All right. Hello everyone, and thank you all for joining us during the Lytham Partners Fall 2026 Investor Conference. My name is Robert Blum, Managing Partner here at Lytham Partners. Up next, Fei Chen, Chief Executive Officer at LiqTech International, will be taking us through the company's slide presentation. As a reminder, LiqTech trades under the ticker symbol LIQT on the Nasdaq. All right, let's get started. Fei, welcome. I will turn the floor over to you for your presentation.
Thank you, Robert, for the opportunity to participate in the Lytham conference, and thank you all for joining us. I am Fei Chen, President and CEO of LiqTech. Today, I would like to introduce LiqTech, explain why our silicon carbide technology is differentiated, and most importantly, show how we are building a more scalable and profitable business around it. Today's remarks include forward-looking statements and non-GAAP financial measures. Please review the important information on this slide and our SEC filings for additional details. For those who are not familiar with LiqTech, let me start with a short overview. We are a Danish clean tech company listed on Nasdaq. Our core technology is our patented silicon carbide membrane, which we manufacture ourselves in Denmark. We then engineer these membranes into filtration systems for demanding water and emission applications.
Today, we operate across six business areas: commercial, aquatic, marine, water for industry, water for energy, DPF and membrane, and plastics. Together, the markets we are targeting represent an estimated addressable market of about $ 6 billion. in 2025, we generated $ 16.5 million of revenue. Our 2026 revenue guidance is $ 20 million-$23 million, representing growth of 21%-39%. Following our finance in June, we ended the second quarter with $ 15.7 million in cash and restricted cash, and were substantially debt-free. We have the technology, commercial proof points, manufacturing capacity, and now a stronger balance sheet to support growth. Let me summarize the investment case in six points. First, proprietary technology. We own and manufacture our patented silicon carbide membranes, supported by more than 20 years of manufacturing knowhow. Second, standardized shorter cycle platforms.
Products such as QlariFlow for aquatics and QureFlow for industry water allow us to configure systems instead of engineering every project from scratch. This is an important driver for scalability and margin improvement. Third, commercial proof points are compounding. Aquatics achieved record quarterly revenue $ 1.5 million in quarter two, and after operating our first system, a U.S. steel customer placed a $ 2.1 million follow-on order for four additional systems. Fourth, we have recapitalized the balance sheet. Our June financing generated approximately $8 million in net proceeds, and we ended June with $ 15.7 million of cash and were substantially debt-free. Fifth, we see operating leverage ahead. Revenue grew 13% in 2025, where operating expenses remained roughly flat. As revenue increases, we have the opportunity to grow much faster than our fixed cost base. Sixth, we have clear financial goals.
Positive adjusted EBITDA in 2027, followed by positive EBIT and free cash flow in 2028. The key now is execution. LiqTech combines centralized manufacturing with local customer support. Our core silicon carbide membranes are manufactured in Ballerup, Denmark, where we maintain our key technology and production knowhow. Our systems are assembled in Hobro, Denmark. At the same time, we are moving closer to our customers. We have a service center in Texas supporting North America, and our joint venture in Nantong provides local capabilities for the important Chinese marine market. Today, we have more than 300 systems installed worldwide, including more than 170 marine scrubber installations. Our model is simple, keep our core technology and manufacturing expertise in Denmark. We are bringing service and customer support closer to our markets.
Let me spend a moment on why our technology matters. Many of the water streams our customers need to treat are hot, oily, abrasive or chemically aggressive. They are difficult conditions for conventional polymeric membranes. Silicon carbide is fundamentally different. It provides high flux, strong chemical and thermal resistance, efficient cleaning and a long service life. For our customers, the important point is not simply the material. It is reliable operation, has higher treatment capacity, and a lower total cost of ownership in difficult conditions. That is the competitive advantage we bring to the market. Owning the membrane technology allows us to capture value at several levels. At the first level, we sell membrane as filters directly as components. At the second level, we integrate our membranes into complete engineered filtration systems.
Once those systems are installed, they create aftermarket opportunities through replacement membranes, spare parts, service, and system expansion. This is important because the value of the customer relationship does not stop with the initial system sale. Standardization makes this business model even stronger. By reusing engineering, procurement, and manufacturing across similar systems, we can reduce cost per system as volume grows. The total industry and municipal water treatment equipment market is enormous, estimated at approximately $300 billion. We think that the filtration market is about $14 billion, and we estimate the area related to LiqTech at around $6 billion. But we do not need to pursue everything. We focus on applications where the water is difficult to treat, where treatment is important to the customer's operation, and where our silicon carbide technology provides a meaningful advantage.
For a company of our size, capturing even a relatively small share of these selected markets can create substantial growth. We organized our portfolio into six business areas, and each has a different strategic role. Aquatics and marine are our growth engines. Water for industry is selective and scaling, where we are seeing opportunities to repeat a standardized solution across similar industry applications. Water for energy remains a very large opportunity, but we are pursuing it selectively and increasingly through partnerships. DPF and membranes provides a foundation of established customer relationships and manufacturing activity. Plastics is a complementary industry business. The important point is that we are not depending on one single market or one large project to drive the entire company. This slide explains one of the most important changes in our strategy. We have learned that a strong technical result does not necessarily mean fast commercial conversion.
Large industry and energy projects can involve years of testing, validation, budgeting, and capital approval. The customer controls that timeline. We therefore want more of our growth to come from markets where the product is configured rather than designed from scratch, and where the sales cycle is measured in months rather than years. For the larger energy opportunities, we increasingly want to work through partners who bring customers access and scale, and we are underwriting less large project revenue in our planning. Our model is simple: land, prove, expand. When the first installation demonstrates the value in real operation, then expand with that customer and similar customers. Aquatic is a good example of this strategy. Our QlariFlow platform is standardized and configurable, which means we do not start with a new engineering design for every project.
We sell primarily through local distributors who identify projects, support installation, and provide local service. This gives us reach without having to build a large direct sales organization in every market. In 2025, we sold a record 34 pool systems. In 2026, we have continued to expand through major projects in Australia and the Netherlands, as well as our first QlariFlow project in the U.S., located in Wyoming. Revenue reached a record $ 1.5 million in quarter two. Each new installation is important, not only for the initial revenue, but also because it creates a reference, aftermarket opportunity, and a platform for additional business in the local market. Marine is our second growth engine. We provide water treatment systems for several applications on large commercial vessels, including scrubbers, fuel ISO systems, and EGR systems. The key change is how we serve this market.
Through our joint venture in China, we have moved engineering, sourcing, assembly, and service closer to the shipyard where vessels are being built, where our core silicon carbide membrane continue to be manufactured in Denmark. This improves local competitiveness and responsiveness. We are protecting our core technology. During 2025, we received orders for eight iCER systems in quarter two 2026. The first two iCER units passed the factory acceptance testing. We also received an order for our four EGR water treatment systems in China. The opportunity is to build a broader and more consistent marine business across several engine platforms and through aftermarket service over the life of each system. Water for industry is becoming increasingly tangible for us. We are focused on selected applications such as steel and industry wastewater reuse, where the water can contain oil, solids, and other contaminants that are difficult for conventional membranes.
Our QureFlow platform allow us to address these applications with a standardized modular system. A very good example is our U.S. steel customer. We first delivered one system and demonstrated technology under actual operating conditions. After seeing the performance, the customer placed a $2.1 million follow-on order for four additional systems. They convert one installation into a five-system deployment. We have also received a QureFlow QF-6 order for industry wastewater reuse in Freeport, Texas. This is exactly the model we wanted. Learn, prove, and expand. Water for energy addresses produced water from oil and gas operations. Technically, this is one of the strongest fit for silicon carbide because produced water can contain oil, solid, and challenging chemistry. It is also the largest long-term market opportunity we are pursuing. But we have learned the important distinction, technical validation and commercial timing are not the same thing.
Large energy projects can have long qualification periods, and investment decisions are controlled by our customers. We therefore have not changed our view of opportunity. We have changed how much of this market we underwrite in any individual year. Going forward, we will pursue fewer, more qualified opportunities and increasingly work through strategic partners who bring customer access and skill. We remain very interested in this market, but we are approaching it with greater commercial discipline. Our DPF membrane and plastic business provide important foundation beneath our growth businesses. Together, they generated about $7.9 million of trailing 12 months revenue at Q2 2026. DPF and membrane components are sold to established OEMs and industry customers. We have renewed our commercial focus on selected non-automotive applications where silicon carbide durability creates a differentiated value proposition. Our plastics business serves customers in food processing, machine building, and other industry applications.
This business provides more than revenue. They also create baseload manufacturing activity, helping us absorb fixed production costs and therefore supporting consolidated growth margin as volume grows. This slide shows the breadth of the progress we have made during the first three quarters of 2026. We have commercial aquatic installation in Europe, Australia, and the U.S. We have new marine orders and successful iCER factory acceptance testing in China. We have continued produced water activity in West Texas, and we have two important industry wastewater orders in the U.S., including a $2.1 million steel follow-on order. These are different applications and different geographics, but they share one thing, our silicon carbide membrane platform. The next task is to convert these individual proof points into repeatable business. This slide brings the business model together. We are not developing a different core technology for each market.
The same silicon carbide membrane platform can address produced water, industrial wastewater, marine water treatment, and aquatics. That allows us to share R&D manufacturing capacity and engineering know-how across multiple markets. We also have substantial existing production capacity. We believe revenue can grow significantly without a corresponding increase in capital investment or fixed operating costs. Every installed system expands the aftermarket opportunity through membrane replacement, service, and further system expansions. The model is increasingly clear. One technology platform, multiple markets, shorter time to revenue, and increasing operating leverage as we scale. Now let me connect the commercial opportunity to our financial performance. Systems and aftermarket has become our largest reported revenue segment. This is strategically important because this segment includes aquatics, marine, water for industry, and water for energy. These system sales are also what build our installed base and create future aftermarket revenue.
Quarterly revenue can still vary because of delivery timing. But over time, our objective is to build a larger system business supported by a growing base of membrane replacement, service, and expansion revenue. The key message here is operating leverage. Operating expenses were approximately $ 9.7 million in 2024 and $ 9.6 million in 2025, despite revenue growth. In the first half of 2026, operating expenses were about $ 5.4 million. We have already built much of the organization and infrastructure required to support a substantially larger business. Gross margin improved from 1.7% in 2024 to 7.6% in 2025 and 8.9% in the first half of 2026. Clearly, this is still not where it needs to be. The biggest levers are higher production volume, better absorption of fixed manufacturing costs, a stronger system mix, and more standardized engineering. We are not yet profitable.
Adjusted EBITDA improved from a loss of approximately $ 6.1 million in 2024 to a loss of approximately $ 5.0 million in 2025. However, our recent quarter results show that the path has not been linear. Our focus is therefore straightforward: convert commercial momentum into delivered revenue, improve gross margin, and maintain strong cost discipline. Our goal is not simply growth, it is profitable growth. Our financial position changed materially following our June financing. We ended the second quarter with approximately $ 15.7 million in cash and restricted cash and no senior promissory notes debt outstanding. Our stockholders' equity were approximately $ 25.8 million. This stronger balance sheet gives us financial flexibility to support customer deliveries and the working capital needed for growth. We intend to remain disciplined. Capital will be allocated selectively against clear commercial priorities and milestones. Our 2026 revenue guidance is $ 20 million-$ 23 million.
That represents growth of approximately 21%-39% compared with 2025. Beyond 2026, we have established internal financial goals. For 2027, our goal is approximately 40% revenue growth, positive adjusted EBITDA, and meaningful progress towards EBIT breakeven. For 2028, our goal is again 40% revenue growth with a positive EBIT and a positive free cash flow. I want to emphasize that 2027 and 2028 figures are internal goals, not financial guidance. They describe the direction in which we are working and the level of operating leverage we believe the business can potentially achieve if we execute successfully. This slide is perhaps the most important financial slide in the presentation. Our path to profitability has four elements. First, grow the standardized platforms. Aquatics and marine have shorter commercial cycles, and our distributor network in China, Jitri LiqTech, allow us to expand our reach efficiently. Second, lift gross margin through scale and mix.
Our fixed production costs are currently not fully absorbed. We estimate that our existing capacity could support revenue several times higher with limited incremental capital expenditure. More systems revenue, higher manufacturing utilization, and standardized engineering should therefore have a meaningful impact on gross margin. Third, hold the cost base disciplined. We have already built shared functions and infrastructure for a larger company. We do not need operating expenses to grow at the same rate as revenue. Fourth, deploy capital selectively. Our June financing substantially strengthened the balance sheet. We will use that capital primarily to support backlog delivery, working capital, and opportunities linked to clear commercial milestones. This is the financial logic behind our strategy. Grow revenue faster than the cost base and translate that growth into improved margins and profitability. Let me close by returning to the investment case.
LiqTech has proprietary silicon carbide membrane technology that has been developed and manufactured in-house for more than 20 years. We are increasingly applying that technology through standardized shorter cycle platforms. Our commercial proof points are building record commercial proof revenue, our first U.S. proof installation, marine progress in China, and $ 2.1 million steel follow-on order. We have recapitalized the balance sheet and are substantially debt-free. Importantly, we have a clear financial objective, positive adjusted EBITDA in 2027 and positive EBIT and free cash flow in 2028. We believe LiqTech is moving from proving the technology towards scaling the business. We now have a proven technology, markets that can buy repeatedly, a stronger balance sheet, and a much sharper commercial focus. Our responsibility is to execute and translate those advantages into substantial growth, profitability, and shareholder value. Thank you very much for joining us today.
Wonderful. Fei, thank you so much for the presentation and everyone for watching here today. If you have any questions or would like to schedule a meeting with LiqTech, send me an email, that's Blum, B-L-U-M, @lythampartners.com. Again, if you'd like to learn more about Lytham, make sure to visit our website or follow us on LinkedIn to stay connected about future events. We hope you all enjoy the rest of the conference and have a great day. Fei, thank you again.
Thank you, Robert.