LiqTech International, Inc.

Good morning and welcome to the LIC Tech International Report Second 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 this event is being recorded. I would now like to turn the conference over to Robert Bloom with Lithum Partners. Please go ahead.

Great. Thank you very much, Chloe. Good morning, everyone, and thank you for joining us on today's call to discuss Lick Tech's second quarter 2026 financial results. Joining us on today's call from the company are Fei Chen, Chief Executive Officer, and David Kowalczyk, the company's Chief Financial and Chief Operating Officer. As the operator mentioned, before I turn the call over to management, I'll remind everyone that there will be a Q&A session at the end of the call today. 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 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 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 may arise after the date of this release and conference call. Now, I'd like to turn the call over to Fei Chen, CEO of Electec International. Fei, please proceed.

Thank you, Roboff, and a good day to everyone on the call. Before discussing the quarter, I want to acknowledge an important development for Littech and our shareholder base. In June, we completed an underwritten public offering that generated approximately 18 million in net proceeds. The offering brought a number of new shareholders into Littech. and I want to thank those investors along with our existing shareholders for the confidence you have placed in our company and our technology. We recognize the rising equity capital comes with significant responsibility to our shareholders. We expect to be judged by how effectively we deploy that capital how consistently we execute and ultimately whether we can translate our technology and market opportunities into sustainable financial performance. A portion of the proceeds was used to repay our outstanding senior promissory notes and original issue discount notes, significantly strengthening our balance sheet. The remaining capital provides us with the working capital and the financial flexibility to execute our growth priorities. Importantly, having a stronger balance sheet does not change the need for financial discipline. We remain focused on capital allocation, disciplined spending, and converting our commercial opportunities into revenue and improved profitability. Our priority now is execution and demonstrating measurable progress in our financial results. For shareholders who are newer to LeedTech, I would like to provide just a very brief high-level review of the strategy we have been implementing over the past several years. Our objective is to build a more balanced, repeatable, and profitable company. around applications where our silicon carbon membrane technology provides a clear performance advantage and where customer adoption can scale. To begin with, commercial pool has become a much more important part of that strategy. We have invested in a standardized and a modular Clariflow platform, expanded our distribution network, and built references across Next, Marine has also re-engaged through our joint venture in China, which gives us local sales, sourcing, assembly, development, and service capabilities in a market where local execution is essential. Our DPF and membrane business and our plastics business provide a steady The largest variable in our outlook remains water for energy and water for industry. These markets represent meaningful revenue opportunities for lead tech, but the sales cycles are typically longer and more complex. Projects often require pilot testing, technical validation, customer approvals, Capital Budgeting and Multiple Layers of Internal Decision Making. As a result, project timing can be difficult to predict and is often influenced by customer processes that are outside our direct control. This means Water for Energy and Water for Industry can be significant drivers of our future growth, but they can also create variability in our quarterly and annual revenues. Our focus is therefore on building a border pipeline, advancing multiple opportunities in parallel, and converting more of these projects into form orders. Over time, we believe this should make the business less dependent on the timing of any single large project. Based on what we have learned from the market, we have refined our go-to-market approach for both water for energy and water for industry. In Water for Energy, going forward, we will focus on building strategic commercial partnerships that help us accelerate market penetration and convert our technology capabilities into commercial opportunities. In Water for Industry, we will take a more targeted approach, focusing our resources on selected applications where we see clear customer needs and a strong technology fit. The steel industry is a good example, where our recent follow-on order demonstrates the potential to move from initial installation to broader multi-system deployments. Our objective is to build a more visible, repeatable, and scalable opportunity pipeline while maintaining disciplined resource allocation. The second quarter illustrates both sides of our strategy. Commercial pool achieved record revenue and the marine continues to execute against its order board. Since quarter end, the U.S. industry wastewater reuse order and the 2.0 million follow-on order from a U.S.-based steel manufacturer have further reinforced the progress we are making in selected water for industry applications. At the same time, delaying a larger Water for Energy project has reduced our revenue visibility for the remainder of 2026. As a result, we are revising our full-year revenue guidance to a range of 20 million to 23 million. Importantly, even at the revised guidance range, we expect to deliver meaningful year-over-year revenue growth reflecting the underlying process across our business. We are disappointed by this delay, particularly because we had expected this project to contribute revenue this year. But our response is not to wait. We are putting greater emphasis and resources behind the markets where we see more repeatable demand, shorter sales cycles, and a better revenue visibility. At the same time, We will continue to pursue significant opportunities in the world of energy, but in a more selective and increasingly partnership-driven manner. This is not a sudden change in direction. Rather, it is a continuation and acceleration of the strategy shifts we have discussed over the past several quarters, informed by what we have learned from the market. We now have a stronger balance sheet and the significant market opportunities. But ultimately, we need to demonstrate that these strengths translate into improved financial performance. Our priorities are clear, execute on the opportunities in front of us, maintain financial discipline, improve profitability, and build a more predictable and sustainable business. And let me be clear, achieving profitability as quickly as possible remains one of our highest priorities. Let us talk about each area in more detail. Commercial pool was the strongest area of business in the second quarter. Revenue reached a record 1.5 million. Compared with 0.8 million in both the second quarter of 2025 and the fourth quarter of 2026. The performance reflects the work we have done to standardize the Clariflow platform, strengthen our distribution partnerships, and establish a border base of reference installations. During the quarter, we completed assembly of the systems. for the Plumtum Aquatic and the Leisure Center project in Australia, and our fourth U.S. commercial pool project in Walland, Wyoming. The large pool system in the entire Netherlands, which we announced in April, is now operating successfully. This project demonstrates that Clary Flow can serve different facility sizes Project Designs and Geographics. We are maintaining the advantage of a modular platform. We continue to have our focus in establishing new distribution relationships in the prioritized geographic regions. Expanding the partner network is an important part of the pool strategy. because local partners are critical for identifying projects earlier, supporting system design and installation, and providing the customer relationships needed to scale efficiently. Pools are attractive to Leetech because the systems can be more standardized than our many large industry projects. The value proposition is straightforward and each successful installation can help create additional opportunities in the surrounding market and add aftermarket service business. Transitioning to marine, marine revenue totalled 0.7 million in the second quarter compared with 0.4 million in the second quarter of 25 and 0.8 million in the first quarter of 26. During the quarter, we received factory acceptance test approval for the first two ISO dual-fuel water treatment units. This represents an important execution milestone and reflects the significant progress made by our team and our joint venture in China. We expect to deliver one additional ISO dual-fuel water treatment unit and the two marine squabble water treatment systems in the third quarter. We also secured a commercial order of four water treatment systems for EGR-equipped vessels in China, with the first system currently expected to be delivered in December. The China joint venture has allowed us to re-establish a stronger position in marine by combining DICTEX membrane technology with localized engineering, sourcing, assembly, and service. We continue to manufacture our co-silicon carbon membranes in Denmark. We're using the joint venture to improve competitiveness and responsiveness in the Chinese shipping building market. The growing mix of ISO, EGR, squabble systems, and related aftermarket opportunities gives us confidence that the marine can become a more consistent contributor over time. Turning to water for energy, the most significant change occurred recently. A major customer went through an organizational change that affected the decision-making process for an important water for energy project that we had expected to contribute revenue in 2026. New decision makers became involved and significant parts of the customer's internal evaluation and approval process effectively had to restart. As the impact of this delay became clear, we reassessed what we could realistically deliver and recognized as revenue during the remainder of 2026. Given the slower customer decision-making process combined with the lead time required for certain critical equipment, we concluded that it was no longer prudent to maintain our previous full-year revenue guidance. I want to be clear that we are disappointed by this delay. Our team has invested Significant time and resources in technical validation, field engagement and commercial development. Importantly, we have not seen any change in the underlying need for our technology and the technical results remain compelling. The project has not been terminated and remains an active opportunity. Our relationship with the customer remains intact, and we continue to engage closely with the new decision-makers as they work through their internal evaluation and approval process. Within the water industry, the near-term opportunity set is becoming increasingly tangible, particularly in steel and other industry wastewater applications. Yesterday, we announced a 2.1 million follow-on order from a US-based steel manufacturer for four additional industry wastewater filtration systems with approximately 75% of the order currently expected to be delivered by the end of 2026. This order views directly on the successful deployment of customers' initial systems which uses our silicon carbon membrane technology to treat challenging waste water with high oil content and significant variability as part of the customer's water water reclamation process. What is particularly important to us is the progression of this customer relationship. We started with one system, allowing the customer to validate our technology under real operating conditions. Based on successful performance of that system, the customer has now moved forward with four additional systems. This demonstrates the potential of our strategy. Proven the technology in a demanding application, establish strong customer reference, and then scale from initial installation to a broader deployment. This transition from an initial installation to a larger multi-system deployment is exactly the type of development we want to see in the waterfall industry. It demonstrates the potential to convert successful technology validation into repeat business and larger commercial opportunities. This week, we also announced an order from a new U.S. customer for a cure-flow QF6 ceramic membrane filtration system to be installed at its new facility in Freeport, Texas. The system will treat wastewater generated from industry equipment cleaning operation and recycle the treated water back into the facility's wash water supply. This is an important proof point for several reasons. It brings a new US customer to Leetech, demonstrates the applicability of our standardized Qflow platform beyond traditional produced water treatment, and addresses a challenging and highly variable waste water stream where consistent removal of suspended solids and oil is critical. Most importantly, It delivers a clear economic and environmental benefit to the customer by reducing both wastewater disposal volumes and fresh water consumption. Together with the new steel industry order, this industry wastewater order reinforces our belief that selected water for industry applications can develop into a more repeatable and scalable business. Our standardized systems provide customers with clear economic and sustainability benefits. We are allowing us to deploy proven solutions across similar applications. This is why we are allocating greater resources toward selected industry segments where we see strong technology fits, increasing customer engagement and a better near-term revenue visibility. Finally, our DPF and membrane business remain important foundational part of LeakTech. DPF and membrane revenue was approximately $1 million in the second quarter compared with $1.3 million in both the previous year quarter and the first quarter of 26. The decrease primarily reflected temporary production delays caused by constrained availability of Critical Raw Material. Plastics revenue was $0.9 million compared to $1.2 million in the second quarter of 2025 and approximately $1 million in the first quarter of 2026. Customer purchasing decisions slowed during the quarter and variability of raw material prices and the border marked uncertainty, where both DPF and plastic and David Nørby Foss Kowalczyk. To summarize, the second quarter delivered record commercial pool revenue, continued execution in marine and meaningful progress industry wastewater. These achievements were off-site by the delay in water for energy that has reduced our near-term revenue visibility and then lead us to revise our 2026 revenue outlook. Where we are disappointed by timing change, we remain optimistic about direction of the business. We have a stronger balance sheet, a broader shareholder base, growing traction in markets where we can build standardized and repeatable solution and a greater clarity around where to allocate our resources. Our priority now is execution, converting these advantages into more predictable revenue growth, improved margins, and ultimately, sustainable profitability. Let me now turn the call over to David to review the financial results in more detail. I will then make a few closing