Good morning, and welcome to the LiqTech International, Inc. Reports Third Quarter Fiscal Year 2025 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 Blum, with Light and Partners. Please go ahead.

Alright. Thank you very much, and good morning, everyone. As the operator indicated, thank you for joining us today to discuss LiqTech International, Inc.'s third quarter 2025 financial results for the period ended September 30, 2025. Joining us on today's call from the company are Fei Chen, the company's Chief Executive Officer, and David Kowalczyk, the company's Chief Financial and Chief Operating Officer. Before I turn it over to management, I do want to remind everyone that there will be a Q&A at the end. To ask a question through the webcast portal, again, simply type your question into the ask a question feature in the webcast player. 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 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 the 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 the release and conference call. With that, I'd like to turn the call over to Fei Chen, Chief Executive Officer of LiqTech International, Inc. Fei, please proceed.

Thank you, Robert. And good day to everyone on the call. There is a lot of optimism for the future based on the execution during the third quarter. Not simply because of the growth in revenues, improvement in gross margins, and reduction in operating expenses, but also due to the strong order books during the third quarter, which sets the stage for a nice fourth quarter. A key driver during the quarter was the strength within our water treatment systems business, led by our swimming pool vertical, which achieved its highest quarterly revenue to date. Equally important is that the new bookings received during the quarter indicate a continuation of this positive trend. It is clear that the market is increasingly recognizing the unique attributes of our ClariFlow filtration system and the competing alternative it offers to traditional media filtration systems used in commercial pools. Beyond the swimming pool vertical, we are making progress in a number of other applications which leverage our robust silicon carbide membrane technology, including water for energy, industry applications, and the marine industry. The increased order flow and interest is the direct result of the numerous successful pilot programs we have implemented over the past two years, showing the success of our systems in real-world examples. We have long emphasized that this transformation would take time, and we now believe that we are on the verge of broad adoption of our systems across multiple market verticals. Where system sales are the ultimate measure of success, we have spent considerable effort rightsizing the business and electing operational efficiencies to drive down costs, both from an OpEx perspective as well as from a manufacturing side. During the quarter, our contribution margin was one of the highest levels we have seen over the past five years, and the gross profit was at 19.6%, also at an improved level. Further, our operating expenses are at their lowest levels in many years. Let me circle back on a few of the key activities during the quarter, starting with the swimming pool vertical. As mentioned, we delivered systems to six customers during the quarter, totaling $1,000,000 in revenue. The systems delivered were much larger in size than many of our historical systems, and it really highlights the progress we are making within the larger swimming pool systems. The orders delivered during the quarter were fulfilled through our partners Boundary and Total Pool in the UK and Oxidime in Spain. These partners have been instrumental to our success, particularly as we have strengthened our collaborations in the past three years. During the quarter, we continued to expand our pipeline within our key markets, including systems in the UK, Denmark, and Holland. This really shows the depth of what we have accomplished in the past few years, building these relationships, but also the internal team's role in helping move projects forward and showcase what is possible with our solutions. Another key development within our swimming pool solutions has been the development of the modular design system, which allows for ease of deployment. Since I took over, we have worked hard to move away from many customized solutions, which often take too long to create and cost too much money. Further, it created too much confusion among customers. This theme of creating a modular design system and driving down costs is not just applicable to our swimming pool vertical but across other applications as well. To that point, we are working with our joint venture partners in China to reduce the cost of components and assembly of our marine water treatment systems, making them more competitive in the market. We will continue manufacturing the silicon carbide membrane in Denmark, but we are also exploring the potential to leverage our Chinese assembly and sourcing capabilities to drive cost reductions across our systems and applications. Another exciting development we are seeing in our China joint venture has been the receipt of two first orders for marine dual-fuel engine water treatment systems. The marine CP industry is moving towards cleaner, fuel-efficient applications, with most new vessels equipped with dual-fuel engines that require reliable water treatment for exhaust gas recirculation systems. According to published data, approximately 400 new vessels are on order with ISO EGR solutions planned between 2024 and 2027. One of the two marine dual-fuel engine orders is scheduled to be delivered here in the first quarter, with the other set for delivery in early 2026. We believe more opportunities are on the horizon. Transitioning from China to the US, we have talked about this for a while now, but the water for energy market is rapidly growing within the US. We have worked with partners such as Resubac Direct and Renewal Resources lately to build a presence in the US. For this reason, we have moved forward with the opening of a dedicated service center near Fort Worth, Texas. The new facility is being launched in partnership with Hydro Systems and opened a few weeks ago. For those not familiar, Hydro is an industry service provider with extensive experience in energy, oil and gas, and industry sectors. They specialize in equipment servicing, maintenance, and field support. The center will strengthen support for our water for energy business segment, offering deployment of certified service technicians, availability of critical spare parts, remote and on-site technical support, and system maintenance and repairs. As we scale our operations in the US, this new service center allows us to respond faster and support customers with deep local knowledge and reflects our strategy to offer fully integrated filtration solutions, from engineering and commissioning to lifetime service. On the topic of new system deployment, we are actively engaged with several end customers and hope to have updates to share soon. Taking a step back, I think it is important to remind everyone of the number of new systems that we have deployed during the past couple of years. Since the beginning of last year, we have deployed nine pilots or commercial systems across a wide range of industry applications, from multiple oil and gas industry systems to lithium brine production, plastic removal from a US petrochemical company, MEG recovery, tomato processing, the broader marine industry, and the most recent order of an advanced membrane-based filtration system to treat oily wastewater to BlueScope Steel, a major US-based steel producer. We are establishing a consistent cadence for large system deliveries each quarter, alongside our base business, including swimming pools, plastics, and DPF filters, bringing us closer to revenue levels that approach breakeven and profitability. This has been our goal, and I am very pleased with the progress we have made. Let me now turn the call over to David to review the finances in more detail. I will then make a few closing comments and look to open the call for your questions.

Thank you, Fei. And good day, everyone. Let me take some time diving into the financial results in a bit more detail and add some color to what was in the press release. So let's start with revenue. Revenue for the quarter came in at $3,800,000, up from $2,500,000 in the year-ago third quarter. Broken down by verticals, sales for the third quarter were as follows: Water system sales and related services of $2,000,000 compared to $700,000 in the same period last year. CPF and ceramic membrane sales were $800,000, down from $1,100,000 in Q3 last year. And finally, plastic revenue came in at $1,000,000 compared to $700,000 in Q3 last year. The key takeaways for the quarter include strong year-over-year improvement in water systems, driven by a combination of multiple swimming pool orders and the remaining portion of the industrial order for the steel industry. Growth in plastics, which was up 54% due to strong external interest, especially within food processing and the upgrade of our production facility in Q3 last year. And stabilization of DPFs and ceramic membranes sequentially but still off the year-ago quarter. Looking ahead to Q4 of 2025, we anticipate revenue to be between $4,600,000 and $5,600,000, which would equate to a 38% to 67% increase from Q4 2024. For the full year 2025, we expect revenue to be between $18,000,000 and $19,000,000, representing a 23% to 30% increase compared to 2024. We do want to note that we do want to be cautious and provide a slight change to guidance solely driven by timing in purchase orders in our systems business. The visibility we have to receive formal purchase orders for two systems during 2024 are likely shifting to 2026. Turning to gross margin, as we continue to be below our optimal revenue level, we continue to have fixed production costs that are not being fully absorbed. Those lower the normalized gross margins. That said, for the third quarter, gross margins were much improved from the year-ago period, coming in at 19.6% compared to a negative margin of 8.5% in the year-ago period. We had previously reported on a contribution margin basis, which excludes the impact from our fixed overhead. This margin for the quarter was significantly higher. The gap between gross margin and contribution margin will narrow in the coming quarters, driven by cost improvements and volume growth. Turning to OpEx, total operating expenses for the quarter were $2,100,000 compared to $2,400,000 in Q3 last year and compared to $2,600,000 in 2025. As we look to the future, our breakeven target, measured on an adjusted EBITDA basis, measured at EBITDA adjusted for amortization, reduced assets, cost of stock-based compensation, continues to be a quarterly revenue of approximately $6,000,000. The one caveat I will state is that there's a product mix component to it. Concluding on the P&L, net loss was $1,500,000 for the quarter, compared to a $2,800,000 loss for the comparable period of 2025. A substantial improvement driven by revenue growth, improved gross margin, and reduced operating expenses. And finally, from a cash perspective, we ended the quarter with $7,300,000 in cash. Everything else was very much in line with our normal operating procedures from a balance sheet perspective. And with that, let me turn it back to Fei.

Thank you, David. Can you hear me?

Yes. Please proceed, sir.

Okay. Thank you, David. To close things out, before I turn the call over to questions, our proprietary silicon carbide filtration technology stands as a foundational element in tackling the planet's most urgent ecological issues. These cutting-edge ceramic membranes deliver exceptional results in the toughest water treatment scenarios, spanning from produced water in oil and gas operations to pool filtration systems. By helping industries comply with rigorous environmental standards, we are cutting down on water and energy use, resolving vital purification problems, and advancing true sustainability. Recent achievements, like landing record orders for swimming pool systems, major contracts for treating produced water, marine applications, and industry applications such as that for the steel industry, highlight the rising worldwide appetite for our innovative solutions. The potential moving forward is immense, fueled by escalating water shortages and tough global regulations. Through key client alliances, we are broadening our impact with application-oriented, ready-to-deploy solutions. Such partnerships enhance our capability to offer complete systems that guarantee regulatory adherence, streamline operations, safeguard assets, and lower costs for customers. In the years to come, we are dedicated to advancing and expanding our filtration solutions to seize these vast possibilities. Again, thank everyone for your support of LiqTech International, Inc. With that, Robert, we would be happy to take any questions.

Alright. Fantastic. Thank you very much, Fei and David, for your prepared remarks. Again, to everyone listening on the webcast player there, if you have a question, you can type it into the ask a question feature on the player there. We do have a few questions submitted already. We'll begin here. Besides swimming pool systems, which segments are seeing the most sustained order momentum?

As mentioned in my speech, we have very much momentum in the water for energy segment as well. And we are also starting to get orders from the marine industry. But I would say compared to the marine industry, it's just that the water for energy is getting momentum.

Okay. Very good. Next question here. Is the uptick in gross margin sustainable? Where do you see gross margins trending over the next few quarters? David?

Yeah. Sure. Thanks for the question. I would say, yes, this is very much sustainable, and with expected higher revenues, we will see also further increases in the gross margin. There's a strong link between the size of revenue and really the gross margin. So talking about a defined level, I think it's hard, but we will see increases with an increase in revenue.

Okay. Very good. Next question here is how is your capacity utilization trending? Are there any metrics you can provide there?

Yeah. Obviously, we have different matrices for capacity and also different sites. But I think, in general, it's fair to say that we have spare capacity, which is also why we provide the insight on the difference between gross margin and contribution margin. We have plenty of capacity to support growth with very, very limited investments.

Alright. Very good. Again, final reminder here, if you have a question or would like to submit a question through the webcast player, please go ahead and submit that now. Barring any further questions coming in, the last question here is what would be a reasonable target for 2026 revenue growth?

That's a very good question. We're actually in the process of making our budget for 2026, so we cannot say any concrete number yet, but we definitely believe and see a very strong growth trend in 2026.

Okay. Very good. I am not showing any further questions at this time. So with that, I will turn it back over to you, Fei, for any closing remarks.

Thank you, everyone. I would like to thank you all very much for being with us today. We look forward to communicating with you soon. Thank you.

Thank you. The conference has now concluded.

Thank you for attending today's presentation. You may now disconnect.

Thank you.