What are, and then more broadly here going forward as it relates to your outlook and some of the markets that you've talked about, what are the biggest risks that could derail this outlook and how are you maybe looking to mitigate them to the extent possible?
As mentioned before, we are expanding geographically. This means we have to watch very carefully the geopolitical situation around the world. We are really doing that constantly and also taking the necessary mitigations. The example we mentioned before, the U.S. service center and the joint venture in China, will help us in this direction. We will continue on those mitigations. The second thing I would like to mention is that we are having very nice commercial growth. That means we have to develop the organization cohesively across the value chain. In this way, we're able to match the commercial growth as well as to satisfy our customers in delivery quality and the service demands. These are the two major things we are working on.
All right, just kind of wrapping things up here then, from this investor conference, from an investor's perspective, what are maybe the top three reasons why people should be excited about LiqTech here today?
First of all, I would like to say LiqTech is experiencing strong mass adaptation in our system business, particularly in the markets that will demand more advanced solutions in the future. With our second-to-none silicon carbide membrane technology and the world-class in-house system design and assembly, we are uniquely positioned as the strong and reliable partner to the industry. Looking ahead, we see highly attractive opportunities in our selected business areas where demand for clean and efficient solutions continues to grow. Behind this success stands our highly knowledgeable team whose strong commitment and dedication ensure we deliver outstanding value to our customers. I would like to make the conclusion we remain confident in our strategy, our technology, and our people to drive sustainable growth and long-term shareholder value.
All right, fantastic, Fei. We will leave it there. Thank you so much for your participation in today's conference. I want to obviously thank everybody for watching here. If there are any questions that you have of management or if you'd like to schedule a meeting with the company here over the next week or two, shoot me an email. That's blum@lythampartners.com. Further, to learn more about Lytham Partners, make sure you visit our website and be sure to follow us on LinkedIn as well to stay connected about future events such as this discussion here with LiqTech . Fei, once again, thank you so much for your participation. We hope you enjoy the conference and hope everyone has a great rest of their day here.
Thank you, Robert, and thanks everyone for watching.