Earnings Call Transcript - LIQT Q4 2023

Operator, Operator

Hello and welcome to the LiqTech International Fourth Quarter and Fiscal Year 2023 Financial Results Conference Call. All participants will be in listen-only mode. As a reminder, this conference is being recorded. I would now like to hand the call to Robert Blum with Lytham Partners. Please go ahead.

Robert Blum, Investor Relations

All right. Thank you so much, M.J. Good morning, everyone and thank you all for joining us today on the conference call to discuss LiqTech International's fourth quarter and fiscal year 2023 financial results for the period ending December 31, 2023. Joining us on today's call from the company is Fei Chen, Chief Executive Officer; and Phillip Price. For those not familiar, Phillip has recently assumed the role as Interim Chief Financial Officer. Before I turn the call over to management, let me remind listeners that there will be an open Q&A session at the end of the call. M.J. provided the instructions on how to queue up at the beginning 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 risk factors that attempt to advise interested parties of the risks that may affect the company's 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 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 LiqTech International. Fei, please proceed.

Fei Chen, CEO

Thank you, Robert, and good day to everyone on the call. I am excited to have this opportunity to speak with you and hear an update on the solid progress we’ve made during the last year. During 2023, we successfully executed a number of strategic initiatives to drive revenue growth, improve our manufacturing and operational efficiencies, and strengthen our balance sheet. We grew our revenue by 13% and increased our gross margin by 12 percentage points. Meanwhile, we reduced our operating expenses by $2.5 million and improved the bottom line by $5.6 million. After taking over as the CEO in late 2022, I introduced a new commercial strategy that has initially focused on stabilizing and growing our established business areas, which are core to our ability to generate revenue. This effort includes reducing the length of the sales cycle we have in market segments such as our commercial pool systems. And it also means addressing new types of customer needs in areas where we have an extensive customer base. This includes, for example, diesel particulate filters, marine scrubbers, and other areas where we have recurring revenue opportunities, such as general aftermarket sales and plastics. These established business markets provide a strong and stable base of revenue for LiqTech and allowed us to gain manufacturing efficiencies by leveraging our existing production capacity. The 2023 financial results clearly show that our new strategic focus is working. I will dive into more details on how we intend to continue focusing and improving each of our established areas in a moment. Before doing so, however, let's talk about what we refer to as our target market. Where we have stabilized the business, and brought about operational efficiencies, we are also setting the stage for growth in key markets where our high-performance silicon carbon ceramic membrane can provide customers with strong returns on their investments. This includes specific industry filtration applications to remove solid oil pathogens and heavy metals from water as well as compounds from emissions and industrial processes. While this has potential to encompass a large number of markets, we have narrowed our near-term focus to chemical and petrochemicals, such as phosphoric acid and monoethylene glycol, and oil & gas produced water. These areas tend to have longer sales cycles, but we believe that if we align ourselves with great partners and establish key reference customers, the sales cycles will decrease, and a large market opportunity will open up for LiqTech. As I hope you all have seen from the two most recent press releases we issued over the last 2 weeks, this process has already begun. Last week, we announced that we have received a significant order for a containerized pilot system for produced water treatment from Razorback Direct. This marks our first-ever new U.S. based oil & gas produced water order. The containerized pilot system that Razorback Direct has required will be used at the customer site to test, demonstrate, and document the efficiency of LiqTech's ultrafiltration technology in treating produced water to facilitate beneficial industrial reuse and meet current and future regulatory requirements. In the longer term, the intention is to use the results from this pilot operation as the basis to design and implement full-scale commercial systems for onshore oil & gas applications in the U.S. The North American oil & gas market is going to be a key focus for LiqTech moving forward, led by our agreement with Razorback Direct, who has a strong presence in key oil & gas geographies in the U.S. The speed at which this order came is really exciting as we entered into a distribution agreement with Razorback Direct only a month ago. This is clearly a significant milestone in our efforts to expand operations in North America, and we are very excited about the future perspectives and the potential it holds. We followed up the U.S. order from Razorback Direct with another significant oil & gas produced water commercial pilot order from National Energy Service Reunited or NESR. In the Middle East, this unit will be used in Gulf Cooperation Council countries by one of the largest integrated energy and chemical companies in the world. This order has been in the works for some time but encountered delays towards the end of last year due to the conflict in the Middle East. The delay accounted for the vast majority of the differences between our initially stated annual guidance and the results we concluded the year with. While we are certainly frustrated by the delay, we couldn't be more pleased to have moved this program forward. Once again, we believe that this commercial unit for produced water has the ability to open the doors for additional orders with this customer and many other operators in the region. It is important to note that the first oil & gas produced water unit that we employed in the Middle East in mid-2022 was a key reference point in receiving this order. That system has been successfully operating for nearly 2 years, and 99% of the feedwater passing through it is being delivered back as clean brine/permeate water for reinjection. Another significant opportunity for us lies within monoethylene glycol or MEG. During 2023, we had our first offshore installation in the Mediterranean with a large oil & gas client, which continues to perform well. As I mentioned last quarter, this was the first of a two-part order for the offshore project with expectations for follow-on orders shown. However, this has again encountered some delays due to the conflicts in the Middle East. As a reminder, the platform is located just off the coast of Israel. We initially expected the second order to ship in late 2023, but it will most likely be a 2024 event now. As I stated at the beginning, while these oil & gas orders can initially have long sales cycles, it is our firm belief that getting our foot in the door with the capabilities of our systems will allow us to shorten future sales cycles and ultimately open a very large attractive addressable market. Transitioning away from oil and gas, let's move on to phosphoric acid, another key target market where we have recently reevaluated our position. In doing so, it has become evident that there is a broader opportunity for us in what I will call the broader chemical or petrochemical markets where our solutions have a superior value proposition. In the past 15 years, we have sold membranes to 40 to 50 different customers for chemicals and petrochemicals applications. The customers are very satisfied with our membrane filtration efficiency and excellent lifetime. We will, therefore, work on establishing strong collaborations with selected system integration companies and OEMs to penetrate this highly relevant and potential marketplace. As you can hear, I am pleased with the progress we have made to advance our position within our target markets where our core technology can be easily adapted. Each of these areas provides us with a large addressable market and opportunity to unlock significant growth for LiqTech as we move forward. But as I have stated many times since I took over as CEO, I will not put all the company's eggs in one basket, chasing opportunities that have longer sales cycles. We need to have a strong base that provides us with revenue and cash flows. That's where our established market strategy comes into play. So let me just touch on a couple of focus areas within our established markets, starting with our commercial swimming pool products. During 2023, we successfully delivered 20 swimming pool systems in total. We now have more than 120 commercial swimming pool installations across Europe and the Pacific regions. During 2023, we executed key distribution agreements to expand our footprint. As we look into 2024, we will work on harvesting the results from our established partnerships and build our reputation further in the market. We are looking to further expand into key geographies where we don't have a presence, such as Germany, France, the Netherlands, and the United States. I am pleased with the progress we have achieved and look forward to continued adoption in the years to come. Transitioning to our DPF and membrane businesses, again, these are areas within our established markets where we have an extensive base of more than 50 long-term DPF customers and another 40 to 50 customers on the membrane side. We offer a highly defined value proposition to our customers across Europe, North America for DPFs, and Europe and China for membranes. During 2023, our DPF and ceramic membrane business combination generated $6.2 million in sales. As we pointed out in our press release, we are seeing order flow improving for DPFs with new orders up 11% sequentially compared to the first quarter of 2023. As we enter 2024, we will remain focused on building up new DPF customers in emerging areas, such as black carbon emission and emergency electricity generation, nurturing our existing customer base, and focusing on strategic customers with massive agreements. On the membrane side, we are looking to scale up through OEM partners in China, Europe, and the U.S. We believe there is a strong opportunity for this business to grow nicely in the years to come. Finally, let's discuss our initiatives on the marine scrubber side. For those of you that have followed the company closely for many years now, this was a very large part of the business in 2018 and 2019, driven by the introduction of IMO 2020, which regulated emissions on marine vessels. Since 2018, we have approximately 170 installations around the world with multiple types of ships. Unfortunately, the adaptation of IMO 2020 was impacted by the pandemic. However, we saw the return of our first new marine scrubber system orders in more than 18 months as we deployed an upgraded modular design system through our recently enhanced distribution relationship during the third quarter of 2023. While we still are not seeing the same adoption rates we saw back in 2018 and 2019, there still appears to be a market for our solutions. Furthermore, new types of marine fuels and engine technologies are currently being developed, and we believe our systems may be suited to support them. Therefore, our team is working to rebuild the relationships we had in the past and develop new agreements that will potentially put us in a position to regain the leadership position we previously built in this market. Having completed my first full fiscal year as CEO of LiqTech, I am proud of the accomplishments we have made. It is my firm belief that LiqTech is more relevant today than ever before. Our filtration solutions address key issues related to climate change, induced freshwater security, and also help to reduce emissions, lower energy consumption, and increase productivity. Our silicon carbon membrane solutions remove particles, pathogens, and heavy metals from water, making it possible to recycle it for essential applications, thereby reducing stress on our freshwater resources. Our diesel particulate filters reduce harmful emissions from diesel vehicles, diesel machinery, or power generators. We are effectively removing black carbon emissions in maritime applications. And our commercial pool solutions provide significant environmental benefits and cost savings with up to 80% less water usage, 60% lower energy consumption, and 30% less chlorine dosing. Together with our partners, we create advanced filtration solutions for liquid and gas purification that provide clear value to our customers and contribute to a cleaner and more sustainable planet. We are executing again the business plan we set forth with strong operational and financial progress made in 2023. As we look to 2024, we are confident in our ability to continue expanding our revenue base across both our established markets and target markets. We're driving improvements in operational efficiency that will move the company to breakeven this year. Before I turn it over to Phillip to review the financial results, let me just take a moment to thank Simon Stadil for his commitment to LiqTech for the past 2 years. Simon joined LiqTech at a time of tremendous transition for the company and provided a steady hand and thoughtful insight when it was needed most. As Robert stated at the beginning, Phillip has assumed the role of Interim Chief Financial Officer. Many of you have had a chance to meet with Phillip over the past few months and hopefully have come away impressed, as I have, with his understanding of LiqTech and our opportunity. Phillip has been the Head of Group Finance for LiqTech for the last 2 years, and I look forward to his continued contribution as he steps into the role of Interim Chief Financial Officer. With that said, let me turn the call over to Phillip to review the financial results in more detail. Phillip?

Phillip Price, Interim CFO

Thank you, Fei, and good morning, everyone. Now let me add some color on the financial highlights for the full year 2023. The reported revenue of $18 million represents an increase of 13% or $2 million compared to the $16 million reported for the full year of 2022, which underlines a robust result in a transition year for LiqTech with a new leadership team and revised strategy. We are pleased with the progress on both top and bottom lines. As Fei mentioned, we did experience delays in order delivery due to the escalating geopolitical unrest in Israel and Gaza, which postponed project deliveries and client commitments in our oil & gas projects in the region. Broken down by verticals, sales were as follows: Systems sales and related services of $7.7 million, an increase of more than 45% compared to the $5.3 million reported in 2022, due to a significant increase in pool system deliveries as well as the increased focus on our aftermarket activities. Looking at our ceramics business, DPF and membrane sales ended at $6.2 million, down 9% compared to $6.8 million last year, reflecting a dedicated focus on improving profitability by carefully managing our revenue mix. Finally, Plastics revenue and externally funded R&D projects of $4.1 million, up 6% compared to $3.8 million reported in 2022, underpinned by stable plastics order intake as well as progress on key external R&D projects. In summary, our system sales and related services experienced a significant increase. The Plastics business continued its stable performance, while the Ceramics business experienced a decline, reflecting our focus on profitable deliveries. To be specific, the key revenue drivers during the year were a record high number of pool system deliveries shipped to clients across Europe and Asia Pacific, the delivery of our first phosphoric acid pilot to China, continued progress on key projects within oil & gas and metal cooling, and increased aftermarket sales with an uptick in orders for both marine and acid applications, leveraging our global installed base. Zooming in on our component business, our ceramics and plastic businesses executed on incoming orders with a decisive focus on improving throughput and reducing lead times. In terms of our forward guidance, we expect the first quarter of 2024 to be comparable to the just-ended quarter of 2023, with top line growth of approximately 3% to 8% and a gross margin ranging between 5% to 10%. We remain committed to growing our business over the coming quarters as we work intensively to execute on our vision to further penetrate the global oil & gas, chemicals, and pool system markets with our proven and industry-leading solutions. Turning to our gross margin and more insight on our journey towards breakeven. We are pleased to report a full-year gross profit of $2.8 million, indicating a gross profit margin of 15.4% compared to just 3.5% reported for the full year of 2022. The result is within our previously disclosed guidance. The positive development compared to 2022 is a direct result of increased activity levels and better revenue mix as we continue to streamline our business, assuming on the markets where we can deliver profitable growth. From an operational perspective, during the year, we have installed new kilns and revitalized our ceramics facility with new organization further complementing the positive momentum. We continue to have excess capacity. Hence, the immediate focus is to compress delivery lead times and ensure the delivery of high-quality membranes and filters. Taking a quick look at our contribution margin, we remain focused on closely monitoring this important KPI to ensure we develop a profitable and sustainable business with accelerated focus on meeting our financial objectives of breakeven. For the full year of 2023, our contribution margin ended at 46%, well above the 30% reported for the full year of 2022. Our contribution margin has historically been volatile as it directly correlates with the underlying revenue mix. However, we have now succeeded in significantly improving and stabilizing our contribution margin well above 40%. On that note, we do maintain our quarterly breakeven target measured on an adjusted EBITDA basis of approximately $7 million in revenue and potentially lower with the wide revenue mix. Turning to OpEx, the full-year OpEx of $10.6 million came down 19% or $2.5 million from the comparable full year of 2022. The result is evidence of our commitment to running a lean business by rightsizing and streamlining our operations. Our primary focus is to keep OpEx at a reasonable level to maintain our quarterly breakeven target. This ensures financial stability and supports strategic investments for sustained profitability. Other expenses of $1 million came down compared to the $1.9 million reported last year, with the development mainly explained by the increased levels in the prior year due to the early repayment of the convertible note in 2022. Concluding on the P&L, we reported a net loss of $8.6 million compared to the net loss of $14.2 million reported in 2022. As evidenced, we still need to deliver profitable growth over the coming years to help safeguard our business and restore profitability. We are well-positioned with excess production capacity, and thus, commercial order intake remains our #1 priority. Finally, let me briefly comment on our cash flow and balance sheet before summarizing and handing back over to Fei. We ended the year with $10.4 million in cash, down $6.2 million compared to the year-end 2022. We took delivery of multiple machines and manufacturing equipment during the year, with net cash used in investment activities of $2.9 million, all related to commitments made in previous years in the context of our domestic and international expansion plans. The equipment has contributed to a solid upgrade to our manufacturing facilities, and therefore, we do not anticipate similar investments over the coming years as we are well-positioned to grow within our existing capacity. Also, I'm pleased that during the year, we successfully extended our June 2024 maturity related to our senior promissory notes to January 2026. In summary, the underlying cash flow profile is improving as we are showing progress on both top line and profitability, combined with a more stable capital structure. Thanks, everyone, for your support, and back over to you.

Fei Chen, CEO

Thank you, Phillip. In closing, we remain committed to executing against our strategic road map, focused on long-term value creation. Over the past year, we have launched a clearly defined commercial strategy that has already yielded positive results. Going forward, our business will be underpinned by strong recurring revenues within our established businesses and an increased foothold in our strategic target markets. This growth, coupled with improved operational execution across organizations, will be key to driving significant changes in gross margins and positive cash flows. I look forward to continuing to execute our strategic initiatives in 2024 to drive value creation for our shareholders. With that, operator, we would be happy to take any questions.

Operator, Operator

Today's first question comes from Rob Brown with Lake Street Capital Markets. Please go ahead.

Robert Brown, Analyst

Hi, Fei. Hi, Phillip.

Fei Chen, CEO

Hi, Robert.

Phillip Price, Interim CFO

Hi, Rob.

Robert Brown, Analyst

First question is on the good progress in the oil & gas area with the U.S. partner. Just wanted to get a sense, I guess, in both the new partnerships, how has that played out? Is there a test period? And how does the incremental order activity sort of play out? What is it dependent?

Fei Chen, CEO

Yes. As you have heard, we are very excited about this opportunity because we actually just signed the distribution agreement with this new partner a month ago. They are really excited to see progress. We already have the first pilot plan on the way to the U.S. this week. We are working closely with this partner. Our joint goal is to get this pilot plan up and running as quickly as possible, as it will serve as a great showcase for other potential partners and customers regarding our new technology for produced water in the U.S., which is a very interesting market for us.

Robert Brown, Analyst

Great. And could you just highlight some of the regulatory driver or other drivers for the system and what the customers are really interested in here?

Fei Chen, CEO

Yes. The regulatory drive in the U.S., especially in places like Texas and New Mexico, is incredibly important. There's increasing water scarcity, and significant discussions are happening regarding the beneficial reuse of water for both industry and agriculture, as well as for reinjection. For all these applications, you need to effectively treat the water beforehand. Our U.S. membrane is optimal for the pretreatment of produced water. Whether it's for reinjection or agricultural irrigation, our technology serves as an efficient first step. Therefore, our application is directly related to upcoming regulatory requirements, but it's not just that—industry needs are also significant drivers because everyone wants to find efficient ways to reuse water.

Robert Brown, Analyst

Okay, great. Congratulations on that progress there. And then sort of the ethylene glycol market, I think you had some delays there. How does that market look at this point? Are you waiting for that project to kick in, or are there other customers that system can be used on? Can you foresee growth in '24 in that market?

Fei Chen, CEO

Yes, the MEG market—we as we announced, we were expecting the second part of the order last year, but it was delayed due to operational periods on the offshore platform located just off the coast of Israel. Now things are starting to return to normal, so we do believe we will see progress in 2024. Additionally, we are working with other companies that could utilize this technology, which also holds more potential.

Robert Brown, Analyst

Okay, great. And then last question is on the DPF market. I think that was down a little bit as you focused on the margin there. How does that look in '24? Should that grow in '24? And what sort of dynamic do you see there?

Fei Chen, CEO

The recent decline in the DPF market was due to a huge order from one customer in Asia that wasn't very profitable for us. We decided to adjust our approach because we wanted to improve our profitability. In fact, I am happy to report that this year, in the first quarter, sales orders for DPF have increased by 11% compared to the same quarter in 2023. So we expect significant growth in DPF this year, particularly in emerging areas such as black carbon emissions and emergency electricity generation for data centers.

Robert Brown, Analyst

Okay, great. Thank you. I will turn it over.

Fei Chen, CEO

Thank you.

Operator, Operator

The next question comes from Lucas Ward with Ascendiant Capital Markets. Please go ahead.

Lucas Ward, Analyst

Hi, Fei. Hi, Phillip. Good afternoon. Rob, good morning.

Fei Chen, CEO

Hi, everyone.

Lucas Ward, Analyst

I'm actually in your time zone, the Danish time zone right now. And yes, this is exciting. I have a few questions. First of all, regarding your business development, how does your overall order book look? Is it getting better? Is it worse than it was, say, 6 months ago?

Fei Chen, CEO

That's a very relevant question. When I joined in late 2022, I realized we needed to build up a sales pipeline. We didn't have a strong pipeline then. Therefore, we worked throughout 2023 to establish a new sales team and enhance our sales pipeline. So I am very confident that the projects we're working on for 2024 are based on a much-improved pipeline compared to 2023.

Lucas Ward, Analyst

Okay, so it is getting better. Can you also help us understand the sales cycle? It seems like a very important aspect, and you've mentioned the need to shorten it. For system sales, what is the typical time between receiving an order and booking revenues?

Fei Chen, CEO

We have different segments, and each has its own sales cycle. For instance, in the commercial pool system segment, we successfully reduced the cycle from receipt of order to delivery. We standardized our design and streamlined production, reducing the delivery time from 24 weeks to just 6 weeks. This means that when we receive an order today, we can convert that into revenue within a maximum of 6 weeks, which is a significant improvement.

Lucas Ward, Analyst

I assume that in some of the target markets where you're still developing it, you can't reduce it immediately. But is the goal over time to achieve that kind of efficiency across all markets?

Fei Chen, CEO

Exactly. We are standardizing all solutions for our system market, so we can reduce conversion time while increasing the quality and stability of our systems. This is our approach across all product lines.

Lucas Ward, Analyst

Okay. Just shifting over to the regulatory environment, would you say that it is getting better overall for LiqTech? Or are we seeing setbacks? There seems to be some backlash against ESG initiatives. What is your experience when trying to sell your systems in terms of regulatory tailwinds or headwinds?

Fei Chen, CEO

From a macroeconomic point of view, we are definitely witnessing megatrends concerning water scarcity, energy efficiency, and air pollution improvement. These trends are indeed providing favorable conditions for our business. We've learned from our marine scrubber market that we need to engage with customers based on their needs, not just regulatory requirements but also their business needs. Most of the markets we are engaging with today are not solely driven by regulatory demands—they reflect genuine market needs, too. The DPF area is regulatory-driven, yet there are strong demands for addressing black carbon emissions in the maritime industry and increasing electricity needs for data centers. Thus, there are solid dynamics in these segments. Additionally, in oil and gas, as discussed, we're not only responding to regulatory requirements but also to the actual needs of companies looking to reuse water. Hence, we are in a more stable position than if we were solely reliant on regulatory requirements.

Lucas Ward, Analyst

Got it. A couple of financial questions—do you have your revenue growth outlook at this point?

Phillip Price, Interim CFO

We only comment on the next quarter. What we guide for is that if you can compare it to the just-ended quarter, we expect revenue growth of 3% to 8%.

Lucas Ward, Analyst

Okay. Should we interpret that to mean you're confident in your visibility that we would be looking to achieve that range?

Fei Chen, CEO

The reason for not providing longer guidance is due to the complexity of our product mix. Some projects are significant, others small, and the dynamics differ considerably. So, we prefer to share quarterly projections cautiously to ensure reliability.

Lucas Ward, Analyst

Understood. Lastly, based on the mix you're targeting over the next year or two, what is your breakeven accounting revenue run rate?

Phillip Price, Interim CFO

We are still comfortable that our breakeven target, revenue target is around $7 million. It could be lower depending on the revenue mix, but that is the target we're aiming at.

Fei Chen, CEO

$7 million per quarter. If we're able to achieve $7 million a quarter, we will be able to reach breakeven.

Lucas Ward, Analyst

Thank you so much for answering all my questions.

Fei Chen, CEO

Thank you very much.

Operator, Operator

Thank you. The next question comes from Craig Rose with Axiom Asset Management. Please go ahead.

Craig Rose, Analyst

Hello, guys. Thanks for taking my questions. Regarding the produced water pilot programs that you're initiating with the Middle East and Razorback Direct, what are the capital requirements to execute on those?

Fei Chen, CEO

We are selling this type of system through our partners. Essentially, we sell directly to our partners, and they purchase the equipment from us and then run it at the customer site. This model works well for us as a smaller company with less capital.

Craig Rose, Analyst

What is the expected capacity for the process you'll be involved in, in terms of barrels per day?

Fei Chen, CEO

In those small pilot units, we can treat the water between 3,000 to 5,000 barrels per day. However, our design can scale up to handle 100,000 barrels per day. We are very excited to initiate these pilot projects, particularly in the U.S., as this is a strategic market for us.

Craig Rose, Analyst

What would your process cost a service provider to buy a system capable of treating 100,000 barrels a day?

Fei Chen, CEO

I cannot provide a specific price because it depends greatly on the water quality and what needs to be adjusted in our system. It's highly site-specific. The more relevant discussion is about the cost to treat a barrel of water, which is what the industry generally compares. Our treatment cost will be competitive with other technologies.

Craig Rose, Analyst

And you're only providing the pretreatment, correct? Are you involved in removing chemicals at the end or taking them out at the beginning?

Fei Chen, CEO

We are only providing the pretreatment. For applications requiring reinjection, our technology is effective enough, and additional treatment may not be necessary. If it's for agricultural irrigation, you might need desalination, but that's outside our scope.

Craig Rose, Analyst

Thank you very much.

Fei Chen, CEO

Thank you.

Operator, Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.