LiqTech International, Inc. Aktie

Good morning, and welcome to the LiqTech International Reports First Quarter Fiscal Year 2026 Financial Results Conference Call. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Robert Blum with Lytham Partners. Please go ahead, sir.

All right. Thank you very much, operator, and good morning, everyone. Thank you all for joining us on today's conference call as the operator indicated to discuss LiqTech International's First 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.

Before I turn the call over to management, let me remind listeners that there will be a Q&A session at the end of the call. [Operator Instructions]

Before we begin with prepared remarks, we submit for the record the following statements. 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 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 their 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 LiqTech International. Fei, please proceed.

Thank you, Robert, and good day to everyone on the call. The first quarter was in line with our expectations and represented a continued step forward in the transition we have been describing over the past several quarters. Our focus remains on building a more balanced, repeatable and ultimately, more profitable LiqTech by placing greater emphasize on end markets where our technology delivers clear value and where customer adoption can scale in a more predictable way.

The year-over-year revenue comparison was impacted by a significant water for energy delivery in the first quarter of 2025, that did not repeat in the first quarter of 2026 as well as timing of order conversion. However, the underlying activities across the business were encouraging. Commercial Pool, Marine, DPF and Membrane all showed meaningful activity in the quarter, and the new pool and marine orders are setting the stage for improved results in the second quarter and throughout 2026.

Compared to quarter 4 in 2025, revenue increased by 32%, our gross margin expanded by roughly 1,290 basis points. The nature of our business and the sales cycle time means that all the improvements we have made in 2025, we assume gradual improvements quarter-over-quarter in 2026. We are, therefore, reiterating our full year 2026 outlook for revenue of $23 million to $27 million. David will go through the financial details in a few minutes. So I will focus on operating progress, customer activity and strategic direction.

The main message is that our strategy is advancing. We are building around a portfolio of opportunities where our silicon carbide membrane technology can be deployed in repeatable platforms, supported by stronger service capabilities and scaled across geographies. Our commercial pool business continues to be one of the clearest examples of this strategy. During the first quarter, pool deliveries totaled revenue of $0.8 million compared to $0.3 million in the first quarter 2025. More importantly, the order activity we have announced since the beginning of the year reinforces our confidence that QlariFlow is getting traction as a differentiated solution for modern commercial aquatic facilities. In fact, based on our order book, we expect a record quarter for commercial swimming pool in quarter 2, 2026.

A key milestone was our first U.S. pool system order consisting of 3 systems to be installed at the Weston County School District #1 Aquatic Center in Newcastle, Wyoming. Entering the U.S. market has been an important objective for us because it is a large market with aging infrastructure, high water quality expectations and a growing need for more automated and space-efficient filtration solutions. We view this first U.S. order as an important proof point that can help open additional opportunities over time.

We also received consecutive record-setting pool system orders internationally. One was in partnership with Lotec for new large-scale commercial pool projects in Den Helder, Netherlands. The next was the follow-on record order in partnership with Waterco Limited for 10 systems for Plumpton Aquatic and Leisure Center in Fraser Rise, Victoria, Australia. These wins demonstrate that our solution is being adopted across different geographies, project types and the partner channels.

QlariFlow is well suited to this market because it addresses several customer needs at the same time. Our systems are compact, modular and designed for stable water quality, automation and efficient operation. For retrofit projects, the smaller footprint can be a meaningful advantage where equipment room space is limited. For new build facilities, the modular design gives customers a flexible solution that can be planned into the project from the beginning.

From a business model perspective, pools are attractive because the systems are becoming more standardized and repeatable. This is different from a large one-off projects, which often require more customization and can be more difficult to forecast. As a pool adoption grows, we believe this vertical can contribute to better revenue visibility, improved execution, and a stronger margin profile over time.

Our marine business also continued to build momentum in the first quarter. We delivered two systems under the quarter for marine dual-fuel engine water treatment for LNG vessels, and we expect two more systems to be delivered during the second quarter. Marine revenue totaled $0.8 million in the first quarter compared to $0.2 million in the first quarter 2025. The growth in this vertical is being supported by our joint venture in China, which we believe can help drive more sustainable order flow throughout 2026.

As we discussed on our last call, we have invested in local capabilities to support the marine market, including development and localization activities and regional service infrastructure. This is important because the marine market requires reliable execution, responsive service and a cost competitive localized supply chain. We believe silicon carbide membrane technology has a strong fit in marine applications, particularly for vessels equipped with the dual-fuel engines. These vessels require advanced water treatment solutions that can support onboard wastewater purification and reuse. We are meeting demanding operating requirements. Marine is also attractive because it has the potential to become more repeatable as adoption grows. Each vessel project has its own delivery schedule, but the underlying system platform can be standardized and supported through our regional presence.

Turning to water for energy and industry applications, our view remains balanced and disciplined. Oil and gas continue to be an opportunity for LiqTech and our pipeline remains active. At the same time, as we have said before, the timing of larger projects can be difficult to predict. During the quarter, we commenced a new pilot program in West Texas for produced water treatment with an energy services and solutions company. This type of field activity is important because it gives customers the opportunity to validate the performance of our technology in demanding operating conditions prior to their investment decision for large-sized commercial projects. And it allows us to further demonstrate the value proposition of silicon carbide membranes in produced water treatment.

We continue to believe our technology is well positioned for difficult water streams, where durability, chemical resistance and stable filtration performance are critical. Produced water and industry wastewater are both areas where customers are looking for solutions that can handle high variability, reduce operational disruptions and support environmental and water reuse objectives.

At the same time, we are being careful in how we allocate resources. We are not basing our operating plan on the timing of any single large oil and gas project. We will continue to pursue attractive opportunities, but we will do so in a way that supports the broader strategy of building a more balanced business.

Beyond systems, our DPF and Membrane business and our Plastic business remains an important contributor to LiqTech. In the first quarter, DPF and membrane revenue increased to $1.3 million from $1 million in the prior year quarter. This was driven by strong order flow from both existing and the new customer following our renewed focus within this [ market ] vertical. Plastic revenue increased approximately 5% in the quarter and totaled about $1 million, driven by strong external interest, especially in food processing.

Looking ahead, our priorities are clear. We are reiterating our 2026 outlook and remain focused on executing against the revenue growth and adjusted EBITDA improvement we have communicated. The path to achieving this outlook is not depending on a single large oil and gas order. It is based on continued progress across commercial pool, marine industry application and the components market with potential upside from water for energy as opportunities convert.

The most important strategic priority is to improve the quality of our growth. [ Markets ], where solutions can be standardized, partners can extend our reach, service infrastructure supports customer confidence and the volumes can support better margins. We believe the first quarter provides encouraging evidence that this transition is working. Pool orders are expanding geographically, Marine deliveries are increasing, supported by China JV, DPF and Membrane is benefit from renewed commercial focus, and the water for energy remains active, but we are approaching it with appropriate discipline.

Let me now turn the call over to David to review the financials in more detail. I will then make a few close comments and look to open the call for your questions. David?

Thank you, Fei, and good day, everyone. Let me take some time to walk through our first quarter financial results in a bit more detail and add some color to what was included in the press release.

As Fei noted, the quarter was generally in line with our expectations, the expectations we provided in our year-end call. My remarks today will focus primarily on the year-over-year changes, for the first quarter and on how those results fit into the full year outlook that we are reiterating today.

Let's start with revenue. So revenue for the first quarter of 2026 was $4.1 million compared with $4.6 million in the first quarter of 2025, this represents a decrease of 10.4%. Broken down by verticals, sales for the year were as follows: systems and aftermarket sales were $1.8 million compared to $2.7 million in the prior year quarter. DPF and membrane sales were $1.3 million compared to $1.0 million in the prior year quarter. And finally, plastic components revenue was $1 million compared to approximately $1 million in the first quarter of '25.

The year-over-year revenue decline was solely attributable to lower system sales, specifically the fact that we had a significant order for energy delivery in the first quarter of '25. This did not repeat in the first quarter of '26. That comparison is important because the underlying activity in several of our priority areas was stronger than the headline revenue number might suggest. Within systems, both Commercial Pool and Marine showed meaningful improvements.

Commercial Pool revenue was approximately $0.8 million for the quarter compared with approximately $0.3 million in the prior year quarter. Marine revenue was also approximately $0.8 million compared with approximately $0.2 million in the first quarter of '25. Those increases were offset by the non-repeat of the larger water for energy deliveries last year.

Outside of systems, DPF and membrane sales increased meaningfully, driven by strong order flow from both existing and new customers, following our renewed focus within that market vertical. Components also increased during the quarter, supported by continued external interest, especially within food processing. These are important contributors because they provide a more stable base for recurring activities, while we continue to scale the high-growth system opportunities.

Turning to gross margins. Gross profit for the quarter was $0.4 million, representing a gross margin of 9.5%. That compares to a gross profit of $0.1 million or a gross profit of 2.7% in the first quarter of '25. The improvement in gross margin is an important point. So even though total revenue was lower year-over-year, our gross profit dollars actually increased, and our gross margin expanded by roughly 280 basis points. The improvement was primarily driven by mix in system sales, better utilization of our manufacturing capacity, procurement efforts on prices and lower depreciation expenses.

As we have discussed before, we are still operating below the level -- at the revenue level, where our production platform can fully absorb fixed costs. As a result, our gross margin is not yet where we believe it can be over time. That said, the first quarter shows the benefit of improving mix, continued operating discipline and greater focus on repeatable applications where our cost structure and system design can become more efficient as volume increases. Gross margin improvement remains a key priority, scaling standardized system in Commercial Pool and Marine, along with continued strength in our component business should help support a better margin profile as we move through 2026.

Turning to operating expenses. The total operating expenses for the first quarter were $2.7 million compared to $2.3 million in the first quarter of '25. Approximately 60% of this increase was related to foreign exchange development. Of course, the majority of our cost base is denominated in Danish kroner or euros, the year-over-year currency movement affected how expenses translate into U.S. dollars.

Breaking operating expenses down by category. Selling expenses for the first quarter were $1.0 million compared to $0.7 million in the prior year quarter. Excluding foreign exchange effects, the increase was primarily related to the full year effect of hires within our Chinese joint venture as well as continued investment in the sales organization across the United States and Europe.

General and administrative expenses were $1.4 million compared to $1.4 million in the first quarter of '25. Adjusting for foreign exchange development, G&A expenses remained stable and below general inflation. We continue to manage overhead carefully and the filling of open position was balanced by savings in other areas.

Research and development expenses were $0.3 million compared to $0.2 million in the prior year quarter. The increase was primarily tied to membrane development costs and development work related to Marine systems.

Overall, our approach to operating expenses remains disciplined. We are investing where we see clear commercial returns, particularly in sales coverage, marine development and capabilities that support the scaling of repeatable system platforms. At the same time, we are carefully managing overhead and focusing resources on the areas of the business that are most important to our path towards profitability.

Other expenses for the quarter were $0.4 million compared to other expenses of $0.2 million in the comparable period for '25. The change was primarily attributable to losses on foreign exchange transactions due to the U.S. dollar development compared to euro, lower interest income, and accrued interest on the senior promissory note, partly balanced by lower amortization of debt discount and a decrease of net interest expenses.

Net loss for the first quarter of '26 was $2.7 million compared to a net loss of $2.4 million in the first quarter of '25. The year-over-year change was primarily driven by the higher operating expenses and other expense levels that I just discussed, particularly offset by the improvement in gross profit.

For the first quarter, adjusted EBITDA was a negative $1.5 million compared to a negative $1.4 million in the first quarter of '25. While the year-over-year comparison was relatively stable, we continue to believe the most important drivers of adjusted EBITDA improvements are revenue scale, a stronger system mix and increased utilization, disciplined operation expense control. We are making investments in targeted areas, but our objective remains to convert revenue growth into meaningful operating leverage as the year progresses.

Turning to our outlook. We are reiterating our expectations for the full year of 2026 revenue to be in the range of $23 million to $27 million. This would represent a growth of approximately 39% to 64% compared to full year '25. As Fei discussed, the growth outlook is expected to be driven primarily by Commercial Pool, Marine and continued activity across Water for Energy and industrial applications, supported by stable contributions from DPF and Membranes and Plastic components. We expect improved pool results in the second quarter and through 2026. The supported by recent order activity, including the first U.S. pool system order and additional larger international pool projects.

In marine, we delivered 2 systems during the first quarter and expect 2 more systems to be delivered during the second quarter with further sustainable order flow expected through the year, supported by our Chinese joint venture. The quarterly cadence of revenue will continue to be influenced by system and delivery time. As a result, we do not view the first quarter as a full year indicator. We remain focused on executing against backlog, converting the order pipeline and maintaining cost discipline as the business scales.

And finally, from a cash perspective, we ended the first quarter with cash on hand, including restricted cash of $2.7 million as of March 31, 2026. Our focus remains on disciplined cash management and careful allocation of resources. We are aligning spending with the verticals that we believe can support repeatable growth, improved margin performance and better revenue visibility over time. As we move through '26, we will continue to balance investments in growth with the need to preserve flexibility and drive the business towards positive adjusted EBITDA.

And with that, let me now turn the call back to Fei.

Thank you, David. Before we open the call for questions, I want to reiterate that our first quarter results were in line with our expectations and reflect continued progress against our strategic plan. We are building LiqTech around end markets that can support more predictable, repeatable growth, particularly in Commercial Pool, Marine, DPF and Membrane and Plastic compound. We believe, the results in this year will continue to highlight this transition. At the same time, we remain encouraged by the long-term opportunity in Water for Energy, but we are being disciplined in how we plan the business and allocate resources. Our focus is on markets, where our silicon carbide technology delivers clear performance advantages and where we can scale profitably.

With that, Robert, we would be happy to take any questions.

Thank you very much, Fei, and David, for your prepared remarks there. [Operator Instructions] We do have a few questions already in the queue here. So Fei and David. I'll begin.

First question here is, what does a "steady-state" margin structure look like for the new LiqTech? How should we model gross margins?

Yes, that's a good question. And so essentially, what we have told before and what we continue to see is that on a project basis, we are realizing margins between 30% to 50%. So essentially on average 40%. So with the volume increase, we should be closing in on a steady-state margin of 40%. Of course, on top of that, with the volume increase, you will see additional scaling effects, leaving opportunity open for lowering the production cost further for systems and membranes.

Okay. Very good. There are a few questions here regarding guidance for the year, so I'll try to combine them together. You are guiding revenue of $19 million to $23 million for the rest of the year here, which implies $6.3 million to $7.6 million per quarter. What are the major drivers of this steep revenue growth? And how much does water for energy or industry contribute to this revenue?

And Robert, that's a very good question and your number is correct. In the first quarter, we do not have very much contribution from water for energy and water for industry. But we do have a pipeline with some very interesting projects with high probabilities. So we expect, in the year going forward, we will see some projects go through from these two areas, water for energy and water for industry. But very importantly, also, we see really significant growth in our commercial pools, marine and also DPF and membrane for the rest of the year. So this all together will contribute the increase quarter-by-quarter.

Okay. Very good. And as a sort of extension of that, do you have any information you can provide relating to how revenue will be distributed between Q2, Q3 and Q4?

Yes. So we definitely -- and as we said also in the presentation of the result, we expect the implementations of changes in how we operate in '25, to show gradual improvements through '26. So we definitely do expect to see a gradual ramp-up, but also with the Q2, increase compared to Q1 of this year already.

Yes, I would like to add, as I mentioned in my speech before, if we look at our order book, we already can see, for example, for marine and especially commercial pool system. We already have a very strong order book. So we know at the quarter 2 for the commercial pool will be a record quarter on revenue because there is a time difference between the commercial order and revenue conversion. And that's always make it complicated when the revenues come in. But we have a very strong order book, so we can't really see what's happening next quarter.

All right, very good. [Operator Instructions]

Next question here is regarding commercial pools. The order that you highlighted in the Netherlands is for a new pool. This person's understanding is that you focused on retrofits, is new sales a new opportunity for the company?

That's a very, very good question. I mean, 2 years ago, I think our pool system has been very much focused on the retrofit. It very much depends on the distributors because at that time, our distributor in U.K. was Total Pool; their focus was and still is retrofit swimming pools. And now we have started building up the new distributors, both in U.K. with Binary and also Lotec. They are the ones really very active both on the retrofit and the new project. So now we see the new projects also coming. So I would like to emphasize, we're actually working both on the retrofit and the new build pools because our system has really strong advantages for both segments.

All right. Very good. I'm showing no further questions in the queue here. So with that, Fei, I will turn it back over to you for closing remarks.

Thank you, Robert. Thank you all very much for being with us today. We look forward to communicating with you soon again.

Good morning, and welcome to the LiqTech International Reports Fourth Quarter and Fiscal Year 2025 Financial Results Conference Call. [Operator Instructions]

Please note, this event is being recorded. I would now like to turn the conference over to Robert Blum with Lytham. Please go ahead.

All right. Thank you very much, Drew, and good morning, everyone, and thank you all for joining us on today's conference call to discuss LiqTech International's fourth quarter and full year 2025 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.

Before I turn the call over to management, let me remind listeners that there will be a Q&A session at the end of the call. [Operator Instructions]

Before we begin with prepared remarks, we submit for the record the following statements. 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 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.

With that, I'd like to turn the call over to Fei Chen, CEO of LiqTech International. Fei, please proceed.

Thank you, Robert, and good day to everyone on the call. 2025 represented a meaningful step forward for LiqTech. For the whole year, revenue increased 13%, driven by a 49% increase in total systems and aftermarket revenue. And we made improvements to drive efficiencies across much of our business. That shift towards higher value system sales is central to our long-term strategy and reflects growing adoption of our silicon carbide membrane technology across multiple end markets.

While we fell short of our original revenue guidance, this was primarily due to continued delays with a large oil and gas order that remains active in our pipeline. The project is still under discussion, but as we have constantly communicated, the timing of large oil and gas project is difficult to predict.

That said, we understand that we cannot -- unpredictable...

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Our focus needs to be and is on building...

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And diversified systems portfolio with stronger visibility and improved margin profile going forward.

In many ways, this has been consistent with our approach since I took over as CEO. To focus on more predictable parts of our business, such as swimming pools, which will be a key driver going forward, we are certainly amplifying this approach going forward in terms of how we allocate our resources.

Our commercial pool business was a standout performer in 2025 and delivered the strongest year in the company's history. We sold 34 pool systems during the year, a new record for LiqTech. Of those, 24 systems were delivered in 2025 with the remaining 10 scheduled for delivery in early 2026. Pool system revenue totaled $2.6 million for the year and represented a drive of growth within our Systems segment.

All systems sold during the year were based on our proprietary QlariFlow commercial pool filtration platform. QlariFlow is designed to meet the increasingly complex operational, regulatory and space requirements facing modern aquatic facilities. Compared to conventional media filtration, our system delivers stable and reliable water quality while enabling greater automation and operational efficiency. Its compact and modern design makes it particularly well suited for retrofit installations where equipment room space is limited, an increasingly important consideration for operators upgrading aging infrastructure.

The record number of system sales reflect growing customer acceptance and increasing confidence among both operators and distribution partners. We see clear momentum as facilities prioritizing water quality, automation and space efficiency, and QlariFlow is emerging as a compelling alternative to traditional filtration measures.

We have also made structural improvements to the pool system itself. Our new and modular design is standardized and cost efficient with improved gross margins and simplifies installation. Unlike oil and gas systems, which oftentimes are highly customized to specific customer needs, pool systems are increasingly becoming repeatable off-the-shelf solutions. This makes the market segment both more scalable and profitable.

From a distribution standpoint, we recently expanded our relationship with Barr + Wray in the U.K. into an exclusive distribution agreement subject to minimum annual system volumes. In addition, we are seeing interest from U.S.-based swimming pool companies. In these days, we are working on the final details for the first U.S. swimming pool project. We see potential opening of a very attractive growth market. All told, we have sold pool system in 6 different countries in 2025 and look to expand that this year.

Based on the guidance we have provided, we expect pool revenue of approximately $5 million to $6 million in 2026, which compares to $2.6 million in 2025, reflecting continued market adoption and delivery of systems already in backlog.

Turning to water for energy. Oil and gas remains an opportunity, but it continues to create timing challenge. We are engaged with multiple providers, both large and small, and the delayed order that impacted 2025 guidance remains under discussion. As mentioned, these systems are typically highly customized, which not only make timing unpredictable, but also impacts our margin profile.

Where we continue to pursue this segment and see potential opportunities with partner companies such as NESR in Middle East and ongoing trials through Razorback Direct in North America. We are going to be disciplined in how we allocate resources, and we are no longer basing our operating plan on difficult to predict customer timing no matter how promised they may be, where we are seeing encouraging and increasing tangible traction within broader water for industry applications.

The successful delivery and commissioning of our advanced member-based filtration system for oily wastewater at NorthStar BlueScope Steel has been a key proof point. The system was designed to resolve recurring filtration disruptions of polymer membrane caused by high oil content and variability in wastewater quality, which has given our customer costly and difficult experiences. Our system has demonstrated strong performance. This project has reinforced our belief that industrial wastewater treatment can become a larger and more stable contributor to our business.

Industrial systems tend to be more standardized than oil gas projects, which supports better margin and shorter sales cycles. We are seeing increased interest across multiple industry verticals and to support this growth, we added dedicated service resource to expanding our industry presence in the U.S.

In further support of our U.S. growth strategy, we also opened a dedicated service center in Texas in partnership with Halldor Systems this past November. This facility enhances our ability to support customers in the water for energy and water for industry segment, and providing certified technicians, spare parts availability, remote and on-site technician support and system maintenance and repairs. Localized service is critical to scaling in the U.S. market. The service center not only strengthens customer support but has already begun to contribute to new business development by increasing customer confidence in our long-term commitments to the region.

Going ahead, we believe we will see strong contribution from industrial side of broader energy segment with upside opportunities from the more specific oil and gas market. In total, we are expecting water, water for energy, water for industry related revenue of $5 million to $8 million. This compares to $4.3 million for this market segment in 2025.

We are happy to see that our Marine segment is building momentum, particularly through our joint venture in China. During 2025, we broke ground on a new marine-focused R&D center and the localization facility in Haimen, Nantong, and completed a regional spare parts warehouse to strengthen service capabilities for our growing marine customer base. These investments are designed to support the development and localization of marine silicon carbide membrane water treatment units for dual-fuel engine vessels and for wastewater purification and reuse. By increasing local assembly and sourcing within China, we are improving supply chain resilience and cost competitiveness in the market.

We strongly believe that silicon carbide membrane technology will continue gaining adoption in new marine vessels equipped with dual-fuel engine, driven by its durability, chemical resistance and energy efficiency. We ended the year with 3 marine orders for 8 commercial vessels in backlog scheduled for delivery throughout 2026.

Marine revenue, including service sales was approximately $1.5 million in 2025. And we are targeting approximately $4 million in 2026, reflecting a good market adaptation of our membrane filtration technology.

Look at the broader Systems business, including pool, water for energy, water for industry and the marine side. Our expectation is that we will generate revenue of $14 million to $18 million. This would be up from $8.2 million in systems revenue in 2025, showing growth of about 70% to 120%. This is a key reason why we are so excited about the future.

Beyond our Systems business, we also have our legacy DPF and membrane business and the plastic business, which remains a stable contributor to our operations. Combined, this segment represented approximately $8 million in revenue in 2025. We expect this part of our business to remain reasonably stable in 2026, and in a cautious outlook anticipating total revenue from the 2 groups combined to be slightly increased to $9 million in revenue.

Looking at 2026, we expect revenue in the range of $23 million to $27 million, a positive full year 2026 adjusted EBITDA in the middle to high range of the revenue guidance, assuming constant currency. Growth is expected to be driven primarily by continued expansion in pool systems, industrial applications and marine. The range in our revenue guidance largely reflects the continued unpredictability of oil and gas project timing.

Our strategic focus remains clear, scale standardized higher-margin system platforms. We are maintaining disciplined cost control and operational efficiency with the goal of near-term profitability.

Let me now turn the call over to David to review the financials in more detail. I will then make a few closing comments and look to open the call for your questions. David?

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. Please note that I will keep my remarks focused primarily on the year-over-year changes.

Let's start with revenue. So revenue for the year came in slightly above $16.5 million, up from $14.6 million a year ago. Broken down by verticals. Sales for the year were as follows. Systems and aftermarket sales of $8.2 million compared to $5.5 million in the prior year. DPF and ceramic membrane sales were $4 million, down from $5.6 million in the prior year. And finally, plastic components revenue came in at $4.1 million compared to $3.4 million last year.

The increase was mainly due to increased deliveries of systems to pool energy industry and marine water treatment and components and plastics, partly offset by decreased sales of filters. The increase in deliveries of systems was mainly driven by increased deliveries within pool filtration and industry systems. The increase in components, mainly within machine building for food industry. The decrease in sales of filters was primarily driven by a refocusing of our strategy to capitalize on subsegments where we see increased due to demand for DPF outside automotives. As Fei mentioned, the delta between our recent expectations for '25 and actual result is primarily due to the delay in a larger oil and gas system, which remains in our pipeline, but we have not yet received the purchase order for.

Turning to gross margins. Margins for the year were 7.6% compared to 1.7% in 2024. As we continue to be below our optimal revenue level, we continue to have fixed production costs that are not being fully absorbed and those lower than normalized gross margins.

A couple of key notes is that part of the increase in gross margins was due to the higher level of overall revenue as our contribution margins are typically on average in the 40% area, where we do have some fluctuations between market segments, as you know. However, this was offset by the investment of resources into deliveries of containerized oil and gas systems to the U.S., which contributed to lower than usual margin, reflecting a strategic decision aimed at demonstrating the validation of our value proposition associated with our technology and seeding the market for future growth. As we move forward, a key focus will be on leveraging our standardized systems, which inherently are higher margin. This means more focus on pools, industrial applications, marine applications and membrane sales.

Turning to OpEx. Total operating expenditures for the year were $9.6 million compared to $9.7 million last year. Breaking it down, selling expenses for the year were $2.7 million compared to $2.7 million last year. This development was partly driven by full year effects of savings made in 2024 and lower accounts receivable write-offs and provision needs. These effects were partly offset by costs associated with our newly formed joint venture in China, costs for outbound distribution, including tariffs to the U.S. and expenditures related to external sales consultancy services, which also increased in 2025.

General and administrative expenses for the year ended December 2025 were $5.7 million compared to $5.7 million in '24. The underlying development in local currencies, Danish kroner was a 4% improvement compared to '24. This development was due to savings made in '24, partly balanced by filling the CFO position and other open positions.

Research and development expenses for the year was $1.2 million compared to $1.4 million in '24. The decrease was primarily due to a more focused R&D strategy with fewer ongoing projects and reduced average number of employees engaged in external research and development activities. For the year, adjusted EBITDA was negative $5 million compared to negative $6.1 million last year.

Turning to our guidance. For 2026, we are expecting revenue to be in the range of $23 million to $27 million. As we break this down, we are anticipating that our broader water for energy and water for industry business will be between $5 million and $8 million. We believe our pool business would be in the range of $5 million to $6 million. Our Marine business would be about $4 million, of which 60% will be from new systems and 40% from our recurring service business. And finally, that our legacy DPF and plastics business will be about $9 million. We target a positive full year 2026 EBITDA in the mid- to high range of the revenue guidance, assuming constant currencies. And finally, from a cash perspective, we ended the quarter with $5.1 million in cash. Everything else was pretty 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. To close things out before I turn over to questions. Our silicon carbon filtration platform is central to how we address increasingly complex global water challenges, built on advanced ceramic membrane technology. Our solutions are designed to operate reliably in some of the harshest and the most demanding treatment environment from produced water in energy application to commercial pool systems and heavy industry wastewater streams.

As European customers meet strict environmental regulation while lowering water usage and energy intensity, we provide practical high-performance solutions that support long-term sustainability goals. The momentum we generated in 2025, including record pool system sales, progress in produced water, marine systems deployment and industry installations such as our project with a major steel producer demonstrates the expanding global recognition of our technologies' value.

As we look ahead, our direction is well defined. We are prioritizing growth in our most attractive verticals, particularly pool, industrial applications and marine. We are remaining disciplined execution across the organization. At the same time, we remain firmly focused on scaling the business to achieve profitability and position LiqTech for durable profitable growth over the long term.

Again, thank you, everyone, for your support of LiqTech. With that, Robert, we would be happy to take any questions.

All right. Thank you very much, Fei and David, for those prepared remarks. [Operator Instructions]

There are a few already in the queue here, Fei and David. So the first one here is, when can we expect revenue from the large oil and gas order push out to be booked?

That's a good question. And of course, as we mentioned, it's a bit, you can say, in the hands of the customer. But we definitely would expect, you can say, the oil and gas project to materialize in the coming -- in this year, essentially 2026, with the timing of -- yes, we don't know the precise timing, but Q2 finalization ideally.

Okay, very good. The next question here is, do tariffs affect your U.S. oil and gas business? Are your products competitively priced?

This is a very good question. And because the tariff is a moving target so we really have our focus on that. And up to now, we have been able to kind of have very good discussion with our customers. So we don't really need to take all the tariffs on ourselves alone. And going forward, we're definitely looking at what is the best way for us to handle the tariffs and how we're able to keep our competitiveness. But as we mentioned before, we are working very, very focused on the cost reduction of our product and also the standardization and efficiency, and that will somehow balance also to the tariff impact on our technology.

Okay, very good. [Operator Instructions] A couple of questions here pertaining to your need for capital here in 2026.

And as you have heard today, we actually have laid out a very clear growth plan with a revenue guidance of $23 million to $27 million in 2026. So we are definitely evaluating how we're able to support this strong growth spend, and that means we are looking at different financial options.

Okay, very good. And it looks like this may be the final question, barring any last minute that may come in. And I think you've touched on this a few times, but to reiterate, what are the drivers of your 2026 revenue outlook of $23 million to $27 million?

This is a very good question also as we used some time in our earnings call about this. And what we really have to say to ourselves is we have to make -- we will focus on a broader and diversified perspective and also working on the verticals, which have more visibility and higher predictability. So we're actually working at the growth in basically all our Systems segment. The pool system, we're going to have $5 million to $ 6 million coming this year. And the Marine growth from $1.5 million to $4 million. And we say water for energy and water for industry will be $5 million to $8 million. That's a bigger range there because the oil and gas project are more difficult to predict the timing. And the DPF and plastic plus the membrane area, we expect a slight increase from $8 million to $9 million. So as you can hear now, the driver is from the different verticals, and this gives us much more reliable and predictable revenue growth compared with before.

Okay, very good. I'm showing no further questions in the queue. So with that, I would like to turn the call back over to Fei Chen for closing remarks.

Thank you, Robert. I would like to say thank you to all of you for being with us today. We look forward to communicating with you soon again. Thank you.

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

Good morning, and welcome to the LiqTech International Reports Third Quarter Fiscal Year 2025 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Robert Blum with Lytham Partners. Please go ahead.

All right. Thank you very much, and good morning, everyone. As the operator indicated, thank you for joining us today to discuss LiqTech International'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 session at the end. [Operator Instructions].

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. 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 indicates a continuation of this positive trend. It is clear that the market is increasingly recognizing the unique attributes of our QlariFlow filtration system and the compelling 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, industrial 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 past 2 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 enacting 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 5 years. And gross profit was at 19.6%, also at an improved level. Further, our operating expenses are at their lowest levels in mining 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 6 customers during the quarter, totaling $1.0 million in revenue. The systems delivered was much larger in size than many of our historical systems and really highlights the progress we are making within the larger swimming pool systems.

The orders delivered during the quarter were fulfilled through our partners, Bindery and Total Pool in the U.K. and Oxidine in Spain. These partners have been instrumental to our success, particularly as we have strengthened our collaborations in the past 3 years.

During the quarter, we continued to expand our pipeline within our key markets, including systems in U.K., Denmark and Holland. This really shows the dips 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 easy 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 many 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 membranes in Denmark. 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 within our China joint venture has been the recipient of 2 first orders for marine dual-fuel engine water treatment systems. The marine shipping industry is moving towards cleaner fuel 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 orders with ISO ADR solutions planned between 2024 and 2027. One of the 2 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 U.S., we have talked about this for a while now, but the water for energy market is rapidly growing within the U.S. We have worked with partners such as Razorback Direct and Renewable Resources lately to build a presence in the U.S. 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 Halldor Systems and opened a few weeks ago. For those not familiar, Halldor 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 U.S., 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 deployments, 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 the new systems that we have deployed during the past couple of years. Since the beginning of last year, we have deployed 9 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 U.S. petrochemical company and EG recovery, metal processing, the broader marine industry and the most recent order of an advanced membrane-based filtration system to trade oily wastewater to North Star BlueScope Steel, a major U.S.-based steel producer.

We are establishing a consistent cadence of 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'm very pleased with the progress we have made.

Let me now turn the call over to David to review the finance in more details. I will then make a few closing comments and look to open the call for your questions. David?

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 $3.8 million, up from $2.5 million 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 million compared to $0.7 million in the same period last year. DPF and ceramic membrane sales were $0.8 million, down from $1.1 million in Q3 last year. And finally, plastics revenue came in at $1.0 million compared to $0.7 million 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 a strong external interest within especially food processing and the upgrade of our production facility in Q3 last year and stabilization of DPF and ceramic membranes sequentially, but still off the year-ago quarter.

Looking ahead to Q4 of 2025, we anticipate revenue to be between $4.6 million and $5.6 million, which would equate to a 38% to 67% increase from Q4 2024.

For the full year 2025, we expect revenue to be between $18 million and $19 million, 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 2 systems during Q4 of 2024 are likely shifting to Q1 of 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 and those lower than 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 $2.1 million compared to $2.4 million in Q3 last year and compared to $2.6 million in Q2 of 2025. As we look to the future, our breakeven target measured on an adjusted EBITDA basis, measured at EBITDA adjusted for amortization, right-of-use assets and cost of stock-based compensation, the level continues to be quarterly revenue of approximately $6 million. The one caveat I will state is that there's a product mix component to it.

Concluding on the P&L, net loss was $1.5 million for the quarter compared to a $2.8 million 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 $7.3 million 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.

Okay. Thank you, David. To close things out, before I turn over to the questions, our proprietary silicon carbide filtration technology stands as a foundational element in tackling the planet's most urgent ecological issues. This cutting-edge ceramic membranes deliver exceptional results in the tough 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. We are resolving water purification problem 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 highlights the rising worldwide appetite for our innovative solutions.

The potential moving forward is immense, fueled by escalating water shortage and tough global regulations. Their key alliance, we are broadening our impact with application-oriented ready-to-deploy solutions. Such partnerships enhance our capability to offer complete systems that guarantee regularly adherence, streamline operations, safeguard assets and lower cost for customers.

In the years to come, we are dedicated to advancing and expanding our filtration solutions to sites seize the best possibilities. Again, thank everyone for your support of LiqTech. With that, Robert, we would be happy to take any questions.

All right. Fantastic. Thank you very much, Fei and David, for your prepared remarks. [Operator Instructions] 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 moment in the Water for Energy segment as well. And we also start getting orders from marine industry. But I would say, compare this to the marine industry, it just start. 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?

Yes, 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 the increase in revenue.

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

Yes. Obviously, we have different metrices 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 capacity to support growth with very, very limited investments.

All right. Very good. [Operator Instructions] 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 again. Thank you.

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

Good day, and welcome to the LiqTech Second Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Robert Blum with Lytham Partners. Please go ahead.

All right. Thank you very much. Good morning, everyone, and thank you for joining us today to discuss LiqTech's second quarter 2025 financial results for the period ended June 30, 2025. 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. Before I turn the call over to management, I do want to remind listeners that there will be a Q&A session at the end. [Operator Instructions]

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 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.

Thank you, Robert, and good day to everyone on the call. At a high level, we achieved improved financial performance across the board during the second quarter, including revenue growth, gross margin improvement and decreased operating expenses as we continued to execute on our key strategic priorities. In the second quarter, we achieved strong performance in our swimming pool segment, delivering 6 systems and generating nearly $800,000 in revenue. Further, the order flow for swimming pools looks strong as we enter the back half of the year.

We also received an order for an advanced membrane-based filtration system to treat oily wastewater and delivered a new pilot system to our partner at Razorback Direct to address a new end market opportunity. These water system orders, coupled with 31% sequential growth in our ceramic and the plastics business combined helped drive the overall revenue improvement during the quarter. Beyond the strength of the second quarter results for the year, our revenue outlook anticipates continued year-over-year improvements in the third and fourth quarter with full year revenue expected to be at company's highest level in 4 years, dating back to the pandemic.

I am certainly pleased with the progress made to date and expected over the rest of the year. In brief, this quarter is a little different than some of the previous quarters in that we really had solid operational performance across the board. Unlike the first quarter where we had the record oil and gas system order, the second quarter was much more balanced with contributions from water system deliveries, ceramics, DPF and the plastics. We obviously like this balance as something to build on for the rest of the year. One item I would like to mention is the order we received from North Star Bluescope Steel, a major U.S.-based steel producer.

The system designed to resolve recurring filtration process upsets caused by the high oil content and the variability in wastewater quality is scheduled to be commissioned and begin operation in the second half of the calendar year 2025. That said, based on consultation with our accounting firm, we have mutually agreed moving forward that when orders exceed a certain threshold, we will record revenue on a percentage of completion basis. For the second quarter, we recognized about $200,000 for this project with another $300,000 or so to be recognized during the second half of the year.

This practice should help to avoid wide swings and better align the balance sheet and income statement. This order is key for a couple of reasons. First, where crossflow filtration is the most sustainable wastewater treatment process. It comes with a major volume in to volume out challenge. LiqTech's ceramics-based system addresses this challenge we're adapting to ever-changing area and to beat water quality. The addition of LiqTech advanced wastewater pretreatment filtration supports North Star's broader water reclamation initiatives and reflects a growing trend in the steel industry towards more sustainable water management practices.

This project demonstrates our growing traction in industry water treatment and our ability to contribute meaningfully to our customers' operational efficiency and sustainability goals. Another key order during the quarter was a pilot unit, which was sold to Razorback Direct. As most of you are aware, Razorback Direct has been a great partner for us in North America. In November 2024, based on the success of an earlier pilot unit at the customer site, we received a record-breaking commercial order from the oil and gas customer. That order has subsequently been installed this quarter at the customer site and is now in stable operations.

This new pilot order also sourced through Razorback Direct is for a completely new customer in a different industry from oil and gas. I will withhold the industry's focus until further customer feedback occurs. -- but we are excited by the opportunity that it may present to us in the long term. Overall, we continue to make progress with multiple pilot projects underway that leverage our proprietary technology to address some of the most demanding environments. As the history of progress with Razorback Direct within the U.S. oil and gas industry highlighted, the first steps to new application success with our filtration systems often starts with a pilot level program.

Recently, our pilot unit at one of the world's leading integrated energy companies has successfully completed. The positive results have resulted in that our ultrafiltration solution has been approved for the commercial application at this influential company. Beyond the various water for energy and industry applications discussed, we made very good progress during the second quarter within our swimming pool segment. As I mentioned a moment ago, during the quarter, we delivered 6 systems generating nearly $800,000 in revenue. This is a significant step-up from the past couple of quarters.

Our team effectively leveraged our broad distribution agreements to source multiple new opportunities in the swimming pool market. As we look at the back half of the year, we believe the momentum within swimming pools will continue. Notably, we have recently received our first inquiry for a U.S. refurbishment pool project through our partner at NAF Aquatics. If we are able to formally secure this project, it would serve as a good reference for other U.S.-based opportunities in the future. Transitioning to our -- to other parts of our established markets, starting with DPF and ceramic membranes, where sales during quarter 2 were about $1.3 million, which was down from the year ago second quarter, but up nicely from $10 million during the most recent sequential first quarter.

Order intake remains strong. We anticipate sustained positive performance for the remainder of the year. Within plastics, we saw a nice uptick during quarter 2 with revenue of $1.2 million, which was up year-over-year and sequentially. The plastic team continues to do a great job differentiating itself and is generally outperforming our expectations. Again, these 2 areas combined, ceramics and plastic were up 31% sequentially. One final area that showed nice progress was our aftermarket sales within the marine industry, driven by several membrane housing replacements.

This growth was boosted by the China JV aftersales framework agreement we discussed in detail last quarter. In addition to aftermarket sales, we are advancing opportunities within our water treatment unit dual-fuel Marine segment. We expect to participate in the upcoming quarter 3 bidding process for water treatment units for dual-fuel vessels, presenting a promising opportunity for LiqTech. Further updates will follow in the coming months. So to recap, we really had a nice quarter across the board. 6 swimming pool systems delivered a new order from a U.S. steel producer, a new pilot system sought to address a new end market opportunity with Razorback Direct -- good performance from our ceramics and the plastic groups, incremental progress being made out of our Chinese GOA, numerous pilot and commercial programs underway, which we believe can drive broad large-scale orders across our segments in the future.

As I mentioned at the beginning, for the year, our revenue outlook anticipates continued year-over-year improvements in the third and fourth quarters with full year revenue expected to be at the company's highest level in 4 years dating back to the pandemic. I believe we are well positioned to build up the success of recent pilot and commercial projects that handle the most challenging liquids across a variety of large-scale applications. We are strengthening our commercial position in established markets such as swimming pools, DPFs, ceramics and the plastics.

Let me now turn the call over to David to review the financials in more details. I will then make a few closing comments and look to open the call for your questions. David, please.

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. Let's start with revenue. Revenue for the quarter came in at almost USD 5 million, up from $4.5 million in the year ago first quarter and up from $4.6 million in the sequential first quarter. Broken down by verticals, sales for the first quarter were as follows: Water system sales and related services of $2.4 million compared to $1.9 million in the same period last year and $2.7 million in Q1 this year.

Remember, we had the large record system sales during Q1 of this year to Razorback Direct. DPF and ceramic membrane sales were $1.3 million, down from $1.7 million in Q2 last year, but up compared to $1 million in Q1 as we see a nice rebound in orders. And finally, plastics revenue came in at $1.2 million compared to $0.9 million in Q2 last year and $1 million in Q1. Key takeaway for the quarter includes strong year-over-year improvement in Water Systems, driven by a combination of multiple swing pool orders, a portion of the industrial order for the steel industry and multiple ongoing pilot programs, continued growth in plastics and stabilization of DPF and ceramic membranes sequentially, but well off the year ago quarter, which included a few large deliveries.

Looking ahead to Q3 of 2025, and as Fei mentioned, we anticipate revenue to be between $3.8 million and $4.2 million, which would equate to a 52% to 68% increase from Q3 2024. We are also introducing full year expectations with 2025 revenue to be between USD 19 million and USD 20 million which will equate to a 30% to 37% increase from full year 2024. 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 and those lower than normalized gross margins. For the second quarter, gross margins were 9.8% compared to 16% in the year ago period. We are better compared to the 2.7% gross margin experienced during Q1 of this year.

In Q2, we had a few one-off write-offs related to the closure of a loss-making project in the Middle East, sale of a pilot unit and currency effects on inventory lowering the margin. Adjusted for these one-off costs of $364,000, we would have had a gross profit margin of close to 15%. We have previously reported on a contribution margin basis, which excludes the impact from our fixed overhead. This margin for the quarter was significantly higher. We expect through 2025 to see the gap between gross margin and contribution margin to narrow driven by cost improvements and volume growth.

Turning to OpEx. Total operating expenses for the quarter were $2.6 million compared to $2.8 million in Q2 of last year and compared to $2.3 million in Q1 of 2025. As we look to the future, our breakeven target measured on an adjusted EBITDA basis is at a quarterly revenue level of approximately $5.5 million to $6 million. Concluding on the P&L, net loss was $2 million for the quarter compared to $2.1 million for the comparable period of 2024.

And finally, from a cash perspective, we ended the quarter with $8.7 million in cash, which compares to $10.4 million at the end of March. Everything else was pretty much in line with our normal operating procedures from a balance sheet perspective. With that, let me turn it back to Fei.

Thank you, David. To close things out before I turn it over to questions, I see our proprietary silicon carbide filtration technology as a cornerstone for addressing some of the world's most pressing environmental challenges. Our advanced ceramic membranes offer unparalleled performance in treating the most difficult water purification applications from oil and gas produced water to swimming pool systems. By enabling industries to meet stringent regulatory requirements, we are reducing water usage and energy consumption. We are not only solving critical purification needs, but also driving sustainabilities.

Our recent successes such as securing significant orders for produced water treatment as well as the steel processing industry in the U.S. and expanding our presence in the marine and pool filtration markets demonstrate the growing global demand for our solutions. The opportunity ahead is significant, driven by increasing water scarcity and strengthen environmental regulation worldwide. Through strategic partnerships such as our collaboration with Razorback Direct for oil and gas application, we are expanding our reach to deliver tailored turnkey systems.

These collaborations amplify our ability to provide turnkey systems that not only ensure compliance, but also optimize production processes, protecting equipment and reducing operational costs for our clients. Looking ahead, LiqTech's vision is to be a global partner in creating a cleaner, more sustainable future. We are committed to innovating and scaling our filtration technologies to address these large opportunities. Again, thank everyone for your support of LiqTech. With that, Robert, we would be happy to take any questions.

Wonderful. Thank you very much, Fei and David, for the prepared remarks. As I do have a couple of questions here, Fei and David. To begin, the first off here, can you discuss the area focus for the new Razorback pilot?

As I mentioned in my speech, it's an area outside oil and gas industry, but it's an industry water treatment. And I would like to wait until we got positive customer feedback before I give more concrete information about the end market.

Okay. Very good. Next question here. What does the approval of the pilot at the U.S. oil and gas industry application mean in terms of potential timing?

It's a very, very good result for us because this is the world-leading integrated engine company. They have their fixed procedures to approve projects in their technology pipeline. And we have now got the highest grade. That means we are able to commercialize across the whole company. And I am optimistic we're going to see some very exciting results in the near future.

Another question here. What timing do you think will be -- or what do you think timing will be for the bidding process in the Marine segment there that was mentioned?

As I said in my speech, it will be in quarter 3. So we expect something is going to happen in the next 2 months.

Okay. Very good. Next question here. It says so based on your full year guide of $19 million to $20 million and your Q3 guide of $3.5 million or $3.8 million to $42 million, that implies a Q4 run rate of $62 million to $66 million. First off, are my numbers correct? And secondly, does that mean you will be EBITDA profitable in Q4?

Yes. So definitely, we expect Q4, you can say to be a higher of the 2 quarters. Will we see an EBITDA positive? Again, we are guiding, you can say up to 6.5% for that to happen. It will be depending on mix. But for sure, the goal will be to reach an EBITDA positive quarter this year. but depending on mix and of course, the total sales volume happening in the quarter.

All right. Very good. I am showing no further questions here. Fei, David, I will turn it back over to you for any closing remarks.

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

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